<PAGE>
As filed with the Securities and Exchange Commission on January 23, 1998
Registration No. 333-41857
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
HERITAGE BANCORP, INC.
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(Exact name of registrant as specified in charter)
Delaware 6035 58-2356162
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(State or other jurisdiction of (Primary SICC No.) (I.R.S. Employer
incorporation or organization) Identification No.)
201 W. Main Street
Laurens, South Carolina 29360
(864) 984-4581
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(Address and telephone number of principal executive offices)
Paul M. Aguggia, Esquire
Aaron M. Kaslow, Esquire
BREYER & AGUGGIA
Suite 470 East
1300 I Street, N.W.
Washington, D.C. 20005
--------------------------------------------
(Name and address of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
<TABLE>
<CAPTION>
==================================================================================================================
Calculation of Registration Fee
==================================================================================================================
Title of Each Class of Securities Proposed Proposed Proposed Maximum Amount of
Being Registered Maximum Offering Aggregate Offering Registration Fee
Amount Being Price(1) Price(1)
Registered(1)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 Par Value 4,628,750 $15.00 $69,431,250 $21,039(3)
Participation interests(2) 66,003 -- -- --
==================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee. As
described in the Prospectus, the actual number of shares to be issued and sold
is subject to adjustment based upon the estimated pro forma market value of the
registrant and market and financial conditions.
(2) The securities of Heritage Bancorp, Inc. to be purchased by the Heritage
Federal Savings & Loan Association 401(k) Plan are included in the amount shown
for Common Stock. Accordingly, pursuant to Rule 457(h) of the Securities Act of
1933, as amended, no separate fee is required for the participation interests.
Pursuant to such rule, the amount being registered has been calculated on the
basis of the number of shares of Common Stock that may be purchased with the
current assets of such Plan.
(3) Previously filed.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PROSPECTUS SUPPLEMENT
HERITAGE BANCORP, INC.
HERITAGE FEDERAL SAVINGS & LOAN ASSOCIATION
401(K) PLAN
This Prospectus Supplement relates to the offer and sale to participants
("Participants") in the 401(k) Plan ("Plan" or "401(k) Plan") of participation
interests and shares of Heritage Bancorp, Inc. common stock, par value $.01 per
share ("Common Stock"), as set forth herein.
In connection with the proposed conversion of Heritage Federal Savings &
Loan Association ("Association" or "Employer") from a federally chartered mutual
savings association to a federally chartered stock savings bank, a holding
company, Heritage Bancorp, Inc. ("Holding Company"), has been formed. The
simultaneous conversion of the Association to stock form, the issuance of the
Association's common stock to the Holding Company and the offer and sale of the
Holding Company's Common Stock to the public are herein referred to as the
"Conversion." Applicable provisions of the 401(k) Plan permit the investment of
the Plan assets in Common Stock of the Holding Company at the direction of a
Plan Participant. This Prospectus Supplement relates to the election of a
Participant to direct the purchase of Common Stock in connection with the
Conversion.
The Prospectus, dated _________, 1998, of the Holding Company
("Prospectus"), which is attached to this Prospectus Supplement, includes
detailed information with respect to the Conversion, the Common Stock and the
financial condition, results of operations and business of the Association and
the Holding Company. This Prospectus Supplement, which provides detailed
information with respect to the Plan, should be read only in conjunction with
the Prospectus. Terms not otherwise defined in this Prospectus Supplement are
defined in the Plan or the Prospectus.
A Participant's eligibility to purchase Common Stock in the Conversion
through the Plan is subject to the Participant's general eligibility to purchase
shares of Common Stock in the Conversion and the maximum and minimum limitations
set forth in the Plan of Conversion. See "THE CONVERSION" and "--Limitations on
Purchases of Shares" in the Prospectus.
For a discussion of certain factors that should be considered by each
Participant, see "RISK FACTORS" in the Prospectus beginning on page _______.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("SEC"), THE OFFICE OF THRIFT SUPERVISION ("OTS"), THE
FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC") OR ANY OTHER FEDERAL OR STATE
AGENCY OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC, THE OTS, THE FDIC OR
ANY OTHER AGENCY OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus Supplement is ____________, 1998.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
The Offering
Securities Offered...................................... S-1
Election to Purchase Common Stock in the Conversion..... S-1
Value of Participation Interests........................ S-1
Method of Directing Transfer............................ S-1
Time for Directing Transfer............................. S-2
Irrevocability of Transfer Direction.................... S-2
Direction Regarding Common Stock After the Conversion... S-2
Purchase Price of Common Stock.......................... S-2
Nature of a Participant's Interest in the Common Stock.. S-2
Voting and Tender Rights of Common Stock................ S-3
Description of the Plan
Introduction............................................ S-3
Eligibility and Participation........................... S-4
Contributions Under the Plan............................ S-4
Limitations on Contributions............................ S-5
Investment of Contributions............................. S-7
The Employer Stock Fund................................. S-7
Benefits Under the Plan................................. S-8
Withdrawals and Distributions from the Plan............. S-8
Administration of the Plan.............................. S-9
Reports to Plan Participants............................ S-10
Plan Administrator...................................... S-10
Amendment and Termination............................... S-10
Merger, Consolidation or Transfer....................... S-10
Federal Income Tax Consequences......................... S-10
Restrictions on Resale.................................. S-13
Legal Opinions............................................... S-14
Investment Form S-15
</TABLE>
i
<PAGE>
THE OFFERING
Securities Offered
The securities offered hereby are participation interests in the Plan and
up to _______ shares, at the actual purchase price of $15.00 per share, of
Common Stock which may be acquired by the Plan for the accounts of employees
participating in the Plan. The Holding Company is the issuer of the Common
Stock. Only employees and former employees of the Association and their
beneficiaries may participate in the Plan. Information with regard to the Plan
is contained in this Prospectus Supplement and information with regard to the
Conversion and the financial condition, results of operation and business of the
Association and the Holding Company is contained in the attached Prospectus.
The address of the principal executive office of the Association is 201 W. Main
Street, Laurens, South Carolina 29360. The Association's telephone number is
(864) 984-4581.
Election to Purchase Common Stock in the Conversion
In connection with the Association's Conversion, each Participant in the
401(k) Plan may direct the trustees of the Plan (collectively, the "Trustees")
to transfer up to 100% of a Participant's account balance to a newly created
Employer Stock Fund and to use such funds to purchase Common Stock issued in
connection with the Conversion. Amounts transferred may include salary
deferral, matching and profit sharing contributions. The Employer Stock Fund
may consist of investments in the Common Stock made on or after the effective
date of the Conversion. Funds not transferred to the Employer Stock Fund will
continue to be invested by the trustees of the Plan (the "Trustees"). See
"DESCRIPTION OF THE PLAN -- Investment of Contributions" below. A Participant's
ability to transfer funds to the Employer Stock Fund in the Conversion is
subject to the Participant's general eligibility to purchase shares of Common
Stock in the Conversion. For general information as to the ability of the
Participants to purchase shares in the Conversion, see "THE CONVERSION -- The
Subscription, Direct Community and Syndicated Community Offerings" in the
attached Prospectus.
Value of Participation Interests
The assets of the Plan are valued on an ongoing basis and each Participant
is informed of the value of his or her beneficial interest in the Plan on at
least an annual basis. This value represents the market value of past
contributions to the Plan by the Association and by the Participants and
earnings thereon, less previous withdrawals, and transfers from other plans.
Method of Directing Transfer
The last page of this Prospectus Supplement is an investment form to direct
a transfer to the Employer Stock Fund ("Investment Form"). If a Participant
wishes to transfer funds to the Employer Stock Fund to purchase Common Stock
issued in connection with the Conversion, the
S-1
<PAGE>
Participant should indicate that decision in Part 2 of the Investment Form. If a
Participant does not wish to make such an election, he or she does not need to
take any action.
Time for Directing Transfer
The deadline for submitting a direction to transfer amounts to the Employer
Stock Fund in order to purchase Common Stock issued in connection with the
Conversion is ___________, 1998. The Investment Form should be returned to
_________ at the Association no later than the close of business on such date.
Irrevocability of Transfer Direction
A Participant's direction to transfer amounts credited to such
Participant's account in the Plan to the Employer Stock Fund in order to
purchase shares of Common Stock in connection with the Conversion shall be
irrevocable. Participants, however, will be able to direct the sale of Common
Stock, as explained below.
Direction Regarding Common Stock After the Conversion
It is currently anticipated that Participants may be permitted to transfer
additional funds from their existing account balances to the Employer Stock Fund
following the Conversion. In addition, it is anticipated that a Participant
will, on a periodic basis, direct the purchase of Common Stock with new
Participant and employer contributions or direct the sale of Common Stock. If
Common Stock is sold, the proceeds will be credited to the Participant's account
and may be reinvested in the other investment options available under the Plan.
Special restrictions may apply to purchases or sales directed by those
Participants who are executive officers, directors and principal stockholders of
the Holding Company who are subject to the provisions of Section 16(b) of the
Securities and Exchange Act of 1934, as amended ("Exchange Act"), or applicable
OTS regulations.
Purchase Price of Common Stock
The funds transferred to the Employer Stock Fund for the purchase of Common
Stock in connection with the Conversion will be used by the Trustees to purchase
shares of Common Stock. The price paid for such shares of Common Stock will be
the same price as is paid by all other persons who purchase shares of Common
Stock in the Conversion.
Nature of a Participant's Interest in the Common Stock
The Common Stock purchased for an account of a Participant will be held in
the name of the Trustees of the Plan in the Employer Stock Fund. Any earnings,
losses or expenses with respect to the Common Stock, including dividends and
appreciation or depreciation in value, will be credited or debited to the
account and will not be credited to or borne by any other accounts.
S-2
<PAGE>
Voting and Tender Rights of Common Stock
The Trustees generally will exercise voting and tender rights attributable
to all Common Stock held by the Trust as directed by Participants with an
interest in the Employer Stock Fund. With respect to each matter as to which
holders of Common Stock have the right to vote, each Participant will be
allocated a number of voting instruction rights reflecting such Participant's
proportionate interest in the Employer Stock Fund. The percentage of shares of
Common Stock held in the Employer Stock Fund that are voted in the affirmative
or negative on each matter shall be the same percentage of the total number of
voting instruction rights that are exercised in either the affirmative or
negative, respectively.
DESCRIPTION OF THE PLAN
Introduction
The Association adopted the Plan effective January 1, 1987 as an amendment
and restatement of the Association's prior defined contribution retirement plan.
The Plan is a cash or deferred arrangement established in accordance with the
requirements under Section 401(a) and Section 401(k) of the Internal Revenue
Code of 1986, as amended ("Code").
The Association intends that the Plan, in operation, will comply with the
requirements under Section 401(a) and Section 401(k) of the Code. The
Association will adopt any amendments to the Plan that may be necessary to
ensure the qualified status of the Plan under the Code and applicable Treasury
Regulations. The Association has received a determination from the Internal
Revenue Service ("IRS") that the Plan is qualified under Section 401(a) of the
Code and that it satisfies the requirements for a qualified cash or deferred
arrangement under Section 401(k) of the Code.
Employee Retirement Income Security Act. The Plan is an "individual
account plan" other than a "money purchase pension plan" within the meaning of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). As
such, the Plan is subject to all of the provisions of Title I (Protection of
Employee Benefit Rights) and Title II (Amendments to the Internal Revenue Code
Relating to Retirement Plans) of ERISA, except the funding requirements
contained in Part 3 of Title I of ERISA, which by their terms do not apply to an
individual account plan (other than a money purchase pension plan). The Plan is
not subject to Title IV (Plan Termination Insurance) of ERISA. Neither the
funding requirements contained in Title IV of ERISA nor the plan termination
insurance provisions contained in Title IV will be extended to Participants or
beneficiaries under the Plan.
S-3
<PAGE>
APPLICABLE FEDERAL LAW REQUIRES THE PLAN TO IMPOSE SUBSTANTIAL RESTRICTIONS
ON THE RIGHT OF A PLAN PARTICIPANT TO WITHDRAW AMOUNTS HELD FOR HIS OR HER
BENEFIT UNDER THE PLAN PRIOR TO THE PARTICIPANT'S TERMINATION OF EMPLOYMENT WITH
THE ASSOCIATION. A SUBSTANTIAL FEDERAL TAX PENALTY MAY ALSO BE IMPOSED ON
WITHDRAWALS MADE PRIOR TO THE PARTICIPANT'S ATTAINMENT OF AGE 59 1/2, UNLESS A
PARTICIPANT RETIRES AS PERMITTED UNDER THIS PLAN REGARDLESS OF WHETHER SUCH A
WITHDRAWAL OCCURS DURING HIS OR HER EMPLOYMENT WITH THE ASSOCIATION OR AFTER
TERMINATION OF EMPLOYMENT.
Reference to Full Text of Plan. The following statements are summaries of
the material provisions of the Plan. The full text of the Plan is filed as an
exhibit to the registration statement filed with the SEC. Copies of the Plan are
available to all employees by filing a request with the Plan Administrator. Each
employee is urged to read carefully the full text of the Plan.
Eligibility and Participation
Any employee of the Association is eligible to participate and will become
a Participant in the Plan following completion of six (6) months of service with
the Association and the attainment of age 21. The Plan year is the calendar
year ("Plan Year"). Directors who are not employees of the Association are not
eligible to participate in the Plan.
During 1997, approximately __ employees participated in the Plan.
Contributions Under the Plan
Participant Contributions. Each Participant in the Plan is permitted to
elect to reduce such Participant's Compensation (as defined below) pursuant to a
salary reduction agreement in amounts ranging from 1% to 10% of Compensation and
have that amount contributed to the Plan on such Participant's behalf. Such
amounts are credited to the Participant's deferral contributions account. For
purposes of the Plan, "Compensation" means a Participant's total amount of
earnings reportable W-2 wages for federal income tax withholding purposes plus a
Participant's elective deferrals pursuant to a salary reduction agreement under
the Plan or any elective deferrals to a Section 125 plan. Due to recent
statutory changes, the annual Compensation of each Participant taken into
account under the Plan is limited to $160,000 (as adjusted under applicable Code
provisions). A Participant may elect to modify the amount contributed to the
Plan under the participant's salary reduction agreement during the Plan Year.
Deferral contributions are transferred by the Association to the Trustees of the
Plan on a periodic basis as required by applicable law.
Employer Contributions. For employees with one or more years of service,
the Association matches employee deferral contributions on a discretionary
basis. Additional
S-4
<PAGE>
contributions may also be made on a discretionary basis in proportion to each
Participant's Compensation.
Limitations on Contributions
Limitations on Annual Additions and Benefits. Pursuant to the requirements
of the Code, the Plan provides that the amount of contributions allocated to
each Participant's Account during any Plan Year may not exceed the lesser of 25%
of the Participant's "Section 415 Compensation" for the Plan Year or $30,000 (as
adjusted under applicable Code provisions). A Participant's "Section 415
Compensation" is a Participant's Compensation, excluding any amount contributed
to the Plan under a salary reduction agreement or any employer contribution to
the Plan or to any other plan or deferred compensation or any distributions from
a plan of deferred compensation. In addition, annual additions are limited to
the extent necessary to prevent the limitations for the combined plans of the
Association from being exceeded. To the extent that these limitations would be
exceeded by reason of excess annual additions to the Plan with respect to a
Participant, the excess must be reallocated to the remaining Participants who
are eligible for an allocation of Employer contributions for the Plan Year.
Limitation on 401(k) Plan Contributions. The annual amount of deferred
compensation of a Participant (when aggregated with any elective deferrals of
the Participant under any other employer plan, a simplified employee pension
plan or a tax-deferred annuity) may not exceed $10,000 (as adjusted under
applicable Code provisions). Contributions in excess of this limitation
("excess deferrals") will be included in the Participant's gross federal income
tax purposes in the year they are made. In addition, any such excess deferral
will again be subject to federal income tax when distributed by the Plan to the
Participant, unless the excess deferral (together with any income allocable
thereto) is distributed to the Participant not later than the first April 15th
following the close of the taxable year in which the excess deferral is made.
Any income on the excess deferral that is distributed not later than such date
shall be treated, for federal income tax purposes, as earned and received by the
Participant in the taxable year in which the excess deferral is made.
Limitation on Plan Contributions for Highly Compensated Employees.
Sections 401(k) and 401(m) of the Code limit the amount of deferred compensation
contributed to the Plan in any Plan Year on behalf of Highly Compensated
Employees (defined below) in relation to the amount of deferred compensation
contributed by or on behalf of all other employees eligible to participate in
the Plan. Specifically, the actual deferral percentage for a Plan Year (i.e.,
----
the average of the ratios, calculated separately for each eligible employee in
each group, by dividing the amount of salary reduction contributions credited to
the salary reduction contribution account of such eligible employee by such
employee's compensation for the Plan Year) of the Highly Compensated Employees
may not exceed the greater of (a) 125% of the actual deferred percentage of all
other eligible employees, or (b) the lesser of (i) 200% of the actual deferred
percentage of all other eligible employees, or (ii) the actual deferral
percentage of all other eligible employees plus two percentage points. In
addition, the actual contribution percentage for a Plan Year (i.e., the average
----
of the ratios calculated separately for each eligible employee in each
S-5
<PAGE>
group, by dividing the amount of employer contributions credited to the Matching
contributions account of such eligible employee by each eligible employee's
compensation for the Plan Year) of the Highly Compensated Employees may not
exceed the greater of (a) 125% of the actual contribution percentage of all
other eligible employees, or (b) the lesser of (i) 200% of the actual
contributions percentage of all other eligible employees, or (ii) the actual
contribution percentage of all other eligible employees plus two percentage
points.
In general, a Highly Compensated Employee includes any employee who, during
the Plan Year or the preceding Plan Year, (1) was at any time a 5% owner (i.e.,
----
owns directly or indirectly more than 5% of the stock of the Employer, or stock
possessing more than 5% of the total combined voting power of all stock of the
Employer) or, (2) during the preceding Plan Year, received Section 415
Compensation in excess of $80,000 (as adjusted under applicable Code provisions)
and, if elected by the Association, was in the top paid group of employees for
such Plan Year.
In order to prevent disqualification of the Plan, any amounts contributed
by Highly Compensated Employees that exceed the average deferral limitation in
any Plan Year ("excess contributions"), together with any income allocable
thereto, must be distributed to such Highly Compensated Employees before the
close of the following Plan Year. However, the Association will be subject to a
10% excise tax on any excess contributions unless such excess contributions,
together with any income allocable thereto, either are recharacterized or are
distributed before the close of the first 2 1/2 months following the Plan Year
to which such excess contributions relate. In addition, in order to avoid
disqualification of the Plan, any contributions by Highly Compensated Employees
that exceed the average contribution limitation in any Plan Year ("excess
aggregate contributions") together with any income allocable thereto, must be
distributed to such Highly Compensated Employees before the close of the
following Plan Year. However, the 10% excise tax will be imposed on the
Association with respect to any excess aggregate contributions, unless such
amounts, plus any income allocable thereto, are distributed within 2 1/2 months
following the close of the Plan Year in which they arose.
Top-Heavy Plan Requirements. If, for any Plan Year, the Plan is a Top-
Heavy Plan (as defined below), then (i) the Association may be required to make
certain minimum contributions to the Plan on behalf of non-key employees (as
defined below), and (ii) certain additional restrictions would apply with
respect to the combination of annual additions to the Plan and projected annual
benefits under any defined plan maintained by the Association.
In general, the Plan will be regarded as a "Top-Heavy Plan" for any Plan
Year, if as of the last day of the preceding Plan Year, the aggregate balance of
the accounts of all Participants who are key Employees exceeds 60% of the
aggregate balance of the Accounts of the Participants. "Key Employees"
generally include any employee, who at any time during the Plan Year or any
other the four preceding Plan Years, if (1) an officer of the Association having
annual compensation in excess of $60,000 who is in an administrative or policy-
making capacity, (2) one of the ten employees having annual compensation in
excess of $30,000 and owing, directly or indirectly, the largest interest in the
employer, (3) a 5% owner of the employer (i.e.,
----
S-6
<PAGE>
owns directly or indirectly more than 5% of the stock of the employer, or stock
possessing more than 5% of the total combined voting power of all stock of the
employer), or (4) a 1% owner of the employer having compensation in excess of
$150,000.
Investment of Contributions
All amounts credited to Participant's Accounts under the Plan are held in
the Trust which is administered by the Trustees who are appointed by the Savings
Bank's Board of Directors. The Plan provides that a Participant may direct the
Trustees to invest all or a portion of his or her Accounts in various investment
options, as listed below. A Participant may periodically elect to change his or
her investment directions with respect to both past contributions and additions
to the Participant's accounts invested in these investment options in accordance
with rules established by the Trustees.
Under the Plan, the Accounts of a Participant held in the Trust will be
invested by the Trustees at the direction of the Participant in the following
portfolios:
[TO BE PROVIDED]
For additional information regarding these investment options, please
contact ____________.
In connection with the Conversion, a Participant may elect to have prior
contributions and additions to the Participant's Account invested either in the
Employer Stock Fund or in any of the other portfolios listed above. Any amounts
credited to a Participant's Accounts for which investment directions are not
given will be invested in _______________.
The net gain (or loss) in the Accounts from investments (including interest
payments, dividends, realized and unrealized gains and losses on securities, and
expenses paid from the Trust) are determined on a daily basis. For purposes of
such allocation, all assets of the Trust are valued at their fair market value.
The Employer Stock Fund
The Employer Stock Fund will consist of investments in Common Stock made on
and after the effective date of the Conversion.
Following the Conversion, when Common Stock is sold, the cost or net
proceeds will be charged or credited to the Accounts of Participants affected by
the purchase or sale. A Participant's Account will also be adjusted to reflect
changes in the value of shares of Common Stock resulting from stock dividends,
stock splits and similar changes.
S-7
<PAGE>
To the extent dividends are not paid on Common Stock held in the Employer
Stock Fund, the return on any investment in the Employer Stock Fund will consist
only of the market value appreciation of the Common Stock subsequent to its
purchase. Declarations and payments of any dividends (regular and special) by
the Board of Directors will depend upon a number of factors, including the
amount of the net proceeds retained by the Holding Company, capital
requirements, regulatory limitations, the Association's and the Holding
Company's financial condition and results of operations, tax considerations and
general economic conditions.
As of the date of this Prospectus Supplement, none of the shares of Common
Stock have been issued or are outstanding and there is no established market for
the Common Stock. Accordingly, there is no record of the historical performance
of the Employer Stock Fund.
Investments in the Employer Stock Fund may involve certain risk factors
associated with investments in Common Stock of the Holding Company. For a
discussion of these risk factors, see "RISK FACTORS" in the Prospectus.
Benefits Under the Plan
Vesting. A Participant has, at all times, a fully vested, nonforfeitable
interest in all of his or her Participant and Employer contributions and the
earnings thereon under the Plan.
Withdrawals and Distributions from the Plan
APPLICABLE FEDERAL LAW REQUIRES THE PLAN TO IMPOSE SUBSTANTIAL RESTRICTIONS
ON THE RIGHT OF A PLAN PARTICIPANT TO WITHDRAW AMOUNTS HELD FOR HIS OR HER
BENEFIT UNDER THE PLAN PRIOR TO THE PARTICIPANT'S ATTAINMENT OF AGE 59 1/2
UNLESS A PARTICIPANT RETIRES AS PERMITTED UNDER THE PLAN REGARDLESS OF WHETHER
SUCH A WITHDRAWAL OCCURS DURING HIS OR HER EMPLOYMENT WITH THE ASSOCIATION.
Distribution Upon Retirement, Death, Disability or Termination of
Employment. The distribution of benefits under the 401(k) Plan to a Participant
may be made in who retires, incurs a form of a lump-sum payment or installment
periods over a specified period. Distributions generally commence as soon as
practicable following the Participant's termination of employment. At the
request of the Participant, the distribution may include an in-kind distribution
of Common Stock of the Holding Company credited to the Participant's Account.
Benefits payments ordinarily must begin not later than 60 days following the end
of the Plan Year in which occurs later of the Participant's: (i) termination of
employment; (ii) attainment of age 65; or (iii) tenth anniversary of
commencement of participation in the Plan; but in no event later than April 1
following the calendar year in which the Participant attains age 70 1/2 (if the
Participant is retired). However, if the vested portion of the Participant's
Account balances exceeds $3,500, no distribution will be made from the Plan
prior to the Participant's attaining age 65 unless the Participant consents to
an earlier distribution. Special rules may apply to the
S-8
<PAGE>
distribution of Common Stock of the Holding Company to those Participants who
are executive officers, directors and principal shareholders of the Holding
Company who are subject to the provisions of Section 16(b) of the Exchange Act.
In-Service Withdrawals and Loans. The Plan provides for distributions of
Participant deferral contributions prior to termination of employment in the
form of hardship withdrawals. Such withdrawals are permitted where the funds
are applied to (i) uninsured medical expenses, (ii) the purchase of a principal
residence, (iii) the payment of tuition and other education expenses or (iv)
payments necessary to prevent eviction from a principal residence or foreclosure
on a mortgage. In order to qualify for a hardship withdrawal, the Participant
must satisfy certain requirements relating to his or her financial resources and
the amount of the withdrawal may not exceed the Participant's immediate and
heavy financial need.
The Plan does not provide for other in-service withdrawals or loans.
Nonalienation of Benefits. Except with respect to federal income tax
withholding and as provided with respect to a qualified domestic relations order
(as defined in the Code), benefits payable under the Plan shall not be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution, or levy of any kind, either
voluntary or involuntary, and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, charge or otherwise dispose of any rights to
benefits payable under the Plan shall be void.
Administration of the Plan
Trustees. The Trustees with respect to Plan assets are currently J. Edward
Wells, Edwin I. Shealy and Debra C. Garrett.
Pursuant to the terms of the Plan, the Trustees receive and hold
contributions to the Plan in trust and have exclusive authority and discretion
to manage and control the assets of the Plan pursuant to the terms of the Plan
and to manage, invest and reinvest the Trust and income therefrom. The Trustees
have the authority to invest and reinvest the Trust and may sell or otherwise
dispose of Trust investments at any time and may hold trust funds uninvested.
The Trustees have authority to invest the assets of the Trust in "any type of
property, investment or security" as defined under ERISA.
The Trustees have full power to vote any corporate securities in the Trust
in person or by proxy; provided, however, that the Participants will direct the
Trustees as to voting and tendering of all Common Stock held in the Employer
Stock Fund.
The Trustees receive no compensation for their services. The expenses of
the Trustees are paid out of the Trust except to the extent such expenses and
compensation are paid by the Association.
S-9
<PAGE>
The Trustees must render at least annual reports to the Association and to
the Participants in such form and containing such information that the Trustees
deem necessary.
Reports to Plan Participants
The Plan Administrator furnishes to each Participant a statement at least
quarterly showing (i) the balance in the Participant's Account as of the end of
that period, (ii) the amount of contributions allocated to any such
Participant's Account for that period, and (iii) the adjustments to such
Participant's Account to reflect earnings or losses (if any).
Plan Administrator
The Association currently serves as the Plan Administrator. The Plan
Administrator is responsible for the administration of the Plan, interpretation
of the provisions of the Plan, prescribing procedures for filing applications
for benefits, preparation and distribution of information explaining the Plan,
maintenance of plan records, books of account and all other data necessary for
the proper administration of the Plan, and preparation and filing of all returns
and reports relating to the Plan which are required to be filed with the U.S.
Department of Labor and the IRS, and for all disclosures required to be made to
Participants, beneficiaries and others under Sections 104 and 105 of ERISA.
Amendment and Termination
The Association may terminate the Plan at any time. If the Plan is
terminated in whole or in part, then regardless of other provisions in the Plan,
each employee who ceases to be a Participant shall have a fully vested interest
in his or her Account. The Association reserves the right to make, from time to
time, any amendment or amendments to the Plan which do not cause any part of the
Trust to be used for, or diverted to, any purpose other than the exclusive
benefit of the Participants or their beneficiaries.
Merger, Consolidation or Transfer
In the event of the merger or consolidation of the Plan with another plan,
or the transfer of the Trust to another plan, the Plan requires that each
Participant (if either the Plan or the other plan then terminated) receive a
benefit immediately after the merger, consolidation or transfer which is equal
to or greater than the benefit he or she would have been entitled to receive
immediately before the merger, consolidation or transfer (if the Plan had then
terminated).
Federal Income Tax Consequences
The following is only a brief summary of certain federal income tax aspects
of the Plan which are of general application under the Code and is not intended
to be a complete or definitive description of the federal income tax
consequences of participating in or receiving distributions from the Plan. The
summary is necessarily general in nature and
S-10
<PAGE>
does not purport to be complete. Moreover, statutory provisions are subject to
change, as are their interpretations, and their application may vary in
individual circumstances. Finally, the consequences under applicable state and
local income tax laws may not be the same as under the federal income tax laws.
PARTICIPANTS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO ANY
DISTRIBUTION FROM THE PLAN AND TRANSACTIONS INVOLVING THE PLAN.
The Plan has received a determination from the IRS that it is qualified
under Sections 401(a) and 401(k) of the Code, and that the related Trust is
exempt from tax under Section 501(a) of the Code. A plan that is "qualified"
under these sections of the Code is afforded special tax treatment which include
the following: (1) the sponsoring employer is allowed an immediate tax deduction
for the amount contributed to the Plan of each year; (2) Participants pay no
current income tax on amounts contributed by the employer on their behalf; and
(3) earnings of the Plan are tax-exempt thereby permitting the tax-free
accumulation of income and gains on investments. The Plan will be administered
to comply in operation with the requirements of the Code as of the applicable
effective date of any change in the law. The Association expects to timely
adopt any amendments to the Plan that may be necessary to maintain the qualified
status of the Plan under the Code. Following such an amendment, the Plan will
be submitted to the IRS for a determination that the Plan, as amended, continues
to qualify under Sections 401(a) and 501(a) of the Code and that it continues to
satisfy the requirements for a qualified cash or deferred arrangement under
Section 401(k) of the Code.
Assuming that the Plan is administered in accordance with the requirements
of the Code, participation in the Plan under existing federal income tax laws
will have the following effects:
(a) Amounts contributed to a Participant's 401(k) account and the
investment earnings are actually distributed or withdrawn from the Plan.
Special tax treatment may apply to the taxable portion of any distribution that
includes Common Stock or qualified as a "Lump Sum Distribution" (as described
below).
(b) Income earned on assets held by the Trust will not be taxable to the
Trust.
Lump Sum Distribution. A distribution from the Plan to a Participant or the
beneficiary of a Participant will qualify as a "Lump Sum Distribution" if it is
made: (i) within a single taxable year of the Participant or beneficiary; (ii)
on account of the Participant's death or separation from service, or after the
Participant attains age 59 1/2; and (iii) consists of the balance to the credits
of the Participant under the Plan and all other profit sharing plans, if any,
maintained by the Association. The portion of any Lump Sum Distribution that is
required to be included in the Participant's or beneficiary's taxable income for
federal income tax purposes ("total taxable amount") consists of the entire
amount of such Lump Sum Distribution less the amount of after-tax contributions,
if any, made by the Participant to any other profit sharing plans maintained by
the Association which is included in such distribution.
S-11
<PAGE>
Averaging Rules. The portion of the total taxable amount of a Lump Sum
Distribution ("ordinary income portion") will be taxable generally as ordinary
income for federal income tax purposes. However, for distributions occurring
prior to January 1, 2000, a Participant who has completed at least five years of
participation in the Plan before the taxable year in which the distribution is
made, or a beneficiary who receives a Lump Sum Distribution on account of the
Participant's death (regardless of the period of the Participant's participation
in the Plan or any other profit sharing plan maintained by the Employer), may
elect to have the ordinary income portion of such Lump Sum Distribution taxed
according to a special averaging rule ("five-year averaging"). The election of
the special averaging rules may apply only to one Lump Sum Distribution received
by the Participant or beneficiary, provided such amount is received on or after
the Participant turns 59 1/2 and the recipient elects to have any other Lump Sum
Distribution from a qualified plan received in the same taxable year taxed under
the special averaging rule. The special five-year averaging rule has been
repealed for distributions occurring after December 31, 1999. Under a special
grandfather rule, individuals who turned 50 by 1986 may elect to have their Lump
Sum Distribution taxed under either the five-year averaging rule (if available)
or the prior law ten-year averaging rule. Such individuals also may elect to
have that portion of the Lump Sum Distribution attributable to the Participant's
pre-1974 participation in the Plan taxed at a flat 20% rate as gain from the
sale of a capital asset.
Common Stock Included in Lump Sum Distribution. If a Lump Sum Distribution
includes Common Stock, the distribution generally will be taxed in the manner
described above, except that the total taxable amount will be reduced by the
amount of any net unrealized appreciation with respect to such Common Stock,
i.e., the excess of the value of such Common Stock at the time of the
- ----
distribution over its cost to the Plan. The tax basis of such Common Stock to
the Participant or beneficiary for purposes of computing gain or loss on its
subsequent sale will be the value of the Common Stock at the time of
distribution less the amount of net unrealized appreciation. Any gain on a
subsequent sale or other taxable disposition of such Common Stock, to the extent
of the amount of net unrealized appreciation at the time of distribution, will
be considered long-term capital gain regardless of the holding period of such
Common Stock. Any gain on a subsequent sale or other taxable disposition of the
Common Stock in excess of the amount of net unrealized appreciation at the time
of distribution will be considered either short-term capital gain or long-term
capital gain depending upon the length of the holding period of the Common
Stock. The recipient of a distribution may elect to include the amount of any
net unrealized appreciation in the total taxable amount of such distribution to
the extent allowed by the regulations by the IRS.
Distributions: Rollovers and Direct Transfers to Another Qualified Plan or
to an IRA. Pursuant to a change in the law, effective January 1, 1993,
virtually all distributions from the Plan may be rolled over to another
qualified Plan or to an individual retirement account ("IRA") without regard to
whether the distribution is a Lump Sum Distribution or Partial Distribution.
Effective January 1, 1993, Participants have the right to elect to have the
Trustees transfer all or any portion of an "eligible rollover distribution"
directly to another plan qualified under Section 401(a) of the Code or to an
IRA. If the Participant does not elect to have an "eligible rollover
distribution" transferred directly to another qualified plan of to an IRA, the
S-12
<PAGE>
distribution will be subject to a mandatory federal withholding tax equal to 20%
of the taxable distribution. An "eligible rollover distribution" means any
amount distributed from the Plan except: (1) a distribution that is (a) one of
a series of substantially equal periodic payments made (not less frequently than
annually) over the Participant's life of the joint life of the Participant and
the Participant's designated beneficiary, or (b) for a specified period of ten
years or more; (2) any amount that is required to be distributed under the
minimum distribution rules; and (3) any other distributions excepted under
applicable federal law. The tax law change described above did not modify the
special tax treatment of Lump Sum Distributions, that are not rolled over or
transferred, i.e., forward averaging, capital gains tax treatment and the
----
nonrecognition of net unrealized appreciation, discussed earlier.
Additional Tax on Early Distributions. A Participant who receives a
distribution from the Plan prior to attaining age 59 1/2 will be subject to an
additional income tax equal to 10% of the taxable amount of the distribution.
The 10% additional income tax will not apply, however, to the extent the
distribution is rolled over into an IRA or another qualified plan or the
distribution is (i) made to a beneficiary (or to the estate of a Participant) on
or after the death of the Participant, (ii) attributable to the Participant's
being disabled within the meaning of Section 72(m)(7) of the Code, (iii) part of
a series of substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the Participant or the joint
lives (or joint life expectancies) of the Participant and his or her
beneficiary, (iv) made to the Participant after separation from service on
account of early retirement under the Plan after attainment of age 55, (v) made
to pay medical expenses to the extent deductible for federal income tax
purposes, (vi) pursuant to a qualified domestic relations order, or (vii) made
to effect the distribution of excess contributions or excess deferrals.
THE FOREGOING IS ONLY A BRIEF SUMMARY OF CERTAIN FEDERAL INCOME TAX ASPECTS
OF THE PLAN WHICH ARE OF GENERAL APPLICATION UNDER THE CODE AND IS NOT INTENDED
TO BE A COMPLETE OR DEFINITIVE DESCRIPTION OF THE FEDERAL INCOME TAX
CONSEQUENCES OF PARTICIPATING IN OR RECEIVING DISTRIBUTIONS FROM THE PLAN.
ACCORDINGLY, EACH PARTICIPANT IS URGED TO CONSULT A TAX ADVISOR CONCERNING THE
FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF PARTICIPATING IN AND RECEIVING
DISTRIBUTIONS FROM THE PLAN.
Restrictions on Resale
Any person receiving shares of the Common Stock under the Plan who is an
"affiliate" of the Association or the Holding Company as the term "affiliate" is
used in Rules 144 and 405 under the Securities Act of 1933, as amended
("Securities Act") (e.g., directors, officers and substantial shareholders of
the Association) may reoffer or resell such shares only pursuant to a
registration statement filed under the Securities Act (the Holding Company and
the Association having no obligation to file such registration statement) or,
assuming the availability thereof, pursuant to Rule 144 or some other exemption
from the registration requirements of the Securities Act. Any person who may be
an "affiliate" of the Association or the Holding Company may
S-13
<PAGE>
wish to consult with counsel before transferring any Common Stock owned by him
or her. In addition, Participants who are officers of the Association or the
Holding Company are advised to consult with counsel as to the applicability of
the reporting and short-swing profit liability rules of Section 16 of the
Exchange Act which may affect the purchase and sale of the Common Stock where
acquired or sold under the Plan or otherwise.
LEGAL OPINIONS
The validity of the issuance of the Common Stock will be passed upon by
Breyer & Aguggia, Washington, D.C., which firm is acting as special counsel for
the Holding Company in connection with the Conversion.
S-14
<PAGE>
Investment Form
(Employer Stock Fund)
HERITAGE FEDERAL SAVINGS & LOAN ASSOCIATION
401(k) PLAN
Name of Participant:
-----------------------------------------------------
Social Security Number:
--------------------------------------------------
1. Instructions. In connection with the proposed conversion of Heritage
Federal Savings & Loan Association ("Association") to a stock savings bank and
the simultaneous formation of a holding company ("Conversion"), participants in
the Heritage Federal Savings & Loan Association 401(k) Plan ("Plan") may elect
to direct the investment of up to 100% of their account balance into the
Employer Stock Fund ("Employer Stock Fund"). Amounts transferred at the
direction of Participants into the Employer Stock Fund will be used to purchase
shares of the common stock of Heritage Bancorp, Inc. ("Common Stock"), the
proposed holding company for the Association. A Participant's eligibility to
purchase shares of Common Stock is subject to the Participant's general
eligibility to purchase shares of Common Stock in the Conversion and the maximum
and minimum limitations set forth in the Plan Conversion. See the Prospectus
for additional information.
You may use this form to direct a transfer of funds credited to your
account to the Employer Stock Fund, to purchase Common Stock in the Conversion.
To direct such a transfer to the Employer Stock Fund, you should complete this
form and return it to _________ at the Association, no later than the close of
business on _______________, 1998. The Association will keep a copy of this
form and return a copy to you. (If you need assistance in completing this form,
please contact _________).
2. Transfer Direction. I hereby direct the Plan Administrator to
transfer $__________ (in increments of $15) to the Employer Stock Fund to be
applied to the purchase of Common Stock in the Conversion. Please transfer this
amount from the following investments in the amounts
indicated:____________________.
3. Effectiveness of Direction. I understand that this Investment Form
shall be subject to all of the terms and conditions of the Plan and the terms
and conditions of the Conversion. I acknowledge that I have received a copy of
the Prospectus and the Prospectus Supplement.
- ------------------------------------ --------------------------------
Signature Date
* * * * *
4. Acknowledgement of Receipt. This Investment Form was received by the
Plan Administrator and will become effective on the date noted below.
- ------------------------------------- --------------------------------
Plan Administrator Date
S-15
<PAGE>
PROSPECTUS
HERITAGE BANCORP, INC.
(Holding company for Heritage Federal Savings & Loan Association,
to be known as Heritage Federal Bank)
Between 2,975,000 and 4,628,750 Shares of Common Stock
Heritage Federal Savings & Loan Association is converting from the mutual form
to the stock form of organization and changing its name to Heritage Federal
Bank. As part of the conversion, Heritage Federal Savings & Loan Association
will become a wholly-owned subsidiary of Heritage Bancorp, Inc., which was
formed in November 1997. The common stock of Heritage 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 the members of
Heritage Federal Savings & Loan Association. The conversion will not go forward
if Heritage Federal Savings & Loan Association does not receive this approval or
Heritage Bancorp, Inc. does not sell at least the minimum number of shares.
- --------------------------------------------------------------------------------
OFFERING SUMMARY
The amount of common stock being offered in the conversion is based on an
independent appraisal of the market value of Heritage Federal Savings & Loan
Association, after giving effect to the conversion and the formation of Heritage
Bancorp, Inc. The independent appraiser has stated that as of November 28, 1997,
the market value of Heritage Bancorp, Inc. and the converted Heritage Federal
Savings & Loan Association ranged from $44,625,000 to $60,375,000. Subject to
approval of the Office of Thrift Supervision, an additional 15% above the
maximum number of shares may be sold.
Price Per Share: $15.00
<TABLE>
<CAPTION>
Maximum, as
Minimum Midpoint Maximum adjusted
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Number of shares: 2,975,000 3,500,000 4,025,000 4,628,750
Gross offering proceeds: $44,625,000 $52,500,000 $60,375,000 $69,431,250
Estimated offering expenses: $ 1,098,000 $ 1,207,000 $ 1,315,000 $ 1,320,000
Estimated net proceeds: $43,527,000 $51,293,000 $59,060,000 $68,111,250
Estimated net proceeds per
share: $ 14.63 $ 14.66 $ 14.67 $ 14.71
</TABLE>
Trident Securities, Inc. will use its best efforts to assist Heritage 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 Heritage Federal Savings & Loan
Association until the completion or termination of the conversion.
Heritage Bancorp, Inc. has received preliminary approval to have its common
stock quoted on the Nasdaq National Market under the symbol HBSC.
The subscription offering will terminate at 12:00 Noon, Eastern Time, on
______________, 1998, unless extended for up to ___ days.
- --------------------------------------------------------------------------------
These securities are not deposits or accounts and are not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
For a discussion of certain risks that you should consider, see "RISK FACTORS"
beginning on page 7.
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.
- --------------------------------------------------------------------------------
For additional information about the conversion, please refer to the more
detailed information in this prospectus. For assistance, please contact the
stock information center at (___)___________.
TRIDENT SECURITIES, INC.
The date of this prospectus is ___________, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary...................................................................
Risk Factors..............................................................
Selected Consolidated Financial Information...............................
Use of Proceeds...........................................................
Dividend Policy...........................................................
Market for Common Stock...................................................
Capitalization............................................................
Historical and Pro Forma Regulatory Capital Compliance....................
Pro Forma Data............................................................
Shares to be Purchased by Management Pursuant to Subscription Rights......
Heritage Federal Savings & Loan Association Statements of Income..........
Management's Discussion and Analysis of Financial Condition and
Results of Operations...................................................
Business of the Holding Company...........................................
Business of the Association...............................................
Management of the Holding Company.........................................
Management of the Association.............................................
Regulation................................................................
Taxation..................................................................
The Conversion............................................................
Restrictions on Acquisition of the Holding Company........................
Description of Capital Stock of the Holding Company.......................
Registration Requirements.................................................
Legal and Tax Opinions....................................................
Experts...................................................................
Additional Information....................................................
Index to Consolidated Financial Statements................................
Glossary.................................................................. G-1
</TABLE>
<PAGE>
Heritage Federal Savings & Loan Association
Laurens, South Carolina
[map of South Carolina showing county boarders, with enlargement of Greenville,
Anderson, Laurens and Greenwood Counties showing the location of the towns of
Simpsonville, Belton, Laurens and Ware Shoals appears here]
<PAGE>
SUMMARY
The following summary explains the significant aspects of the conversion.
For additional information about the conversion, please refer to the more
detailed information in this prospectus. For assistance, please contact the
stock information center at (___) ____________. Throughout this prospectus,
Heritage Federal Savings & Loan Association is referred to as the "Association"
and Heritage Bancorp, Inc. is referred to as the "Holding Company." See the
glossary at the back of this prospectus for the definitions of certain terms
that are printed in boldface type the first time they appear in this prospectus.
Heritage Bancorp, Inc.
The Association formed the Holding Company under Delaware law in November
1997 for the purpose of owning all of the Association's capital stock following
completion of the conversion. The Holding Company has received conditional
approval of the OTS to become a savings and loan holding company by acquiring
the capital stock of the Association in the conversion. Before the completion of
the conversion, the Holding Company will not have any material assets or
liabilities, and it will not engage in any material operations. After the
conversion, the Holding Company's primary assets will be all of the capital
stock of the Association, a portion of the net proceeds of the conversion and a
note receivable from the Association's ESOP. Initially, the primary activity of
the Holding Company will be to direct, plan and coordinate the Association's
business activities. In the future, the Holding Company might become an
operating company or acquire or organize other operating subsidiaries, including
other financial institutions. The Holding Company's main office is located at
201 W. Main Street, Laurens, South Carolina 29360 and its telephone number is
(864) 984-4581.
Heritage Federal Savings & Loan Association
Chartered in 1948, the Association is a federal mutual savings and loan
association. The Association was originally known as Laurens Federal Savings &
Loan Association. In 1977, the Association changed its name to Heritage Federal
Savings & Loan Association. In connection with the conversion, the Association
will change its name to Heritage Federal Bank. The Association's main office is
located at 201 W. Main Street, Laurens, South Carolina 29360 and its telephone
number is (864) 984-4581.
The Association is regulated by the OTS and the FDIC. The Association's
deposits have been federally-insured by the FDIC since 1948 and are currently
insured by the FDIC under the SAIF. The Association has been a member of the
FHLB-System since 1948.
The Association is a community oriented financial institution that operates
out of four offices in the Upstate region of South Carolina. The Association's
principal business is attracting deposits from the general public and using
those funds to originate residential mortgage loans. At September 30, 1997, the
Association had total assets of $247.5 million, deposits of $215.4 million and
total equity of $29.2 million. At that date, $180.6 million, or 73.0%, of the
Association's assets were residential mortgage loans and $200.2 million, or
91.7%, of the Association's liabilities were certificates of deposit. The
Association emphasizes the origination of ARM loans and generally holds its
loans for long-term investment purposes. For a discussion of the Association's
business strategy and recent results of operations, see "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." For a discussion
of the Association's business activities, see "BUSINESS OF THE ASSOCIATION."
The Conversion
The Association is undertaking the conversion pursuant to its Plan of
Conversion. The conversion is a change in the Association's legal form of
organization. The Association currently operates as a federally chartered mutual
savings and loan association with no stockholders. Through the conversion, the
Association will become a federally chartered stock savings bank and will issue
shares of its common stock to Heritage Bancorp, Inc. As part
1
<PAGE>
of the conversion, Heritage Bancorp, Inc., as the Association's holding company,
will issue shares of its common stock to the public and to the Association's
ESOP. Currently, the Association's depositor and borrower members have voting
rights in the Association and, therefore, are entitled to elect directors of the
Association and to vote on other important matters. Following the conversion,
the Holding Company will exercise all voting rights with respect to the
Association's common stock, and the Holding Company's stockholders will elect
its directors and exercise all other voting rights with respect to the Holding
Company's common stock. The OTS has approved the conversion, subject to approval
by the Association's members at a special meeting to be held on _________, 1998.
For further description of the conversion, see "THE CONVERSION."
Reasons for the Conversion
As a federal mutual savings and loan association, the Association does not
have stockholders and does not have authority to issue capital stock. By
converting to the stock form of organization, the Association will be structured
in the form used by commercial banks, most business entities and a growing
number of savings institutions. The conversion will be important to the
Association's future growth and performance by providing a larger capital base
from which it can operate, by enhancing its ability to attract and retain
qualified management through stock-based compensation plans, by enhancing its
ability to diversify into other financial services related activities and by
expanding its ability to provide services to the public. At this time, the
Association does not have any specific plans or arrangements for diversification
or expansion. See "THE CONVERSION -- Reasons for the Conversion."
Use of Proceeds
The Holding Company will use the net conversion proceeds as follows:
- 50% will be used to buy all of the common stock of the Association. The
Association will use these funds to make loans and purchase investments
similar to the kinds it currently holds.
- 8% will be loaned to the ESOP to fund its purchase of common stock.
- 42% will be kept for general corporate purposes. These purposes may
include, for example, paying dividends or buying back shares of common
stock.
For further discussion, see "USE OF PROCEEDS."
The Subscription and Direct Community Offerings
The Holding Company is offering shares of its common stock in a
Subscription Offering to certain current and former depositor and borrower
customers of the Association and to the Association's ESOP. Pursuant to its Plan
of Conversion, the Association has granted subscription rights in the following
order of priority in accordance with applicable regulatory requirements to:
1. "Eligible Account Holders" -- the Association's depositors with $50
or more on deposit as of June 30, 1996.
2. "ESOP" -- the Employee Stock Ownership Plan to be implemented by the
Association in the conversion.
3. "Supplemental Eligible Account Holders" -- the Association's
depositors with $50 or more on deposit as of December 31, 1997.
2
<PAGE>
4. "Other Members" -- the Association's depositors as of January 30,
1998 and borrowers of the Association as of October 21, 1997 whose
loans continue to be outstanding as of January 30, 1998.
- --------------------------------------------------------------------------------
Subscription rights are not transferable, and persons with subscription
rights may not subscribe for shares for the benefit of any other person. If you
violate this prohibition you may lose your right to purchase shares in the
conversion and may be subject to criminal prosecution and/or other sanctions.
- --------------------------------------------------------------------------------
The Subscription Offering will expire at 12:00 Noon, Eastern Time, on
___________, 1998, unless extended by the Association and the Holding Company
for up to ___ days. In the event of an oversubscription, shares will be
allocated in accordance with the Plan of Conversion.
Shares not sold in the Subscription Offering may be offered to the general
public in a Direct Community Offering with preference given to natural persons
and trusts of natural persons who are residents of the Association's Local
Community. The Direct Community Offering, if one is held, is expected to begin
immediately after the conclusion of the Subscription Offering, but may begin at
any time during the Subscription Offering. The Subscription Offering, and the
Direct Community Offering, if any, are being managed by Trident Securities.
Trident Securities is a registered broker-dealer and a member of the NASD.
Trident Securities is not obligated to purchase any shares of common stock in
this offering. Shares not sold in the Subscription Offering or Direct Community
Offering may be offered for sale in a Syndicated Community Offering, which would
be an offering to the general public on a best efforts basis by a selling group
of broker-dealers managed by Trident Securities. See "THE CONVERSION -- The
Subscription, Direct Community and Syndicated Community Offerings."
You will not pay a commission to buy any shares in the conversion.
Stock Pricing and Number of Shares to be Issued in the Conversion
Between 2,975,000 and 4,025,000 shares of the common stock will be sold,
all at a price of $15.00 per share. With the approval of the OTS, the number of
shares may be increased to 4,628,750.
The amount of common stock being offered in the conversion is based on an
independent appraisal of the estimated pro forma market value of the Holding
Company and the Association. RP Financial, the independent appraiser, has
estimated that, in its opinion, as of November 28, 1997, the aggregate pro forma
market value of the Holding Company and the Association ranged between
$44,625,000 and $60,375,000 (with a midpoint of $52,500,000) ("Estimated
Valuation Range"). The pro forma market value is the market value of the Holding
Company and the Association after taking into account the sale of shares in this
offering. The appraisal was based in part on the Association's financial
condition and operations and the effect of the additional capital raised by the
sale of common stock in this offering. The independent appraisal will be updated
prior to the completion of the conversion. If the pro forma market value of the
Holding Company and the Association changes to either below $44,625,000 or above
$69,431,250 (the adjusted maximum of the offering), you will be notified and
provided with the opportunity to modify or cancel your order. The $15.00 per
share purchase price was determined by the Boards of Directors of the Holding
Company and the Association. See "THE CONVERSION -- Stock Pricing and Number of
Shares to be Issued."
Purchase Limitations
The minimum number of shares that you may purchase is 25. The Association
has established the following additional purchase limitations:
- Except for the ESOP, which may subscribe for 8% of the shares issued in
the conversion, no eligible subscriber (including all persons on a joint
account) may purchase more than $330,000 of common stock (or 22,000 shares)
in the Subscription Offering.
3
<PAGE>
- No person may purchase more than $330,000 of common stock (or 22,000
shares) in the Direct Community Offering or Syndicated Community Offering.
- No person, either alone or together with associates or persons acting in
concert, may purchase more than the overall maximum purchase limitation of
1% of the total number of shares of common stock issued in the conversion
(not taking into account an increase in the number of shares as a result of
the increase of the appraisal to the adjusted maximum).
For further discussion of the purchase limits and definitions of
"associate" and "acting in concert," see "THE CONVERSION -- Limitations on
Purchases of Shares."
Procedure for Purchasing Common Stock
To subscribe for shares of common stock in the Subscription Offering, you
should send or deliver an original, signed stock order form together with full
payment (or appropriate instructions for withdrawal from permitted deposit
accounts, as described below) to the Association in the postage-paid envelope
provided so that the stock order form is received before the end of the
Subscription Offering. You must also sign the certification that is part of the
stock order form. Payment for shares may be made in cash (if made in person) or
by check or money order. The Association will pay interest at the rate it pays
on passbook accounts from the date funds are received until completion or
termination of the conversion. Subscribers who have deposit accounts with the
Association may include instructions on the stock order form requesting
withdrawal from such deposit account(s) to purchase shares. Withdrawals from
certificates of deposit may be made without incurring an early withdrawal
penalty. All funds authorized for withdrawal from deposit accounts with the
Association will earn interest at the applicable account rate. After the
Association receives your order, your order cannot be withdrawn or changed,
except with the consent of the Association.
To ensure that your subscription rights are properly identified, you must
list all qualifying savings accounts and loans, as of the respective qualifying
dates, on the stock order form. Persons who do not list all qualifying savings
accounts and loans may be subject to reduction or rejection of their
subscription.
The Holding Company and the Association have the discretion to accept or
reject orders received either through the Direct Community Offering or the
Syndicated Community Offering. If your order is rejected in part, you will not
have the right to cancel the remainder of the order.
Owners of self-directed IRAs may use the assets of their IRAs to purchase
shares of common stock in the conversion, provided that their IRAs are not
maintained on deposit with the Association. If you want to use funds in a self-
directed IRA maintained by the Association to purchase shares of common stock,
you must transfer your account to an unaffiliated institution or broker. If you
are interested in doing so, you should contact the Association's stock
information center no later than _____________, 1998.
For further information on how to purchase stock, see "THE CONVERSION --
Procedure for Purchasing Shares in the Subscription and Direct Community
Offerings."
Purchases by Officers and Directors
The Association expects its directors and executive officers (together with
their associates) to subscribe for 168,336 shares, which equals 4.8% of the
shares issued at the midpoint of the offering range. The purchase price paid by
them will be the same $15.00 per share price as that paid by all other persons
who purchase shares in the conversion. See "SHARES TO BE PURCHASED BY MANAGEMENT
PURSUANT TO SUBSCRIPTION RIGHTS."
4
<PAGE>
Benefits of the Conversion to Management
ESOP. The Association will adopt the ESOP in connection with the
conversion. The ESOP intends to purchase 8% of the shares of common stock issued
in the conversion. If the ESOP's subscription is not filled in its entirety, the
ESOP may purchase shares in the open market or may purchase shares directly from
the Holding Company. The Holding Company will recognize additional compensation
expense as a result of the adoption of the ESOP. If the number of shares sold in
the conversion is increased above the maximum of the offering range, the ESOP
will have a first priority to purchase any such shares over the maximum of the
offering range, up to a total of 8% of the common stock. For information about
the ESOP, see "MANAGEMENT OF THE ASSOCIATION -- Benefits -- Employee Stock
Ownership Plan." See also "RISK FACTORS -- New Expenses Associated With ESOP and
MRP" and "PRO FORMA DATA."
Management Recognition Plan. The Holding Company expects to seek
stockholder approval of the MRP no earlier than six months after completion of
the conversion. The MRP will reserve a number of shares equal to 4% of the
number of shares issued in the conversion. Pursuant to the MRP, the Holding
Company would be able to make awards of shares of common stock to key employees
and directors of the Holding Company and the Association at no cost to the
recipient. All awards would be subject to vesting over a minimum of five years.
The size of individual awards will be determined prior to submitting the MRP for
stockholder approval, and disclosure of anticipated awards will be included in
the proxy materials for such meeting. For additional information about the MRP,
see "MANAGEMENT OF THE ASSOCIATION -- Benefits -- Management Recognition Plan."
See also "RISK FACTORS -- New Expenses Associated With ESOP and MRP" and "PRO
FORMA DATA."
Stock Option Plan. The Holding Company expects to seek stockholder
approval of a Stock Option Plan no earlier than six months after completion of
the conversion. The Stock Option Plan will reserve a number of shares equal to
10% of the number of shares issued in the conversion. Pursuant to the Stock
Option Plan, the Holding Company would be able to award options to acquire
shares of common stock to key employees and directors of the Holding Company and
the Association at no cost to the recipient. The exercise price of such options
would be 100% of the fair market value of the common stock on the date the
option is granted. All awards would be subject to vesting over a minimum of five
years. The size of individual awards will be determined prior to submitting the
Stock Option Plan for stockholder approval, and disclosure of anticipated awards
will be included in the proxy materials for such meeting. For additional
information about the Stock Option Plan, see "MANAGEMENT OF THE ASSOCIATION --
Benefits -- Stock Option Plan."
Employment and Severance Agreements. The Holding Company and the
Association plan to enter into an employment agreement with J. Edward Wells, the
Association's Chief Executive Officer. The employment agreement will provide
certain benefits to Mr. Wells if he is terminated following a change in control
of the Holding Company or the Association. If there is a change in control of
the Holding Company or the Association, Mr. Wells will be entitled to a package
of cash and/or benefits with a maximum value equal to 2.99 times his average
annual compensation during the five-year period preceding the change in control.
If a change of control had occurred as of September 30, 1997, the total value of
the severance benefits payable to Mr. Wells under the proposed employment
agreement would have been approximately $427,000. See "RISK FACTORS --
Provisions of Employment and Severance Agreements and Severance Plan" and
"MANAGEMENT OF THE ASSOCIATION -- Executive Compensation -- Employment
Agreement."
The Holding Company and the Association plan to enter into severance
agreements with four of the Association's senior officers, none of whom will be
covered by an employment agreement. The severance agreements provide certain
benefits to the officers if they are terminated following a change in control of
the Holding Company or the Association. If there is a change in control of the
Holding Company or the Association, each senior officer would be entitled to a
package of cash and/or benefits with a maximum value equal to two times his
compensation during the 12-month period preceding the change in control. If a
change of control had occurred as of September 30, 1997, the total value of the
severance benefits payable to these senior officers under the proposed
agreements would have been approximately $417,000. See "RISK FACTORS --
Provisions of Employment and
5
<PAGE>
Severance Agreements and Severance Plan" and "MANAGEMENT OF THE ASSOCIATION --
Executive Compensation -- Severance Agreements."
Employee Severance Compensation Plan. In connection with the conversion,
the Board of Directors of the Association intends to adopt the Severance Plan to
provide benefits to eligible employees in the event of a change in control of
the Holding Company or the Association. Officers who enter into separate
employment or severance agreements with the Holding Company and the Association
will not be eligible to participate in the Severance Plan. The Severance Plan
will provide that, in the event of a change in control of the Holding Company or
the Association, eligible employees who are terminated or who terminate
employment (but only upon the occurrence of events specified in the Severance
Plan) within 12 months of the effective date of a change in control will be
entitled to a payment based on years of service and/or position with the
Association, subject to certain limits. If a change in control had occurred at
September 30, 1997 and all eligible employees had been terminated, the total
payment due under the Severance Plan would be approximately $529,000. See "RISK
FACTORS -- Provisions of Employment and Severance Agreements and Severance Plan"
and "MANAGEMENT OF THE ASSOCIATION -- Executive Compensation -- Employee
Severance Compensation Plan."
Market for Common Stock
The Holding Company has obtained preliminary approval for the common stock
to be quoted on the Nasdaq National Market under the symbol HBSC. After shares
of the common stock commence trading, interested investors may contact a stock
broker to buy or sell shares. The Holding Company cannot assure you that there
will be active trading market for the common stock. See "RISK FACTORS -- Absence
of Prior Market for the Common Stock" and "MARKET FOR COMMON STOCK."
Dividend Policy
The Holding Company intends to adopt a policy of paying regular semi-annual
cash dividends at an annual rate of $0.30 per share (2.0% based on the $15.00
per share purchase price of the common stock in the conversion). Dividends will
be subject to determination and declaration by the Board of Directors, which
will take into account a number of factors, including the Holding Company's
consolidated operating results and financial condition, net worth and capital
requirements, as well as regulatory restrictions on the payment of dividends
from the Association to the Holding Company (which would be a primary source of
funds for the Holding Company). The Holding Company cannot assure you that
dividends will in fact be paid or that if paid such dividends will not be
reduced or eliminated in the future. For further information about the payment
of dividends, see "DIVIDEND POLICY."
6
<PAGE>
RISK FACTORS
Before investing in the common stock please carefully consider the matters
discussed below. The common stock is not a savings account or deposit and is not
insured by the FDIC or any other government agency.
Reliance on Certificates of Deposit
At September 30, 1997, $200.2 million, or 92.9%, of the Association's
deposits were certificates of deposit, of which $148.9 million mature within one
year. Jumbo certificates of deposit (certificate accounts with balances of
$100,000 or more) totalled $40.3 million, or 20.1% of certificates of deposit,
at September 30, 1997. As a result of the large percentage of certificates of
deposit, the average rate paid on the Association's deposits is higher than the
average rate paid by institutions that have more checking and savings accounts,
which generally pay lower rates of interest. The Association's high cost of
deposits results in a lower interest rate spread and negatively impacts the
Association's profitability. In addition, certificates of deposit can be a more
interest rate sensitive source of funds than checking or savings accounts. If
interest rates rise significantly or if the Association does not offer
competitive interest rates on its certificates of deposit, the Association could
experience a significant decrease in its deposit accounts.
Mortgage Lending and Risks Associated with ARM Loans
At September 30, 1997, approximately 73.0% of the Association's assets
consisted of residential mortgage loans. Such loans represented 90.0% of the
total loan portfolio at that date. While generally considered to involve less
risk than other types of lending such as commercial mortgage loans, commercial
business loans and consumer loans, residential mortgage loans provide relatively
lower yields. The Association's loan portfolio also includes a significant
amount of loans with adjustable rates of interest. At September 30, 1997, $170.3
million, or 84.8%, of the Association's total loans receivable had adjustable
interest rates. Adjustable rate loans generally pose the risk that as interest
rates rise the underlying payments of the borrowers rise, thereby increasing the
potential for loan delinquencies and loan losses. At the same time, the
marketability of the underlying properties may be adversely affected by higher
interest rates. The Association's adjustable rate loans contain periodic and
lifetime interest rate adjustment limits which, in a rising interest rate
environment, may prevent such loans from repricing to market interest rates.
Furthermore, most of the Association's ARM loans have an annual adjustment limit
of 1% and a lifetime adjustment limit of 4%. Most of the Association's ARM loans
adjust based on the National Median Cost of Funds Index. This index is a lagging
market index, which means that upward adjustments in this index may occur more
slowly than changes in the Association's cost of interest-bearing liabilities,
especially during periods of rapidly increasing interest-rates. Moreover, the
Association's ability to originate ARM loans may be affected by changes in the
level of interest rates and by market acceptance of the terms of such loans. In
a relatively low interest rate environment, as currently exists, borrowers
generally tend to favor fixed-rate loans over ARM loans. For a discussion of the
Association's loan portfolio, see "BUSINESS OF THE ASSOCIATION -- Lending
Activities."
Interest Rate Risk
Changes in interest rates can have significant effects on the Association's
profitability. The Association's ability to make a profit, like that of most
financial institutions, depends largely on its net interest income, which is the
difference between the interest income received from its interest-earning assets
(such as loans and investment securities) and the interest expense incurred in
connection with its interest-bearing liabilities (such as deposits and
borrowings). The Association's net interest income and the market value of its
assets and liabilities could be significantly affected by changes in interest
rates. In a rising interest rate environment, the Association anticipates that
its net interest income could be adversely affected as liabilities could reprice
to higher market rates more quickly than assets. In addition, rising interest
rates may adversely affect the Association's earnings because they may cause a
decrease in customer demand for loans. See "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Asset and Liability
Management."
7
<PAGE>
Changes in interest rates also can affect the average life of loans and
mortgage-backed securities. During periods of declining interest rates, loans
and mortgage-backed securities prepay faster as loans are prepaid and refinanced
at lower interest rates. During such periods, the Association generally will not
be able to reinvest the proceeds of any such prepayments at comparable yields.
Conversely, during periods of rising interest rates, the rate of prepayments
generally slows. Moreover, volatility in interest rates also can result in
disintermediation, or the flow of funds away from savings institutions into
direct investments, such as U.S. Government and corporate securities and other
investment vehicles which, because of the absence of federal insurance premiums
and reserve requirements, generally pay higher rates of return than savings
institutions.
Below Average Return on Equity After Conversion
Return on equity (net income divided by average equity) is a ratio used by
many investors to compare the performance of a particular company with other
companies. The Holding Company's post-conversion return on equity will be below
the average return on equity for many publicly held savings and loans and banks.
In addition, the expenses associated with the ESOP and MRP, along with other
post-conversion expenses, are expected to contribute to reduced earnings levels.
Over time, the Holding Company intends to deploy the net proceeds from the
conversion to increase earnings per share and book value per share, without
assuming undue risk, with the goal of achieving a return on equity competitive
with other publicly traded savings and loans. This goal could take a number of
years to achieve, and the Holding Company cannot assure you that this goal can
be attained. Consequently, you should not expect a competitive return on equity
in the near future. See "SELECTED CONSOLIDATED FINANCIAL INFORMATION,"
"CAPITALIZATION" AND "PRO FORMA DATA."
New Expenses Associated With ESOP and MRP
If the ESOP and MRP are implemented, the Association will recognize
additional material employee compensation and benefit expenses that stem from
the shares purchased or granted to employees and executives under those plans.
The Association cannot predict the actual amount of these new expenses because
applicable accounting practices require that they be based on the fair market
value of the shares of common stock when the expenses are recognized. Expenses
for the ESOP would be recognized when shares are committed to be released to
participants' accounts, and expenses for the MRP would be recognized over the
vesting period of awards made to recipients. These expenses have been reflected
in the pro forma financial information under "PRO FORMA DATA" assuming the
$15.00 per share purchase price as fair market value. Actual expenses, however,
will be based on the fair market value of the common stock at the time of
recognition, which may be higher or lower than $15.00. For further discussion of
these plans, see "MANAGEMENT OF THE ASSOCIATION -- Benefits -- Employee Stock
Ownership Plan" and "-- Benefits -- Management Recognition Plan."
Possible Dilutive Effect of Benefit Programs
If the conversion is completed and stockholders approve the MRP and Stock
Option Plan, the Holding Company intends to issue shares to its officers and
directors through these plans. If the shares for the MRP are issued from
authorized but unissued stock, your ownership interest could be diluted by up to
approximately 3.85%. If the shares for the Stock Option Plan are issued from
authorized but unissued stock, your ownership interest could be diluted by up to
approximately 9.09%. In either case, the issuance of additional shares would
decrease net income per share and stockholders' equity per share. If the ESOP is
not able to purchase 8% of the shares of common stock issued in the conversion,
the ESOP may purchase newly issued shares from the Holding Company. If this
occurs, your ownership interest would be diluted and net income per share and
stockholders' equity per share may be decreased. See "PRO FORMA DATA."
Possible Voting Control by Management and Employees
The 168,336 shares of common stock expected to be purchased by the
Association's directors and executive officers and their associates in the
conversion, combined with the shares expected to be awarded or sold to plan
8
<PAGE>
participants under the ESOP, the MRP and the Stock Option Plan, could ultimately
result in management and employees and their associates controlling up to
approximately 26.2% of the outstanding shares of the common stock (assuming the
sale of 4,025,000 shares in the conversion and that the shares issued under the
MRP and the Stock Option Plan are repurchased treasury shares) and could permit
management to benefit from certain statutory and regulatory provisions, as well
as certain provisions in the Holding Company's Certificate of Incorporation and
Bylaws, that may tend to promote the continuity of existing management. If these
individuals were to act as a group or in concert with each other, they could
have significant influence over the outcome of any stockholder vote requiring a
majority vote and in the election of directors and could effectively exercise
veto power in matters requiring the approval of stockholders, such as certain
business combinations. Management might thus have the power to authorize actions
that may be viewed as contrary to the best interests of non-affiliated holders
of the common stock and might have veto power over actions that such holders may
deem to be in their best interests. See "SHARES TO BE PURCHASED BY MANAGEMENT
PURSUANT TO SUBSCRIPTION RIGHTS," "MANAGEMENT OF THE ASSOCIATION -- Executive
Compensation" and "RESTRICTIONS ON ACQUISITIONS OF THE HOLDING COMPANY."
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 that management opposes. As a result,
stockholders who might desire to participate in such a transaction may not have
an opportunity to do so. Such provisions will also make the removal of the
current board of directors or management of the Holding Company, or the
appointment of new directors, more difficult. These provisions include:
limitations on voting rights of beneficial owners of more than 10% of the
Holding Company's common stock; supermajority voting requirements for certain
business combinations; the election of directors to staggered terms of three
years; the elimination of cumulative voting for directors; and the removal of
directors without cause only upon the vote of holders of 80% of the outstanding
voting shares. The Certificate of Incorporation of the Holding Company also
contains provisions regarding the timing and content of stockholder proposals
and nominations and limiting the calling of special meetings. See "RESTRICTIONS
ON ACQUISITION OF THE HOLDING COMPANY."
Provisions of Employment and Severance Agreements and Severance Plan
The employment and severance agreements of senior officers of the Holding
Company and the Association provide for cash severance payments and/or the
continuation of health, life and disability benefits in the event of their
termination of employment following a change in control of the Holding Company
or the Association. If a change in control had occurred at September 30, 1997,
the aggregate value of the severance benefits available to these executive
officers under the agreements would have been approximately $844,000. In
addition, if a change in control had occurred at September 30, 1997 and all
eligible employees had been terminated, the aggregate payment due under the
Severance Plan would have been approximately $529,000. These arrangements may
have the effect of increasing the costs of acquiring the Holding Company,
thereby discouraging future attempts to take over the Holding Company or the
Association. For information about the proposed employment and severance
agreements and Severance Plan, see "MANAGEMENT OF THE ASSOCIATION -- Executive
Compensation."
Competition
The Association faces intense competition both in making loans and
attracting deposits. Competition for loans principally comes from commercial
banks, savings associations, credit unions, mortgage banking companies and
insurance companies. Historically, commercial banks, savings associations and
credit unions have been the Association's most direct competition for deposits.
The Association also competes with short-term money market funds and with other
financial institutions, such as brokerage firms and insurance companies, for
deposits. In competing for loans, the Association may be forced to offer lower
loan interest rates periodically. Conversely, in
9
<PAGE>
competing for deposits, the Association may be forced to offer higher deposit
interest rates periodically. Either case or both cases could adversely affect
net interest income. See "BUSINESS OF THE ASSOCIATION -- Competition."
Absence of Prior Market for the Common Stock
The Holding Company has never issued capital stock and, consequently, there
is no existing market for the common stock. Although the Holding Company has
received preliminary approval to list its common stock on the Nasdaq National
Market under the symbol HBSC, the Holding Company cannot guarantee that an
active and liquid trading market for its common stock will develop, or if it
does develop, that it will continue. Furthermore, the Holding Company cannot
guarantee that if you purchase shares in the conversion you will be able to sell
your shares at or above the $15.00 purchase price. See "MARKET FOR COMMON
STOCK."
Possible Increase in Estimated Valuation Range and Number of Shares Issued
RP Financial may increase the Estimated Valuation Range up to 15% to
reflect material changes in the financial condition or results of operations of
the Association or changes in market conditions or general financial, economic
or regulatory conditions following the commencement of the offering. If the
Estimated Valuation Range is increased, the Holding Company anticipates that it
would issue up to 4,628,750 shares of common stock for an aggregate price of up
to $69,431,250. This increase in the number of shares would decrease pro forma
net earnings per share and stockholders' equity per share, increase the Holding
Company's pro forma consolidated stockholders' equity and net earnings, and
increase the purchase price as a percentage of pro forma stockholders' equity
per share and net earnings per share. See "PRO FORMA DATA."
Possible Adverse Income Tax Consequences of the Distribution of Subscription
Rights
If the IRS were to determine that the subscription rights granted pursuant
to the Plan of Conversion have an ascertainable value, receipt of such rights
may be a taxable event (either as capital gain or ordinary income), to those
persons who receive and/or exercise the subscription rights in an amount equal
to such value. Additionally, the IRS could require the Association to recognize
a gain for tax purposes on the distribution of subscription rights. Whether
subscription rights are considered to have ascertainable value is an inherently
factual determination. RP Financial has advised the Association in writing that
such rights have no value, but RP Financial's conclusion is not binding on the
IRS. See "THE CONVERSION -- Effects of Conversion to Stock Form on Depositors
and Borrowers of the Association --Tax Effects."
Financial Institution Regulation and the Future of the Thrift Industry
The Association is subject to extensive regulation, supervision and
examination by the OTS and the FDIC. Legislation has been introduced into
Congress that would consolidate the OTS with the Office of the Comptroller of
the Currency, which regulates national banks. If this or similar legislation is
enacted into law, the Association could be forced to become a state or national
bank and become subject to regulation by a different government agency. If the
Association is required to change charters, its investment authority and the
ability of the Holding Company to engage in diversified activities may be
limited. It is impossible at this time to predict whether such legislation will
be passed or the impact of any such legislation on the operations of the
Association and the Holding Company.
10
<PAGE>
SELECTED FINANCIAL INFORMATION
The following tables set forth certain information concerning the financial
position and results of operations of the Association at the dates and for the
periods indicated. This information should be read in conjunction with the
Financial Statements and Notes thereto presented elsewhere in this prospectus.
<TABLE>
<CAPTION>
At September 30,
-----------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Total assets................................................... $247,499 $244,659 $233,780 $214,817 $211,493
Investment securities.......................................... 24,378 37,892 29,823 32,819 24,681
Mortgage-backed securities..................................... 6,665 9,726 11,989 14,097 13,356
Loans receivable, net.......................................... 192,663 182,950 178,259 159,682 158,536
Loans held for sale............................................ 1,045 -- -- -- 1,674
Deposit accounts............................................... 215,412 209,730 201,473 189,922 190,728
FHLB advances.................................................. -- 5,000 5,000 -- --
Total equity .................................................. 29,235 26,740 25,692 23,367 19,599
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Interest income................................................ $17,773 $16,974 $16,164 $15,361 $16,474
Interest expense............................................... 12,230 12,212 10,431 8,550 9,382
------- ------- ------- ------- -------
Net interest income............................................ 5,543 4,762 5,733 6,811 7,092
Provision for loan losses (recovery of allowance).............. 337 (7) 47 62 35
------- ------- ------- ------- -------
Net interest income after provision for loan losses............ 5,206 4,769 5,686 6,749 7,057
------- ------- ------- ------- -------
Other income................................................... 202 227 218 107 251
Other operating expenses....................................... 2,362 3,877(1) 2,379 2,255 2,400
------- ------- ------- ------- -------
Income before income taxes..................................... 3,046 1,119 3,525 4,601 4,908
Provision for income taxes..................................... 1,094 360 1,546 1,691 1,763
Cumulative effect of change in
accounting principle.......................................... -- -- -- 570(2) --
------- ------- ------- ------- -------
Net income...................................................... $ 1,952 $ 759 $ 1,979 $ 3,480 $ 3,145
======= ======= ======= ======= =======
</TABLE>
- -----------------------
(1) Includes one-time SAIF assessment of $1.2 million.
(2) Reflects adoption of SFAS No. 109, "Accounting for Income Taxes."
11
<PAGE>
<TABLE>
<CAPTION>
At September 30,
-------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SELECTED OTHER DATA:
Number of:
Mortgage loans outstanding.................................... 3,366 3,340 3,418 3,360 3,493
Deposit accounts.............................................. 11,424 11,576 11,684 11,480 11,957
Full-service offices.......................................... 4 4 4 4 4
<CAPTION>
At September 30,
-------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL RATIOS:
Performance Ratios:
Return on average assets(1) ................................... 0.80% 0.32% 0.87% 1.62% 1.52%
Return on average equity(2).................................... 6.93 2.87 8.08 16.11 17.61
Average equity as a percent of average assets.................. 11.49 10.99 10.79 10.09 8.62
Interest rate spread(3)........................................ 1.76 1.51 2.09 2.84 3.13
Net interest margin(4)......................................... 2.33 2.04 2.59 3.24 3.51
Average interest-earning assets to
average interest-bearing liabilities.......................... 1.11 1.10 1.10 1.10 1.08
Other operating expenses as a
percent of average total assets............................... 0.96 1.61 1.05 1.05 1.16
Capital Ratios:
Tangible....................................................... 11.3 10.6 10.8 10.9 9.3
Core........................................................... 11.3 10.6 10.8 10.9 9.3
Risk-based..................................................... 23.3 22.2 23.1 23.6 20.5
Asset Quality Ratios:
Nonperforming loans as a percent
of loans receivable, net(5)................................... 0.48 0.56 0.52 0.84 1.25
Nonperforming assets as a
percent of total assets(6).................................... 0.54 0.45 0.44 0.81 1.28
Allowance for loan losses as a percent
of gross loans receivable..................................... 0.44 0.35 0.32 0.37 0.34
Allowance for loan losses as a
percent of nonperforming loans................................ 93.58 65.24 63.10 46.28 28.18
Net charge-offs as a percent of
average outstanding loans..................................... 0.07 (0.05) 0.05 0.00 0.00
</TABLE>
- ---------------
(1) Net income divided by average total assets.
(2) Net income divided by average total equity.
(3) Difference between weighted average yield on interest-earning assets and
weighted average cost of interest-bearing liabilities.
(4) Net interest income as a percentage of average interest-earning assets.
(5) Nonperforming loans consist of loans accounted for on a nonaccrual basis.
(6) Nonperforming assets consist of nonperforming loans and real estate
acquired in settlement of loans, but exclude restructured loans. See
"BUSINESS OF THE ASSOCIATION -- Lending Activities -- Nonperforming Assets
and Delinquencies."
12
<PAGE>
RECENT DEVELOPMENTS
The following tables sets forth selected financial condition data for the
Association at December 31, 1997, and September 30, 1997, selected operating
data for the Association for the three months ended December 31, 1997 and 1996
and selected financial ratios for the Association at and for the three months
ended December 31, 1997 and 1996. The selected financial and operating data and
financial ratios at and for the three months ended December 31, 1997 and 1996
are derived from the unaudited financial statements of the Association, which,
in the opinion of management, reflect all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation. This information should
be read in conjunction with the Financial Statements and Notes thereto presented
elsewhere in this prospectus.
<TABLE>
<CAPTION>
At At
December 31, September 30,
1997 1997
------------- -------------
(In Thousands)
<S> <C> <C>
SELECTED BALANCE SHEET DATA:
Total assets....................................................... 252,329 247,499
Investment securities.............................................. 25,598 24,378
Mortgage-backed securities......................................... 5,105 6,665
Loans receivable, net.............................................. 192,086 192,663
Loans held for sale................................................ 1,072 1,045
Deposit accounts................................................... 219,230 215,412
FHLB advances...................................................... -- --
Total equity ...................................................... 30,054 29,235
Three Months
Ended December 31,
-----------------------
1997 1996
---- ----
(In Thousands)
<S> <C> <C>
SELECTED OPERATING DATA:
Interest income.................................................... $4,512 $4,431
Interest expense................................................... 3,118 3,096
------ ------
Net interest income................................................ 1,394 1,335
Provision for loan losses.......................................... -- --
------ ------
Net interest income after
provision for loan losses........................................ 1,394 1,335
Other income....................................................... 48 54
Other operating expenses........................................... 588 581
------ ------
Income before income taxes......................................... 854 808
Provision for income taxes......................................... 330 310
------ ------
Net income ........................................................ $ 524 $ 498
====== ======
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
At or For the
Three Months
Ended December 31,
-----------------------
1997 1996
<S> <C> <C>
SELECTED FINANCIAL RATIOS:
Performance Ratios:(1)
Return on average assets(2) ....................................... 0.84 0.81
Return on average equity(3)........................................ 7.00 7.47
Average equity as a percent of average assets...................... 12.01 10.90
Interest rate spread(4)............................................ 1.69 1.70
Net interest margin(5)............................................. 2.31 2.25
Average interest-earning assets to
average interest-bearing liabilities.............................. 1.12 1.11
Other operating expenses as a percent of average total assets...... 0.94 0.95
Capital Ratios:
Tangible........................................................... 11.0 10.9
Core............................................................... 11.0 10.9
Risk-based......................................................... 23.6 22.6
Asset Quality Ratios:
Nonperforming loans as a percent of loans receivable, net(6)....... 0.43 0.43
Nonperforming assets as a percent of total assets(7)............... 0.54 0.41
Allowance for loan losses as a percent of gross loans receivable... 0.43 0.36
Allowance for loan losses as a percent of nonperforming loans...... 105.95 85.90
Net charge-offs as a percent of average outstanding loans.......... 0.00 0.00
</TABLE>
- -----------
(1) Ratios for the three-month periods are annualized where appropriate.
(2) Net income divided by average total assets.
(3) Net income divided by average equity.
(4) Difference between weighted average yield on interest-earning assets and
weighted average rate on interest-bearing liabilities.
(5) Net interest income as a percentage of average interest-earning assets.
(6) Nonperforming loans consist of loans accounted for on a nonaccrual basis.
(7) Nonperforming assets consist of nonperforming loans and real estate
acquired in settlement of loans, but exclude restructured loans.
Comparison of Financial Condition at December 31, 1997 and September 30, 1997
Total assets increased $4.8 million, or 2.0%, during the first quarter of
fiscal 1998 to $252.3 million. Loans receivable decreased $577,000 as low
long-term interest rates led many borrowers to refinance their loans.
Mortgage-backed securities decreased to $5.1 million from $6.7 million as a
result of continued repayments. Investment securities increased to $25.6 million
from $24.4 million. Cash and cash equivalents increased to $20.2 million from
$14.7 million as the Association continued to accumulate cash faster than it was
able to originate loans.
Total liabilities increased $4.0 million, or 1.8%, during the first quarter
of fiscal 1998 to $222.3 million. Deposit accounts increased $3.8 million, or
1.8%, to $219.2 million. The Association had no borrowings at December 31, 1997.
14
<PAGE>
Total equity increased $819,000, or 2.8%, to $30.0 million at December 31,
1997 from $29.2 million at September 30, 1997. Retained income increased
$524,000 while unrealized gain on available-for-sale securities increased
$294,000.
Nonperforming Assets
Nonaccrual loans decreased $110,000 to $824,000 at December 31, 1997 from
$934,000 at September 30, 1997. Nonaccrual one- to four-family mortgage loans
and builder construction loans decreased $28,000 and $176,000, respectively,
while nonaccrual home equity loans increased $94,000. At December 31, 1997,
total nonaccrual loans accounted for 0.43% of net loans receivable, compared to
0.48% at September 30, 1997. Real estate owned increased $134,000 to $544,000 at
December 31, 1997 from $410,000 at September 30, 1997 as a result of
foreclosures during the quarter. Total nonperforming assets were 0.54% of total
assets at December 31, 1997, which is unchanged from September 30, 1997.
Comparison of Operating Results for the Three Months Ended December 31, 1997 and
1996
General. Net income increased $26,000, or 5.2%, to $524,000 for the three
months ended December 31, 1997 from $498,000 for the three months ended December
31, 1996. The increase in net income was primarily the result of an increase in
interest income, which was partially offset by a small decrease in other income
and small increases in other operating expenses and income taxes.
Net Interest Income. Net interest income increased $59,000, or 4.4%, from
the first quarter of fiscal 1997 to the first quarter of fiscal 1998. Interest
income increased $81,000, or 1.8%, between the periods. Interest income on loans
increased $191,000 as a result of an increase in the average balance of loans
receivable and an increase in the average yield to 8.02% from 7.94%. Interest
income on investment and mortgage-backed securities decreased $110,000 primarily
as a result of smaller balances of these investments. The average yield on total
interest-earning assets was 7.46% for the first quarter of fiscal 1998 compared
to 7.47% for the first quarter of fiscal 1997. Interest expense increased
$22,000, or 0.7%, between the periods. Interest expense on deposits increased
$103,000, or 3.3%, as a result of an increase in the average balance of
deposits. Interest expense on FHLB deposits was $0 compared with $81,000 in the
first quarter of fiscal 1997. The average rate paid on interest-bearing
liabilities was 5.77% for the first quarter of fiscal 1998, which is unchanged
from the same period in the prior year.
Provision for Loan Losses. There was no provision for loan losses in either
the first quarter of fiscal 1998 or the first quarter of fiscal 1997. During the
three months ended December 31, 1997, the Association had charge-offs of $1,000
and no recoveries. At December 31, 1997, the Association's allowance for loan
losses totalled $873,000, which equaled 0.43% of total loans.
Other Income. Other income decreased $6,000, or 11.1%, to $48,000 for the
three months ended December 31, 1997 from $54,000 for the three months ended
December 31, 1996. The decrease was primarily due to a decrease in service
charges and fees, which accounts for substantially all of the Association's
other income.
Other Operating Expenses. Other operating expenses increased $6,000, or
1.0%, from the first quarter of fiscal 1997 to the first quarter of fiscal 1998.
Deposit insurance premiums decreased $86,000 as a result of the reduction in
premiums and employee benefit and compensation expense decreased $13,000.
Expenses for real estate owned were $26,000 in the first quarter of fiscal 1998
compared to income of $77,000 in the first quarter of fiscal 1997. In the three
months ended December 31, 1996, the Association sold real estate owned for a net
gain of $92,000.
Income Taxes. The provision for income taxes was $330,000 in the first
quarter of fiscal 1998 compared to $310,000 in the first quarter of fiscal 1997.
The provision was higher in fiscal 1998 because of higher taxable income.
15
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the common stock offered hereby are
estimated to range from $43.5 million to $59.1 million, or up to $68.1 million
if the Estimated Valuation Range is increased by 15%. See "PRO FORMA DATA" for
the assumptions used to arrive at such amounts. The Holding Company has received
conditional OTS approval to purchase all of the capital stock of the Association
to be issued in the conversion in exchange for 50% of the net proceeds of the
conversion. This will result in the Holding Company retaining approximately
$21.8 million to $29.5 million of net proceeds, or up to $34.1 million if the
Estimated Valuation Range is increased by 15%, and the Association receiving an
equal amount.
Receipt of 50% of the net proceeds of the sale of the common stock will
increase the Association's capital and will support the expansion of the
Association's existing business activities. The Association will use the funds
contributed to it for general corporate purposes, including, initially, lending
and investment in short-term U.S. Government and agency obligations. Depending
on loan demand, the Association may consider using a portion of the conversion
proceeds for investment in mortgage-backed securities.
In connection with the conversion and the establishment of the ESOP, the
Holding Company intends to loan the ESOP the amount necessary to purchase 8% of
the shares of common stock sold in the conversion. The Holding Company's loan to
fund the ESOP may range from $3,570,000 to $4,830,000 based on the sale of
238,000 shares to the ESOP (at the minimum of the Estimated Valuation Range) and
322,000 shares (at the maximum of the Estimated Valuation Range), respectively,
at $15.00 per share. If 15% above the maximum of the Estimated Valuation Range,
or 4,628,750 shares, are sold in the conversion, the Holding Company's loan to
the ESOP would be approximately $5,554,500 (based on the sale of 370,300 shares
to the ESOP). It is anticipated that the ESOP loan will have a 15-year term with
interest payable at the prime rate as published in The Wall Street Journal on
the closing date of the conversion. The loan will be repaid principally from the
Association's contributions to the ESOP and from any dividends paid on shares of
common stock held by the ESOP.
The remaining net proceeds retained by the Holding Company initially will
be invested primarily in short-term U.S. Government and agency obligations. Such
proceeds will be available for additional contributions to the Association in
the form of debt or equity, to support future diversification or acquisition
activities, as a source of dividends to the stockholders of the Holding Company
and for future repurchases of common stock to the extent permitted under
Delaware law and federal regulations. The Holding Company will consider
exploring opportunities to use such funds to expand operations through acquiring
or establishing additional branch offices or acquiring other financial
institutions. Currently, there are no specific plans, arrangements, agreements
or understandings, written or oral, regarding any expansion activities.
Following consummation of the conversion, the Board of Directors will have
the authority to adopt plans for repurchases of common stock, subject to
statutory and regulatory requirements. Since the Holding Company has not yet
issued stock, there currently is insufficient information upon which an
intention to repurchase stock could be based. The facts and circumstances upon
which the Board of Directors may determine to repurchase stock in the future
would include but are not limited to: (i) market and economic factors such as
the price at which the stock is trading in the market, the volume of trading,
the attractiveness of other investment alternatives in terms of the rate of
return and risk involved in the investment, the ability to increase the book
value and/or earnings per share of the remaining outstanding shares, and the
ability to improve the Holding Company's return on equity; (ii) the avoidance of
dilution to stockholders by not having to issue additional shares to cover the
exercise of stock options or to fund employee stock benefit plans; and (iii) any
other circumstances in which repurchases would be in the best interests of the
Holding Company and its stockholders. Any stock repurchases will be subject to a
determination by the Board of Directors that both the Holding Company and the
Association will be capitalized in excess of all applicable regulatory
requirements after any such repurchases and that capital will be adequate,
taking into account, among other things, the Association's level of
nonperforming and classified assets, the Holding Company's and the Association's
current and projected results of operations and asset/liability structure, the
economic environment and tax and other
16
<PAGE>
regulatory considerations. For a discussion of the regulatory limitations
applicable to stock repurchases, see "THE CONVERSION -- Restrictions on
Repurchase of Stock."
DIVIDEND POLICY
General
The Holding Company's Board of Directors anticipates declaring and paying
semi-annual cash dividends on the common stock at an annual rate of $0.30 per
share per year, or 2.0% based on the $15.00 per share purchase price. The first
cash dividend is expected to be declared and paid during the second full quarter
following the consummation of the conversion. In addition, the Board of
Directors may determine to pay periodic special cash dividends in addition to,
or in lieu of, regular cash dividends. Declarations or payments of any dividends
(regular and special) will be subject to determination by the Holding Company's
Board of Directors, which will take into account the amount of the net proceeds
retained by the Holding Company, the Holding Company's financial condition,
results of operations, tax considerations, capital requirements, industry
standards, economic conditions and other factors, including the regulatory
restrictions that affect the payment of dividends by the Association to the
Holding Company discussed below. Under Delaware law, the Holding Company will be
permitted to pay cash dividends after the conversion either out of surplus or,
if there is no surplus, out of net profits for the fiscal year in which the
dividend is declared and/or the preceding fiscal year. In order to pay such cash
dividends, however, the Holding Company must have available cash either from the
net proceeds raised in the conversion and retained by the Holding Company,
borrowings by the Holding Company, dividends received from the Association or
earnings on Holding Company assets. No assurances can be given that any
dividends, either regular or special, will be declared or, if declared, what the
amount of dividends will be or whether such dividends, if commenced, will
continue.
Current Restrictions
Dividends from the Holding Company may depend, in part, upon receipt of
dividends from the Association because the Holding Company initially will have
no source of income other than dividends from the Association and earnings from
the investment of the net proceeds from the offering retained by the Holding
Company. OTS regulations require the Association to give the OTS 30 days'
advance notice of any proposed declaration of dividends to the Holding Company,
and the OTS has the authority under its supervisory powers to prohibit the
payment of dividends to the Holding Company. The OTS imposes certain limitations
on the payment of dividends from the Association to the Holding Company which
utilize a three-tiered approach that permits various levels of distributions
based primarily upon a savings association's capital level. The Association
currently meets the criteria to be designated a Tier 1 association, as
hereinafter defined, and consequently could at its option (after prior notice to
and no objection made by the OTS) distribute up to 100% of its net income during
the calendar year plus 50% of its surplus capital ratio at the beginning of the
calendar year less any distributions previously paid during the year. In
addition, the Association may not declare or pay a cash dividend on its capital
stock if the effect thereof would be to reduce the regulatory capital of the
Association below the amount required for the liquidation account to be
established pursuant to the Association's Plan of Conversion. See "REGULATION --
Federal Regulation of Savings Associations -- Limitations on Capital
Distributions," "THE CONVERSION -- Effects of Conversion to Stock Form on
Depositors and Borrowers of the Association -- Liquidation Account" and Note 1
of Notes to the Financial Statements included elsewhere herein.
Additionally, in connection with the conversion, the Holding Company and
the Association have committed to the OTS that during the one-year period
following consummation of the conversion, the Holding Company will not take any
action to declare an extraordinary dividend to stockholders that would be
treated by recipients as a tax-free return of capital for federal income tax
purposes.
17
<PAGE>
Tax Considerations
In addition to the foregoing, retained earnings of the Association
appropriated to bad debt reserves and deducted for federal income tax purposes
cannot be used by the Association to pay cash dividends to the Holding Company
without the payment of federal income taxes by the Association at the then
current income tax rate on the amount deemed distributed, which would include
the amount of any federal income taxes attributable to the distribution. See
"TAXATION -- Federal Taxation" and Note 9 of Notes to the Financial Statements
included elsewhere herein. The Holding Company does not contemplate any
distribution by the Association that would result in a recapture of the
Association's bad debt reserve or create the above-mentioned federal tax
liabilities.
MARKET FOR COMMON STOCK
The Holding Company has never issued capital stock and, consequently,
there is no existing market for the common stock. Although the Holding Company
has received preliminary approval to list its common stock on the Nasdaq
National Market under the symbol HBSC, there can be no assurance that the
Holding Company will meet Nasdaq National Market listing requirements, which
include a minimum market capitalization, at least three market makers and a
minimum number of record holders. Trident Securities has agreed to make a market
for the Holding Company's common stock following consummation of the conversion
and will assist the Holding Company in seeking to encourage at least two
additional market makers to establish and maintain a market in the common stock.
Making a market involves maintaining bid and ask quotations and being able, as
principal, to effect transactions in reasonable quantities at those quoted
prices, subject to various securities laws and other regulatory requirements.
The Holding Company anticipates that prior to the completion of the conversion
it will be able to obtain the commitment from at least two additional
broker-dealers to act as market makers for the common stock. Additionally, the
development of a liquid public market depends on the existence of willing buyers
and sellers, the presence of which is not within the control of the Holding
Company, the Association or any market maker. There can be no assurance that an
active and liquid trading market for the common stock will develop or that, if
developed, it will continue. The number of active buyers and sellers of the
common stock at any particular time may be limited. Under such circumstances,
investors in the common stock could have difficulty disposing of their shares on
short notice and should not view the common stock as a short-term investment.
Furthermore, there can be no assurance that purchasers will be able to sell
their shares at or above the purchase price or that quotations will be available
on the Nasdaq National Market as contemplated.
18
<PAGE>
CAPITALIZATION
The following table presents the historical capitalization of the
Association at September 30, 1997, and the pro forma consolidated capitalization
of the Holding Company after giving effect to the assumptions set forth under
"PRO FORMA DATA," based on the sale of the number of shares of common stock at
the minimum, midpoint, maximum and maximum, as adjusted, of the Estimated
Valuation Range. The shares that would be issued at the maximum, as adjusted,
of the Estimated Valuation Range would be subject to receipt of OTS approval of
an updated appraisal confirming such valuation. A CHANGE IN THE NUMBER OF
SHARES TO BE ISSUED IN THE CONVERSION MAY MATERIALLY AFFECT PRO FORMA
CONSOLIDATED CAPITALIZATION.
<TABLE>
<CAPTION>
Holding Company
Pro Forma Consolidated Capitalization
Based Upon the Sale of
-------------------------------------------------------------
2,975,000 3,500,000 4,025,000 4,628,750
Capitalization Shares at Shares at Shares at Shares at
as of $15.00 $15.00 $15.00 $15.00
September 30, 1997 Per Share(1) Per Share(1) Per Share(1) Per Share(2)
------------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Deposits(3).......................... $215,412 $215,412 $215,412 $215,412 $215,412
======== ======== ======== ======== ========
Stockholders' equity:
Preferred stock:
500,000 shares, $.01
par value per share,
authorized; none issued
or outstanding.................... $ -- $ -- $ -- $ -- $ --
Common stock:
10,000,000 shares, $.01 par
value per share, authorized;
specified number of shares
assumed to be issued and
outstanding(4).................... -- 30 35 40 46
Additional paid-in capital......... -- 43,497 51,258 59,020 68,065
Retained income(5)................. 29,235 29,235 29,235 29,235 29,235
Less:
Common Stock acquired
by ESOP(6)....................... -- (3,570) (4,200) (4,830) (5,555)
Common Stock to be acquired
by MRP(7)........................ -- (1,785) (2,100) (2,415) (2,777)
--------- -------- -------- -------- --------
Total stockholders' equity........... $ 29,235 $ 67,407 $ 74,228 $ 81,050 $ 89,014
======== ======== ======== ======== ========
</TABLE>
(footnotes on following page)
19
<PAGE>
- ----------------
(1) Does not reflect the possible increase in the Estimated Valuation Range to
reflect material changes in the financial condition or results of
operations of the Association or changes in market conditions or general
financial, economic and regulatory conditions, or the issuance of
additional shares under the Stock Option Plan.
(2) This column represents the pro forma capitalization of the Holding Company
in the event the aggregate number of shares of common stock issued in the
conversion is 15% above the maximum of the Estimated Valuation Range. See
"PRO FORMA DATA" and Footnote 1 thereto.
(3) Withdrawals from deposit accounts for the purchase of common stock are not
reflected. Such withdrawals will reduce pro forma deposits by the amounts
thereof.
(4) The Association's authorized capital will consist solely of 1,000 shares of
common stock, par value $1.00 per share, 1,000 shares of which will be
issued to the Holding Company, and 9,000 shares of preferred stock, no par
value per share, none of which will be issued in connection with the
conversion.
(5) Retained income is substantially restricted by applicable regulatory
capital requirements. Additionally, the Association will be prohibited from
paying any dividend that would reduce its regulatory capital below the
amount in the liquidation account, which will be established for the
benefit of the Association's Eligible Account Holders and Supplemental
Eligible Account Holders at the time of the conversion and adjusted
downward thereafter as such account holders reduce their balances or cease
to be depositors. See "THE CONVERSION -- Effects of Conversion to Stock
Form on Depositors and Borrowers of the Association -- Liquidation
Account."
(6) Assumes that 8% of the common stock sold in the conversion will be acquired
by the ESOP in the conversion with funds from the Holding Company. Under
GAAP, the amount of common stock to be purchased by the ESOP represents
unearned compensation and is, accordingly, reflected as a reduction of
capital. As shares are released to ESOP participants' accounts, a
corresponding reduction in the charge against capital will occur. Since the
funds are borrowed from the Holding Company, the borrowing will be
eliminated in consolidation and no liability or interest expense will be
reflected in the consolidated financial statements of the Holding Company.
See "MANAGEMENT OF THE ASSOCIATION -- Benefits -- Employee Stock Ownership
Plan."
(7) Assumes the purchase in the open market at $15.00 per share, pursuant to
the proposed MRP, of a number of shares equal to 4% of the shares of common
stock issued in the conversion at the minimum, midpoint, maximum and 15%
above the maximum of the Estimated Valuation Range. The issuance of an
additional 4% of the shares of common stock for the MRP from authorized but
unissued shares would dilute the ownership interest of stockholders by
3.85%. The shares are reflected as a reduction of stockholders' equity. See
"RISK FACTORS -- Possible Dilutive Effect of Benefit Programs," "PRO FORMA
DATA" and "MANAGEMENT OF THE ASSOCIATION -- Benefits -- Management
Recognition Plan." The MRP is subject to stockholder approval, which is
expected to be sought at a meeting to be held no earlier than six months
following consummation of the conversion.
20
<PAGE>
HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE
The following table presents the Association's historical and pro forma
capital position relative to its capital requirements at September 30, 1997. The
amount of capital infused into the Association for purposes of the following
table is 50% of the net proceeds of the offering. For purpose of the table
below, the amount expected to be borrowed by the ESOP and the cost of the shares
expected to be acquired by the MRP are deducted from pro forma regulatory
capital. For a discussion of the assumptions underlying the pro forma capital
calculations presented below, see "USE OF PROCEEDS," "CAPITALIZATION" and "PRO
FORMA DATA." The definitions of the terms used in the table are those provided
in the capital regulations issued by the OTS. For a discussion of the capital
standards applicable to the Association, see "REGULATION -- Federal Regulation
of Savings Associations -- Capital Requirements."
<TABLE>
<CAPTION>
PRO FORMA AT SEPTEMBER 30, 1997
---------------------------------------------------------------------------------------
15% above
Minimum of Midpoint of Maximum of Maximum of
Estimated Estimated Estimated Estimated
Valuation Range Valuation Range Valuation Range Valuation Range
------------------- ------------------- ------------------- -------------------
2,975,000 Shares 3,500,000 Shares 4,025,000 Shares 4,628,750 Shares
September 30, 1997 at $15.00 Per Share at $15.00 Per Share at $15.00 Per Share at $15.00 Per Share
------------------- ------------------- ------------------- ------------------- -------------------
Percent of Percent of Percent of Percent of Percent of
Adjusted Adjusted Adjusted Adjusted Adjusted
Total Total Total Total Total
Amount Assets (1) Amount Assets (1) Amount Assets (1) Amount Assets (1) Amount Assets (1)
------ ---------- ------ ---------- ------ ---------- ------ ---------- ------ ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GAAP capital(2)..... $29,235 11.9% $45,643 17.2% $48,581 18.0% $51,518 18.9% $54,959 19.8%
Tangible capital(2). $27,769 11.3% $44,177 16.6% $47,115 17.5% $50,052 18.3% $53,493 19.3%
Tangible capital
requirement....... 3,690 1.5 3,990 1.5 4,044 1.5 4,097 1.5 4,160 1.5
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
Excess.............. $24,079 9.8% $40,187 15.1% $43,071 16.0% $45,955 16.8% $49,333 17.8%
======= ==== ======= ==== ======= ==== ======= ==== ======= ====
Core capital(2)..... $27,769 11.3% $44,177 16.6% $47,115 17.5% $50,052 18.3% $53,493 19.3%
Core capital
requirement(3).... 7,381 3.0 7,980 3.0 8,087 3.0 8,194 3.0 8,319 3.0
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
Excess.............. $20,388 8.3% $36,197 13.6% $39,028 14.5% $41,858 15.3% $45,174 16.3%
======= ==== ======= ==== ======= ==== ======= ==== ======= ====
Total capital(4).... $28,519 23.3% $44,927 35.5% $47,865 37.6% $50,802 39.7% $54,243 42.1%
Risk-based capital
requirement....... 9,796 8.0 10,116 8.00 10,173 8.0 10,230 8.0 10,296 8.0
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
Excess.............. $18,723 15.3% $34,811 27.5% $37,692 29.6% $40,572 31.7% $43,947 34.1%
======= ==== ======= ==== ======= ==== ======= ==== ======= ====
</TABLE>
- ---------------
(1) Based upon total adjusted assets of $246.0 million at September 30, 1997 and
$267.8 million, $271.7 million, $275.6 million and $280.1 million at the
minimum, midpoint, maximum, and maximum, as adjusted, of the Estimated
Valuation Range, respectively, for purposes of the tangible and core capital
requirements, and upon risk-weighted assets of $122.4 million at September
30, 1997 and $126.8 million, $127.6 million, $128.4 million and $129.3
million at the minimum, midpoint, maximum, and maximum, as adjusted, of the
Estimated Valuation Range, respectively, for purposes of the risk-based
capital requirement.
(2) An unrealized gain on securities available-for-sale, net of taxes, accounts
for the difference between GAAP capital and each of tangible capital and
core capital.
(3) The current OTS core capital requirement for savings associations is 3% of
total adjusted assets. The OTS has proposed core capital requirements which
would require a core capital ratio of 3% of total adjusted assets for
thrifts that receive the highest supervisory rating for safety and soundness
and a core capital ratio of 4% to 5% for all other thrifts.
(4) Percentage represents total core and supplementary capital divided by total
risk-weighted assets. Assumes net proceeds are invested in assets that carry
a 20% risk-weighting.
21
<PAGE>
PRO FORMA DATA
Under the Plan of Conversion, the common stock must be sold at a price
equal to the estimated pro forma market value of the Holding Company and the
Association as converted, based upon an independent valuation. The Estimated
Valuation Range as of November 28, 1997 is from a minimum of $44,625,000 to a
maximum of $60,375,000 with a midpoint of $52,500,000. At a price per share of
$15.00, this results in a minimum number of shares of 2,975,000, a maximum
number of shares of 4,025,000 and a midpoint number of shares of 3,500,000. The
actual net proceeds from the sale of the common stock cannot be determined until
the conversion is completed. However, net proceeds set forth on the following
table are based upon the following assumptions: (i) Trident Securities will
receive fees of approximately $578,000, $687,000, $795,000 and $800,000 at the
minimum, midpoint, maximum and 15% above the Estimated Valuation Range,
respectively (see "THE CONVERSION -- Plan of Distribution for the Subscription,
Direct Community and Syndicated Community Offerings); (ii) all of the common
stock will be sold in the Subscription and Direct Community Offerings; and (iii)
conversion expenses, excluding the fees paid to Trident Securities, will total
approximately $520,000 at each of the minimum, midpoint, maximum and 15% above
the Estimated Valuation Range. Actual expenses may vary from this estimate, and
the fees paid will depend upon the percentages and total number of shares sold
in the Subscription Offering, Direct Community Offering and Syndicated Community
Offering and other factors.
The following table summarizes the historical net income and retained
income of the Association and the pro forma consolidated net income and
stockholders' equity of the Holding Company for the periods and at the dates
indicated, based on the minimum, midpoint and maximum of the Estimated Valuation
Range and based on a 15% increase in the maximum of the Estimated Valuation
Range. The pro forma consolidated net income of the Association for the year
ended September 30, 1997 has been calculated as if the conversion had been
consummated at the beginning of the period and the estimated net proceeds
received by the Holding Company and the Association had been invested at 5.68%,
at the beginning of the period, which represents the one-year U.S. Treasury Bill
yield as of September 30, 1997. While OTS regulations provide for the use of a
yield representing the arithmetic average of the weighted average yield earned
by the Association on its interest-earning assets and the rates paid on its
deposits, the Holding Company believes that the U.S. Treasury Bill yield
represents a more realistic yield on the investment of the conversion proceeds.
As discussed under "USE OF PROCEEDS," the Holding Company expects to retain 50%
of the net proceeds of the offering from which it will fund the ESOP loan. A pro
forma after-tax return of 3.61% is used for both the Holding Company and the
Association for the period, after giving effect to an incremental combined
federal and state income tax rate of 36.5%. Historical and pro forma per share
amounts have been calculated by dividing historical and pro forma amounts by the
number of shares of common stock indicated in the footnotes to the table. Per
share amounts have been computed as if the common stock had been outstanding at
the beginning of the respective periods or at September 30, 1997, but without
any adjustment of per share historical or pro forma stockholders' equity to
reflect the earnings on the estimated net proceeds.
No effect has been given to: (i) the shares to be reserved for issuance
under the Holding Company's Stock Option Plan, which is expected to be voted
upon by stockholders at a meeting to be held no earlier than six months
following consummation of the conversion; (ii) withdrawals from deposit accounts
for the purpose of purchasing common stock in the conversion; (iii) the issuance
of shares from authorized but unissued shares to the MRP, which is expected to
be voted upon by stockholders at a meeting to be held no earlier than six months
following consummation of the conversion; or (iv) the establishment of a
liquidation account for the benefit of Eligible Account Holders and Supplemental
Eligible Account Holders. See "MANAGEMENT OF THE ASSOCIATION -- Benefits --
Stock Option Plan" and "THE CONVERSION -- Stock Pricing and Number of Shares to
be Issued."
The following pro forma information may not be representative of the
financial effects of the conversion at the date on which the conversion actually
occurs and should not be taken as indicative of future results of operations.
Stockholders' equity represents the difference between the stated amounts of
consolidated assets and liabilities of the Holding Company computed in
accordance with GAAP. Stockholders' equity has not been increased or decreased
to reflect the difference between the carrying value of loans and other assets
and market value. Stockholders' equity is not intended to represent fair market
value nor does it represent amounts that would be available for distribution to
stockholders in the event of liquidation.
22
<PAGE>
<TABLE>
<CAPTION>
At or For the Year Ended September 30, 1997
-------------------------------------------------------------------
Minimum of Midpoint of Maximum of 15% Above
Estimated Estimated Estimated Maximum of
Valuation Valuation Valuation Estimated
Range Range Range Valuation Range
--------- --------- --------- ---------------
2,975,000 3,500,000 4,025,000 4,628,750(1)
Shares Shares Shares Shares
at $15.00 at $15.00 at $15.00 at $15.00
Per Share Per Share Per Share Per Share
--------- --------- --------- ---------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Gross proceeds ................................... $44,625 $52,500 $60,375 $69,431
Less: estimated expenses ......................... 1,098 1,207 1,315 1,320
------- ------- ------- -------
Estimated net proceeds ........................... 43,527 51,293 59,060 68,111
Less: Common stock acquired by ESOP .............. (3,570) (4,200) (4,830) (5,555)
Less: Common stock to be acquired by MRP ......... (1,785) (2,100) (2,415) (2,777)
------- ------- ------- -------
Net investable proceeds ..................... $38,172 $44,993 $51,815 $59,779
======= ======= ======= =======
Consolidated net income:
Historical ...................................... $1,952 $1,952 $1,952 $1,952
Pro forma income on net proceeds(2) ............. 1,377 1,623 1,869 2,156
Pro forma ESOP adjustments(3) ................... (151) (178) (204) (235)
Pro forma MRP adjustments(4) .................... (227) (267) (307) (353)
------ ------ ------ ------
Pro forma net income .......................... $2,951 $3,130 $3,310 $3,520
====== ====== ====== ======
Consolidated net income per share (5)(6):
Historical ...................................... $0.71 $0.60 $0.52 $0.46
Pro forma income on net proceeds ................ 0.50 0.50 0.50 0.50
Pro forma ESOP adjustments(3) ................... (0.05) (0.05) (0.05) (0.05)
Pro forma MRP adjustments(4) .................... (0.08) (0.08) (0.08) (0.08)
----- ----- ----- -----
Pro forma net income per share ................ $1.08 $0.97 $0.89 $0.83
===== ===== ===== =====
Consolidated stockholders' equity (book value):
Historical ...................................... $29,235 $29,235 $29,235 $29,235
Estimated net proceeds .......................... 43,527 51,293 59,060 68,111
Less: Common stock acquired by ESOP ............. (3,570) (4,200) (4,830) (5,555)
Less: Common stock to be acquired by MRP(4) ..... (1,785) (2,100) (2,415) (2,777)
------- ------- ------- -------
Pro forma stockholders' equity(7) ............. $67,407 $74,228 $81,050 $89,014
======= ======= ======= =======
Consolidated stockholders' equity per share(6)(8):
Historical(6) ................................... $ 9.83 $ 8.35 $ 7.26 $ 6.32
Estimated net proceeds .......................... 14.63 14.66 14.67 14.71
Less: Common stock acquired by ESOP ............. (1.20) (1.20) (1.20) (1.20)
Less: Common stock to be acquired by MRP(4) ..... (0.60) (0.60) (0.60) (0.60)
------ ------ ------ ------
Pro forma stockholders' equity per share(9) ... $22.66 $21.21 $20.13 $19.23
====== ====== ====== ======
Purchase price as a percentage of pro forma
stockholders' equity per share .................. 66.20% 70.72% 74.52% 78.00%
Purchase price as a multiple of pro forma
net income per share ............................ 13.89x 15.46x 16.85x 18.07x
</TABLE>
(footnotes on following page)
23
<PAGE>
- --------------
(1) Gives effect to the sale of an additional 603,750 shares in the conversion,
which may be issued to cover an increase in the pro forma market value of
the Holding Company and the Association as converted, without the
resolicitation of subscribers or any right of cancellation. The issuance of
such additional shares will be conditioned on a determination by RP
Financial that such issuance is compatible with its determination of the
estimated pro forma market value of the Holding Company and the Association
as converted. See "THE CONVERSION -- Stock Pricing and Number of Shares to
be Issued."
(2) No effect has been given to withdrawals from savings accounts for the
purpose of purchasing common stock in the conversion. Since funds on
deposit at the Association may be withdrawn to purchase shares of common
stock (which will reduce deposits by the amount of such purchases), the net
amount of funds available to the Association for investment following
receipt of the net proceeds of the conversion will be reduced by the amount
of such withdrawals.
(3) It is assumed that 8% of the shares of common stock offered in the
conversion will be purchased by the ESOP. The funds used to acquire such
shares will be borrowed by the ESOP (at an interest rate equal to the prime
rate as published in The Wall Street Journal on the closing date of the
conversion, which rate is currently 8.50%) from the net proceeds from the
conversion retained by the Holding Company. The amount of this borrowing
has been reflected as a reduction from gross proceeds to determine
estimated net investable proceeds. The Association intends to make
contributions to the ESOP in amounts at least equal to the principal and
interest requirement of the debt. As the debt is paid down, stockholders'
equity will be increased. The Association's payment of the ESOP debt is
based upon equal installments of principal over a 15-year period, assuming
a combined federal and state income tax rate of 36.5%. Interest income
earned by the Holding Company on the ESOP debt offsets the interest paid by
the Association on the ESOP loan. No reinvestment is assumed on proceeds
contributed to fund the ESOP. Applicable accounting practices require that
compensation expense for the ESOP be based upon shares committed to be
released and that unallocated shares be excluded from earnings per share
computations. The valuation of shares committed to be released would be
based upon the average market value of the shares during the year, which,
for purposes of this calculation, was assumed to be equal to the $15.00 per
share purchase price. See "MANAGEMENT OF THE ASSOCIATION -- Benefits --
Employee Stock Ownership Plan."
(4) In calculating the pro forma effect of the MRP, it is assumed that the
required stockholder approval has been received, that the shares were
acquired by the MRP at the beginning of the period presented in open market
purchases at the $15.00 per share purchase price, that 20% of the amount
contributed was an amortized expense during such period, and that the
combined federal and state income tax rate is 36.5%. The issuance of
authorized but unissued shares of the common stock instead of open market
purchases would dilute the voting interests of existing stockholders by
approximately 3.85% and pro forma net income per share would be $1.05,
$0.95, $0.87 and $0.81 at the minimum, midpoint, maximum and 15% above the
maximum of the Estimated Valuation Range for the year ended September 30,
1997, respectively, and pro forma stockholders' equity per share would be
$22.36, $20.97, $19.94 and $19.07 at the minimum, midpoint, maximum and 15%
above the maximum of the Estimated Valuation Range at September 30, 1997,
respectively. Shares issued under the MRP vest 20% per year and for
purposes of this table compensation expense is recognized on a
straight-line basis over each vesting period. In the event the fair market
value per share is greater than $15.00 per share on the date shares are
awarded under the MRP, total MRP expense would increase. The total
estimated MRP expense was multiplied by 20% (the total percent of shares
for which expense is recognized in the first year) resulting in pre-tax MRP
expense of $357,000, $420,000, $483,000 and $555,000 at the minimum,
midpoint, maximum and 15% above the maximum of the Estimated Valuation
Range for the year ended September 30, 1997, respectively. No effect has
been given to the shares reserved for issuance under the proposed Stock
Option Plan.
(5) Per share amounts are based upon shares outstanding of 2,752,867,
3,238,667, 3,724,467 and 4,283,137 at the minimum, midpoint, maximum and
15% above the maximum of the Estimated Valuation Range for the year ended
September 30, 1997, respectively, which includes the shares of common stock
sold in the conversion less the number of shares assumed to be held by the
ESOP not committed to be released within the first year following the
conversion.
24
<PAGE>
(6) Historical per share amounts have been computed as if the shares of common
stock expected to be issued in the conversion had been outstanding at the
beginning of the period or on the date shown, but without any adjustment of
historical net income or historical retained earnings to reflect the
investment of the estimated net proceeds of the sale of shares in the
conversion, the additional ESOP expense or the proposed MRP expense, as
described above.
(7) "Book value" represents the difference between the stated amounts of the
Association's assets and liabilities. The amounts shown do not reflect the
liquidation account which will be established for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders in the
conversion, or the federal income tax consequences of the restoration to
income of the Association's special bad debt reserves for income tax
purposes which would be required in the unlikely event of liquidation. See
"THE CONVERSION -- Effects of Conversion to Stock Form on Depositors and
Borrowers of the Association" and "TAXATION." The amounts shown for book
value do not represent fair market values or amounts distributable to
stockholders in the unlikely event of liquidation.
(8) Per share amounts are based upon shares outstanding of 2,975,000,
3,500,000, 4,025,000 and 4,628,750 at the minimum, midpoint, maximum and
15% above the maximum of the Estimated Valuation Range, respectively.
(9) Does not represent possible future price appreciation or depreciation of
the common stock.
25
<PAGE>
SHARES TO BE PURCHASED BY MANAGEMENT PURSUANT TO SUBSCRIPTION RIGHTS
The following table sets forth certain information as to the
approximate purchases of common stock by each director and executive officer of
the Association, including their associates, as defined by applicable
regulations. No individual has entered into a binding agreement with respect to
such intended purchases, and, therefore, actual purchases could be more or less
than indicated below. Directors and officers of the Association and their
associates may not purchase in excess of 29% of the shares sold in the
conversion. For purposes of the following table, it has been assumed that
sufficient shares will be available to satisfy subscriptions in all categories.
Directors, officers, their associates and employees will pay the same price for
the shares for which they subscribe as the price that will be paid by all other
subscribers.
<TABLE>
<CAPTION>
Percent of Percent of
Shares at Shares at
Minimum of Maximum of
Name and Anticipated Number of Anticipated Dollar Estimated Estimated
Position Shares Purchased (1) Amount Purchased Valuation Range Valuation Range
-------- --------------------- ------------------ --------------- ---------------
<S> <C> <C> <C> <C>
J. Edward Wells 33,334 $500,010 1.13% 0.81%
President, Chief Executive
Officer and Director
Aaron H. King 20,000 300,000 0.67 0.50
Director
J. Riley Bailes 28,000 420,000 0.94 0.70
Director
John H. Lake 13,334 200,010 0.45 0.33
Director
John C. Owings, II 6,667 100,005 0.22 0.17
Director
Edwin I. Shealy 20,000 300,000 0.67 0.50
Chief Financial Officer
James H. Wasson, Jr. 16,667 250,005 0.56 0.41
Vice President
John M. Swofford 8,334 125,010 0.28 0.21
Vice President
Will B. Ferguson 22,000 330,000 0.74 0.55
------- ---------- ---- ----
Vice President
Total 168,336 $2,525,040 5.66% 4.18%
======= ========== ==== ====
</TABLE>
- -------------------
(1) Excludes any shares awarded pursuant to the ESOP and MRP and options to
acquire shares pursuant to the Stock Option Plan.
26
<PAGE>
HERITAGE FEDERAL SAVINGS & LOAN ASSOCIATION
STATEMENTS OF INCOME
The following Statements of Income of Heritage Federal Savings & Loan
Association for the fiscal years ended September 30, 1997, 1996 and 1995 have
been audited by Deloitte & Touche LLP, independent auditors, whose report
thereon appears elsewhere in this prospectus. These statements should be read in
conjunction with the Financial Statements and related Notes included elsewhere
herein.
<TABLE>
<CAPTION>
Years Ended September 30,
------------------------------------
1997 1996 1995
---- ---- ----
(In thousands)
<S> <C> <C> <C>
INTEREST INCOME:
Loans:
First mortgage loans............................................. $14,056 $13,166 $12,660
Other loans...................................................... 978 872 889
Investment securities and other................................... 2,289 2,310 1,866
Mortgage-backed securities........................................ 450 626 749
-------- -------- --------
Total interest income........................................... 17,773 16,974 16,164
------- ------- -------
INTEREST EXPENSE:
Deposits.......................................................... 12,004 11,885 9,941
Federal Home Loan Bank borrowings................................. 226 327 490
------- ------- -------
Total interest expense.......................................... 12,230 12,212 10,431
------- ------- -------
NET INTEREST INCOME................................................ 5,543 4,762 5,733
PROVISION FOR LOAN LOSSES
(RECOVERY OF ALLOWANCE) (Note 4).................................. 337 (7) 47
------- ------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES......................................... 5,206 4,769 5,686
------- ------- -------
OTHER INCOME (EXPENSE):
Service charge and fees........................................... 205 206 210
Gain (loss) of sale of mortgage loans held-for-sale............... 6 16 0
Gain (loss) on sale of investments available-for-sale............. (13) 2 0
Other income, other............................................... 4 3 8
------- ------- -------
Total other income, net......................................... 202 227 218
------- ------- -------
OTHER OPERATING EXPENSES:
Employee compensation and benefits (Note 11)...................... 1,450 1,344 1,329
Deposit insurance premiums (Note 1)............................... 234 1,725 416
Occupancy and equipment expense................................... 397 413 142
Data processing - service bureau fees............................. 132 129 114
Office supplies, postage, printing, etc........................... 81 97 82
Professional fees................................................. 56 54 41
Advertising and promotions........................................ 24 31 22
Net (income)/cost of real estate operations....................... (167) (120) 77
Other............................................................. 155 204 156
------- ------- -------
Total other operating expenses................................... 2,362 3,877 2,379
------- ------- -------
INCOME BEFORE INCOME TAXES......................................... 3,046 1,119 3,525
PROVISION FOR INCOME TAXES (Note 9)................................ 1,094 360 1,546
------- ------- -------
NET INCOME......................................................... $ 1,952 $ 759 $ 1,979
======= ======= =======
</TABLE>
See Notes to Financial Statements.
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
Management's discussion and analysis of financial condition and results of
operations is intended to assist in understanding the financial condition and
results of operations of the Association. The information contained in this
section should be read in conjunction with the Financial Statements and
accompanying Notes thereto and the other sections contained in this prospectus.
Operating Strategy
The Association's business consists principally of attracting retail
deposits (primarily certificates of deposit) from the general public and using
these funds to originate mortgage loans secured by one- to four-family
residences located in South Carolina. To a lesser extent, the Association also
originates commercial real estate loans, home equity loans, builder construction
loans and savings account loans. The Association intends to continue to fund its
assets primarily with retail deposits, although FHLB-Atlanta advances may be
used as a supplemental source of funds.
The Association's profitability depends primarily on its net interest
income, which is the difference between the income it receives on its loan and
investment portfolio and its cost of funds, which consists of interest paid on
deposits and borrowings. Net interest income is also affected by the relative
amounts of interest-earning assets and interest-bearing liabilities. When
interest-earning assets equal or exceed interest-bearing liabilities, any
positive interest rate spread will generate net interest income. The
Association's profitability is also affected by the level of other operating
income and expenses. Other operating income includes service charges and fees,
gain on sale of mortgage loans and gain on sale of investments. Other operating
expenses include compensation and benefits, occupancy and equipment expenses,
deposit insurance premiums, data processing expenses and other operating costs.
The Association's results of operations are also significantly affected by
general economic and competitive conditions, particularly changes in market
interest rates, government legislation and regulation and monetary and fiscal
policies.
The Association's business strategy is to operate as a well-capitalized,
profitable and independent financial institution dedicated to financing home
ownership and providing quality customer service. In recent years the
Association has emphasized the origination for retention in its portfolio of
adjustable-rate mortgage loans in order to reduce its interest rate risk.
Beginning in the year ended September 30, 1997, to increase the yield on its
loan portfolio, the Association has emphasized the origination for its portfolio
of fixed-rate mortgage loans with terms of 15 years or less and ARM loans with
an interest rate that is fixed for an initial period of ten years. In addition,
the Association has purchased $1.0 million of conforming fixed-rate loans for
its held for sale portfolio and plans to continue this activity depending on
market conditions. The Association relies heavily on certificates of deposit as
its source of funds. As a result, the Association's cost of funds is generally
higher than that of institutions that have more checking and savings accounts.
The Association's high cost of funds has contributed to a lower interest rate
spread and reduced profitability in recent years. The Association intends to
attempt to reduce its reliance on certificates of deposit by increasing its
emphasis on transaction accounts.
The conversion will increase the consolidated capital of the Holding
Company by the amount of the net proceeds, after deduction of the shares to be
sold to the ESOP. Funds withdrawn from deposit accounts will decrease
interest-bearing liabilities, and new funds used to purchase shares will
increase interest-earning assets. While the Holding Company expects these
changes to increase its net interest income, the Holding Company also expects
that the adoption of the ESOP and the MRP and the additional costs of operating
as a public company will increase its other operating expenses. For additional
information regarding the effects of this offering, see "PRO FORMA DATA."
28
<PAGE>
Comparison of Financial Condition at September 30, 1997 and 1996
Total assets increased $2.8 million, or 1.2%, to $247.5 million at
September 30, 1997 from $244.7 million at September 30, 1996. Loans receivable
increased $9.7 million to $192.7 million from $183.0 million. Early in fiscal
1997, management determined to increase investment in loans and decrease
investment in investment and mortgage-backed securities since loans offered the
Association the opportunity to earn higher yields. Investment securities
decreased to $24.4 million from $37.9 million as a result of maturities, calls
and sales by the Association and mortgage-backed securities decreased to $6.7
million from $9.7 million as a result of prepayments. The Association used the
cash generated by the reduction in its investment and mortgage-backed securities
portfolios to fund loan growth. Cash and cash equivalents increased to $14.7
million from $5.9 million as the Association accumulated cash faster than it was
able to originate loans.
Total liabilities increased $345,000, or 0.2%, to $218.3 million at
September 30, 1997 from $217.9 million at September 30, 1996. Deposit accounts
increased $5.7 million to $215.4 million from $209.7 million. The increase in
deposit accounts was offset by a decrease in FHLB advances from $5.0 million to
$0. The Association used cash generated by the reduction in its investment and
mortgage-backed securities portfolios to repay its FHLB advances.
Total equity increased $2.5 million, or 9.3%, to $29.2 million at September
30, 1997 from $26.7 million at September 30, 1996. Retained income increased
$1.9 million to $27.8 million, while unrealized gain on available-for-sale
securities increased $543,000 to $1.5 million.
Comparison of Operating Results for the Years Ended September 30, 1997 and 1996
Net Income. Net income increased $1.2 million, or 157.2%, to $2.0 million
for the year ended September 30, 1997 from $759,000 for the year ended September
30, 1996. The results for fiscal 1996 reflect the payment of a one-time,
industry wide special assessment to recapitalize the SAIF, which for the
Association was $1.2 million. Without the payment of the SAIF special
assessment, net income for fiscal 1996 would have been $1.5 million.
Net Interest Income. Net interest income increased $781,000, or 16.4%, to
$5.5 million for fiscal 1997 from $4.8 million for fiscal 1996. The
Association's interest rate spread increased 25 basis points to 1.76% for fiscal
1997 from 1.51% for fiscal 1996 as the Association experienced a 19 basis point
increase in the yield on its interest-earning assets and a 6 basis point
decrease in the cost of its interest-bearing liabilities.
Total interest income increased $799,000, or 4.7%, from fiscal 1996 to
fiscal 1997. Interest income on loans receivable increased $996,000 largely as a
result of an increase of $11.6 million, or 6.5%, in the average balance of
loans. The Association's average yield on loans increased 5 basis points to
7.93% in fiscal 1997. The growth in interest income on loans was partially
offset by a reduction in interest income on mortgage-backed securities and
federal funds sold and interest-bearing deposits, as the Association reduced the
average balance of these investments. The yield on the Association's
interest-earning assets increased to 7.47% from 7.28% as a result of having a
larger percentage of interest-earning assets invested in loans.
Total interest expense increased $18,000, or 0.1%, from fiscal 1996 to
fiscal 1997. The average balance of interest-bearing liabilities increased $2.6
million, or 1.2%, while the average rate paid decreased to 5.71% from 5.77%.
Interest paid on passbook, NOW and money market accounts decreased a total of
$25,000 primarily because of a decrease in the average balance of such accounts.
Interest paid on certificates of deposit increased $144,000 because of an
increase in the average balance of such accounts. This was partially offset by a
decrease in the average rate paid on certificates of deposit to 5.91% from
6.00%. Interest paid on FHLB advances decreased $101,000 as the decrease in the
average balance of advances was partially offset by the increase in the average
rate paid. By the end of fiscal 1997, the Association had repaid all of its FHLB
advances.
29
<PAGE>
Provision for Loan Losses. Provisions for loan losses are charged to
operations to bring the total allowance for loan losses to a level considered by
management to be adequate to provide for estimated losses based on management's
evaluation of such factors as the delinquency status of loans, current economic
conditions, the net realizable value of the underlying collateral and prior loan
loss experience. The provision for loan losses was $337,000 in fiscal 1997
compared with a recovery of $7,000 in fiscal 1996. During fiscal 1997, the
Association added $137,000 to the allowance for loan losses to provide for
estimated losses on specific problem loans. The Association added an additional
$200,000 to the allowance for loan losses based on its re-evaluation of the
risks inherent in the loan portfolio. At September 30, 1997, the Association's
allowance for loan losses totalled $874,000, which equaled .44% of total loans.
Although management uses the best information available, future adjustments to
the allowance may be necessary due to changes in economic, operating, regulatory
and other conditions that may be beyond the Association's control. While the
Association maintains its allowance for loan losses at a level which it
considers to be adequate to provide for estimated losses, there can be no
assurance that further additions will not be made to the allowance for loan
losses and that actual losses will not exceed the estimated amounts.
Other Income. Other income decreased $25,000, or 11.0%, to $202,000 for
fiscal 1997 from $227,000 for fiscal 1996. Substantially all of the
Association's other income is derived from service charges and fees. Service
charges and fees totalled $205,000 in fiscal 1997 compared with $206,000 in
fiscal 1996. Gain on sale of mortgage loans decreased to $6,000 in fiscal 1997
from $16,000 in fiscal 1996 as a result of fewer loan sales in 1997. The
Association realized a loss of $13,000 on the sale of investments in fiscal 1997
compared with a gain of $2,000 in fiscal 1996.
Other Operating Expenses. Other operating expenses were $2.4 million in
fiscal 1997 compared to $3.9 million in fiscal 1996. Included in other operating
expenses for fiscal 1996 is the SAIF special assessment. Excluding the SAIF
special assessment, other operating expenses were $2.6 million for fiscal 1996.
As a result of the recapitalization of the SAIF, the FDIC substantially reduced
deposit insurance premiums. Since January 1, 1997, the Association has paid
deposit insurance premiums at the rate of $.065 per $100 of deposits. Prior to
the recapitalization of the SAIF, deposit insurance premiums were $.23 per $100
of deposits. Employee compensation and benefits expense increased $106,000, or
7.9%, as a result of an increase in directors' fees, normal wage increases and
an increase in benefits costs. Income from real estate operations was $167,000
in fiscal 1997 as a result of gains on sales of real estate owned, as compared
with $120,000 in fiscal 1996. The Association anticipates that other operating
expenses will increase following the conversion as a result of increased costs
associated with operating as a public company and increased compensation expense
as a result of adoption of the ESOP and, if approved by the Holding Company's
stockholders, the MRP. Because the Association uses an outside data processing
service, the Association believes that its cost of addressing Year 2000 issues
will not be significant. See "RISK FACTORS -- Below Average Return on Equity
After Conversion" and "-- New Expenses Associated with ESOP and MRP."
Income Taxes. The provision for income taxes increased to $1.1 million for
fiscal 1997 from $360,000 for fiscal 1996. Income taxes in fiscal 1996 were
lower because of the SAIF special assessment.
Comparison of Operating Results for the Years Ended September 30, 1996 and 1995
Net Income. Net income decreased $1.2 million, or 61.6%, to $759,000 for
the year ended September 30, 1996 from $2.0 million for the year ended September
30, 1995. The results for fiscal 1996 include the payment of the $1.2 million
special SAIF assessment. Without the payment of the SAIF assessment, net income
for fiscal 1996 would have been $1.5 million.
Net Interest Income. Net interest income decreased $971,000, or 16.9%, to
$4.8 million for fiscal 1996 from $5.7 million for fiscal 1995. The
Association's interest rate spread decreased to 1.51% for fiscal 1996 from 2.09%
for fiscal 1995 as a result of an increase in the cost of the Association's
interest-bearing liabilities. The decrease in the interest rate spread was
partially offset by an increase in the average balance of interest-earning
assets.
30
<PAGE>
Total interest income increased $810,000, or 5.0%, from fiscal 1995 to
fiscal 1996. Interest income on loans receivable increased $489,000, or 3.6%, as
a result of growth of the loan portfolio. The average yield on loans receivable
was essentially unchanged between fiscal 1995 and 1996. The remainder of the
growth in interest income is primarily attributable to increases in the average
balances of investment securities and federal funds sold and overnight deposits.
Interest income on mortgage-backed securities decreased as a result of principal
repayments on mortgage-backed securities.
Total interest expense increased $1.8 million, or 17.1%, from fiscal 1995
to fiscal 1996. Total interest paid on deposits increased $1.9 million as a
result of an increase in the average balance of certificates of deposit and an
increase in the average rate paid on certificates of deposit from 5.39% to
6.00%. The average rate paid on certificates of deposit increased as depositors
sought higher yields through longer maturities. Interest paid on FHLB advances
decreased $163,000 as a decrease in the average balance was partially offset by
an increase in the rate paid on such advances.
Provision for Loan Losses. The Association had a recovery of $7,000 in
fiscal 1996 compared to a provision of $47,000 in fiscal 1995. The provision was
larger in fiscal 1995 as a result of larger charge-offs that year. The
Association had net charge-offs of $79,000 in fiscal 1995 compared to net
recoveries of $87,000 in fiscal 1996.
Other Income. Other income increased $9,000 to $227,000 for fiscal 1996
from $218,000 for fiscal 1995. Service charges and fees totalled $206,000 in
fiscal 1996 compared to $210,000 in fiscal 1995. The Association had $16,000 of
gain on the sale of mortgage loans in fiscal 1996 with no such gain in fiscal
1995.
Other Operating Expenses. Other operating expenses were $3.9 million in
fiscal 1996, compared to $2.4 million in fiscal 1995. Excluding the SAIF
assessment, other operating expenses were $2.6 million for fiscal 1996, an
increase of $251,000, or 10.55%, over fiscal 1995. Occupancy and equipment
expense increased $271,000, or 190.8%, as a result of increased depreciation
expense associated with its new main office opened in October 1995. Other
expenses such as office supplies, advertising and promotion also increased as a
result of the opening of the new main office. Income from real estate operations
was $120,000 in fiscal 1996 as a result of gains on the sale of real estate
owned compared with a cost of $77,000 in fiscal 1995.
Income Taxes. The provision for income taxes decreased to $360,000 for
fiscal 1996 from $1.5 million for fiscal 1995. The decrease was the result of
the payment of the SAIF assessment.
Average Balances, Interest and Average Yields/Cost
The following table sets forth certain information for the periods
indicated regarding average balances of assets and liabilities as well as the
total dollar amounts of interest income from average interest-earning assets and
interest expense on average interest-bearing liabilities and average yields and
costs. Such yields and costs for the periods indicated are derived by dividing
income or expense by the average balances of assets or liabilities,
respectively, for the periods presented. Average balances for the year ended
September 30, 1995 were derived from month-end balances. Management does not
believe that the use of month-end balances instead of daily balances has caused
any material differences in the information presented.
31
<PAGE>
<TABLE>
<CAPTION>
Years Ended September 30,
-------------------------------------------------------------
1997 1996
--------------------------- ----------------------------
Interest Interest
Average and Yield/ Average and Yield/
Balance Dividends Cost Balance Dividends Cost
------- --------- ---- ------- --------- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable, net (1).......... $189,689 $15,034 7.93% $178,081 $14,038 7.88%
Mortgage-backed securities......... 8,401 450 5.36 11,192 626 5.59
Investment securities (3).......... 32,397 1,856 5.73 35,684 1,815 5.09
FHLB stock......................... 2,042 148 7.25 2,042 147 7.20
Federal funds sold and overnight
deposits.......................... 5,335 285 5.34 6,317 348 5.51
-------- ------- ---- -------- ------- ----
Total interest-earning assets.... 237,864 17,773 7.47 233,316 16,974 7.28
-------- ------- ---- -------- ------- ----
Non-interest-earning assets......... 7,315 7,328
-------- --------
Total average assets............. $245,179 $240,644
======== ========
Interest-bearing liabilities(2):
Passbook accounts.................. $ 11,561 340 2.94 $ 12,270 362 2.95
NOW and money market accounts...... 3,751 89 2.37 3,784 92 2.43
Certificates of deposit............ 195,853 11,575 5.91 190,572 11,431 6.00
-------- ------- ---- -------- ------- ----
Total deposits................... 211,165 12,004 5.68 206,626 11,885 5.75
FHLB advances...................... 3,082 226 7.33 5,000 327 6.54
-------- ------- ---- -------- ------- ----
Total interest-bearing
liabilities..................... 214,247 12,230 5.71 211,626 12,212 5.77
-------- ------- ---- -------- ------- ----
Noninterest-bearing liabilities..... 2,759 2,570
-------- --------
Total average liabilities........ 217,006 214,196
-------- --------
Average equity...................... 28,173 26,448
-------- --------
Total average liabilities and
equity.......................... $245,179 $240,644
======== ========
Net interest income................. $ 5,543 $ 4,762
======= =======
Interest rate spread................ 1.76% 1.51%
Net interest margin................. 2.33% 2.04%
Ratio of average interest-earning
assets to average interest-
bearing liabilities................ 1.11x 1.10x
<CAPTION>
Years Ended September 30,
---------------------------
1995
---------------------------
Interest
Average and Yield/
Balance Dividends Cost
------- --------- ----
<S> <C> <C> <C>
Interest-earning assets:
Loans receivable, net (1).......... $172,133 $ 13,549 7.87%
Mortgage-backed securities......... 13,020 749 5.75
Investment securities (3).......... 31,882 1,580 4.96
FHLB stock......................... 2,042 153 7.49
Federal funds sold and overnight
deposits.......................... 2,202 133 6.04
-------- --------- ----
Total interest-earning assets.... 221,279 16,164 7.30
-------- --------- ----
Non-interest-earning assets......... 5,632
--------
Total average assets............. $226,911
========
Interest-bearing liabilities(2):
Passbook accounts.................. $ 13,343 393 2.95
NOW and money market accounts...... 3,751 94 2.51
Certificates of deposit............ 175,431 9,454 5.39
-------- --------- ----
Total deposits................... 192,525 9,941 5.16
FHLB advances...................... 7,812 490 6.27
-------- --------- ----
Total interest-bearing
liabilities..................... 200,337 10,431 5.21
-------- --------- ----
Noninterest-bearing liabilities..... 2,091
--------
Total average liabilities........ 202,428
--------
Average equity...................... 24,483
--------
Total average liabilities and
equity.......................... $226,911
========
Net interest income................. $ 5,733
=========
Interest rate spread................ 2.09%
Net interest margin................. 2.59%
Ratio of average interest-earning
assets to average interest-
bearing liabilities................ 1.10x
</TABLE>
- ------------------
(1) Loans receivable, net includes loans held-for-sale and nonaccrual loans.
Interest on loan receivable does not include interest on nonaccrual loans.
(2) Does not include escrow balances.
(3) Yield information does not give affect to changes in fair value that are
reflected as a component of equity.
32
<PAGE>
Yields Earned and Rates Paid
The following table sets forth at the date and for the periods
indicated the weighted average yields earned on the Association's assets and the
weighted average interest rates paid on the Association's liabilities, together
with the net yield on interest-earning assets.
<TABLE>
<CAPTION>
At Years Ended September 30,
September 30, ----------------------------
1997 1997 1996 1995
------------- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average yield earned on:
Loans receivable, net.............................. 7.89% 7.93% 7.88% 7.87%
Mortgage-backed securities......................... 5.30 5.36 5.59 5.75
Investment securities.............................. 6.03 5.73 5.09 4.96
FHLB stock......................................... 7.24 7.25 7.20 7.49
Federal funds sold and overnight deposits.......... 6.13 5.34 5.51 6.04
Total interest-earning assets.................... 7.53 7.47 7.28 7.30
Weighted average rate paid on:
Passbook accounts.................................. 3.00 2.94 2.95 2.95
NOW and money market accounts...................... 2.27 2.37 2.43 2.51
Certificates of deposit............................ 5.93 5.91 6.00 5.39
Total average deposits........................... 5.71 5.68 5.75 5.16
FHLB advances...................................... -- 7.33 6.54 6.27
Total interest-bearing liabilities............... 5.71 5.71 5.77 5.21
Interest rate spread (spread between weighted
average rate earned on all interest-earning assets
and paid on all interest-bearing liabilities)...... 1.82 1.76 1.51 2.09
Net interest margin (net interest
income as a percentage of average
interest-earning assets)............................ 2.33 2.04 2.59
</TABLE>
33
<PAGE>
Rate/Volume Analysis
The following table sets forth the effects of changing rates and volumes
on the interest income and interest expense of the Association. Information is
provided with respect: (i) to effects attributable to changes in volume (changes
in volume multiplied by prior rate); and (ii) to effects attributable to changes
in rate (changes in rate multiplied by prior volume). The net change
attributable to the combined impact of volume and rate has been allocated
proportionately to the change due to volume and the change due to rate.
<TABLE>
<CAPTION>
Year Ended September 30, 1997 Year Ended September 30, 1996
Compared to September 30, 1996 Compared to September 30, 1995
Increase (Decrease) Increase (Decrease)
Due to Due to
------------------------------- -------------------------------
Rate Volume Total Rate Volume Total
---- ------ ----- ---- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable, net (1).......... $ 88 $ 908 $ 996 $ 17 $ 472 $ 489
Mortgage-backed securities......... (25) (151) (176) (20) (103) (123)
Investment securities.............. 153 (112) 41 42 193 235
FHLB stock......................... 1 -- 1 (6) -- (6)
Federal funds sold and
overnight deposits................ (11) (52) (63) (11) 226 215
---- ----- ----- ------- ------ ------
Total net change in income
on interest-earning assets......... 206 593 799 22 788 810
---- ----- ----- ------- ------ ------
Interest-bearing liabilities:
Passbook accounts.................. (1) (21) (22) -- (31) (31)
NOW and money market
accounts.......................... (2) (1) (3) (3) 1 (2)
Certificates of deposit............ (171) 315 144 1,122 855 1,977
---- ----- ----- ------- ------ ------
Total average deposits........... (174) 293 119 1,119 825 1,944
FHLB advances...................... 48 (149) (101) 22 (185) (163)
---- ----- ----- ------- ------ ------
Total net change in expense
on interest-bearing
liabilities........................ (126) 144 18 1,141 640 1,781
---- ----- ----- ------- ------ ------
Net change in net interest
income............................. $332 $ 449 $ 781 $(1,119) $ 148 $ (971)
==== ===== ===== ======= ====== ======
</TABLE>
- -------------
(1) Does not include interest on nonaccrual loans.
Asset and Liability Management
Quantitative Aspects of Market Risk. The Association does not maintain a
trading account for any class of financial instrument nor does the Association
engage in hedging activities or purchase purchase high-risk derivative
instruments. Furthermore, the Association is not subject to foreign currency
exchange rate risk or commodity price risk. For information regarding the
sensitivity to interest rate risk of the Association's interest-earning assets
and interest-bearing liabilities, see the tables under "BUSINESS OF THE
ASSOCIATION --Lending Activities -- Maturity of Loan Portfolio," "-- Investment
Activities" and "-- Deposit Activities and Other Sources of Funds -- Time
Deposits by Maturities."
34
<PAGE>
Qualitative Aspects of Market Risk. The Association's principal financial
objective is to achieve long-term profitability while reducing its exposure to
fluctuating market interest rates. The Association has sought to reduce the
exposure of its earnings to changes in market interest rates by attempting to
manage the mismatch between asset and liability maturities and interest rates.
The principal element in achieving this objective is to increase the
interest-rate sensitivity of the Association's interest-earning assets by
retaining for its portfolio loans with interest rates subject to periodic
adjustment to market conditions and selling fixed-rate one- to- four family
mortgage loans with terms over 15 years. In addition, the Association maintains
an investment portfolio of U.S. Government and agency securities with
contractual maturities of between one and five years. The Association relies on
retail deposits as its primary source of funds. Management believes retail
deposits, compared to brokered deposits, reduce the effects of interest rate
fluctuations because they generally represent a more stable source of funds.
In order to encourage institutions to reduce their interest rate risk, the
OTS adopted a rule incorporating an interest rate risk component into the
risk-based capital rules. Using data compiled by the OTS, the Association
receives a report which measures interest rate risk by modeling the change in
NPV (net portfolio value) over a variety of interest rate scenarios. This
procedure for measuring interest rate risk was developed by the OTS to replace
the "gap" analysis (the difference between interest-earning assets and
interest-bearing liabilities that mature or reprice within a specific time
period). NPV is the present value of expected cash flows from assets,
liabilities and off-balance sheet contracts. The calculation is intended to
illustrate the change in NPV that will occur in the event of an immediate change
in interest rates of at least 200 basis points with no effect given to any steps
that management might take to counter the effect of that interest rate movement.
Under OTS regulations, an institution with a greater than "normal" level of
interest rate risk is subject to a deduction from total capital for purposes of
calculating its risk-based capital. The OTS, however, has delayed the
implementation of this regulation. An institution with a "normal" level of
interest rate risk is defined as one whose "measured interest rate risk" is less
than 2.0%. Institutions with assets of less than $300 million and a risk-based
capital ratio of more than 12.0% are exempt. The Association is exempt because
of its asset size. Based on the Association's regulatory capital levels at
September 30, 1997, the Association believes that, if the proposed regulation
was implemented at that date, the Association's level of interest rate risk
would have caused it to be treated as an institution with greater than "normal"
interest rate risk.
The following table is provided by the OTS and sets forth the change in the
Association's NPV at September 30, 1997, based on OTS assumptions, that would
occur in the event of an immediate change in interest rates, with no effect
given to any steps that management might take to counteract that change.
<TABLE>
<CAPTION>
Basis Point ("bp") Estimated Change in
Change in Rates Net Portfolio Value
------------------ -------------------
(Dollars in thousands)
<S> <C>
+400 ($15,494)
+300 (10,826)
+200 (6,391)
+100 (2,645)
0 0
(100) 1,360
(200) 2,285
(300) 3,283
(400) 4,712
</TABLE>
The above table illustrates, for example, that an instantaneous 200 basis
point increase in market interest rates at September 30, 1997 would reduce the
Association's NPV by approximately $6.4 million, or 20%, at that date.
35
<PAGE>
Certain assumptions utilized by the OTS in assessing the interest rate risk
of savings associations within its region were utilized in preparing the
preceding table. These assumptions relate to interest rates, loan prepayment
rates, deposit decay rates, and the market values of certain assets under
differing interest rate scenarios, among others.
As with any method of measuring interest rate risk, certain shortcomings
are inherent in the method of analysis presented in the foregoing table. For
example, although certain assets and liabilities may have similar maturities or
periods to repricing, they may react in different degrees to changes in market
interest rates. Also, the interest rates on certain types of assets and
liabilities may fluctuate in advance of changes in market interest rates, while
interest rates on other types may lag behind changes in market rates.
Additionally, certain assets, such as ARM loans, have features which restrict
changes in interest rates on a short-term basis and over the life of the asset.
Further, in the event of a change in interest rates, expected rates of
prepayments on loans and early withdrawals from certificates could deviate
significantly from those assumed in calculating the table.
Liquidity and Capital Resources
The Association's primary sources of funds are customer deposits, proceeds
from principal and interest payments on and the sale of loans, maturing
securities and FHLB advances. While maturities and scheduled amortization of
loans are a predictable source of funds, deposit flows and mortgage prepayments
are greatly influenced by general interest rates, economic conditions and
competition.
The Association must maintain an adequate level of liquidity to ensure the
availability of sufficient funds to fund loan originations and deposit
withdrawals, to satisfy other financial commitments and to take advantage of
investment opportunities. The Association generally maintains sufficient cash
and short-term investments to meet short-term liquidity needs. At September 30,
1997, cash and cash equivalents totalled $14.7 million, or 5.9% of total assets,
and investment securities classified as available-for-sale totalled $8.4
million. At September 30, 1997, the Association also maintained, but did not
draw upon, an uncommitted credit facility with the FHLB-Atlanta, which provided
for immediately available advances up to an aggregate amount of $32.0 million.
OTS regulations require savings institutions to maintain an average daily
balance of liquid assets (cash and eligible investments) equal to at least 4.0%
of the average daily balance of its net withdrawable deposits and short-term
borrowings. The Association's actual liquidity ratio at September 30, 1997 was
19.2%. See "-- Comparison of Financial Condition at September 30, 1997 and 1996"
and "BUSINESS OF THE ASSOCIATION -- Investment Activities."
The Association's primary investing activity is the origination of one- to-
four family mortgage loans. During the years ended September 30, 1997, 1996 and
1995, the Association originated $37.0 million, $36.5 million, and $39.4 million
of such loans, respectively. At September 30, 1997, the Association had loan
commitments totalling $1.4 million, unused lines of credit of $6.3 million and
undisbursed loans in process totalling $7.0 million. The Association anticipates
that it will have sufficient funds available to meet current loan commitments.
Certificates of deposit that are scheduled to mature in less than one year from
September 30, 1997 totalled $148.9 million. Historically, the Association has
been able to retain a significant amount of its deposits as they mature.
OTS regulations require the Association to maintain specific amounts of
regulatory capital. As of September 30, 1997, the Association complied with all
regulatory capital requirements as of that date with tangible, core and
risk-based capital ratios of 11.3%, 11.3% and 23.3%, respectively. For a
detailed discussion of regulatory capital requirements, see "REGULATION --
Federal Regulation of Savings Associations -- Capital Requirements." See also
"HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE."
Year 2000 Issues
Computer programs that use only two digits to identify a year could fail or
create erroneous results by or at the year 2000. All of the material data
processing of the Association that could be affected by this problem is
36
<PAGE>
provided by a third party service bureau. The Association has contacted its
service bureau and has received assurances that the service bureau will properly
function in the year 2000. In coordination with its service bureau, the
Association has tentatively scheduled testing for the third calendar quarter of
1998. The Association anticipates that if such testing cannot be performed to
its satisfaction, it will commence a search for a new service bureau.
Internally, the Association has determined that certain computer programs must
be revised in advance of the year 2000. The Association does not believe that
the costs associated with its actions and those of its vendors will be material
to the Association. However, in the event the Association's service bureau is
unable to fulfill its contractual obligations to the Association, it could have
a significant adverse impact on the financial condition and results of
operations of the Association.
Impact of Accounting Pronouncements and Regulatory Policies
Accounting for Stock-Based Compensation. SFAS No. 123, "Accounting for
Stock-Based Compensation," establishes financial accounting and reporting
standards for stock-based employee compensation plans. This statement encourages
all entities to adopt a new method of accounting to measure compensation cost of
all employee stock compensation plans based on the estimated fair value of the
award at the date it is granted. Companies are, however, allowed to continue to
measure compensation cost for those plans using the intrinsic value based method
of accounting, which generally does not result in compensation expense
recognition for most plans. Companies that elect to remain with the existing
accounting method are required to disclose in a footnote to the financial
statements pro forma net income and, if presented, earnings per share, as if
this statement had been adopted. The accounting requirements of this statement
are effective for transactions entered into in fiscal years that begin after
December 15, 1995; however, companies are required to disclose information for
awards granted in their first fiscal year beginning after December 15, 1994.
Management of the Association has not completed an analysis of the potential
effects of SFAS No. 123 on its financial condition or results of operations, but
expects to use the intrinsic value method upon consummation of the Conversion.
Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities. SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities," provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishment of liabilities. This statement applies prospectively
to transactions occurring after December 31, 1996, and establishes new standards
that focus on control whereas, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the liabilities it
has incurred, derecognizes financial assets when control has been surrendered,
and derecognizes liabilities when extinguished. The adoption of SFAS No. 125 did
not have a material impact on the Association's results of operations or
financial position.
Deferral of the Effective Date of Certain Provisions of SFAS No. 125. In
December 1996, the FASB issued SFAS No. 127, "Deferral of the Effective Date of
Certain Provisions of FASB Statement No. 125." SFAS No. 127 defers for one year
the effective date of portions of SFAS No. 125 that address secured borrowings
and collateral for all transactions. Additionally, SFAS No. 127 defers for one
year the effective date of transfers of financial assets that are part of
repurchase agreements, securities lending and similar transactions.
Earnings Per Share. SFAS No. 128, "Earnings Per Share," standardizes the
international calculation for earnings per share and requires companies with
complex capital structures that have publicly held common stock or potential
common stock to present both basic and diluted earnings per share on the face of
the income statement. SFAS No. 128 becomes effective for periods ending after
December 15, 1997.
Comprehensive Income. SFAS No. 130, "Reporting Comprehensive Income,"
issued in July 1997, establishes standards for reporting and presentation of
comprehensive income and its components (revenues, expenses, gains, and losses)
in a full set of general-purpose financial statements. It requires that all
items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
presented with the same prominence as other financial statements. SFAS No. 130
requires that companies (i) classify items of other comprehensive income by
their nature in a financial statement and (ii) display
37
<PAGE>
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of the statement
of financial condition. SFAS No. 130 is effective for fiscal years beginning
after December 15, 1997. Reclassification of financial statements for earlier
periods provided for comprehensive purposes is required.
Segment Information. SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information" establishes standards for the way public
business enterprises report information about operating segments and establishes
standards for related disclosures about products and services, geographic areas
and major customers. Operating segments are components of an enterprise about
which separate financial information is available that is evaluated regularly by
the chief operating decision maker in deciding how to allocate resources and in
assessing performance. Information required to be disclosed includes segment
profit or loss, certain specific revenue and expense items, segment assets and
certain other information. This statement is effective for the Holding Company
for financial statements issued for the fiscal year ending September 30, 1999.
Effect of Inflation and Changing Prices
The financial statements and related financial data presented herein have
been prepared in accordance with GAAP, which require the measurement of
financial position and operating results in terms of historical dollars without
considering the change in the relative purchasing power of money over time due
to inflation. The primary impact of inflation is reflected in the increased cost
of the Association's operations. Unlike most industrial companies, virtually all
the assets and liabilities of a financial institution are monetary in nature. As
a result, interest rates generally have a more significant impact on a financial
institution's performance than do general levels of inflation. Interest rates do
not necessarily move in the same direction or to the same extent as the prices
of goods and services.
BUSINESS OF THE HOLDING COMPANY
General
The Holding Company was organized as a Delaware business corporation at the
direction of the Association in November 1997 for the purpose of becoming the
holding company for the Association upon completion of the conversion. As a
result of the Conversion, the Association will be a wholly-owned subsidiary of
the Holding Company and all of the issued and outstanding capital stock of the
Association will be owned by the Holding Company.
Business
Prior to the conversion, the Holding Company has not and will not engage in
any significant activities other than of an organizational nature. Upon
completion of the Conversion, the Holding Company's sole business activity will
be the ownership of the outstanding capital stock of the Association. The
Holding Company will also hold a note receivable from the ESOP. In the future,
the Holding Company may acquire or organize other operating subsidiaries,
although there are no current plans, arrangements, agreements or understandings,
written or oral, to do so.
Initially, the Holding Company will neither own nor lease any property but
will instead use the premises, equipment and furniture of the Association with
the payment of appropriate rental fees, as required by applicable law and
regulations.
Since the Holding Company will only hold the outstanding capital stock
of the Association upon consummation of the conversion, the competitive
conditions applicable to the Holding Company will be the same as those
confronting the Association. See "BUSINESS OF THE ASSOCIATION -- Competition."
38
<PAGE>
BUSINESS OF THE ASSOCIATION
General
The Association operates as a community oriented financial institution. The
Association's business consists primarily of attracting retail deposits from the
general public and using those funds to originate real estate loans. The
Association emphasizes the origination of adjustable-rate mortgages and
generally holds its loans for long-term investment purposes. See "-- Lending
Activities."
Market Area
The Association conducts operations out of its main office in Laurens,
South Carolina (in Laurens County) and three branch offices in Upstate South
Carolina, Belton (in Anderson County), Ware Shoals (in Greenwood County) and
Simpsonville (in Greenville County). Most of the Association's depositors live
in the areas surrounding the Association's offices and most of the Association's
loans are made to persons in the counties in which its branches are located, as
well as in the Columbia, South Carolina metropolitan area.
Laurens County, with an estimated population of 62,000, is located to the
east of the Greenville-Spartanburg-Anderson metropolitan area. Although a rural
county, the completion of U.S. Interstate Routes I-26 and I-385 has provided
access to the larger population and employment centers of Columbia and
Greenville-Spartanburg-Anderson. The Association's Belton and Simpsonville
branches are within the Greenville-Spartanburg-Anderson metropolitan area, while
the Ware Shoals branch is in a rural area between Laurens and the city of
Greenwood. South Carolina's economy, historically dependent on the textile
industry, has expanded into a broad variety of employment sectors in recent
years as the textile industry has declined. The development of major
transportation routes, low cost of living and labor, and aggressive marketing by
local and state government have resulted in an increase in industrial
development. As a result, the Association's market areas have reported increases
in population, households and income in recent years.
The Association faces intense competition for deposits and loan
originations from the many financial institutions conducting business within its
market area. See "--Competition" and "RISK FACTORS -- Competition."
Lending Activities
General. At September 30, 1997, the Association's total loans receivable
portfolio amounted to $192.7 million, or 77.8% of total assets at that date. The
Association has traditionally concentrated its lending activities on mortgage
loans, with such loans amounting to $191.3 million, or 95.3% of the total loans
receivable at September 30, 1997. At that date, $170.3 million, or 84.8% of the
Association's total loans receivable had adjustable interest rates. In addition
to one- to four-family mortgage loans, the Association originates construction
loans, commercial real estate loans, home equity loans and savings account
loans. All of the Association's mortgage loan portfolio is secured by real
estate, either as primary or secondary collateral, located in South Carolina.
39
<PAGE>
Loan Portfolio Analysis. The following table sets forth the composition of
the Association's loan portfolio (excluding loans held-for-sale) at the dates
indicated. The Association had no concentration of loans exceeding 10% of total
loans receivable other than as disclosed below.
<TABLE>
<CAPTION>
At September 30,
-----------------------------------------------------------------------------------------
1997 1996 1995 1994
------------------ ------------------ ------------------- -----------------
Amount Percent Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ ------- ------ -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans:
One- to four-family........... $180,609 90.0% $173,925 90.4% $167,092 90.2% $151,238 89.9%
Builder construction.......... 2,601 1.3 3,836 2.0 2,735 1.5 2,763 1.6
Commercial.................... 8,136 4.0 6,450 3.3 7,573 4.1 7,536 4.5
-------- ------ -------- ------ -------- ------ -------- ------
Total mortgage loans........ 191,346 95.3 184,211 95.7 177,400 95.8 161,537 96.0
Savings account loans.......... 1,419 0.7 1,146 0.6 1,439 0.8 1,133 0.7
Home equity loans.............. 8,124 4.0 7,050 3.7 6,429 3.4 5,607 3.3
-------- ------ -------- ------ -------- ------ -------- ------
Total loans receivable....... 200,889 100.0% 192,407 100.0% 185,268 100.0% 168,277 100.0%
====== ====== ====== ======
Less:
Undisbursed loan funds........ 6,989 8,375 5,995 7,584
Deferred loan origination fees 363 412 424 389
Allowance for loan losses..... 874 670 590 622
-------- -------- -------- --------
Loans receivable, net........ $192,663 $182,950 $178,259 $159,682
======== ======== ======== ========
<CAPTION>
At September 30,
--------------------
1993
--------------------
Amount Percent
------ -------
(Dollars in thousands)
<S> <C> <C>
Mortgage loans:
One- to four-family........... $147,968 90.0%
Builder construction.......... 1,871 1.1
Commercial.................... 7,731 4.7
-------- ------
Total mortgage loans........ 157,570 95.8
Savings account loans.......... 1,444 0.9
Home equity loans.............. 5,476 3.3
-------- ------
Total loans receivable....... 164,490 100.0%
=====
Less:
Undisbursed loan funds........ 4,980
Deferred loan origination fees 414
Allowance for loan losses..... 560
--------
Loans receivable, net........ $158,536
========
</TABLE>
40
<PAGE>
One- to Four-Family Real Estate Loans. The Association has concentrated its
lending activities on the origination of loans secured by first mortgage loans
on one- to four-family residences located in South Carolina. At September 30,
1997, $180.6 million, or 90.0%, of the Association's total loan portfolio
consisted of such loans. Included in this amount are $8.1 million of
construction loans that will convert to permanent mortgage loans after the
completion of the construction phase.
The Association offers ARM loans at rates and terms competitive with market
conditions. At September 30, 1997, $154.1 million, or 85.3%, of the
Association's one- to four-family real estate loans were subject to periodic
interest rate adjustments. Substantially all of the Association's ARM loans are
underwritten and documented in accordance with guidelines established by Freddie
Mac, even though the Association originates ARM loans primarily for its own
portfolio. The Association originates for its portfolio ARM loans which provide
for an interest rate that adjusts every year or that is fixed for three or ten
years and then adjusts every year after the initial period. The Association's
ARM loans generally provide for annual and lifetime interest rate adjustment
limits of 1% and 4%, respectively. The Association's ARM loans adjust based on
the National Median Cost of Funds Index. This index is a lagging market index,
which means that upward adjustments in this index may occur more slowly than
changes in the Association's cost of interest-bearing liabilities, especially
during periods of rapidly increasing interest-rates. The Association's ARM loans
are typically based on a 30-year amortization schedule. The initial rate on most
of the Association's ARM loans is .75% to 1% below the fully indexed rate for
the loan.
The Association offers fixed-rate, one- to four-family mortgage loans with
maturities ranging from ten to 30 years. These loans are fully amortizing with
monthly payments sufficient to repay the total amount of the loan with interest
by the end of the loan term. Generally, they are underwritten and documented in
accordance with guidelines established by Freddie Mac. The Association's
fixed-rate loans customarily include "due on sale" clauses, which give the
Association the right to declare a loan immediately due and payable in the event
the borrower sells or otherwise disposes of the real property subject to the
mortgage and the loan is not paid. In recent years, as part of its
asset/liability management, the Association has retained for its portfolio
fixed-rate loans with terms of ten to 15 years. The Association determines
whether to sell or retain fixed-rate loans with terms of more than 15 years on a
case-by-case basis.
The Association also offers loans to individuals for the construction and
acquisition of their personal residence. Such loans are made on the same terms
as the Association's one- to four-family mortgage loans, but provide for the
payment of interest only during the construction phase, which is usually six
months. At the end of the construction phase, the loan converts to a permanent
mortgage loan.
The Association offers second mortgage loans, although these have become
less popular since the introduction of home equity lines of credit. The
Association's second mortgage loans have fixed interest rates and terms of up to
ten years. At September 30, 1997, the Association had $1.1 million of second
mortgage loans included in its one- to four-family mortgage loans.
Borrower demand for ARM loans versus fixed-rate mortgage loans is a
function of the level of interest rates, the expectations of changes in the
level of interest rates and the difference between the initial interest rates
and fees charged for each type of loan. The relative amount of fixed-rate
mortgage loans and ARM loans that can be originated at any time is largely
determined by the demand for each in a competitive environment.
The retention of ARM loans in the Association's loan portfolio helps reduce
the Association's exposure to changes in interest rates. There are, however,
unquantifiable credit risks resulting from the potential of increased costs due
to changed rates to be paid by the borrower. It is possible that during periods
of rising interest rates the risk of default on ARM loans may increase as a
result of repricing and the increased payments required by the borrower. See
"RISK FACTORS -- Risks Associated with ARM Loans." In addition, although ARM
loans allow the Association to increase the sensitivity of its asset base to
changes in the interest rates, the extent of this interest sensitivity is
limited by the annual and lifetime interest rate adjustment limits. Because of
these considerations and its use of a lagging market index, the Association has
no assurance that yields on ARM loans will be sufficient to
41
<PAGE>
offset increases in the Association's cost of funds. The Association believes
these risks, which have not had a material adverse effect on the Association to
date, generally are less than the risks associated with holding fixed-rate loans
in portfolio during a rising interest rate environment.
The Association generally requires title insurance insuring the status of
its lien or an acceptable attorney's opinion on all loans where real estate is
the primary source of security. The Association also requires that fire and
casualty insurance (and, if appropriate, flood insurance) be maintained in an
amount at least equal to the outstanding loan balance.
The Association's one- to four-family residential mortgage loans typically
do not exceed 80% of the appraised value of the security property. Pursuant to
underwriting guidelines adopted by the Association's Board of Directors, the
Association can lend up to 95% of the appraised value of the property securing a
one- to- four family residential loan; however, the Association generally
obtains private mortgage insurance on the portion of the principal amount that
exceeds 80% of the appraised value of the security property.
Builder Construction Loans. The Association originates residential
construction loans to local home builders, generally with whom it has an
established relationship. At September 30, 1997, builder construction loans
amounted to $2.6 million, or 1.3% of the Association's total loans receivable.
The Association's construction loans to builders generally have fixed
interest rates and are for a term of one year. Such loans to builders are
typically made with a maximum loan to value ratio of 80%. These loans are made
either on a pre-sold or speculative (unsold) basis. However, the Association
generally limits the number of outstanding loans on unsold homes under
construction to individual builders, with the amount dependent on the financial
strength of the builder, the present exposure of the builder, the degree of loan
concentration and prior sales of homes in the development. At September 30,
1997, the largest amount of construction loans outstanding to one builder was
$455,000, all of which was for speculative construction.
Prior to making a commitment to fund a construction loan, the Association
requires an appraisal of the property by a state-licensed and qualified
appraiser. The Association's staff or a paid inspector also reviews and inspects
each project prior to disbursement of funds during the term of the construction
loan. Loan proceeds are disbursed after inspection of the project based on
percentage of completion.
Construction lending affords the Association the opportunity to earn higher
interest rates with shorter terms to maturity relative to single-family
permanent mortgage lending. Construction lending, however, is generally
considered to involve a higher degree of risk than single-family permanent
mortgage lending because of the inherent difficulty in estimating both a
property's value at completion of the project and the estimated cost of the
project. The nature of these loans is such that they are generally more
difficult to evaluate and monitor. If the estimate of construction cost proves
to be inaccurate, the Association may be required to advance funds beyond the
amount originally committed to permit completion of the project. If the estimate
of value upon completion proves to be inaccurate, the Association may be
confronted with a project whose value is insufficient to assure full repayment.
Projects may also be jeopardized by disagreements between borrowers and builders
and by the failure of builders to pay subcontractors. Loans to builders to
construct homes for which no purchaser has been identified carry more risk
because the payoff for the loan is dependent on the builder's ability to sell
the property prior to the time that the construction loan is due.
The Association has attempted to minimize the foregoing risks by, among
other things, limiting its construction lending primarily to residential
properties. It is also the Association's general policy to obtain personal
guarantees from financially capable parties where the loan is made to a
corporation or other legal entity.
Commercial Real Estate Loans. The Association originates mortgage loans for
the acquisition and refinancing of commercial real estate properties. The
Association does not actively solicit commercial real estate loans. At September
30, 1997, $8.1 million, or 4.0% of the Association's total loans receivable,
consisted of loans
42
<PAGE>
secured by existing commercial real estate properties. The majority of the
Association's commercial real estate loans are secured by office buildings,
churches, retail shops and warehouses, all of which are located in South
Carolina. Occasionally, the Association makes land acquisition and development
loans. At September 30, 1997, the Association's largest commercial real estate
loan was $1.8 million and is secured by improved and unimproved lots in a
subdivision near Greenwood, South Carolina.
Most of the Association's commercial real estate loans have adjustable
interest rates and 15-year terms. The Association requires appraisals of all
properties securing commercial real estate loans. Appraisals are performed by an
independent appraiser designated by the Association, all of which are reviewed
by management.
Commercial real estate lending affords the Association an opportunity to
receive interest at rates higher than those generally available from one- to
four-family residential lending. However, loans secured by such properties
usually are greater in amount and are more difficult to evaluate and monitor,
and, therefore, involve a greater degree of risk than one- to four-family
residential mortgage loans. Because payments on loans secured by commercial
properties are often dependent on the successful operation and management of the
properties, repayment of such loans may be affected by adverse conditions in the
real estate market or the economy. The Association seeks to minimize these risks
by limiting the maximum loan-to-value ratio to 80% and strictly scrutinizing the
financial condition of the borrower, the cash flow of the project, the quality
of the collateral and the management of the property securing the loan. The
Association also obtains loan guarantees from financially capable parties based
on a review of personal financial statements.
Savings Account Loans. The Association offers loans secured by savings
deposits. At September 30, 1997, savings account loans totalled $1.4 million, or
0.7% of total loans receivable. Generally, such loans are made up to 90% of the
amount on deposit at the Association.
Home Equity Loans. The Association originates home equity loans in the form
of lines of credit. At September 30, 1997, the Association had $8.1 million of
home equity loans and unused commitments to extend credit under home equity
loans of $6.3 million. Most of these loans are made to existing customers. The
Association's home equity loans have variable interest rates tied to the prime
lending rate. The Association imposes a maximum loan-to-value ratio of 90% after
considering both the first and second mortgage loans.
The Association's home equity loans may have greater credit risk than one-
to four-family residential mortgage loans because they are secured by mortgages
subordinated to an existing first mortgage on the property, which, in most
cases, is held by the Association.
43
<PAGE>
Maturity of Loan Portfolio. The following table sets forth certain
information at September 30, 1997 regarding the dollar amount of loans maturing
in the Association's portfolio based on their contractual terms to maturity, but
does not include scheduled payments or potential prepayments. Demand loans,
loans having no stated schedule of repayments and no stated maturity, and
overdrafts are reported as becoming due within one year. Loan balances do not
include undisbursed loan proceeds, unearned discounts, unearned income and
allowance for loans losses.
<TABLE>
<CAPTION>
After After After
One Year 3 Years 5 Years
Within Through Through Through
One Year 3 Years 5 Years 10 Years
-------- ------- ------- --------
(In thousands)
<S> <C> <C> <C> <C>
Mortgage loans:
One- to four-family................................ $ 146 $1,085 $4,888 $18,032
Builder construction............................... 2,601 -- -- --
Commercial......................................... -- 589 2,088 857
Savings account loans................................ 1,419 -- -- --
Home equity loans ................................... 8,124 -- -- --
------- ------ ------ -------
Total............................................. $12,290 $1,674 $6,976 $18,889
======= ====== ====== =======
<CAPTION>
Beyond
10 Years Total
-------- -----
(In thousands)
<S> <C> <C>
Mortgage loans:
One- to four-family................................ $156,458 $180,609
Builder construction............................... -- 2,601
Commercial......................................... 4,602 8,136
Savings account loans................................ -- 1,419
Home equity loans ................................... -- 8,124
-------- --------
Total............................................. $161,060 $200,889
======== ========
</TABLE>
The following table sets forth the dollar amount of all loans due after
September 30, 1998, which have fixed interest rates and have floating or
adjustable interest rates.
<TABLE>
<CAPTION>
Fixed- Floating- or
Rates Adjustable-Rates
------- ----------------
(In thousands)
<S> <C> <C>
Mortgage loans:
One- to- four family............................... $26,348 $154,115
Builder construction............................... -- --
Commercial......................................... 1,494 6,642
Savings account loans................................ -- --
Home equity loans ................................... -- --
------- --------
Total............................................ $27,842 $160,757
======= ========
</TABLE>
<PAGE>
Scheduled contractual principal repayments of loans do not reflect the
actual life of such assets. The average life of a loan is substantially less
than its contractual terms because of prepayments. In addition, due-on-sale
clauses on loans generally give the Association the right to declare loans
immediately due and payable in the event, among other things, that the borrower
sells the real property subject to the mortgage and the loan is not repaid. The
average life of a mortgage loan tends to increase, however, when current
mortgage loan market rates are substantially higher than rates on existing
mortgage loans and, conversely, decrease when rates on existing mortgage loans
are substantially higher than current mortgage loan market rates.
Loan Solicitation and Processing. The Association's lending activities are
subject to the written, non-discriminatory, underwriting standards and loan
origination procedures established by the Association's Board of Directors and
management. Loan originations come from a number of sources. The customary
sources of loan originations are realtors, walk-in customers, referrals and
existing customers. The Association also uses one mortgage broker in Columbia
and one mortgage broker in Greenwood to originate loans. For the year ended
September 30, 1997, the Association originated $11.8 million loans, or 26.1% of
total originations, through these brokers. All loans originated through these
mortgage brokers are underwritten by the Association pursuant to the
Association's underwriting guidelines.
All single-family residential mortgage loans up to $300,000 and all other
loans up to $200,000 must be approved by two members of the Association's Loan
Committee. All loans in excess of such amounts but below $500,000 must be
approved by a committee consisting of the President, two Vice Presidents in
charge of lending operations and two outside Directors. All loans of $500,000 or
more must be approved by the Association's Board of Directors.
Loan Originations, Purchases and Sales. While the Association originates
both adjustable-rate and fixed-rate loans, its ability to generate each type of
loan depends upon relative customer demand for loans in its primary market area.
During the years ended September 30, 1997, 1996 and 1995, the Association
originated $45.1 million, $46.3 million and $47.1 million of loans,
respectively. Of the $45.1 million of loans originated in the year ended
September 30, 1997, $35.8 million, or 79.3%, had adjustable rates of interest.
In fiscal 1997, the Association began purchasing loans from a mortgage
banking company in Greenville, South Carolina. All of the loans purchased in
fiscal 1997 were purchased through this company and all of the property securing
such loans is located in Upstate South Carolina. These loans are written to
Freddie Mac guidelines with all exceptions reviewed and approved by the
Association. The Association anticipates that it will continue to purchase loans
from time to time to supplement its own originations.
The Association sells loans in order to manage the interest rate risk
associated with holding long-term, fixed-rate mortgages, to enable the
Association to offer a wide variety of mortgage products, and to earn
origination fees and premiums. In 1995, the Association established a
relationship with another financial institution pursuant to which the
Association sells fixed-rate, one- to four-family mortgage loans with terms in
excess of 15 years. The Association does not retain servicing rights on the
loans that it sells.
45
<PAGE>
The following table sets forth total loans originated, purchased, sold and
repaid during the periods indicated.
<TABLE>
<CAPTION>
Years Ended September 30,
----------------------------------------------------------
1997 1996 1995
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Loans originated:
Mortgage loans:
One- to four-family ................... $37,020 $36,450 $39,444
Builder construction................... 2,901 5,255 4,175
Commercial............................. 1,958 1,739 543
Savings account loans................... 1,128 572 1,079
Home equity loans....................... 2,139 2,243 1,871
------- ------- -------
Total loans originated................ 45,146 46,259 47,112
------- ------- -------
Loans purchased:
Mortgage loans:
One- to four-family.................... 2,975 -- --
Builder construction................... -- -- --
Commercial............................. 541 -- --
------- ------- -------
Total loans purchased................. 3,516 -- --
------- ------- -------
Loans sold............................... (479) (954) --
Principal repayments..................... (35,198) (42,970) (26,764)
Transfer to real estate owned............ (996) (92) (185)
Increase (decrease) in other items, net.. (1,231) 2,448 (1,586)
------- ------- -------
Net increase (decrease) in loans
receivable, net......................... $10,758 $ 4,691 $18,577
======= ======= =======
</TABLE>
Loan Commitments. The Association issues commitments for mortgage loans
conditioned upon the occurrence of certain events. Such commitments are made in
writing on specified terms and conditions and are honored for up to 30 days from
approval, depending on the type of transaction. At September 30, 1997, the
Association had loan commitments (excluding undisbursed portions of interim
construction loans of $7.0 million) of $1.4 million and unused lines of credit
of $6.3 million. See Note 10 of Notes to the Financial Statements.
Loan Fees. In addition to interest earned on loans, the Association
receives income from fees in connection with loan originations, loan
modifications, late payments and for miscellaneous services related to its
loans. Income from these activities varies from period to period depending upon
the volume and type of loans made and competitive conditions.
The Association charges loan origination fees which are calculated as a
percentage of the amount borrowed. In accordance with applicable accounting
procedures, loan origination fees and discount points in excess of loan
origination costs are deferred and recognized over the contractual remaining
lives of the related loans on a level yield basis. Discounts and premiums on
loans purchased are accreted and amortized in the same manner. At September 30,
1997, the Association had $363,000 of deferred loan fees. The Association
recognized $151,000, $162,000 and $100,000 of deferred loan fees during the
years ended September 30, 1997, 1996 and 1995, respectively, in connection with
loan refinancings, payoffs, sales and ongoing amortization of outstanding loans.
46
<PAGE>
Nonperforming Assets and Delinquencies. When a borrowers fails to make a
required payment on a loan, the Association attempts to cure the deficiency by
contacting the borrower and seeking the payment. A late notice is mailed 15 days
after a payment is due. In most cases, deficiencies are cured promptly. If a
delinquency continues, additional contact is made either through additional
notices or other means and the Association will attempt to work out a payment
schedule. While the Association generally prefers to work with borrowers to
resolve such problems, the Association will institute foreclosure or other
proceedings, as necessary, to minimize any potential loss.
Loans are placed on nonaccrual status generally if, in the opinion of
management, principal or interest payments are not likely in accordance with the
terms of the loan agreement, or when principal or interest is past due more than
90 days. Interest accrued but not collected at the date the loan is placed on
nonaccrual status is reversed against income in the current period. Loans may be
reinstated to accrual status when payments are 90 days or less past due and, in
the opinion of management, collection of the remaining past due balances can be
reasonably expected.
The Association's Board of Directors is informed monthly of the amounts of
loans delinquent more than 30, 60 and 90 days, all loans in foreclosure and all
foreclosed and repossessed property owned by the Association.
47
<PAGE>
The following table sets forth information with respect to the
Association's nonperforming assets and restructured loans within the meaning of
SFAS No. 15 at the dates indicated.
<TABLE>
<CAPTION>
At September 30,
-----------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Loans accounted for on
a nonaccrual basis:
Mortgage loans:
One- to four-family............... $ 444 $ 679 $ 867 $1,010 $1,329
Builder construction.............. 411 348 40 121 103
Commercial........................ 33 -- 28 187 539
Savings account loans.............. -- -- -- -- --
Home equity loans.................. 46 -- -- 26 16
------ ------ ------ ------ ------
Total of nonaccrual loans.... 934 1,027 935 1,344 1,987
Real estate owned................... 410 86 104 388 724
------ ------ ------ ------ ------
Total nonperforming assets..... $1,344 $1,113 $1,039 $1,732 $2,711
====== ====== ====== ====== ======
Restructured loans.................. $732 $769 $588 $479 $481
==== ==== ==== ==== ====
Nonaccrual loans as a percentage
of loans receivable, net......... 0.48% 0.56% 0.52% 0.84% 1.25%
Nonaccrual loans as a percentage
of total assets.................... 0.38% 0.42% 0.40% 0.63% 0.94%
Nonperforming assets as a
percentage of total assets......... 0.54% 0.45% 0.44% 0.81% 1.28%
</TABLE>
Interest income that would have been recorded for the year ended September
30, 1997 had nonaccruing loans been current in accordance with their original
terms amounted to $85,000. The amount of interest included in interest income on
such loans for the year ended September 30, 1997 amounted to $42,000. Interest
income that would have been recorded for the year ended September 30, 1997 had
restructured loans been current in accordance with their original terms amounted
to $60,000, and the amount of interest included in interest income on such loans
for that period amounted to $74,000.
Real Estate Owned. Real estate acquired by the Association as a result of
foreclosure or by deed-in-lieu of foreclosure is classified as real estate owned
until sold. When property is acquired it is recorded at fair market value at the
date of foreclosure. Subsequent to foreclosure, real estate owned is carried at
the lower of the foreclosed amount or fair value, less estimated selling costs.
At September 30, 1997, the Association had $410,000 of real estate owned, which
consisted of three single family residences.
Restructured Loans. Under GAAP, the Association is required to account for
certain loan modifications or restructuring as a "troubled debt restructuring."
In general, the modification or restructuring of a debt constitutes a troubled
debt restructuring if the Association for economic or legal reasons related to
the borrower's financial difficulties grants a concession to the borrowers that
the Association would not otherwise consider. A debt restructuring or loan
modification for a borrower does not necessarily always constitute a troubled
debt restructuring, however, and a troubled debt restructuring does not
necessarily result in a nonaccrual loan. The Association had
48
<PAGE>
$732,000 of restructured loans as of September 30, 1997, which consisted of one
commercial mortgage loan and six one- to four-family mortgage loans.
Asset Classification. The OTS has adopted various regulations regarding
problem assets of savings institutions. The regulations require that each
insured institution review and classify its assets on a regular basis. In
addition, in connection with examinations of insured institutions, OTS examiners
have authority to identify problem assets and, if appropriate, require them to
be classified. There are three classifications for problem assets: substandard,
doubtful and loss. Substandard assets have one or more defined weaknesses and
are characterized by the distinct possibility that the insured institution will
sustain some loss if the deficiencies are not corrected. Doubtful assets have
the weaknesses of substandard assets with the additional characteristic that the
weaknesses make collection or liquidation in full on the basis of currently
existing facts, conditions and values questionable, and there is a high
possibility of loss. An asset classified as loss is considered uncollectible and
of such little value that continuance as an asset of the institution is not
warranted. If an asset or portion thereof is classified as loss, the insured
institution establishes specific allowances for loan losses for the full amount
of the portion of the asset classified as loss. All or a portion of general loan
loss allowances established to cover possible losses related to assets
classified substandard or doubtful can be included in determining an
institution's regulatory capital, while specific valuation allowances for loan
losses generally do not qualify as regulatory capital. Assets that do not
currently expose the insured institution to sufficient risk to warrant
classification in one of the aforementioned categories but possess weaknesses
are designated "special mention" and monitored by the Association.
The aggregate amounts of the Association's classified and special mention
assets at the dates indicated were as follows:
<TABLE>
<CAPTION>
At September 30,
-------------------
1997 1996
---- ----
(In thousands)
<S> <C> <C>
Classified assets:
Loss................................. $ 123 $ 120
Doubtful............................. 592 264
Substandard ......................... 1,190 881
Special mention...................... 1,072 1,549
</TABLE>
At September 30, 1997, assets classified as loss consisted of one builder
construction loan totalling $8,000 and one commercial mortgage loan totalling
$115,000; assets classified as doubtful consisted of 14 one- to four-family
mortgage loans totalling $592,000; and assets classified as substandard
consisted of 21 one- to four-family mortgage loans totalling $668,000 and nine
builder construction loans totalling $522,000. At September 30, 1997, assets
classified as special mention consisted primarily of one- to four-family
mortgage loans that were delinquent more than 60 days.
Allowance for Loan Losses. In originating loans, the Association recognizes
that losses will be experienced and that the risk of loss will vary with, among
other things, the type of loan being made, the creditworthiness of the borrower
over the term of the loan, general economic conditions and, in the case of a
secured loan, the quality of the security for the loan. The allowance method is
used in providing for loan losses. Accordingly, all loan losses are charged to
the allowance and all recoveries are credited to it. The allowance for loan
losses is established through a provision for loan losses charged to operations.
The provision for loan losses is based on management's periodic evaluation of
such factors as the delinquency status of loans, current economic conditions,
the net realizable value of the underlying collateral and prior loan loss
experience.
At September 30, 1997, the Association had an allowance for loan losses of
$874,000. Although management believes that it uses the best information
available to establish the allowance for loan losses, future
49
<PAGE>
adjustments to the allowance for loan losses may be necessary and results of
operations could be significantly and adversely affected if circumstances differ
substantially from the assumptions used in making the determinations.
Furthermore, while the Association believes it has established its existing
allowance for loan losses in accordance with GAAP, there can be no assurance
that regulators, in reviewing the Association's loan portfolio, will not request
the Association to increase significantly its allowance for loan losses. In
addition, because future events affecting borrowers and collateral cannot be
predicted with certainty, there can be no assurance that the existing allowance
for loan losses is adequate or that substantial increases will not be necessary
should the quality of any loans deteriorate as a result of the factors discussed
above. Any material increase in the allowance for loan losses may adversely
affect the Association's financial condition and results of operations.
The following table sets forth an analysis of the Association's allowance
for loan losses.
<TABLE>
<CAPTION>
Years Ended September 30,
----------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Allowance at beginning of period......... $670 $590 $622 $560 $525
Provision for loan losses................ 337 (7) 47 62 35
Recoveries:
Mortgage loans:
One- to four-family.................... -- -- -- -- --
Builder construction................... -- -- -- -- --
Commercial............................. -- 115 -- -- --
Savings account loans................... -- -- -- -- --
Home equity loans....................... -- -- -- -- --
---- ---- ---- ---- ----
Total recoveries..................... -- 115 -- -- --
---- ---- ---- ---- ----
Charge-offs:
Mortgage loans:
One- to four-family.................... -- 28 -- -- --
Builder construction................... -- -- -- -- --
Commercial............................. 133 -- 79 -- --
Savings account loans................... -- -- -- -- --
Home equity loans....................... -- -- -- -- --
---- ---- ---- ---- ----
Total charge-offs.................... 133 28 79 -- --
---- ---- ---- ---- ----
Net charge-offs...................... 133 (87) 79 -- --
---- ---- ---- ---- ----
Balance at end of period............. $874 $670 $590 $622 $560
==== ==== ==== ==== ====
Allowance for loan losses as a percentage
of total loans outstanding at the end of
the period.............................. 0.44% 0.35% 0.32% 0.37% 0.34%
Net charge-offs (recoveries) as a
percentage of average loans outstanding
during the period....................... 0.07% (0.05%) 0.05% 0.00% 0.00%
Allowance for loan losses as a percentage
of nonperforming loans at end of period. 93.58% 65.24% 63.10% 46.28% 28.18%
</TABLE>
For additional discussion regarding the provisions for loan losses in
recent periods, see "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- Comparison of Operating Results for the Years Ended
September 30, 1997 and 1996 -- Provision for Loan Losses," and "-- Comparison of
Operating Results for the Years Ended September 30, 1996 and 1995 -- Provision
for Loan Losses."
50
<PAGE>
The following table sets forth the breakdown of the allowance for loan
losses by loan category at the dates indicated. Management believes that the
allowance can be allocated by category only on an approximate basis. The
allocation of the allowance to each category is not necessarily indicative of
future losses and does not restrict the use of the allowance to absorb losses in
any other category.
<TABLE>
<CAPTION>
At September 30,
--------------------------------------------------------------------------------------
1997 1996 1995 1994
-------------------- -------------------- -------------------- --------------------
Percent Percent Percent Percent
of Loans of Loans of Loans of Loans
in Category in Category in Category in Category
to Total to Total to Total to Total
Amount Loans Amount Loans Amount Loans Amount Loans
------ ----- ------ ----- ------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans:
One- to four-family................... $668 90.0% $452 90.4% $540 90.2% $486 89.9%
Builder construction.................. 42 1.3 26 2.0 8 1.5 12 1.6
Commercial............................ 138 4.0 175 3.3 19 4.1 111 4.5
Savings account loans.................. -- 0.7 -- 0.6 -- 0.8 -- 0.7
Home equity loans...................... 26 4.0 17 3.7 23 3.4 13 3.3
Unallocated............................ -- N/A -- N/A -- N/A -- N/A
---- ---- ---- ---- ---- ----- ---- -----
Total allowance for loan losses..... $874 100.0% $670 100.0% $590 100.0% $622 100.0%
==== ==== ==== ==== ==== ===== ==== =====
</TABLE>
<TABLE>
<CAPTION>
At September 30,
-----------------------
1993
-----------------------
Percent
of Loans
in Category
to Total
Amount Loans
------ -----
(Dollars in thousands)
<S> <C> <C>
Mortgage loans:
One- to four-family................... $450 90.0%
Builder construction.................. 9 1.1
Commercial............................ 89 4.7
Savings account loans.................. -- 0.9
Home equity loans...................... 12 3.3
Unallocated............................ -- N/A
---- -----
Total allowance for loan losses..... $560 100.0%
==== =====
</TABLE>
51
<PAGE>
Investment Activities
The Association is permitted under federal law to invest in various types
of liquid assets, including U.S. Government obligations, securities of various
federal agencies and of state and municipal governments, deposits at the
FHLB-Atlanta, certificates of deposit of federally insured institutions, certain
bankers' acceptances and federal funds. Subject to various restrictions, the
Association may also invest a portion of its assets in commercial paper and
corporate debt securities. Savings institutions like the Association are also
required to maintain an investment in FHLB stock. The Association is required
under federal regulations to maintain a minimum amount of liquid assets. See
"REGULATION" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- Liquidity and Capital Resources."
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," requires that investments be categorized as "held to maturity,"
"trading securities" or "available for sale," based on management's intent as to
the ultimate disposition of each security. SFAS No. 115 allows debt securities
to be classified as "held to maturity" and reported in financial statements at
amortized cost only if the reporting entity has the positive intent and ability
to hold those securities to maturity. Securities that might be sold in response
to changes in market interest rates, changes in the security's prepayment risk,
increases in loan demand, or other similar factors cannot be classified as "held
to maturity." Debt and equity securities held for current resale are classified
as "trading securities." Such securities are reported at fair value, and
unrealized gains and losses on such securities would be included in earnings.
The Association does not currently use or maintain a trading account. Debt and
equity securities not classified as either "held to maturity" or "trading
securities" are classified as "available for sale." Such securities are reported
at fair value, and unrealized gains and losses on such securities are excluded
from earnings and reported as a net amount in a separate component of equity.
The Association's investment policies limit investments to U.S. Government
and agency securities, Federal Funds and overnight deposits and mortgage-backed
securities. The Association's investment policy does not permit engaging
directly in hedging activities or purchasing high risk mortgage derivative
products. Investments are made based on certain considerations, which include
the interest rate, yield, settlement date and maturity of the investment, the
Association's liquidity position, and anticipated cash needs and sources (which
in turn include outstanding commitments, upcoming maturities, estimated deposits
and anticipated loan amortization and repayments). The effect that the proposed
investment would have on the Association's credit and interest rate risk and
risk-based capital is also considered.
The Association purchases investment securities to provide for necessary
liquidity for day-to-day operations. The Association also purchases investment
securities when investable funds exceed loan demand. In recent years, the
Association's investment securities purchases have been limited to U.S.
Government and agency securities with contractual maturities of up to five
years. Depending on loan demand, the Association may consider increasing its
investment in mortgage-backed securities after the conversion.
52
<PAGE>
The following table sets forth the amortized cost and fair value of the
Association's securities, by accounting classification and by type of security,
at the dates indicated.
<TABLE>
<CAPTION>
At September 30,
------------------------------------------------------------------------------
1997 1996 1995
------------------ ------------------- -------------------
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
--------- ----- --------- ----- --------- -----
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Available for sale:
Investment securities:
U.S. Treasury obligations ............... $ 2,010 $ 2,008 $ 7,536 $ 7,472 $10,061 $ 9,944
U.S. Government Agency obligations ...... 3,996 3,976 7,841 7,761 -- --
Freddie Mac common stock .................. 57 2,406 57 1,666 57 1,180
------- ------- ------- ------- ------- -------
Total available for sale............. 6,063 8,390 15,434 16,899 10,118 11,124
------- ------- ------- ------- ------- -------
Held to maturity:
Investment securities:
U.S. Government Agency
obligations ........................... 15,988 15,954 20,993 20,778 18,699 18,349
Mortgage-backed securities:
Fannie Mae .............................. 788 781 1,142 1,117 1,455 1,423
Freddie Mac ............................. 5,877 5,854 8,584 8,467 10,534 10,363
------- ------- ------- ------- ------- -------
Total held to maturity .............. 22,653 22,589 30,719 30,362 30,688 30,135
------- ------- ------- ------- ------- -------
Total ............................... $28,716 $30,979 $46,153 $47,261 $40,806 $41,259
======= ======= ======= ======= ======= =======
</TABLE>
The following table sets forth certain information regarding the carrying
value, weighted average yields and maturities or periods to repricing of the
Association's debt securities and mortgage-backed securities at September 30,
1997. U.S. Treasury obligations and certain U.S. Government agency obligations
are exempt from state taxation. Their yields, however, have not been computed on
a tax equivalent basis for purposes of the table.
<TABLE>
<CAPTION>
Less Than One to
One Year Five Years Totals
---------------------- ---------------------- ---------------------
Weighted Weighted Weighted
Amortized Average Amortized Average Amortized Average
Cost Yield Cost Yield Cost Yield
--------- -------- --------- -------- --------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Available for sale:
Investment securities:
U.S. Treasury obligations......... $ 501 6.03% $ 1,509 5.44% $ 2,010 5.52%
U.S. Government Agency
obligations..................... 2,496 5.30 1,500 5.46 3,996 5.36
----- ----- -----
Total available for sale...... 2,997 6.49 3,009 5.45 6,006 5.41
----- ----- -----
Held to maturity:
Investment securities:
U.S. Government Agency
obligations..................... 2,002 5.09 13,986 6.16 15,988 6.07
Mortgage-backed securities:
Fannie Mae........................ -- -- 788 5.75 788 5.75
Freddie Mac....................... 3,574 5.39 2,303 5.06 5,877 5.21
----- ----- -----
Total held to maturity........ 5,576 5.26 17,077 5.99 22,653 5.88
------ ------ ------
Total......................... $8,573 5.82 $20,086 5.91 $28,659 5.89
====== ======= =======
</TABLE>
53
<PAGE>
Deposit Activities and Other Sources of Funds
General. Deposits are the major external source of funds for the
Association's lending and other investment activities. In addition, the
Association also generates funds internally from loan principal repayments and
prepayments and maturing investment and mortgage-backed securities. Scheduled
loan repayments are a relatively stable source of funds, while deposit inflows
and outflows and loan prepayments are influenced significantly by general
interest rates and money market conditions. Borrowings from the FHLB-Atlanta
may be used to compensate for reductions in the availability of funds from other
sources. Presently, the Association has no other borrowing arrangements.
Deposit Accounts. A substantial number of the Association's depositors
reside in South Carolina. The Association's deposit products include NOW
accounts, money market accounts, regular passbook savings, and term certificate
accounts. Deposit account terms vary with the principal difference being the
minimum balance deposit, early withdrawal penalties and the interest rate. The
Association reviews its deposit mix and pricing weekly. The Association does not
utilize brokered deposits, nor has it aggressively sought jumbo certificates of
deposit. To attract larger deposits, from time to time the Association has paid
bonus rates on large deposits.
The Association believes it is competitive in the interest rates it offers
on its deposit products. The Association does not seek to pay the highest
deposit rates but a competitive rate. The Association determines the rates paid
based on a number of conditions, including rates paid by competitors, the
Association's interest rate spread, loan demand and deposit balances.
In the unlikely event the Association is liquidated after the conversion,
depositors will be entitled to full payment of their deposit accounts before any
payment is made to the Holding Company as the sole stockholder of the
Association.
The following table sets forth information concerning the Association's
time deposits and other interest-bearing deposits at September 30, 1997.
<TABLE>
<CAPTION>
Weighted Percentage
Average Minimum of Total
Interest Rate Term Checking and Savings Deposits Amount Balance Deposits
- ------------- ---- ----------------------------- ------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
3.00% None Passbook accounts $ 200 $ 11,423 5.3%
2.03 None NOW accounts 250 2,833 1.3
3.00 None Money market deposit accounts 2,500 939 0.4
Certificate Accounts
--------------------
5.44 Within 6 months Fixed term, fixed rate 2,500 91,350 42.5
5.83 7 - 12 months Fixed term, fixed rate 2,500 57,509 26.7
6.11 13 - 36 months Fixed term, fixed rate 500 48,943 22.7
5.96 37 - 60 months Fixed term, fixed rate 500 2,415 1.1
-------- -----
TOTAL $215,412 100.0%
======== =====
</TABLE>
54
<PAGE>
The following table indicates the amount of the Association's jumbo
certificate accounts by time remaining until maturity as of September 30, 1997.
Jumbo certificate accounts have principal balances of $100,000 or more.
<TABLE>
<CAPTION>
Certificate
Maturity Period Accounts
--------------- --------------
(In thousands)
<S> <C>
Three months or less.............. $ 7,069
Over three through six months..... --
Over six through 12 months........ 4,715
Over 12 months.................... 28,473
--------
Total........................ $40,257
========
</TABLE>
Deposit Flow. The following table sets forth the balances (inclusive of
interest credited) and changes in dollar amounts of deposits in the various
types of accounts offered by the Association between the dates indicated.
<TABLE>
<CAPTION>
At September 30,
--------------------------------------------------------------------------------------
1997 1996 1995
------------------------------- ------------------------------ -----------------
Percent Percent Percent
of Increase of Increase of
Amount Total (Decrease) Amount Total (Decrease) Amount Total
------ ----- ---------- ------ ----- ---------- ------ -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Passbook accounts..................... $ 11,423 5.3% $(444) $ 11,867 5.6% $(608) $12,475 6.2%
NOW and money market accounts......... 3,772 1.7 (149) 3,921 1.9 255 3,666 1.8
Fixed-rate certificate accounts which
mature in the year ending:
Within 1 year....................... 148,859 69.1 39,787 109,072 52.0 (18,637) 127,709 63.4
After 1 year, but within 2 years.... 41,284 19.2 (18,054) 59,338 28.3 34,110 25,228 12.5
After 2 years, but within 5 years... 10,074 4.7 (15,458) 25,532 12.2 (6,863) 32,395 16.1
-------- ----- ------ -------- ----- ------ -------- -----
Total............................ $215,412 100.0% $5,682 $209,730 100.0% $8,257 $201,473 100.0%
======== ===== ====== ======== ===== ====== ======== =====
</TABLE>
Time Deposits by Rates. The following table sets forth the amount of
time deposits in the Association categorized by rates at the dates indicated.
<TABLE>
<CAPTION>
At September 30,
------------------------------------------------------
1997 1996 1995
---- ---- ----
(In thousands)
<S> <C> <C> <C>
3.01 - 4.00%........ $ 5,575 $ 6,826 $ 3,262
4.01 - 5.00%........ 1,218 2,216 17,716
5.01 - 6.00%........ 95,528 97,960 59,427
6.01 - 7.00%........ 92,245 81,430 98,864
7.01 - 8.00%........ 5,651 5,510 5,958
8.01 - 9.00%........ -- -- 105
-------- -------- --------
Total............. $200,217 $193,942 $185,332
======== ======== ========
</TABLE>
55
<PAGE>
Time Deposits by Maturities. The following table sets forth the amount
of time deposits in the Association categorized by maturities at September 30,
1997.
<TABLE>
<CAPTION>
Amount Due
------------------------------------------------------------------------------
Less Than 1-2 2-3 3-4 After
One Year Years Years Years 4 Years Total
-------- ----- ----- ----- ------- -----
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
3.01 - 4.00%....... $ 5,575 $ -- $ -- $ -- $ -- $ 5,575
4.01 - 5.00%....... 1,218 -- -- -- -- 1,218
5.01 - 6.00%....... 73,227 18,886 2,257 872 286 95,528
6.01 - 7.00%....... 64,327 22,298 4,363 974 283 92,245
7.01 - 8.00%....... 4,512 100 1,039 -- -- 5,651
-------- ------- ------ ------ ------ --------
Total............ $148,859 $41,284 $7,659 $1,846 $ 569 $200,217
======== ======= ====== ====== ====== ========
</TABLE>
Deposit Activity. The following table sets forth the deposit activity of
the Association for the periods indicated.
<TABLE>
<CAPTION>
Years Ended September 30,
---------------------------------------
1997 1996 1995
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Beginning balance.................. $209,730 $201,473 $189,922
-------- -------- --------
Net deposits (withdrawals)
before interest credited......... (3,430) (821) 3,963
Interest credited.................. 9,112 9,078 7,588
-------- -------- --------
Net increase in deposits........... 5,682 8,257 11,551
-------- -------- --------
Ending balance..................... $215,412 $209,730 $201,473
======== ======== ========
</TABLE>
Borrowings. The Association has the ability to use advances from the
FHLB-Atlanta to supplement its supply of lendable funds and to meet deposit
withdrawal requirements. The FHLB-Atlanta functions as a central reserve bank
providing credit for savings associations and certain other member financial
institutions. As a member of the FHLB-Atlanta, the Association is required to
own capital stock in the FHLB-Atlanta and is authorized to apply for advances on
the security of such stock and certain of its mortgage loans and other assets
(principally securities that are obligations of, or guaranteed by, the U.S.
Government or agencies thereof) provided certain creditworthiness standards have
been met. Advances are made pursuant to several different credit programs. Each
credit program has its own interest rate and range of maturities. Depending on
the program, limitations on the amount of advances are based on the financial
condition of the member institution and the adequacy of collateral pledged to
secure the credit.
56
<PAGE>
The following table sets forth certain information regarding the
Association's use of FHLB advances during the periods indicated.
<TABLE>
<CAPTION>
Years Ended September 30,
----------------------------------------
1997 1996 1995
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Maximum balance at any month end....... $5,000 $5,000 $13,250
Average balance........................ 3,082 5,000 7,812
Year end balance....................... -- 5,000 5,000
Weighted average interest rate:
At end of year....................... -- 6.54% 6.54%
During the year...................... 7.33% 6.54% 6.27%
</TABLE>
Competition
The Association faces intense competition in its primary market area for
the attraction of deposits (its primary source of lendable funds) and in the
origination of loans. Its most direct competition for deposits has historically
come from commercial banks, credit unions, other thrifts operating in its market
area, and other financial institutions, such as brokerage firms and insurance
companies. Particularly in times of high interest rates, the Association has
faced additional significant competition for investors' funds from short-term
money market securities and other corporate and government securities. The
Association's competition for loans comes from commercial banks, thrift
institutions, credit unions and mortgage bankers. Such competition for deposits
and the origination of loans may limit the Association's growth in the future.
See "RISK FACTORS -- Competition."
Subsidiary Activities
Under OTS regulations, the Association generally may invest up to 3% of
its assets in service corporations, provided that at least one-half of
investment in excess of 1% is used primarily for community, inner-city and
community development projects. The Association does not have any subsidiaries.
57
<PAGE>
Properties
At September 30, 1997, the net book value of the Association's properties
(including land and buildings), fixtures, furniture and equipment was $4.3
million. The following table sets forth certain information regarding the
Association's offices at September 30, 1997, all of which are owned.
<TABLE>
<CAPTION>
Approximate
Location Year Opened Square Footage Deposits
- -------- ----------- -------------- --------
(In thousands)
<S> <C> <C> <C>
Main Office 1995(1) 24,500 $104,187
201 West Main Street
Laurens, SC 29360
Belton Office 1962 1,800 63,380
208 Anderson Street
Belton, SC 29627
Ware Shoals Office 1968 1,444 23,570
81 North Greenwood Avenue
Ware Shoals, SC 29692
Simpsonville Office 1977 3,668 24,275
514 North Main Street
Simpsonville, SC 29681
</TABLE>
- ------------------
(1) The Association occupied a smaller facility at the same location from 1955
to 1995.
Personnel
As of September 30, 1997, the Association had 35 full-time and four
part-time employees, none of whom is represented by a collective bargaining
unit. The Association believes its relationship with its employees is good.
Legal Proceedings
Periodically, there have been various claims and lawsuits involving the
Association, such as claims to enforce liens, condemnation proceedings on
properties in which the Association holds security interests, claims involving
the making and servicing of real property loans and other issues incident to the
Association's business. The Association is not a party to any pending legal
proceedings that it believes would have a material adverse effect on the
financial condition or operations of the Association.
MANAGEMENT OF THE HOLDING COMPANY
Directors shall be elected by the stockholders of the Holding Company for
staggered three-year terms, or until their successors are elected and qualified.
The Holding Company's Board of Directors consists of five persons divided into
three classes, each of which contains approximately one third of the Board. One
class, consisting of Messrs. John H. Lake and John C. Owings, II, has a term of
office expiring at the first annual meeting of stockholders; a second class,
consisting of Messrs. Aaron H. King and J. Riley Bailes, has a term of office
expiring at the second annual meeting of stockholders; and a third class,
consisting of Mr. J. Edward Wells, has a term of office expiring at the third
annual meeting of stockholders.
58
<PAGE>
The executive officers of the Holding Company are elected annually and hold
office until their respective successors have been elected and qualified or
until death, resignation or removal by the Board of Directors. The executive
officers of the Holding Company are:
<TABLE>
<CAPTION>
Name Position
- ---- --------
<S> <C>
J. Edward Wells Chairman of the Board, President,
Chief Executive Officer, and Secretary
Edwin I. Shealy Chief Financial Officer and Treasurer
</TABLE>
Since the formation of the Holding Company, none of the executive officers,
directors or other personnel has received remuneration from the Holding Company.
Initially, no separate compensation will be paid for service as an executive
officer of the Holding Company. For information concerning the principal
occupations, employment and compensation of the directors and executive officers
of the Holding Company during the past five years, see "MANAGEMENT OF THE
ASSOCIATION -- Biographical Information."
MANAGEMENT OF THE ASSOCIATION
Directors and Executive Officers
The Board of Directors of the Association is presently composed of five
members who are elected for terms of three years, approximately one third of
whom are elected annually in accordance with the Bylaws of the Association. The
executive officers of the Association are elected annually by the Board of
Directors and serve at the Board's discretion. The following table sets forth
information with respect to the Directors and executive officers of the
Association.
<TABLE>
<CAPTION>
Directors
Current
Director Term
Name Age (1) Position with Association Since Expires
- ---- ------- ------------------------- ------- -------
<S> <C> <C> <C> <C>
John H. Lake 69 Director 1977 1999
John C. Owings, II 45 Director 1998 1999
Aaron H. King 73 Director 1972 2000
J. Riley Bailes 58 Director 1986 2000
J. Edward Wells 58 President, Chief Executive 1971 2001
Officer and Director
</TABLE>
<TABLE>
<CAPTION>
Executive Officers Who Are Not Directors
Name Age (1) Position with Association
- ---- ------- -------------------------
<S> <C> <C>
Edwin I. Shealy 50 Chief Financial Officer and Treasurer
James H. Wasson 53 Vice President and Secretary
John M. Swofford 52 Vice President
Will B. Ferguson 40 Vice President
</TABLE>
- ----------------
(1) As of September 30, 1997.
59
<PAGE>
Biographical Information
Set forth below is certain information regarding the Directors and
executive officers of the Association. Unless otherwise stated, each Director
and executive officer has held his current occupation for the last five years.
There are no family relationships among or between the Directors or executive
officers, except that Mr. Wasson is the first cousin of Mr. Wells' wife.
J. Edward Wells is the President and Chief Executive Officer of the
Association, positions he has held since 1972. Mr. Wells joined the Association
in 1967.
Aaron H. King retired as Senior Vice President and Branch Manager of
the Association in 1996 after 34 years with the Association.
J. Riley Bailes is the retired owner of a retail clothing store in
Laurens, South Carolina.
John H. Lake is a retired dentist.
John C. Owings, II is the owner of Laurens Lumber Co. in Laurens, South
Carolina.
Edwin I. Shealy is the Chief Financial Officer and Treasurer of the
Association, positions he has held since 1990.
John M. Swofford is a Vice President of the Association and manager of
the Association's Laurens branch, positions he has held since 1988. From 1976 to
1988, Mr. Swofford served as the manager of the Association's Simpsonville
branch.
James H. Wasson, Jr. is Secretary and Vice President of the Association
responsible for mortgage lending, positions he has held since 1977. Mr. Wasson
has been employed by the Association since 1968.
Will B. Ferguson is a Vice President of the Association, a position he
has held since 1995. Mr. Ferguson has been employed by the Association since
1984.
Meetings and Committees of the Board of Directors
The business of the Association is conducted through meetings and
activities of the Board of Directors and its committees. During the fiscal year
ended September 30, 1997, the Board of Directors held 13 regular meetings. No
director attended fewer than 75% of the total meetings of the Board of Directors
and of committees on which such director served.
The Audit Committee, consisting of the non-employee members of the
Board of Directors, receives and reviews all reports prepared by the
Association's external auditor. The Audit Committee met one time during the year
ended September 30, 1997.
The full Board of Directors acts as a Nominating Committee for the
annual selection of management's nominees for election as directors. The full
Board of Directors met once in its capacity as Nominating Committee during the
year ended September 30, 1997.
Directors' Compensation
Fees. Directors of the Association receive a monthly retainer and a
monthly attendance fee. First term members receive a retainer of $425 and
attendance fee of $425. Second term members receive a retainer of $475
60
<PAGE>
and attendance fee of $475. For subsequent terms, directors receive a retainer
of $625 and attendance fee of $625. No additional fees are paid for service on
committees. If the Board of Directors declares a bonus for employees, then each
Director who is not also an employee receives a bonus based on their annual
remuneration and computed at the same rate as the employee bonus. For the year
ended September 30, 1997, the Association paid an aggregate of $1,800 in bonuses
to non-employee Directors. Following consummation of the conversion, directors'
fees will continue to be paid by the Association and, initially, no separate
fees are expected to be paid for service on the Holdings Company's Board of
Directors.
Executive Compensation
Summary Compensation Table. The following information is furnished for
Mr. Wells for the year ended September 30, 1997. No other executive officer of
the Association received salary and bonus of $100,000 or more during the year
ended September 30, 1997.
<TABLE>
<CAPTION>
Annual Compensation(1)
---------------------------------------------------
Name and Other Annual All Other
Position Year Salary Bonus Compensation(2) Compensation
- -------- ---- ------ ----- --------------- ------------
<S> <C> <C> <C> <C> <C>
J. Edward Wells 1997 $145,052 $4,372 $1,698 $21,754(3)
President and Chief
Executive Officer
</TABLE>
- -------------------------
(1) Compensation information for the years ended September 30, 1996 and 1995
has been omitted as the Association was not a public company nor a
subsidiary thereof at such time.
(2) The aggregate amount of perquisites and other personal benefits was less
than 10% of the total annual salary and bonus reported.
(3) Consists of $5,824 contribution to 401(k) plan, $14,560 contribution to
money purchase pension plan and $1,370 of life insurance premiums.
Employment Agreement. In connection with the conversion, the Holding
Company and the Association (collectively, the "Employers") plan to enter into a
three-year employment agreement ("Employment Agreement") with Mr. Wells. Under
the Employment Agreement, the initial salary level for Mr. Wells will be
$151,315 which amount will be paid by the Association and may be increased at
the discretion of the Board of Directors or an authorized committee of the
Board. On each anniversary of the commencement date of the Employment Agreement,
the term of each agreement may be extended for an additional year at the
discretion of the Board. The agreement is terminable by the Employers at any
time, by Mr. Wells if he is assigned duties inconsistent with his initial
position, duties, responsibilities and status, or upon the occurrence of certain
events specified by federal regulations. In the event that Mr. Wells' employment
is terminated without cause or upon Mr. Wells' voluntary termination following
the occurrence of an event described in the preceding sentence, the Association
would be required to honor the terms of the agreement through the expiration of
the current term, including payment of current cash compensation and
continuation of employee benefits.
The Employment Agreement also provides for a severance payment and
other benefits in the event of involuntary termination of employment in
connection with any change in control of the Employers. A severance payment also
will be provided on a similar basis in connection with a voluntary termination
of employment where, subsequent to a change in control, Mr. Wells is assigned
duties inconsistent with his position, duties, responsibilities and status
immediately prior to such change in control. The term "change in control" is
defined in the agreement as having occurred when, among other things, (a) a
person other than the Holding Company purchases shares of the Holding Company's
common stock pursuant to a tender or exchange offer for such shares, (b) any
person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act)
is or becomes the beneficial owner, directly or
61
<PAGE>
indirectly, of securities of the Holding Company representing 25% or more of the
combined voting power of the Holding Company's then outstanding securities, (c)
the membership of the Board of Directors changes as the result of a contested
election, or (d) shareholders of the Holding Company approve a merger,
consolidation, sale or disposition of all or substantially all of the Holding
Company's assets, or a plan of partial or complete liquidation.
The maximum value of the severance benefits under the Employment
Agreements is 2.99 times Mr. Wells' average annual compensation during the
five-year period preceding the effective date of the change in control (the
"base amount"). The Employment Agreement provides that the value of the maximum
benefit may be distributed, at Mr. Wells' election, (i) in the form of a lump
sum cash payment equal to 2.99 times Mr. Wells' base amount or (ii) a
combination of a cash payment and continued coverage under the Employers'
health, life and disability programs for a 36-month period following the change
in control, the total value of which does not exceed 2.99 times the Executive's
base amount. Assuming that a change in control had occurred at September 30,
1997 and that Mr. Wells elected to receive a lump sum cash payment, he would
have been entitled to a payment of approximately $427,000. Section 280G of the
Internal Revenue Code of 1986, as amended ("Code"), provides that severance
payments that equal or exceed three times the individual's base amount are
deemed to be "excess parachute payments" if they are contingent upon a change in
control. Individuals receiving excess parachute payments are subject to a 20%
excise tax on the amount of such excess payments, and the Employers would not be
entitled to deduct the amount of such excess payments.
The Employment Agreement restrict Mr. Wells' right to compete against
the Employers for a period of one year from the date of termination of the
agreement if he voluntarily terminates employment, except in the event of a
change in control.
Severance Agreements. In connection with the conversion, the Holding
Company and the Association plan to enter into severance agreements with Mr.
Shealy, the Holding Company's Chief Financial Officer and the Association's
Treasurer and Chief Financial Officer, and Messrs. Swofford, Wasson and
Ferguson, each a Vice President of the Association. On each anniversary of the
commencement date of the severance agreements, the term of each agreement may be
extended for an additional year at the discretion of the Board. It is
anticipated that the four severance agreements will have an initial term of two
years.
The severance agreements will provide for severance payments and
continuation of insured employee welfare benefits in the event of involuntary
termination of employment in connection with any change in control of the
Employers in the same manner as provided for in the employment agreements.
Severance payments and benefits also will be provided on a similar basis in
connection with a voluntary termination of employment where, subsequent to a
change in control, an officer is assigned duties inconsistent with his position,
duties, responsibilities and status immediately prior to such change in control.
The term "change in control" is defined in the agreement as having occurred
when, among other things, (a) a person other than the Holding Company purchases
shares of the Holding Company's common stock pursuant to a tender or exchange
offer for such shares, (b) any person (as such term is used in Sections 13(d)
and 14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly
or indirectly, of securities of the Holding Company representing 25% or more of
the combined voting power of the Holding Company's then outstanding securities,
(c) the membership of the Board of Directors changes as the result of a
contested election, or (d) shareholders of the Holding Company approve a merger,
consolidation, sale or disposition of all or substantially all of the Holding
Company's assets, or a plan of partial or complete liquidation.
Assuming that a change in control had occurred at September 30, 1997,
and excluding any other benefits due under the severance agreements, the
aggregate value of the severance benefits payable to the four officers would
have been approximately $417,000.
Employee Severance Compensation Plan. In connection with the
conversion, the Board of Directors of the Association intends to adopt the
Severance Plan to provide benefits to eligible employees in the event of a
change in control of the Holding Company or the Association. In general, all
employees (except for officers who enter into separate employment or severance
agreements with the Holding Company and the Association) will be eligible to
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participate in the Severance Plan. Under the Severance Plan, in the event of a
change in control of the Holding Company or the Association, eligible employees,
other than officers of the Association, who are terminated or who terminate
employment (but only upon the occurrence of events specified in the Severance
Plan) within 12 months of the effective date of a change in control will be
entitled to a payment based on years of service with the Association. However,
the maximum payment for any eligible employee would be equal to 52 weeks of
their current compensation. The Severance Plan also provides that employees who
have not met the three year service requirement for participation would receive
a payment equal to two weeks' compensation. Assuming that a change in control
had occurred at September 30, 1997 and the termination of all eligible
employees, the maximum aggregate payment due under the Severance Plan would be
approximately $529,000.
Benefits
General. The Association currently pays 100% of the premiums for
medical, dental, life and disability insurance benefits for full-time employees,
subject to certain deductibles.
401(k) Plan. The Association maintains the Heritage Federal Savings &
Loan Association 401(k) Plan ("401(k) Plan") for the benefit of eligible
employees of the Association. The 401(k) Plan is intended to be a tax-qualified
plan under Sections 401(a) and 401(k) of the Code. Employees of the Association
who have completed six months of service and who have attained age 21 are
eligible to participate in the 401(k) Plan on the January 1 next following the
date such requirements are satisfied. Participants may contribute up to 10% of
their annual compensation to the 401(k) Plan through a salary reduction
election. The Association matches participant contributions on a discretionary
basis.
In addition to employer matching contributions, the Association may
contribute a discretionary amount to the 401(k) Plan in any plan year which is
allocated to individual participants in the proportion that their annual
compensation bears to the total compensation of all participants during the plan
year. Participants are at all times 100% vested in all salary reduction
contributions and employer matching and profit-sharing contributions. For the
year ended September 30, 1997, the Association incurred total
contribution-related expenses of $43,000 in connection with the 401(k) Plan.
The Association formerly maintained a money purchase pension plan for
the benefit of eligible officers and employees. The money purchase pension plan
was merged with the 401(k) Plan effective December 31, 1997.
Generally, the investment of 401(k) Plan assets is directed by plan
participants. In connection with the conversion, the investment options
available to participants will be expanded to include the opportunity to direct
the investment of up to 100% of their 401(k) Plan account balance to purchase
shares of the Holding Company's common stock. A participant in the 401(k) Plan
who elects to purchase common stock in the conversion through the 401(k) Plan
will receive the same subscription priority and be subject to the same
individual purchase limitations as if the participant had elected to make such
purchase using other funds. See "THE CONVERSION -- Limitations on Purchases of
Shares."
Employee Stock Ownership Plan. The Board of Directors has authorized
the adoption by the Association of an ESOP for employees of the Association to
become effective upon the completion of the conversion. The ESOP is intended to
satisfy the requirements for an employee stock ownership plan under the Code and
the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
Full-time employees of the Holding Company and the Association who have been
credited with at least 1,000 hours of service during a 12-month period and who
have attained age 21 will be eligible to participate in the ESOP.
In order to fund the purchase of up to 8% of the common stock to be
issued in the conversion, it is anticipated that the ESOP will borrow funds from
the Holding Company. Such loan will equal 100% of the aggregate purchase price
of the common stock. The loan to the ESOP will be repaid principally from the
Association's contributions to the ESOP and dividends payable on common stock
held by the ESOP over the
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anticipated 15-year term of the loan. The interest rate for the ESOP loan is
expected to be the prime rate as published in The Wall Street Journal on the
closing date of the conversion. See "PRO FORMA DATA." To the extent that the
ESOP is unable to acquire 8% of the common stock issued in the conversion, such
additional shares will be acquired following the conversion through open market
purchases.
In any plan year, the Association may make additional discretionary
contributions to the ESOP for the benefit of plan participants in either cash or
shares of common stock, which may be acquired through the purchase of
outstanding shares in the market or from individual stockholders or which
constitute authorized but unissued shares or shares held in treasury by Holding
Company. The timing, amount, and manner of such discretionary contributions will
be affected by several factors, including applicable regulatory policies, the
requirements of applicable laws and regulations, and market conditions.
Shares purchased by the ESOP with the proceeds of the loan will be held
in a suspense account and released on a pro rata basis as the loan is repaid.
Discretionary contributions to the ESOP and shares released from the suspense
account will be allocated among participants on the basis of each participant's
proportional share of total compensation. Forfeitures will be reallocated among
the remaining plan participants.
Participants will vest in their accrued benefits under the ESOP at the
rate of 20% per year, beginning upon the completion of two years of service. A
participant is fully vested at retirement, in the event of disability or upon
termination of the ESOP. Benefits are distributable upon a participant's
retirement, early retirement, death, disability, or termination of employment.
The Association's contributions to the ESOP are not fixed, so benefits payable
under the ESOP cannot be estimated.
It is anticipated that members of the Association's Board of Directors
will serve as trustees of the ESOP. Under the ESOP, the trustees must vote all
allocated shares held in the ESOP in accordance with the instructions of plan
participants and unallocated shares and allocated shares for which no
instructions are received must be voted in the same ratio on any matter as those
shares for which instructions are given.
Pursuant to Statement of Position 93-6, compensation expense for a
leveraged ESOP is recorded at the fair market value of the ESOP shares when
committed to be released to participants' accounts. See "PRO FORMA DATA" and
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Comparison of Operating Results for the Years Ended September 30,
1997 and 1996.
If the ESOP purchases newly issued shares from the Holding Company,
total stockholders' equity would neither increase nor decrease. However, on a
per share basis, stockholders' equity and per share net earnings would decrease
because of the increase in the number of outstanding shares.
The ESOP will be subject to the requirements of ERISA and the
regulations of the IRS and the Department of Labor issued thereunder. The
Association intends to request a determination letter from the IRS regarding the
tax-qualified status of the ESOP. Although no assurance can be given that a
favorable determination letter will be issued, the Association expects that a
favorable determination letter will be received by the ESOP.
Stock Option Plan. The Board of Directors of the Holding Company
intends to adopt the Stock Option Plan and to submit the Stock Option Plan to
the stockholders for approval at a meeting held no earlier than six months
following consummation of the conversion. Under current OTS regulations, the
approval of a majority vote of the Holding Company's outstanding shares is
required prior to the implementation of the Stock Option Plan within one year of
the consummation of the conversion. The Stock Option Plan will comply with all
applicable regulatory requirements. However, the Stock Option Plan will not be
approved or endorsed by the OTS.
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The Stock Option Plan will be designed to attract and retain qualified
management personnel and nonemployee directors, to provide such officers, key
employees and nonemployee directors with a proprietary interest in the Holding
Company as an incentive to contribute to the success of the Holding Company and
the Association, and to reward officers and key employees for outstanding
performance. The Stock Option Plan will provide for the grant of incentive stock
options ("ISOs") intended to comply with the requirements of Section 422 of the
Code and for nonqualified stock options ("NQOs"). Upon receipt of stockholder
approval of the Stock Option Plan, stock options may be granted to key employees
of the Holding Company and its subsidiaries, including the Association. Unless
sooner terminated, the Stock Option Plan will continue in effect for a period of
ten years from the date the Stock Option Plan is approved by stockholders.
A number of authorized shares of common stock equal to 10% of the
number of shares of common stock issued in connection with the conversion will
be reserved for future issuance under the Stock Option Plan (402,500 shares
based on the issuance of 4,025,000 shares at the maximum of the Estimated
Valuation Range). Shares acquired upon exercise of options will be authorized
but unissued shares or treasury shares. In the event of a stock split, reverse
stock split, stock dividend, or similar event, the number of shares of common
stock under the Stock Option Plan, the number of shares to which any award
relates and the exercise price per share under any option may be adjusted by the
Committee (as defined below) to reflect the increase or decrease in the total
number of shares of common stock outstanding.
The Stock Option Plan will be administered and interpreted by a
committee of the Board of Directors ("Committee"). Subject to applicable OTS
regulations, the Committee will determine which nonemployee directors, officers
and key employees will be granted options, whether, in the case of officers and
employees, such options will be ISOs or NQOs, the number of shares subject to
each option, and the exercisability of such options. All options granted to
nonemployee directors will be NQOs. The per share exercise price of all options
will equal at least 100% of the fair market value of a share of common stock on
the date the option is granted.
Under current OTS regulations, if the Stock Option Plan is implemented
within one year of the consummation of the conversion, (i) no officer or
employees could receive an award of options covering in excess of 25%, (ii) no
nonemployee director could receive in excess of 5% and (iii) nonemployee
directors, as a group, could not receive in excess of 30% of the number of
shares reserved for issuance under the Stock Option Plan.
It is anticipated that all options granted under the Stock Option Plan
will be granted subject to a vesting schedule whereby the options become
exercisable over a specified period following the date of grant. Under OTS
regulations, if the Stock Option plan is implemented within the first year
following consummation of the conversion the minimum vesting period will be five
years. All unvested options will be immediately exercisable in the event of the
recipient's death or disability. Unvested options also will be exercisable
following a change in control (as defined in the Stock Option Plan) of the
Holding Company or the Association to the extent authorized or not prohibited by
applicable law or regulations. OTS regulations currently provide that if the
Stock Option Plan is implemented prior to the first anniversary of the
conversion, vesting may not be accelerated upon a change in control of the
Holding Company or the Association.
Each stock option that is awarded to an officer or key employee will
remain exercisable at any time on or after the date it vests through the earlier
to occur of the tenth anniversary of the date of grant or three months after the
date on which the optionee terminates employment (one year in the event of the
optionee's termination by reason of death or disability), unless such period is
extended by the Committee. Each stock option that is awarded to a nonemployee
director will remain exercisable through the earlier to occur of the tenth
anniversary of the date of grant or one year (two years in the event of a
nonemployee director's death or disability) following the termination of a
nonemployee director's service on the Board. All stock options are
nontransferable except by will or the laws of descent or distribution.
Under current provisions of the Code, the federal tax treatment of ISOs
and NQOs is different. With respect to ISOs, an optionee who satisfies certain
holding period requirements will not recognize income at the time the
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option is granted or at the time the option is exercised. If the holding period
requirements are satisfied, the optionee will generally recognize capital gain
or loss upon a subsequent disposition of the shares of common stock received
upon the exercise of a stock option. If the holding period requirements are not
satisfied, the difference between the fair market value of the common stock on
the date of grant and the option exercise price, if any, will be taxable to the
optionee at ordinary income tax rates. A federal income tax deduction generally
will not be available to the Holding Company as a result of the grant or
exercise of an ISO, unless the optionee fails to satisfy the holding period
requirements. With respect to NQOs, the grant of an NQO generally is not a
taxable event for the optionee and no tax deduction will be available to the
Holding Company. However, upon the exercise of an NQO, the difference between
the fair market value of the common stock on the date of exercise and the option
exercise price generally will be treated as compensation to the optionee upon
exercise, and the Holding Company will be entitled to a compensation expense
deduction in the amount of income realized by the optionee.
Although no specific award determinations have been made at this time,
the Holding Company and the Association anticipate that if stockholder approval
is obtained it would provide awards to its directors, officers and employees to
the extent and under terms and conditions permitted by applicable regulations.
The size of individual awards will be determined prior to submitting the Stock
Option Plan for stockholder approval, and disclosure of anticipated awards will
be included in the proxy materials for such meeting.
Management Recognition Plan. Following the conversion, the Board of
Directors of the Holding Company intends to adopt an MRP for officers,
employees, and nonemployee directors of the Holding Company and the Association,
subject to shareholder approval. The MRP will enable the Holding Company and the
Association to provide participants with a proprietary interest in the Holding
Company as an incentive to contribute to the success of the Holding Company and
the Association. The MRP will comply with all applicable regulatory
requirements. However, the MRP will not be approved or endorsed by the OTS.
Under current OTS regulations, the approval of a majority vote of the Holding
Company's outstanding shares is required prior to the implementation of the MRP
within one year of the consummation of the conversion.
The MRP expects to acquire a number of shares of the Holding Company's
common stock equal to 4% of the common stock issued in connection with the
conversion (161,000 shares based on the issuance of 4,025,000 shares in the
conversion at the maximum of the Estimated Valuation Range). Such shares will be
acquired on the open market, if available, with funds contributed by the Holding
Company or the Association to a trust which the Holding Company may establish in
conjunction with the MRP ("MRP Trust") or from authorized but unissued shares or
treasury shares of the Holding Company.
A committee of the Board of Directors of the Holding Company will
administer the MRP, the members of which will also serve as trustees of the MRP
Trust, if formed. The trustees will be responsible for the investment of all
funds contributed by the Holding Company or the Association to the MRP Trust.
The Board of Directors of the Holding Company may terminate the MRP at any time
and, upon termination, all unallocated shares of common stock will revert to the
Holding Company.
Shares of common stock granted pursuant to the MRP will be in the form
of restricted stock payable ratably over a specified vesting period following
the date of grant. During the period of restriction, all shares will be held in
escrow by the Holding Company or by the MRP Trust. Under OTS regulations, if the
MRP is implemented within the first year following consummation of the
conversion, the minimum vesting period will be five years. All unvested MRP
awards will vest in the event of the recipient's death or disability. Unvested
MRP awards will also vest following a change in control (as defined in the MRP)
of the Holding Company or the Association to the extent authorized or not
prohibited by applicable law or regulations. OTS regulations currently provide
that, if the MRP is implemented prior to the first anniversary of the
conversion, vesting may not be accelerated upon a change in control of the
Holding Company or the Association.
A recipient of an MRP award in the form of restricted stock generally
will not recognize income upon an award of shares of common stock, and the
Holding Company will not be entitled to a federal income tax deduction,
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until the termination of the restrictions. Upon such termination, the recipient
will recognize ordinary income in an amount equal to the fair market value of
the common stock at the time and the Holding Company will be entitled to a
deduction in the same amount after satisfying federal income tax withholding
requirements. However, the recipient may elect to recognize ordinary income in
the year the restricted stock is granted in an amount equal to the fair market
value of the shares at that time, determined without regard to the restrictions.
In that event, the Holding Company will be entitled to a deduction in such year
and in the same amount. Any gain or loss recognized by the recipient upon
subsequent disposition of the stock will be either a capital gain or capital
loss.
Although no specific award determinations have been made at this time,
the Holding Company and the Association anticipate that if stockholder approval
is obtained it would provide awards to its directors, officers and employees to
the extent and under terms and conditions permitted by applicable regulations.
Under current OTS regulations, if the MRP is implemented within one year of the
consummation of the conversion, (i) no officer or employees could receive an
award covering in excess of 25%, (ii) no nonemployee director could receive in
excess of 5% and (iii) nonemployee directors, as a group, could not receive in
excess of 30% of the number of shares reserved for issuance under the MRP. The
size of individual awards will be determined prior to submitting the MRP for
stockholder approval, and disclosure of anticipated awards will be included in
the proxy materials for such meeting.
Transactions with the Association
Federal regulations require that all loans or extensions of credit to
executive officers and directors must generally be made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons (unless the loan or
extension of credit is made under a benefit program generally available to all
other employees and does not give preference to any insider over any other
employee) and must not involve more than the normal risk of repayment or present
other unfavorable features. The Association's policy is not to make any new
loans or extensions of credit to the Association's executive officers and
directors at different rates or terms than those offered to the general public.
In addition, loans made to a director or executive officer in an amount that,
when aggregated with the amount of all other loans to such person and his
related interests, are in excess of the greater of $25,000 or 5% of the
Association's capital and surplus (up to a maximum of $500,000) must be approved
in advance by a majority of the disinterested members of the Board of Directors.
See "REGULATION -- Federal Regulation of Savings Associations -- Transactions
with Affiliates." The aggregate amount of loans by the Association to its
executive officers and directors was $383,000 at September 30, 1997, or
approximately 0.5% of pro forma stockholders' equity (based on the issuance of
the maximum of the Estimated Valuation Range).
REGULATION
General
The Association is subject to extensive regulation, examination and
supervision by the OTS as its chartering agency, and the FDIC, as the insurer of
its deposits. The activities of federal savings institutions are governed by the
Home Owners' Loan Act, as amended (the "HOLA") and, in certain respects, the
Federal Deposit Insurance Act ("FDIA") and the regulations issued by the OTS and
the FDIC to implement these statutes. These laws and regulations delineate the
nature and extent of the activities in which federal savings associations may
engage. Lending activities and other investments must comply with various
statutory and regulatory capital requirements. In addition, the Association's
relationship with its depositors and borrowers is also regulated to a great
extent, especially in such matters as the ownership of deposit accounts and the
form and content of the Association's mortgage documents. The Association must
file reports with the OTS and the FDIC concerning its activities and financial
condition in addition to obtaining regulatory approvals prior to entering into
certain transactions such as mergers with, or acquisitions of, other financial
institutions. There are periodic examinations by the OTS and the FDIC to review
the Association's compliance with various regulatory requirements. The
regulatory structure also gives the regulatory authorities extensive discretion
in connection with their supervisory and enforcement activities
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and examination policies, including policies with respect to the classification
of assets and the establishment of adequate loan loss reserves for regulatory
purposes. Any change in such policies, whether by the OTS, the FDIC or Congress,
could have a material adverse impact on the Association and its operations.
Federal Regulation of Savings Associations
Office of Thrift Supervision. The OTS is an office in the Department of
the Treasury subject to the general oversight of the Secretary of the Treasury.
The OTS generally possesses the supervisory and regulatory duties and
responsibilities formerly vested in the Federal Home Loan Bank Board. Among
other functions, the OTS issues and enforces regulations affecting federally
insured savings associations and regularly examines these institutions.
Federal Home Loan Bank System. The FHLB System, consisting of 12 FHLBs,
is under the jurisdiction of the Federal Housing Finance Board ("FHFB"). The
designated duties of the FHFB are to supervise the FHLBs, to ensure that the
FHLBs carry out their housing finance mission, to ensure that the FHLBs remain
adequately capitalized and able to raise funds in the capital markets, and to
ensure that the FHLBs operate in a safe and sound manner. The Association, as a
member of the FHLB-Atlanta, is required to acquire and hold shares of capital
stock in the FHLB-Atlanta in an amount equal to the greater of (i) 1.0% of the
aggregate outstanding principal amount of residential mortgage loans, home
purchase contracts and similar obligations at the beginning of each year, or
(ii) 1/20 of its advances (i.e., borrowings) from the FHLB-Atlanta. The
Association is in compliance with this requirement with an investment in
FHLB-Atlanta stock of $2.0 million at September 30, 1997. Among other benefits,
the FHLB-Atlanta provides a central credit facility primarily for member
institutions. It is funded primarily from proceeds derived from the sale of
consolidated obligations of the FHLB System. It makes advances to members in
accordance with policies and procedures established by the FHFB and the Board of
Directors of the FHLB-Atlanta.
Federal Deposit Insurance Corporation. The FDIC is an independent
federal agency that insures the deposits, up to prescribed statutory limits, of
depository institutions. The FDIC currently maintains two separate insurance
funds: the Bank Insurance Fund ("BIF") and the SAIF. As insurer of the
Association's deposits, the FDIC has examination, supervisory and enforcement
authority over the Association.
The Association's accounts are insured by the SAIF to the maximum
extent permitted by law. The Association pays deposit insurance premiums based
on a risk-based assessment system established by the FDIC. Under applicable
regulations, institutions are assigned to one of three capital groups that are
based solely on the level of an institution's capital -- "well capitalized,"
"adequately capitalized," and "undercapitalized" -- which are defined in the
same manner as the regulations establishing the prompt corrective action system,
as discussed below. These three groups are then divided into three subgroups
which reflect varying levels of supervisory concern, from those which are
considered to be healthy to those which are considered to be of substantial
supervisory concern. The matrix so created results in nine assessment risk
classifications, with rates that until September 30, 1996 ranged from 0.23% for
well capitalized, financially sound institutions with only a few minor
weaknesses to 0.31% for undercapitalized institutions that pose a substantial
risk of loss to the SAIF unless effective corrective action is taken.
Pursuant to the Deposit Insurance Funds Act ("DIF Act"), which was
enacted on September 30, 1996, the FDIC imposed a special assessment on each
depository institution with SAIF-assessable deposits which resulted in the SAIF
achieving its designated reserve ratio. In connection therewith, the FDIC
reduced the assessment schedule for SAIF members, effective January 1, 1997, to
a range of 0% to 0.27%, with most institutions, including the Association,
paying 0%. This assessment schedule is the same as that for the BIF, which
reached its designated reserve ratio in 1995. In addition, since January 1,
1997, SAIF members are charged an assessment of .065% of SAIF-assessable
deposits for the purpose of paying interest on the obligations issued by the
Financing Corporation ("FICO") in the 1980s to help fund the thrift industry
cleanup. BIF-assessable deposits will be charged an assessment to help pay
interest on the FICO bonds at a rate of approximately .013% until the earlier of
December 31, 1999 or the date upon which the last savings association ceases to
exist, after which time the assessment will be the same for all insured
deposits.
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The DIF Act provides for the merger of the BIF and the SAIF into the
Deposit Insurance Fund on January 1, 1999, but only if no insured depository
institution is a savings association on that date. The DIF Act contemplates the
development of a common charter for all federally chartered depository
institutions and the abolition of separate charters for national banks and
federal savings associations. It is not known what form the common charter may
take and what effect, if any, the adoption of a new charter would have on the
operation of the Association.
The FDIC may terminate the deposit insurance of any insured depository
institution if it determines after a hearing that the institution has engaged or
is engaging in unsafe or unsound practices, is in an unsafe or unsound condition
to continue operations, or has violated any applicable law, regulation, order or
any condition imposed by an agreement with the FDIC. It also may suspend deposit
insurance temporarily during the hearing process for the permanent termination
of insurance, if the institution has no tangible capital. If insurance of
accounts is terminated, the accounts at the institution at the time of
termination, less subsequent withdrawals, shall continue to be insured for a
period of six months to two years, as determined by the FDIC. Management is
aware of no existing circumstances that could result in termination of the
deposit insurance of the Association.
Liquidity Requirements. Under OTS regulations, each savings institution
is required to maintain an average daily balance of liquid assets (cash, certain
time deposits and savings accounts, bankers' acceptances, and specified U.S.
Government, state or federal agency obligations and certain other investments)
equal to a monthly average of not less than a specified percentage (currently
4.0%) of its net withdrawable accounts plus short-term borrowings. Monetary
penalties may be imposed for failure to meet liquidity requirements. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Liquidity and Capital Resources."
Prompt Corrective Action. Under the FDIA, each federal banking agency
is required to implement a system of prompt corrective action for institutions
that it regulates. The federal banking agencies have promulgated substantially
similar regulations to implement this system of prompt corrective action. Under
the regulations, an institution shall be deemed to be (i) "well capitalized" if
it has a total risk-based capital ratio of 10.0% or more, has a Tier I
risk-based capital ratio of 6.0% or more, has a leverage ratio of 5.0% or more
and is not subject to specified requirements to meet and maintain a specific
capital level for any capital measure; (ii) "adequately capitalized" if it has a
total risk-based capital ratio of 8.0% or more, has a Tier I risk-based capital
ratio of 4.0% or more, has a leverage ratio of 4.0% or more (3.0% under certain
circumstances) and does not meet the definition of "well capitalized;" (iii)
"undercapitalized" if it has a total risk-based capital ratio that is less than
8.0%, has a Tier I risk-based capital ratio that is less than 4.0% or has a
leverage ratio that is less than 4.0% (3.0% under certain circumstances); (iv)
"significantly undercapitalized" if it has a total risk-based capital ratio that
is less than 6.0%, has a Tier I risk-based capital ratio that is less than 3.0%
or has a leverage ratio that is less than 3.0%; and (v) "critically
undercapitalized" if it has a ratio of tangible equity to total assets that is
equal to or less than 2.0%.
A federal banking agency may, after notice and an opportunity for a
hearing, reclassify a well capitalized institution as adequately capitalized and
may require an adequately capitalized institution or an undercapitalized
institution to comply with supervisory actions as if it were in the next lower
category if the institution is in an unsafe or unsound condition or has received
in its most recent examination, and has not corrected, a less than satisfactory
rating for asset quality, management, earnings or liquidity. (The OTS may not,
however, reclassify a significantly undercapitalized institution as critically
undercapitalized.)
An institution generally must file a written capital restoration plan
that meets specified requirements, as well as a performance guaranty by each
company that controls the institution, with the appropriate federal banking
agency within 45 days of the date that the institution receives notice or is
deemed to have notice that it is undercapitalized, significantly
undercapitalized or critically undercapitalized. Immediately upon becoming
undercapitalized, an institution shall become subject to various mandatory and
discretionary restrictions on its operations.
At September 30, 1997, the Association was categorized as "well
capitalized" under the prompt corrective action regulations of the OTS.
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Standards for Safety and Soundness. The federal banking regulatory
agencies have prescribed, by regulation, standards for all insured depository
institutions relating to: (i) internal controls, information systems and
internal audit systems; (ii) loan documentation; (iii) credit underwriting; (iv)
interest rate risk exposure; (v) asset growth; (vi) asset quality; (vii)
earnings; and (viii) compensation, fees and benefits ("Guidelines"). The
Guidelines set forth the safety and soundness standards that the federal banking
agencies use to identify and address problems at insured depository institutions
before capital becomes impaired. If the OTS determines that the Association
fails to meet any standard prescribed by the Guidelines, the agency may require
the Association to submit to the agency an acceptable plan to achieve compliance
with the standard. OTS regulations establish deadlines for the submission and
review of such safety and soundness compliance plans.
Qualified Thrift Lender Test. All savings associations are required to
meet a qualified thrift lender ("QTL") test to avoid certain restrictions on
their operations. A savings institution that fails to become or remain a QTL
shall either convert to a national bank charter or be subject to the following
restrictions on its operations: (i) the association may not make any new
investment or engage in activities that would not be permissible for national
banks; (ii) the association may not establish any new branch office where a
national bank located in the savings institution's home state would not be able
to establish a branch office; (iii) the association shall be ineligible to
obtain new advances from any FHLB; and (iv) the payment of dividends by the
association shall be subject to the rules regarding the statutory and regulatory
dividend restrictions applicable to national banks. Also, beginning three years
after the date on which the savings institution ceases to be a QTL, the savings
institution would be prohibited from retaining any investment or engaging in any
activity not permissible for a national bank and would be required to repay any
outstanding advances to any FHLB. In addition, within one year of the date on
which a savings association controlled by a company ceases to be a QTL, the
company must register as a bank holding company and become subject to the rules
applicable to such companies. A savings institution may requalify as a QTL if it
thereafter complies with the QTL test.
Currently, the QTL test requires that either an institution qualify as
a domestic building and loan association under the Internal Revenue Code or that
65% of an institution's "portfolio assets" (as defined) consist of certain
housing and consumer-related assets on a monthly average basis in nine out of
every 12 months. Assets that qualify without limit for inclusion as part of the
65% requirement are loans made to purchase, refinance, construct, improve or
repair domestic residential housing and manufactured housing; home equity loans;
mortgage-backed securities (where the mortgages are secured by domestic
residential housing or manufactured housing); FHLB stock; direct or indirect
obligations of the FDIC; and loans for educational purposes, loans to small
businesses and loans made through credit cards. In addition, the following
assets, among others, may be included in meeting the test subject to an overall
limit of 20% of the savings institution's portfolio assets: 50% of residential
mortgage loans originated and sold within 90 days of origination; 100% of
consumer loans; and stock issued by Freddie Mac or Fannie Mae. Portfolio assets
consist of total assets minus the sum of (i) goodwill and other intangible
assets, (ii) property used by the savings institution to conduct its business,
and (iii) liquid assets up to 20% of the institution's total assets.
At September 30, 1997, the Association was in compliance with the QTL test.
Capital Requirements. Under OTS regulations a savings association must
satisfy three minimum capital requirements: core capital, tangible capital and
risk-based capital. Savings associations must meet all of the standards in order
to comply with the capital requirements.
OTS capital regulations establish a 3% core capital or leverage ratio
(defined as the ratio of core capital to adjusted total assets). Core capital is
defined to include common stockholders' equity, noncumulative perpetual
preferred stock and any related surplus, and minority interests in equity
accounts of consolidated subsidiaries, less (i) any intangible assets, except
for certain qualifying intangible assets; (ii) certain mortgage servicing
rights; and (iii) equity and debt investments in subsidiaries that are not
"includable subsidiaries," which is defined as subsidiaries engaged solely in
activities not impermissible for a national bank, engaged in activities
impermissible for a national bank but only as an agent for its customers, or
engaged solely in mortgage-banking activities. In calculating adjusted total
assets, adjustments are made to total assets to give effect to the exclusion of
certain assets from capital and to account appropriately for the investments in
and assets of both includable and non-includable subsidiaries.
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Institutions that fail to meet the core capital requirement would be required to
file with the OTS a capital plan that details the steps they will take to reach
compliance. In addition, the OTS's prompt corrective action regulation provides
that a savings institution that has a leverage ratio of less than 4% (3% for
institutions receiving the highest CAMEL examination rating) will be deemed to
be "undercapitalized" and may be subject to certain restrictions. See "--
Federal Regulation of Savings Associations -- Prompt Corrective Action."
Savings associations also must maintain "tangible capital" not less
than 1.5% of the Association's adjusted total assets. "Tangible capital" is
defined, generally, as core capital minus any "intangible assets" other than
purchased mortgage servicing rights.
Each savings institution must maintain total risk-based capital equal
to at least 8% of risk-weighted assets. Total risk-based capital consists of the
sum of core and supplementary capital, provided that supplementary capital
cannot exceed core capital, as previously defined. Supplementary capital
includes (i) permanent capital instruments such as cumulative perpetual
preferred stock, perpetual subordinated debt and mandatory convertible
subordinated debt, (ii) maturing capital instruments such as subordinated debt,
intermediate-term preferred stock and mandatory convertible subordinated debt,
subject to an amortization schedule, and (iii) general valuation loan and lease
loss allowances up to 1.25% of risk-weighted assets.
The risk-based capital regulation assigns each balance sheet asset held
by a savings institution to one of four risk categories based on the amount of
credit risk associated with that particular class of assets. Assets not included
for purposes of calculating capital are not included in calculating
risk-weighted assets. The categories range from 0% for cash and securities that
are backed by the full faith and credit of the U.S. Government to 100% for
repossessed assets or assets more than 90 days past due. Qualifying residential
mortgage loans (including multi-family mortgage loans) are assigned a 50% risk
weight. Consumer, commercial, home equity and residential construction loans are
assigned a 100% risk weight, as are nonqualifying residential mortgage loans and
that portion of land loans and nonresidential construction loans that do not
exceed an 80% loan-to-value ratio. The book value of assets in each category is
multiplied by the weighing factor (from 0% to 100%) assigned to that category.
These products are then totalled to arrive at total risk-weighted assets.
Off-balance sheet items are included in risk-weighted assets by converting them
to an approximate balance sheet "credit equivalent amount" based on a conversion
schedule. These credit equivalent amounts are then assigned to risk categories
in the same manner as balance sheet assets and included risk-weighted assets.
The OTS has incorporated an interest rate risk component into its
regulatory capital rule. Under the rule, savings associations with "above
normal" interest rate risk exposure would be subject to a deduction from total
capital for purposes of calculating their risk-based capital requirements. A
savings association's interest rate risk is measured by the decline in the net
portfolio value of its assets (i.e., the difference between incoming and
----
outgoing discounted cash flows from assets, liabilities and off-balance sheet
contracts) that would result from a hypothetical 200 basis point increase or
decrease in market interest rates divided by the estimated economic value of the
association's assets, as calculated in accordance with guidelines set forth by
the OTS. A savings association whose measured interest rate risk exposure
exceeds 2% must deduct an interest rate risk component in calculating its total
capital under the risk-based capital rule. The interest rate risk component is
an amount equal to one-half of the difference between the institution's measured
interest rate risk and 2%, multiplied by the estimated economic value of the
association's assets. That dollar amount is deducted from an association's total
capital in calculating compliance with its risk-based capital requirement. Under
the rule, there is a two quarter lag between the reporting date of an
institution's financial data and the effective date for the new capital
requirement based on that data. A savings association with assets of less than
$300 million and risk-based capital ratios in excess of 12% is not subject to
the interest rate risk component, unless the OTS determines otherwise. The rule
also provides that the Director of the OTS may waive or defer an association's
interest rate risk component on a case-by-case basis. Under certain
circumstances, a savings association may request an adjustment to its interest
rate risk component if it believes that the OTS-calculated interest rate risk
component overstates its interest rate risk exposure. In addition, certain
"well-capitalized" institutions may obtain authorization to use their own
interest rate risk model to calculate their interest rate risk component in lieu
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of the OTS-calculated amount. The OTS has postponed the date that the component
will first be deducted from an institution's total capital.
See "HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE" for a
table that sets forth in terms of dollars and percentages the OTS tangible, core
and risk-based capital requirements, the Association's historical amounts and
percentages at September 30, 1997 and pro forma amounts and percentages based
upon the assumptions stated therein.
Limitations on Capital Distributions. OTS regulations impose uniform
limitations on the ability of all savings associations to engage in various
distributions of capital such as dividends, stock repurchases and cash-out
mergers. In addition, OTS regulations require the Association to give the OTS 30
days' advance notice of any proposed declaration of dividends, and the OTS has
the authority under its supervisory powers to prohibit the payment of dividends.
The regulation utilizes a three-tiered approach which permits various levels of
distributions based primarily upon a savings association's capital level.
A Tier 1 savings association has capital in excess of its fully
phased-in capital requirement (both before and after the proposed capital
distribution). Tier 1 savings association may make (without application but upon
prior notice to, and no objection made by, the OTS) capital distributions during
a calendar year up to 100% of its net income to date during the calendar year
plus one-half its surplus capital ratio (i.e., the amount of capital in excess
of its fully phased-in requirement) at the beginning of the calendar year or the
amount authorized for a Tier 2 association. Capital distributions in excess of
such amount require advance notice to the OTS. A Tier 2 savings association has
capital equal to or in excess of its minimum capital requirement but below its
fully phased-in capital requirement (both before and after the proposed capital
distribution). Such an association may make (without application) capital
distributions up to an amount equal to 75% of its net income during the previous
four quarters depending on how close the association is to meeting its fully
phased-in capital requirement. Capital distributions exceeding this amount
require prior OTS approval. Tier 3 associations are savings associations with
capital below the minimum capital requirement (either before or after the
proposed capital distribution). Tier 3 associations may not make any capital
distributions without prior approval from the OTS.
The Association currently meets the criteria to be designated a Tier 1
association and, consequently, could at its option (after prior notice to, and
no objection made by, the OTS) distribute up to 100% of its net income during
the calendar year plus 50% of its surplus capital ratio at the beginning of the
calendar year less any distributions previously paid during the year.
Loans to One Borrower. Under the HOLA, savings institutions are
generally subject to the national bank limit on loans to one borrower.
Generally, this limit is 15% of the Association's unimpaired capital and
surplus, plus an additional 10% of unimpaired capital and surplus, if such loan
is secured by readily-marketable collateral, which is defined to include certain
financial instruments and bullion. The OTS by regulation has amended the loans
to one borrower rule to permit savings associations meeting certain
requirements, including capital requirements, to extend loans to one borrower in
additional amounts under circumstances limited essentially to loans to develop
or complete residential housing units. At September 30, 1997, the Association's
regulatory limit on loans to one borrower was $4.2 million. At September 30,
1997, the Association's largest aggregate amount of loans to one borrower was
$1.8 million.
Activities of Associations and Their Subsidiaries. A savings
association may establish operating subsidiaries to engage in any activity that
the savings association may conduct directly and service corporation
subsidiaries to engage in certain preapproved activities or, with approval of
the OTS, other activities reasonably related to the activities of financial
institutions. When a savings association establishes or acquires a subsidiary or
elects to conduct any new activity through a subsidiary that the association
controls, the savings association must notify the FDIC and the OTS 30 days in
advance and provide the information each agency may, by regulation, require.
Savings associations also must conduct the activities of subsidiaries in
accordance with existing regulations and orders.
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The OTS may determine that the continuation by a savings association of
its ownership control of, or its relationship to, the subsidiary constitutes a
serious risk to the safety, soundness or stability of the association or is
inconsistent with sound banking practices or with the purposes of the FDIA.
Based upon that determination, the FDIC or the OTS has the authority to order
the savings association to divest itself of control of the subsidiary. The FDIC
also may determine by regulation or order that any specific activity poses a
serious threat to the SAIF. If so, it may require that no SAIF member engage in
that activity directly.
Transactions with Affiliates. Savings associations must comply with
Sections 23A and 23B of the Federal Reserve Act relative to transactions with
affiliates in the same manner and to the same extent as if the savings
association were a Federal Reserve member bank. A savings and loan holding
company, its subsidiaries and any other company under common control are
considered affiliates of the subsidiary savings association under the HOLA.
Generally, Sections 23A and 23B: (i) limit the extent to which the insured
association or its subsidiaries may engage in certain covered transactions with
an affiliate to an amount equal to 10% of such institution's capital and surplus
and place an aggregate limit on all such transactions with affiliates to an
amount equal to 20% of such capital and surplus, and (ii) require that all such
transactions be on terms substantially the same, or at least as favorable to the
institution or subsidiary, as those provided to a non-affiliate. The term
"covered transaction" includes the making of loans, the purchase of assets, the
issuance of a guarantee and similar types of transactions. Any loan or extension
of credit by the Association to an affiliate must be secured by collateral in
accordance with Section 23A.
Three additional rules apply to savings associations: (i) a savings
association may not make any loan or other extension of credit to an affiliate
unless that affiliate is engaged only in activities permissible for bank holding
companies; (ii) a savings association may not purchase or invest in securities
issued by an affiliate (other than securities of a subsidiary); and (iii) the
OTS may, for reasons of safety and soundness, impose more stringent restrictions
on savings associations but may not exempt transactions from or otherwise
abridge Section 23A or 23B. Exemptions from Section 23A or 23B may be granted
only by the Federal Reserve, as is currently the case with respect to all
FDIC-insured banks.
The Association's authority to extend credit to executive officers,
directors and 10% shareholders, as well as entities controlled by such persons,
is currently governed by Sections 22(g) and 22(h) of the Federal Reserve Act,
and Regulation O thereunder. Among other things, these regulations require that
such loans be made on terms and conditions substantially the same as those
offered to unaffiliated individuals and not involve more than the normal risk of
repayment. Regulation O also places individual and aggregate limits on the
amount of loans the Association may make to such persons based, in part, on the
Association's capital position, and requires certain board approval procedures
to be followed. The OTS regulations, with certain minor variances, apply
Regulation O to savings institutions.
Community Reinvestment Act. Banks are also subject to the provisions of
the Community Reinvestment Act of 1977, which requires the appropriate federal
bank regulatory agency, in connection with its regular examination of a bank, to
assess the bank's record in meeting the credit needs of the community serviced
by the bank, including low and moderate income neighborhoods. The regulatory
agency's assessment of the bank's record is made available to the public.
Further, such assessment is required of any bank which has applied, among other
things, to establish a new branch office that will accept deposits, relocate an
existing office or merge or consolidate with, or acquire the assets or assume
the liabilities of, a federally regulated financial institution.
Savings and Loan Holding Company Regulations
Holding Company Acquisitions. The HOLA and OTS regulations issued
thereunder generally prohibit a savings and loan holding company, without prior
OTS approval, from acquiring more than 5% of the voting stock of any other
savings association or savings and loan holding company or controlling the
assets thereof. They also prohibit, among other things, any director or officer
of a savings and loan holding company, or any individual who owns or controls
more than 25% of the voting shares of such holding company, from acquiring
control of any
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savings association not a subsidiary of such savings and loan holding company,
unless the acquisition is approved by the OTS.
Holding Company Activities. As a unitary savings and loan holding
company, the Holding Company generally is not subject to activity restrictions
under the HOLA. If the Holding Company acquires control of another savings
association as a separate subsidiary other than in a supervisory acquisition, it
would become a multiple savings and loan holding company. There generally are
more restrictions on the activities of a multiple savings and loan holding
company than on those of a unitary savings and loan holding company. The HOLA
provides that, among other things, no multiple savings and loan holding company
or subsidiary thereof which is not an insured association shall commence or
continue for more than two years after becoming a multiple savings and loan
association holding company or subsidiary thereof, any business activity other
than: (i) furnishing or performing management services for a subsidiary insured
institution, (ii) conducting an insurance agency or escrow business, (iii)
holding, managing, or liquidating assets owned by or acquired from a subsidiary
insured institution, (iv) holding or managing properties used or occupied by a
subsidiary insured institution, (v) acting as trustee under deeds of trust, (vi)
those activities previously directly authorized by regulation as of March 5,
1987 to be engaged in by multiple holding companies or (vii) those activities
authorized by the Federal Reserve Board as permissible for bank holding
companies, unless the OTS by regulation, prohibits or limits such activities for
savings and loan holding companies. Those activities described in (vii) above
also must be approved by the OTS prior to being engaged in by a multiple savings
and loan holding company.
Qualified Thrift Lender Test. The HOLA provides that any savings and
loan holding company that controls a savings association that fails the QTL
test, as explained under "-- Federal Regulation of Savings Associations --
Qualified Thrift Lender Test," must, within one year after the date on which the
association ceases to be a QTL, register as and be deemed a bank holding company
subject to all applicable laws and regulations.
TAXATION
Federal Taxation
General. The Holding Company and the Association will report their
income on a fiscal year basis using the accrual method of accounting and will be
subject to federal income taxation in the same manner as other corporations with
some exceptions, including particularly the Association's reserve for bad debts
discussed below. The following discussion of tax matters is intended only as a
summary and does not purport to be a comprehensive description of the tax rules
applicable to the Association or the Holding Company.
Bad Debt Reserve. Historically, savings institutions such as the
Association which met certain definitional tests primarily related to their
assets and the nature of their business ("qualifying thrift") were permitted to
establish a reserve for bad debts and to make annual additions thereto, which
may have been deducted in arriving at their taxable income. The Association's
deductions with respect to "qualifying real property loans," which are generally
loans secured by certain interest in real property, were computed using an
amount based on the Association's actual loss experience, or a percentage equal
to 8% of the Association's taxable income, computed with certain modifications
and reduced by the amount of any permitted additions to the non-qualifying
reserve. Due to the Association's loss experience, the Association generally
recognized a bad debt deduction equal to 8% of taxable income.
In August 1996, the provisions repealing the current thrift bad debt
rules were passed by Congress as part of "The Small Business Job Protection Act
of 1996." The new rules eliminate the 8% of taxable income method for deducting
additions to the tax bad debt reserves for all thrifts for tax years beginning
after December 31, 1995. These rules also require that all institutions
recapture all or a portion of their bad debt reserves added since the base year
(last taxable year beginning before January 1, 1988). The Association has
previously recorded a deferred tax liability equal to the bad debt recapture and
as such the new rules will have no effect on the net income or federal
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income tax expense. For taxable years beginning after December 31, 1995, the
Association's bad debt deduction will be determined under the experience method
using a formula based on actual bad debt experience over a period of years or,
if the Association is a "large" association (assets in excess of $500 million)
on the basis of net charge-offs during the taxable year. The new rules allow an
institution to suspend bad debt reserve recapture for the 1996 and 1997 tax
years if the institution's lending activity for those years is equal to or
greater than the institution's average mortgage lending activity for the six
taxable years preceding 1996 adjusted for inflation. For this purpose, only home
purchase or home improvement loans are included and the institution can elect to
have the tax years with the highest and lowest lending activity removed from the
average calculation. If an institution is permitted to postpone the reserve
recapture, it must begin its six year recapture no later than the 1998 tax year.
The unrecaptured base year reserves will not be subject to recapture as long as
the institution continues to carry on the business of banking. In addition, the
balance of the pre-1988 bad debt reserves continue to be subject to provisions
of present law referred to below that require recapture in the case of certain
excess distributions to shareholders.
Distributions. To the extent that the Association makes "nondividend
distributions" to the Holding Company, such distributions will be considered to
result in distributions from the balance of its bad debt reserve as of December
31, 1987 (or a lesser amount if the Association's loan portfolio decreased since
December 31, 1987) and then from the supplemental reserve for losses on loans
("Excess Distributions"), and an amount based on the Excess Distributions will
be included in the Association's taxable income. Nondividend distributions
include distributions in excess of the Association's current and accumulated
earnings and profits, distributions in redemption of stock and distributions in
partial or complete liquidation. However, dividends paid out of the
Association's current or accumulated earnings and profits, as calculated for
federal income tax purposes, will not be considered to result in a distribution
from the Association's bad debt reserve. The amount of additional taxable income
created from an Excess Distribution is an amount that, when reduced by the tax
attributable to the income, is equal to the amount of the distribution. Thus,
if, after the conversion, the Association makes a "nondividend distribution,"
then approximately one and one-half times the Excess Distribution would be
includable in gross income for federal income tax purposes, assuming a 34%
corporate income tax rate (exclusive of state and local taxes). See "REGULATION"
and "DIVIDEND POLICY" for limits on the payment of dividends by the Association.
The Association does not intend to pay dividends that would result in a
recapture of any portion of its tax bad debt reserve.
Corporate Alternative Minimum Tax. The Code imposes a tax on alternative
minimum taxable income ("AMTI") at a rate of 20%. The excess of the tax bad debt
reserve deduction using the percentage of taxable income method over the
deduction that would have been allowable under the experience method is treated
as a preference item for purposes of computing the AMTI. In addition, only 90%
of AMTI can be offset by net operating loss carryovers. AMTI is increased by an
amount equal to 75% of the amount by which the Association's adjusted current
earnings exceeds its AMTI (determined without regard to this preference and
prior to reduction for net operating losses). For taxable years beginning after
December 31, 1986, and before January 1, 1996, an environmental tax of 0.12% of
the excess of AMTI (with certain modification) over $2.0 million is imposed on
corporations, including the Association, whether or not an Alternative Minimum
Tax is paid.
Dividends-Received Deduction. The Holding Company may exclude from its
income 100% of dividends received from the Association as a member of the same
affiliated group of corporations. The corporate dividends-received deduction is
generally 70% in the case of dividends received from unaffiliated corporations
with which the Holding Company and the Association will not file a consolidated
tax return, except that if the Holding Company or the Association owns more than
20% of the stock of a corporation distributing a dividend, then 80% of any
dividends received may be deducted.
Audits. The Association's federal income tax returns have not been audited
within the past five years.
State Taxation
South Carolina. The provisions of South Carolina tax law mirror the Code,
with certain modifications, as it relates to savings and loan associations. The
Association is subject to South Carolina income tax at the rate of
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6%. This rate of tax is imposed on savings and loan associations in lieu of the
general state business corporation income tax. The Association's state income
tax returns have not been audited within the last five years.
Delaware. As a Delaware holding company not earning income in Delaware, the
Holding Company is exempt from Delaware corporate income tax, but is required to
file an annual report with and pay an annual franchise tax to the State of
Delaware.
THE CONVERSION
The OTS has approved the Plan of Conversion subject to its approval by the
members of the Association entitled to vote thereon and to the satisfaction of
certain other conditions imposed by the OTS in its approval. OTS approval does
not constitute a recommendation or endorsement of the Plan of Conversion.
General
On September 10, 1997, the Board of Directors of the Association
unanimously adopted the Plan of Conversion, which was subsequently amended on
November 19, 1997, pursuant to which the Association will be converted from a
federally chartered mutual savings and loan association to a federally chartered
stock savings bank to be held as a wholly-owned subsidiary of the Holding
Company, a newly formed Delaware corporation. The following discussion of the
Plan of Conversion is qualified in its entirety by reference to the Plan of
Conversion, which is attached as Exhibit A to the Association's Proxy Statement
and is available to members of the Association upon request. The Plan of
Conversion is also filed as an exhibit to the Registration Statement. See
"ADDITIONAL INFORMATION." The OTS has approved the Plan of Conversion subject to
its approval by the members of the Association entitled to vote on the matter at
a Special Meeting called for that purpose to be held on ___________, 1998, and
subject to the satisfaction of certain other conditions imposed by the OTS in
its approval.
The conversion will be accomplished through adoption of a Federal Stock
Charter and Bylaws to authorize the issuance of capital stock by the
Association. As part of the conversion, the Association will issue all of its
newly issued common stock (1,000 shares) to the Holding Company in exchange for
50% of the net proceeds from the sale of common stock by the Holding Company.
The Plan of Conversion provides generally that: (i) the Association will
convert from a federally chartered mutual savings and loan association to a
federally chartered stock savings bank; (ii) the common stock will be offered by
the Holding Company in the Subscription Offering to persons having subscription
rights; (iii) if necessary, shares of common stock not subscribed for in the
Subscription Offering will be offered in a Direct Community Offering to certain
members of the general public, with preference given to natural persons and
trusts of natural persons residing in the Local Community, and then to certain
members of the general public in a Syndicated Community Offering through a
syndicate of registered broker-dealers pursuant to selected dealers agreements;
and (iv) the Holding Company will purchase all of the capital stock of the
Association to be issued in connection with the conversion. The conversion will
be effected only upon completion of the sale of at least $44,625,000 of common
stock to be issued pursuant to the Plan of Conversion.
As part of the conversion, the Holding Company is making a Subscription
Offering of its common stock to holders of subscription rights in the following
order of priority: (i) Eligible Account Holders (depositors with $50.00 or more
on deposit as of June 30, 1996); (ii) the Association's ESOP; (iii) Supplemental
Eligible Account Holders (depositors with $50.00 or more on deposit as of
December 31, 1997); and (iv) Other Members (depositors of the Association as of
January 30, 1998 and borrowers of the Association with loans outstanding as of
October 21, 1997 which continue to be outstanding as of January 30, 1998).
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Shares of common stock not subscribed for in the Subscription Offering may
be offered for sale in the Direct Community Offering. The Direct Community
Offering, if one is held, is expected to begin immediately after the expiration
of the Subscription Offering, but may begin at any time during the Subscription
Offering. Shares of common stock not sold in the Subscription and Direct
Community Offerings may be offered in the Syndicated Community Offering.
Regulations require that the Direct Community and Syndicated Community Offerings
be completed within 45 days after completion of the fully extended Subscription
Offering unless extended by the Association or the Holding Company with the
approval of the regulatory authorities. If the Syndicated Community Offering is
determined not to be feasible, the Board of Directors of the Association will
consult with the regulatory authorities to determine an appropriate alternative
method for selling the unsubscribed shares of common stock. The Plan of
Conversion provides that the conversion must be completed within 24 months after
the date of the approval of the Plan of Conversion by the members of the
Association.
No sales of common stock may be completed, either in the Subscription
Offering, Direct Community Offering or Syndicated Community Offering unless the
Plan of Conversion is approved by the members of the Association.
The completion of the offering, however, is subject to market conditions
and other factors beyond the Association's control. No assurance can be given as
to the length of time after approval of the Plan of Conversion at the Special
Meeting that will be required to complete the Direct Community or Syndicated
Community Offerings or other sale of the common stock. If delays are
experienced, significant changes may occur in the estimated pro forma market
value of the Holding Company and the Association as converted, together with
corresponding changes in the net proceeds realized by the Holding Company from
the sale of the common stock. In the event the conversion is terminated, the
Association would be required to charge all Conversion expenses against current
income.
Orders for shares of common stock will not be filled until at least
2,975,000 shares of common stock have been subscribed for or sold and the OTS
approves the final valuation and the conversion closes. If the conversion is not
completed within 45 days after the last day of the fully extended Subscription
Offering and the OTS consents to an extension of time to complete the
conversion, subscribers will be given the right to increase, decrease or rescind
their subscriptions. Unless an affirmative indication is received from
subscribers that they wish to continue to subscribe for shares, the funds will
be returned promptly, together with accrued interest at the Association's
passbook rate from the date payment is received until the funds are returned to
the subscriber. If such period is not extended, or, in any event, if the
conversion is not completed, all withdrawal authorizations will be terminated
and all funds held will be promptly returned together with accrued interest at
the Association's passbook rate from the date payment is received until the
conversion is terminated.
Reasons for the Conversion
The Board of Directors and management believe that the conversion is in the
best interests of the Association, its members and the communities it serves.
The Association's Board of Directors has formed the Holding Company to serve as
a holding company, with the Association as its subsidiary, upon the consummation
of the conversion. By converting to the stock form of organization, the Holding
Company and the Association will be structured in the form used by holding
companies of commercial banks, most business entities and by a growing number of
savings institutions. Management of the Association believes that the conversion
offers a number of advantages which will be important to the future growth and
performance of the Association. The capital raised in the conversion is intended
to support the Association's current lending and investment activities and may
also support possible future expansion and diversification of operations,
although there are no current specific plans, arrangements or understandings,
written or oral, regarding any such expansion or diversification. The conversion
is also expected to afford the Association's management, members and others the
opportunity to become stockholders of the Holding Company and participate more
directly in, and contribute to, any future growth of the Holding Company and the
Association. The conversion will also enable the Holding Company and the
Association to raise additional capital in the public equity or debt markets
should the need arise, although there are no current specific plans,
arrangements
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or understandings, written or oral, regarding any such financing activities. The
Association, as a mutual savings and loan association, does not have the
authority to issue capital stock or debt instruments, other than by accepting
deposits.
Effects of Conversion to Stock Form on Depositors and Borrowers of the
Association
Voting Rights. Savings members and borrowers will have no voting rights in
the converted Association or the Holding Company and therefore will not be able
to elect directors of the Association or the Holding Company or to control their
affairs. Currently, these rights are accorded to savings members of the
Association. Subsequent to the conversion, voting rights will be vested
exclusively in the Holding Company with respect to the Association and the
holders of the common stock as to matters pertaining to the Holding Company.
Each holder of common stock shall be entitled to vote on any matter to be
considered by the stockholders of the Holding Company. A stockholder will be
entitled to one vote for each share of common stock owned.
Savings Accounts and Loans. The Association's savings accounts, account
balances and existing FDIC insurance coverage of savings accounts will not be
affected by the conversion. Furthermore, the conversion will not affect the loan
accounts, loan balances or obligations of borrowers under their individual
contractual arrangements with the Association.
Tax Effects. The Association has received an opinion from Breyer & Aguggia,
Washington, D.C., that the conversion will constitute a nontaxable
reorganization under Section 368(a)(1)(F) of the Code. Among other things, the
opinion states that:
(i) no gain or loss will be recognized to the Association in its
mutual or stock form by reason of the conversion;
(ii) no gain or loss will be recognized to its account holders upon the
issuance to them of accounts in the Association immediately after the
conversion, in the same dollar amounts and on the same terms and
conditions as their accounts at the Association in its mutual form plus
interest in the liquidation account;
(iii) the tax basis of account holders' accounts in the Association
immediately after the conversion will be the same as the tax basis of
their accounts immediately prior to conversion;
(iv) the tax basis of each account holder's interest in the liquidation
account will be equal to the value, if any, of that interest;
(v) the tax basis of the common stock purchased in the conversion will
be the amount paid and the holding period for such stock will commence
at the date of purchase; and
(vi) no gain or loss will be recognized to account holders upon the
receipt or exercise of subscription rights in the conversion, except to
the extent subscription rights are deemed to have value as discussed
below.
Unlike a private letter ruling issued by the IRS, an opinion of counsel
is not binding on the IRS and the IRS could disagree with the conclusions
reached therein. In the event of such disagreement, no assurance can be given
that the conclusions reached in an opinion of counsel would be sustained by a
court if contested by the IRS.
Based upon past rulings issued by the IRS, the opinion provides that
the receipt of subscription rights by Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members under the Plan of Conversion will be
taxable to the extent, if any, that the subscription rights are deemed to have a
fair market value. RP Financial, a financial consulting firm retained by the
Association, whose findings are not binding on the IRS, has issued a letter
indicating that the subscription rights do not have any value, based on the fact
that such rights are acquired by the recipients without cost, are
nontransferable and of short duration and afford the recipients the right
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only to purchase shares of the common stock at a price equal to its estimated
fair market value, which will be the same price paid by purchasers in the Direct
Community Offering for unsubscribed shares of common stock. If the subscription
rights are deemed to have a fair market value, the receipt of such rights may
only be taxable to those Eligible Account Holders, Supplemental Eligible Account
Holders and Other Members who exercise their subscription rights. The
Association could also recognize a gain on the distribution of such subscription
rights. Eligible Account Holders, Supplemental Eligible Account Holders and
Other Members are encouraged to consult with their own tax advisors as to the
tax consequences in the event the subscription rights are deemed to have a fair
market value.
The Association has also received an opinion from Deloitte & Touche
LLP, Greenville, South Carolina, that, assuming the conversion does not result
in any federal income tax liability to the Association, its account holders, or
the Holding Company, implementation of the Plan of Conversion will not result in
any South Carolina income tax liability to such entities or persons.
The opinions of Breyer & Aguggia and Deloitte & Touche LLP and the
letter from RP Financial are filed as exhibits to the Registration Statement.
See "ADDITIONAL INFORMATION."
PROSPECTIVE INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS
REGARDING THE TAX CONSEQUENCES OF THE CONVERSION PARTICULAR TO THEM.
Liquidation Account. In the unlikely event of a complete liquidation of
the Association in its present mutual form, each depositor in the Association
would receive a pro rata share of any assets of the Association remaining after
payment of claims of all creditors (including the claims of all depositors up to
the withdrawal value of their accounts). Each depositor's pro rata share of such
remaining assets would be in the same proportion as the value of his or her
deposit account to the total value of all deposit accounts in the Association at
the time of liquidation.
After the conversion, holders of withdrawable deposit(s) in the
Association, including certificates of deposit ("Savings Account(s)"), shall not
be entitled to share in any residual assets in the event of liquidation of the
Association. However, pursuant to OTS regulations, the Association shall, at the
time of the conversion, establish a liquidation account in an amount equal to
its total equity as of the date of the latest statement of financial condition
contained herein.
The liquidation account shall be maintained by the Association
subsequent to the conversion for the benefit of Eligible Account Holders and
Supplemental Eligible Account Holders who retain their Savings Accounts in the
Association. Each Eligible Account Holder and Supplemental Eligible Account
Holder shall, with respect to each Savings Account held, have a related inchoate
interest in a portion of the liquidation account balance ("subaccount").
The initial subaccount balance for a Savings Account held by an
Eligible Account Holder or a Supplemental Eligible Account Holder shall be
determined by multiplying the opening balance in the liquidation account by a
fraction of which the numerator is the amount of such holder's "qualifying
deposit" in the Savings Account and the denominator is the total amount of the
"qualifying deposits" of all such holders. Such initial subaccount balance shall
not be increased, and it shall be subject to downward adjustment as provided
below.
If the deposit balance in any Savings Account of an Eligible Account
Holder or Supplemental Eligible Account Holder at the close of business on any
annual closing day of the Association subsequent to June 30, 1996, or December
31, 1997 is less than the lesser of (i) the deposit balance in such Savings
Account at the close of business on any other annual closing date subsequent to
June 30, 1996 or December 31, 1997 or (ii) the amount of the "qualifying
deposit" in such Savings Account on June 30, 1996 or December 31, 1997, then the
subaccount balance for such Savings Account shall be adjusted by reducing such
subaccount balance in an amount proportionate to the reduction in such deposit
balance. In the event of a downward adjustment, such subaccount balance shall
not
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be subsequently increased, notwithstanding any increase in the deposit balance
of the related Savings Account. If any such Savings Account is closed, the
related subaccount balance shall be reduced to zero.
In the event of a complete liquidation of the Association (and only in
such event) each Eligible Account Holder and Supplemental Eligible Account
Holder shall be entitled to receive a liquidation distribution from the
liquidation account in the amount of the then current adjusted subaccount
balance(s) for Savings Account(s) then held by such holder before any
liquidation distribution may be made to stockholders. No merger, consolidation,
bulk purchase of assets with assumptions of Savings Accounts and other
liabilities or similar transactions with another federally insured institution
in which the Association is not the surviving institution shall be considered to
be a complete liquidation. In any such transaction the liquidation account shall
be assumed by the surviving institution.
In the unlikely event the Association is liquidated after the
conversion, depositors will be entitled to full payment of their deposit
accounts before any payment is made to the Holding Company as the sole
stockholder of the Association.
The Subscription, Direct Community and Syndicated Community Offerings
Subscription Offering. In accordance with the Plan of Conversion,
nontransferable subscription rights to purchase the common stock have been
issued to persons and entities entitled to purchase the common stock in the
Subscription Offering. The amount of the common stock which these parties may
purchase will be subject to the availability of the common stock for purchase
under the categories set forth in the Plan of Conversion. Subscription
priorities have been established for the allocation of stock to the extent that
the common stock is available. These priorities are as follows:
Category 1: Eligible Account Holders. Each depositor with $50.00 or
more on deposit at the Association as of June 30, 1996 will receive
nontransferable subscription rights to subscribe for up to the greater of
$330,000 of common stock, one-tenth of one percent of the total offering of
common stock or 15 times the product (rounded down to the next whole number)
obtained by multiplying the total number of shares of common stock to be issued
by a fraction of which the numerator is the amount of qualifying deposit of the
Eligible Account Holder and the denominator is the total amount of qualifying
deposits of all Eligible Account Holders. If the exercise of subscription rights
in this category results in an oversubscription, shares of common stock will be
allocated among subscribing Eligible Account Holders so as to permit each
Eligible Account Holder, to the extent possible, to purchase a number of shares
sufficient to make such person's total allocation equal 100 shares or the number
of shares actually subscribed for, whichever is less. Thereafter, unallocated
shares will be allocated among subscribing Eligible Account Holders
proportionately, based on the amount of their respective qualifying deposits as
compared to total qualifying deposits of all Eligible Account Holders.
Subscription rights received by officers and directors in this category based on
their increased deposits in the Association in the one year period preceding
December 31, 1995 are subordinated to the subscription rights of other Eligible
Account Holders.
Category 2: ESOP. The Plan of Conversion provides that the ESOP shall
receive nontransferable subscription rights to purchase up to 8% of the shares
of common stock issued in the conversion. The ESOP intends to purchase 8% of the
shares of common stock issued in the conversion. In the event the number of
shares offered in the conversion is increased above the maximum of the Estimated
Valuation Range, the ESOP shall have a priority right to purchase any such
shares exceeding the maximum of the Estimated Valuation Range up to an aggregate
of 8% of the common stock. If the ESOP's subscription is not filled in its
entirety, the ESOP may purchase shares in the open market or may purchase shares
directly from the Holding Company.
Category 3: Supplemental Eligible Account Holders. Each depositor with
$50.00 or more on deposit as of December 31, 1997 will receive nontransferable
subscription rights to subscribe for up to the greater of $330,000 of common
stock, one-tenth of one percent of the total offering of common stock or 15
times the product (rounded down to the next whole number) obtained by
multiplying the total number of shares of common stock to be issued
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by a fraction of which the numerator is the amount of qualifying deposits of the
Supplemental Eligible Account Holder and the denominator is the total amount of
qualifying deposits of all Supplemental Eligible Account Holders. If the
exercise of subscription rights in this category results in an oversubscription,
shares of common stock will be allocated among subscribing Supplemental Eligible
Account Holders so as to permit each Supplemental Eligible Account Holder, to
the extent possible, to purchase a number of shares sufficient to make his or
her total allocation equal 100 shares or the number of shares actually
subscribed for, whichever is less. Thereafter, unallocated shares will be
allocated among subscribing Supplemental Eligible Account Holders
proportionately, based on the amount of their respective qualifying deposits as
compared to total qualifying deposits of all Supplemental Eligible Account
Holders.
Category 4: Other Members. Each depositor of the Association as of the
Voting Record Date (January 30, 1998) and each borrower with a loan outstanding
on October 21, 1997 which continues to be outstanding as of the Voting Record
Date will receive nontransferable subscription rights to purchase up to $330,000
of common stock in the conversion to the extent shares are available following
subscriptions by Eligible Account Holders, the Association's ESOP and
Supplemental Eligible Account Holders. In the event of an oversubscription in
this category, the available shares will be allocated proportionately based on
the amount of the respective subscriptions.
Subscription rights are nontransferable. Persons selling or otherwise
transferring their rights to subscribe for common stock in the Subscription
Offering or subscribing for common stock on behalf of another person will be
subject to forfeiture of such rights and possible further sanctions and
penalties imposed by the OTS or another agency of the U.S. Government. Each
person exercising subscription rights will be required to certify that he or she
is purchasing such shares solely for his or her own account and that he or she
has no agreement or understanding with any other person for the sale or transfer
of such shares. ONCE TENDERED, SUBSCRIPTION ORDERS CANNOT BE REVOKED WITHOUT THE
CONSENT OF THE ASSOCIATION AND THE HOLDING COMPANY.
The Holding Company and the Association will make reasonable attempts
to provide a prospectus and related offering materials to holders of
subscription rights. However, the Subscription Offering and all subscription
rights under the Plan of Conversion will expire at 12:00 Noon, Eastern Time, on
the Expiration Date, whether or not the Association has been able to locate each
person entitled to such subscription rights. Orders for common stock in the
Subscription Offering received in hand by the Association after the Expiration
Date will not be accepted. The Subscription Offering may be extended by the
Holding Company and the Association up to _____ __, 1998 without the OTS's
approval. OTS regulations require that the Holding Company complete the sale of
common stock within 45 days after the close of the Subscription Offering. If the
Direct Community Offering and the Syndicated Community Offerings are not
completed within such period all funds received will be promptly returned with
interest at the Association's passbook rate and all withdrawal authorizations
will be canceled. If regulatory approval of an extension of the time period has
been granted, all subscribers will be notified of such extension and of the
duration of any extension that has been granted, and will be given the right to
increase, decrease or rescind their orders. If an affirmative response to any
resolicitation is not received by the Holding Company from a subscriber, the
subscriber's order will be rescinded and all funds received will be promptly
returned with interest (or withdrawal authorizations will be canceled). No
single extension can exceed 90 days.
Direct Community Offering. Any shares of common stock which remain
unsubscribed for in the Subscription Offering will be offered by the Holding
Company to certain members of the general public in a Direct Community Offering,
with preference given to natural persons and trusts of natural persons residing
in the Local Community (Laurens, Anderson, Greenwood and Greenville Counties,
South Carolina). Purchasers in the Direct Community Offering are eligible to
purchase up to $330,000 of common stock. In the event an insufficient number of
shares are available to fill orders in the Direct Community Offering, the
available shares will be allocated on a pro rata basis determined by the amount
of the respective orders. The Direct Community Offering, if held, is expected to
commence immediately subsequent to the Expiration Date, but may begin at anytime
during the Subscription Offering. The Direct Community Offering may terminate on
or at any time subsequent to the
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Expiration Date, but no later than 45 days after the close of the Subscription
Offering, unless extended by the Holding Company and the Association, with
approval of the OTS. Any extensions beyond 45 days after the close of the fully
extended Subscription Offering would require a resolicitation of orders, wherein
subscribers for the maximum numbers of shares of common stock would be, and
certain other large subscribers in the discretion of the Holding Company and the
Association may be, given the opportunity to continue their orders, in which
case they will need to reconfirm affirmatively their subscriptions prior to the
expiration of the resolicitation offering or their subscription funds will be
promptly refunded with interest at the Association's passbook rate, or be
permitted to modify or cancel their orders. The right of any person to purchase
shares in the Direct Community Offering is subject to the absolute right of the
Holding Company and the Association to accept or reject such purchases in whole
or in part. If an order is rejected in part, the purchaser does not have the
right to cancel the remainder of the order. The Holding Company presently
intends to terminate the Direct Community Offering as soon as it has received
orders for all shares available for purchase in the conversion.
If all of the common stock offered in the Subscription Offering is
subscribed for, no common stock will be available for purchase in the Direct
Community Offering.
Syndicated Community Offering. The Plan of Conversion provides that, if
necessary, all shares of common stock not purchased in the Subscription Offering
and Direct Community Offering, if any, may be offered for sale to certain
members of the general public in a Syndicated Community Offering through a
syndicate of registered broker-dealers to be formed and managed by Trident
Securities acting as agent of the Holding Company. The Holding Company and the
Association have the right to reject orders, in whole or part, in their sole
discretion in the Syndicated Community Offering. Neither Trident Securities nor
any registered broker-dealer shall have any obligation to take or purchase any
shares of the common stock in the Syndicated Community Offering; however,
Trident Securities has agreed to use its best efforts in the sale of shares in
the Syndicated Community Offering.
Stock sold in the Syndicated Community Offering also will be sold at
the $15.00 purchase price. See "--Stock Pricing and Number of Shares to be
Issued." No person will be permitted to subscribe in the Syndicated Community
Offering for shares of common stock with an aggregate purchase price of more
than $330,000. See "--Plan of Distribution for the Subscription, Direct
Community and Syndicated Community Offerings" for a description of the
commission to be paid to the selected dealers and to Trident Securities.
Trident Securities may enter into agreements with selected dealers to
assist in the sale of shares in the Syndicated Community Offering. During the
Syndicated Community Offering, selected dealers may only solicit indications of
interest from their customers to place orders with the Holding Company as of a
certain date ("Order Date") for the purchase of shares of Conversion Stock. When
and if Trident Securities and the Holding Company believe that enough
indications of interest and orders have been received in the Subscription
Offering, the Direct Community Offering and the Syndicated Community Offering to
consummate the conversion, Trident Securities will request, as of the Order
Date, selected dealers to submit orders to purchase shares for which they have
received indications of interest from their customers. Selected dealers will
send confirmations to such customers on the next business day after the Order
Date. Selected dealers may debit the accounts of their customers on a date which
will be three business days from the Order Date ("Settlement Date"). Customers
who authorize selected dealers to debit their brokerage accounts are required to
have the funds for payment in their account on but not before the Settlement
Date. On the Settlement Date, selected dealers will remit funds to the account
that the Holding Company established for each selected dealer. Each customer's
funds so forwarded to the Holding Company, along with all other accounts held in
the same title, will be insured by the FDIC up to the applicable $100,000 legal
limit. After payment has been received by the Holding Company from selected
dealers, funds will earn interest at the Association's passbook rate until the
completion of the offering. At the completion of the conversion, the funds
received will be used to purchase the shares of common stock ordered. The shares
issued in the conversion cannot and will not be insured by the FDIC or any other
government agency. In the event the conversion is not consummated as described
above, funds with interest will be returned promptly to the selected dealers,
who, in turn, will promptly credit their customers' brokerage accounts.
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The Syndicated Community Offering may terminate no more than 45 days
after the expiration of the Subscription Offering, unless extended by the
Holding Company and the Association, with approval of the OTS.
In the event the Association is unable to find purchasers from the
general public for all unsubscribed shares, other purchase arrangements will be
made by the Board of Directors of the Association, if feasible. Such other
arrangements will be subject to the approval of the OTS. The OTS may grant one
or more extensions of the offering period, provided that (i) no single extension
exceeds 90 days, (ii) subscribers are given the right to increase, decrease or
rescind their subscriptions during the extension period, and (iii) the
extensions do not go more than two years beyond the date on which the members
approved the Plan of Conversion. If the conversion is not completed within 45
days after the close of the Subscription Offering, either all funds received
will be returned with interest (and withdrawal authorizations canceled) or, if
the OTS has granted an extension of time, all subscribers will be given the
right to increase, decrease or rescind their subscriptions at any time prior to
20 days before the end of the extension period. If an extension of time is
obtained, all subscribers will be notified of such extension and of their rights
to modify their orders. If an affirmative response to any resolicitation is not
received by the Holding Company from a subscriber, the subscriber's order will
be rescinded and all funds received will be promptly returned with interest (or
withdrawal authorizations will be canceled).
Persons in Non-Qualified States. The Holding Company and the
Association will make reasonable efforts to comply with the securities laws of
all states in the United States in which persons entitled to subscribe for stock
pursuant to the Plan of Conversion reside. However, the Holding Company and the
Association are not required to offer stock in the Subscription Offering to any
person who resides in a foreign country or resides in a state of the United
States with respect to which (i) a small number of persons otherwise eligible to
subscribe for shares of common stock reside in such state or (ii) the Holding
Company or the Association determines that compliance with the securities laws
of such state would be impracticable for reasons of cost or otherwise, including
but not limited to a request or requirement that the Holding Company and the
Association or their officers, directors or trustees register as a broker,
dealer, salesman or selling agent, under the securities laws of such state, or a
request or requirement to register or otherwise qualify the subscription rights
or common stock for sale or submit any filing with respect thereto in such
state. Where the number of persons eligible to subscribe for shares in one state
is small, the Holding Company and the Association will base their decision as to
whether or not to offer the common stock in such state on a number of factors,
including the size of accounts held by account holders in the state, the cost of
reviewing the registration and qualification requirements of the state (and of
actually registering or qualifying the shares) or the need to register the
Holding Company, its officers, directors or employees as brokers, dealers or
salesmen.
Plan of Distribution for the Subscription, Direct Community and Syndicated
Community Offerings
The Association and the Holding Company have retained Trident
Securities to consult with and advise the Association and to assist the
Association and the Holding Company, on a best efforts basis, in the
distribution of shares in the offering. Trident Securities is a broker-dealer
registered with the SEC and a member of the NASD. Trident Securities will assist
the Association in the conversion as follows: (i) it will act as marketing
advisor with respect to the Subscription Offering and will represent the
Association as placement agent on a best efforts basis in the sale of the common
stock in the Direct Community Offering if one is held; (ii) it will conduct
training sessions with directors, officers and employees of the Association
regarding the conversion process; and (iii) it will assist in the establishment
and supervision of the Association's stock information center and, with
management's input, will train the Association's staff to record properly and
tabulate orders for the purchase of common stock and to respond appropriately to
customer inquiries.
Based upon negotiations between Trident Securities on the one hand and
the Holding Company and the Association on the other hand concerning fee
structure, Trident Securities will receive a commission equal to 1.5% of the
aggregate amount of common stock sold in the Subscription and Direct Community
Offerings, excluding shares sold to the ESOP and to directors, officers and
employees of the Association and associates of such persons. Fees payable to
Trident Securities will not exceed $800,000. Trident Securities and selected
dealers participating
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in the Syndicated Community Offering may receive a commission in the Syndicated
Community Offering in an amount to be agreed upon by the Holding Company and the
Association. Fees and commissions paid to Trident Securities and to any selected
dealers may be deemed to be underwriting fees, and Trident Securities and such
selected dealers may be deemed to be underwriters. Trident Securities will also
be reimbursed for its reasonable out-of-pocket expenses not to exceed $7,500 and
its legal fees not to exceed $27,500. Trident Securities has received an advance
of $7,500 towards its reimbursable expenses. For additional information, see "--
Stock Pricing and Number of Shares to be Issued" and "USE OF PROCEEDS."
Subject to certain limitations, the Holding Company and the Association
have also agreed to indemnify Trident Securities against liabilities and
expenses (including legal fees) incurred in connection with certain claims or
litigation arising out of or based upon untrue statements or omissions contained
in the offering material for the common stock or with regard to allocations of
shares (in the event of oversubscription) or determinations of eligibility to
purchase shares.
Description of Sales Activities
The common stock will be offered in the Subscription Offering and
Direct Community Offering principally by the distribution of this prospectus and
through activities conducted at the Association's stock information center at
its main office facility. The stock information center is expected to operate
during normal business hours throughout the Subscription Offering and Direct
Community Offering. It is expected that at any particular time one or more
Trident Securities employees will be working at the stock information center.
Such employees of Trident Securities will be responsible for mailing materials
relating to the offering, responding to questions regarding the conversion and
the offering and processing stock orders.
Sales of common stock will be made by registered representatives
affiliated with Trident Securities or by the selected dealers managed by Trident
Securities. The management and employees of the Association may participate in
the offering in clerical capacities, providing administrative support in
effecting sales transactions or, when permitted by state securities laws,
answering questions of a mechanical nature relating to the proper execution of
the order form. Management of the Association may answer questions regarding the
business of the Association when permitted by state securities laws. Other
questions of prospective purchasers, including questions as to the advisability
or nature of the investment, will be directed to registered representatives. The
management and employees of the Holding Company and the Association have been
instructed not to solicit offers to purchase common stock or provide advice
regarding the purchase of common stock.
No officer, director or employee of the Association or the Holding
Company will be compensated, directly or indirectly, for any activities in
connection with the offer or sale of securities issued in the conversion.
None of the Association's personnel participating in the offering is
registered or licensed as a broker or dealer or an agent of a broker or dealer.
The Association's personnel will assist in the above-described sales activities
pursuant to an exemption from registration as a broker or dealer provided by
Rule 3a4-1 promulgated under the Exchange Act. Rule 3a4-1 generally provides
that an "associated person of an issuer" of securities shall not be deemed a
broker solely by reason of participation in the sale of securities of such
issuer if the associated person meets certain conditions. Such conditions
include, but are not limited to, that the associated person participating in the
sale of an issuer's securities not be compensated in connection therewith at the
time of participation, that such person not be associated with a broker or
dealer and that such person observe certain limitations on his or her
participation in the sale of securities. For purposes of this exemption,
"associated person of an issuer" is defined to include any person who is a
director, officer or employee of the issuer or a company that controls, is
controlled by or is under common control with the issuer.
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Procedure for Purchasing Shares in the Subscription and Direct Community
Offerings
To ensure that each purchaser receives a prospectus at least 48 hours
prior to the Expiration Date in accordance with Rule 15c2-8 under the Exchange
Act, no prospectus will be mailed any later than five days prior to such date or
hand delivered any later than two days prior to such date. Execution of the
order form will confirm receipt or delivery in accordance with Rule 15c2-8.
Order forms will only be distributed with a prospectus. The Association will
accept for processing only orders submitted on original order forms. The
Association is not obligated to accept orders 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.
To purchase shares in the Subscription Offering, an executed order form
with the required full payment for each share subscribed for, or with
appropriate authorization for withdrawal of full payment from the subscriber's
deposit account with the Association (which may be given by completing the
appropriate blanks in the order form), must be received by the Association by
12:00 Noon, Eastern Time, on the Expiration Date. Order forms that are not
received by such time or are executed defectively or are received without full
payment (or without appropriate withdrawal instructions) are not required to be
accepted. The Holding Company and the Association have the right to waive or
permit the correction of incomplete or improperly executed order forms, but do
not represent that they will do so. Pursuant to the Plan of Conversion, the
interpretation by the Holding Company and the Association of the terms and
conditions of the Plan of Conversion and of the order form will be final. In
order to purchase shares in the Direct Community Offering, the order form,
accompanied by the required payment for each share subscribed for, must be
received by the Association prior to the time the Direct Community Offering
terminates, which may be on or at any time subsequent to the Expiration Date.
Once received, an executed order form may not be modified, amended or rescinded
without the consent of the Association unless the conversion has not been
completed within 45 days after the end of the Subscription Offering, unless such
period has been extended.
In order to ensure that Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members are properly identified as to their stock
purchase priorities, depositors as of the Eligibility Record Date (June 30,
1996) and/or the Supplemental Eligibility Record Date (December 31, 1997) and/or
the Voting Record Date (January 30, 1998) must list all accounts on the order
form giving all names in each account, the account number and the approximate
account balance as of such date. Failure to list an account could result in
fewer shares being allocated in the event of an oversubscription than if all
accounts had been disclosed.
Full payment for subscriptions may be made (i) in cash if delivered in
person at the Association's stock information center, (ii) by check, bank draft,
or money order, or (iii) by authorization of withdrawal from deposit accounts
maintained with the Association. Appropriate means by which such withdrawals may
be authorized are provided on the order form. No wire transfers will be
accepted. Interest will be paid on payments made by cash, check, bank draft or
money order at the Association's passbook rate from the date payment is received
until the completion or termination of the conversion. If payment is made by
authorization of withdrawal from deposit accounts, the funds authorized to be
withdrawn from a deposit account will continue to accrue interest at the
contractual rates until completion or termination of the conversion (unless the
certificate matures after the date of receipt of the order form but prior to
closing, in which case funds will earn interest at the passbook rate from the
date of maturity until consummation of the conversion), but a hold will be
placed on such funds, thereby making them unavailable to the depositor until
completion or termination of the conversion. At the completion of the
conversion, the funds received in the offering will be used to purchase the
shares of common stock ordered. The shares of common stock issued in the
conversion cannot and will not be insured by the FDIC or any other government
agency. In the event that the conversion is not consummated for any reason, all
funds submitted will be promptly refunded with interest as described above.
If a subscriber authorizes the Association to withdraw the amount of
the aggregate purchase price from his or her deposit account, the Association
will do so as of the effective date of conversion, though the account must
contain the full amount necessary for payment at the time the subscription order
is received. The Association will waive any applicable penalties for early
withdrawal from certificate accounts. If the remaining balance in a
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certificate account is reduced below the applicable minimum balance requirement
at the time that the funds actually are transferred under the authorization the
certificate will be canceled at the time of the withdrawal, without penalty, and
the remaining balance will earn interest at the Association's passbook rate.
The ESOP will not be required to pay for the shares subscribed for at
the time it subscribes, but rather may pay for such shares of common stock
subscribed for at the $15.00 purchase price upon consummation of the conversion,
provided that there is in force from the time of its subscription until such
time, a loan commitment from an unrelated financial institution or the Holding
Company to lend to the ESOP, at such time, the aggregate purchase price of the
shares for which it subscribed.
IRAs maintained in the Association do not permit investment in the
common stock. A depositor interested in using his or her IRA funds to purchase
common stock must do so through a self-directed IRA. Since the Association does
not offer such accounts, it will allow such a depositor to make a
trustee-to-trustee transfer of the IRA funds to a trustee offering a
self-directed IRA program with the agreement that such funds will be used to
purchase the Holding Company's common stock in the offering. There will be no
early withdrawal or IRS interest penalties for such transfers. The new trustee
would hold the common stock in a self-directed account in the same manner as the
Association now holds the depositor's IRA funds. An annual administrative fee
may be payable to the new trustee. Depositors interested in using funds in an
Association IRA to purchase common stock should contact the stock information
center as soon as possible so that the necessary forms may be forwarded for
execution and returned prior to the Expiration Date. In addition, the provisions
of ERISA and IRS regulations require that officers, directors and 10%
shareholders who use self-directed IRA funds to purchase shares of common stock
in the Subscription Offering, make such purchases for the exclusive benefit of
IRAs.
Certificates representing shares of common stock purchased, and any
refund due, will be mailed to purchasers at such address as may be specified in
properly completed order forms or to the last address of such persons appearing
on the records of the Association as soon as practicable following consummation
of the sale of all shares of common stock. Any certificates returned as
undeliverable will be disposed of in accordance with applicable law. Purchasers
may not be able to sell the shares of common stock which they purchased until
certificates for the common stock are available and delivered to them, even
though trading of the common stock may have commenced.
Stock Pricing and Number of Shares to be Issued
Federal regulations require that the aggregate purchase price of the
securities sold in connection with the conversion be based upon an estimated pro
forma value of the Holding Company and the Association as converted (i.e.,
taking into account the expected receipt of proceeds from the sale of securities
in the conversion), as determined by an independent appraisal. The Association
and the Holding Company have retained RP Financial to prepare an appraisal of
the pro forma market value of the Holding Company and the Association as
converted, as well as a business plan. RP Financial will receive a fee expected
to total approximately $42,500 for its appraisal services and assistance in the
preparation of a business plan, plus reasonable out-of-pocket expenses incurred
in connection with the appraisal. The Association has agreed to indemnify RP
Financial under certain circumstances against liabilities and expenses
(including legal fees) arising out of, related to, or based upon the conversion.
RP Financial has prepared an appraisal of the estimated pro forma
market value of the Holding Company and the Association as converted taking into
account the formation of the Holding Company as the holding company for the
Association. For its analysis, RP Financial undertook substantial investigations
to learn about the Association's business and operations. Management supplied
financial information, including annual financial statements, information on the
composition of assets and liabilities, and other financial schedules. In
addition to this information, RP Financial reviewed the Association's Form AC
Application for Approval of Conversion and the Holding Company's Form S-1
Registration Statement. Furthermore, RP Financial visited the Association's
facilities and had discussions with the Association's management and its special
conversion legal counsel, Breyer & Aguggia.
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No detailed individual analysis of the separate components of the Holding
Company's or the Association's assets and liabilities was performed in
connection with the evaluation.
In estimating the pro forma market value of the Holding Company and the
Association as converted, as required by applicable regulatory guidelines, RP
Financial's analysis utilized three selected valuation procedures, the
Price/Book ("P/B") method, the Price/Earnings ("P/E") method, and Price/Assets
("P/A") method, all of which are described in its report. RP Financial placed
the greatest emphasis on the P/E and P/B methods in estimating pro forma market
value. In applying these procedures, RP Financial reviewed, among other factors,
the economic make-up of the Association's primary market area, the Association's
financial performance and condition in relation to publicly-traded institutions
that RP Financial deemed comparable to the Association, the specific terms of
the offering of the Holding Company's common stock, the pro forma impact of the
additional capital raised in the conversion, conditions of securities markets in
general, and the market for thrift institution common stock in particular. RP
Financial's analysis provides an approximation of the pro forma market value of
the Holding Company and the Association as converted based on the valuation
methods applied and the assumptions outlined in its report. Included in its
report were certain assumptions as to the pro forma earnings of the Holding
Company after the conversion that were utilized in determining the appraised
value. These assumptions included expenses as described under "PRO FORMA DATA,"
an assumed after-tax rate of return on the net conversion proceeds of 3.61%,
purchases by the ESOP of 8% of the common stock sold in the conversion and
purchases in the open market by the MRP of a number of shares equal to 4% of the
common stock sold in the conversion at the $15.00 purchase price. See "PRO FORMA
DATA" for additional information concerning these assumptions. The use of
different assumptions may yield different results.
On the basis of the foregoing, RP Financial has advised the Holding
Company and the Association that, in its opinion, as of November 28, 1997, the
aggregate estimated pro forma market value of the Holding Company and the
Association as converted and, therefore, the common stock was within the
valuation range of $44,625,000 to $60,375,000 with a midpoint of $52,500,000.
After reviewing the methodology and the assumptions used by RP Financial in the
preparation of the appraisal, the Board of Directors established the Estimated
Valuation Range which is equal to the valuation range of $44,625,000 to
$60,375,000 with a midpoint of $52,500,000. Assuming that the shares are sold at
$15.00 per share in the conversion, the estimated number of shares would be
between 2,975,000 and 4,025,000 with a midpoint of 3,500,000. The purchase price
of $15.00 was determined by discussion among the Boards of Directors of the
Association and the Holding Company and Trident Securities, taking into account,
among other factors (i) the requirement under OTS regulations that the common
stock be offered in a manner that will achieve the widest distribution of the
stock, (ii) desired liquidity in the common stock subsequent to the conversion,
and (iii) the expense of issuing shares for purposes of Delaware franchise
taxes. Since the outcome of the offering relates in large measure to market
conditions at the time of sale, it is not possible to determine the exact number
of shares that will be issued by the Holding Company at this time. The Estimated
Valuation Range may be amended, with the approval of the OTS, if necessitated by
developments following the date of such appraisal in, among other things, market
conditions, the financial condition or operating results of the Association,
regulatory guidelines or national or local economic conditions.
RP Financial's appraisal report is filed as an exhibit to the
Registration Statement. See "ADDITIONAL INFORMATION."
If, upon completion of the Subscription Offering, at least the minimum
number of shares are subscribed for, RP Financial, after taking into account
factors similar to those involved in its prior appraisal, will determine its
estimate of the pro forma market value of the Holding Company and the
Association as converted, as of the close of the Subscription Offering.
No sale of the shares will take place unless prior thereto RP Financial
confirms to the OTS that, to the best of RP Financial's knowledge and judgment,
nothing of a material nature has occurred that would cause it to conclude that
the actual total purchase price on an aggregate basis was incompatible with its
estimate of the total pro forma market value of the Holding Company and the
Association as converted at the time of the sale. If, however, the facts
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do not justify such a statement, the offering or other sale may be canceled, a
new Estimated Valuation Range and price per share set and new Subscription,
Direct Community and Syndicated Community Offerings held. Under such
circumstances, subscribers would have the right to modify or rescind their
subscriptions and to have their subscription funds returned promptly with
interest and holds on funds authorized for withdrawal from deposit accounts
would be released or reduced.
Depending upon market and financial conditions, the number of shares
issued may be more or less than the range in number of shares discussed herein.
In the event the total amount of shares issued is less than 2,975,000 or more
than 4,628,750 (15% above the maximum of the Estimated Valuation Range), for
aggregate gross proceeds of less than $44,625,000 or more than $69,431,250,
subscription funds will be returned promptly with interest to each subscriber
unless he indicates otherwise. In the event a new valuation range is established
by RP Financial, such new range will be subject to approval by the OTS.
If purchasers cannot be found for an insignificant residue of
unsubscribed shares from the general public, other purchase arrangements will be
made by the Boards of Directors of the Association and the Holding Company, if
possible. Such other purchase arrangements will be subject to the approval of
the OTS and may provide for purchases for investment purposes by directors,
officers, their associates and other persons in excess of the limitations
provided in the Plan of Conversion and in excess of the proposed director
purchases set forth herein, although no such purchases are currently intended.
If such other purchase arrangements cannot be made, the Plan of Conversion will
terminate.
In formulating its appraisal, RP Financial relied upon the
truthfulness, accuracy and completeness of all documents the Association
furnished to it. RP Financial also considered financial and other information
from regulatory agencies, other financial institutions, and other public
sources, as appropriate. While RP Financial believes this information to be
reliable, RP Financial does not guarantee the accuracy or completeness of such
information and did not independently verify the financial statements and other
data provided by the Association and the Holding Company or independently value
the assets or liabilities of the Holding Company and the Association. The
appraisal by RP Financial is not intended to be, and must not be interpreted as,
a recommendation of any kind as to the advisability of voting to approve the
Plan of Conversion or of purchasing shares of common stock. Moreover, because
the appraisal is necessarily based on many factors which change from time to
time, there is no assurance that persons who purchase such shares in the
conversion will later be able to sell shares thereafter at prices at or above
the purchase price.
Limitations on Purchases of Shares
The Plan of Conversion provides for certain limitations to be placed
upon the purchase of common stock by eligible subscribers and others in the
conversion. Each subscriber must subscribe for a minimum of 25 shares. With the
exception of the ESOP, which is expected to subscribe for 8% of the shares of
common stock issued in the conversion, the Plan of Conversion provides for the
following purchase limitations: (i) No Eligible Account Holder, Supplemental
Eligible Account Holder or Other Member, including, in each case, all persons on
a joint account, may purchase shares of common stock with an aggregate purchase
price of more than $330,000, (ii) no person may purchase in the Direct Community
Offering, if any, or in the Syndicated Community Offering, if any, shares of
common stock with an aggregate purchase price of more than $330,000, and (iii)
no person, either alone or together with associates of or persons acting in
concert with such person, may purchase in the aggregate more than the overall
maximum purchase limitation of 1% of the total number of shares of common stock
issued in the conversion (exclusive of any shares issued pursuant to an increase
in the Estimated Valuation Range of up to 15%). For purposes of the Plan of
Conversion, the directors are not deemed to be acting in concert solely by
reason of their Board membership. Pro rata reductions within each subscription
rights category will be made in allocating shares to the extent that the maximum
purchase limitations are exceeded.
The Association's and the Holding Company's Boards of Directors may, in
their sole discretion, increase the maximum purchase limitation set forth above
up to 9.99% of the shares of common stock sold in the conversion,
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provided that orders for shares which exceed 5% of the shares of common stock
sold in the conversion may not exceed, in the aggregate, 10% of the shares sold
in the conversion. The Association and the Holding Company do not intend to
increase the maximum purchase limitation unless market conditions are such that
an increase in the maximum purchase limitation is necessary to sell a number of
shares in excess of the minimum of the Estimated Valuation Range. If the Boards
of Directors decide to increase the purchase limitation above, persons who
subscribed for the maximum number of shares of common stock will be, and other
large subscribers in the discretion of the Holding Company and the Association
may be, given the opportunity to increase their subscriptions accordingly,
subject to the rights and preferences of any person who has priority
subscription rights.
The term "acting in concert" is defined in the Plan of Conversion to
mean (i) knowing participation in a joint activity or interdependent conscious
parallel action towards a common goal whether or not pursuant to an express
agreement; or (ii) a combination or pooling of voting or other interests in the
securities of an issuer for a common purpose pursuant to any contract,
understanding, relationship, agreement or other arrangement, whether written or
otherwise. In general, a person who acts in concert with another party shall
also be deemed to be acting in concert with any person who is also acting in
concert with that other party.
The term "associate" of a person is defined in the Plan of Conversion
to mean (i) any corporation or organization (other than the Association or a
majority-owned subsidiary of the Association) of which such person is an officer
or partner or is, directly or indirectly, the beneficial owner of 10% or more of
any class of equity securities; (ii) any trust or other estate in which such
person has a substantial beneficial interest or as to which such person serves
as trustee or in a similar fiduciary capacity (excluding tax-qualified employee
plans); and (iii) any relative or spouse of such person, or any relative of such
spouse, who either has the same home as such person or who is a director or
officer of the Association or any of its parents or subsidiaries. For example, a
corporation of which a person serves as an officer would be an associate of such
person and, therefore, all shares purchased by such corporation would be
included with the number of shares which such person could purchase individually
under the above limitations.
The term "officer" is defined in the Plan of Conversion to mean an
executive officer of the Association, including its Chairman of the Board,
President, Executive Vice Presidents, Senior Vice Presidents, Vice Presidents in
charge of principal business functions, Secretary and Treasurer.
Common stock purchased pursuant to the conversion will be freely
transferable, except for shares purchased by directors and officers of the
Association and the Holding Company and by NASD members. See "-- Restrictions on
Transferability by Directors and Officers and NASD Members."
Restrictions on Repurchase of Stock
Pursuant to OTS regulations, OTS-regulated savings associations (and
their holding companies) may not for a period of three years from the date of an
institution's mutual-to-stock conversion repurchase any of its common stock from
any person, except in the event of (i) an offer made to all of its stockholders
to repurchase the common stock on a pro rata basis, approved by the OTS; or (ii)
the repurchase of qualifying shares of a director. Furthermore, repurchases of
any common stock are prohibited if the effect thereof would cause the
association's regulatory capital to be reduced below (a) the amount required for
the liquidation account or (b) the regulatory capital requirements imposed by
the OTS. Repurchases are generally prohibited during the first year following
conversion. Upon ten days' written notice to the OTS, and if the OTS does not
object, an institution may make open market repurchases of its outstanding
common stock during years two and three following the conversion, provided that
certain regulatory conditions are met and that the repurchase would not
adversely affect the financial condition of the institution. Any repurchases of
common stock by the Holding Company would be subject to these regulatory
restrictions unless the OTS would provide otherwise.
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Restrictions on Transferability by Directors and Officers and NASD Members
Shares of common stock purchased in the offering by directors and
officers of the Holding Company may not be sold for a period of one year
following consummation of the conversion, except in the event of the death of
the stockholder or in any exchange of the common stock in connection with a
merger or acquisition of the Holding Company. Shares of common stock received by
directors or officers through the ESOP or the MRP or upon exercise of options
issued pursuant to the Stock Option Plan or purchased subsequent to the
conversion are not subject to this restriction. Accordingly, shares of common
stock issued by the Holding Company to directors and officers shall bear a
legend giving appropriate notice of the restriction and, in addition, the
Holding Company will give appropriate instructions to the transfer agent for the
Holding Company's common stock with respect to the restriction on transfers. Any
shares issued to directors and officers as a stock dividend, stock split or
otherwise with respect to restricted common stock shall be subject to the same
restrictions.
Purchases of outstanding shares of common stock of the Holding Company
by directors, executive officers (or any person who was an executive officer or
director of the Association after adoption of the Plan of Conversion) and their
associates during the three-year period following the conversion may be made
only through a broker or dealer registered with the SEC, except with the prior
written approval of the OTS. This restriction does not apply, however, to
negotiated transactions involving more than 1% of the Holding Company's
outstanding common stock or to the purchase of stock pursuant to the Stock
Option Plan.
The Holding Company has filed with the SEC a registration statement
under the Securities Act for the registration of the common stock to be issued
pursuant to the conversion. The registration under the Securities Act of shares
of the common stock to be issued in the conversion does not cover the resale of
such shares. Shares of common stock purchased by persons who are not affiliates
of the Holding Company may be resold without registration. Shares purchased by
an affiliate of the Holding Company will be subject to the resale restrictions
of Rule 144 under the Securities Act. If the Holding Company meets the current
public information requirements of Rule 144 under the Securities Act, each
affiliate of the Holding Company who complies with the other conditions of Rule
144 (including those that require the affiliate's sale to be aggregated with
those of certain other persons) would be able to sell in the public market,
without registration, a number of shares not to exceed, in any three-month
period, the greater of (i) 1% of the outstanding shares of the Holding Company
or (ii) the average weekly volume of trading in such shares during the preceding
four calendar weeks. Provision may be made in the future by the Holding Company
to permit affiliates to have their shares registered for sale under the
Securities Act under certain circumstances.
Under guidelines of the NASD, members of the NASD and their associates
are subject to certain restrictions on the transfer of securities purchased in
accordance with subscription rights and to certain reporting requirements upon
purchase of such securities.
RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY
The following discussion is a summary of certain provisions of federal
law and regulations and Delaware corporate law, as well as the Certificate of
Incorporation and Bylaws of the Holding Company, relating to stock ownership and
transfers, the Board of Directors and business combinations, all of which may be
deemed to have "anti-takeover" effects. The description of these provisions is
necessarily general and reference should be made to the actual law and
regulations and to the Certificate of Incorporation and Bylaws of the Holding
Company contained in the Registration Statement filed with the SEC. See
"ADDITIONAL INFORMATION" as to how to obtain a copy of these documents.
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Conversion Regulations
OTS regulations prohibit any person from making an offer, announcing an
intent to make an offer or participating in any other arrangement to purchase
stock or acquiring stock or subscription rights in a converting institution (or
its holding company) from another person prior to completion of its conversion.
Further, without the prior written approval of the OTS, no person may make such
an offer or announcement of an offer to purchase shares or actually acquire
shares in the converting institution (or its holding company) for a period of
three years from the date of the completion of the conversion if, upon the
completion of such offer, announcement or acquisition, that person would become
the beneficial owner of more than 10% of the outstanding stock of the
institution (or its holding company). The OTS has defined "person" to include
any individual, group acting in concert, corporation, partnership, association,
joint stock company, trust, unincorporated organization or similar company, a
syndicate or any other group formed for the purpose of acquiring, holding or
disposing of securities of an insured institution. However, offers made
exclusively to an association (or its holding company) or an underwriter or
member of a selling group acting on the converting institution's (or its holding
company's) behalf for resale to the general public are excepted. The regulation
also provides civil penalties for willful violation or assistance in any such
violation of the regulation by any person connected with the management of the
converting institution (or its holding company) or who controls more than 10% of
the outstanding shares or voting rights of a converting or converted institution
(or its holding company).
Change of Control Regulations
Under the Change in Bank Control Act, no person may acquire control of
an insured federal savings and loan association or its parent holding company
unless the OTS has been given 60 days' prior written notice and has not issued a
notice disapproving the proposed acquisition. In addition, OTS regulations
provide that no company may acquire control of a savings association without the
prior approval of the OTS. Any company that acquires such control becomes a
"savings and loan holding company" subject to registration, examination and
regulation by the OTS.
Control, as defined under federal law, means ownership, control of or
holding irrevocable proxies representing more than 25% of any class of voting
stock, control in any manner of the election of a majority of the savings
association's directors, or a determination by the OTS that the acquiror has the
power to direct, or directly or indirectly to exercise a controlling influence
over, the management or policies of the institution. Acquisition of more than
10% of any class of a savings association's voting stock, if the acquiror also
is subject to any one of eight "control factors," constitutes a rebuttable
determination of control under the regulations. Such control factors include the
acquiror being one of the two largest stockholders. The determination of control
may be rebutted by submission to the OTS, prior to the acquisition of stock or
the occurrence of any other circumstances giving rise to such determination, of
a statement setting forth facts and circumstances which would support a finding
that no control relationship will exist and containing certain undertakings. The
regulations provide that persons or companies which acquire beneficial ownership
exceeding 10% or more of any class of a savings association's stock must file
with the OTS a certification form that the holder is not in control of such
institution, is not subject to a rebuttable determination of control and will
take no action which would result in a determination or rebuttable determination
of control without prior notice to or approval of the OTS, as applicable. There
are also rebuttable presumptions in the regulations concerning whether a group
"acting in concert" exists, including presumed action in concert among members
of an "immediate family."
The OTS may prohibit an acquisition of control if it finds, among other
things, that (i) the acquisition would result in a monopoly or substantially
lessen competition, (ii) the financial condition of the acquiring person might
jeopardize the financial stability of the institution, or (iii) the competence,
experience or integrity of the acquiring person indicates that it would not be
in the interest of the depositors or the public to permit the acquisition of
control by such person.
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Anti-takeover Provisions in the Holding Company's Certificate of Incorporation
and Bylaws and in Delaware Law
A number of provisions of the Holding Company's Certificate of
Incorporation and Bylaws deal with matters of corporate governance and certain
rights of stockholders. The following discussion is a general summary of certain
provisions of the Holding Company's Certificate of Incorporation and Bylaws and
regulatory provisions relating to stock ownership and transfers, the Board of
Directors and business combinations, which might be deemed to have a potential
"anti-takeover" effect. These provisions may have the effect of discouraging a
future takeover attempt which is not approved by the Board of Directors but
which individual Holding Company stockholders may deem to be in their best
interests or in which stockholders may receive a substantial premium for their
shares over then current market prices. As a result, stockholders who might
desire to participate in such a transaction may not have an opportunity to do
so. Such provisions will also render the removal of the incumbent Board of
Directors or management of the Holding Company more difficult. The following
description of certain of the provisions of the Certificate of Incorporation and
Bylaws of the Holding Company is necessarily general and reference should be
made in each case to such Certificate of Incorporation and Bylaws, which are
incorporated herein by reference. See "ADDITIONAL INFORMATION" as to where to
obtain a copy of these documents.
Limitation on Voting Rights. The Certificate of Incorporation of the
Holding Company provides that in no event shall any record owner of any
outstanding common stock which is beneficially owned, directly or indirectly, by
a person who beneficially owns in excess of 10% of the then outstanding shares
of common stock (the "Limit") be entitled or permitted to any vote in respect of
the shares held in excess of the Limit, unless permitted by a resolution adopted
by a majority of the board of directors. Beneficial ownership is determined
pursuant to Rule 13d- 3 of the General Rules and Regulations of the Exchange Act
and includes shares beneficially owned by such person or any of his or her
affiliates (as defined in the Certificate of Incorporation), shares which such
person or his or her affiliates have the right to acquire upon the exercise of
conversion rights or options and shares as to which such person and his or her
affiliates have or share investment or voting power, but shall not include
shares beneficially owned by the ESOP or directors, officers and employees of
the Association or Holding Company or shares that are subject to a revocable
proxy and that are not otherwise beneficially, or deemed by the Holding Company
to be beneficially, owned by such person and his or her affiliates.
Board of Directors. The Board of Directors of the Holding Company is
divided into three classes, each of which shall contain approximately one-third
of the whole number of the members of the Board. The members of each class shall
be elected for a term of three years, with the terms of office of all members of
one class expiring each year so that approximately one-third of the total number
of directors are elected each year. The Holding Company's Certificate of
Incorporation provides that the size of the Board shall be as set forth in the
Bylaws. The Bylaws currently set the number of directors at five. The
Certificate of Incorporation provides that any vacancy occurring in the Board,
including a vacancy created by an increase in the number of directors, shall be
filled by a vote of two-thirds of the directors then in office and any director
so chosen shall hold office for a term expiring at the annual meeting of
stockholders at which the term of the class to which the director has been
chosen expires. The classified Board is intended to provide for continuity of
the Board of Directors and to make it more difficult and time consuming for a
stockholder group to fully use its voting power to gain control of the Board of
Directors without the consent of the incumbent Board of Directors of the Holding
Company. The Certificate of Incorporation of the Holding Company provides that a
director may be removed from the Board of Directors prior to the expiration of
his or her term only for cause and only upon the vote of 80% of the outstanding
shares of voting stock. In the absence of this provision, the vote of the
holders of a majority of the shares could remove the entire Board, but only with
cause, and replace it with persons of such holders' choice.
Cumulative Voting, Special Meetings and Action by Written Consent. The
Certificate of Incorporation does not provide for cumulative voting for any
purpose. Moreover, the Certificate of Incorporation provides that special
meetings of stockholders of the Holding Company may be called only by the Board
of Directors of the Holding Company and that stockholders may take action only
at a meeting and not by written consent.
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Authorized Shares. The Certificate of Incorporation authorizes the
issuance of 10,000,000 shares of common stock and 500,000 shares of preferred
stock. The shares of common stock and preferred stock were authorized in an
amount greater than that to be issued in the conversion to provide the Holding
Company's Board of Directors with as much flexibility as possible to effect,
among other transactions, financings, acquisitions, stock dividends, stock
splits, restricted stock grants and the exercise of stock options. However,
these additional authorized shares may also be used by the Board of Directors,
consistent with fiduciary duties, to deter future attempts to gain control of
the Holding Company. The Board of Directors also has sole authority to determine
the terms of any one or more series of preferred stock, including voting rights,
conversion rates, and liquidation preferences. As a result of the ability to fix
voting rights for a series of preferred stock, the Board has the power, to the
extent consistent with its fiduciary duty, to issue a series of preferred stock
to persons friendly to management in order to attempt to block a tender offer,
merger or other transaction by which a third party seeks control of the Holding
Company, and thereby assist members of management to retain their positions. The
Holding Company's Board currently has no plans for the issuance of additional
shares, other than the issuance of shares of common stock upon exercise of stock
options and in connection with the MRP.
Stockholder Vote Required to Approve Business Combinations with
Principal Stockholders. The Certificate of Incorporation requires the approval
of the holders of at least 80% of the Holding Company's outstanding shares of
voting stock to approve certain "Business Combinations" (as defined therein)
involving a "Related Person" (as defined therein) except in cases where the
proposed transaction has been approved in advance by a majority of those members
of the Holding Company's Board of Directors who are unaffiliated with the
Related Person and were directors prior to the time when the Related Person
became a Related Person. The term "Related Person" is defined to include any
individual, corporation, partnership or other entity (other than the Holding
Company or its subsidiary) which owns beneficially or controls, directly or
indirectly, 10% or more of the outstanding shares of voting stock of the Holding
Company or an affiliate of such person or entity. This provision of the
Certificate of Incorporation applies to any "Business Combination," which is
defined to include: (i) any merger or consolidation of the Holding Company with
or into any Related Person; (ii) any sale, lease, exchange, mortgage, transfer,
or other disposition of 25% or more of the assets of the Holding Company or
combined assets of the Holding Company and its subsidiaries to a Related Person;
(iii) any merger or consolidation of a Related Person with or into the Holding
Company or a subsidiary of the Holding Company; (iv) any sale, lease, exchange,
transfer, or other disposition of 25% or more of the assets of a Related Person
to the Holding Company or a subsidiary of the Holding Company; (v) the issuance
of any securities of the Holding Company or a subsidiary of the Holding Company
to a Related Person; (vi) the acquisition by the Holding Company or a subsidiary
of the Holding Company of any securities of a Related Person; (vii) any
reclassification of common stock of the Holding Company or any recapitalization
involving the common stock of the Holding Company; or (viii) any agreement or
other arrangement providing for any of the foregoing.
Under Delaware law, absent this provision, business combinations,
including mergers, consolidations and sales of substantially all of the assets
of a corporation must, subject to certain exceptions, be approved by the vote of
the holders of a majority of the outstanding shares of common stock of the
Holding Company and any other affected class of stock. One exception under
Delaware law to the majority approval requirement applies to stockholders owning
15% or more of the common stock of a corporation for a period of less than three
years. Such 15% stockholder, in order to obtain approval of a business
combination, must obtain the approval of two-thirds of the outstanding stock,
excluding the stock owned by such 15% stockholder, or satisfy other requirements
under Delaware law relating to board of director approval of his or her
acquisition of the shares of the Holding Company. The increased stockholder vote
required to approve a business combination may have the effect of foreclosing
mergers and other business combinations which a majority of stockholders deem
desirable and placing the power to prevent such a merger or combination in the
hands of a minority of stockholders.
Amendment of Certificate of Incorporation and Bylaws. Amendments to the
Holding Company's Certificate of Incorporation must be approved by a majority
vote of its Board of Directors and also by a majority of the outstanding shares
of its voting stock, provided, however, that an affirmative vote of at least 80%
of the outstanding voting stock entitled to vote (after giving effect to the
provision limiting voting rights) is required to
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<PAGE>
amend or repeal certain provisions of the Certificate of Incorporation,
including the provision limiting voting rights, the provisions relating to
approval of certain business combinations, calling special meetings, the number
and classification of directors, director and officer indemnification by the
Holding Company and amendment of the Holding Company's Bylaws and Certificate of
Incorporation. The Holding Company's Bylaws may be amended by its Board of
Directors, or by a vote of 80% of the total votes eligible to be voted at a duly
constituted meeting of stockholders.
Stockholder Nominations and Proposals. The Certificate of Incorporation
of the Holding Company requires a stockholder who intends to nominate a
candidate for election to the Board of Directors, or to raise new business at a
stockholder meeting to give not less than 30 nor more than 60 days' advance
notice to the Secretary of the Holding Company. The notice provision requires a
stockholder who desires to raise new business to provide certain information to
the Holding Company concerning the nature of the new business, the stockholder
and the stockholder's interest in the business matter. Similarly, a stockholder
wishing to nominate any person for election as a director must provide the
Holding Company with certain information concerning the nominee and the
proposing stockholder.
Purpose and Takeover Defensive Effects of the Holding Company's
Certificate of Incorporation and Bylaws. The Board of Directors of the
Association believes that the provisions described above are prudent and will
reduce the Holding Company's vulnerability to takeover attempts and certain
other transactions that have not been negotiated with and approved by its Board
of Directors. These provisions will also assist the Association in the orderly
deployment of the conversion proceeds into productive assets during the initial
period after the conversion. The Board of Directors believes these provisions
are in the best interest of the Association and Holding Company and its
stockholders. In the judgment of the Board of Directors, the Holding Company's
Board will be in the best position to determine the true value of the Holding
Company and to negotiate more effectively for what may be in the best interests
of its stockholders. Accordingly, the Board of Directors believes that it is in
the best interest of the Holding Company and its stockholders to encourage
potential acquirors to negotiate directly with the Board of Directors of the
Holding Company and that these provisions will encourage such negotiations and
discourage hostile takeover attempts. It is also the view of the Board of
Directors that these provisions should not discourage persons from proposing a
merger or other transaction at a price reflective of the true value of the
Holding Company and that is in the best interest of all stockholders.
Attempts to acquire control of financial institutions and their holding
companies have recently become increasingly common. Takeover attempts that have
not been negotiated with and approved by the Board of Directors present to
stockholders the risk of a takeover on terms that may be less favorable than
might otherwise be available. A transaction that is negotiated and approved by
the Board of Directors, on the other hand, can be carefully planned and
undertaken at an opportune time in order to obtain maximum value of the Holding
Company for its stockholders, with due consideration given to matters such as
the management and business of the acquiring corporation and maximum strategic
development of the Holding Company's assets.
An unsolicited takeover proposal can seriously disrupt the business and
management of a corporation and cause it great expense. Although a tender offer
or other takeover attempt may be made at a price substantially above the current
market prices, such offers are sometimes made for less than all of the
outstanding shares of a target company. As a result, stockholders may be
presented with the alternative of partially liquidating their investment at a
time that may be disadvantageous, or retaining their investment in an enterprise
that is under different management and whose objectives may not be similar to
those of the remaining stockholders. The concentration of control, which could
result from a tender offer or other takeover attempt, could also deprive the
Holding Company's remaining stockholders of benefits of certain protective
provisions of the Exchange Act, if the number of beneficial owners became less
than 300, thereby allowing for deregistration under the Exchange Act.
Despite the belief of the Association and the Holding Company as to the
benefits to stockholders of these provisions of the Holding Company's
Certificate of Incorporation and Bylaws, these provisions may also have the
effect of discouraging a future takeover attempt that would not be approved by
the Holding Company's Board, but
94
<PAGE>
pursuant to which stockholders may receive a substantial premium for their
shares over then current market prices. As a result, stockholders who might
desire to participate in such a transaction may not have any opportunity to do
so. Such provisions will also render the removal of the Holding Company's Board
of Directors and of management more difficult. The Board of Directors of the
Association and the Holding Company, however, have concluded that the potential
benefits outweigh the possible disadvantages.
Following the conversion, pursuant to applicable law and, if required,
following the approval by stockholders, the Holding Company may adopt additional
anti-takeover charter provisions or other devices regarding the acquisition of
its equity securities that would be permitted for a Delaware business
corporation.
The cumulative effect of the restriction on acquisition of the Holding
Company contained in the Certificate of Incorporation and Bylaws of the Holding
Company and in Federal and Delaware law may be to discourage potential takeover
attempts and perpetuate incumbent management, even though certain stockholders
of the Holding Company may deem a potential acquisition to be in their best
interests, or deem existing management not to be acting in their best interests.
DESCRIPTION OF CAPITAL STOCK OF THE HOLDING COMPANY
General
The Holding Company is authorized to issue 10,000,000 shares of common
stock having a par value of $.01 per share and 500,000 shares of preferred stock
having a par value of $.01 per share. The Holding Company currently expects to
issue up to 4,025,000 shares of common stock and no shares of preferred stock in
the conversion. Each share of the Holding Company's common stock will have the
same relative rights as, and will be identical in all respects with, each other
share of common stock. Upon payment of the purchase price for the common stock,
in accordance with the Plan of Conversion, all such stock will be duly
authorized, fully paid and nonassessable.
The common stock of the Holding Company will represent nonwithdrawable
capital, will not be an account of any type, and will not be insured by the FDIC
or any other government agency.
Common Stock
Dividends. The Holding Company can pay dividends out of statutory
surplus or from certain net profits if, as and when declared by its Board of
Directors. The payment of dividends by the Holding Company is subject to
limitations which are imposed by law and applicable regulation. See "DIVIDEND
POLICY" and "REGULATION." The holders of common stock of the Holding Company
will be entitled to receive and share equally in such dividends as may be
declared by the Board of Directors of the Holding Company out of funds legally
available therefor. If the Holding Company issues preferred stock, the holders
thereof may have a priority over the holders of the common stock with respect to
dividends.
Voting Rights. Upon conversion, the holders of common stock of the
Holding Company will possess exclusive voting rights in the Holding Company.
They will elect the Holding Company's Board of Directors and act on such other
matters as are required to be presented to them under Delaware law or as are
otherwise presented to them by the Board of Directors. Except as discussed in
"RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY," each holder of common
stock will be entitled to one vote per share and will not have any right to
cumulate votes in the election of directors. If the Holding Company issues
preferred stock, holders of the Holding Company preferred stock may also possess
voting rights. Certain matters require a vote of 80% of the outstanding shares
entitled to vote thereon. See "RESTRICTIONS ON ACQUISITION OF THE HOLDING
COMPANY."
95
<PAGE>
As a federal mutual savings and loan association, corporate powers and
control of the Association are vested in its Board of Directors, who elect the
officers of the Association and who fill any vacancies on the Board of Directors
as it exists upon conversion. Subsequent to Conversion, voting rights will be
vested exclusively in the owners of the shares of capital stock of the
Association, all of which will be owned by the Holding Company, and voted at the
direction of the Holding Company's Board of Directors. Consequently, the holders
of the common stock will not have direct control of the Association.
Liquidation. In the event of any liquidation, dissolution or winding up
of the Association, the Holding Company, as holder of the Association's capital
stock would be entitled to receive, after payment or provision for payment of
all debts and liabilities of the Association (including all deposit accounts and
accrued interest thereon) and after distribution of the balance in the special
liquidation account to Eligible Account Holders and Supplemental Eligible
Account Holders (see "THE CONVERSION"), all assets of the Association available
for distribution. In the event of liquidation, dissolution or winding up of the
Holding Company, the holders of its common stock would be entitled to receive,
after payment or provision for payment of all its debts and liabilities, all of
the assets of the Holding Company available for distribution. If Holding Company
preferred stock is issued, the holders thereof may have a priority over the
holders of the common stock in the event of liquidation or dissolution.
Preemptive Rights. Holders of the common stock of the Holding Company
will not be entitled to preemptive rights with respect to any shares that may be
issued. The common stock is not subject to redemption.
Preferred Stock
None of the shares of the authorized Holding Company preferred stock
will be issued in the conversion and there are no plans to issue the preferred
stock. Such stock may be issued with such designations, powers, preferences and
rights as the Board of Directors may from time to time determine. The Board of
Directors can, without stockholder approval, issue preferred stock with voting,
dividend, liquidation and conversion rights that could dilute the voting
strength of the holders of the common stock and may assist management in
impeding an unfriendly takeover or attempted change in control.
Restrictions on Acquisition
Acquisitions of the Holding Company are restricted by provisions in its
Certificate of Incorporation and Bylaws and by the rules and regulations of
various regulatory agencies. See "REGULATION" and "RESTRICTIONS ON ACQUISITION
OF THE HOLDING COMPANY."
REGISTRATION REQUIREMENTS
The Holding Company will register the common stock with the SEC
pursuant to Section 12(g) of the Exchange Act upon the completion of the
conversion and will not deregister its common stock for a period of at least
three years following the completion of the conversion. Upon such registration,
the proxy and tender offer rules, insider trading reporting and restrictions,
annual and periodic reporting and other requirements of the Exchange Act will be
applicable.
LEGAL AND TAX OPINIONS
The legality of the common stock has been passed upon for the Holding
Company by Breyer & Aguggia, Washington, D.C. The federal tax consequences of
the offering have been opined upon by Breyer & Aguggia and the South Carolina
tax consequences of the offering have been opined upon by Deloitte & Touche LLP.
Breyer & Aguggia and Deloitte & Touche LLP have consented to the references
herein to their opinions. Certain legal matters will be passed upon for Trident
Securities by Luse Lehman Gorman Pomerenk & Schick, Washington, D.C.
96
<PAGE>
EXPERTS
The financial statements of the Association as of September 30, 1997
and 1996 and for the years ended September 30, 1997, 1996 and 1995 included in
this prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein, and have been so included
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
RP Financial has consented to the publication herein of the summary of
its report to the Association setting forth its opinion as to the estimated pro
forma market value of the Holding Company and the Association as converted and
its letter with respect to subscription rights and to the use of its name and
statements with respect to it appearing herein.
ADDITIONAL INFORMATION
The Holding Company has filed with the SEC a Registration Statement on
Form S-1 (File No. 333-41857) under the Securities Act with respect to the
common stock offered in the conversion. This prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the SEC. Such
information may be inspected at the public reference facilities maintained by
the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at its
regional offices at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661; and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies
may be obtained at prescribed rates from the Public Reference Section of the SEC
at 450 Fifth Street, N.W., Washington, D.C. 20549. The Registration Statement
also is available through the SEC's World Wide Web site on the Internet
(http://www.sec.gov).
The Association has filed with the OTS an Application for Approval of
Conversion, which includes proxy materials for the Association's Special Meeting
and certain other information. This prospectus omits certain information
contained in such Application. The Application, including the proxy materials,
exhibits and certain other information that are a part thereof, may be
inspected, without charge, at the offices of the OTS, 1700 G Street, N.W.,
Washington, D.C. 20552 and at the office of the Regional Director of the OTS at
the Southeast Regional Office of the OTS, 1475 Peachtree Street, N.E., Atlanta,
Georgia 30309.
97
<PAGE>
Index To Financial Statements
Heritage Federal Savings & Loan Association
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report.......................................... F-1
Balance Sheets as of September 30, 1997 and 1996...................... F-2
Statements of Income for the
Years Ended September 30, 1997, 1996 and 1995........................ 27
Statements of Equity for the
Years Ended September 30, 1997, 1996, and 1995....................... F-3
Statements of Cash Flows for the
Years Ended September 30, 1997, 1996 and 1995........................ F-4
Notes to Financial Statements......................................... F-6
</TABLE>
* * *
All schedules are omitted as the required information either is not
applicable or is included in the Consolidated Financial Statements or related
Notes.
Separate financial statements for the Holding Company have not been
included herein because the Holding Company, which has engaged in only
organizational activities to date, has no significant assets, liabilities
(contingent or otherwise), revenues or expenses.
98
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Heritage Federal Savings and Loan Association:
We have audited the accompanying balance sheets of Heritage Federal Savings and
Loan Association (the "Association") as of September 30, 1997 and 1996, and the
related statements of income, equity and cash flows for each of the three years
in the period ended September 30, 1997, 1996, and 1995. 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, such financial statements present fairly, in all material
respects, the financial position of the Association at September 30, 1997 and
1996, and the results of its operations and its cash flows for each of the three
years in the period ended September 30, 1997 in conformity with generally
accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
Greenville, South Carolina
November 7, 1997
F-1
<PAGE>
HERITAGE FEDERAL SAVINGS AND LOAN ASSOCIATION
BALANCE SHEETS
SEPTEMBER 30, 1997 AND 1996
(In Thousands of Dollars)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1997 1996
<S> <C> <C>
Cash $ 2,012 $ 1,557
Federal funds sold and overnight interest-bearing deposits 12,647 4,318
---------- ----------
Total cash and cash equivalents 14,659 5,875
Investment securities (Note 2):
Held-to-maturity - at amortized cost (fair value: 1997 - $15,954; 1996 -
$20,778) 15,988 20,993
Available-for-sale - at fair value (amortized cost: 1997 - $6,063; 1996 -
$15,434) 8,390 16,899
Mortgage-backed securities - held to maturity - at amortized cost
(fair value: 1997 - $6,635; 1996 - $9,584) (Note 3) 6,665 9,726
Loans receivable - net (Notes 4 and 8) 192,663 182,950
Loans held-for-sale - at lower of cost or market (market value:
1997 - $1,065) 1,045 -
Office properties and equipment - net (Note 5) 4,278 4,530
Federal Home Loan Bank Stock - at cost (Note 8) 2,042 2,042
Accrued interest receivable 1,242 1,334
Real estate acquired in settlement of loans - net (Note 6) 410 86
Other assets 117 224
---------- ----------
TOTAL $ 247,499 $ 244,659
========== ==========
LIABILITIES AND EQUITY
LIABILITIES:
Deposit accounts (Note 7) $ 215,412 $ 209,730
Advance from Federal Home Loan Bank of Atlanta (Note 8) - 5,000
Accrued interest on deposit accounts 338 358
Other liabilities (Note 9) 2,514 2,831
---------- ----------
Total liabilities 218,264 217,919
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 10)
EQUITY:
Retained income - substantially restricted (Notes 9 and 12) 27,769 25,817
Unrealized gain on available-for-sale securities (net of deferred income
taxes of $861 in 1997 and $542 in 1996) 1,466 923
---------- ----------
Total equity 29,235 26,740
---------- ----------
TOTAL $ 247,499 $ 244,659
========== ==========
</TABLE>
See notes to financial statements.
F-2
<PAGE>
HERITAGE FEDERAL SAVINGS AND LOAN ASSOCIATION
STATEMENTS OF EQUITY
YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
(In Thousands of Dollars)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Unrealized
Gain on
Available-for-Sale Retained
Securities (1) Income Total
<S> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1994 $ 288 $23,079 $23,367
Net income for the year ended September 30, 1995 - 1,979 1,979
Change in net unrealized gain on available-for-sale
securities for the year ended September 30, 1995 346 - 346
------- ------- -------
BALANCE, SEPTEMBER 30, 1995 634 25,058 25,692
Net income for the year ended September 30, 1996 - 759 759
Change in net unrealized gain on available-for-sale
securities for the year ended September 30, 1996 289 - 289
------- ------- -------
BALANCE, SEPTEMBER 30, 1996 923 25,817 26,740
Net income for the year ended September 30, 1997 - 1,952 1,952
Change in net unrealized gain on available-for-sale
securities for the year ended September 30, 1997 543 - 543
------- ------- -------
BALANCE, SEPTEMBER 30, 1997 $ 1,466 $27,769 $29,235
======= ======= =======
</TABLE>
(1) Net of deferred income taxes.
See notes to financial statements.
F-3
<PAGE>
HERITAGE FEDERAL SAVINGS AND LOAN ASSOCIATION
STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
(In Thousands of Dollars
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended September 30,
----------------------------------------
1997 1996 1995
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,952 $ 759 $ 1,979
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for deferred income taxes (benefit) 528 (110) 204
Loss (gain) on sale of available-for-sale securities 13 (2) -
Amortization of premium on investment and mortgage-backed
securities 30 59 66
Gain on sale of loans held-for-sale (6) (16) -
Amortization of net deferred income (151) (162) (100)
Provision for loan losses (recovery of allowance) 337 (7) 47
Proceeds from the sale of loans held-for-sale 485 970 -
Purchase of loans held-for-sale (1,051) - -
Depreciation on office properties and equipment 280 242 52
Loss on sale of property - 37 -
Provision for losses (recovery of allowance) on real estate acquired
in settlement of loans 9 (1) 61
Loss (gain) on sales of real estate acquired in settlement of loans (185) (122) 3
(Increase) decrease in accrued interest receivable and other assets 199 (194) (421)
Increase (decrease) in accrued interest payable and other liabilities (1,184) 1,515 865
------- ------- -------
Net cash provided by operating activities 1,256 2,968 2,756
------- ------- -------
INVESTING ACTIVITIES:
Proceeds from maturities and calls of available-for-sale investment
securities 8,100 6,500 3,500
Proceeds from maturities and calls of held-to-maturity investment
securities 8,500 7,100 -
Proceeds from the sale of available-for-sale investment securities 1,737 1,002 -
Purchases of available-for-sale investment securities (500) (2,504) -
Purchases of held-to-maturity investment securities (3,492) (19,750) -
Purchases of mortgage-backed securities - (499) -
Principal repayments on mortgage-backed securities 3,049 2,747 2,087
Purchase of loans receivable (2,465) - -
Net loan originations and principal payments on loans (8,903) (5,568) (18,711)
Proceeds from sales of real estate acquired in settlement of loans 986 232 405
Capitalized costs of real estate acquired in settlement of loans (138) - -
Acquisition of office properties and equipment (28) (663) (3,227)
------- ------- -------
Net cash provided by (used in) investing activities 6,846 (11,403) (15,946)
------- ------- -------
</TABLE>
F-4
<PAGE>
HERITAGE FEDERAL SAVINGS AND LOAN ASSOCIATION
STATEMENTS OF CASH FLOWS
YEAR ENDED SEPTEMBER 30, 1997, 1996 AND 1995
(In Thousands of Dollars)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended September 30,
-------------------------------------
1997 1996 1995
<S> <C> <C> <C>
FINANCING ACTIVITIES:
Net increase in deposits $ 5,682 $ 8,257 $ 11,551
Proceeds from Federal Home Loan Bank borrowings - - 18,250
Principal repayments on Federal Home Loan Bank borrowings (5,000) - (13,250)
-------- -------- ---------
Net cash provided by financing activities 682 8,257 16,551
-------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 8,784 (178) 3,361
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 5,875 6,053 2,692
-------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 14,659 $ 5,875 $ 6,053
======== ======== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 12,250 $ 12,211 $ 10,310
======== ======== =========
Income taxes $ 553 $ 650 $ 1,246
======== ======== =========
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:
Transfers from loans to real estate acquired in settlement of loans $ 996 $ 92 $ 185
======== ======== =========
Increase in net unrealized gain on available-for-sale investment
securities $ 543 $ 289 $ 346
======== ======== =========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
HERITAGE FEDERAL SAVINGS AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations and Customer Concentration - Heritage Federal Savings
and Loan Association (the "Association") is a federally chartered mutual
savings and loan association engaged in the business of accepting savings and
demand deposits and providing mortgage and commercial loans to its members
and others. The Association's business is primarily conducted in Laurens
County and adjacent counties of South Carolina.
Conversion to Capital Stock Form of Ownership - On September 10, 1997, the
Board of Directors of the Association adopted a Plan of Conversion to convert
from a federally chartered mutual savings and loan association to a federally
chartered capital stock savings and loan association with the concurrent
formation of a holding company, subject to approval by regulatory authorities
and depositors of the Association. The conversion is expected to be
accomplished through the adoption of a federal stock charter for the
Association, the sale of all of the Association's stock to the holding
company and the sale of the holding company's common stock to the public. A
subscription offering of the shares of common stock will be offered initially
to eligible account holders, employee benefit plans of the Association,
supplemental eligible account holders, other members and directors, officers
and employees of the Association. Any shares of common stock not sold in the
subscription offering are expected to be offered for sale to the general
public.
At the time of the conversion, the Association will establish a liquidation
account in an amount equal to its retained income as of the date of the
latest balance sheet appearing in the final prospectus. The liquidation
account will be maintained for the benefit of eligible account holders and
supplemental eligible account holders who continue to maintain their accounts
at the Association after the conversion. The liquidation account will be
reduced annually to the extent that eligible account holders and supplemental
eligible account holders have reduced their qualifying deposits as of each
anniversary date. Subsequent increases will not restore an eligible or
supplemental eligible account holder's interest in the liquidation account.
In the event of a complete liquidation of the Association, each eligible
account holder and supplemental eligible account holder will be entitled to
receive a distribution from the liquidation account in an amount
proportionate to the current adjusted qualifying balances for accounts then
held.
Subsequent to the conversion, the Association may not declare or pay cash
dividends on or repurchase any of its share of common stock, if the effect
thereof would cause equity to be reduced below applicable regulatory capital
maintenance requirements or if such declaration and payment would otherwise
violate regulatory requirements.
Conversion costs will be deferred and reduce the proceeds from the shares
sold in the conversion. If the conversion is not completed, all costs will
be charged as an expense. As of September 30, 1997, approximately $17,000 of
conversion costs have been incurred.
F-6
<PAGE>
The following is a description of the more significant accounting policies
which the Association follows in preparing and presenting its financial
statements.
Basis of Accounting - The accounting and reporting policies of the
Association conform to generally accepted accounting principles and to
general practices within the savings and loan industry.
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 susceptible to change
relate to the determination of the allowance for loan losses and the
valuation of real estate owned.
Cash and Cash Equivalents - For purposes of reporting cash flows, cash and
cash equivalents includes cash on hand, federal funds sold, overnight
interest-bearing deposits and amounts due from depository institutions.
Investment and Mortgage-Backed Securities - Debt securities that the
Association has the positive intent and ability to hold to maturity are
classified as "held-to-maturity" securities and reported at amortized cost.
Debt and equity securities that are bought and held principally for the
purpose of selling in the near term are classified as "trading" securities
and reported at fair value with unrealized gains and losses included in
earnings. Debt and equity securities not classified as either held-to-
maturity or trading securities are classified as "available-for-sale"
securities and reported at fair value with unrealized gains and losses
excluded from earnings and reported, net of taxes, as a separate component of
equity. Transfers of securities between classifications are accounted for at
fair value. No securities have been classified as trading securities.
In November 1995, the Financial Accounting Standards Board ("FASB") issued a
Special Report, A Guide to Implementation of Statement 115 on Accounting for
Certain Debt and Equity Securities, which included a transition provision
allowing all entities to reassess the appropriateness of the classifications
of all securities held and account for any resulting reclassifications at
fair value. Reclassifications from the held-to-maturity category resulting
from this one-time reassessment did not call into question, or "taint," the
intent of the Association to hold other debt securities to maturity in the
future. In accordance with this Special Report, on December 19, 1995, the
Association transferred securities with a fair value of approximately $10.3
million and amortized cost of approximately $10.4 million from held-to-
maturity to available-for-sale.
Realized gains and losses on investment securities are recognized at the time
of sale based upon the specific identification method.
Loans - Loans held for investment are recorded at cost.
Nonaccrual loans are those loans on which the accrual of interest has ceased.
Loans are placed on nonaccrual status if, generally, in the opinion of
management, principal or interest is not likely to be paid in accordance with
the terms of the loan agreement, or when principal or interest is past due
more than 90 days. Interest accrued but not collected at the date a loan is
placed on nonaccrual status is reversed against interest income in the
current period. Interest income on nonaccrual loans is recognized only to
the extent received in cash.
F-7
<PAGE>
Restructured loans are those for which concessions, such as the reduction of
interest rates or deferral of interest or principal payments, have been
granted due to a deterioration in the borrowers' financial condition. The
difference between interest that would have been recognized under the
original terms of nonaccrual and renegotiated loans and interest actually
recognized on such loans was not a material amount for the years ended
September 30, 1997, 1996 and 1995.
Effective October 1, 1995, the Association adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, Accounting by Creditors for Impairment
of a Loan, and SFAS No. 118, Accounting by Creditors for Impairment of a Loan
- Income Recognition and Disclosures. SFAS No. 114 requires that the
carrying value of an impaired loan be based on the present value of expected
future cash flows discounted at the loan's effective interest rate or, as a
practical expedient, at the loan's observable market price or the fair value
of the collateral, if the loan is collateral-dependent. Under SFAS No. 114,
a loan is considered impaired when, based on current information, it is
probable that the borrower will be unable to pay contractual interest or
principal payments as scheduled in the loan agreement. SFAS No. 114 applies
to all loans except smaller-balance homogenous mortgage and consumer loans,
loans carried at fair value or the lower of cost or fair value, debt
securities, and leases. Generally, the Association applies SFAS No. 114 to
nonaccrual commercial loans and renegotiated loans. The adoption of the
statements did not affect operating results, the level of the overall
allowance or the comparability of credit related data. Income recognition or
charge-off policies were not changed as a result of SFAS No. 114 and SFAS No.
118. The total principal balances of impaired loans at September 30, 1997
was not material.
Effective January 1, 1997, the Association adopted SFAS No. 125, Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities, which requires that liabilities and derivatives incurred or
obtained by transferors as part of a transfer of financial assets be
initially measured at fair value, if practicable. It also requires that
servicing assets and other retained interests in the transferred assets be
measured by allocating the previous carrying amount between the assets sold,
if any, and retained interests, if any, based on their relative fair values
at the date of the transfer. Servicing assets and liabilities must be
subsequently measured by amortization in proportion to and over the period of
estimated net servicing income or loss and assessment for asset impairment or
increased obligation based on their fair values. This statement was
effective for transfers and servicing of financial assets and extinguishments
of liabilities occurring after December 31, 1996. The total amount of
servicing assets was considered immaterial as of September 30, 1997.
In December 1996, the FASB issued SFAS No. 127, Deferral of the Effective
Date of Certain Provisions of FASB Statement No. 125. SFAS No. 127 defers
for one year the effective date of portions of SFAS No. 125 that address
secured borrowings and collateral for all transactions. Additionally, SFAS
No. 127 defers for one year the effective date of transfers of financial
assets that are part of repurchase agreements, securities lending and similar
transactions.
Allowances for Losses - The Association maintains allowances for loan losses.
Provisions for losses are charged to income when, in the opinion of
management, losses are probable.
The allowance for loan losses is based upon management's evaluation of the
loan portfolio. The evaluation considers such factors as the delinquency
status of loans, current economic conditions, the fair value of the
underlying collateral and prior loan loss experience.
Recovery of the carrying value of loans is dependent to some extent on future
economic, operating and other conditions that may be beyond the Association's
control. Unanticipated future adverse changes in such conditions could
result in material adjustments to allowances (and future results of
operations).
F-8
<PAGE>
Loans Held-for-Sale - Loans intended for sale in the secondary market are
stated at the lower of cost or estimated market value as determined by
outstanding commitments from investors or current investor market yield
requirements calculated on an aggregate basis. Net unrealized losses are
recognized in a valuation allowance by charges to income.
Office Properties and Equipment - Office properties and equipment are carried
at cost less accumulated depreciation. Depreciation is computed over the
estimated useful lives of the related assets using straight-line and
accelerated methods.
Long-Lived Assets - Effective October 1, 1996, the Association adopted SFAS
No. 121, Accounting for the Impairment of Long-lived Assets and for Long-
lived Assets to be Disposed of. SFAS No. 121 establishes accounting
standards for the impairment of long-lived assets, certain identifiable
intangible assets and goodwill related to those assets to be held and used
and for long-lived assets to be held and certain intangible assets to be
disposed of. The adoption of SFAS No. 121 did not have a material impact on
financial conditions or results of operations.
Real Estate Acquired in Settlement of Loans - Real estate acquired in
settlement of loans is initially carried at fair value at the date of
foreclosure, establishing a new cost basis. Valuations are periodically
performed by management and allowances for losses are established when the
cost of real estate acquired in settlement of loans exceeds fair value less
estimated costs to sell. Revenues, expenses and additions to the valuation
allowance related to real estate acquired in settlement of loans are charged
to operations.
Fair values are based primarily on independent appraisals of market value.
Recovery of estimated fair value is dependent to a great extent on economic,
operating and other conditions that may be beyond the Association's control.
Accordingly, these estimates are particularly susceptible to changes that
could result in material adjustment in the near term.
Deferred Loan Origination Fees - Nonrefundable loan fees and certain direct
loan origination costs are deferred and recognized over the lives of the
loans using the level yield method. Amortization of these deferrals is
recognized as an adjustment to interest income.
SAIF Fund Assessment - On September 30, 1996, legislation was enacted to
recapitalize the Savings Association Insurance Fund. The effect of this
legislation was to require a one-time assessment on all federally insured
savings associations' deposits, payable by November 1996. The $1.2 million
assessment was accrued as a charge to earnings in the quarter ended September
30, 1996 and is included in deposit insurance premiums in the statement of
income. The assessment was paid by the Association in November 1996.
Advertising Costs - The Association expenses advertising costs as incurred.
Income Taxes - Provisions for income taxes are based on amounts reported in
the statements of income (after exclusion of nontaxable income such as
interest on municipal securities) and include changes in deferred income
taxes. Deferred tax assets and liabilities are reflected at currently
enacted income tax rates applicable to the period in which the deferred tax
assets or liabilities are expected to be realized or settled. As changes in
tax laws or rates are enacted, deferred tax assets and liabilities are
adjusted through the provision for income taxes.
F-9
<PAGE>
Recently Issued Accounting Standards - The FASB has recently issued two
new accounting standards that will affect the reporting and disclosure of
financial information by the Company. Management has not determined the
effects of adopting these statements, but their adoptions will not impact
financial condition or results of operations since they deal with
reporting and disclosure. The following is a summary of the standards and
their required implementation dates:
. SFAS No. 130, Reporting Comprehensive Income - This statement
establishes standards for reporting and disclosure of comprehensive
income and its components (revenues, expenses, gains and losses). This
statement requires that all items that are required to be recognized
under accounting standards as components of comprehensive income
(including, for example, unrealized holding gains and losses on
available-for-sale securities) be reported in a financial statement
similar to the statement of income and retained income. The accumulated
balance of other comprehensive income will be disclosed separately from
retained income in the equity section of the balance sheet. This
statement is effective for the Association for the fiscal year
beginning October 1, 1998.
. SFAS No. 131, Disclosures About Segments of an Enterprise and Related
Information - This statement establishes standards for the way public
business enterprises report information about operating segments and
establishes standards for related disclosures about products and
services, geographic areas and major customers. Operating segments are
components of an enterprise about which separate financial information
is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. Information required to be disclosed includes segment
profit or loss, certain specific revenue and expense items, segment
assets and certain other information. This statement will be effective
for the Association for financial statements issued for the fiscal year
beginning October 1, 1998 if the conversion to a capital stock form of
ownership discussed above is completed.
Reclassifications - Certain 1996 and 1995 amounts have been reclassified
to conform with the 1997 presentation.
2. INVESTMENT SECURITIES
Investment securities at September 30, 1997 and 1996 are summarized as
follows (in thousands of dollars):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
September 30, 1997 Cost Gains Losses Value
<S> <C> <C> <C> <C>
Held-to-maturity - U.S. Government
Agency obligations $ 15,988 $ 19 $ (53) $ 15,954
--------- --------- --------- ---------
Available-for-sale:
U.S. Treasury obligations $ 2,010 $ 6 $ (8) $ 2,008
U.S. Government Agency obligations 3,996 - (20) 3,976
FHLMC common stock 57 2,349 - 2,406
--------- --------- --------- ---------
Total $ 6,063 $ 2,355 $ (28) $ 8,390
========= ========= ========= =========
</TABLE>
F-10
<PAGE>
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
September 30, 1996 Cost Gains Losses Value
<S> <C> <C> <C> <C>
Held-to-maturity - U.S. Government
Agency obligations $20,993 $ 6 $ (221) $20,778
======= ======= ======= =======
Available-for-sale:
U.S. Treasury obligations $ 7,536 $ 6 $ (70) $ 7,472
U.S. Government Agency obligations 7,841 2 (82) 7,761
FHLMC common stock 57 1,609 - 1,666
------- ------- ------- -------
Total $15,434 $ 1,617 $ (152) $16,899
======= ======= ======= =======
</TABLE>
The amortized cost and fair value of debt securities at September 30, 1997,
by contractual maturity, follow (in thousands of dollars):
<TABLE>
<CAPTION>
Available for Sale Held to Maturity
--------------------------- ---------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
<S> <C> <C> <C> <C>
Due in one year or less $ 2,997 $ 2,984 $ 2,002 $ 1,995
Due after one year through five years 3,009 3,000 13,986 13,959
------- ------- ------- -------
Total $ 6,006 $ 5,984 $15,988 $15,954
======= ======= ======= =======
</TABLE>
Gross realized gains on sales of available-for-sale securities were
approximately $0, $2,000 and $0 in the years ended September 30, 1997, 1996
and 1995, respectively. Gross realized losses on sales of available-for-sale
investment securities were $13,000, $0 and $0 in the years ended September
30, 1997, 1996 and 1995, respectively.
Investment securities totaling $825,000 and $1.7 million at September 30,
1997 and 1996, respectively, were pledged as collateral for public deposits.
3. MORTGAGE-BACKED SECURITIES
Fixed rate mortgage-backed securities are all classified as held to maturity
and consisted of the following (in thousands of dollars):
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
September 30, 1997 Cost Gains Losses Value
<S> <C> <C> <C> <C>
FNMA $ 788 $ - $ (7) $ 781
FHLMC 5,877 2 (25) 5,854
------- --- ----- -------
Total $ 6,665 $ 2 $ (32) $ 6,635
======= === ===== =======
</TABLE>
F-11
<PAGE>
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
September 30, 1996 Cost Gains Losses Value
<S> <C> <C> <C> <C>
FNMA $1,142 $ 1 $ (26) $1,117
FHLMC 8,584 5 (122) 8,467
------ ---- ------ ------
Total $9,726 $ 6 $ (148) $9,584
====== ==== ====== ======
</TABLE>
The amortized cost and fair value of mortgage-backed securities at September
30, 1997, by contractual maturity, follow (in thousands of dollars):
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
<S> <C> <C>
Due in one year or less $3,574 $3,566
Due after one year through five years 3,091 3,069
------ ------
Total $6,665 $6,635
====== ======
</TABLE>
4. LOANS RECEIVABLE
Loans receivable consisted of the following (in thousands of dollars):
<TABLE>
<CAPTION>
September 30,
---------------------------------
1997 1996
<S> <C> <C>
Mortgage loans:
Residential (1-4 family) $ 180,609 $ 173,925
Builder construction loans 2,601 3,836
Commercial loans 8,136 6,450
Savings account loans 1,419 1,146
Home equity loans 8,124 7,050
--------- ---------
Total loans 200,889 192,407
Less:
Undisbursed portion of loans in process (6,989) (8,375)
Deferred loan origination fees (363) (412)
Allowance for loan losses (874) (670)
--------- ---------
Total $ 192,663 $ 182,950
========= =========
Weighted average interest yield of loans 7.93% 7.88%
---- ----
</TABLE>
Under regulations of the Office of Thrift Supervision ("OTS"), the
Association may not make loans to one borrower in excess of 15% of unimpaired
capital. This limitation does not apply to loans made before August 9, 1989.
At September 30, 1997, the Association had loans outstanding to individual
borrowers ranging up to $1.8 million and is in compliance with this
regulation.
F-12
<PAGE>
The Association sells mortgage loans in the secondary market. Generally such
loans are sold without recourse and servicing is retained. Servicing loans
for others consists of collecting mortgage payments, maintaining escrow
accounts, disbursing payments to investors and foreclosure processing. Loan
servicing income is recorded on the accrual basis and includes servicing fees
received from investors as well as certain charges collected from borrowers,
such as late payment fees. At September 30, 1997, 1996 and 1995, the
Association serviced loans for others with a total balance outstanding of
$5.4 million, $6.0 million and $6.6 million, respectively, and held
borrowers' escrow balances in the amounts of $41,000, $53,000 and $63,000,
respectively.
The following is a reconciliation of the allowance for loan losses for the
years ended September 30, 1997, 1996 and 1995 (in thousands of dollars):
<TABLE>
<CAPTION>
Year Ended
September 30,
----------------------------------
1997 1996 1995
<S> <C> <C> <C>
Balance at beginning of year $ 670 $ 590 $ 622
Provision for losses (recovery of allowance) 337 (7) 47
Write-offs (133) (28) (79)
Recoveries - 115 -
----- ----- -----
Balance at end of year $ 874 $ 670 $ 590
===== ===== =====
</TABLE>
Directors and officers of the Association are customers of the institution in
the ordinary course of business. Deposits and loans of directors and
officers have terms consistent with those offered to other customers. At
September 30, 1997 and 1996, loans to officers or directors of the
Association totaled approximately $638,000 and $700,000, respectively.
5. OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment are summarized as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
September 30,
----------------------------
1997 1996
<S> <C> <C>
Land $ 237 $ 237
Land improvements 271 271
Office buildings 3,453 3,442
Furniture, fixtures and equipment 1,157 1,142
------- -------
Total 5,118 5,092
Less accumulated depreciation (840) (562)
------- -------
Office properties and equipment - net $ 4,278 $ 4,530
======= =======
</TABLE>
F-13
<PAGE>
6. REAL ESTATE ACQUIRED IN SETTLEMENT OF LOANS
Real estate acquired in settlement of loans is summarized as follows (in
thousands of dollars):
<TABLE>
<CAPTION>
September 30,
-----------------------
1997 1996
<S> <C> <C>
Real estate acquired in settlement of loans $ 424 $ 1,009
Less allowance for losses (14) (923)
------- -------
Total $ 410 $ 86
======= =======
</TABLE>
The changes in the allowance for losses on real estate acquired in settlement
of loans consisted of the following (in thousands of dollars):
<TABLE>
<CAPTION>
Year Ended
September 30,
-------------------------------------
1997 1996 1995
<S> <C> <C> <C>
Balance at beginning of year $ 923 $ 1,074 $ 1,023
Provision for losses (recovery of allowance) 15 (1) 61
Total write-offs (924) (150) (10)
------- ------- -------
Balance at end of year $ 14 $ 923 $ 1,074
======= ======= =======
</TABLE>
7. DEPOSIT ACCOUNTS
Deposit accounts are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
September 30,
-----------------------
Account Type 1997 1996
<S> <C> <C>
Passbook Accounts (1997 - 3.0%; 1996 - 2.5%) $ 11,423 $ 11,867
-------- --------
NOW Accounts (1997 - 2.0%; 1996 - 2.1%) 2,833 2,706
-------- --------
Money Market Deposit Accounts (1997 - 3.0%; 1996 - 2.75%) 939 1,215
-------- --------
Certificates of Deposit:
3.01-4.00% 5,575 6,826
4.01-5.00% 1,218 2,216
5.01-6.00% 95,528 97,960
6.01-7.00% 92,245 81,430
7.01-8.00% 5,651 5,510
-------- --------
Total certificates of deposit 200,217 193,942
-------- --------
Total $215,412 $209,730
======== ========
Weighted average rate:
Savings certificates 5.93% 5.87%
All deposit accounts 5.71% 5.64%
</TABLE>
F-14
<PAGE>
At September 30, 1997, deposit accounts with balances of $100,000 and greater
totaled approximately $40.3 million. Deposits in excess of $100,000 are not
federally insured. The Association does not accept brokered deposits.
Maturities of certificates of deposits (in thousands of dollars):
Year Ending September 30, 1997
<TABLE>
<S> <C>
Maturing:
Within 1 year $148,859
After 1 but within 2 years 41,284
After 2 but within 3 years 7,659
After 3 but within 4 years 1,846
After 4 but within 5 years 569
--------
Total $200,217
========
</TABLE>
Interest expense by type of deposit is summarized as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
Year Ended September 30,
---------------------------------------
1997 1996 1995
<S> <C> <C> <C>
Demand accounts:
Passbook $ 340 $ 362 $ 393
NOW and Money Market Accounts 89 92 94
Certificate accounts 11,575 11,431 9,454
------- ------- -------
Total $12,004 $11,885 $ 9,941
======= ======= =======
</TABLE>
8. BORROWING ARRANGEMENTS WITH FEDERAL HOME LOAN BANK OF ATLANTA
The Association had outstanding advances of $0 and $5,000,000 from the
Federal Home Loan Bank of Atlanta ("FHLB") at September 30, 1997 and 1996.
The $5,000,000 advance outstanding at September 30, 1996 had a fixed interest
rate of 6.54% and matured May 11, 1997. The maximum amount of outstanding
advances at any month-end during fiscal years 1997, 1996 and 1995 was
$5,000,000, $5,000,000 and $13,250,000, respectively. The average balance
outstanding for such years was approximately $3,082,000, $5,000,000 and
$7,812,000, respectively. The weighted average interest rate during fiscal
years 1997, 1996 and 1995 was 7.33%, 6.54% and 6.27%, respectively.
The Association pledged as collateral for these borrowings its FHLB stock and
has entered into blanket collateral agreements with the FHLB whereby the
Association maintains, free of other encumbrances, qualifying mortgages (as
defined) with unpaid principal balances, when discounted at 75% of the unpaid
principal balances, of at least 100% of total advances.
Additionally, the Association may borrow under various line of credit
programs with the FHLB. Any amounts advanced to the Association under these
programs are secured by the Association's investment securities and bear
interest at an adjustable rate with interest payable monthly. At September
30, 1997 and 1996, the Association had no amounts outstanding.
F-15
<PAGE>
9. INCOME TAXES
The tax effects of significant items comprising the Association's net
deferred tax liability as of September 30, 1997 and 1996 are as follows (in
thousands of dollars):
<TABLE>
<CAPTION>
September 30,
---------------------------
1997 1996
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $ 355
Accrued SAIF assessment - $ 498
Deferred loan fees 4 70
Real estate acquired in settlement of loans - 20
Difference between book and tax basis of fixed assets 7 73
Other 9 --
------ ------
Total 375 661
------ ------
Deferred tax liabilities:
Difference between book and tax basis of Federal Home Loan
Bank stock 336 336
Unrealized gain on investments available for sale 861 542
Tax basis bad debt reserves in excess of book basis bad debt reserves
arising after December 31, 1987 - 54
Tax basis bad debt reserve arising after December 31, 1987 subject
to recapture 326 -
Other - 30
------ ------
Total 1,523 962
------ ------
Net deferred tax liability $1,148 $ 301
====== ======
</TABLE>
The net deferred tax liability at September 30, 1997 and 1996 is included in
"other liabilities" in the balance sheet.
The provision for income taxes is summarized as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
Year Ended September 30,
-----------------------------------------
1997 1996 1995
<S> <C> <C> <C>
Current provision:
Federal $ 553 $ 470 $1,221
State 13 -- 121
------ ------ ------
Total current 566 470 1,342
------ ------ ------
Deferred provision:
Federal 443 (93) 172
State 85 (17) 32
------ ------ ------
Total deferred 528 (110) 204
------ ------ ------
Total provision for income taxes $1,094 $ 360 $1,546
====== ====== ======
</TABLE>
F-16
<PAGE>
No valuation allowance on deferred tax assets has been established as
management believes that the existing deductible temporary differences will
reverse during periods in which the Association generates net taxable income.
In years ended September 30, 1996 and prior, the Association was allowed
under the Internal Revenue Code to deduct, subject to certain conditions, an
annual addition to a reserve for bad debts ("reserve method") in determining
taxable income. Legislation enacted in August 1996 repealed the reserve
method effective for the Association beginning with the fiscal year ended
September 30, 1997. Under the legislation, the Association will be allowed to
deduct actual bad debt charge-offs ("charge-off method") in determining
taxable income. The income tax deduction under the reserve method has been
historically greater than the provision for loan losses recorded for
financial accounting purposes. The income tax deduction under the charge-off
method for the year ended September 30, 1997 was less than the provision for
loan losses recorded for financial accounting purposes.
Deferred income taxes have been provided on differences between the bad debt
reserve for tax purposes determined under the formerly used reserve method
and the loan loss allowance for financial accounting purposes only to the
extent of differences arising subsequent to December 31, 1987. Under the
legislation previously mentioned, the Association will be required to
recapture the post-1987 tax bad debt reserve of approximately $326,000 into
expense over a six-year period beginning with the fiscal year ended no later
than September 30, 1999 (September 30, 1998 if certain conditions are not
met). Since a deferred tax liability has been provided on this difference,
the recapture will have no impact on equity or results of operations.
Retained earnings as of September 30, 1997 includes approximately $4.9
million representing reserve method bad debt reserves originating prior to
December 31, 1987 for which no deferred income taxes are required to be
provided. These reserves may be included in taxable income if the Association
pays dividends in excess of its accumulated earnings and profits (as defined
by the Internal Revenue Code) or in the event of a distribution in partial or
complete liquidation of the Association.
Income taxes differed from amounts computed by applying the statutory federal
rate of 34% to income before income taxes as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
Years Ended September 30,
-------------------------------------
1997 1996 1995
<S> <C> <C> <C>
Tax at statutory Federal income tax rate (34%) $ 1,036 $ 380 $ 1,199
Increase (decrease) resulting from:
State income taxes 66 (11) 100
Other - net (8) (9) 247
------- ------- -------
Total $ 1,094 $ 360 $ 1,546
======= ======= =======
Effective rate 35.9% 32.1% 43.8%
</TABLE>
F-17
<PAGE>
10. COMMITMENTS AND CONTINGENCIES
Loan Commitments - Loan commitments are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Commitments extend over various periods of time with the majority of such
commitments disbursed within a ninety day period. Commitments generally have
fixed expiration dates or other termination clauses and may require payment
of a fee. Commitments to extend credit at fixed rates exposes the
Association to some degree of interest rate risk. The Association evaluates
each customer's creditworthiness on a case-by-case basis. The type or amount
of collateral obtained varies and is based on management's credit evaluation
of the potential borrower.
At September 30, 1997, the Association had loan commitments, excluding
undisbursed portions of interim construction loans, of approximately $1.4
million.
At September 30, 1997, the Association had approved home equity lines of
credit approximating $14.4 million ($175,000 at fixed rates ranging from
8.0% to 9.5%). Commitments, which are disbursed subject to certain
limitations, extend over periods of time with the majority of such
commitment disbursed within a 30-day period.
The Association leases various property and equipment. The effect of these
leases on the financial position or results of operations is insignificant.
The Association has no additional financial instruments with off-balance
sheet risk.
Potential Impact of Changes in Interest Rates - The Association's
profitability depends to a large extent on its net interest income, which is
the difference between interest income from loans and investments and
interest expense on deposits. Like most financial institutions, the
Association's short-term interest income and interest expense are
significantly affected by changes in market interest rates and other
economic factors beyond its control. The Association's interest earning
assets consist primarily of long-term, fixed rate and adjustable rate
mortgage loans and investments which adjust more slowly to changes in
interest rates than its interest bearing liabilities which are deposits.
Accordingly, the Association's earnings could be adversely affected during
periods of rising interest rates.
Litigation - The Association is involved in legal actions in the normal
course of business. Management, based on advice of counsel, does not expect
any material losses from current litigation.
Concentrations of Credit Risk - The Association's business activity is
principally with customers located in South Carolina. Except for residential
loans in the Association's market area, the Association has no other
significant concentrations of credit risk.
11. RETIREMENT PLANS
The Association has a noncontributory money purchase pension plan covering
substantially all full-time employees over the age of twenty-one who have
completed six months of continuous employment with the Association at the
anniversary date of the plan. Pension costs are computed by multiplying
eligible participants' annual salaries by ten percent. Amounts credited to
participants' accounts vest (become nonforfeitable) as follows:
. Twenty percent of the account balance after three years of service
. Twenty percent each year thereafter, until fully vested at the completion
of seven years of service.
F-18
<PAGE>
The Association provides additional retirement benefits by means of a 401(k)
plan for substantially all employees over the age of twenty-one who have
completed six months of employment. Under the plan, employees may defer from
1% to 10% of their compensation to be contributed to the plan. The
Association contributes an equal amount of the salary deferral (subject to a
maximum contribution of 4% of a participant's compensation) to the plan.
Participants are 100% vested upon participation in the plan.
Total expense under both retirement plans for the years ended September 30,
1997, 1996 and 1995 was approximately $151,000, $156,000 and $156,000,
respectively.
The Association provides no other post-employment benefits.
12. REGULATORY CAPITAL REQUIREMENTS
The Association is subject to various regulatory capital requirements
administered by the federal financial institution regulatory agencies.
Failure to meet minimum capital requirements can initiate certain mandatory
and possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the Association's
financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Association must meet specific
capital guidelines that involve quantitative measures of the Association's
assets, liabilities and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Association's capital amounts and
classification are also subject to qualitative judgments by the regulators
about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Association to maintain minimum amounts and ratios. Under
regulations of the Office of Thrift Supervision ("OTS"), the Association
must have: (i) core capital equal to 3.0% of adjusted total assets, (ii)
tangible capital equal to 1.5% of adjusted total assets and (iii) total
capital equal to 8.0% of risk-weighted assets. In measuring compliance with
all three capital standards, institutions must deduct from their capital
(with several exceptions primarily for mortgage banking subsidiaries and
insured depository institution subsidiaries) their investments in, and
advances to, subsidiaries engaged (as principal) in activities not
permissible for national banks, and certain other adjustments. Management
believes, as of September 30, 1997, that the Association meets all capital
adequacy requirements to which it is subject.
The following is a reconciliation of the Association's equity reported in
the financial statements under generally accepted accounting principles to
OTS regulatory capital requirements (in thousands of dollars):
<TABLE>
<CAPTION>
Tangible Core Risk-Based
Capital Capital Capital
<S> <C> <C> <C>
September 30, 1997
Total equity as reported in the financial statements $ 29,235 $ 29,235 $ 29,235
General allowance for loan losses - - 750
Net unrealized loss on available-for-sale securities (1,466) (1,466) (1,466)
-------- -------- --------
Regulatory Capital $ 27,769 $ 27,769 $ 28,519
======== ======== ========
September 30, 1996
Total equity as reported in the financial statements $ 26,740 $ 26,740 $ 26,740
General allowance for loan losses - - 550
Net unrealized gain on available-for-sale securities (923) (923) (923)
-------- -------- --------
Regulatory Capital $ 25,817 $ 25,817 $ 26,367
======== ======== ========
</TABLE>
F-19
<PAGE>
The Association's actual and required capital amounts and ratios are
summarized as follows (in thousands of dollars):
<TABLE>
<CAPTION>
Minimum
Actual Requirement
------------------ ------------------
Amount Ratio Amount Ratio
<S> <C> <C> <C> <C>
September 30, 1997
Tangible capital (to total assets) $27,769 11.3% $ 3,690 1.5%
Core capital (to adjusted total assets) $27,769 11.3% $ 7,381 3.0%
Risk-based capital (to risk-based assets) $28,519 23.3% $ 9,796 8.0%
September 30, 1996
Tangible capital (to total assets) $25,817 10.6% $ 3,648 1.5%
Core capital (to adjusted total assets) $25,817 10.6% $ 7,297 3.0%
Risk-based capital (to risk-based assets) $26,367 22.2% $ 9,492 8.0%
</TABLE>
As of September 30, 1997 and 1996, the most recent respective notifications
from the OTS classified the Association as well capitalized under the
regulatory framework for prompt corrective action. There are no conditions or
events since the most recent notification that management believes have
changed the Association's category. To be categorized as well capitalized,
the Association must maintain minimum ratios of total capital to risk-based
assets, core capital to risk-based assets and core capital to adjusted total
assets. The Association's actual and minimum capital requirements to be well
capitalized under prompt corrective action provisions are as follows:
<TABLE>
<CAPTION>
Minimum
Actual Requirement
------------------ ------------------
Amount Ratio Amount Ratio
<S> <C> <C> <C> <C>
September 30, 1997
Tier I Capital (to adjusted-total assets) $27,769 11.3% $12,302 5.0%
Tier I Capital (to risk-weighted assets) $27,769 22.7% $ 7,346 6.0%
Total Capital (to risk-weighted assets) $28,519 23.3% $12,245 10.0%
September 30, 1996
Tier I Capital (to adjusted-total assets) $25,817 10.6% $12,156 5.0%
Tier I Capital (to risk-weighted assets) $25,817 21.8% $ 7,118 6.0%
Total Capital (to risk-weighted assets) $26,367 22.2% $11,865 10.0%
</TABLE>
F-20
<PAGE>
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, Disclosures About Fair Value of Financial Instruments,
requires disclosure of fair value information regarding financial
instruments, whether or not recognized in the balance sheet, for which it is
practicable to estimate a value. The stated and estimated fair value amounts
of the Association's financial instruments, as of September 30, 1997 and
1996, are summarized below (in thousands of dollars):
<TABLE>
<CAPTION>
1997 1996
--------------------------- ----------------------------
Stated Estimated Stated Estimated
Assets Amount Fair Value Amount Fair Value
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 14,659 $ 14,659 $ 5,875 $ 5,875
Mortgage-backed securities 6,665 6,635 9,726 9,584
Investment securities 24,378 24,344 37,892 37,677
Loans receivable, net 192,663 196,037 182,950 184,828
Loans held-for-sale 1,045 1,065 -- --
Federal Home Loan Bank stock 2,042 2,042 2,042 2,042
Accrued interest receivable 1,242 1,242 1,334 1,334
-------- -------- -------- --------
$242,694 $246,024 $239,819 $241,340
======== ======== ======== ========
Liabilities
Interest bearing demand deposits $ 11,423 $ 11,423 $ 11,867 $ 11,867
Money market accounts 939 939 1,215 1,215
NOW accounts 2,833 2,833 2,706 2,706
Certificates of deposit 200,217 200,832 193,942 194,143
Accrued interest payable 338 338 358 358
-------- -------- -------- --------
$215,750 $216,365 $210,088 $210,289
======== ======== ======== ========
</TABLE>
The Association had off-balance sheet financial commitments, which include
commitments to originate loans, undisbursed portions of interim construction
loans and unused lines of credit (see Note 10). Since these commitments are
based on current rates, the commitment amount is considered to be a
reasonable estimate of fair value.
Estimated fair values were determined using the following methods and
assumptions:
Cash and Cash Equivalents - Cash and cash equivalents have maturities of
three months or less and, accordingly, the carrying amounts of such
instruments are deemed to be reasonable estimates of fair value.
Mortgage-Backed Securities and Investment Securities - Fair values are based
on quoted market prices where available. If quoted market prices are not
available, fair values are based on quoted market prices of comparable
instruments.
Loans Receivable, Net - Fair values for loans are estimated by segregating
the portfolio by type of loan and discounting scheduled cash flows using
current market interest rates for loans with similar terms, reduced by an
estimate of credit losses inherent in the portfolio.
F-21
<PAGE>
Loans Held-for-Sale - Loans held-for-sale are valued at the lower of cost or
market as determined by outstanding commitments from investors or current
investor yield requirements calculated on an aggregate loan basis.
Federal Home Loan Bank Stock - Investment in stock of the FHLB is required
by law for every federally insured savings institution. No ready market
exists for this stock and it has no quoted market value. However, redemption
of this stock has historically been at par value. Accordingly, the carrying
amount is deemed to be a reasonable estimate of fair value.
Deposits - As required by SFAS No. 107, fair values for demand deposits,
money market accounts and savings accounts are the amounts payable on demand
as of the reporting date (i.e., their stated amounts). The fair value of
certificates of deposit is estimated by discounting the contractual cash
flows using current market interest rates for accounts with similar
maturities.
Accrued Interest Receivable and Payable - The stated amounts of accrued
interest receivable and payable approximate the fair value.
Limitations - 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 market exists for
a significant portion of the Association's financial instruments, fair value
estimates are based on judgments regarding future expected loss experience,
current economic conditions, 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.
Fair value estimates are based on existing on-and-off balance sheet
financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities that are
not considered financial instruments. For example, a significant asset not
considered a financial asset is premises and equipment. In addition, tax
ramifications related to the realization of the unrealized gains and losses
can have a significant effect on fair value estimates and have not been
considered in any of the estimates.
**********
F-22
<PAGE>
GLOSSARY
<TABLE>
<S> <C>
ARM loans Adjustable-rate mortgage loans.
Direct Community Offering The offering of shares of the
Common Stock to the general public
with preference given to natural
persons and trusts of natural
persons who are residents of the
Association's Local Community.
Eligible Account Holders Holders of savings accounts at the
Association with balances of at
least $50 as of June 30, 1996.
Exchange Act The Securities Exchange Act of
1934, as amended.
Expiration Date _____________, 1998.
ESOP Employee Stock Ownership Plan to be
implemented by the Association in
the conversion.
FASB Financial Accounting Standards
Board.
FDIC Federal Deposit Insurance
Corporation.
FHLB Federal Home Loan Bank.
Freddie Mac Federal Home Loan Mortgage
Corporation.
Fannie Mae Federal National Mortgage
Association.
GAAP Generally accepted accounting
principles.
IRA Individual Retirement Account.
IRS Internal Revenue Service.
Local Community The counties where the
Association's offices are located:
Laurens, Anderson, Greenwood and
Greenville Counties, South
Carolina.
MRP The Management Recognition Plan, a
restricted stock plan, that the
Holding Company intends to adopt
following the conversion.
NASD National Association of Securities
Dealers, Inc.
Other Members Depositors of the Association as of
January 30, 1998 and borrowers of
the Association as of October 21,
1997 whose loans continue to be
outstanding as of January 30, 1998.
OTS Office of Thrift Supervision of the
United States Department of the
Treasury.
</TABLE>
G-1
<PAGE>
<TABLE>
<S> <C>
Plan of Conversion The plan of conversion adopted by
the Association, pursuant to which
the conversion is being undertaken.
RP Financial RP Financial, LC., the firm the
Association engaged to prepare the
appraisal of its estimated pro
forma market value in the
conversion and to advise the
Association about its business
plan.
SAIF Savings Association Insurance Fund.
SEC Securities and Exchange Commission.
Securities Act The Securities Act of 1933, as
amended.
Severance Plan The Employee Severance Compensation
Plan that the Association intends
to adopt in connection with the
conversion.
SFAS Statement of Financial Accounting
Standards.
Stock Option Plan The stock option plan that the
Holding Company intends to adopt
following the conversion.
Subscription Offering The offering of shares of the
Common Stock, in order to priority,
to Eligible Account Holders, the
ESOP, Supplement Eligible Account
Holders and Other Members.
Supplemental Eligible Account Holders Holders of accounts at the
Association with balances of at
least $50 as of December 31, 1997.
Syndicated Community Offering The offering of shares of the
Common Stock to the general public
by a group of selected dealers.
Trident Securities Trident Securities, Inc., the firm
the Association engaged to advise
and assist it in marketing the
Common Stock and conducting the
Subscription Offering and, if any,
the Community Offering and/or
Syndicated Offering.
</TABLE>
G-2
<PAGE>
No dealer, salesman or any other person has been authorized to give any
information or to make any representation other than as contained in this
prospectus in connection with the offering made hereby, and, if given or made,
such other information or representation must not be relied upon as having been
authorized by Heritage Bancorp, Inc. or Heritage Federal Savings & Loan
Association. This prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby to any
person or in any jurisdiction in which such offer or solicitation is not
authorized or in which the person making such offer or solicitation is not
qualified to do so, or to any person to whom it is unlawful to make such offer
or solicitation in such jurisdiction. Neither the delivery of this prospectus
nor any sale hereunder shall under any circumstances create any implication that
there has been no change in the affairs of Heritage Bancorp, Inc. or Heritage
Federal Savings & Loan Association since any of the dates as of which
information is furnished herein or since the date hereof.
[Logo for Heritage Bancorp, Inc.]
(Proposed Holding Company for
Heritage Federal Savings
& Loan Association, to be known
as Heritage Federal Bank)
2,975,000 to 4,628,750 Shares of
Common Stock
-----------
Prospectus
-----------
TRIDENT SECURITIES, INC.
______ __, 1998
Until the later of _______, 1998, or 25 days after commencement of the
Syndicated Community Offering of Common Stock, if any, all dealers that buy,
sell or trade these securities, whether or not participating in this offering,
may be required to deliver a prospectus. This is in addition to the dealers'
obligation 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 13. Other Expenses of Issuance and Distribution
<TABLE>
<S> <C>
Legal fees and expenses................................ $185,000
Securities marketing legal fees........................ 27,500
Printing, postage and mailing.......................... 105,000
Appraisal and business plan preparation................ 42,500
Accounting fees........................................ 100,000
Data processing fees................................... 15,000
SEC registration fee................................... 20,000
Blue Sky filing fees and expenses...................... 3,000
OTS filing fees........................................ 8,400
Other expenses......................................... 13,600
--------
Total............................................ $520,000
========
</TABLE>
Trident Securities, Inc. will receive a fee of 1.5% of the aggregate dollar
amount of stock sold in the Subscription Offering and Community Offering
(excluding shares purchased by the Association's ESOP and by directors, officers
and employees of the Association and associates of such persons) not to exceed
$800,000.
Item 14. Indemnification of Officers and Directors
Article XVII of the Certificate of Incorporation of Heritage Bancorp,
Inc. requires indemnification of directors, officers and employees to
the fullest extent permitted by Delaware law.
Section 145 of the Delaware General Corporation Law sets forth
circumstances under which directors, officers, employees and agents
may be insured or indemnified against liability which they may incur
in their capacities:
145 INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS;
INSURANCE.--(a) A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been
II-1
<PAGE>
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or director
in defending any civil, criminal, administrative or investigative action, suit
or proceeding may be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the corporation as
authorized in this section. Such expenses (including attorneys' fees) incurred
by other employees and agents may be so paid upon such terms and conditions, if
any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
incurred by him any such capacity, or arising out of his status as such, whether
or not the corporation would have the power to indemnify him against such
liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agents, so that any
person who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith
II-2
<PAGE>
and in a manner he reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to in
this section.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Item 15. Recent Sales of Unregistered Securities.
Not Applicable
Item 16. Exhibits and Financial Statement Schedules:
The financial statements and exhibits filed as part of this
Registration Statement are as follows:
<TABLE>
<S> <C>
(a) List of Exhibits
1.1 -- Form of proposed Agency Agreement among Heritage Bancorp, Inc.,
Heritage Federal Savings & Loan Association and Trident Securities,
Inc.
1.2 -- Engagement Letter between Heritage Federal Savings & Loan Association
and Trident Securities, Inc. (a)
2 -- Plan of Conversion of Heritage Federal Savings & Loan Association
(attached as an exhibit to the Proxy Statement included herein as
Exhibit 99.5) (a)
3.1 -- Certificate of Incorporation of Heritage Bancorp, Inc. (a)
3.2 -- Bylaws of Heritage Bancorp, Inc. (a)
4 -- Form of Certificate for Common Stock (a)
5 -- Opinion of Breyer & Aguggia regarding legality of securities
registered (a)
8.1 -- Federal Tax Opinion of Breyer & Aguggia
8.2 -- State Tax Opinion of Deloitte & Touche LLP
8.3 -- Opinion of RP Financial, LC. as to the value of subscription
rights (a)
10.1 -- Proposed Form of Employment Agreement with J. Edward Wells (a)
10.2 -- Proposed Form of Severance Agreement For Certain Senior Officers (a)
10.3 -- Proposed Form of Employee Stock Ownership Plan (a)
10.4 -- Heritage Federal Savings & Loan Association 401(k) Plan
10.5 -- Form of Heritage Federal Savings & Loan Association Employee
Severance Compensation Plan (a)
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C>
21 -- Subsidiaries of Heritage Bancorp, Inc. (a)
23.1 -- Consent of Deloitte & Touche LLP
23.2 -- Consent of Breyer & Aguggia (contained in opinion included as
Exhibit 5) (a)
23.3 -- Consent of Breyer & Aguggia as to its Federal Tax Opinion (a)
23.4 -- Consent of RP Financial, LC. (a)
24 -- Power of Attorney (contained in signature page to the Registration
Statement) (a)
27 -- Financial Data Schedule (a)
99.1 -- Order and Acknowledgement Form (a)
99.2 -- Solicitation and Marketing Materials (a)
99.3 -- Agreement with RP Financial, LC. (a)
99.4 -- Appraisal Report of RP Financial, LC.
99.5 -- Proxy Statement for Special Meeting of Members of Heritage Federal
Savings & Loan Association (a)
</TABLE>
- -----------------------
(a) Previously filed.
(b) Financial Statements and Schedules
Heritage Federal Savings & Loan Association
<TABLE>
<CAPTION>
Pages
<S> <C>
Independent Auditors' Report...................................... F-1
Balance Sheets as of September 30, 1997 and 1996 ................. F-2
Statements of Income for the Years Ended
September 30, 1997, 1996 and 1995................................ 27
Statements of Equity for the Years Ended
September 30, 1997, 1996 and 1995................................ F-3
Statements of Cash Flows for the Years Ended
September 30, 1997, 1996 and 1995 ............................... F-4
Notes to Financial Statements..................................... F-6
</TABLE>
All schedules are omitted because the required information is either not
applicable or is included in the financial statements or related notes.
II-4
<PAGE>
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933, as amended ("Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high and of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, as amended ("Exchange Act") (and, where
applicable, each filing of any employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act, and is therefore, unenforceable. In the event that a claim for
indemnification against liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the questions whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amended Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in Laurens, South
Carolina on the 23rd day of January 1998.
HERITAGE BANCORP, INC.
By: /s/ J. Edward Wells
------------------------------
J. Edward Wells
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amended Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ J. Edward Wells President, Chief Executive Officer January 23, 1998
- ------------------------ and Director (Principal Executive Officer)
J. Edward Wells
/s/ Edwin I. Shealy Chief Financial Officer January 23, 1998
- ------------------------ (Principal Financial and
Edwin I. Shealy Accounting Officer)
/s/ Aaron H. King* Director January 23, 1998
- ------------------------
Aaron H. King
/s/ J. Riley Bailes* Director January 23, 1998
- ------------------------
J. Riley Bailes
/s/ John H. Lake* Director January 23, 1998
- ------------------------
John H. Lake
/s/ John C. Owings, II Director January 23, 1998
- ------------------------
John C. Owings, II
</TABLE>
- -------------------
* By power of attorney dated December 10, 1997.
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<S> <C>
1.1 -- Form of proposed Agency Agreement among Heritage Bancorp, Inc.,
Heritage Federal Savings & Loan Association and Trident Securities,
Inc.
1.2 -- Engagement Letter between Heritage Federal Savings & Loan Association
and Trident Securities, Inc. (a)
2 -- Plan of Conversion of Heritage Federal Savings & Loan Association
(attached as an exhibit to the Proxy Statement included herein as
Exhibit 99.5) (a)
3.1 -- Certificate of Incorporation of Heritage Bancorp, Inc. (a)
3.2 -- Bylaws of Heritage Bancorp, Inc. (a)
4 -- Form of Certificate for Common Stock (a)
5 -- Opinion of Breyer & Aguggia regarding legality of securities
registered (a)
8.1 -- Federal Tax Opinion of Breyer & Aguggia
8.2 -- State Tax Opinion of Deloitte & Touche LLP
8.3 -- Opinion of RP Financial, LC. as to the value of subscription
rights (a)
10.1 -- Proposed Form of Employment Agreement with J. Edward Wells (a)
10.2 -- Proposed Form of Severance Agreement For Certain Senior Officers (a)
10.3 -- Proposed Form of Employee Stock Ownership Plan (a)
10.4 -- Heritage Federal Savings & Loan Association 401(k) Plan
10.5 -- Form of Heritage Savings & Loan Association Employee Severance
Compensation Plan (a)
21 -- Subsidiaries of Heritage Bancorp, Inc. (a)
23.1 -- Consent of Deloitte & Touche LLP
23.2 -- Consent of Breyer & Aguggia (contained in opinion included as
Exhibit 5) (a)
23.3 -- Consent of Breyer & Aguggia as to its Federal Tax Opinion (a)
23.4 -- Consent of RP Financial, LC. (a)
24 -- Power of Attorney (contained in signature page to the Registration
Statement) (a)
27 -- Financial Data Schedule (a)
99.1 -- Order and Acknowledgement Form (a)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
99.2 -- Solicitation and Marketing Materials (a)
99.3 -- Agreement with RP Financial, LC. (a)
99.4 -- Appraisal Report of RP Financial, LC.
99.5 -- Proxy Statement for Special Meeting of Members of Heritage Federal
Savings & Loan Association (a)
</TABLE>
- --------------
(a) Previously filed.
<PAGE>
EXHIBIT 1.1
HERITAGE BANCORP, INC.
Up to 4,628,750 Shares
of
Common Stock
(Par Value $.01 Per Share)
$15.00 Per Share
SALES AGENCY AGREEMENT
----------------------
February ___, 1998
Trident Securities, Inc.
4601 Six Forks Road, Suite 400
Raleigh, North Carolina 27609
Dear Sirs:
Heritage Bancorp, Inc., a Delaware-chartered corporation ("Company"), and
Heritage Federal Savings & Loan Association, a federally chartered and insured
mutual savings and loan association ("Association"), hereby confirm as of the
date above their respective agreements with Trident Securities, Inc.
("Trident"), a broker-dealer registered with the Securities and Exchange
Commission ("Commission") and a member of the National Association of Securities
Dealers, Inc. ("NASD"), as follows:
1. Introduction. The Association intends to convert from a federally
------------
chartered mutual savings and loan association to a federally chartered stock
savings and loan association as a wholly-owned subsidiary of the Company
(together with the Offerings, as defined below, the issuance of shares of common
stock of the Association to the Company, and the incorporation of the Company,
collectively the "Conversion") pursuant to a plan of conversion adopted on
September 10, 1997, as amended November 19, 1997, ("Plan"). In accordance with
the Plan, the Company is offering shares of its common stock, par value $.01 per
share ("Shares" or the "Common Stock"), pursuant to nontransferable subscription
rights in a subscription offering ("Subscription Offering"), in order of
priority, to (i) the Association's Eligible Account Holders (as defined in the
Plan), (ii) the Association's Employee Stock Ownership Plan ("ESOP"), (iii) the
Association's Supplemental Eligible Account Holders (as defined in the Plan),
(iv) the Association's Other Members (as defined in the Plan), and (v)
directors, officers and employees of the Association. Shares of the Common
Stock not sold in the Subscription Offering are being offered to the general
public in a direct community offering, with preference being given to natural
persons residing in Laurens, Anderson, Greenville and Greenwood Counties, South
Carolina ("Association's Local Community") ("Direct Community Offering"), and,
if necessary, through a syndicate of NASD-registered broker-dealers
<PAGE>
Trident Securities, Inc.
Page 2
managed by Trident in a syndicated community offering ("Syndicated Community
Offering"). The Direct Community Offering and the Syndicated Community Offering
may commence any time during the Subscription Offering or after the expiration
of the Subscription Offering. The Subscription Offering, the Direct Community
Offering and the Syndicated Community Offering are collectively referred to as
the "Offerings." Purchases of Shares in the Offerings are subject to certain
limitations and restrictions as described in the Plan.
The Company and the Association have been advised by Trident that it
intends to utilize its best efforts to assist the Company and the Association
with the sale of the Shares in the Subscription Offering and, if deemed
necessary, in the Direct Community Offering and the Syndicated Community
Offering.
2. Representations and Warranties.
------------------------------
(a) The Company and the Association jointly and severally represent and
warrant to Trident that:
(i) The Company has filed with the Commission a registration
statement, including exhibits and an amendment or amendments thereto, on
Form S-1 (No. 333-41857), including a Prospectus relating to the Offerings,
for the registration of the Shares under the Securities Act of 1933, as
amended ("Securities Act"); and such registration statement has been
declared effective under the Securities Act and no stop order has been
issued with respect thereto and no proceedings therefor have been initiated
or, to the Company's best knowledge, threatened by the Commission. Except
as the context may otherwise require, such registration statement, as
amended or supplemented, on file with the Commission at the time the
registration statement became effective, including the Prospectus,
financial statements, schedules, exhibits and all other documents filed as
part thereof, as amended and supplemented, is herein called the
"Registration Statement," and the prospectus, as amended or supplemented,
on file with the Commission at the time the Registration Statement became
effective is herein called the "Prospectus," except that if any prospectus
filed by the Company with the Commission pursuant to Rule 424(b) of the
general rules and regulations of the Commission under the Securities Act
(together with the published policies and actions of the Commission
thereunder, the "Securities Act Regulations") differs from the form of
prospectus on file at the time the Registration Statement became effective,
the term "Prospectus" shall refer to the Rule 424(b) prospectus from and
after the time it is filed with or mailed for filing to the Commission and
shall include any amendments or supplements thereto from and after their
dates of effectiveness or use, respectively.
(ii) The Association has filed an Application for Approval of
Conversion on Form AC, including exhibits (as amended or supplemented, the
"Form AC" or the "Conversion Application") with the Office of Thrift
Supervision ("OTS") under the Home Owners' Loan Act, as amended ("HOLA"),
and the rules and regulations, including published policies and
<PAGE>
Trident Securities, Inc.
Page 3
actions, of the OTS thereunder (collectively, the "OTS Regulations"), which
has been approved by the OTS; and the Prospectus and the proxy statement
for the solicitation of proxies from members for the special meeting to
approve the Plan ("Proxy Statement") included as part of the Form AC have
been approved for use by the OTS. No order has been issued by the OTS
preventing or suspending the use of the Prospectus or the Proxy Statement
and no action by or before the OTS revoking such approvals is pending or,
to the Association's best knowledge, threatened. The Company has filed with
the OTS the Company's application on Form H-e(1)-S ("Holding Company
Application") promulgated under the savings and loan holding company
provisions of the HOLA and the regulations promulgated thereunder and has
received approval of its acquisition of the Association from the OTS.
(iii) As of the date hereof (i) the Registration Statement and the
Prospectus complied with the Securities Act and the Securities Act
Regulations, (ii) the Registration Statement does not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and (iii) the
Prospectus does not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. Representations or warranties in this
subsection shall not apply to statements or omissions made in reliance upon
and in conformity with written information furnished to the Company or the
Association by or on behalf of Trident relating to Trident expressly for
use in the Registration Statement or Prospectus.
(iv) The Company has been duly incorporated as a Delaware
corporation and the Association has been duly organized as a mutual savings
and loan association under the laws of the United States, and each of them
is validly existing and in good standing under the laws of their
jurisdiction of organization with full power and authority to own its
property and conduct its business as described in the Registration
Statement and Prospectus; the Association is a member in good standing of
the Federal Home Loan Bank of Atlanta; and the deposit accounts of the
Association are insured by the Savings Association Insurance Fund ("SAIF")
administered by the Federal Deposit Insurance Corporation ("FDIC") up to
the applicable legal limits. Upon consummation of the Conversion, the
Company will be qualified to transact business as a foreign corporation in
the State of South Carolina. Each of the Company and the Association is not
required to be qualified to do business as a foreign corporation in any
jurisdiction where non-qualification would have a material adverse effect
on the financial condition, operations, business, properties or assets of
the Company and the Association.
(v) The Association has good, marketable and insurable title to all
assets material to its business and to those assets described in the
Prospectus as owned by it, free and clear
<PAGE>
Trident Securities, Inc.
Page 4
of all liens, charges, encumbrances or restrictions, except for liens for
taxes not yet due, except as described in the Prospectus and except as do
not in the aggregate have a material adverse effect upon the financial
condition, operations, business, properties or assets of the Association;
and all of the leases and subleases material to the financial condition,
operations, business, assets or properties of the Association, under which
it holds properties, including those described in the Prospectus, are in
full force and effect as described therein.
(vi) The Association has no direct or indirect subsidiaries.
(vii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary actions on the part of each of the
Company and the Association, and this Agreement is a valid and binding
obligation of each of the Company and the Association, enforceable in
accordance with its terms (except as the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium, reorganization,
conservatorship, receivership or similar laws relating to or affecting the
enforcement of creditors' rights generally or the rights of creditors of
insured financial institutions and their holding companies, the accounts of
whose subsidiaries are insured by the FDIC, by general equity principles,
regardless of whether such enforceability is considered in a proceeding in
equity or at law, or laws relating to the safety and soundness of insured
depository institutions and their affiliates, and except to the extent that
the provisions of Sections 8 and 9 hereof may be unenforceable as against
public policy or by applicable law, including without limitation, Section
23A of the Federal Reserve Act, 12 U.S.C. Section 371c (("Section 23A")).
(viii) Except as referred to in the Prospectus, there is no litigation
or governmental proceeding pending or, to the best knowledge of the Company
or the Association, threatened against or involving the Company or the
Association, or any of their respective assets which individually or in the
aggregate would reasonably be expected to have a material adverse effect on
the financial condition, results of operations, business, assets or
properties of the Company or the Association. Any litigation or
governmental proceeding is not considered "threatened" unless the potential
litigation or governmental authority had manifested to the management of
the Company or the Association a present intention to initiate such
litigation or proceeding.
(ix) The Company and the Association have received the opinions of
Breyer & Aguggia with respect to the federal income tax consequences of the
Conversion, and of Deloitte & Touche LLP with respect to South Carolina
income tax consequences of the Conversion, to the effect that the
Conversion will constitute a tax-free reorganization under the Internal
Revenue Code of 1986, as amended, and will not be a taxable transaction for
the Association or the Company under the laws of South Carolina; and the
facts and representations made by the Company and the Association and
relied upon in rendering such
<PAGE>
Trident Securities, Inc.
Page 5
opinions are accurate and complete, and neither the Company nor the
Association have taken any action inconsistent therewith.
(x) Neither the Company nor the Association is in violation of any
rule or regulation of the OTS or the FDIC that could reasonably be expected
to result in any enforcement action against the Company or the Association,
or their officers or directors, that might have a material adverse effect
on the financial condition, operations, businesses, assets or properties of
the Company and the Association, taken as a whole.
(xi) RP Financial, LC. ("RP Financial"), the firm that prepared the
independent appraisal dated as of November 28, 1997, is independent with
respect to the Company and the Association within the meaning of the OTS
Regulations. The Company and the Association believe RP Financial to be
experienced and expert in rendering appraisals of thrift institutions, and
nothing has come to the attention of the Company and the Association which
has caused them to believe that the appraisal by RP Financial was not
prepared in accordance with the requirements of the OTS Regulations.
(xii) Deloitte & Touche LLP, the firm that certified the financial
statements of the Association filed as part of the Registration Statement
and the Conversion Application, is independent with respect to the Company
and the Association as required by the Securities Act, the Securities Act
Regulations, the Code of Professional Ethics of the American Institute of
Certified Public Accountants, and Title 12 of the Code of Federal
Regulations Parts 563c and 571, and nothing has come to the attention of
the Company and the Association which has caused them to believe that such
firm is not independent within the meaning of such provisions.
(xiii) The financial statements and related notes which are included
in the Registration Statement and the Prospectus fairly present the
financial condition, earnings, equity and cash flows of the Association at
the respective dates thereof and for the respective periods covered thereby
and comply as to form with the applicable accounting requirements of the
Securities Act Regulations and the OTS Regulations. Such financial
statements have been prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied throughout the periods
involved, except as set forth therein, and such financial statements are
consistent with financial statements and other reports filed by the
Association with the OTS, except as GAAP may otherwise require. The
financial tables in the Prospectus accurately present the information
purported to be shown thereby at the respective dates thereof and for the
respective periods covered thereby.
(xiv) There has been no material change in the financial condition,
operations, business, assets or properties of the Company and the
Association, taken as a whole, since the latest date as of which such
condition is set forth in the Prospectus, except as set forth therein; and
the capitalization, assets, properties and business of each of the Company
and
<PAGE>
Trident Securities, Inc.
Page 6
the Association conform in all material aspects to the descriptions thereof
contained in the Prospectus. Neither the Company nor the Association has
any material liabilities of any kind, contingent or otherwise, except as
set forth in the Prospectus.
(xv) There has been no breach or default (or the occurrence of any
event which, with notice or lapse of time or both, would constitute a
default) under, or creation or imposition of any lien, charge or other
encumbrance upon any of the properties or assets of the Company or the
Association pursuant to any of the terms, provisions or conditions of, any
agreement, contract, indenture, bond, debenture, note, instrument or
obligation to which the Company or the Association is a party or by which
any of them or any of their respective assets or properties may be bound or
is subject, or violation of any governmental license or permit or any
enforceable published law, administrative regulation or order or court
order, writ, injunction or decree, which breach, default, encumbrance or
violation would have a material adverse effect on the financial condition,
operations, business, assets or properties of the Company and the
Association, taken as a whole; all agreements which are material to the
financial condition, results of operations or business of the Company and
the Association, taken as a whole, are in full force and effect, and no
party to any such agreement has instituted or, to the best knowledge of the
Company and the Association, threatened any action or proceeding wherein
the Company or the Association would be alleged to be in default
thereunder.
(xvi) Neither the Company nor the Association is in violation of its
respective charter, certificate of incorporation or bylaws. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby by the Company and the Association do not conflict with
or result in a breach of the charter, certificate of incorporation or
bylaws of the Company or the Association (in either mutual or stock form)
or constitute a material breach of or default (or an event which, with
notice or lapse of time or both, would constitute a default) under, give
rise to any right of termination, cancellation or acceleration contained
in, or result in the creation or imposition of any lien, charge or other
encumbrance upon any of the properties or assets of the Company or the
Association pursuant to any of the terms, provisions or conditions of, any
material agreement, contract, indenture, bond, debenture, note, instrument
or obligation to which the Company or the Association is a party (other
than the establishment of a liquidation account pursuant to the Plan) or
violate any governmental license or permit or any law, administrative
regulation or order or court order, writ, injunction or decree (subject to
the satisfaction of certain conditions imposed by the OTS in connection
with its approval of the Conversion Application), which breach, default,
encumbrance or violation would have a material adverse effect on the
financial condition, operations or business of the Company and the
Association, taken as a whole.
(xvii) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, except as otherwise may
be indicated or
<PAGE>
Trident Securities, Inc.
Page 7
contemplated therein, none of the Company or the Association has issued any
securities which will remain issued at the Closing Date or incurred any
liability or obligation, direct or contingent, or borrowed money, except
borrowings or liabilities in the ordinary course of business, or entered
into any other transaction not in the ordinary course of business and not
consistent with prior practices, which is material in light of the business
of the Company and the Association, taken as a whole.
(xviii) The issuance and the sale of the Shares of the Company have
been duly authorized by all necessary action of the Company and approved by
the OTS and, when issued in accordance with the terms of the Plan and paid
for, shall be validly issued, fully paid and nonassessable and shall
conform to the description thereof contained in the Prospectus; the
issuance of the Shares is not subject to preemptive rights, except as set
forth in the Prospectus; and good title to the Shares will be transferred
by the Company upon issuance thereof against payment therefor, free and
clear of all claims, encumbrances, security interests and liens against the
Company whatsoever. The issuance and sale of the capital stock of the
Association to the Company has been duly authorized by all necessary action
of the Association and the Company and all appropriate regulatory
authorities (subject to the satisfaction of various conditions imposed by
the OTS in connection with its approvals of the Conversion Application and
the Holding Company Application), and such capital stock, when issued in
accordance with the terms of the Plan, will be fully paid and nonassessable
and will conform in all material respects to the description thereof
contained in the Prospectus.
(xix) No approval of any regulatory or supervisory or other public
authority is required in connection with the execution and delivery of this
Agreement or the issuance of the Shares, except such approvals as have been
obtained and except for the declaration of effectiveness of any required
post-effective amendment by the Commission and approval thereof by the OTS,
the issuance of the Association's Federal Stock Charter by the OTS and as
may be required under the "blue sky" or securities laws of various
jurisdictions.
(xx) All contracts and other documents required to be filed as
exhibits to the Registration Statement, the Conversion Application or the
Holding Company Application have been filed with the Commission or the OTS
or both, as the case may be.
(xxi) The Company and the Association have timely filed all required
federal, state and local franchise tax returns, and no deficiency has been
asserted with respect to such returns by any taxing authorities, and the
Company and the Association have paid all taxes that have become due and,
to the best of their knowledge, have made adequate reserves for accrued tax
liabilities, except where any failure to make such filings, payments and
reserves, or the assertion of such a deficiency, would not have a material
adverse effect on the financial condition or results of operations of the
Company and the Association, taken as a whole.
<PAGE>
Trident Securities, Inc.
Page 8
(xxii) All of the loans represented as assets of the Association as
of the most recent date for which financial condition data is included in
the Prospectus meet or are exempt from all requirements of federal, state
or local law pertaining to lending, including without limitation truth in
lending (including the requirements of Regulation Z and 12 C.F.R. Part 226
and Section 563.99), real estate settlement procedures, consumer credit
protection, equal credit opportunity and all disclosure laws applicable to
such loans, except for violations which, if asserted, would not have a
material adverse effect on the Company, the Association and the Subsidiary,
taken as a whole.
(xxiii) The records of Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members (as those terms are defined in the Plan)
delivered to Trident by the Association or its agent for use during the
Conversion have been reviewed by the Association and are believed to be
accurate, reliable and complete and Trident shall have no liability to any
person relating to the reliability, accuracy or completeness of such
records or for any denial or allocation of a subscription to purchase
shares to any person based upon such records.
(xxiv) Neither the Company nor the Association or, to the best
knowledge of the Company and the Association, the employees of the Company
or the Association, has made any payment of funds of the Company or the
Association prohibited by law, and no funds of the Company or the
Association have been set aside to be used for any payment prohibited by
law.
(xxv) To the best knowledge of the Company and the Association, the
Company and the Association are in compliance with all laws, rules and
regulations relating to environmental protection and neither the Company
nor the Association is subject to liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
or any similar law, except for violations which, if asserted, would not
have a material adverse effect on the Company and the Association, taken as
a whole. There are no actions, suits, regulatory investigations or other
proceedings pending or, to the best knowledge of the Company or the
Association, threatened against the Company or the Association relating to
environmental protection. To the best knowledge of the Company and the
Association, no disposal, release or discharge of hazardous or toxic
substances, pollutants or contaminants, including petroleum and gas
products, as any of such terms may be defined under federal, state or local
law, has been caused by the Company or the Association or, to the best
knowledge of the Company and the Association, and except as already
disclosed in the Prospectus, has occurred on, in or at any of the
facilities or properties owned or leased by the Company or the Association
or in which the Association has a security interest, except such disposal,
release or discharge which would not have a material adverse effect on the
financial condition, operations, business, assets or properties of the
Company and the Association, taken as a whole.
<PAGE>
Trident Securities, Inc.
Page 9
(xxvi) All documents delivered by the Association or the Company or
their representatives in connection with the issuance and sale of the
Common Stock, except for those documents that were prepared by parties
other than the Association, the Company or their representatives, were, on
the dates on which they were delivered, true, complete and correct.
(b) Trident represents and warrants to the Company and the Association
that:
(i) Trident is registered as a broker-dealer and is in good
standing with the Commission and the NASD.
(ii) Trident is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, with full corporate
power and authority to provide the services to be furnished to the Company
and the Association hereunder.
(iii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary action on the part of Trident, and this
Agreement is a legal, valid and binding obligation of Trident, enforceable
in accordance with its terms (except as the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium, reorganization or similar
laws relating to or affecting the enforcement of creditors' rights
generally or the rights of creditors of registered broker-dealers accounts
of whose may be protected by the Securities Investor Protection Corporation
or by general equity principles, regardless of whether such enforceability
is considered in a proceeding in equity or at law, and except to the extent
that the provisions of Sections 8 and 9 hereof may be unenforceable as
against public policy or pursuant to Section 23A).
(iv) Trident and, to Trident's best knowledge, its employees, agents
and representatives who shall perform any of the services required
hereunder to be performed by Trident, shall be duly authorized and shall
have all licenses, approvals and permits necessary to perform such
services, and Trident is a registered selling agent in the jurisdictions in
which the Company is relying on such registration for the sale of the
Shares, and will remain so registered until the Conversion is consummated
or terminated.
(v) The execution and delivery of this Agreement by Trident, the
fulfillment of the terms set forth herein and the consummation of the
transactions contemplated hereby shall not violate or conflict with the
charter or bylaws of Trident or violate, conflict with or constitute a
breach of, or default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, any material agreement, indenture
or other instrument by which Trident is bound or under any governmental
license or permit or any law, administrative regulation, authorization,
approval or order or court decree, injunction or order.
<PAGE>
Trident Securities, Inc.
Page 10
(vi) All funds received by Trident to purchase Common Stock will be
handled in accordance with Rule 15c2-4 under the Securities Exchange Act of
1934, as amended ("Exchange Act").
(vii) No action or proceeding against Trident before the Commission,
the NASD, any state securities commission, or any state or federal court is
pending or, to Trident's best knowledge, threatened concerning Trident's
activities as a broker-dealer.
3. Employment of Trident; Sale and Delivery of the Shares. On the basis
------------------------------------------------------
of the representations and warranties herein contained, but subject to the terms
and conditions herein set forth, the Company and the Association hereby employ
Trident as their agent to utilize its best efforts to assist the Company with
the Company's sale of the Shares in the Offerings, and Trident hereby accepts
such employment. The employment of Trident hereunder shall terminate (a) forty-
five (45) days after the Subscription and Direct Community Offering closes,
unless the Company and the Association, with the approval of the OTS, are
permitted to extend such period of time, or (b) upon consummation of the
Conversion, whichever date shall first occur.
In the event the Company is unable to sell a minimum of 2,975,000 Shares
(or such lesser amount as the OTS may permit) within the period herein provided,
this Agreement shall terminate, and the Company and the Association shall refund
promptly to any persons who have subscribed for any of the Shares, the full
amount which it may have received from them, together with interest as provided
in the Prospectus, and no party to this Agreement shall have any obligation to
the other party hereunder, except as set forth in Sections 6, 8, 9 and 10
hereof. Appropriate arrangements for placing the funds received from
subscriptions for Shares in special interest-bearing accounts with the
Association until all Shares are sold and paid for will be made prior to the
commencement of the Subscription and Direct Community Offering, with provision
for prompt refund to the purchasers as set forth above, or for delivery to the
Company if all Shares are sold.
If all conditions precedent to the consummation of the Conversion are
satisfied, including the sale of all Shares required by the Plan to be sold, the
Company agrees to issue or have issued such Shares and to release for delivery
certificates to subscribers thereof for such Shares on or as soon as possible
following the Closing Date against payment to the Company by any means
authorized pursuant to the Prospectus, at the principal office of the Company,
201 W. Main Street, Laurens, South Carolina, or at such other place as shall be
agreed upon between the parties hereto. The date upon which the Company shall
release or deliver the Shares sold in the Offerings, in accordance with the
terms hereof, is herein called the "Closing Date."
Trident agrees either (a) upon receipt of an executed order form of a
subscriber to forward the offering price of the Common Stock ordered on or
before twelve noon on the next business day following receipt or execution of an
order form by Trident to the Association for deposit in a segregated account or
(b) to solicit indications of interest in which event (i) Trident will
subsequently contact any potential subscriber indicating interest to confirm the
interest and give
<PAGE>
Trident Securities, Inc.
Page 11
instructions to execute and return an order form or to receive authorization to
execute the order form on the subscriber's behalf, (ii) Trident will mail
acknowledgements of receipt of orders to each subscriber confirming interest on
the business day following such confirmation, (iii) Trident will debit accounts
of such subscribers on the third business day ("debit date") following receipt
of the confirmation referred to in (i), and (iv) Trident will forward completed
order forms together with such funds to the Association on or before twelve noon
on the next business day following the debit date for deposit in a segregated
account. Trident acknowledges that if the procedure in (b) is adopted,
subscribers' funds are not required to be in their accounts until the debit
date.
Trident shall receive the following compensation and expense reimbursement
for its services hereunder:
(a) (i) A commission equal to one and one half percent (1.5%) of the
aggregate dollar amount of the Shares sold in the Subscription Offering and
Direct Community Offering (excluding Shares sold to the Association's
directors, executive officers, employees and all employee benefit plans
including the ESOP, and (ii) a commission to be agreed upon by Trident and
the Company for Shares sold by other member firms of the NASD through a
selected dealers arrangement in the Syndicated Community Offering, which
aggregate commission shall be determined at the discretion of the Company
and the Association with the advice of Trident. All such fees shall be
paid to Trident in next-day funds on the Closing Date.
(b) Reimbursement for reasonable out-of-pocket allocable expenses,
including but not limited to travel, food, lodging and legal fees, incurred
by it whether or not the Offerings are successfully completed; provided,
however, that reimbursable legal fees will not exceed $27,500 and that
other reimbursable expenses will not exceed $7,500, and, provided further,
that neither the Company nor the Association shall reimburse Trident for
any of the foregoing expenses accrued after Trident shall have notified the
Company or the Association of its election to terminate this Agreement
pursuant to Section 11 hereof or after such time as the Company or the
Association shall have given notice in accordance with Section 12 hereof
that Trident is in breach of this Agreement. Full reimbursement of Trident
shall be made in next-day funds on the Closing Date or, if the Conversion
is not completed and is terminated for any reason, within ten (10) business
days of receipt by the Company of a written request detailing allocable
expenses from Trident for reimbursement of such expenses. Trident
acknowledges receipt of a $7,500 advance payment from the Association,
which shall be credited against the total reimbursement due Trident
hereunder. In the event this Agreement is terminated pursuant to Section
11 hereof, Trident shall be reimbursed only for its actual allocable
expenses.
(c) Reimbursement for any expenses of the Company and the Association
set forth in Section 6 hereof to the extent paid by Trident on behalf of
the Company and the Association. Full reimbursement shall be made in next-
day funds on the Closing Date or,
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Trident Securities, Inc.
Page 12
if the Conversion is not completed and is terminated for any reason, within
ten (10) business days of receipt by the Company and the Association of a
written request for such reimbursement detailing such reimbursements.
Notwithstanding the limitations on reimbursement of Trident for its
allocable expenses provided in subsection (b) above and notwithstanding any
reimbursement of Trident pursuant to subsection (c) above, in the event that a
resolicitation or other event causes the Offerings to be extended beyond their
original expiration date, Trident shall be reimbursed for its reasonable
allocable expenses incurred during such extended period, provided that the
allowance for allocable expenses provided for in subsection (b) above has been
exhausted and subject to the following: such reimbursement shall be in an
amount equal to the product obtained by dividing $35,000 (the reimbursable
expenses and legal fees limitation set forth in Section (b) above by the total
number of days of the unextended Subscription Offering (calculated from the date
of the Prospectus to the intended close of the Subscription Offering as stated
in the Prospectus) and multiplying such product by the number of days of the
extension (that number of days from the date of the supplemental prospectus used
in the extended Subscription Offering to the closing of the extension of the
Subscription Offering described in such supplemental prospectus).
4. Offering. Subject to the provisions of Section 7 hereof, Trident is
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assisting the Company on a best efforts basis in offering a minimum of 2,975,000
and a maximum of 4,025,000 Shares, subject to adjustment up to 4,628,750 Shares
(except as the OTS may permit to be decreased or increased) in the Offerings.
The Shares are to be offered to the public at the price set forth on the cover
page of the Prospectus and the first page of this Agreement.
5. Further Agreements. The Company and the Association jointly and
------------------
severally covenant and agree that:
(a) Subsequent to the respective dates as of which information is given in
the Registration Statement and Prospectus and through and including the Closing
Date, except as otherwise may be indicated or contemplated therein, neither the
Company nor the Association will issue any securities which will remain issued
at the Closing Date or incur any liability or obligation, direct or contingent,
or borrow money, except borrowings or liabilities in the ordinary course of
business, or enter into any other transaction not in the ordinary course of
business and consistent with prior practices, which is material in light of the
financial condition, operations, business, properties or assets of the Company
and the Association, taken as a whole.
(b) If any Shares remain unsubscribed following completion of the
Subscription Offering and the Direct Community Offering, the Company (i) will,
if deemed necessary, promptly file with the Commission a post-effective
amendment to such Registration Statement relating to the results of the
Subscription and the Community Offerings, any additional information with
respect to the proposed plan of distribution and any revised pricing information
or (ii) if no such post-effective amendment is required, will file with, or mail
for filing to, the Commission a prospectus or
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Trident Securities, Inc.
Page 13
prospectus supplement containing information relating to the results of the
Subscription and Community Offerings and pricing information pursuant to Rule
424(c) of the Securities Act Regulations, in either case in a form reasonably
acceptable to the Company and Trident.
(c) Upon consummation of the Conversion, the authorized, issued and
outstanding equity capital of the Company shall be within the range as set forth
in the Prospectus under the caption "Capitalization," and no Common Stock of the
Company shall be outstanding immediately prior to the Closing Date (other than
shares of Common Stock issued in connection with the initial capitalization of
the Company, which shares will be canceled upon consummation of the Conversion);
and the certificates representing the Shares will conform in all material
respects with the requirements of applicable laws and OTS Regulations.
(d) At all times subsequent to the date of the Prospectus through and
including the Closing Date (i) the Registration Statement and the Prospectus
will comply with the Securities Act and the Securities Act Regulations, (ii) the
Registration Statement will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and (iii) the Prospectus will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Agreements in this
subsection shall not apply to statements or omissions made in reliance upon and
in conformity with written information furnished to the Company or the
Association relating to Trident by or on behalf of Trident expressly for use in
the Registration Statement or Prospectus.
(e) Upon amendment of the Association's charter and bylaws as provided in
the OTS Regulations and completion of the sale by the Company of the Shares as
contemplated by the Prospectus, (i) the Association will be converted pursuant
to the Plan to a federally chartered capital stock savings bank with full power
and authority to own its property and conduct its business as described in the
Prospectus, (ii) all of the authorized and outstanding capital stock of the
Association will be owned of record and beneficially by the Company, and (iii)
the Company will have no direct subsidiaries other than the Association.
(f) The Company shall deliver to Trident, from time to time, such number
of copies of the Prospectus as Trident reasonably may request. The Company
authorizes Trident to use the Prospectus in any lawful manner in connection with
the offer and sale of the Shares.
(g) The Company will notify Trident immediately, and confirm the notice in
writing, (i) when any post-effective amendment to the Registration Statement
becomes effective or any supplement to the Prospectus has been filed, (ii) of
the issuance by the Commission of any stop order relating to the Registration
Statement or of the initiation or the threat of any proceedings for that
purpose, (iii) of the receipt of any notice with respect to the suspension of
the qualification of the Shares for offering or sale in any jurisdiction, and
(iv) of the receipt of any comments from the staff
<PAGE>
Trident Securities, Inc.
Page 14
of the Commission relating to the Registration Statement. If the Commission
enters a stop order relating to the Registration Statement at any time, the
Company will make every reasonable effort to obtain the lifting of such order at
the earliest possible moment.
(h) During the time when a prospectus is required to be delivered under
the Securities Act, the Company will comply with all requirements imposed upon
it by the Securities Act and by the Securities Act Regulations to permit the
continuance of offers and sales of or dealings in the Shares in accordance with
the provisions hereof and the Prospectus. If during the period when the
Prospectus is required to be delivered in connection with the offer and sale of
the Shares any event relating to or affecting the Company and the Association,
taken as a whole, shall occur as a result of which it is necessary, in the
reasonable opinion of counsel for Trident, to amend or supplement the Prospectus
in order to make the Prospectus not false or misleading in light of the
circumstances existing at the time it is delivered to a purchaser of the Shares,
the Company forthwith shall prepare and furnish to Trident a reasonable number
of copies of an amendment or amendments or of a supplement or supplements to the
Prospectus (in form and substance reasonably satisfactory to counsel for
Trident) which shall amend or supplement the Prospectus so that, as amended or
supplemented, the Prospectus shall not contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in light of the circumstances existing at the time the Prospectus is
delivered to a purchaser of the Shares, not misleading. The Company will not
file or use any amendment or supplement to the Registration Statement or the
Prospectus unless Trident has been first furnished a copy or if Trident shall
reasonably object after having been furnished such copy. For the purposes of
this subsection the Company and the Association shall furnish such information
with respect to themselves as Trident from time to time may reasonably request.
(i) The Company and the Association will take all reasonably necessary
action as may be required to qualify or register the Shares for offer and sale
by the Company under the securities or blue sky laws of such jurisdictions as
Trident and the Company or its counsel may agree upon; provided, however, that
the Company shall not be obligated to qualify as a foreign corporation to do
business under the laws of any such jurisdiction. In each jurisdiction where
such qualification or registration shall be effected, the Company, unless
Trident agrees that such action is not necessary or advisable in connection with
the distribution of the Shares, shall file and make such statements or reports
as are, or reasonably may be, required by the laws of such jurisdiction.
(j) Appropriate entries will be made in the financial records of the
Association to establish a liquidation account for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders (as those terms are
defined in the Plan) in accordance with the OTS Regulations.
(k) The Company will file a registration statement for the Common Stock
under Section 12(g) of the Exchange Act prior to completion of the Offerings
pursuant to the Plan and shall request that such registration statement be
effective upon completion of the Conversion. The Company shall
<PAGE>
Trident Securities, Inc.
Page 15
maintain the effectiveness of such registration for a minimum period of three
years or for such shorter period as may be required by applicable law.
(l) The Company will make generally available to its security holders as
soon as practicable, but not later than 90 days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions of
Rule 158 of the Securities Act Regulations) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date (as defined in said Rule 158) of the Registration
Statement.
(m) For a period of three (3) years from the date of this Agreement, the
Company will furnish to Trident, as soon as publicly available after the end of
each fiscal year, a copy of its annual report to shareholders for such year; and
the Company will furnish to Trident (i) as soon as publicly available, a copy of
each report or definitive proxy statement of the Company filed with the
Commission under the Exchange Act or mailed to shareholders, and (ii) from time
to time, such other public information concerning the Company as Trident may
reasonably request.
(n) The Company shall use the net proceeds from the sale of the Shares in
the manner set forth in the Prospectus.
(o) The Company shall not deliver the Shares until each and every
condition set forth in Section 7 hereof has been satisfied, unless such
condition is waived in writing by Trident.
(p) The Company after consultation with Trident, shall make all
determinations, if necessary, as to the allocation of deposits, in the case of
Eligible Account Holders and Supplemental Eligible Account Holders, and votes,
in the case of Other Members, and of the Shares in the event of an
oversubscription, and shall provide Trident final instructions as to the
allocation of the Shares ("Allocation Instructions") in such event and the
Allocation Instructions shall be accurate, reliable and complete. Trident shall
be entitled to rely on the Allocation Instructions and shall have no liability
in respect of its reliance thereon, including without limitation, no liability
for or related to any denial or grant of a subscription in whole or in part.
(q) The Company and the Association will take such actions and furnish
such information as are reasonably requested by Trident in order for Trident to
comply with the NASD's "Interpretation Relating to Free-Riding and Withholding."
(r) At the Closing Date, the Company and the Association will have
completed the conditions precedent to, and shall have conducted the Conversion
in all material respects in accordance with, the Plan, OTS Regulations and all
other applicable laws, regulations, published decisions and orders, including
all terms, conditions, requirements and provisions precedent to the Conversion
imposed by the OTS.
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Trident Securities, Inc.
Page 16
(s) The Company will use its best efforts to obtain approval for and
maintain quotation of its shares of common stock on the Nasdaq stock market
effective on or prior to the Closing Date.
6. Payment of Expenses. Subject to Section 3(c) hereof, whether or not
-------------------
the Conversion is consummated, the Company and the Association shall pay the
following expenses: (a) all regulatory filing fees, including but not limited to
those payable to the Commission, OTS, "blue sky" authorities and the NASD
(including fees payable to the NASD for Trident's filing pursuant to the NASD
Corporate Finance Rule), (b) all stock issue and transfer taxes which may be
payable with respect to the sale of the Shares, (c) attorneys' fees of the
Company and the Association, (d) attorneys' fees relating to any required "blue
sky" laws research and filings, (e) telephone charges, (f) air freight, (g)
rental equipment, (h) supplies, (i) transfer agent and registrar fees and
expenses, (j) auditing and accounting fees and expenses, (k) costs of printing
and mailing all documents necessary in connection with the Conversion, and (l)
slide production expenses in connection with any community investor meetings to
be held by Trident.
7. Conditions of Trident's Obligations. Except as may be waived in
-----------------------------------
writing by Trident, the obligations of Trident as provided herein shall be
subject to the accuracy of the representations and warranties contained in
Section 2 hereof as of the date hereof and as of the Closing Date, to the
performance by the Company and the Association of their obligations hereunder,
and to the following conditions:
(a) At the Closing Date, Trident shall receive the favorable opinion
of Breyer & Aguggia, special counsel for the Company and the Association,
dated the Closing Date, addressed to Trident, in form and substance
reasonably satisfactory to counsel for Trident and stating that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, and the Association is validly existing in good standing
as a mutual savings and loan association under the laws of the United
States, each with full power and authority to own its properties and
conduct its business as described in the Prospectus;
(ii) the Association is a member of the Federal Home Loan Bank
of Atlanta, and the deposit accounts of the Association are insured by
the SAIF up to the applicable legal limits, and no action or
proceeding to suspend or revoke such membership or insurance coverage
is pending or, to such counsel's Actual Knowledge, threatened;
(iii) the activities of the Association as described in the
Prospectus are permitted under the HOLA and OTS Regulations;
<PAGE>
Trident Securities, Inc.
Page 17
(iv) to such counsel's actual knowledge, the Association has no
direct or indirect subsidiary corporations;
(v) the Company and the Association are each duly qualified to
do business and are in good standing as a foreign corporation in each
jurisdiction where the ownership or leasing of its properties or the
conduct of its business requires such qualification, unless the
failure to be so qualified would not have a material adverse effect on
the Company and the Association, taken as a whole.
(vi) to such counsel's Actual Knowledge, the Association has
obtained all licenses, permits and other governmental authorizations
required for the conduct of its business as described in the
Prospectus, except where the failure to obtain such licenses, permits
or governmental authorizations would not have a material adverse
effect on the financial condition, operations, business, properties or
assets of the Company and the Association, taken as a whole; to such
counsel's Actual Knowledge, all of the leases and subleases material
to the business of the Association under which the Association holds
properties are in full force and effect; to such counsel's Actual
Knowledge, the Association is not in violation of its charter or
bylaws;
(vii) the Plan has been duly adopted and approved by the Boards
of Directors of the Association and the Company and the members of the
Association; the Plan complies with, and to such counsel's Actual
Knowledge, the Conversion has been effected in all material respects
in accordance with, the HOLA and the OTS Regulations and applicable
OTS approvals issued thereunder; to such counsel's Actual Knowledge,
all of the terms, conditions, requirements and provisions with respect
to the Plan and the Conversion imposed by the OTS, except with respect
to the Conversion Application (which is covered by opinion (xix)
below) and the filing or submission of certain required post-
Conversion reports or other materials by the Company or the
Association, have been complied with by the Company and the
Association; and, to such counsel's Actual Knowledge, no person has
sought to obtain regulatory or judicial review of the final action of
the OTS in approving the Plan;
(viii) the Company has authorized Common Stock as set forth in
the Registration Statement and the Prospectus, and the description
thereof in the Registration Statement and the Prospectus is accurate
and complete in all material respects;
(ix) the issuance and sale of the Shares have been duly and
validly authorized by all necessary corporate action on the part of
the Company; the Shares, upon receipt of consideration and issuance in
accordance with the terms of the Plan
<PAGE>
Trident Securities, Inc.
Page 18
and this Agreement, will be validly issued, fully paid, nonassessable
and, except as disclosed in the Prospectus, free of preemptive rights,
and good title thereto shall be transferred by the Company free and
clear of all claims, encumbrances, security interests and liens
created by the Company;
(x) the certificates for the Shares are in due and proper form
and comply in all material respects with applicable Delaware law and
OTS Regulations;
(xi) the issuance and sale of the capital stock of the
Association to the Company have been duly authorized by all necessary
corporate action of the Association and the Company and have received
the approval of the OTS, and such capital stock, upon receipt of
payment and issuance in accordance with the terms of the Plan, will be
validly issued, fully paid and nonassessable;
(xii) subject to the satisfaction of the conditions to the OTS
approval of the Conversion Application and the Holding Company
Application, no further approval, authorization, consent or other
order of any regulatory agency is required in connection with the
execution and delivery of this Agreement, the issuance and sale of the
Shares and the consummation of the Conversion, except with respect to
the issuance to the Association's Federal Stock Charter by the OTS,
and except as may be required under the "blue sky" securities laws of
various jurisdictions and the regulations of the NASD (as to which no
opinion need be rendered);
(xiii) the execution and delivery of this Agreement and the
consummation of the Conversion have been duly and validly authorized
by all necessary corporate action on the part of each of the Company
and the Association; and this Agreement is a legal, valid and binding
obligation of each of the Company and the Association, enforceable in
accordance with its terms (except as the enforceability thereof may be
limited by (i) bankruptcy, insolvency, moratorium, reorganization,
receivership, conservatorship or other similar laws relating to or
affecting the enforcement of creditors' rights generally or the rights
of creditors of depository institutions whose accounts are insured by
the FDIC or savings and loan holding companies the accounts of whose
subsidiaries are insured by the FDIC; (ii) general equity principles,
regardless of whether such enforceability is considered in a
proceeding in equity or at law, or (iii) laws relating to the safety
and soundness of insured depository institutions and their affiliates,
and except to the extent that the provisions of Sections 8 and 9
hereof may be unenforceable as against public policy or applicable
law, including but not limited to, Section 23A of the Federal Reserve
Act, as amended);
(xiv) except as set forth in the Prospectus, there are no legal
or governmental proceedings pending or, to such counsel's Actual
Knowledge,
<PAGE>
Trident Securities, Inc.
Page 19
threatened against or involving the assets of the Company or the
Association which would have a material adverse effect on the Company
and the Association, taken as a whole (provided that for this purpose
such counsel need not regard any litigation or governmental procedure
to be "threatened" unless the potential litigant or government
authority has manifested to the management of the Company or the
Association, or to such counsel, a present intention to initiate such
litigation or proceeding);
(xv) the statements in the Prospectus under the captions
"Regulation," "Taxation," "Dividend Policy," "Restrictions on
Acquisition of the Holding Company" and "Description of Capital Stock
of the Holding Company," insofar as they are, or refer to, statements
of federal law or legal conclusions (excluding financial or
statistical data or stock valuation information included therein, as
to which an opinion need not be expressed), have been prepared or
reviewed by such counsel and are accurate and complete in all material
respects;
(xvi) the Form AC has been approved by the OTS, and the
Prospectus and the Proxy Statement have been authorized for use by the
OTS; the Registration Statement has been declared effective by the
Commission; and no proceedings are pending by or before the Commission
or the OTS seeking to revoke or rescind the orders declaring the
Registration Statement effective or approving the Conversion
Application or, to such counsel's Actual Knowledge, are contemplated
or threatened (provided that for this purpose such counsel need not
regard any litigation or governmental procedure to be "threatened"
unless the potential litigant or government authority has manifested
to the management of the Company or the Association, or to such
counsel, a present intention to initiate such litigation or
proceeding);
(xvii) the execution and delivery of this Agreement and the
consummation of the Conversion by the Company and the Association do
not conflict with or result in a breach of the charter, certificate of
incorporation or bylaws of the Company or the Association (in either
mutual or stock form), or, to such counsel's Actual Knowledge,
constitute a breach of or default (or an event which, with notice or
lapse of time or both, would constitute a default) under, give rise to
any right of termination, cancellation or acceleration contained in,
or result in the creation or imposition of any lien, charge or other
encumbrance upon any of the properties or assets of the Company or the
Association pursuant to any of the terms, provisions or conditions of,
any material agreement, contract, indenture, bond, debenture, note,
instrument or obligation to which the Company or the Association is a
party (other than the establishment of the liquidation account
pursuant to the Plan) or violate any governmental license or permit or
any enforceable published law, administrative regulation or order or
court order, writ, injunction or decree (subject to the
<PAGE>
Trident Securities, Inc.
Page 20
satisfaction of certain conditions imposed by the OTS in connection
with its approval of the Conversion Application and the Holding
Company Application), which breach, default, encumbrance or violation
would have a material adverse effect on the financial condition,
operations, business, assets or properties of the Company and the
Association taken as a whole;
(xviii) to such counsel's Actual Knowledge, there has been no
breach of any provision of the Company's or the Association's charter,
certificate of incorporation or bylaws or breach or default (or the
occurrence of any event which, with notice or lapse of time or both,
would constitute a default) by the Company or the Association under
any agreement, contract, indenture, bond, debenture, note, instrument
or obligation to which the Company or the Association is a party or by
which any of them or any of their respective assets or properties may
be bound, which breach or default would have a material adverse effect
on the financial condition, operations, business, assets or properties
of the Company and the Association, taken as a whole;
(xix) at the time the Conversion Application was approved by
the OTS and the Registration Statement was declared effective by the
Commission, the Conversion Application and the Registration Statement
(including the Prospectus and the Proxy Statement contained therein),
complied as to form in all material respects with the requirements of
the Securities Act, the HOLA, the Securities Act Regulations and the
OTS Regulations, as the case may be (except as to information provided
in writing by Trident with respect to Trident included therein and
financial statements, notes to financial statements, financial tables
and other financial and statistical data and stock valuation
information included therein, as to which no opinion need be
rendered); to such counsel's Actual Knowledge, all documents and
exhibits required to be filed with the Conversion Application and the
Registration Statement have been so filed; and the descriptions in the
Conversion Application and the Registration Statement of such
documents and exhibits are accurate and complete in all material
respects; and
(xx) upon the effectiveness of the Association's stock
charter and bylaws in accordance with applicable regulations and
completion of the sale by the Company of the Shares as contemplated by
the Prospectus and the Plan, (i) the Association will be converted to
a permanent capital stock savings bank under the laws of the United
States with full power and authority to own its property and conduct
its business as described in the Prospectus, and (ii) all of the
outstanding capital stock of the Association will be owned of record
and, to such counsel's Actual Knowledge, beneficially by the Company,
free and clear of all liens, charges, encumbrances and restrictions.
<PAGE>
Trident Securities, Inc.
Page 21
In rendering such opinions, such counsel may rely as to certain
matters of fact on certificates of executive officers and directors of the
Company and the Association and certificates of public officials delivered
pursuant hereto. Such counsel may assume that any agreement is the valid
and binding obligation of any parties to such agreement other than the
Company and the Association. The opinion of Breyer & Aguggia shall cover
matters governed by federal law and, Delaware General Corporation Law and,
the laws of the state of South Carolina. With respect to matters of South
Carolina law, such counsel may rely on the Opinion of qualified local
counsel, which opinion shall be in form and substance satisfactory to
Trident and its counsel. The opinion of Breyer & Aguggia shall be governed
by, and interpreted in accordance with, the Legal Opinion Accord ("Accord")
of the ABA Section of Business Law (1991), and, as a consequence,
references in such opinion to such counsel's "Actual Knowledge" shall be as
such term is defined in the Accord (or knowledge based on certificates).
For purposes of such opinion, no proceeding shall be deemed to be pending,
no order or stop order shall be deemed to be issued, and no action shall be
deemed to be instituted unless, in each case, a director or executive
officer of the Company or the Association, or its counsel, shall have
received a copy of such proceeding, order, stop order or action. Such
opinion may be limited to statutes, regulations and judicial
interpretations and to facts as they exist as of the date of such opinions.
In rendering such opinion, such counsel need assume no obligation to revise
or supplement it should such statutes, regulations and judicial
interpretations be changed by legislative or regulatory action, judicial
decision or otherwise. Such counsel need express no view, opinion or
belief with respect to whether any proposed or pending legislation, if
enacted, or any proposed or pending regulations or policy statements issued
by any regulatory agency, whether or not promulgated pursuant to any such
legislation, would affect the validity of the execution and delivery by the
Company and the Association of this Agreement or the issuance of the
Shares.
(b) At the Closing Date, Trident shall receive the letter of Breyer
& Aguggia, special counsel for the Company and the Association, dated the
Closing Date, addressed to Trident, in form and substance reasonably
satisfactory to counsel for Trident and to the effect that: (i) based on
such counsel's participation in conferences with representatives of the
Company, the Association, its counsel, the independent appraiser, the
independent certified public accountants, Trident and its counsel, review
of documents and applicable law (including the requirements of Form S-1)
and the experience such counsel has gained in its practice under the
Securities Act (relying as to factual matters on certificates of officers
and other written factual representations by the Company and the
Association), nothing has come to such counsel's attention that would lead
it to believe that the Registration Statement, as amended or supplemented
(except as to information in respect of Trident contained therein and
except as to the financial statements, notes to financial statements,
financial tables and other financial and statistical data and stock
valuation information contained therein, as to which such counsel need
express no view), at the time it became effective contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated
<PAGE>
Trident Securities, Inc.
Page 22
therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading, and that the
Prospectus, as amended or supplemented (except as to information in respect
of Trident contained therein and except as to financial statements, notes
to financial statements, financial tables and other financial and
statistical data and stock valuation information contained therein as to
which such counsel need express no view), at the time the Prospectus was
filed with the Commission under Rule 424(b) of the Securities Act
regulations and at the Closing Date, contained any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading (in issuing such letter, such counsel may indicate
that it has not confirmed the accuracy or completeness of or otherwise
verified the factual information contained in the Registration Statement or
the Prospectus and that it does not assume any responsibility for the
accuracy or completeness thereof.)
(c) Counsel for Trident shall have been furnished such documents as
they reasonably may require for the purpose of enabling them to review or
pass upon the sale of the Shares as herein contemplated and related
proceedings, and for the purpose of evidencing the accuracy, completeness
or satisfaction of any of the representations, warranties or conditions
herein contained, including but not limited to, resolutions of the Board of
Directors of the Company and the Association regarding the authorization of
this Agreement and the transactions contemplated hereby.
(d) Prior to and at the Closing Date, in the reasonable opinion of
Trident, (i) there shall have been no material adverse change in the
financial condition, business, operations, assets or properties of the
Company and the Association, taken as a whole, since the latest date as of
which such condition is set forth in the Prospectus, except as referred to
or contemplated therein; (ii) there shall have been no transaction entered
into by the Company or the Association after the latest date as of which
the financial condition of the Company or the Association is set forth in
the Prospectus other than transactions referred to or contemplated therein,
transactions in the ordinary course of business, and transactions which are
not material to the Company and the Association, taken as a whole; (iii)
none of the Company or the Association shall have received from the OTS or
Commission any directive (oral or written) to make any change in the method
of conducting their respective businesses which is material to the business
of the Company and the Association, taken as a whole, with which they have
not complied; (iv) no action, suit or proceeding, at law or in equity or
before or by any federal or state commission, board or other administrative
agency, shall be pending or threatened against the Company or the
Association or affecting any of their respective assets, wherein an
unfavorable decision, ruling or finding would have a material adverse
effect on the business, operations, financial condition or income of the
Company and the Association, taken as a whole; and (v) the Shares shall
have been qualified or registered for offering and sale by the Company
under the securities or "blue sky" laws of such jurisdictions as Trident
and the Company shall have agreed upon.
<PAGE>
Trident Securities, Inc.
Page 23
(e) At the Closing Date, Trident shall receive a certificate of the
principal executive officer and the principal financial officer of each of
the Company and the Association, dated the Closing Date, to the effect
that: (i) they have examined the Prospectus and, the Prospectus does not
contain an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading with respect to
the Company or the Association; (ii) since the date the Prospectus became
authorized for final use, no event has occurred which should have been set
forth in an amendment or supplement to the Prospectus which has not been so
set forth, including specifically, but without limitation, any material
adverse change in the business, financial condition, operations, assets or
properties of the Company or the Association and, the conditions set forth
in clauses (ii) through (iv) inclusive of subsection (d) of this Section 7
have been satisfied; (iii) no order has been issued by the Commission or
the OTS to suspend the Offerings or the effectiveness of the Prospectus,
and, to the best knowledge of such officers, no action for such purposes
has been instituted or threatened by the Commission or the OTS; (iv) to the
best knowledge of such officers, no person has sought to obtain review of
the final actions of the OTS approving the Plan; and (v) all of the
representations and warranties contained in Section 2 of this Agreement are
true and correct, with the same force and effect as though expressly made
on the Closing Date.
(f) At the Closing Date, Trident shall receive, among other
documents, (i) copies of the letters from the OTS authorizing the use of
the Prospectus and the Proxy Statement, (ii) a copy of the order of the
Commission declaring the Registration Statement effective; (iii) copy of
the certificate from the OTS evidencing the corporate existence of the
Association; (iv) copy of the certificate from the FDIC evidencing the
insured status of the Association, (v) a copy of the letter from the
appropriate Delaware authority evidencing the incorporation (and, if
generally available from such authority, good standing) of the Company;
(vi) a copy of the Company's certificate of incorporation certified by the
appropriate Delaware governmental authority; and, (vii) if available, a
copy of the letter from the OTS approving the Association's Federal Stock
Charter.
(g) As soon as available after the Closing Date, Trident shall
receive a certified copy of the Association's Federal Stock Charter as
executed by the OTS.
(h) Concurrently with the execution of this Agreement, Trident
acknowledges receipt of a letter from Deloitte & Touche LLP, independent
certified public accountants, addressed to Trident and the Company, in
substance and form reasonably satisfactory to counsel for Trident, with
respect to the consolidated financial statements of the Association and
certain financial information contained in the Prospectus.
(i) At the Closing Date, Trident shall receive a letter in form and
substance reasonably satisfactory to counsel for Trident from Deloitte &
Touche LLP, independent
<PAGE>
Trident Securities, Inc.
Page 24
certified public accountants, dated the Closing Date and addressed to
Trident and the Company, confirming the statements made by them in the
letter delivered by them pursuant to the preceding subsection as of a
specified date not more than five (5) days prior to the Closing Date.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are, in the reasonable
opinion of Trident and its counsel, satisfactory to Trident and its counsel.
Any certificates signed by an officer or director of the Company or the
Association prepared for Trident's reliance and delivered to Trident or to
counsel for Trident shall be deemed a representation and warranty by the Company
and the Association to Trident as to the statements made therein. If any
condition to Trident's obligations hereunder to be fulfilled prior to or at the
Closing Date is not so fulfilled, Trident may terminate this Agreement or, if
Trident so elects, may waive in writing any such conditions which have not been
fulfilled, or may extend the time of their fulfillment.
8. Indemnification.
---------------
(a) The Company and the Association jointly and severally agree to
indemnify and hold harmless Trident, its officers, directors and employees and
each person, if any, who controls Trident within the meaning of Section 15 of
the Securities Act or Section 20(a) of the Exchange Act, against any and all
loss, liability, claim, damage and expense whatsoever and shall further promptly
reimburse such persons for any legal or other expenses reasonably incurred by
each or any of them in investigating, preparing to defend or defending against
any action, proceeding or claim (whether commenced or threatened) arising out of
or based upon (A) any untrue or alleged untrue statement of a material fact or
the omission or alleged omission of a material fact required to be stated or
necessary to make the statements, in light of the circumstances under which they
were made, not misleading in (i) the Registration Statement or the Prospectus or
(ii) any application (including the Form AC) or other document or communication
(in this Section 8 collectively called "Application") prepared or executed by or
on behalf of the Company, the Association or based upon written information
furnished by or on behalf of the Company or the Association, filed in any
jurisdiction to register or qualify the Shares under the securities laws thereof
or filed with the OTS or Commission with respect to the offering of the Shares,
unless such statement or omission was made in reliance upon and in conformity
with information furnished in writing to the Company or the Association with
respect to Trident by or on behalf of Trident expressly for use in the
Prospectus or any amendment or supplement thereof or in any Application, as the
case may be, or (B) the Conversion or other actions taken by Trident where
acting as an agent of the Company or the Association; provided, however, that
such indemnification shall be unavailable if such action, proceeding or claim
arises as a result of Trident's gross negligence, bad faith or willful
misconduct.
(b) The Company shall indemnify and hold Trident harmless for any
liability whatsoever arising out of (i) the Allocation Instructions or (ii) any
records of Eligible Account Holders,
<PAGE>
Trident Securities, Inc.
Page 25
Supplemental Eligible Account Holders and Other Members (as those terms are
defined in the Plan) delivered to Trident by the Association or its agents for
use during the Conversion.
(c) Trident agrees to indemnify and hold harmless the Company and the
Association, their officers, directors and employees and each person, if any,
who controls the Company and the Association within the meaning of Section 15 of
the Securities Act or Section 20(a) of the Exchange Act, to the same extent as
the foregoing indemnity from the Company and the Association to Trident, but
only with respect to statements or omissions, if any, made in the Prospectus or
any amendment or supplement thereof, in any Application or to a purchaser of the
Shares in reliance upon, and in conformity with, information furnished in
writing to the Company or the Association with respect to Trident by or on
behalf of Trident expressly for use in the Prospectus or any amendment or
supplement thereof or in any Application.
(d) Promptly after receipt by an indemnified party under this Section 8 of
notice of any action, proceeding or claim (whether commenced or threatened) such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party of such
action, proceeding or claim; but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section 8. In case any such action
is brought against any indemnified party, and it notifies the indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with the other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section 8 for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than the
reasonable cost of investigation except as otherwise provided herein. In the
event the indemnifying party elects to assume the defense of any such action and
retain counsel acceptable to the indemnified party, the indemnified party may
retain additional counsel, but shall bear the fees and expenses of such counsel
unless (i) the indemnifying party shall have specifically authorized the
indemnified party to retain such counsel or (ii) the parties to such suit
include such indemnifying party and the indemnified party, and such indemnified
party shall have been advised by counsel that one or more material legal
defenses may be available to the indemnified party which may not be available to
the indemnifying party, in which case the indemnifying party shall not be
entitled to assume the defense of such suit notwithstanding the indemnifying
party's obligation to bear the fees and expenses of such counsel. In no event
shall the indemnifying parties be liable for the fees and expenses of more than
one separate firm of attorneys (and any special counsel that said firm may
retain) for all indemnified parties in connection with any one action,
proceeding, claim or suit or separate but similar or related actions,
proceedings or claims in the same jurisdiction arising out of the same general
allegations or circumstances. An indemnifying party against whom indemnity may
be sought shall not be liable to indemnify an indemnified party under this
Section 8 if any settlement of any such action is effected without such
indemnifying party's consent. To the extent applicable, this Section 8 is
<PAGE>
Trident Securities, Inc.
Page 26
subject to and limited by public policy and the provisions of applicable law,
including but not limited to, Section 23A.
9. Contribution. In order to provide for just and equitable contribution
------------
in circumstances in which the indemnity agreement provided for in Section 8
above is for any reason held to be unavailable to Trident, the Company and/or
the Association other than in accordance with its terms, the Company and the
Association or Trident shall contribute to the aggregate losses, liabilities,
claims, damages, and expenses of the nature contemplated by said indemnity
agreement incurred by the Company and the Association or Trident (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Association on the one hand and Trident on the other from the
offering of the Shares or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above, but also the
relative fault of the Company or the Association on the one hand and Trident on
the other hand in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. The relative benefits received by the
Company and the Association on the one hand and Trident on the other shall be
deemed to be in the same proportion as the total net proceeds from the
Conversion received by the Company and the Association bear to the total fees
received by Trident under this Agreement. The relative fault of the Company or
the Association on the one hand and Trident on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Association or by Trident
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Association and Trident agree that it would not be just
and equitable if contribution pursuant to this Section 9 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
the indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 9, Trident
shall not be required to contribute any amount in excess of the amount by which
fees owed Trident pursuant to this Agreement exceeds the amount of any damages
which Trident has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. To the extent applicable, this
Section 9 is subject to and limited by public policy and the provisions of
applicable law, including but not limited to, Section 23A.
<PAGE>
Trident Securities, Inc.
Page 27
10. Survival of Agreements, Representations and Indemnities. The
--------------------------------------------------------
respective indemnities of the Company and the Association and Trident and the
representation and warranties of the Company and the Association and of Trident
set forth in or made pursuant to this Agreement shall remain in full force and
effect, regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of Trident or the Company or the Association
or any controlling person or indemnified party referred to in Section 8 hereof,
and shall survive any termination or consummation of this Agreement and/or the
issuance of the Shares, and any legal representative of Trident, the Company,
the Association and any such controlling persons shall be entitled to the
benefit of the respective agreements, indemnities, warranties and
representations.
11. Termination. Trident may terminate this Agreement by giving the
-----------
notice indicated below in this Section at any time after this Agreement becomes
effective as follows:
(a) If any domestic or international event or act or occurrence has
materially disrupted the United States securities markets such as to make it, in
Trident's reasonable opinion, impracticable to proceed with the offering of the
Shares; or if trading on the New York Stock Exchange shall have suspended; or if
the United States shall have become involved in a war or major hostilities; or
if a general banking moratorium has been declared by a state or federal
authority which has material effect on the Association or the Conversion; or if
a moratorium in foreign exchange trading by major international banks or persons
has been declared; or if there shall have been a material change in the
capitalization, condition or business of the Company, or if the Association
shall have sustained a material or substantial loss by fire, flood, accident,
hurricane, earthquake, theft, sabotage or other calamity or malicious act,
whether or not said loss shall have been insured; or if there shall have been a
material change in the condition or prospects of the Company or the Association.
(b) Any party hereto may terminate this Agreement by giving notice
pursuant to Section 12 hereof of a material breach of this Agreement by the
other party at any time after this Agreement becomes effective.
(c) If this Agreement is terminated as provided in this Section 11, the
party terminating this Agreement shall notify the non-terminating party promptly
by telephone or telegram, confirmed by letter.
(d) If this Agreement is terminated by Trident for any of the reasons set
forth in subsection (a) above, and to fulfill its obligations, if any, pursuant
to Sections 3, 6, 8(a) and 9 of this Agreement and upon demand, the Company and
the Association shall pay Trident the full amount so owing thereunder.
(e) The Association may terminate the Conversion in accordance with the
terms of the Plan. Such termination shall be without liability to any party,
except that the Company and the Association shall be required to fulfill their
obligations pursuant to Sections 3(b), 3(c), 6, 8(a), 9 and 10 of this
Agreement.
<PAGE>
Trident Securities, Inc.
Page 28
12. Notices. All communications hereunder, except as herein otherwise
-------
specifically provided, shall be in writing and if sent to Trident shall be
mailed, delivered or telegraphed and confirmed to Trident Securities, Inc., 4601
Six Forks Road, Suite 400, Raleigh, North Carolina 27609, Attention: Mr. R. Lee
Burrows, Jr. (with a copy to Luse Lehman Gorman Pomerenk & Schick, 5335
Wisconsin Avenue, N.W., Suite 400, Washington, D.C. 20015, Attention: Robert I.
Lipsher, Esquire) and if sent to the Company or the Association, shall be
mailed, delivered or telegraphed and confirmed to Heritage Bancorp, Inc. or
Heritage Federal Savings & Loan Association, 201 W. Main Street, Laurens, South
Carolina 29360, Attention: J. Edward Wells, President (with a copy to Breyer &
Aguggia, 1300 I Street, N.W., Suite 470 East, Washington, D.C. 20005, Attention
Paul M. Aguggia, Esquire).
13. Parties. This Agreement shall inure solely to the benefit of, and
-------
shall be binding upon, Trident, the Company, the Association and the controlling
and other persons referred to in Section 8 hereof, and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained.
14. Construction. Unless preempted by federal law, this Agreement shall
------------
be governed by and construed in accordance with the substantive laws of North
Carolina.
15. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute but one and the same instrument.
<PAGE>
Trident Securities, Inc.
Page 29
Please acknowledge your agreement to the foregoing by signing below and
returning to the Company one copy of this letter.
HERITAGE BANCORP, INC.
By:
------------------------------------------
J. Edward Wells
President and Chief Executive Officer
HERITAGE FEDERAL SAVINGS & LOAN ASSOCIATION
By:
------------------------------------------
J. Edward Wells
President and Chief Executive Officer
Agreed to and accepted as of
the date first written above:
TRIDENT SECURITIES, INC.
By:
------------------------------------
Name:
Title:
<PAGE>
[LETTERHEAD OF BREYER & AGUGGIA APPEARS HERE]
EXHIBIT 8.1
January 12, 1998
Boards of Directors
Heritage Federal Savings &
Loan Association
Heritage Bancorp, Inc.
201 W. Main Street
Laurens, South Carolina 29360
Re: Certain Federal Income Tax Consequences Relating to
Proposed Holding Company Conversion of Heritage Federal
Savings & Loan Association
-------------------------------------------------------
To the Board of Directors:
In accordance with your request, set forth herein is the opinion of
this firm relating to certain federal income tax consequences of (i) the
proposed conversion of Heritage Federal Savings & Loan Association (the
"Association") from a federally-chartered mutual savings and loan association to
a federally-chartered stock savings bank (the "Converted Association") (the
"Stock Conversion") and (ii) the concurrent acquisition of 100% of the
outstanding capital stock of the Converted Association by a parent holding
company formed at the direction of the Board of Directors of the Association and
to be known as Heritage Bancorp, Inc. (the "Holding Company").
For purposes of this opinion, we have examined such documents and
questions of law as we have considered necessary or appropriate, including but
not limited to, the Plan of Conversion as adopted by the Association's Board of
Directors on September 10, 1997, and subsequently amended on November 19, 1997
(the "Plan"); the federal mutual charter and bylaws of the Association; the
certificate of incorporation and bylaws of Holding Company; the Affidavit of
Representations dated January 9, 1998 provided to us by the Association and the
Holding Company (the "Affidavit"), and the Prospectus (the "Prospectus")
included in the Registration Statement on Form S-1 filed with the Securities and
Exchange Commission ("SEC") on December 10, 1997 (the "Registration Statement").
In such examination, we have assumed, and have not independently verified, the
genuineness of all signatures on original documents where
<PAGE>
Boards of Directors
Heritage Federal Savings &
Loan Association
Heritage Bancorp, Inc.
January 12, 1998
Page 2
due execution and delivery are requirements to the effectiveness thereof. Terms
used but not defined herein, whether capitalized or not, shall have the same
meaning as defined in the Plan.
BACKGROUND
----------
Based solely upon our review of such documents, and upon such
information as the Association has provided to us (which we have not attempted
to verify in any respect), and in reliance upon such documents and information,
we set forth herein a general summary of the relevant facts and proposed
transactions, qualified in its entirety by reference to the documents cited
above.
The Association is a federally-chartered mutual savings and loan
association which is in the process of converting to a federally-chartered stock
savings bank. The Association was initially chartered in 1948, and originally
known as Laurens Federal Savings & Loan Association. In 1977, the Association
changed its name to Heritage Federal Savings & Loan Association. The Association
is also a member of the Federal Home Loan Bank System and its deposits are
federally insured under the Savings Association Insurance Fund ("SAIF") of the
Federal Deposit Insurance Corporation. The Association operates out of its main
office in Laurens, South Carolina and branch offices in neighboring communities.
The Association's principal business is attracting retail deposits
from the general public and using those funds to originate residential mortgage
loans. At September 30, 1997, the Association had total assets of $247.5
million, deposits of $215.4 million and total equity of $29.2 million.
As a federally-chartered mutual savings and loan association, the
Association has no authorized capital stock. Instead, the Association, in mutual
form, has a unique equity structure. A savings depositor of the Association is
entitled to payment of interest on his account balance as declared and paid by
the Association, but has no right to a distribution of any earnings of the
Association except for interest paid on his deposit. Rather, such earnings
become retained earnings of the Association.
However, a savings depositor does have a right to share pro rata, with
--- ----
respect to the withdrawal value of his respective savings account, in any
liquidation proceeds distributed if the Association is ever liquidated. Savings
depositors and certain borrowers are members of the Association and thereby have
voting rights in the Association. Each savings depositor is entitled to cast
votes in proportion to the size of their account balances or fraction thereof
held in a withdrawable deposit account of the Association, and each borrower
member (hereinafter
<PAGE>
Boards of Directors
Heritage Federal Savings &
Loan Association
Heritage Bancorp, Inc.
January 12, 1998
Page 3
"borrower") is entitled to one vote in addition to the votes (if any) to which
such person is entitled in such borrower's capacity as a savings depositor of
the Association. All of the interests held by a savings depositor in the
Association cease when such depositor closes his accounts with the Association.
The Holding Company was incorporated in November 1997 under the laws
of the State of Delaware as a general business corporation in order to act as a
savings institution holding company. The Holding Company has an authorized
capital structure of 10 million shares of common stock and 250,000 shares of
preferred stock.
PROPOSED TRANSACTION
--------------------
Management of the Association believes that the Stock Conversion
offers a number of advantages which will be important to the future growth and
performance of the Converted Association in that it is intended to (i) provide
substantially increased capital for investment in its business to expand the
operations of the Converted Association; (ii) provide future access to capital
markets; (iii) enhance the ability to diversify its operations into new business
activities; and (iv) afford depositors and others the opportunity to become
stockholders of the Converted Association and thereby participate more directly
in any future growth of the Converted Association.
Accordingly, pursuant to the Plan, the Association will undergo the
Stock Conversion whereby it will be converted from a federally-chartered mutual
savings and loan association to a federally-chartered stock savings bank to be
known as Heritage Federal Bank. As part of the Stock Conversion, the Association
will amend its existing mutual savings and loan association charter and bylaws
to read in the form of a Federal Stock Charter and Bylaws. The Converted
Association will then issue to the Holding Company shares of the Converted
Association's common stock, representing all of the shares of capital stock to
be issued by the Converted Association in the Conversion, in exchange for
payment by the Holding Company of 50% of the net proceeds realized by the
Holding Company from such sale of its Common Stock, less amounts necessary to
fund the Employee Stock Ownership Plan of the Association, or such other
percentage as the Office of Thrift Supervision ("OTS") may authorize or require.
Also pursuant to the Plan, the Holding Company will offer its shares
of Common Stock for sale in a Subscription Offering and, if necessary, a Direct
Community Offering. The aggregate purchase price at which all shares of Common
Stock will be offered and sold pursuant to the Plan and the total number of
shares of Common Stock to be offered in the Conversion will be determined by the
Boards of Directors of the Association and the Holding Company on the
<PAGE>
Boards of Directors
Heritage Federal Savings &
Loan Association
Heritage Bancorp, Inc.
January 12, 1998
Page 4
basis of the estimated pro forma market value of the Converted Association as a
--- -----
subsidiary of the Holding Company. The estimated pro forma market value will be
--- -----
determined by an independent appraiser. Pursuant to the Plan, all such shares
will be issued and sold at a uniform price per share. The Stock Conversion,
including the sale of newly issued shares of the stock of the Converted
Association to the Holding Company, will be deemed effective concurrently with
the closing of the sale of the Common Stock.
Under the Plan and in accordance with regulations of the OTS, the
shares of Common Stock will first be offered through the Subscription Offering
pursuant to nontransferable subscription rights on the basis of preference
categories in the following order of priority:
(1) Eligible Account Holders;
(2) Tax-Qualified Employee Stock Benefit Plans of the
Association;
(3) Supplemental Eligible Account Holders; and
(4) Other Members.
Any shares of Common Stock not subscribed for in the Subscription
Offering may be offered in the Direct Community Offering in the following order
of priority:
(a) Natural persons and trust of natural persons who are residing
in the Local Community, consisting of Laurens, Anderson,
Greenwood and Greenville Counties, South Carolina; and
(b) The general public.
Any shares of Common Stock not subscribed for in the Direct Community
Offering may be offered to certain members of the general public on a best
efforts basis by a selling group of broker dealers in a Syndicated Community
Offering.
The Plan also provides for the establishment of a Liquidation Account
by the Converted Association for the benefit of all Eligible Account Holders and
any Supplemental Eligible Account Holders in an amount equal to the net worth of
the Association as of the date of the latest statement of financial condition
contained in the final prospectus issued in connection with the Conversion. The
establishment of the Liquidation Account will not operate to restrict the use or
application of any of the net worth accounts of the Converted Association. The
account holders will have an inchoate interest in a proportionate amount of the
Liquidation Account with
<PAGE>
Boards of Directors
Heritage Federal Savings &
Loan Association
Heritage Bancorp, Inc.
January 12, 1998
Page 5
respect to each savings account held and will be paid by the Converted
Association in event of liquidation prior to any liquidation distribution being
made with respect to capital stock.
Following the Stock Conversion, voting rights in the Converted
Association shall be vested in the sole holder of stock in the Converted
Association, which will be the Holding Company. Voting rights in the Holding
Company after the Stock Conversion will be vested in the holders of the Common
Stock.
The Stock Conversion will not interrupt the business of the
Association. The Converted Association will continue to engage in the same
business as the Association immediately prior to the Stock Conversion, and the
Converted Association will continue to have its savings accounts insured by the
SAIF. Each depositor will retain a withdrawable savings account or accounts
equal in dollar amount to, and on the same terms and conditions as, the
withdrawable account or accounts at the time of Stock Conversion except to the
extent funds on deposit are used to pay for Common Stock purchased in the Stock
Conversion. All loans of the Association will remain unchanged and retain their
same characteristics in the Converted Association.
The Plan must be approved by the OTS and by an affirmative vote of at
least a majority of the total votes eligible to be cast at a meeting of the
Association's members called to vote on the Plan.
Immediately prior to the Conversion, the Association will have a
positive net worth determined in accordance with generally accepted accounting
principles.
OPINION
-------
Based on the foregoing and in reliance thereon, and subject to the
conditions stated herein, it is our opinion that the following federal income
tax consequences will result from the proposed transaction.
1. The Stock Conversion will constitute a reorganization within
the meaning of Section 368(a)(1)(F) of the Internal Revenue
Code of 1986, as amended (the "Code"), and no gain or loss
will be recognized to either the Association or the Converted
Association as a result of the Stock Conversion (see Rev.
---
Rul. 80-105, 1980-1 C.B. 78).
<PAGE>
Boards of Directors
Heritage Federal Savings &
Loan Association
Heritage Bancorp, Inc.
January 12, 1998
Page 6
2. The assets of the Association will have the same basis in the
hands of the Converted Association as in the hands of the
Association immediately prior to the Stock Conversion
(Section 362(b) of the Code).
3. The holding period of the assets of the Association to be
received by the Converted Association will include the period
during which the assets were held by the Association prior to
the Stock Conversion (Section 1223(2) of the Code).
4. No gain or loss will be recognized by the Converted
Association on the receipt of money from the Holding Company
in exchange for shares of common stock of the Converted
Association (Section 1032(a) of the Code). The Holding
Company will be transferring solely cash to the Converted
Association in exchange for all the outstanding capital stock
of the Converted Association and therefore will not recognize
any gain or loss upon such transfer. (Section 351(a) of the
Code; see Rev. Rul. 69-357, 1969-1 C.B. 101).
5. No gain or loss will be recognized by the Holding Company
upon receipt of money from stockholders in exchange for
shares of Common Stock (Section 1032(a) of the Code).
6. No gain or loss will be recognized by the Eligible Account
Holders and Supplemental Eligible Account Holders of the
Association upon the issuance 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; Treas. Reg.
(S)1.1001-1(a)).
7. The tax basis of the Eligible Account Holders' and
Supplemental Eligible Account Holders' savings accounts in
the Converted Association received as part of the Stock
Conversion will equal the tax basis of such account holders'
corresponding deposit accounts in the Association surrendered
in exchange therefor (Section 1012 of the Code).
8. Gain or loss, if any, will be realized by the deposit account
holders of the Association upon the constructive receipt of
their interest in the liquidation account of the Converted
Association and on the nontransferable subscription rights to
purchase stock of the Holding Company in exchange for their
proprietary rights in the Association. Any such gain will be
recognized by the Association deposit
<PAGE>
Boards of Directors
Heritage Federal Savings &
Loan Association
Heritage Bancorp, Inc.
January 12, 1998
Page 7
account holders, but only in an amount not in excess of the
fair market value of the liquidation account and
subscription rights received. (Section 1001 of the Code;
Paulsen v. Commissioner, 469 U.S. 131 (1985); Rev. Rul.
-----------------------
69-646, 1969-2 C.B. 54.)
9. The basis of each account holder's interest in the
Liquidation Account received in the Stock Conversion and to
be established by the Converted Association pursuant to the
Stock Conversion will be equal to the value, if any, of that
interest.
10. No gain or loss will be recognized upon the exercise of a
subscription right in the Stock Conversion. (Rev. Rul.
56-572, 1956-2 C.B. 182).
11. The basis of the Common Stock acquired in the Stock
Conversion will be equal to the purchase price of such stock,
increased, in the case of such stock acquired pursuant to the
exercise of subscription rights, by the fair market value, if
any, of the subscription rights exercised (Section 1012 of
the Code).
12. The holding period of the Common Stock acquired in the Stock
Conversion pursuant to the exercise of subscription rights
will commence on the date on which the subscription rights
are exercised (Section 1223(6) of the Code). The holding
period of the Common Stock acquired in the Community Offering
will commence on the date following the date on which such
stock is purchased (Rev. Rul. 70-598, 1970-2 C.B. 168; Rev.
Rul. 66-97, 1966-1 C.B. 190).
SCOPE OF OPINION
----------------
Our opinion is limited to the federal income tax matters described
above and does not address any other federal income tax considerations or any
federal, state, local, foreign or other tax considerations. If any of the
information upon which we have relied is incorrect, or if changes in the
relevant facts occur after the date hereof, our opinion could be affected
thereby. Moreover, our opinion is based on the case law, Code, Treasury
Regulations thereunder and Internal Revenue Service rulings as they now exist.
These authorities are all subject to change, and such change may be made with
retroactive effect. We can give no assurance that, after such change, our
opinion would not be different. We undertake no responsibility to update or
supplement our opinion. This opinion is not binding on the Internal Revenue
Service and there can be no assurance, and none is hereby given, that the
Internal Revenue Service will not take a position contrary to one or more of the
positions reflected in the foregoing opinion, or that our opinion will be upheld
by the courts if challenged by the Internal Revenue Service.
<PAGE>
Boards of Directors
Heritage Federal Savings &
Loan Association
Heritage Bancorp, Inc.
January 12, 1998
Page 8
Regarding the valuation of subscription rights, we understand that the
Association has received the opinion of RP Financial, LC. dated November 21,
1997 to the effect that the subscription rights have no ascertainable market
value. We express no opinion regarding the valuation of the subscription rights.
CONSENTS
--------
We hereby consent to the filing of this opinion with the OTS as an
exhibit to the Application H-(e)1-S filed by the Holding Company with the OTS in
connection with the Conversion and the reference to our firm in the Application
H-(e)1-S under Item 110.55 therein.
We also hereby consent to the filing of this opinion with the SEC and
the OTS as exhibits to the Registration Statement and the Association's
Application for Conversion on Form AC ("Form AC"), respectively, and the
reference on our firm in the Prospectus, which is a part of both the
Registration Statement and the Form AC, under the headings "THE CONVERSION --
Effect of Conversion to Stock Form on Depositors and Borrowers of the
Association -- Tax Effects" and "LEGAL AND TAX OPINIONS."
Very truly yours,
/s/ Breyer & Aguggia
BREYER & AGUGGIA
<PAGE>
[LETTERHEAD OF DELOITTE & TOUCHE LLP APPEARS HERE]
Exhibit 8.2
January 21, 1998
Boards of Directors
Heritage Federal Savings and
Loan Association
Heritage Bancorp, Inc.
201 W. Main Street
Laurens, South Carolina 29360
Re: State of South Carolina Income Tax Opinion regarding the conversion of
Heritage Federal Savings and Loan Association from a federally-
chartered mutual savings and loan association to a federally-chartered
stock savings and loan association.
Dear 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 Heritage Federal Savings and Loan Association from a federally-
chartered mutual savings and loan association (the "Association") to a
federally-chartered stock savings and loan association (the "Converted
Association"). Concurrent with the Stock Conversion, all of the Converted
Association's to-be-issued capital stock will be acquired by Heritage Bancorp,
Inc. (the "Holding Company"), a newly-organized Delaware-chartered corporation.
The Holding Company, which has an authorized capital structure of 10 million
shares of common stock and 250,000 shares of preferred stock, will, in
accordance with the Plan of Conversion, offer its shares of common stock for
sale in a Subscription Offering and, if necessary, a Direct Community Offering.
FACTS
- -----
For purposes of our opinion, we have relied on: (1) the facts and assumptions
set forth in and the opinion rendered in the Federal Income Tax Opinion relating
to the conversion of Heritage Federal Savings and Loan Association 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 January 12, 1998 as prepared by the law firm of
Breyer & Aguggia, Washington, D.C. including the Affidavit of Representation
dated January 9, 1998, as referenced in the Federal Income Tax Opinion; (2)
Deloitte Touche
Tohmatsu
International
<PAGE>
January 21, 1998
Board of Directors
Page 2
the letter of representation from Heritage Federal Savings & Loan Association
and Heritage Bancorp, Inc. dated January 14, 1998 (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 September 10, 1997 and
subsequently amended on November 19, 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, 1996. . . ."
Chapter 13 of Title 12 of the Code of Laws of South Carolina imposes an income
tax on associations which meet the qualified thrift lender test set forth in the
Financial Institutions Reform, Recovery and Enforcement Act of 1989 (P.L. 101-
73), as amended. With respect to such taxation, Section 12-13-20 provides in
part:
"The term 'net income,' as used in this chapter, [Income Tax
on Building and Loan Associations] means taxable income
as determined for a regular corporation in Chapter 7 [now
Chapter 6 as discussed below] of this title after deducting
all earnings accrued, paid, credited, or set aside for the benefit
of holders of savings or investment accounts, any additions to
reserves which are required by law, regulation, or direction
of appropriate supervisory agencies, and a bad debt deduction. . ."
<PAGE>
January 21, 1998
Board of Directors
Page 3
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 Chapters
6, 8, 20, . . . of Title 12 of the 1976 Code."
The Act does not contain specific Sections which are identical to the Internal
Revenue Code but merely adopts the entire Internal Revenue Code with certain
exclusions then makes specific adjustments thereto.
As indicated above, taxable income as determined under Chapter 6 is determined
under the Internal Revenue Code as of December 31, 1996, except to the extent
the Internal Revenue Code as of December 31, 1996 is modified or specifically
not adopted; therefore, taxable income under Chapter 13 is also determined under
the Internal Revenue Code as of December 31, 1996. Since Association and
Holding Company are taxed under Chapter 6 or Chapter 13 of the South Carolina
Code, income tax transactions involving these corporations are taxed based on
the Internal Revenue Code as of December 31, 1996, except to the extent it is
modified or specifically not adopted. The South Carolina General Assembly, as
of January 21, 1998, has not adopted the changes in the Internal Revenue Code
passed by Congress under the provisions of the Taxpayer Relief Bill of 1997. We
have reviewed the changes to Sec. 368 of the Internal Revenue Code and have
determined that the changes to this Section, even if adopted by the South
Carolina General Assembly, would not affect this Opinion on the South Carolina
income tax consequences of the Stock Conversion.
None of the Internal Revenue Code sections excluded from South Carolina law by
Section 12-6-50 of the Code of Laws of South Carolina are relied upon in the
opinion below, and none of the Code sections presented is modified by Chapter 6
of Title 12.
REPRESENTATIONS
- ---------------
We have received a signed letter, dated January 14, 1998, containing certain
representations of management of the Association and the Holding Company in
connection with this opinion.
<PAGE>
January 21, 1998
Board of Directors
Page 4
This letter is attached hereto as Exhibit A and is incorporated herein by
reference and shall be considered an integral part of this opinion.
OPINION
- -------
Based on the facts and assumptions set forth in and the opinions rendered in the
Breyer & Aguggia Federal Income Tax Opinion letter, all of which are
incorporated herein by reference, and our review and analysis of the Code of
Laws of South Carolina (1976, as amended), the Letter of Representation, and the
Plan of Conversion, it is our opinion that, provided the 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).
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
<PAGE>
January 21, 1998
Board of Directors
Page 5
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 adjusted basis, 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:
<PAGE>
January 21, 1998
Board of Directors
Page 6
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.
If there are any significant changes of the foregoing tax authorities (for which
we have no responsibility to advise you), it may result in our opinion being
rendered invalid, or necessitate (upon your request) a reconsideration of the
opinion.
While this opinion represents our considered judgment as to the proper tax
treatment to the parties involved, it is not binding on South Carolina or the
state or federal courts.
This opinion letter is solely for your information, for the information of your
shareholders and for inclusion in certain filings with regard to the transaction
described herein as follows: (a) with the OTS as an exhibit to Application H-
(e)1-S filed by the Holding Company; (b) with the SEC as an exhibit to the
Registration Statement; and (c) with the OTS as an exhibit to the Association's
Application for Conversion. Other than the uses indicated in the preceding
sentence, our opinion may not be relied upon, distributed, or disclosed by
anyone without the prior written consent of Deloitte & Touche LLP.
Yours truly,
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
<PAGE>
EXHIBIT A
Heritage Bancorp, Inc.
Heritage Federal Savings & Loan Association
201 W. Main Street
Laurens, South Carolina 29360
January 14, 1998
Deloitte & Touche LLP
1200 NationsBank Plaza
7 North Laurens Street
Greenville, South Carolina 29601
Gentleman and Ladies:
We understand that Deloitte & Touche LLP is issuing an opinion letter regarding
the South Carolina income tax consequences of the conversion (the "Conversion")
of Heritage Federal Savings and Loan Association from a federally-chartered
mutual savings and loan association (the "Association") to a federally-chartered
stock savings and loan association (the "Converted Association"). Concurrent
with the Conversion, all of the Converted Association's to-be-issued common
stock will be acquired by Heritage Bancorp, Inc. (the "Holding Company"), a
newly-organized Delaware-chartered corporation. The Holding Company, which has
an authorized capital structure of 10 million shares of common stock and 250,000
shares of preferred stock, will, in accordance with the Plan of Conversion,
offer its shares of common stock for sale in a Subscription Offering and, if
necessary, a Direct Community Offering.
Your opinion is based upon certain assumptions of fact set forth in your letter,
certain of which you need us to confirm are true and correct.
We hereby represent and confirm to you as follows:
1. The Converted Association has no plan or intention to redeem or otherwise
acquire any of its stock issued in the proposed transaction.
2. The Holding Company has no plan or intention to redeem or otherwise acquire
any of its stock issued in the proposed transaction.
<PAGE>
January 14, 1998
Deloitte & Touche LLP
Page 2
3. Immediately following the consummation of the proposed transaction, the
Converted Association will possess the same assets and liabilities as the
Association held immediately prior to the proposed transaction, plus a
portion of the proceeds from the sale of the Holding Company stock by the
Holding Company. Assets used to pay expenses of the reorganization (without
reference to the expenses incurred in the distribution of the subscription
rights and public offering) and all distributions (except for regular,
normal interest payments made by the Association immediately preceding the
transaction) will in the aggregate constitute less than one percent of the
net assets of the Association and any such expenses and distributions will
be paid by the Holding Company and the Converted Association from the
proceeds of the subscription rights offering and public offering.
4. Following the Conversion, the Converted Association will continue to engage
in its business in substantially the same manner as engaged in by the
Association prior to the Conversion, and has no plan or intention to sell or
otherwise dispose of any of its assets, except in the ordinary course of
business.
5. The Association is not under any jurisdiction of a court in any Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").
6. The Holding Company has no plan or intention to sell or otherwise dispose of
the stock of the Converted Association received by it in the proposed
transaction. There is no plan or intention for Converted Association to be
liquidated or merged into another corporation following consummation of the
proposed transaction. Similarly, Holding Company is aware of no plan or
intention on the part of its shareholders to sell or otherwise dispose of
Holding Company Stock to be purchased in the proposed transaction.
7. Compensation to be paid to depositor-employees will be commensurate with
amounts paid to third parties bargaining at arm's length for similar
services.
8. The aggregate fair market value of the "qualifying deposits" (as that term
is defined in the Plan of Conversion) held by eligible account holders and
supplemental eligible account holders as of the close of business on the
eligibility record date and supplemental eligibility record date,
respectively, will equal or exceed 99% of the aggregate fair market value of
all savings accounts (including those accounts of less than $50) in the
Association as of the close of business on such date.
9. No shares of the Holding Company stock will be issued to or purchased by
depositor-employees at a discount or as compensation in the proposed
transaction.
10. No cash or property will be given to eligible account holders or
supplemental eligible account holders in lieu of (a) non-transferable
subscription rights, or (b) an interest in the liquidation account of the
Converted Association.
<PAGE>
January 14, 1998
Deloitte & Touche LLP
Page 3
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.
11. The Association, the Converted Association, and the Holding Company are
corporations within the meaning of Section 7701(a)(3) of the Code.
12. 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.
13. No eligible account holders or supplemental eligible account holders of
qualifying deposits will be excluded from participation in the liquidation
account.
14. The fair market value of the withdrawable savings accounts plus interests in
the liquidation account of the Converted Association to be constructively
received under the Plan of Conversion will in each instance be equal to the
fair market value of the withdrawable savings accounts of the Association
surrendered in exchange therefor. All proprietary rights in the Association
form an integral part of the withdrawable savings accounts being surrendered
in the exchange.
15. The Holding Company is not an investment company as described in Treasury
Regulation Section 1.351-1(c).
16. Immediately following the Conversion, the former depositors of the
Association will own all of the outstanding interests in the Converted
Association liquidation account and will own such interests solely by reason
of their ownership of deposits in the Association (including the attendant
rights to liquidation proceeds) immediately before the Conversion.
17. 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.
<PAGE>
January 14, 1998
Deloitte & Touche LLP
Page 4
18. 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,
HERITAGE BANCORP, INC.
By: /s/ J. Edward Wells
------------------------------------------
Title: President
---------------------------------------
HERITAGE FEDERAL SAVINGS AND LOAN ASSOCIATION
By: /s/ J. Edward Wells
------------------------------------------
Title: President
---------------------------------------
<PAGE>
EXHIBIT 10.4
CONVERSION APPRAISAL REPORT
HERITAGE BANCORP, INC.
PROPOSED HOLDING COMPANY FOR
HERITAGE FEDERAL SAVINGS AND LOAN ASSOCIATION
LAURENS, SOUTH CAROLINA
DATED AS OF:
NOVEMBER 28, 1997
PREPARED BY:
RP FINANCIAL, LC.
1700 NORTH MOORE STREET
SUITE 2210
ARLINGTON, VIRGINIA 22209
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
INTRODUCTION Name and Date of Agreement 1
SECTION 1 Definitions 1
SECTION 2 Administration of Plan by Committee 22
SECTION 3 Eligibility and Participation 30
SECTION 4 Employer Non-Elective Contributions
and Elective Contributions 32
SECTION 5 Allocation of Contributions and Forfeitures 37
SECTION 6 Top Heavy Provision and Administration 46
SECTION 7 Retirement Benefits 49
SECTION 8 Death Benefits 50
SECTION 9 Disability Benefits 51
SECTION 10 Benefits and Vesting Upon Termination of Employment
Other Than By Reason of Retirement, Death,
or Disability 52
SECTION 11 Annuity Requirements 54
SECTION 12 Distribution Requirements 54
SECTION 13 Valuation Upon Distribution 65
SECTION 14 Trustee 66
SECTION 15 Amendment and Termination of Plan 79
SECTION 16 Limitation on Benefits and Contributions 82
SECTION 17 Rollovers and Other Transfers 85
SECTION 18 Miscellaneous Provisions 85
SECTION 19 Voluntary Participant Contributions 87
SECTION 20 Participant Loans 87
SECTION 21 Hardship Distributions 87
SECTION 22 Cash or Deferred Limitations 88
SECTION 23 Investment Direction By Participant 103
</TABLE>
<PAGE>
HERITAGE FEDERAL SAVINGS & LOAN ASSOCIATION
401(k) PLAN
AND TRUST AGREEMENT
AGREEMENT made this 7th day of December, 1994, by and between HERITAGE
FEDERAL SAVINGS & LOAN ASSOCIATION, a savings & loan association organized and
existing under the laws of the United States of America, (hereinafter called
"Employer"), and DEBRA C. GARRETT, J. EDWARD WELLS and EDWIN I. SHEALY, as
Trustees of the Trust herein created, (hereinafter called "Trustee").
WHEREAS, Employer did adopt a 401(k) Profit-Sharing Plan and Trust
Agreement on December 9, 1986; and
WHEREAS, it is now deemed necessary to amend and restate said 401(k)
Profit-Sharing Plan and Trust Agreement.
NOW, THEREFORE, Employer and Trustee mutually do covenant and agree to
amend and restate said 401(k) Profit-Sharing Plan and Trust Agreement by
substituting in its entirety the following:
SECTION 1 - Definitions
--------- -----------
When used herein, the following terms shall have the indicated meanings,
unless the context clearly indicates otherwise:
1.1 "Account" or "Accounts" includes a Participant's Account for Employer
Non-Elective Contributions which do not satisfy the Code Sections 401(k)(2)(B)
and (C) Provisions, Account for Employer Non-Elective Contributions which
satisfy the Code Sections 401(k)(2)(B) and (C) Provisions, and the Participant's
Elective Account, unless the context indicates otherwise.
1
<PAGE>
1.2 "Accrued Benefit" shall mean the amount standing in a Participant's
Account (including his Non-Elective Account and Elective Account) as of any
particular date.
1.3 "Affiliated Employer" shall mean the Employer and any corporation
which is a member of a controlled group of corporations (as defined in Code
Section 414(b)) which includes the Employer; any trade or business (whether or
not incorporated) which is under common control (as defined in Code Section
414(c)) with the Employer; any organization (whether or not incorporated) which
is a member of an affiliated service group (as defined in Code Section 414(m))
which includes the Employer; and any other entity required to be aggregated with
the Employer pursuant to regulations under Code Section 414(o).
1.4 "Aggregate Account" shall mean, with respect to each Participant, the
value of all Accounts maintained on behalf of a Participant, whether
attributable to Employer or Employee contributions, subject to the Top Heavy
Provision and Administration Section.
1.5 "Anniversary Date" shall mean December 31.
1.6 "Annuity" or "Annuity Contract" shall mean a qualified,
nontransferable Annuity Contract.
1.7 "Authorized Leave of Absence" shall mean a temporary cessation of
active employment with the Employer pursuant to a nondiscriminatory policy,
provided the cessation was approved by the Employer and the Employee returns to
work for the Employer not later than the expiration of such approved cessation
of employment.
2
<PAGE>
1.8 "Beneficiary" or "Beneficiaries" shall mean such person or persons or
legal entity as may be designated by a Participant to receive benefits hereunder
after the Participant's death, or if the Participant fails to designate a
Beneficiary, then the estate of the Participant, except as otherwise provided in
the Death Benefits Section and Annuity Requirements Section where the
Participant's spouse is the required Beneficiary.
1.9 "Code" shall mean the Internal Revenue Code of 1986, and any
amendments thereto.
1.10 "Code Section 415 Compensation". shall mean:
(a) a Participant's wages, salaries, and fees for professional services,
and other amounts received (without regard to whether or not an amount
is paid in cash) for personal services actually rendered in the course
of employment with the Employer maintaining the Plan to the extent
that the amounts are includable in gross income (including, but not
limited to, commissions paid salesmen, compensation for services on
the basis of a percentage of profits, commissions on insurance
premiums, tips, bonuses, fringe benefits, reimbursements, and expense
allowances);
(b) in the case of a Participant who is an Employee within the meaning of
Code Section 401(c)(1) and the regulations thereunder, the
Participant's Earned income (as described in Code Section 401(c)(2)
and the regulations thereunder);
(c) amounts described in Code Section 104(a)(3), 105(a) and 105(h), but
only to the extent that these amounts are includable in the gross
income of the Employee;
(d) amounts paid or reimbursed by the Employer for moving expenses
incurred by an Employee, but only to the extent that these amounts are
not deductible by the Employee under Code Section 217;
(e) the value of a non-qualified stock option granted to an Employee by
the Employer, but only to the extent that the value of the option is
includable in the gross income of the Employee for the taxable year in
which granted; and
3
<PAGE>
(f) the amount includable in the gross income of an Employee upon making
the election described in Code Section 83(b).
Subparagraphs (a) and (b) above include foreign earned income (as defined
in Code Section 911(b)), whether or not excludable from gross income under
Section 911.
Code Section 415 Compensation does not include the following:
(a) Employer contributions to a plan of deferred compensation which are
not included in the Employee's gross income for the taxable year in
which contributed or Employer contributions under a simplified
employee pension plan to the extent such contributions are deductible
by the Employee, or any distributions from a plan of deferred
compensation;
(b) amounts realized from the exercise of a non-qualified stock option, or
when restricted stock (or property) held by the Employee either
becomes freely transferable or is no longer subject to a substantial
risk of forfeiture;
(c) amounts realized from the sale, exchange or other disposition of stock
acquired under a qualified stock option; and
(d) other amounts which received special tax benefits, or contributions
made by the Employer (whether or not under a salary reduction
agreement) towards the purchase of an annuity described in Code
Section 403(b) (whether or not the amounts are actually excludable
from the gross income of the Employee).
Code Section 415 Compensation for any Limitation Year is the compensation
actually paid or made available to a Participant within such Limitation Year.
For any Limitation Year beginning after December 31, 1991, Code Section 415
Compensation shall not include accrued compensation (other than de minimis
accrued compensation as provided for in Treasury Regulations).
1.11 "Code Sections 401(k)(2)(A), (B) and (C) Provisions" shall mean a
qualified cash or deferred arrangement under which
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(a) a covered employee may elect to.have the Employer make payments as
contributions to a trust under the plan on behalf of the Employee, or
to the Employee in cash;
(b) the amounts held in the trust attributable to Employer contributions
made pursuant to the Employee's election may not be distributable to
the Participant or Beneficiary earlier than separation from service,
death, disability, termination of the Plan without establishment of a
successor plan, the attainment of age 59 1/2, or Hardship; and
(c) the Employee's right to his Accrued Benefit derived from Employer
contributions made to the trust pursuant to his election is non-
forfeitable.
1.12 "Code Sections 401(k)(2)(B) and (C) Provisions" shall mean a qualified
cash or deferred arrangement under which
(a) the amounts held in the trust attributable to Employer contributions
are treated as made pursuant to the Employee's election may not be
distributable to the Participant or Beneficiary earlier than
separation from service, death, disability, termination of the Plan
without establishment of a successor plan, or the attainment of age 59
1/2; and
(b) the Employee's right to his Accrued Benefit derived from Employer
contributions when made to the trust pursuant to his election is non-
forfeitable.
1.13 "Committee" shall mean the Plan committee appointed by the Employer
pursuant to the Administration of Plan by Committee Section.
1.14 "Compensation" shall mean the entire amount paid to an Employee by the
Employer during the Plan Year as salary, commissions, overtime pay and bonuses,
but excluding any benefits and credits under this or any other employee benefit
plan of the Employer. Notwithstanding the preceding sentence, all Code Section
415 Compensation during the entire Limitation Year shall be taken into account
for determining the required minimum allocation for a Non-Key Employee if the
Plan is a Top Heavy Plan and the required minimum benefit has not been otherwise
provided
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under Code Section 416(c). For years beginning after December 31, 1988 and
before January 1, 1994, the annual Compensation of each Participant taken into
account under the Plan for any year shall not exceed $200,000. This limitation
shall be adjusted by the Secretary at the same time and in the same manner as
under Code Section 415(d), except that the dollar increase in effect on January
l of any calendar year is effective for years beginning in such calendar year
and the first adjustment to the $200,000 limitation is effected on January l,
1990. If the Plan determines compensation on a period of time that contains
fewer than twelve (12) calendar months, then the annual Compensation limit is an
amount equal to the annual Compensation limit for the calendar year in which the
Compensation period begins multiplied by the ratio obtained by dividing the
number of full months in the period by 12.
In determining the Compensation of a Participant for purposes of this
limitation, the rules of Code Section 414(q)(6) shall apply, except in applying
such rules, the term "family" shall include only the spouse of the Participant
and any lineal descendants of the Participant who have not attained age nineteen
(19) before the close of the year. If, as a result of the application of such
rules the adjusted $200,000 limitation is exceeded, then (except for purposes of
determining the portion of Compensation up to the integration level if this Plan
provides for permitted disparity), the limitation shall be prorated among the
affected individuals in proportion to each such individuals Compensation as
determined under this Section prior to the application of this limitation.
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If Compensation for any prior Plan Year is taken into account in
determining an Employee's contributions or benefits for the current year, the
Compensation for such prior year is subject to the applicable annual
Compensation limit in effect for that prior year. For this purpose, for years
beginning before January 1, 1990, the applicable annual Compensation limit is
$200,000.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual compensation of each Employee
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with Section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding
twelve (12) months, over which compensation is determined (determination period)
beginning in such calendar year. If a determination period consists of fewer
than twelve (12) months, the OBRA '93 annual compensation limit will be
multiplied by a fraction, the numerator of which is the number of months in the
determination period, and the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in this
Plan to the limitation under Section 401(a)(17) of the Code shall mean the OBRA
'93 annual compensation limit set forth in this provision.
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If compensation for any prior determination period is taken into account in
determining an Employee's benefits accruing in the current Plan Year, the
compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
Compensation shall include Employer contributions made pursuant to a salary
reduction agreement which are not includible in the gross income of the Employee
under Code Section 125.
Compensation shall include Employer contributions made to a Code Section
401(k) plan pursuant to a salary reduction agreement which are not includible in
the gross income of the Employee under Code Section 402(a)(8).
Compensation shall include Employer contributions made pursuant to a salary
reduction agreement which are not includible in the gross income of the Employee
under Code Section 402(h) and Code Section 403(b).
1.15 "Deferred Compensation" shall mean with respect to any Participant
that part of such Participant's Compensation paid or accrued by the Employer for
a Plan Year that such Participant has elected to defer pursuant to Section 4.2.
1.16 "Determination Date" shall mean (a) the last day of the preceding Plan
Year, or (b) in the case of the first Plan Year, the last day of such Plan Year.
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1.17 "Disability" shall mean total and permanent physical or mental
incapacity of a Participant to perform the duties of his employment with the
Employer unless such physical or mental incapacity occurs as a result of the
willfulness or gross negligence of the Participant. Such incapacity shall be
established by a medical examination by a medical doctor selected or approved by
the Committee.
1.18 "Effective Date" of this amended and restated Plan and Trust shall be
January 1, 1987 except as provided below for the following special Effective
Dates:
(a) The requirements for Section 1.14 are effective January 1, 1992.
(b) The requirements for Section 3.1 are effective January 1, 1995.
The Plan provisions in effect prior to a special Effective Date for such
provisions shall control until such special Effective Date.
1.19 "Elective Account" shall mean the account established and maintained
for each Participant with respect to his total interest in the Plan and Trust
resulting from Employer Elective Contributions and Employer Non-Elective
contributions which satisfy the Code Sections 401(k)(2)(B) and (C) Provisions.
1.20 "Elective Contribution" shall mean the Employer's contributions to the
Plan that are made pursuant to the Participant's cash or deferred election.
1.21 "Employee" shall mean any individual employed by the Employer other
than an independent contractor. Any Leased Employee, as defined in Code Section
414(n)(2), shall be treated as an Employee of the Employer. The preceding
sentence shall not
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<PAGE>
apply to any Leased Employees if such employees are covered by a money purchase
pension plan as described in Code Section 414(n)(5) providing (a) a
nonintegrated employer contribution rate of at least ten (101) percent of
compensation as defined in Code Section 415(c)(3) but including amounts
contributed pursuant to a salary reduction agreement which are excludable from
the Employee's gross income under Code Sections 125, 402(a)(8), 402(h) or
403(b), (b) immediate participation, and (c) full and immediate vesting, and
such Leased Employees, with respect to services performed after December 31,
1986, do not constitute more than twenty (20%) percent of the Employer's Non-
Highly Compensated Employee work force.
1.22 "Employer" shall mean HERITAGE FEDERAL SAVINGS & LOAN ASSOCIATION and
any holding company, subsidiary or affiliated company authorized by HERITAGE
FEDERAL SAVINGS & LOAN ASSOCIATION to adopt and participate in this Plan and
Trust.
1.23 "Five Percent Owner" shall mean any person who owns (or is considered
as owning within the meaning of Code Section 318) more than five (5%) percent of
the outstanding stock of the Employer or stock possessing more than five (5%)
percent of the total combined voting power of all stock of the Employer. In
determining percentage ownership hereunder, employers that would otherwise be
aggregated under Code Sections 414(b), (c), (m) and (o) shall be treated as
separate employers.
1.24 "Hardship" shall mean a distribution that is made only if the
distribution is made both on account of an immediate and heavy financial need of
the Employee and is necessary to satisfy such financial need. A distribution
will be made on account of
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<PAGE>
an immediate and heavy financial need of the Employee only if the distribution
is on account of:
(a) medical expenses described in Code Section 213(d) incurred by the
Employee, the Employee's spouse, children or any dependents of the
Employee (as defined in Code Section 152);
(b) costs (excluding mortgage payments) directly related to the purchase
of a principal residence for the Employee;
(c) payment of tuition for the next twelve (12) months of post-secondary
education for the Employee, his spouse, children, or dependents (as
defined in Code Section 152);
(d) the need to prevent the eviction of the Employee from his principal
residence or foreclose on the mortgage of the Employee's principal
residence; or
(e) a need designated by the Treasury Department which is a safe harbor
for Hardship distributions.
A distribution will be considered necessary to satisfy an immediate and
heavy financial need of an Employee only if all of the following requirements
are satisfied:
(a) The distribution is not in excess of the amount of the immediate and
heavy financial need of the Employee. The amount of an immediate and
heavy financial need may include any amounts necessary to pay any
federal, state, or local income taxes or penalties reasonably
anticipated to result from the distribution.
(b) The Employee has obtained all distributions, other than hardship
distributions, and all nontaxable (at the time of the loan) loans
currently available under all plans maintained by the Employer.
(c) All other plans maintained by the Employer limit the Employee's
elective contributions for the next taxable year to the applicable
limit under Code Section 402(g) for that year minus the Employee's
elective contributions for the year of the hardship distribution.
(d) The Employee is prohibited, under the terms of the Plan or an
otherwise legally enforceable agreement, from making elective
contributions and Employee contributions to the Plan and all other
plans maintained by the Employer for at least twelve (12) months after
receipt of the hardship distribution. For this purpose the phrase "all
other plans maintained by the Employer"
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means all qualified and nonqualified plans of deferred compensation
maintained by the Employer. The phrase includes a stock option, stock
purchase, or similar plan, or a cash or deferred arrangement that is
part of a cafeteria plan within the meaning of Section 125. However,
it does not include the mandatory Employee contribution portion of a
defined benefit plan. It also does not include a health or welfare
benefit plan, including one that is part of a cafeteria plan within
the meaning of Code Section 125.
1.25 "Highly Compensated Employee" shall mean highly compensated active
Employees and highly compensated former Employees.
A highly compensated active Employee includes any Employee who performs
service for the Employer during the determination year and who, during the look-
back year: (a) received compensation from the Employer in excess of $75,000 (as
adjusted pursuant to Code Section 415(d)); (b) received compensation from the
Employer in excess of $50,000 (as adjusted pursuant to Code Section 415(d)) and
was a member of the top-paid group for such year; or (c) was an officer of the
Employer and received compensation during such year that is greater than fifty
(50%) percent of the dollar limitation in effect under Code Section
415(b)(1)(A).
The term Highly Compensated Employee also includes: (i) Employees who are
both described in the preceding sentence if the term "determination year" is
substituted for the term "look-back year" and the Employee is one of the 100
Employees who received the most compensation from the Employer during the
determination year; and (ii) Employees who are Five Percent Owners at any time
during the look-back year or determination year.
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If no officer has satisfied the compensation requirement of (c) above
during either a determination year or look-back year, the highest paid officer
for such year shall be treated as a Highly Compensated Employee.
For this purpose, the determination year shall be the Plan Year. The look-
back year shall be the twelve (12) month period immediately preceding the
determination year. Top-paid group means the group consisting of the top 20` of
the Employees when ranked on the basis of compensation paid during such year.
A highly compensated former Employee includes any Employee who separated
from service (or was deemed to have separated) prior to the determination year,
performs no service for the Employer during the determination year, and was a
highly compensated active Employee for either the separation year or any
determination year ending on or after the Employee's fifty-fifth (55th)
birthday.
If any Employee is, during the determination year or look back year, a
family member of either a Five Percent Owner who is an active or former Employee
or a Highly Compensated Employee who is one of the ten (10) most Highly
Compensated Employees ranked on the basis of compensation paid by the Employer
during such year, then the family member and the Five Percent Owner or top ten
Highly Compensated Employee shall be aggregated. In such case, the family member
and Five Percent Owner or top-ten Highly Compensated Employee shall be treated
as a single Employee receiving compensation and Plan contributions or benefits
equal to the sum of such compensation and contributions or benefits of the
family member and Five Percent Owner or top-ten Highly Compensated
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Employee. For purposes of this Section, family member includes the spouse,
lineal ascendants and descendants of the Employee or former Employee and the
spouses of such lineal ascendants and descendants.
The determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of Employees in the top-paid group,
the top 100 Employees, the number of Employees treated as officers and the
compensation that is considered, will be made in accordance with Code Section
414(q) and the regulations thereunder.
In determining Highly Compensated Employees, Employers shall be
appropriately aggregated under Code Section 414(b), (c), (m) and (o).
With respect to an Employee who separated from service before January 1,
1987, such Employee will be included as a Highly Compensated Employee only if
the Employee was a Five Percent Owner or received compensation in excess of
$50,000 during (i) the Employee's separation year (or the year preceding such
separation year) or (ii) any year ending on or after such Employee's 55th
birthday (or the last year ending before such Employee's 55th birthday).
For purposes of this Section, compensation shall mean Code Section 415
Compensation.
1.26 "Hour of Service" shall mean:
(a) each hour for which an Employee is paid, or entitled to payment, for
the performance of duties for the Employer during the applicable
period.
(b) each hour for which an Employee is paid, or entitled to payment, on
account of a period of time during which no duties are performed
(irrespective of whether the
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employment relationship has terminated) due to vacation, holiday,
illness, incapacity (including disability or pregnancy), layoff, jury
duty, military duty or Authorized Leave of Absence. Notwithstanding
the foregoing:
(i) no more than 501 Hours of Service will be credited to an Employee
on account of any single continuous period during which no duties
are performed (whether or not such period occurs in a single Plan
Year or other period); and
(ii) no credit for an Hour of Service will be given for which an
Employee is directly or indirectly paid, or entitled to payment,
on account of a period during which no duties were performed if
such payment is made or due under a plan maintained solely for
the purpose of complying with applicable workmen's compensation
or unemployment compensation or disability insurance laws; and
(iii) no credit for an Hour of Service will be given for payment
which solely reimburses an Employee for medical or medically
related expenses incurred by the Employee.
For purposes of this subsection, a payment shall be deemed to be
made by or due from the Employer, regardless of whether such payment
is made by, or due from the Employer, directly or indirectly through,
among others, a trust fund, or insurer to which the Employer
contributes or pays premiums, and regardless of whether contributions
made or due to the trust fund, insurer or other entity are for the
benefit of a particular Employee or are on behalf of a group of
Employees in the aggregate.
(c) each hour for which back pay, irrespective of mitigation of damages,
is either awarded or agreed to by the Employer.
Crediting of Hours of Service for back pay awarded or agreed to with
respect to the periods described in (b) above shall be subject to the
limitations of that Subsection.
The same Hours of Service shall not be credited both under (a) or (b), as
the case may be, and under (c) above of this Section.
In the case of a payment which is made or due on account of a period during
which an Employee performs no duties, and which
15
<PAGE>
results in the crediting of Hours of Service under (b) above of this Section, or
in the case of an award or agreement for back pay, to the extent that such award
or agreement is made with respect to such a period described in (b) above of
this Section, the number of Hours of Service to be credited shall be determined
pursuant to applicable Labor Department regulations.
The computation and crediting of Hours of Service shall be determined
pursuant to Department of Labor regulations section 2530.200b-2(b) and (c).
Nothing in this Section shall be construed as denying an Employee credit
for an Hour of Service if credit is required by separate federal law.
Military service shall mean service in the armed forces of the United
States if the Employer is required by applicable federal law to re-employ such
Employee and reinstate such Employee's rights and benefits.
Solely for purposes of determining whether a One-Year Break in Service for
participation and vesting purposes has occurred in a computation period for Plan
Years beginning after 1984, an individual who is absent from work for maternity
or paternity reasons shall receive credit for the Hours of Service which would
otherwise have been credited to such individual but for such absence, or in any
case in which such Hours of Service cannot be determined, eight (8) Hours of
Service per day of such absence. For purposes of this paragraph, an absence from
work for maternity or paternity reasons means an absence (a) by reason of the
pregnancy of the individual, (b) by reason of a birth of a child of the
individual, (c) by reason of the placement of a child with
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the individual in connection with the adoption of such child by such individual,
or (d) for purposes of caring for such child for a period beginning immediately
following such birth or placement. The Hours of Service credited under this
paragraph shall be credited (a) in the computation period in which the absence
begins if the crediting is necessary to prevent a One-Year Break in Service in
that period, or (b) in all other cases, in the following computation period.
An Hour of Service with an Affiliated Employer shall be credited as an Hour
of Service under this Plan. Hours of Service will also be credited for any
individual considered an Employee for purposes of this Plan under Code Section
414(n) or Code Section 414(o) and the regulations thereunder.
1.27 "Inactive Participant" shall mean any Employee or former Employee who
has ceased to be a Participant and on whose behalf an Account is maintained
under the Plan.
1.28 "Investment Manager" shall mean any party that (a) is either (i)
registered as an investment advisor under the Investment Advisors Act of 1940,
or (ii) a bank, or (iii) an insurance company; (b) acknowledges in writing that
it is a fiduciary with respect to the Plan; and (c) is granted the power to
manage, acquire, or dispose of any asset of the Plan.
1.29 "Key Employee" shall mean any Employee or former Employee (and his
Beneficiaries) who, at any time during the Plan Year containing the
Determination Date or any of the preceding four (4) Plan Years, is or was:
(a) an officer of an Employer having annual compensation greater than
fifty (501) percent of the amount in
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effect under Code Section 415(b)(1)(A) for any such Plan Year;
(b) an owner (or considered an owner under Code Section 318) of one of the
ten largest interests in the Employer if such individual's annual
compensation exceeds one hundred (100%) percent of the dollar
limitation under Code Section 415(c)(1)(A);
(c) a "Five Percent Owner" of the Employer; or
(d) a "One Percent Owner" of the Employer having an annual compensation
from the Employer of more than $150,000.
Annual compensation means compensation as defined in Code Section 415(c)(3)
but including amounts. contributed by the Employer pursuant to a salary
reduction agreement which are excludible from the Employee's gross income under
Code Section 125, Code Section 402(a)(8), Code Section 402(h) or Code Section
403(b) of the Code. The determination of who is a Key Employee will be made in
accordance with Code Section 416(i)(1) and the regulations thereunder.
1.30 "Leased Employee" shall mean any person (other than a common law
Employee of the Employer) who pursuant to an agreement between the recipient and
any other person ("leasing organization") has performed services for the
recipient (or for the Employer and related persons determined in accordance with
Code Section 414(n)(6)) on a substantially full time basis for a period of at
least one year and such services are of a type historically performed by
Employees in the business field of the recipient Employer. Contributions or
benefits provided a Leased Employee by the leasing organization which are
attributable to services performed for the recipient Employer shall be treated
as provided by the recipient Employer. A Leased Employee shall be credited with
service performed for an Affiliated Employer.
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1.31 "Limitation Year" shall be the twelve (12) consecutive month period
beginning on January 1 and ending on December 31.
1.32 "Named Fiduciary" shall be the Committee.
1.33 "Non-Elective Contribution" shall mean the Employer's contributions to
the Plan other than those made pursuant to the Participant's cash or deferred
election.
1.34 "Non-Highly Compensated Employee" shall mean an Employee of the
Employer who is neither a Highly Compensated Employee nor a Family Member.
1.35 "Non-Key Employee" means any Employee who is not a Key Employee.
1.36 "Normal Retirement Age" shall mean the day on which the Participant
attains his sixty-fifth (65th) birthday.
1.37 "Normal Retirement Date" shall mean the day on which the Participant
attains his sixty-fifth (65th) birthday, unless the Participant's employment is
continued beyond his sixty-fifth (65th) birthday in which case the Participant's
Normal Retirement Date shall be the day on which he actually retires.
1.38 "One Percent Owner" shall mean any person who owns (or is considered
as owning within the meaning of Code Section 318) more than one (11) percent of
the outstanding stock of the Employer or stock possessing more than one (1~)
percent of the total combined voting power of all stock of the Employer. In
determining percentage ownership hereunder, employers that would otherwise be
aggregated under Code Sections 414(b), (c) and (m) shall be treated as separate
employers. However, in determining whether an individual has Compensation of
more than $150,000,
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Compensation from each employer required to be aggregated under Code Sections
414(b)(c) and (m) shall be taken into account.
1.39 "One-Year Break in Service" shall mean the applicable computation
period during which an Employee has not completed more than 500 Hours of Service
with the Employer. An Authorized Leave of Absence shall not cause a One-Year
Break in Service. The applicable computation period shall mean the period or
periods used in the definition of Year of Service.
1.40 "Participant" shall mean any Employee of the Employer who has met the
eligibility requirements and participation requirements of this Plan and becomes
a Participant in this Plan.
1.41 "Plan" shall mean the profit-sharing and 401(k) plan of the Employer
as set forth in and by this document and all subsequent amendments thereto.
1.42 "Plan Administrator" shall be the Employer.
1.43 "Plan Name" shall be HERITAGE FEDERAL SAVINGS & LOAN ASSOCIATION
401(k) PLAN.
1.44 "Plan Year" shall be the twelve (12) consecutive month period
beginning on January 1 and ending on December 31.
1.45 "Shareholder-Employee" shall mean a Participant who owns more than
five (5%) percent of the Employer's outstanding capital stock interest during
any year in which the Employer elects to be taxed as an "S" corporation under
the Code.
1.46 "Super Top Heavy Plan" shall mean, for Plan Years commencing after
December 31, 1983, that, as of the Determination Date, (a) the Present Value of
Accrued Benefits of Key Employees, and (b) the sum of the Aggregate Accounts of
Key Employees under this Plan and all plans of an Aggregation Group, exceeds
ninety
20
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(90%) percent of the Present Value of Accrued Benefits and the Aggregate
Accounts of all Participants under this Plan and all plans of an Aggregation
Group.
1.47 "Taxable Year" shall mean the twelve (12) consecutive month period
beginning on October 1 and ending on September 30.
1.48 "Top Heavy Group" shall mean an Aggregation Group in which, as of the
Determination Date, the sum of:
(a) the Present Value of Accrued Benefits of Key Employees under all
defined benefit plans included in the group, and
(b) the Aggregate Accounts of Key Employees under all defined contribution
plans included in the group,
exceeds sixty (60%) percent of a similar sum determined for all Participants.
1.49 "Top Heavy Plan" shall mean, for Plan Years commencing after December
31, 1983, that, as of the Determination Date, (a) the Present Value of Accrued
Benefits of Key Employees, and (b) the sum of the Aggregate Accounts of Key
Employees under this Plan and all plans of an Aggregation Group, exceeds sixty
(60%) percent of the Present Value of Accrued Benefits and the Aggregate
Accounts of all Participants under this Plan and all plans of an Aggregation
Group.
1.50 "Top Heavy Plan Year" shall mean that, for a particular Plan Year
commencing after December 31, 1983, the Plan is a Top Heavy Plan as defined
herein.
1.51 "Trust" as herein used shall mean the legal entity resulting from the
agreement between the Employer and the Trustee by which the contributions
hereunder shall be made, received, held, invested, reinvested and disbursed to
or for the benefit of
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the Participants or their Beneficiaries, or both, according to the terms of this
Plan.
1.52 "Trust Fund" shall mean all funds received by the Trustee, together
with all income, profits, losses or increments thereon.
1.53 "Trustee" shall mean a corporation, association, individual, group of
individuals, or any combination of them, or any successor or successors who
shall accept the designation and enter into the duties of Trustee as
specifically set forth in this Trust Agreement.
1.54 "Valuation Date" shall mean the last day of any Plan Year.
1.55 "Year of Service" shall mean for purposes of
(a) accrual of benefits in this Plan, a Plan Year during which a
Participant completes at least 1,000 Hours of Service, except as
otherwise specifically provided for herein.
SECTION 2 - Administration of Plan by Committee
--------- -----------------------------------
2.1 The Employer hereby delegates its administrative duties and
responsibilities in connection with the administration of this Plan to the
Committee who shall be an individual or individuals designated by the Employer.
2.2 The Committee shall appoint a chairman and a secretary and may appoint
an acting chairman and an acting secretary. One person may hold more than one
position on the Committee.
2.3 The Committee shall hold meetings upon such notice, at such place and
at such times as they may from time to time determine. Notice of a meeting shall
not be required if waived in writing, or if all of the members are present at
the meeting. A
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majority of the members of the Committee at any time in office shall constitute
a quorum. All resolutions or other actions taken by the Committee at any meeting
shall be by vote of a majority present at any such meeting and entitled to vote.
Resolutions may be adopted or other action taken without a meeting upon written
consent signed by all of the members.
2.4 The Committee shall maintain full and complete records of their
deliberations and decisions. The minutes of their proceedings shall be
conclusive proof of the facts of the operation of the Plan. Their records shall
contain all relevant data pertaining to individual Participants and their rights
under the Plan and in the Trust Fund.
2.5 The members of the Committee shall be bonded to the extent required by
law.
2.6 No fee or compensation shall be paid to any member for his services as
such, but any expenses properly incurred by the Committee shall be paid or
reimbursed by the Trust Fund unless voluntarily paid by Employer.
2.7 The Committee shall have the duty and complete authority to interpret
and construe the provisions of the Plan and this Agreement, and to decide any
dispute which may arise regarding the rights and benefits of any Participant,
his legal representatives or Beneficiaries, which determinations shall apply
uniformly to all persons similarly situated and shall be binding and conclusive
upon all interested persons. The Committee may adopt rules, regulations or by-
laws for use in the administration of the Plan, appoint agents and compensate
them, and, in general, direct the administration of this Plan. Interpretation
and
23
<PAGE>
administration of this Plan and Trust shall always be made with the fundamental
purpose that the Plan and Trust is a retirement plan qualified under Code
Section 401.
2.8 Any member of the Committee may resign at any time and may be removed
with or without cause by the Employer. The Employer may (but shall not be
required to) appoint a successor to fill any vacancy in the membership of the
Committee and shall notify the Trustee of any such appointment.
2.9 The Committee or its designee shall, within a reasonable time preceding
a Participant's Normal Retirement Date, consult and advise such Participant
concerning his benefits, options and rights under the Plan.
2.10 The Committee may correct errors and, so far as practicable and in
conformity with the Code and other applicable law and regulations, may adjust
any benefit or payment or credit accordingly.
2.11 The Committee shall determine the eligibility of Employees in
accordance with the provisions of this Plan from the information furnished to it
by Employer in accordance with the request of the Committee.
2.12 On or about the date upon which Employer shall make payment of any
contribution under the Plan by payment to the Trustee, the Committee shall
deliver to the Trustee a schedule showing the names of the Participants,
Inactive Participants and Beneficiaries, the Compensation of each Participant
for the Plan Year, the amount of Employer contributions, the amount of each
Participant's contributions, if any, the names of the Inactive Participants
whose employment was terminated during the Plan Year
24
<PAGE>
together with forfeitures, if any, and such other information as shall be
necessary for the Trustee to allocate contributions and if otherwise permitted
herein, forfeitures to the Participants (unless the Trustee and Committee have
agreed in writing that the Committee is to make such allocations).
2.13 In any case involving termination of employment of a Participant or
any question as to vested interest, the Committee shall determine the percentage
of vesting and shall communicate its determination to the Trustee. If a
terminated Participant's benefits are to be received or invested in Annuity
Contracts (if Annuities are otherwise specifically permitted under the Annuity
Requirements Section), the Committee shall make proper application for such an
Annuity to an insurance company and shall direct the Trustee to purchase said
Annuity Contract and deliver it in accordance with the Committee's instructions
after taking into account the consent requirements of Code Section 401 (a)(11),
Code Section 417 and the Annuity Requirements Section.
2.14 The Committee shall be the agent for service of legal process.
2.15 The Committee is authorized to secure such legal, medical, accounting,
actuarial, or other consultant's advice, and to appoint qualified appraisers of
real, personal, or intangible property, and to pay their reasonable expenses and
compensation from the Trust Fund, unless the Employer voluntarily makes such
payments.
2.16 In the event and to the extent not insured against by any insurance
company, the Employer shall indemnify and hold harmless the Committee members,
their assistants and representatives,
25
<PAGE>
from any and all claims, demands, suits, losses, damages and any other liability
arising from their responsibilities in connection with the Plan or Trust, unless
the same is determined to be due to gross negligence or willful misconduct.
2.17 A Participant, Inactive Participant or Beneficiary shall have the
right to file a claim, inquire if he has any right to benefits and the amounts
thereof, or appeal the denial of a claim.
A claim will be considered as having been filed when a written
communication is made by the Participant or his authorized representative who
brings his claim request to the attention of the Plan Administrator or any
member of the Committee.
The Committee shall notify the claimant in writing within ninety (90) days
after receipt of the claim if the claim is wholly or partially denied. If an
extension of time beyond the initial ninety (90) day period for processing the
claim is required, written notice of the extension shall be provided the
claimant prior to the termination of the initial ninety (90) day period. In no
event shall the extension exceed a period of ninety (90) days from the end of
the initial period. The extension notice shall indicate the special
circumstances requiring an extension of time and the date by which the Committee
expects to render a final decision.
Notice of a wholly or partially denied claim for benefits will be in
writing in a manner calculated to be understood by the claimant and shall
include:
(a) The reason or reasons for denial;
26
<PAGE>
(b) Specific reference to the Plan provisions that apply in the case;
(c) A description of any additional material or information necessary for
the claimant to perfect the claim and an explanation of why such
material or information is necessary; and
(d) An explanation of the Plan's claim appeal procedure.
If a claim is denied, the claimant may file an appeal asking the Committee
to conduct a full and fair review of his claim. An appeal must be made in
writing no more than sixty (60) days after the claimant receives written notice
of the denial. The claimant may review any documents that apply to the case and
may also submit points of disagreement and other comments in writing along with
the appeal.
The decision of the Committee regarding the appeal shall be given to the
claimant in writing no later than sixty (60) days following receipt of the
appeal. However, if the Committee, in its sole discretion, grants a hearing, or
there are special circumstances involved, the decision will be given no later
than one-hundred twenty (120) days after receiving the appeal. If such an
extension of time for review is required because of special circumstances,
written notice of the extension shall be furnished to the claimant prior to the
commencement of the extension. The decision shall include specific reasons for
the decision, written in a manner calculated to be understood by the claimant,
as well as specific references to the pertinent Plan provisions on which the
decision is based.
2.18 The Committee from time to time may appoint one or more Investment
Managers to direct or approve all investments and reinvestments of the Trust
Fund, by written notice to the Trustee.
27
<PAGE>
However, until notified to the contrary by the Committee or unless the Plan and
Trust specifically permits a Participant to self-direct the investment of his
Account, the Trustee is responsible for all investments and reinvestments. After
the Committee has notified the Trustee of its appointment of an Investment
Manager to direct or approve investments and reinvestments, the Investment
Manager then shall become responsible for any and all investments and
reinvestments made by it. The Trustee may rely upon the directions and
instructions of the Committee and Investment Manager without being in any way
liable or responsible for the consequences.
2.19 The Committee from time to time, either itself or through its duly
appointed agents, may direct or approve all investments and reinvestments of the
Trust Fund, by written notice to the Trustee. However, until notified to the
contrary by the Committee or unless the Plan and Trust specifically permits a
Participant to self-direct the investment of his Account, the Trustee is
responsible for all investments and reinvestments. After the Committee has
notified the Trustee of its intention to direct or approve investments and
reinvestments, the Committee then shall become responsible for any and all
investments and reinvestments made pursuant to such direction or approval. The
Trustee may rely upon the directions and instructions of the Committee without
being in any way liable or responsible for the consequences.
2.20 The Committee shall have the responsibility for developing a funding
policy for the Plan, if required, and shall communicate such funding policy to
the Trustee, or other Investment
28
<PAGE>
Manager, and shall see to it that the funding policy is carried out.
2.21 If a Participant or a Beneficiary receives a qualifying rollover
distribution from the Plan, the Committee shall provide a written explanation to
the recipient (a) that the distribution will not be taxed currently to the
extent transferred to another qualified plan or individual retirement account
within sixty (60) days after the date on which the recipient received the
distribution, and (b) of income averaging and capital gains provisions, if
applicable. In the case of a series of distributions the notice shall explain
that the sixty (60) day period does not begin to run until the last distribution
is made.
2.22 If any person entitled to receive any benefit hereunder shall be a
minor child or incompetent person, but no legal representative has been
appointed for him or her, the Committee may, in its discretion, cause any
benefit otherwise payable to such person to be paid to the conservator, parent
or guardian or spouse of such person, or to the institution maintaining such
person, or to the individual having custody of such person, or may otherwise
cause the same to be applied for the benefit of such person in any manner which
the Committee may deem proper, without regard to the duty of any person to
support such minor or incompetent person, and without regard to any other funds
which may be available for the purpose, and, in the case of any payment made for
the benefit of such person in any of the manners just authorized, the receipt by
the person to whom the payment is made shall be in full discharge of all
liability under the Plan and Trust in respect of such payment. Deposit to the
credit of a
29
<PAGE>
Participant or Beneficiary in any bank, savings and loan or trust company shall
be deemed payment into the hands of such person.
2.23 Notwithstanding anything in this Plan and Trust to the contrary, the
Trustee and Committee may agree in writing that the Committee will perform
certain record keeping functions delegated to the Trustee herein such as
allocating contributions and in such event the Trustee shall be fully relieved
of such duties.
SECTION 3 - Eligibility and Participation
--------- -----------------------------
3.1 Any Employee who has completed six (6) Months of Service and has
attained his twenty-first (21st) birthday shall be eligible to participate in
this Plan on the January 1 next following the date he has satisfied such age and
requirements, provided such Employee is employed on such date (or if such
Employee is not employed on such January 1, as of the date of rehire if a One-
Year Break in Service has not occurred).
For purposes of this Section 3.1 an Employee will be deemed to have
completed six (6) Months of Service if he is in the employ of the Employer at
any time six (6) months after his employment commencement date. Employment
commencement date shall be the first day that he is entitled to be credited with
an Hour of Service for the performance of duty.
For purposes of this Section 3.1 "Month of Service" means a calendar month
during any part of which an Employee completed an Hour of Service. Except,
however, a Participant shall be credited with a Month of Service for each month
during the twelve (12) month computation period in which he has not incurred a
One-Year Break in Service.
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<PAGE>
An hourly paid Employee and a Leased Employee shall not be eligible to
participate in this Plan.
3.2 An Employee who satisfies the eligibility requirements to participate
and whose employment is subsequently terminated with the Employer shall again
participate effective with the Employee's re-employment commencement date. The
re-employment commencement date is the first day on which the Employee is
credited an Hour of Service for the performance of duties after the first
eligibility computation period in which the Employee incurs a One-Year Break in
Service.
3.3 Notwithstanding the positive statements herein as to eligibility,
participation in this Plan shall be entirely voluntary on the part of each
eligible Employee. An Employee shall automatically participate in this Plan upon
becoming eligible unless the Employee irrevocably elects not to participate in
the Plan. The election not to participate must be in writing, signed by the
Employee, and delivered to the Committee before the Employee first becomes
eligible to participate in this Plan.
3.4 If, in any Plan Year, any Employee who should have been included as a
Participant in the Plan is erroneously omitted and discovery of such omission is
not made until after a contribution by the Employer for the year has been made
and allocated, the Employer shall make a subsequent contribution with respect to
the omitted Employee in the amount which the Employer would have contributed
with respect to him had he not been omitted. Such contribution shall be made
regardless of whether or not it is deductible in whole or in part in any Taxable
Year under applicable provisions of the Code by such Employer.
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<PAGE>
3.5 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 and allocated, the Employer shall not be entitled to recover the
contribution made with respect to the ineligible person regardless of whether or
not a deduction is allowable with respect to such contribution. In such event,
the amount contributed with respect to the ineligible person shall constitute a
forfeiture for the Plan Year in which the discovery is made.
3.6 In the event a Participant is no longer a member of an eligible class
of Employees and becomes ineligible to participate, but has not incurred a One-
Year Break in Service, eligibility will be determined under the break in service
rules of the Plan. In the event an Employee who is not a member of the eligible
class of Employees becomes a member of the eligible class such Employee will
participate immediately if such Employee has satisfied the minimum age and
service requirements and would have otherwise previously become a Participant.
SECTION 4 - Employer Non-Elective Contributions and Elective Contributions
--------- --------------------------------------------------------------
4.1 For each Taxable Year during the continuance of this Plan, the
Employer shall contribute such amount (if any) to the Trust Fund as the Employer
in its sole discretion shall determine; provided, however, Employer's aggregate
contributions of both Elective Contributions and Non-Elective Contributions for
any Taxable Year shall not exceed the maximum amount that can be allowed as a
deduction under the applicable provisions of the
32
<PAGE>
Code. Employer contributions made under this Section 4.1 are generally referred
to in this Plan and Trust as "Employer Profit Sharing Contributions" and shall
be deemed an Employer Non-Elective Contribution subject to the vesting
requirements contained in Section 10.
4.2 In addition to Employer Profit-Sharing Contributions, upon adoption and
execution of this Plan by the Employer each Participant in the Plan pursuant to
a uniform, non-discriminatory policy may elect to defer a portion of his
Compensation of not less than one (1%) percent and not more than ten (10%)
percent of Compensation or the maximum amount which will not cause the Plan to
violate the annual additions limitations under Code Section 415. However, under
no circumstances shall a Participant defer an amount of his Compensation which
causes the Plan to exceed the maximum amount allowable as a deduction to the
Employer under Code Section 404. Further, the Employee's deferrals shall be
further limited as provided in the Cash or Deferral Limitations Section.
Contributions under this Section 4.2 are generally referred to in this Plan and
Trust as the "Employee Elective Deferrals." The Committee may establish payroll
deduction procedures and other contribution procedures to facilitate the
Employee's contribution to the Plan. The Committee shall provide deferral forms
and determine such time or times that a Participant may commence deferral of his
Compensation and cease deferral of his Compensation; provided however, that at
least once during each calendar year a Participant may elect to commence and
terminate (or modify) deferral of his Compensation. The Employer shall
contribute to the Trust Fund the amount of the Participant's
33
<PAGE>
Deferred Compensation which shall be deemed an Employer Elective Contribution.
The Participant shall be 100% fully vested in and have a non-forfeitable right
to Employee Elective Deferrals made under this Section 4.2. Prior to the end of
each Plan Year, all Participants may commence, change or terminate their
deferral of Compensation for the next Plan Year, or such shorter period of time
as announced by the Committee. Additionally, the Committee may allow other time
periods during the Plan Year when all Participants may prospectively commence,
change or terminate their deferral of Compensation.
Employee Elective Deferrals shall satisfy the Code Sections 401(k)(2)(A),
(B) and (C) Provisions.
4.3 In addition to Employer Profit-Sharing Contributions and Employee
Elective Deferral, for each Taxable Year during the continuance of this Plan,
the Employer may in its sole discretion contribute a discretionary amount to the
Trust Fund. Any contribution made by the Employer under this Section 4.3 are
generally referred to as Qualified Non-Elective Contributions (as defined in
Section 22.13) and must be specifically designated by the Employer to the
Trustee. The Participant shall be 100` fully vested in and have a nonforfeitable
right to Qualified Non-Elective Contributions made under this Section 4.3.
Further Qualified Non-Elective Contributions shall satisfy the Code Sections
401(k)(2)(B) and (C) Provisions. The Employer may direct that Qualified Non-
Elective Contributions shall be allocated only to Non-Highly Compensated
Employees.
4.4 In addition to Employer Profit-Sharing Contributions, Employee
Elective Deferrals and Employer Qualified Non-Elective
34
<PAGE>
Contributions, the Employer may make Matching Contributions to a Participant's
Account for a Plan Year in such amounts and in such manner as the Employer shall
determine in its sole discretion. Further, at any time the Employer may make a
bonus Matching Contribution. Any Matching Contributions shall be referred to in
this Plan and Trust as "Employer Matching Contributions." The Participant shall
be 100% fully vested in and have a non-forfeitable right to Employer Matching
Contributions made under this Section 4.4.
Prior to the beginning of a Matching Contribution period, the Employer
shall announce the Matching Contribution formula for such period if the Employer
intends to contribute a Matching Contribution. The Matching Contribution formula
shall be the same for all Participants and shall contain the following:
(a) the ratio of the amount of contribution the Employer will contribute
to the amount of the Employee's Elective Deferrals during the Matching
Contribution period;
(b) the maximum dollar amount (if any) the Employer will contribute as a
Matching Contribution;
(c) the dollar amount limitation (if any) the Employer will contribute as
Matching Contribution for any one Participant;
(d) a percentage limitation based upon each Participant's Compensation or
portion of Compensation; and
(e) the Matching Contribution period which shall be a period of time not
to exceed the Plan Year.
The Plan shall meet the non-discrimination requirements set forth in Code
Section 401(m) and Regulations 1.401(m-1) and 1.401(m)-2 which are incorporated
herein by reference.
The Employer may also make Qualified Matching Contributions. Qualified
Matching Contributions shall satisfy the Code Sections
35
<PAGE>
401(k)(2)(B) and (C) Provisions. The Participant shall be 100` fully vested in
and have a non-forfeitable right to Qualified Matching Contributions. Further,
Qualified Matching Contributions and Matching Contributions shall be defined and
meet the requirements of the Cash or Deferred Limitation Section including
Sections 22.10 and 22.11.
4.5 Except as provided below, the Employer may make payment of its
contributions for any Taxable Year on any date or dates it elects, provided only
that the total amount of its contributions for any Taxable Year shall be paid in
full not later than twelve (12) months (or within the time prescribed by
Treasury Department Regulations) after the Plan Year for which they are deemed
paid. Notwithstanding the preceding sentence, Employer Elective Contributions
resulting from a Participant's deferral of Compensation shall be paid to the
Trustee as soon as the Deferred Compensation can reasonably be segregated from
the Employer's assets.
4.6 The Employer may make payment of its Non-Elective Contribution for any
Taxable Year on any date or dates it elects, provided only that the total amount
of its contribution for any Taxable Year shall be paid in full on or before the
date required by law for filing its federal income tax return for such Taxable
Year, including any extensions granted for filing such tax return.
4.7 The Employer's Non-Elective Contribution and Elective Contributions for
each Taxable Year shall be paid by the Employer directly to the Trustee. On or
about the date of such payment, the Committee shall be advised of the amount of
such payment upon which the allocation to Participants is to be calculated.
36
<PAGE>
4.8 All contributions made to this Plan and Trust by the Employer are
expressly made upon the condition that such contributions are fully deductible
for income tax purposes unless the Employer otherwise specifies in writing.
Contributions made by the Employer to the Plan shall be made irrevocably and it
shall be impossible for the assets of the Plan to inure to the benefit of the
Employer or to be used in any manner other than for the exclusive purpose of
providing benefits to Participants, retired Participants, and Beneficiaries, and
for defraying reasonable expenses of administering the Plan; provided, however
that
(a) if the Plan does not initially qualify by the Internal Revenue
Service, then any contribution made to the Plan by the Employer must
be returned to the Employer within one year after the date of denial
of qualification of the Plan;
(b) if a contribution is made by the Employer by a mistake of fact, such
contribution must be returned to the Employer within one year after
the payment of the contribution; or
(c) to the extent the deduction for a contribution under Code Section 404
is disallowed, the contribution (to the extent disallowed) must be
returned to the Employer within one year after the disallowance of the
deduction.
4.9 Unless otherwise specifically provided in this Plan and Trust, a
Participant must have a Year of Service for accrual of benefits during a Plan
Year in order to accrue benefits for such Plan Year.
SECTION 5 - Allocation of Contributions and Forfeitures
--------- -------------------------------------------
5.1 The Employer's Profit-Sharing Contribution for any Plan Year shall be
allocated and credited by the Trustee among the Accounts of the Participants as
of the last day of such Plan Year in the proportion that each Participant's
Compensation bears to
37
<PAGE>
the total Compensation received by all the Participants during the Plan Year
(including Compensation that has been paid to a Participant who has terminated
employment during the Plan Year as a result of death, Disability, attainment of
early retirement (if applicable) or Normal Retirement Date.
5.2 The Employee Elective Deferrals shall be allocated and credited by the
Trustee to the Participant's Elective Contribution Account who made the
deferral.
5.3 The Employer Qualified Non-Elective Contributions shall be allocated
and credited by the Trustee among the Participant's Elective Accounts as of the
Valuation Date in proportion that each Participant's Compensation bears to the
total Compensation received by all the Participants during the period ending on
the Valuation Date; provided, however, the Employer, in its sole discretion, may
direct that only Non-Highly Compensated Employees shall be eligible to receive
an allocation or credit of Qualified Non-Elective Contributions.
5.4 The Employer Matching Contribution shall be allocated and credited by
the Trustee to the Employee's Matching Contribution Account in such manner as
the Employer may designate in a non-discriminatory manner in accordance with the
Matching Contribution formula. Qualified Matching Contributions shall be
allocated to the Employee's Qualified Matching Contribution Account as the
Employer designates and may, in the Employer's sole discretion, be allocated
only to Non-Highly Compensated Employees.
38
<PAGE>
5.5 Notwithstanding anything in this Plan and Trust to the contrary, a
Participant shall always be one-hundred (1001) percent fully vested in his Non-
Elective Account even though the term "forfeitures" are referred to in this Plan
and Trust Agreement.
5.6 For any Top Heavy Plan Year, the total of the Employer's contribution
and, if otherwise permitted herein, forfeitures allocated to the Participant's
Account of each Non-Key Employee shall not be less than the lesser of (i) three
(3%) percent of such Non-Key Employee's compensation (as defined below), or (ii)
in the case where the Employer has no defined benefit plan which designates this
Plan to satisfy Code Section 401(a)(4) or Code Section 410, the largest
percentage of Employer contributions and forfeitures, as a percentage of the
first $200,000 (or $150,000, as adjusted by the Internal Revenue Service, for
Plan Years beginning after 1993) of the Key Employee's Code Section 415
Compensation (including any amounts contributed as a result of a salary
reduction agreement under a Code Section 401(k) plan), allocated on behalf of
any Key Employee for that year. Neither Elective Deferrals nor Employer Matching
Contributions shall be taken into account for purposes of satisfying the minimum
Top Heavy Plan minimum allocation requirements; provided, however, that any
Employer Matching Contributions not necessary to satisfy the non-discrimination
requirements of Code Sections 401(k) and 401(m) may be taken into account for
purposes of satisfying the Top Heavy Plan minimum allocation requirements. For
any Plan Year when (i) the Plan is a Top Heavy Plan but not a Super Top Heavy
Plan and (ii) a Key Employee is a Participant in both this
39
<PAGE>
Plan and a defined benefit plan included in a Required Aggregation Group which
is top heavy, the extra minimum allocation (required by Code Section 416(h) to
provide higher limitations) shall be provided for each Non-Key Employee who is a
Participant only in this Plan by substituting four (4%) percent for three (3%)
percent in the preceding sentence. For purposes of determining the minimum
allocation, all Code Section 415 Compensation during the entire Limitation Year
shall be taken into account for determining the required minimum allocation for
such Non-Key Employee. The minimum allocation is determined without regard to
any Employer Social Security contribution or the Non-Key Employee's level of
Compensation. This Section shall not apply to any Participant to the extent the
Participant is covered under any other plan or plans of the Employer and the
Employer has provided that minimum allocation or benefit requirements applicable
to a Top Heavy Plan will be met in the other plan or plans.
The minimum allocation required (to the extent required to be non-
forfeitable under Code Section 416(b)) may not be forfeited under Code Sections
411(a)(3)(B) or 411(a)(3)(D). The minimum allocation required shall be allocated
to a Non-Key Employee's Account if the Non-Key Employee is a Participant even
though he has not completed a Year of Service and declined to make mandatory
contributions to the Plan, if required. The minimum Top Heavy Plan benefit
allocation shall not be provided to each Key Employee. If the Employer maintains
another qualified plan and a Non-Key Employee participates in this Plan and the
other plan, then such other plan shall first satisfy the minimum Top Heavy Plan
benefits required herein.
40
<PAGE>
5.7 The fact that an allocation shall be made and credited to the Non-
Elective Account of a Participant shall not vest in such Participant any right,
title, or interest in and to any assets of the Trust Fund, except at the time or
times and upon such terms and conditions as are expressly set forth in this
Plan.
5.8 Any assets contributed by the Employer to the Trust Fund shall be
allocated only as set forth herein and, until allocated in accordance with the
provisions of this Plan, shall be held in suspense by the Trustee.
5.9 Notwithstanding any other provision of the Plan or the effect thereof,
this Plan and Trust shall comply with the annual additions limitations contained
in Code Section 415. The maximum annual additions that may be contributed or
allocated by the Employer (including any Affiliated Employer) to a Participant's
Account under the Plan for any Limitation Year shall not exceed the lesser of
(a) the Defined Contribution Dollar Limitation, or (b) twenty-five (25%) percent
of the Code Section 415 Compensation paid to the Participant by the Employer for
the Limitation Year, or such other limits as may, from time to time, be
prescribed by regulations promulgated by the Secretary of the Treasury. The
compensation limitation in (b) above shall not apply to (i) any contribution for
medical benefits (within the meaning of Section 419A(f)(2) of the Code) after
separation from service which is otherwise treated as an annual addition, or
(ii) any amount otherwise treated as an annual addition under Section 415(1)(1)
of the Code.
41
<PAGE>
For purposes of this Section, the Defined Contribution Dollar Limitation
means $30,000 or, if greater, one-fourth of the defined benefit dollar
limitation set forth in Code Section 415(b)(1)(A) as in effect for the
Limitation Year.
For purposes of this Section, for any Limitation Year "annual additions"
shall mean for this Plan (which shall include an Affiliated Employer's plan),
the sum of:
(a) the Participant's share of the Employer contribution;
(b) the Participant's contributions, if any;
(c) the Participant's share of forfeitures, if any, added to his Account;
(d) amounts allocated after March 31, 1984 to an individual medical
account, as defined in Code Section 415(1)(2), which is part of a
pension or annuity plan maintained by the Employer; and
(e) amounts derived from contributions paid or accrued after December 31,
1985, in Limitation Years ending after such date, which are
attributable to post-retirement medical benefits allocated to the
separate account of a Key Employee, as defined in Code Section
419A(d)(2).
Solely for purposes of determining the annual additions under this Section,
a Participant's contributions shall exclude any rollover amount or rollover
contribution and any contributions to a simplified employee pension plan which
are excludible from income under Code Section 408(k)(6).
In the event the Employer has two or more defined contribution plans which
allow aggregate contributions to exceed the limits of Code Section 415, as
amended, as the result of allocation of forfeitures, a reasonable error in
estimating a Participant's annual Compensation, or under other facts and
circumstances which the Commissioner of Internal Revenue Service determines
42
<PAGE>
justifies the excess, then the defined contribution plan with the latest
effective date shall sufficiently reduce contributions and allocations to
prevent an excess annual addition.
For purposes of this Section and the annual additions limitations,
compensation used in this Section shall mean all Code Section 415 Compensation
paid during the Limitation Year and Employer means the Employer and all
Affiliated Employers. Further, this Section applies to all defined contribution
plans (whether or not terminated) of the Employer in the aggregate.
5.10 In the event that it is determined that the annual additions to a
Participant's Account for a Plan Year would be in excess of the limits contained
herein as the result of allocation of forfeitures, a reasonable error in
estimating a Participant's annual Compensation, or under other facts and
circumstances which the Commissioner of Internal Revenue Service determines
justifies the excess, such annual additions shall be reduced to the extent
necessary in the following order:
(a) Any contributions (including Elective Contributions) made by the
Participant during the Plan Year, including the earnings thereon,
which are included in such annual additions shall be returned to such
Participant to the extent necessary to reduce the annual additions to
the limitations contained herein.
(b) If the Participant has made no contributions, or if such Participant's
contributions are not sufficient to reduce the annual additions to the
limitations contained herein, such Participant's allocable share first
of forfeitures, and next of Employer contributions, for such Plan
Year, shall be reduced, and the amount of such reduction shall be
allocated among the remaining Participants in accordance with the
method contained in this Plan for the allocation of Employer
contributions and forfeitures, subject to the limitations with respect
to annual additions to the Accounts of Participants. This subparagraph
(b) shall not be applicable if this Plan provides that forfeitures are
used to reduce Employer contributions.
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<PAGE>
(c) If, after the allocations in accordance with (b) above of this
Section, there are any amounts remaining which cannot be allocated to
any Participant for the Limitation Year as a result of the limitations
contained herein, such amounts shall be maintained unallocated in a
suspended Account under the Trust Fund. If a suspended Account is in
existence at any time during a particular Limitation Year, other than
the Limitation Year described in the preceding sentence, all amounts
in the suspended Account must be allocated and reallocated to
Participants' Accounts subject to Code Section 415 before any Employer
contributions and any Employee contributions which would constitute
annual additions may be made to the Plan for that Limitation Year. If
forfeitures are used to reduce Employer contributions, then such
suspended amounts shall be used to reduce contributions prior to any
contribution by the Employer.
(d) Upon termination of this Plan, any amounts held in a suspended Account
because such amounts cannot be allocated to the Participants as a
result of the limitations contained herein shall revert to the
Employer.
For purposes of the annual additions limitations used in this Section,
compensation used in this Section shall mean all Code Section 415 Compensation
paid during the Limitation Year.
5.11 For purposes of allocating Employer contributions and forfeitures, if
otherwise permitted herein, after an Employee has satisfied the initial
eligibility requirements of the Plan and has entered the Plan, Compensation for
the entire Plan Year shall be taken into account.
5.12 Unless otherwise required in a Top Heavy Plan, except in the event of
death, Disability or attainment of early retirement date or Normal Retirement
Date during the Plan Year, a Participant shall not receive an allocation or
credit of the Employer's Profit-Sharing Contribution unless the Participant is
employed with the Employer as of the last day of the Plan Year and has a Year of
Service for accrual of benefits for such Plan Year. A Participant who terminates
employment during a Plan Year
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for reasons of death, Disability or attainment of early retirement date or
Normal Retirement Date shall share in an allocation or credit of the Employer's
Profit-Sharing Contribution for that Plan Year if he is credited with one (1)
Hour of Service for such Plan Year.
5.13 A Participant who terminates employment before the next Valuation Date
shall not be ineligible to receive an allocation or credit of the Employer
Matching Contribution solely because of the Participant's termination of
employment prior to such Valuation Date. Furthermore, such Participant shall not
be required to have a Year of Service for accrual of benefits during a Plan Year
to receive an allocation or credit of the Employer Matching Contribution.
5.14 Notwithstanding anything in this Plan and Trust to the contrary, if
the Plan and Trust would violate either or both the participation test under
Code Section 401(a)(26) or the coverage test under Code Section 410(b) for a
particular Plan Year, then the following shall apply in the order designated to
the extent necessary to satisfy both the aforesaid participation test and
coverage test for such Plan Year:
(a) First, each Participant who is employed with the Employer on the last
day of the Plan Year that did not receive any accrual of benefits for
such Plan Year shall nevertheless receive an accrual of benefits. If
after complying with this subparagraph (a) the Plan and Trust
continues to violate either or both the participation test and
coverage test, then subparagraph (b) shall apply for such Plan Year.
(b) Second, each Participant who is not employed on the last day of the
Plan Year and did not receive an accrual of benefits for such Plan
Year but was credited with 501 or more Hours of Service during such
Plan Year shall receive an accrual of benefits.
45
<PAGE>
In accruing benefits under subparagraphs (a) or (b) above, if the Plan is a
Top Heavy Plan for such Plan Year, then the Participant shall only receive the
minimum Top Heavy Plan benefit for such Plan Year if the minimum Top Heavy Plan
benefit is all that is required for the Plan and Trust to satisfy Code Sections
401(a)(26) and 410(b), otherwise the Participant shall receive a full benefit
accrual.
SECTION 6 - Top Heavy Provision and Administration
--------- --------------------------------------
6.1 For any Top Heavy Plan Year, the Plan hereby provides the following:
(a) special vesting requirements of Code Section 416(b);
(b) special minimum allocation requirements of Code Section 416 (c); and
(c) special Compensation requirements of Code Section 416(d) for Plan
Years beginning before January 1, 1989.
6.2 A Participant's Aggregate Account as of the Determination Date is the
sum of:
(a) The Participant's Account balance as of the most recent valuation
occurring within a twelve (12) month period ending on the
Determination Date. The Account balance and Accrued Benefit of a
Participant who is (i) not a Key Employee but who was a Key Employee
in a prior year, or (ii) has not been credited with at least one Hour
of Service with any Employer maintaining the Plan at any time during
the five (5) year period ending on the Determination Date will be
disregarded;
(b) An adjustment for any contributions due as of the Determination Date.
Such adjustment shall be the amount of any contributions actually made
after the valuation date but before the Determination Date, except for
the first Plan Year when such adjustment shall also reflect the amount
of any contributions made after the Determination Date that are
allocated as of the date in that first Plan Year;
(c) Any Plan distributions (including distributions from a terminated
plan) made within the Plan Year that includes the Determination Date
or within the four (4) preceding Plan Years. However, in the case of
distributions
46
<PAGE>
made after the valuation date and prior to the Determination Date,
such distributions are not included as distributions for top heavy
purposes to the extent that such distributions are already included in
the Participant's Aggregate Account balance as of the valuation date.
Notwithstanding anything herein to the contrary, all distributions,
including distributions made prior to January 1, 1984, will be
counted;
(d) Any Employee contributions, whether voluntary or mandatory. However,
amounts attributable to tax deductible qualified employee
contributions shall not be considered to be a part of the
Participant's Aggregate Account balance;
(e) With respect to unrelated rollovers and plan-to-plan transfers (ones
which are both initiated by the Employee and made from a plan
maintained by one employer to a plan maintained by another employer),
if this Plan provides for rollovers or plan-to-plan transfers, it
shall always consider such rollover or plan-to-plan transfer as a
distribution for purposes of this Section. If this Plan is the plan
accepting such rollovers or plan-to-plan transfers, it shall not
consider such rollovers or plan-to-plan transfers accepted after
December 31, 1983 as part of the Participant's Aggregate Account
balance. However, rollovers or plan-to-plan transfers accepted prior
to January 1, 1984 shall be considered as part of the Participant's
Aggregate Account balance; and
(f) With respect to related rollovers and plan-to-plan transfers (ones
either not initiated by the Employee or made to a plan maintained by
the same employer), if this Plan provides the rollover or plan-to-plan
transfer, it shall not be counted as a distribution for purposes of
this Section. If this Plan is the plan accepting such rollover or
plan-to-plan transfer, it shall consider such rollover or plan-to-plan
transfer as part of the Participant's Aggregate Account balance,
irrespective of the date on which such rollover or plan-to-plan
transfer is accepted.
6.3 Aggregation Group shall mean either a Required Aggregation Group or a
Permissive Aggregation Group as hereinafter determined:
(a) In determining a Required Aggregation Group hereunder, each plan of
the Employer in which at least one Key Employee participates, or
participated at any time during the determination period (regardless
of whether the plan has terminated), and each other plan of the
Employer which enables any plan in which a Key Employee
47
<PAGE>
participates to meet the requirements of Code Sections 401(a)(4) or
410, will be required to be aggregated. Such group shall be known as a
Required Aggregation Group.
In the case of a Required Aggregation Group, each plan in the group
will be considered a Top Heavy Plan if the Required Aggregation Group
is a Top Heavy Group. No plan in the Required Aggregation Group will
be considered a Top Heavy Plan if the Required Aggregation Group is
not a Top Heavy Group.
(b) The Employer may also include any other plan not required to be
included in the Required Aggregation Group, provided the resulting
group, taken as a whole, would continue to satisfy the provisions of
Code Section 401(a)(4) and 410. Such group shall be known as a
Permissive Aggregation Group.
In the case of a Permissive Aggregation Group, only a plan that is
part of the Required Aggregation Group will be considered a Top Heavy
Plan if the Permissive Aggregation Group is a Top Heavy Group. No plan
in the Permissive Aggregation Group will be considered a Top Heavy
Plan if the Permissive Aggregation Group is not a Top Heavy Group.
(c) Only those plans of the Employer in which the Determination Dates fall
within the same calendar year shall be aggregated in order to
determine whether such plans are Top Heavy Plans.
6.4 In the case of a defined benefit plan, a Participant's Present Value
of Accrued Benefit shall be as determined under the provisions of the applicable
defined benefit plan. Further, the accrued benefit in such defined benefit plan
of any Employee (other than a Key Employee) shall be determined
(a) under the method which is used for accrual purposes for all Plans of
the Employer; or
(b) if there is no method described in (a), as if such benefit accrued not
more rapidly than the slowest accrual rate permitted under Code
Section 411(b)(1)(C).
6.5 Annual Compensation of each Employee taken into account during any Top
Heavy Plan Year shall not exceed the sum of Two Hundred Thousand ($200,000)
Dollars, or One Hundred Fifty Thousand
48
<PAGE>
($150,000) Dollars for Plan Years beginning after 1993 (subject to an annual
cost of living increase as determined by Treasury regulations).
6.6 If any Participant is a Non-Key Employee for any Plan Year, but such
Participant was a Key Employee for any prior Plan Year, such Participant's
Present Value of Accrued Benefit or Aggregate Account balance shall not be taken
into account for purposes of determining whether this Plan is a Top Heavy Plan
(or whether any Aggregation Group which includes this Plan is a Top Heavy
Group). If a Participant has not performed services for any Employer maintaining
the Plan at any time during the five (5) year period ending on the Determination
Date, any Accrued Benefit for such Participant (and the Account of such
Participant) shall not be taken into account for purposes of determining whether
this Plan is a Top Heavy Plan.
SECTION 7 - Retirement Benefits
--------- -------------------
7.1 A Participant may retire from the employ of Employer as of his Normal
Retirement Date. If the Participant continues in the employ of the Employer
beyond his Normal Retirement Date, he shall for purposes of this Plan and Trust
continue to be treated in all respects as an Employee and Participant until his
actual retirement. A Participant shall be entitled to early retirement upon
attainment of age fifty-five (55) and ten (10) Years of Service and if then
employed with the Employer, shall be one hundred (100%) percent fully vested in,
and have a non-forfeitable right to his Account. A Participant who satisfies the
service requirement for early retirement, but who separates from service (with
any nonforfeitable right to an Accrued Benefit) before satisfying the age
requirement for early retirement, shall
49
<PAGE>
be entitled upon satisfaction of such age requirement to receive a benefit equal
in value to the vested portion of his Account balance at such early retirement
age. After determination of the value of the Participant's Account, the early
retirement benefits and normal retirement benefits shall be handled and paid to
the Participant in accordance with the Annuity Requirements Section and the
Distribution Requirements Section.
SECTION 8 - Death Benefits
--------- ---------------
8.1 In the event of the death of a Participant while employed with the
Employer, the Inactive Participant's Account shall be one hundred (100%) percent
fully vested and non-forfeitable. After determination of the value of the
Inactive Participant's Account, the Account (including the proceeds of any life
insurance on the Participant's life other than key man life insurance) shall be
paid to the Inactive Participant's surviving spouse in accordance with the
Distribution Requirements Section. If the Inactive Participant has no surviving
spouse, or the spouse has consented to the Account being paid to another
designated Beneficiary, then the Account shall be paid to such other designated
Beneficiary. Such consent shall acknowledge the specific non-spouse Beneficiary,
including any class of Beneficiaries or any contingent Beneficiaries. Any
consent by the spouse shall be in writing and shall acknowledge the effect of
such election. Prior to the death of the Participant, the Participant may revoke
such non-spouse Beneficiary designation at any time and cause the death benefit
to be payable to the Participant's spouse. Further, if all of the designated
non-spouse Beneficiaries predecease the Participant or if the designation of
50
<PAGE>
the non-spouse Beneficiary is not legally effective to cause payment of the
Account to the non-spouse Beneficiary, then the Participant's spouse shall
receive payment of the Account if the spouse survives the Participant. The
spouse's consent shall be witnessed by a notary public or Committee member. Any
consent by the spouse shall be effective only with respect to such spouse. A
former spouse will be treated as the spouse, or surviving spouse, to the extent
provided under a qualified domestic relations order as described in Code
Section 414(p).
8.2 Except as provided above, at any time, and from time to time, each
Participant or Inactive Participant shall have the unrestricted right to
designate a Beneficiary or Beneficiaries to receive his Account, and to revoke
any such designation at any time thereafter. Each such designation shall be in
writing, filed with the Committee, signed by the Participant or Inactive
Participant, and bearing the signature of at least one (1) witness. If no such
designation is on file at the death of the Participant, or if the designated
Beneficiary or Beneficiaries are not living at the death of the Participant,
then the estate of the Participant shall receive the Account.
8.3 The Committee or the Trustee, or both, may require the execution and
delivery of such documents, papers and receipts as may be deemed necessary in
order to be assured that the payment of any of said death benefits is properly
made and is made to the proper person or party entitled thereto.
SECTION 9 - Disability Benefits
--------- -------------------
9.1 In the event of termination of employment of a Participant by the
Employer by reason of Disability, the Participant's
51
<PAGE>
right to his Account shall be one hundred (100%) percent fully vested and non-
forfeitable. After determination of the value of the Inactive Participant's
Account, the Disability benefit shall be paid to the Inactive Participant in
accordance with the Annuity Requirements Section and the Distribution
Requirements Section.
SECTION 10 - Benefits and Vesting Upon Termination of Employment Other Than By
- ------------------------------------------------------------------------------
Reason of Retirement Death or Disability
----------------------------------------
10.1 A Participant's right to his Account shall always be one hundred
(100%) percent fully vested and non-forfeitable.
10.2 For any Top Heavy Plan Year, a Participant's right to his Account
shall always be one hundred (100%) percent fully vested and non-forfeitable.
10.3 After the employment of a Participant is terminated (other than by
reason of attainment of Normal Retirement Date, early retirement, if applicable,
death or Disability), and the value of the Inactive Participant's Account
determined, the Inactive Participant's Account shall be paid to him in
accordance with the Annuity Requirements Section and Distribution Requirements
Section.
10.4 No amendment to the vesting schedule shall deprive a Participant of
his nonforfeitable right to benefits accrued to the date of the amendment, or
the date the amendment is effective, if later. Further, if the vesting schedule
of the Plan is amended or, if the Plan is deemed amended by an automatic change
to or from a Top Heavy Plan vesting schedule, each Participant with at least
three (3) Years of Service for vesting purposes (whether or not consecutive and
without regard to Years of Service
52
<PAGE>
which may be excluded) with the Employer may elect, within a reasonable period
after adoption of the amendment or change, to have his nonforfeitable percentage
computed under the Plan without regard to such amendment, or change, unless the
Participant's nonforfeitable percentage computed under the Plan, as amended, at
any time cannot be less than such percentage determined without regard to such
amendment. For Participants who do not have at least one (1) Hour of Service in
any Plan Year beginning after December 31, 1988, the preceding sentence shall be
applied by substituting "five (5) Years of Service" for "three (3) Years of
Service" where such language appears. The period during which the election may
be made commences with the date the amendment is adopted and ends on the later
of:
(a) Sixty (60) days after the amendment is adopted;
(b) Sixty (60) days after the amendment becomes effective; or
(c) Sixty (60) days after the Participant is issued written notice of the
amendment by the Employer or Plan Administrator.
Further, no amendment to the Plan shall be effective to the extent that it
has the effect of decreasing a Participant's Accrued Benefit. Notwithstanding
the preceding sentence, a Participant's Account balance may be reduced to the
extent permitted under Code Section 412(c)(8). For purposes of this paragraph, a
Plan amendment which has the effect of decreasing a Participant's Account
balance or eliminating an optional form of benefit, with respect to benefits
attributable to service before the amendment shall be treated as reducing an
Accrued Benefit. Furthermore, if the vesting schedule of the Plan is amended, in
53
<PAGE>
the case of an Employee who is a Participant as of the later of the date such
amendment is adopted or the date it becomes effective, the nonforfeitable
percentage (determined as of such date) of such Employee's Employer derived
Accrued Benefit will not be less than the percentage computed under the Plan
without regard to such amendment.
SECTION 11 - Annuity Requirements
---------- --------------------
11.1 Notwithstanding anything in this Plan and Trust to the contrary, a
Participant, his spouse or other Beneficiary shall not receive payment of his
Accrued Benefit in any form of a life Annuity, specifically including a joint
and survivor Annuity. Further, if an insurance policy is distributed from the
Plan and Trust, such policy shall not be a life Annuity or contain any life
Annuity conversion option. Nothing in this Plan and Trust shall be construed as
allowing for the purchase or distribution of an Annuity.
SECTION 12 - Distribution Requirements
----------- -------------------------
12.1 Except as otherwise provided in the Annuity Requirements Section, the
requirements of this Distribution Requirements Section shall apply to any
distribution of an Inactive Participant's Accrued Benefit (or active Participant
after attainment of age 70 1/2). Except as provided below, the Trustee shall
commence distribution of the Inactive Participant's (or active Participant's
after attainment of age 70 1/2) Accrued Benefit (to the extent vested) as soon
as reasonably practical after the Valuation Date coinciding with or next
following the Participant's termination of employment, death or attainment of
age 70 1/2, whichever occurs first. Notwithstanding the preceding, if
54
<PAGE>
the vested value of the Inactive Participant's Accrued Benefit (including both
Employer and Employee contributions, if applicable) exceeds $3,500 (or at the
time of any prior distribution exceeded $3,500), the Inactive Participant and,
if payment in the form of an Annuity is permitted in this Plan under Section
11.1, the Participant's spouse (or the surviving spouse, as the case may be)
must consent to any such distribution if the distribution occurs prior to the
Inactive Participant's Normal Retirement Age or attainment of age sixty-two (62)
if later than Normal Retirement Age. If the distribution occurs after the
Participant's Normal Retirement Age, or attainment of age sixty-two (62) if
later than Normal Retirement Age, the Accrued Benefit shall be distributed
without the Inactive Participant's consent and if applicable, his spouse's
consent. Further, if payment in the form of an Annuity is not permitted in this
Plan under Section 11.1, then distribution of the Accrued Benefit upon the
Participant's death to the Participant's spouse (or other Beneficiary, if
applicable) shall not require the spouse's (or other Beneficiary's) consent.
Additionally, in the event the date for commencing initial payment of benefits
specified above would not occur until after the April 1 following the calendar
year the Participant attains age 70 1/2, then nevertheless distribution shall
commence prior to such April 1 for such Participant so as to not violate Code
Section 401(a)(9). Further, if the vested value of the Inactive Participant's
Accrued Benefit is $3,500 or less, the Trustee shall distribute the Accrued
Benefit without the Participant's consent. If the Inactive Participant (or his
spouse if payment in the form of an Annuity is permitted in this Plan under
55
<PAGE>
Section 11.1) does not initially consent to the distribution, the Inactive
Participant's Accrued Benefit shall not again be available for distribution
until after the Valuation Date following the earlier of the Inactive
Participant's consent, death, Normal Retirement Date or attainment of early
retirement date.
If this Plan terminates and this Plan does not provide for payment of
benefits in the form of an Annuity under Section 11.1, then the Participant's
Accrued Benefit may be distributed without the Participant's consent if the
Employer (or any entity within the same controlled group as the Employer) does
not maintain another defined contribution~plan (other than an employee stock
ownership plan as defined in Code Section 4975(e)(7)). If another defined
contribution plan is so maintained, the Participant's Accrued Benefit may be
transferred without the Participant's consent to such other plan if the
Participant does not consent to the immediate distribution from this Plan. If
this Plan does provide for payment of benefits in the form of an Annuity under
Section 11.1 and the Plan terminates, then the Plan shall purchase and
distribute deferred Annuities as required in the Annuity Requirements Section
unless the Participant and his spouse (if applicable) properly elect another
form of payment as provided above.
12.2 Subject to the Annuity Requirements Section, a Participant's Accrued
Benefit may be distributed in one of the following forms of payment as the
Participant directs the Trustee after the Participant is otherwise eligible for
payment.
(a) lump sum payment of the Accrued Benefit
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<PAGE>
(b) installment payments
(c) if the Participant is employed with the Employer after attaining age
seventy and one-half (70 1/2), the minimum required distribution under
Code Section 401(a)(9) and the regulations thereunder until his
employment terminates and after termination of employment such Accrued
Benefit shall be paid in such form as selected by the Participant as
permitted in this Plan and Trust.
Distributions made in installment payments (if installment payments are
otherwise specifically permitted above) may be made over one of the following
periods:
(a) a period certain not extending beyond the life expectancy of the
Participant; or
(b) a period certain not extending beyond the joint and last survivor
expectancy of the Participant and his designated Beneficiary.
All distributions under this Distribution Requirements Section shall comply
with the requirements of Code Section 401(a)(9) and the regulations thereunder
including the minimum incidental benefit requirement of Regulation 1.401(a)(9)-
2.
12.3 Subject to the Annuity Requirement Section, the requirements of this
Distribution Requirements Section shall apply to any distribution of a
Participant's interest and will take precedence over any inconsistent provisions
of this Plan. The entire interest of a Participant must be distributed or begin
to be distributed no later than the Participant's required beginning date.
As of the first distribution calendar year, distributions, if not made in a
single lump sum (if otherwise permitted herein), may only be made over one of
the following periods (or a combination thereof):
(i) the life of the Participant,
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<PAGE>
(ii) the life of the Participant and a designated beneficiary,
(iii) a period certain not extending beyond the life expectancy of the
Participant, or
(iv) a period certain not extending beyond the joint and last survivor
expectancy of the Participant and a designated beneficiary.
If the Participant's Accrued Benefit is to be distributed in other than a
single lump sum (if otherwise permitted herein), the following minimum
distribution rules shall apply on or after the required beginning date:
(a) If a Participant's benefit is to be distributed over (i) a period not
extending beyond the life expectancy of the Participant or the joint
life and last survivor expectancy of the Participant and the
Participant's designated Beneficiary or (ii) a period not extending
beyond the life expectancy of the designated Beneficiary, the amount
required to be distributed for each calendar year, beginning with
distributions for the first distribution calendar year, must at least
equal the quotient obtained by dividing the Participant's benefit by
the applicable life expectancy.
(b) For calendar years beginning before January 1, 1989, if the
Participant's spouse is not the designated Beneficiary, the method of
distribution selected must assure that at least fifty (50%) percent of
the present value of the amount available for distribution is paid
within the life expectancy of the Participant.
(c) For calendar years beginning after December 31, 1988, the amount to be
distributed each year, beginning with distributions for the first
distribution calendar year shall not be less than the quotient
obtained by dividing the Participant's benefit by the lesser of (i)
the applicable life expectancy or (ii) if the Participant's spouse is
not the designated Beneficiary, the applicable divisor determined from
the table set forth in Q&A4 of Section 1.401(a)(9)-2 of the
regulations. Distributions after the death of the Participant shall be
distributed using the applicable life expectancy in (a) above as the
relevant divisor without regard to regulations Section 1.401(a)(9)-2.
(d) The minimum distribution required for the Participant's first
distribution calendar year must be made on or before the Participant's
required beginning date. The minimum distribution for other calendar
years, including
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<PAGE>
the minimum distribution for the distribution calendar year in which
the Employee's required date occurs, must be made on or before
December 31 of that distribution calendar year.
If the Participant's benefit is distributed in the form of an Annuity
purchased from an insurance company, distributions thereunder shall be made in
accordance with the requirements of Code Section 401(a)(9) and the proposed
regulations thereunder.
Upon the death of the Participant, the following distribution provisions
shall apply:
(e) If the Participant dies after distribution of his Accrued Benefit has
begun, the remaining portion of such Accrued Benefit will continue to
be distributed at least as rapidly as under the method of distribution
being used prior to the Participant's death.
(f) If the Participant dies before distribution of his Accrued Benefit
begins, distribution of the Participant's entire interest shall be
completed by December 31 of the calendar year containing the fifth
anniversary of the Participant's death, except to the extent that an
election is made to receive distributions in accordance with (i) or
(ii) below:
(i) If any portion of the Participant's interest is payable to a
designated Beneficiary, distributions may be made over the life
or over a period certain not greater than the life expectancy of
the designated Beneficiary commencing on or before December 31 of
the calendar year immediately following the calendar year in
which the Participant died.
(ii) If the designated Beneficiary is the Participant's surviving
spouse, the date distributions are required to begin in
accordance with (i) above shall not be earlier than the later of
(1) December 31 of the calendar year immediately following the
calendar year in which the Participant died and (2) December 31
of the calendar year in which the Participant would have attained
age 70 1/2.
(g) If the Participant has not made an election pursuant to this Section
12.3 by the time of his death, the Participant's designated
Beneficiary must elect the method of distribution no later than the
earlier of (i) December 31 of the calendar year in which distributions
would be required to begin under this Section, or (ii) December 31 of
the calendar year which contains the
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<PAGE>
fifth anniversary of the date of death of the Participant. If the
Participant has no designated Beneficiary, or if the designated
Beneficiary does not elect a method of distribution, distribution of
the Participant's entire interest must be completed by December 31 of
the calendar year containing the fifth anniversary of the
Participant's death.
(h) For purposes of this Section 12.3, if the surviving spouse dies after
the Participant, but before payments to such spouse begin, the
provisions of this Section above, with the exception of paragraph
(f)(ii) therein, shall be applied as if the surviving spouse were the
Participant.
(i) For purposes of this Section 12.3, any amount paid to a child of the
Participant will be treated as if it had been paid to the surviving
spouse if the amount becomes payable to the surviving spouse when the
child reaches the age of majority.
(j) For the purposes of this Section 12.3, distribution of a Participant's
interest is considered to begin on the Participant's required
beginning date (or, if paragraph (h) above is applicable, the date
distribution is required to begin to the surviving spouse pursuant to
paragraphs (f) and (g) above). If distribution in the form of an
Annuity irrevocably commences to the Participant before the required
beginning date, the date distribution is considered to begin is the
date distribution actually commences.
When used in this Distribution Requirements Section, the following terms
shall have the indicated meanings:
(k) "Applicable life expectancy" shall mean the life expectancy (or joint
and last survivor expectancy) calculated using the attained age of the
Participant (or designated Beneficiary) as of the Participant's (or
designated Beneficiary's) birthday in the applicable calendar year
reduced by one for each calendar year which has elapsed since the date
life expectancy was first calculated. If life expectancy is being
recalculated, the applicable life expectancy shall be the life
expectancy as so recalculated. The applicable calendar year shall be
the first distribution calendar year, and if life expectancy is being
recalculated such succeeding calendar year.
(l) "Designated beneficiary" shall mean the individual who is designated
as the Beneficiary under the Plan in accordance with Code Section
401(a)(9) and the regulations thereunder.
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(m) "Distribution calendar year" shall mean a calendar year for which a
minimum distribution is required. For distributions beginning before
the Participant's death, the first distribution calendar year is the
calendar year immediately preceding the calendar year which contains
the Participant's required beginning date. For distributions beginning
after the Participant's death, the first distribution calendar year is
the calendar year in which distributions are required to begin in this
Section 12.3.
(n) "Life expectancy" shall mean the life expectancy and joint and last
survivor expectancy as computed by use of the expected return
multiples in Tables V and VI of Section 1.72-9 of the Income Tax
Regulations.
Unless otherwise elected by the Participant (or spouse, in the
case of distributions described in (f)(ii) above) by the time
distributions are required to begin, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the
Participant (or spouse) and shall apply to all subsequent years. The
life expectancy of a non-spouse Beneficiary may not be recalculated.
(o) "Participant's benefit" shall mean:
(i) The Account balance as of the last Valuation Date in the calendar
year immediately preceding the distribution calendar year
(valuation calendar year) increased by the amount of any
contributions or forfeitures allocated to the Account balance as
of dates in the valuation calendar year after the Valuation Date
and decreased by distributions made in the valuation calendar
year after the Valuation Date.
(ii) For purposes of (i) above, if any portion of the minimum
distribution for the first distribution calendar year is made in
the second distribution calendar year on or before the required
beginning date, the amount of the minimum distribution made in
the second distribution calendar year shall be treated as if it
had been made in the immediately preceding distribution calendar
year.
(p) "Required beginning date" shall mean:
(i) Except as provided in (ii) below, the required beginning date of
a Participant is the first day of April of the calendar year
following the calendar year in which the Participant attains age
70 1/2.
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(ii) The required beginning date of a Participant who attains age 70
1/2 before January 1, 1988, shall be determined in accordance
with (1) or (2) below:
(1) The required beginning date of a Participant who is not a
five percent owner is the first day of April of the calendar
year following the calendar year in which the later of
retirement or attainment of age 70 1/2 occurs.
(2) The required beginning date of a Participant who is a five
percent owner during any year beginning after December 31,
1979, is the first day of April following the later of:
(I) the calendar year in which the Participant attains age
70 1/2, or
(II) the earlier of the calendar year with or within which
ends the Plan Year in which the Participant becomes a
five percent owner, or the calendar year in which the
Participant retires.
The required beginning date of a Participant who is not a five
percent owner who attains age 70 1/2 during 1988 and who has not
retired as of January 1, 1989, is April 1, 1990.
(iii) A Participant is treated as a five percent owner for purposes
of this Section if such Participant is a five percent owner as
defined in Section 416(i) of the Code (determined in accordance
with Section 416 but without regard to whether the plan is a Top-
Heavy Plan) at any time during the Plan Year ending with or
within the calendar year in which such owner attains age 66 1/2
or any subsequent Plan Year.
(iv) Once distributions have begun to a five percent owner under this
Section, they must continue to be distributed, even if the
Participant ceases to be a five percent owner in a subsequent
year.
The provisions set forth in this Section 12.3 will take precedence over any
inconsistent provisions in this Plan and Trust.
12.4 Distribution of the Accrued Benefit to a Participant who is a Five
(5%) Percent Owner, and for Plan Years beginning after December 31, 1988, all
Participants, must commence no later
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than the first day of April following the calendar year in which a Participant
attains age 70 1/2. Except as otherwise provided in the preceding sentence, no
distribution of an Employee's Accrued Benefit derived from Employer
contributions shall be made while the Employee is employed with the Employer.
Further, unless the Participant elects otherwise, payment of Accrued Benefits
must begin not later than the sixtieth (60th) day after the close of the Plan
Year in which the latest of the following events occur: (a) the Participant
attains age 65 (or Normal Retirement Age, if earlier), (b) the occurrence of the
tenth anniversary of the year in which the Participant commences participation
in the Plan, or (c) the Participant terminates his service with the Employer.
12.5 In the event of a qualified domestic relations order (as defined in
Code Section 414(p)), distribution shall be made to the alternate payee pursuant
to the order at any time, irrespective of whether the Participant has attained
his earliest retirement age under the Plan. A distribution to an alternate payee
prior to the Participant's attainment of earliest retirement age is available
only if
(a) the order specifies distribution at that time or permits an agreement
between the Plan and the alternate payee to authorize an earlier
distribution, and
(b) if the present value of the alternate payee's benefits under the Plan
exceeds $3,500, and the order requires, the alternate payee consents
to any distribution occurring prior to the Participant's attainment of
earliest retirement age. Nothing in this Section regarding earlier
payment under a qualified domestic relations order shall be construed
or deemed to permit a Participant a right to receive distribution at a
time otherwise not permitted under this Plan nor does it permit the
alternate payee to receive a form of payment not permitted under the
Plan.
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12.6 This Section 12.7 applies to distributions made on or after January 1,
1993. Notwithstanding any provision in this Plan and Trust to the contrary that
would otherwise limit a distributee's election under this Section, a distributee
may elect, at the time and in the manner prescribed by the Committee, to have
any portion of an eligible rollover distribution paid directly to an eligible
retirement plan specified by the distributee in a direct rollover.
When used in this Section 12.7, the following terms shall have the
indicated meanings:
(a) "Eligible rollover distribution'' shall mean any distribution of all
or any portion of the Accrued Benefit of the distributee, except that
an eligible rollover distribution does not include: any distribution
that is one of a series of substantially equal periodic payments (not
less frequently than annually) made for the life (or life expectancy)
of the distributee or the joint lives (or joint life expectancies) of
the distributee and the distributee's designated Beneficiary, or for a
specified period of ten (10) years or more; any distribution to the
extent such distribution is required under Code Section 401(a)(9); and
the portion of any distribution that is not includible in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to Employer securities).
(b) "Eligible retirement plan" shall mean an individual retirement account
described in Code Section 408(a), an individual retirement annuity
described in Code Section 408(b), an annuity plan described in Code
Section 403(a), or a qualified trust described in Code Section 401(a),
that accepts the 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.
(c) "Distributee" includes an Employee or former Employee. In addition,
the Employee's or former Employee's surviving spouse and the
Employee's or former Employee's spouse or former spouse who is the
alternate payee under a qualified domestic relations order, as defined
in Code Section 414(p) are distributees with regard to the interest of
the spouse or former spouse.
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(d) "Direct rollover" shall mean a payment by the Plan to the eligible
retirement plan specified by the distributee.
SECTION 13 - Valuation Upon Distribution
---------- ---------------------------
13.1 Upon the Participant's termination of employment, or attainment of age
70 1/2 while employed with the Employer, the value of the amount credited to the
Inactive Participant's Account (or active Participant after attainment of age 70
1/2) for payment purposes (if payment is otherwise to commence) shall be
determined as of the Valuation Date coinciding with or next following the date
such termination of employment or attainment of age 70 1/2, as the case may be,
occurs. If payment is not to commence following the aforesaid Valuation Date,
then the amount credited to the Participant's Account shall be determined as of
the Valuation Date coinciding with or immediately preceding the date payment is
otherwise to commence. The Account shall include the proceeds of any life
insurance policy received as a result of the Participant's death (other than a
key man Employee policy). In the event the Valuation Date specified above would
not occur until after the April 1 following the calendar year following the
Participant attains age 70 1/2, then a reasonable estimate of the value shall be
used until a final value can be determined so that payment in all events shall
commence prior to such April 1. Except for a Participant's self-directed
investment Account, no earnings or losses of the Trust shall be applied to the
Participant's Account after the value of the Account is determined as provided
above for purposes of paying the Account to the Participant unless the Account
is paid in installment payments over more than one (1) Plan Year (if installment
payments are otherwise
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specifically permitted herein). The value of a Participant's self-directed
investment Account shall be its value as of the time it is either transferred in
kind or liquidated to provide for payment of benefits.
13.2 Where the Trustee is directed by the Inactive Participant to defer
payment of the vested portion of the Inactive Participant's Account for any
period, or where the vested portion of the Account is to be paid in
installments, (if installment payments are otherwise specifically permitted
herein), the Inactive Participant may continue to direct the investment of his
Account pursuant to the Investment Direction By Participant Section.
SECTION 14 - Trustee
---------- -------
14.1 The Trustee hereby accepts the Trust created hereunder and agrees to
carry out its duties and responsibilities hereunder. The Trustee shall serve at
the pleasure of the Employer, or upon such length of term or terms as may be
determined by the Employer. Whenever more than one Trustee serves hereunder, the
decision of a majority of the Trustees shall control. Any documents, including
checks, shall be valid if signed by a majority of the Trustees, or such person
or persons designated in writing by the Trustees. The Trustee shall maintain a
separate Account for each Participant to which will be credited the Employer
contributions and earnings thereon.
14.2 Except as specifically provided for, all contributions voluntarily
paid by or in behalf of the Employer to the Trustee from time to time, and all
contributions voluntarily paid by Participants, and all income and enhancement
shall constitute and
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be held and administered by the Trustee as a single Trust Fund; provided,
however, that the Trustee may maintain separate trusts and separate subtrusts
subject to the provisions contained herein.
14.3 The Trustee shall allocate to each Participant his share of the
Employer contributions and if otherwise permitted herein, forfeitures in
accordance with the provisions of this Plan and Trust agreement, based upon the
information furnished by the Committee. The Trustee and the Committee may agree
that the Committee, and not the Trustee, shall be responsible for making such
allocations.
14.4 Except as provided in the Investment Direction By Participant Section,
the Trustee shall invest and reinvest the Trust Fund and keep it invested,
without distinction between principal and income, and without restriction to
properties and securities authorized for investment by trustees under any
present or future law, in any and all common stocks, preferred stocks, bonds,
notes, debentures, mortgages, equipment trust certificates, options and in such
other property, real or personal, investments and securities of any kind, class,
or character, (specifically including any kind or class of savings accounts,
statement account, certificates of deposit, or any other types of deposits of
the Employer if the Employer is a bank or savings and loan association) as the
Trustee may deem advisable and suitable, including, but not limited to,
qualifying Employer securities and qualifying Employer real property,
partnership interests and stock or securities in other companies, any common
trust fund, or funds maintained by the Trustee, insurance policies on the lives
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of key Employees of the Employer payable on death to the Trust as beneficiary,
and if the Employer permits, insurance policies on the lives of Participants.
After giving consideration to diversifying the investment of assets, the Trustee
shall not acquire or hold any qualifying Employer securities or qualifying
Employer real property if immediately after such acquisition the aggregate fair
market value of the Employer securities or Employer real property exceeds one
hundred (100%) percent of the fair market value of the Plan assets. The Trustee,
in its discretion, may keep such portion of the Trust Fund in cash or cash
balances as the Trustee from time to time may deem to be in the best interests
of the Plan and Trust. The Trustee is authorized to invest in any type of
deposit of the Trustee provided the Trustee is a bank or savings and loan
association and the deposit earns a reasonable rate of interest. The Trustee
shall apply for and be the owner of the insurance policies. The proceeds of the
insurance policies shall be payable to the Trustee to provide the benefits
required in this Plan. In the case of any conflict between the terms of this
Plan and an insurance policy, then the Plan's provisions shall control. The
Trustee shall, in its discretion, either convert the entire value of any life
insurance contract at or before a Participant's retirement into cash, or
distribute the life insurance contract to the Participant at retirement. In no
event shall any life insurance be continued for the benefit of a Participant
after his retirement.
Notwithstanding anything in this Plan and Trust to the contrary, the
Employer specifically authorizes the Trustee to invest all or any portion of the
assets comprising the Trust Fund
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in any group trust fund which at the time of the investment provides for the
pooling of the assets of plans qualified under Code Section 401(a). This
authorization applies solely to a group trust fund exempt from taxation under
Code Section 501(a) and the trust agreement of which satisfies the requirements
of Internal Revenue Service Revenue Ruling 81-100. The provisions of the group
trust fund agreement, as amended from time to time, are by this reference
incorporated within this Plan and Trust. The provisions of the group trust fund
shall govern any investment of Plan assets in that fund. The Employer shall
specify in a resolution of its governing body the group trust funds to which
this authorization applies.
Furthermore, the Trustee, for collective investment purposes, may combine
into one (1) trust fund the Trust created under this Plan with the trust created
under any other qualified retirement plan the Employer maintains. However, the
Trustee shall maintain separate records of account for the assets of each Trust
in order to reflect properly each Participant's Accrued Benefit under the
plan(s) in which he is a Participant.
If payment of benefits in the form of an Annuity is otherwise permitted in
this Plan and Trust, any Annuity or insurance contract distributed hereunder
shall comply with the requirements set forth in the Code Section 401 (a)(11),
Code Section 417 and the Annuity Requirements Section.
14.5 If the Employer consents to the purchase of life insurance policies
used to provide incidental life insurance for Plan Participants, then the
following limitations shall apply.
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(a) If ordinary life insurance contracts are purchased, then less than
fifty (50%) percent of the aggregate Employer contributions allocated
to any Participant will be used to pay the premiums attributable to
them. Ordinary life insurance contracts for these purposes are
contracts with both nondecreasing death benefits and nonincreasing
premiums.
(b) No more than twenty-five (25%) percent of the aggregate Employer
contributions allocated to any Participant will be used to pay the
premiums on term life insurance contracts, universal life insurance
contracts, and all other life insurance contracts which are not
ordinary life contracts.
(c) The sum of fifty (501) percent of the ordinary life insurance premiums
and all other life insurance premiums will not exceed twenty-five
(25%) percent of the aggregate Employer contributions allocated to any
Participant.
Premiums on each policy, after taking credit for any policy dividends,
shall be deemed paid from each Participant's Account, and shall be debited for
purposes of allocations under this Plan first to such Participant's voluntary
contribution Account, if any, and then to his other Account. Any life insurance
on the life of a Participant shall not violate the incidental benefits rule as
required under Treasury Department Regulations.
14.6 In addition to the powers conferred by common law or by statute, the
Trustee is authorized and empowered:
(a) To sell, exchange, convey, transfer, or otherwise dispose of any
property held by it, by private contract or at public auction, and no
person dealing with the Trustee shall be bound to see to the
application of the purchase money or to inquire into the validity,
expediency, or propriety of any such sale or other disposition;
(b) To vote upon any stocks, bonds, or other securities; to give general
or special proxies or powers of attorney with or without power of
substitution; to exercise any conversion privileges, subscription
rights, or other options and to make any payments incidental thereto;
to consent to or otherwise participate in corporate reorganizations or
other changes affecting corporate securities and to delegate
discretionary powers and to pay
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any assessments or charges in connection therewith; and, generally, to
exercise any of the powers of an owner with respect to stocks, bonds,
securities, or other property held in the Trust Fund;
(c) To make, execute, acknowledge, and deliver any and all documents of
transfer and conveyance and any and all other instruments that may be
necessary or appropriate to carry out the powers herein granted;
(d) To register any investment held in the Trust Fund in its own name or
in the name of a nominee and to hold any investment in bearer form,
but the books and records of the Trustee shall at all times show that
all such investments are part of the Trust Fund;
(e) To manage, administer, operate, lease for any number of years,
develop, improve, repair, alter, demolish, mortgage, pledge, grant
options with respect to, partition, build entire new structures on,
abandon, foreclose, or otherwise deal with any real property or
interest therein at any time held by it, including specifically,
qualifying Employer real property, using other Trust assets for any of
such purposes if deemed advisable;
(f) To employ suitable agents and counsel and to pay their reasonable
expenses and compensation;
(g) To borrow or raise monies for the purposes of the Trust and for any
sum so borrowed to issue its promissory note as Trustee and to secure
the repayment thereof by pledging all or any part of the Trust Fund,
but nothing herein contained shall obligate the Trustee to render
itself liable individually for the amount of any such borrowing; and
no person loaning money to the Trustee shall be bound to see to the
application of the money loaned or to inquire into the validity,
expediency, or propriety of any such borrowing; and any borrowing
against life insurance policies shall be done on a pro rata basis so
as to avoid discrimination; and
(h) To acquire real estate by purchase, exchange, or as the result of any
foreclosure, liquidation, or other salvage of any investment
previously made hereunder; to hold such real estate in such manner and
upon such terms as the Trustee may deem advisable; and to manage,
operate, repair, improve, partition, mortgage, build entire new
structures on, or lease for any term of years any such real estate or
any other real estate constituting a part of the Trust Fund, upon such
terms and conditions as the Trustee deems proper, using other Trust
assets for any of such purposes if deemed advisable.
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14.7 Notwithstanding the broad powers granted to the Trustee, the Trustee
and Committee are prohibited from engaging in certain transactions with a party-
in-interest. Such transactions include engaging in (a) selling, exchanging, or
leasing property between the Plan and Trust and a party-in-interest, except
qualifying Employer securities or Employer real property; (b) loaning or
extending credit between the Plan and Trust and a party-in interest; (c)
furnishing goods, services or facilities between the Plan and Trust and a party-
in-interest; (d) transferring Plan and Trust assets to a party-in-interest; (e)
dealing with the income or assets of the Plan and Trust for their own benefit;
(f) receiving any consideration for their own benefit from any party dealing
with the Plan and Trust in connection with a transaction involving Plan and
Trust assets; or (g) acting in any transaction (in any capacity) involving a
Plan on behalf of a party whose interests are adverse to the interests of the
Plan and Trust, its Participants or Beneficiaries.
14.8 The term "party in interest" means:
(a) any fiduciary (including, but not limited to, any administrator,
officer, Trustee, or custodian), counsel, or employee of the Plan;
(b) a person providing services to the Plan;
(c) an Employer any of whose Employees are covered by the Plan;
(d) an Employee organization any of whose members are covered by the Plan;
(e) an owner, direct or indirect, of fifty (50%) percent or more of
(i) the combined voting power of all classes of stock entitled to
vote or the total value of shares of all classes of stock of a
corporation; or
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(ii) the capital interest or profits interest of a partnership; or
(iii) the beneficial interest of a trust or unincorporated enterprise
which is an Employer or an Employee organization described in
subparagraphs (c) or (d).
(f) a relative as defined herein of any individual described in
subparagraphs (a), (b), (c) or (e);
(g) a corporation, partnership, trust or estate of which (or in which)
fifty (50%) percent or more of
(i) the combined voting power of all classes of stock entitled to
vote, or the total value of shares of all classes of stock of
such corporation; or
(ii) the capital interest or profits interest of such partnership; or
(iii) the beneficial interest of such trust or estate,
is owned, directly or indirectly, or held by persons described in
subparagraphs (a), (b), (c), (d) or (e);
(h) an officer, director (or an individual having powers or
responsibilities similar to those of officers or directors), or a ten
(10%) percent or more shareholder, or a highly compensated employee
(earning ten (10%) percent or more of the yearly wages of an employer)
of a person described in subparagraphs (b), (c), (d), (e) or (g); or
(i) a ten (10%) percent or more (directly or indirectly in capital or
profits) partner or joint venturer of a person described in
subparagraphs (b), (c), (d), (e),
or (g).
The term "relative" means a spouse, ancestor, lineal descendant, or spouse of a
lineal descendant.
14.9 The Trustee shall keep accurate and detailed records of its
administration of the Trust Fund, which records shall be open to inspection at
all reasonable times by any person designated in writing by the Committee or the
Employer. Within ninety (90) days following the close of each Plan Year (and at
such other times as the Trustee shall determine in its sole discretion),
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the Trustee shall value the Trust Fund (exclusive of Employer's contributions
and forfeitures for such Plan Year and segregated Accounts) as of the last day
of such Plan Year, at the current fair market value of the respective assets,
but life insurance policies shall be shown at their carrying value on the books
of the Trustee. As soon as practicable after making such valuation, but not more
than fifteen (15) days thereafter, the Trustee shall file with the Committee a
written report setting forth the valuation made and, in addition, setting forth
all investments made, together with disbursements and receipts and other
transactions effected by it during such Plan Year, and securities and
investments held at the end of such Plan Year, and the cost of each item as
carried on the books of the Trustee.
14.10 Except as provided in the Investment Direction By Participant
Section, any earnings, gains, profits or losses of the Trust Fund since the
immediately preceding Valuation Date shall be credited or debited to the Account
of a Participant (or Inactive Participant as the case may be) as of a particular
Valuation Date in the proportion that such Account of such Participant on such
Valuation Date, exclusive of the Employer's contribution, any forfeitures, if
otherwise permitted herein, and any Employee voluntary contributions, if
otherwise permitted herein, since such immediately preceding Valuation Date,
bears to the total of all such Accounts. Any dividends or credits earned on
insurance contracts (other than a key man Employee policy) will be allocated to
the Participant's Account derived from Employer contributions for whose benefit
the contract is held.
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14.11 If a corporate Trustee (other than the Employer) serves hereunder,
then the corporate Trustee shall be paid for its service rendered hereunder
compensation and other charges as agreed by the Employer and the Trustee, but if
no agreement is in effect then as stipulated in its regularly adopted schedules
of compensation in effect and applicable at the time of performance of such
services, together with all reasonable expenses incurred by the Trustee in and
about the execution of its duties hereunder, including counsel fees and
disbursements. Except as provided below, if a non-corporate Trustee serves
hereunder, then the non-corporate Trustee shall be entitled to such reasonable
compensation for services rendered by it as may from time to time be agreed upon
between the Employer and the non-corporate Trustee, together with all reasonable
expenses incurred by the non-corporate Trustee in and about the execution of its
duties hereunder, including counsel fees and disbursements. Unless the Employer
agrees to pay the Trustee for services rendered, such compensation and expenses
shall be charged against and paid out of the Trust Fund and any segregated (or
self-directed) Accounts pro rata among the Participants. If the Employer advises
the Trustee in writing of its determination to make no further contributions to
the Trust Fund, and the Employer decides not to continue payment of the Trustee
compensation and expenses, such compensation and expenses of the Trustee shall
be charged against and paid out of the Trust Fund and any segregated (or self-
directed) Accounts pro rata among the Participants, and a lien for the payment
thereof shall be impressed upon any cash, securities or other property held by
the Trustee hereunder the same to be
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charged pro rata against the credit of each Participant. Notwithstanding
anything herein to the contrary, no compensation shall be paid to a fully paid
Employee of the Employer or, if a corporation, to a member of its Board of
Directors, for serving as a fiduciary, but such person may be reimbursed for
expenses reasonably incurred.
14.12 The Trustee may consult with counsel, who may be counsel for the
Employer, in respect of any of its duties or obligations hereunder, and the
Trustee shall be fully protected in acting or refraining from acting in
accordance with the advice of such counsel.
14.13 Any determination or action of the Employer pursuant to the
provisions of this Agreement shall be evidenced in writing duly executed by the
Employer and delivered to the Trustee. All authorizations, directions,
instructions, notices, or information given by the Committee to the Trustee
shall be in writing and signed in the name of the members of the Committee or by
such member or representative of the Committee as a majority of it shall specify
in writing. If the Trustee acts in accordance with authorizations, directions,
instructions, notices, or information given to it by the Employer or the
Committee, the Trustee shall be indemnified and held harmless by the Employer,
except for its own gross negligence or willful misconduct.
14.14 If neither the Employer nor the Committee gives authorizations,
directions, instructions, notices, or information to the Trustee, the Trustee
may act without such authorizations, directions, instructions, notices, or
information as it, in its
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sole discretion, deems advisable and appropriate in the circumstances for the
carrying out of the provisions of this Agreement.
14.15 The Trustee shall not be responsible for the adequacy of the Trust
Fund to meet and discharge any and all payments and liabilities under the Plan.
All persons dealing with the Trustee are released from inquiry into the decision
or authority of the Trustee to act, and from responsibility for the application
of any monies, securities or other property paid or delivered to the Trustee.
The Trustee shall not be obligated to pay interest on uninvested cash balances.
14.16 The Trustee shall not be required to determine, or to make any
investigation to determine, the identity or mailing address of any person
entitled to benefits under this Agreement, and shall have discharged its
obligation in that respect when it shall have sent checks or other papers by
ordinary mail to such persons and addresses as may be furnished to it by the
Committee.
14.17 The Trustee may be removed by the Employer by the delivery to the
Trustee of a written notice duly executed by the Employer to that effect. The
Trustee may resign as Trustee hereunder upon written notice to that effect,
delivered to the Employer. Any such removal or resignation shall become
effective sixty (60) days from the date of the delivery of such written
notice, unless an earlier date is agreed upon by the Employer and the Trustee.
In the event of such removal or resignation (or in the event the office of
Trustee becomes vacant for any reason), a successor Trustee or Trustees shall be
appointed by the Employer and such successor Trustee or Trustees, upon accepting
such appointment by an instrument in writing delivered to the Employer,
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shall become vested with all the duties, immunities, powers, privileges and
rights as Trustee hereunder as if it originally had been designated Trustee in
this Agreement. No successor Trustee shall be liable or responsible in any way
for any acts or defaults of any predecessor Trustee, but such successor Trustee
shall be liable only for its own acts and defaults with respect to property
actually received by it as such Trustee. The successor Trustee may accept the
accounting rendered and the assets and property delivered to it by the
predecessor Trustee and shall incur no liability or responsibility to any
Participant or Beneficiary under this Plan and Trust by reason of relying
thereon. The Employer may designate as many Trustees to serve hereunder as it
shall from time to time determine. Upon such appointment and acceptance, the
replaced Trustee shall assign, endorse, convey, deliver and transfer to the
successor Trustee all of the funds, securities and other property then held by
it under this Trust Agreement and such records as may reasonably be required in
order that the successor Trustee may properly administer the Trust hereunder. In
the event of such removal or resignation of any Trustee hereunder, within sixty
(60) days from the date of such removal or resignation such Trustee shall file
with the Employer and with the Committee a statement and report of its Accounts
and proceedings covering the period since the date of its last annual statement
and report to the date of such removal or resignation.
14.18 In the event and to the extent not insured against by any insurance
company pursuant to provisions of any applicable insurance policy, the Employer
shall indemnify and hold harmless any Trustees who are natural persons, their
assistants and representatives,
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from any and all claims, demands, suits, losses, damages, and any other
liability arising from their responsibilities in connection with this Plan or
Trust, unless the same is determined to be due to gross negligence or willful
misconduct.
14.19 In the event an individual is sole Trustee of this Trust while a
beneficiary of this Trust, then the Employer shall appoint a Co-Trustee to serve
with the individual Trustee immediately before the individual Trustee becomes
the sole beneficiary of the Trust if a merger would occur under state law.
SECTION 15 - Amendment and Termination of Plan
---------- ---------------------------------
15.1 The Board of Directors of the Employer may amend this Plan and Trust
at any time and from time to time. However, it is the intention of the Employer
and Trustee that this Plan and Trust shall always be a retirement plan and trust
qualified under Code Section 401, et. sea. and this Plan and Trust shall be
interpreted and administered accordingly. Except to the extent permitted in Code
Section 412(c)(8), no amendment shall decrease a Participant's Accrued Benefit
or otherwise violate Code Section 411(d)(6). For purposes of the preceding
sentence, a Plan amendment which has the effect of (a) eliminating or reducing a
subsidy or an early retirement benefit, if applicable, (as defined in Treasury
Regulations), or (b) eliminating an optional form of benefit, with respect to
benefits attributable to service before the amendment, shall be treated as
reducing Accrued Benefits. In the case of a retirement-type subsidy, the
preceding sentence shall apply only with respect to a Participant who satisfies
(either before or after the amendment) the pre-amendment conditions for the
subsidy. Treasury Regulations may provide that
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this Section shall not apply to a Plan amendment described in (b) above (other
than a Plan amendment having an effect described in (a) above).
Any amendment shall be in writing and shall be executed by an officer of
the Employer. The Trustee and the Plan Administrator shall be given a copy of
the amendment.
15.2 No change may be made in the Plan and Trust which shall vest in the
Employer, directly or indirectly, any control, interest, or ownership in any of
the present or subsequent assets or funds of the Trust, or in any of the present
or subsequent assets or funds set aside for Participants pursuant to this Plan
and Trust.
15.3 No part of the Trust Fund shall, by reason of any amendment, be used
for or directed to purposes other than for the exclusive benefit of Participants
and their Beneficiaries or for administration expenses of the Plan. The corpus
or income of the Trust may not be diverted to or used for other than the
exclusive benefit of the Participants and their Beneficiaries.
15.4 It is the present intention of the Employer to continue this Plan
indefinitely; however, the Board of Directors of the Employer may partially or
completely terminate this Plan, or completely discontinue contributions
hereunder, in which events the Accrued Benefit of all affected Participants in
the Trust Fund shall vest immediately and fully, without forfeiture. Any
complete termination of this Plan shall be in writing. Notice of the complete
termination shall be given to each Participant. In the event the Plan is
terminated, the Accrued Benefit of all Participants shall be distributed to
them. In the event contributions
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are completely discontinued, the Accrued Benefit of all Participants may be
distributed to them, or the Plan may continue to operate for the benefit of the
Participants pursuant to its terms, in which case the Accrued Benefits shall be
paid upon attainment of Normal Retirement Date (or early retirement, if
applicable), death, Disability, or other termination of employment as provided
in the Plan. Complete discontinuance of contributions or termination of the Plan
by an Employer, including a partial termination, shall be considered a complete
discontinuance of contributions or termination of the Plan only with respect to
that particular Employer. Suspension of contributions on a temporary basis for
reasons of business deemed adequate by the Employer shall not be considered a
complete discontinuance of contributions or a termination of the Plan.
15.5 In any event, the liabilities of the Employer to make contributions
under the Plan shall automatically terminate upon dissolution of the Employer,
upon its adjudication as a bankrupt, upon its making a general assignment for
the benefit of creditors, or upon its merger or consolidation with any other
corporation or corporations unless the Employer's liabilities to make further
contributions under the Plan are assumed by such other corporation or
corporations.
15.6 In the event of termination of the Employer's liabilities to make
further contributions under this Plan, such liabilities may be assumed by any
other corporation or business organization which employs a substantial number of
the Participants of the Plan. Such assumption of liabilities shall be expressed
in an agreement between such other corporation or business
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organization and the Employer. Any Participant under this Plan who does not
become an Employee of such other corporation or other business organization
shall have the rights hereunder of an Employee whose employment terminated by
normal retirement.
15.7 In the event of any merger or consolidation with, or transfer of
assets or liabilities to, any other retirement plan of the Employer, its
affiliate, or of any Employer, each Participant in the Plan will (as if the Plan
then terminated) receive a benefit immediately after the merger, consolidation,
or transfer which is equal to or greater than the benefit he would have been
entitled to receive immediately before the merger, consolidation, or transfer
(as if the Plan had then terminated).
SECTION 16 - Limitation on Benefits and Contributions
---------- ----------------------------------------
16.1 If an Employee is a Participant in one or more defined benefit plans
and one or more defined contribution plans (whether or not terminated)
maintained by the Employer or an Affiliated Employer, the sum of his defined
benefit plan fraction and his defined contribution plan fraction shall not
exceed 1.0 for any year. If the sum of the defined benefit plan fraction in the
Employer's defined benefit plan and the defined contribution plan fraction in
the Employer's defined contribution plan shall exceed 1.0 in any year of any
Participant in this Plan, the Employer shall adjust the numerator of the defined
contribution plan fraction so that the sum of the defined benefit plan fraction
and the defined contribution plan fraction shall not be in excess of 1.0 in any
year for such Participant in the order set forth in Section 5.10.
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For the purpose of this Section, the term defined benefit plan fraction for
any year shall mean a fraction the numerator of which is the projected annual
benefits payable to a Participant under all such defined benefit plans as of the
close of the current year and the denominator of which is the lesser of:
(a) the product of 1.25 multiplied by $90,000, (or such other dollar
limitation in effect under Code Section 415(b)(1)(A) for such year),
or
(b) the product of 1.4 multiplied by the average Compensation of the
Participant.
Notwithstanding the above, if the Participant was a participant as of the
first day of the first Limitation Year beginning after December 31, 1986, in one
or more defined benefit plans maintained by the Employer which were in existence
on May 6, 1986, the denominator of this fraction will not be less than 125
percent of the sum of the annual benefits under such plans which the Participant
had accrued as of the close of the last Limitation Year beginning before January
1, 1987, disregarding any changes in the terms and conditions of the plan after
May 5, 1986. The preceding sentence applies only if the defined benefit plans
individually and in the aggregate satisfied the requirements of Code Section 415
for all Limitation Years beginning before January 1, 1987.
The term defined contribution plan fraction for any year shall mean a
fraction the numerator of which is the aggregate amount of annual additions
under all such defined contribution plans made to a Participant's Account
balances as of the close of the current year and the denominator of which is the
sum of the
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lesser of the following amounts determined for such year and for each prior Year
of Service with the Employer:
(a) the product of 1.25 multiplied by $30,000, (or such other dollar
limitation in effect under Code Section 415(c)(1)(A) for such year,
without regard to Code Section 415(c)(6)), or
(b) the product of 1.4 multiplied by twenty-five (25%) percent of the
Compensation of the Participant.
If the Employee was a participant as of the end of the first day of the
first Limitation Year beginning after December 31, 1986, in one or more defined
contribution plans maintained by the Employer which were in existence on May 6,
1986, the numerator of this fraction will be adjusted if the sum of this
fraction and the defined benefit fraction would otherwise exceed 1.0 under the
terms of this Plan. Under the adjustment, an amount equal to the product of (i)
the excess of the sum of the fractions over 1.0 times (ii) the denominator of
this fraction, will be permanently subtracted from the numerator of this
fraction. The adjustment is calculated using the fractions as they would be
computed as of the end of the last Limitation Year beginning before January 1,
1987, and disregarding any changes in the terms and conditions of the plan made
after May 5, 1986, but using the Code Section 415 limitation applicable to the
first Limitation Year beginning on or after January 1, 1987.
The annual addition for any Limitation Year beginning before January 1,
1987, shall not be recomputed to treat all Employee contributions as annual
additions.
For any Plan Year this Plan is a Top Heavy Plan or a Super Top Heavy Plan,
then 1.0 shall be substituted for 1.25 in both subparagraphs (a) of this
Section. However, 1.25 will continue
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to be used for any Plan Year that this Plan is a Top Heavy Plan (but not a Super
Top Heavy Plan) provided the minimum allocation requirements of Code Section
416(c) are increased pursuant to Code Section 416(h)(2)(A)(ii). Further, if the
special minimum allocation of 7 1/2% is provided for in Section 5.6, then 1.25
will continue to be used for any Plan Year that this Plan is a Top Heavy Plan
(but not a Super Top Heavy Plan). If this Plan and a pre-Tax Equity and Fiscal
Responsibility Act (TEFRA) defined benefit plan are aggregated, a permanent
adjustment will be made to the numerator of the defined contribution fraction to
insure that the sum of the defined contribution fraction and defined benefit
fraction does not exceed 1.0 as of the effective date of TEFRA. Annual additions
in the numerator of the defined contribution plan fraction shall not exceed
annual additions in the denominator of the defined contribution plan fraction in
any year beginning prior to January 1, 1976.
SECTION 17 - Rollovers and Other Transfers
---------- -----------------------------
17.1 The Trustee shall not accept a rollover contribution or a direct or
indirect transfer on behalf of a Participant from another qualified plan,
individual retirement account or the Participant.
SECTION 18 - Miscellaneous Provisions
---------- ------------------------
18.1 The adoption and maintenance of this Plan shall not be deemed to
constitute a contract, express or implied, between the Employer and any Employee
or to be a consideration for, or inducement or condition of, the employment of
any person. Nothing herein contained shall be deemed to give any Employee the
right to be retained in the employ of the Employer or to interfere with
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the right of the Employer to discharge any Employee at any time, nor shall it
give the Employer the right to require the Employee to remain in its employ.
18.2 All benefits payable under this Plan shall be paid or provided for
solely from the Trust Fund. Neither the Employer nor the Trustee assumes any
liability or responsibility therefor.
18.3 Headings of Sections are included solely for convenience of reference,
and, if there is any conflict between such -headings and the text, the text
shall control.
18.4 As used in this Plan and Trust, the masculine gender shall include the
feminine, and the singular shall include the plural, unless the context clearly
indicates otherwise.
18.5 All legal questions pertaining to the Plan shall be determined in
accordance with the laws of the State of South Carolina, unless pre-empted under
Federal law.
18.6 The right of any Participant or his Beneficiary to any benefit or to
any payment herein or to any separate Account or insurance contract shall not be
subject to alienation, assignment, attachment, garnishment, or other legal or
equitable process, and if such Participant shall attempt to assign, transfer, or
dispose of such right, or should an attempt be made to subject such right to
attachment, execution, garnishment, or other legal or equitable process, such
attempt shall be null and void. The preceding sentence shall also apply to the
creation, assignment, or recognition of a right to any benefit payable with
respect to a Participant pursuant to a domestic relations order, unless such
order is determined to be a qualified domestic relations order,
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as defined in Code Section 414(p), or any domestic relations order entered into
before January 1, 1985.
18.7 Every fiduciary of this Plan and Trust shall be bonded to the extent
required by law.
18.8 No provision of this Plan and Trust is purported to relieve any
fiduciary from liability for any responsibilities, obligations, or duties
imposed on such fiduciary by the Employee Retirement Income Security Act of
1974, including any amendments thereto.
SECTION 19 - Voluntary Participant Contributions
---------- -----------------------------------
19.1 A Participant shall not make, and the Trustee shall not accept,
voluntary Participant contributions in this Plan and Trust.
SECTION 20 - Participant Loans
---------- -----------------
20.1 The Trustee shall not make a loan to any Participant or Beneficiary.
SECTION 21 - Hardship Distributions
---------- ----------------------
21.1 In the discretion of the Committee in accordance with uniform non-
discriminatory principles consistently applied, the Committee, upon application
and consent of an Employee, may direct the Trustee to make a Hardship
distribution to an Employee. The consent shall be obtained within the ninety
(90) day period before the Hardship distribution is made. Under no circumstances
shall a Hardship distribution exceed the aggregate total amount of the
Participant's Deferred Compensation portion in the Participant's Elective
Account as of the Valuation Date coinciding with or immediately preceding the
Hardship withdrawal request. No earnings credited for any period after
December 31,
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1988 shall be distributed as part of a Hardship withdrawal. Hardship
distributions shall be deemed to be made as of the Valuation Date coinciding
with or immediately preceding the Hardship withdrawal request and the Employee's
Elective Account shall be reduced accordingly.
21.2 If an Employee receives a Hardship distribution, then (i) the Employee
may not defer any Compensation in the Plan until at least twelve (12) months
after the Employee receives the Hardship distribution, and (ii) the Employee
shall not make Elective contributions for the Employee's taxable year
immediately following the taxable year of the Hardship distribution in excess of
the applicable limits under Code Section 402(g) for the next taxable year less
the amount of such Employee's Elective Contributions for the taxable year of the
Hardship distribution.
SECTION 22 - Cash or Deferred Limitations
----------- ----------------------------
22.1 No Participant shall be permitted to have Elective Deferrals made
under this Plan, or any other qualified plan maintained by the Employer, during
any taxable year, in excess of the dollar limitation contained in Code Section
402(g) in effect at the beginning of such taxable year.
22.2 A Participant may assign to this Plan any Excess Elective Deferrals
made during a taxable year of the Participant by notifying the Committee in
writing on or before February 15 of the amount of the Excess Elective Deferrals
to be assigned to the Plan. A Participant is deemed to notify the Committee of
any Excess Elective Deferrals that arise by taking into account only those
Elective Deferrals made to this Plan and any other plans of this Employer.
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Notwithstanding any other provision of the Plan, Excess Elective Deferrals,
plus any income and minus any loss allocable thereto, shall be distributed no
later than April 15 to any Participant to whose Account Excess Elective
Deferrals were assigned for the preceding year and who claims Excess Elective
Deferrals for such taxable year.
When used in this Plan, the following terms shall have the indicated
meanings:
(a) "Elective Deferrals" shall mean any Employer contributions made to the
Plan at the election of the Participant, in lieu of cash compensation,
and shall include contributions made pursuant to a salary reduction
agreement or other deferral mechanism. With respect to any taxable
year, a Participant's Elective Deferral is the sum of all Employer
contributions made on behalf of such Participant pursuant to an
election to defer under any qualified cash or deferred arrangement
(CODA) as described in Code Section 401(k), any simplified Employee
pension cash or deferred arrangement as described in Code Section
402(h)(1)(B), any eligible deferred compensation plan under Code
Section 457, any plan as described under Code Section 501 (c)(18), and
any Employer contributions made on the behalf of a Participant for the
purchase of an annuity contract under Code Section 403(b) pursuant to
a salary reduction agreement. Elective Deferrals shall not include any
deferrals properly distributed as excess annual additions.
(b) "Excess Elective Deferrals" shall mean those Elective Deferrals that
are includible in a Participant's gross income under Code Section
402(g) to the extent such Participant's Elective Deferrals for a
taxable year exceed the dollar limitation under such Code Section.
Excess Elective Deferrals shall be treated as annual additions under
the plan, unless such amounts are distributed no later than the first
April 15 following the close of the Participant's taxable year.
22.3 Excess Elective Deferrals shall be adjusted for any income or loss up
to the date of distribution. The income or loss allocable to Excess Elective
Deferrals is the sum of: (a) income or loss allocable to the Participant's
Elective Deferral account for the taxable year multiplied by a fraction, the
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numerator of which is such Participant's Excess Elective Deferrals for the year
and the denominator is the Participant's Account balance attributable to
Elective Deferrals without regard to any income or loss occurring during such
taxable year; and (b) ten (101) percent of the amount determined under (a)
multiplied by the number of whole calendar months between the end of the
Participant's taxable year and the date of distribution, counting the month of
distribution if distribution occurs after the 15th of such month.
22.4 Qualified Matching Contributions and Qualified NonElective
Contributions may be taken into account as Elective Deferrals for purposes of
calculating the Actual Deferral Percentages. In determining Elective Deferrals
for the purpose of the Actual Deferral Percentage test, the Employer shall
include Qualified Matching Contributions and Qualified Non-Elective
Contributions under this Plan or any other plan of the Employer, as provided by
regulations under the Code.
The amount of Qualified Matching Contributions made under the Employer Non-
Elective Contributions and Elective Contributions Section of this Plan and taken
into account as Elective Deferrals for purposes of calculating the Actual
Deferral Percentage, subject to such other requirements as may be prescribed by
the Secretary of the Treasury, shall be: such Qualified Matching Contributions
that are needed to meet the Actual Deferral Percentage test stated in this Cash
or Deferred Limitations Section.
The amount of Qualified Non-Elective Contributions made under the Employer
Non-Elective Contributions and Elective Contributions
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Section of this Plan and taken into account as Elective Deferrals for purposes
of calculating the Actual Deferral Percentages, subject to such other
requirements as may be prescribed by the Secretary of the Treasury, shall be:
such Qualified Non-Elective Contributions that are needed to meet the Actual
Deferral Percentage test stated in this Cash or Deferred Limitations Section.
22.5 The Actual Deferral Percentage (hereinafter "ADP") for Participants
who are Highly Compensated Employees for each Plan Year and the ADP for
Participants who are Non-Highly Compensated Employees for the same Plan Year
must satisfy one of the following tests:
(a) The ADP for Participants who are Highly Compensated Employees for the
Plan Year shall not exceed the ADP for Participants who are Non-Highly
Compensated Employees for the same Plan Year multiplied by 1.25; or
(b) The ADP for Participants who are Highly Compensated Employees for the
Plan Year shall not exceed the ADP for Participants who are Non-Highly
Compensated Employees for the same Plan Year multiplied by 2.0,
provided that the ADP for Participants who are Highly Compensated
Employees does not exceed the ADP for Participants who are Non-Highly
Compensated Employees by more than two (2) percentage points.
The following special rules shall apply:
(a) The ADP for any Participant who is a Highly Compensated Employee for
the Plan Year and who is eligible to have Elective Deferrals (and
Qualified Non-Elective Contributions or Qualified Matching
Contributions, or both, if treated as Elective Deferrals for purposes
of the ADP test) allocated to his accounts under two or more
arrangements described in Code Section 401(k), that are maintained by
the Employer, shall be determined as if such Elective Deferrals (and,
if applicable, such Qualified Non-Elective Contributions or Qualified
Matching Contributions, or both) were made under a single arrangement.
If a Highly Compensated Employee participates in two or more cash or
deferred arrangements that have different Plan Years, all cash or
deferred
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arrangements ending with or within the same calendar year
shall be treated as a single arrangement.
(b) In the event that this Plan satisfies the requirements of Code
Sections 401(k), 401(a)(4), or 410(b) only if aggregated with one or
more other plans, or if one or more other plans satisfy the
requirements of such Code Sections only if aggregated with this Plan,
then this Section shall be applied by determining the ADP of Employees
as if all such plans were a single plan. For Plan Years beginning
after December 31, 1989, plans may be aggregated in order to satisfy
Code Section 401(k) only if they have the same Plan Year.
(c) For purposes of determining the ADP of a Participant who is a Five
Percent Owner or one of the ten most highly-paid Highly Compensated
Employees, the Elective Deferrals (and Qualified Non-Elective
Contributions or Qualified Matching Contributions, or both, if treated
as Elective Deferrals for purposes of the ADP test) and Compensation
of such Participant shall include the Elective Deferrals (and, if
applicable, Qualified NonElective Contributions and Qualified Matching
Contributions, or both) and Compensation for the Plan Year of Family
Members (as defined in Code Section 414(q)(6)). Family Members, with
respect to such Highly Compensated Employees, shall be disregarded as
separate Employees in determining the ADP both for Participants who
are Non-Highly Compensated Employees and for Participants who are
Highly Compensated Employees.
(d) For purposes of determining the ADP test, Elective Deferrals,
Qualified Non-Elective Contributions and Qualified Matching
Contributions must be made before the last day of the twelve-month
period immediately following the Plan Year to which contributions
relate.
(e) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ADP test and the amount of Qualified Non-Elective
Contributions or Qualified Matching Contributions, or both, used in
such test. Qualified Non-Elective Contributions and Qualified Matching
Contributions may only be used in the test if they satisfy Regulation
1.401(k)-l(b)(3).
(f) The determination and treatment of the ADP amounts of any Participant
shall satisfy such other requirements as may be prescribed by the
Secretary of the Treasury.
When used in this Plan, the following terms shall have the indicated
meaning:
(a) "Actual Deferral Percentage" shall mean, for a specified group of
Participants for a Plan Year, the average
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of the ratios (calculated separately for each Participant in such
group) of (i) the amount of Employer contributions actually paid over
to the Trust on behalf of such Participant for the Plan Year to (ii)
the Participant's Compensation for such Plan Year. Employer
contributions on behalf of any Participant shall include: (1) any
Elective Deferrals made pursuant to the Participant's deferral
election (including Excess Elective Deferrals of Highly Compensated
Employees), but excluding (a) Excess Elective Deferrals of Non-highly
Compensated Employees that arise solely from Elective Deferrals made
under the plan or plans of this Employer and (b) Elective Deferrals
that are taken into account in the Contribution Percentage test
(provided the ADP test is satisfied both with and without exclusion of
these Elective Deferrals); and (2) at the election of the Employer,
Qualified Non-Elective Contributions and Qualified Matching
Contributions. For purposes of computing Actual Deferral Percentages,
an Employee who would be a Participant but for the failure to make
Elective Deferrals shall be treated as a Participant on whose behalf
no Elective Deferrals are made.
22.6 Notwithstanding any other provision of this Plan, Excess
Contributions, plus any income and minus any loss allocable thereto, shall be
distributed no later than the last day of each Plan Year to Participants to
whose accounts such Excess Contributions were allocated for the preceding Plan
Year. If such excess amounts are distributed more than 2 1/2 months after the
last day of the Plan Year in which such excess amounts arose, a ten (10%)
percent excise tax will be imposed on the Employer maintaining the Plan with
respect to such amounts. Such distributions shall be made to Highly Compensated
Employees on the basis of the respective portions of the Excess Contributions
attributable to each of such Employees. Excess Contributions shall be allocated
to Participants who are subject to the family member aggregation rules of Code
Section 414(q)(6) among the family members in proportion to the Elective
Contribution of each family member that is combined to determine the Actual
Deferral Percentage in accordance with Treasury regulations.
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22.7 Excess Contributions (including the amounts recharacterized if
otherwise allowed herein) shall be treated c additions under this Plan.
22.8 Excess Contributions shall be adjusted for any income or loss up to
the date of distribution. The income or loss allocable to Excess Contributions
is the sum of: (a) income or loss allocable to the Participant's Elective
Deferral account (and, if applicable, the Qualified Non-Elective Contribution
account or the Qualified Matching Contributions account or both) for the Plan
Year multiplied by a fraction, the numerator of which is such Participant's
Excess Contributions for the year and the denominator is the Participant's
Account balance attributable to Elective Deferrals (and Qualified Non-Elective
Contributions or Qualified Matching Contributions, or both, if any of such
contributions are included in the ADP test) without regard to any income or loss
occurring during such Plan Year; and (b) ten (10%) percent of the amount
determined under (a) multiplied by the number of whole calendar months between
the end of the Plan Year and the date of distribution, counting the month of
distribution if distribution occurs after the 15th of such month.
Excess Contributions shall be distributed from the Participant's Elective
Deferral account and Qualified Matching Contribution account (if applicable) in
proportion to the Participant's Elective Deferrals and Qualified Matching
Contributions (to the extent used in the ADP test) for the Plan Year. Excess
Contributions shall be distributed from the Participant's Qualified NonElective
Contribution account only to the extent that such Excess Contributions exceed
the balance in the Participant's Elective Deferral account and Qualified
Matching Contribution account.
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Excess Contributions shall be distributed to Participants who are subject
to the family member aggregation rules of Code Section 414(q)(6) among the
family members in proportion to the Elective Contribution of each family member
that is combined to determine the Actual Deferral Percentage in accordance with
Treasury regulations.
Excess Contributions shall be reduced by the amount of excess Elective
Deferrals already distributed.
When used in this Plan, the following terms shall have the indicated
meanings:
(a) "Excess Contribution" shall mean, with respect to any Plan Year, the
excess of:
(i) The aggregate amount of Employer contributions actually taken
into account in computing the ADP of Highly Compensated Employees
for such Plan Year, over
(ii) The maximum amount of such contributions permitted by the ADP
test (determined by reducing contributions made on behalf of
Highly Compensated Employees in order of the ADPs, beginning with
the highest of such percentages).
22.9 If this Plan and Trust otherwise specifically permit all Participants
to make voluntary non-deductible contributions, then a Participant may treat his
Excess Contributions as an amount distributed to the Participant and then
contributed by the Participant to the Plan. Recharacterized amounts will remain
nonforfeitable and subject to the same distribution requirements as Elective
Deferrals. Amounts may not be recharacterized by a Highly Compensated Employee
to the extent that such amount in combination with other Employee Contributions
made by that Employee would exceed any stated limit under the Plan on Employee
Contributions.
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Recharacterization must occur no later than two and one-half months after
the last day of the Plan Year in which such Excess Contributions arose and is
deemed to occur no earlier than the date the last Highly Compensated Employee is
informed in writing of the amount recharacterized and the consequences thereof.
Recharacterized amounts will be taxable to the Participant for the Participant's
tax year in which the Participant would have received them in cash. Under no
circumstances shall recharacterization be permitted if the Plan and Trust does
not otherwise specifically permit voluntary non-deductible contributions by all
Participants.
22.10 The Employer may make Qualified Matching Contributions to the Plan.
"Qualified Matching Contributions" shall mean Matching Contributions which are
subject to the distribution and nonforfeitability requirements under Code
Section 401(k) when made. Further, after December 31, 1988 Qualified Matching
Contributions may not be distributed to a Participant or Beneficiary because of
Hardship, if Hardship distributions are otherwise specifically permitted in this
Plan and Trust.
22.11 The Actual Contribution Percentage (hereinafter "ACP") for
Participants who are Highly Compensated Employees for each Plan Year and the ACP
for Participants who are Non-Highly Compensated Employees for the same Plan Year
must satisfy one of the following tests:
(a) The ACP for Participants who are Highly Compensated Employees for the
Plan Year shall not exceed the ACP for Participants who are Non-Highly
Compensated Employees for the same Plan Year multiplied by 1.25; or
(b) The ACP for Participants who are Highly Compensated Employees for the
Plan Year shall not exceed the ACP for Participants who are Non-Highly
Compensated Employees for the same Plan Year multiplied by two (2),
provided that the ACP for Participants who are Highly
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Compensated Employees exceed the ACP for Participants who are Non-
Highly Compensated Employees by more than two (2) percentage points.
The following special rules shall apply:
(a) If one or more Highly Compensated Employees participate in both a CODA
and a plan subject to the ACP test maintained by the Employer (whether
or not one or more plans exist) and the sum of the ADP and ACP of
those Highly Compensated Employees subject to either or both tests
exceeds the Aggregate Limit, then the ADP of those Highly Compensated
Employees who also participate in a CODA will be reduced (beginning
with such Highly Compensated Employee whose ADP is the highest) so
that the limit is not exceeded. The amount by which each Highly
Compensated Employee's Contribution Percentage Amounts is reduced
shall be treated as an Excess Contribution. The ADP and ACP of the
Highly Compensated Employees are determined after any corrections
required to meet the ADP and ACP tests. Multiple use does not occur if
both the ADP and ACP of the Highly Compensated Employees does not
exceed 1.25 multiplied by the ADP and ACP of the Non-Highly
Compensated Employees.
(b) For purposes of this Section, the Contribution Percentage for any
Participant who is a Highly Compensated Employee and who is eligible
to have Contribution Percentage Amounts allocated to his account under
two or more plans described in Code Section 401(a), or arrangements
described in Code Section 401(k) that are maintained by the Employer,
shall be determined as if the total of such Contribution Percentage
Amounts was under each plan. If a Highly Compensated Employee made
participates in two or more cash or deferred arrangements that have
different plan years, all cash or deferred arrangements ending with or
within the same calendar year shall be treated as a single
arrangement.
(c) In the event that this Plan satisfies the requirements of Code
Sections 401(m), 401(a)(4) or 410(b) only if aggregated with one or
more other plans, or if one or more other plans satisfy the
requirements of such sections of the Code only if aggregated with this
Plan, then this Section shall be applied by determining the
Contribution Percentage of Employees as if all such plans were a
single plan. For Plan Years beginning after December 31, 1989, plans
may be aggregated in order to satisfy Code Section 401(m) only if they
have the same Plan Year.
(d) For purposes of determining the Contribution Percentage of a
Participant who is a Five-Percent Owner or one of the ten most highly-
paid Highly Compensated Employees, the Contribution Percentage Amounts
and Compensation of such participant shall include the Contribution
Percentage Amounts and Compensation for the Plan Year of
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Family Members (as defined in Code Section 414(q)(6)). Family Members,
with respect to Highly Compensated Employees, shall be disregarded as
separate Employees in determining the Contribution Percentage both for
Participants who are Non-Highly Compensated Employees and for
Participants who are Highly Compensated Employees.
(e) For purposes of determining the Contribution Percentage test, Employee
Contributions are considered to have been made in the Plan Year in
which contributed to the Trust. Matching Contributions and Qualified
Non-Elective Contributions will be considered made for a Plan Year if
made no later than the end of the twelve (12) month period beginning
on the day after the close of the Plan Year.
(f) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ACP test and the amount of Qualified Non-Elective
Contributions or Elective Contributions, or both, used in such test.
Qualified NonElective Contributions and Elective Contributions may
only be used in the test if they satisfy Regulation 1.401(m)-1(b)(2).
(g) The determination and treatment of the Contribution Percentage of any
Participant shall satisfy such other requirements as may be prescribed
by the Secretary of the Treasury.
When used in this Plan, the following terms shall have the indicated
meanings:
(a) "Aggregate Limit" shall mean the sum of (i) 125 percent of the greater
of the ADP of the Non-Highly Compensated Employees for the Plan Year
or the ACP of Nonhighly Compensated Employees under the Plan subject
to Code Section 401(m) for the Plan Year beginning with or within the
Plan Year of the CODA and (ii) the lesser of 200` or two plus the
lesser of such ADP or ACP. For Plan Years beginning before the later
of January 1, 1992 or the date that is sixty (60) days after
publication of final regulations regarding multiple use, the Aggregate
limit is increased to the greater of the Aggregate Limit in the
preceding sentence or the sum of 125 percent of the lesser of (i) the
ADP of Non-Highly Compensated Employees for the Plan Year or the ACP
of Non-Highly Compensated Employees under the Plan subject to Code
Section 401(m) for the Plan Year beginning with or within the Plan
Year of the CODA and (ii) the greater of 200` or two plus the greater
of such ADP or ACP.
(b) "Average Contribution Percentage" shall mean the average of the
Contribution Percentages of the Eligible Participants in a group.
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(c) "Contribution Percentage" shall mean the ratio (expressed as a
percentage) of the Participant's Contribution Percentage Amounts to
the Participant's Compensation for the Plan Year (whether or not the
Employee was a Participant for the entire Plan Year).
(d) "Contribution Percentage Amounts" shall mean the sum of the Employee
Contributions, Matching Contributions, and Qualified Matching
Contributions (to the extent not taken into account for purposes of
the ADP test) made under the Plan on behalf of the Participant for the
Plan Year. Such Contribution Percentage Amounts shall include
forfeitures of Excess Aggregate Contributions or Matching
Contributions allocated to the Participant's account which shall be
taken into account in the year in which such forfeiture is allocated.
The Employer may include Qualified Non-Elective Contributions in the
Contribution Percentage Amounts. The Employer also may elect to use
Elective Deferrals in the Contribution Percentage Amounts so long as
the ADP test is met before the Elective Deferrals are used in the ACP
test and continues to be met following the exclusion of those Elective
Deferrals that are used to meet the ACP test.
(e) "Eligible Participant" shall mean any Employee who is eligible to make
an Employee Contribution, or an Elective Deferral (if the Employer
takes such contributions into account in the calculation of the
Contribution Percentage), or to receive a Matching Contribution
(including forfeitures) or a Qualified Matching Contribution. If an
Employee Contribution is required as a condition of participation in
the Plan, any Employee who would be a Participant in the Plan if such
Employee made such a contribution shall be treated as an eligible
Participant on behalf of whom no Employee Contributions are made.
(f) "Employee Contribution" shall mean any contribution made to the Plan
by or on behalf of a Participant that is included in the Participant's
gross income in the year in which made and that is maintained under a
separate account to which earnings and losses are allocated.
(g) "Matching Contribution" shall mean an Employer contribution made to
this or any other defined contribution plan on behalf of a Participant
on account of an Employee Contribution made by such Participant, or on
account of a Participant's Elective Deferral, under a plan maintained
by the Employer.
22.12 Notwithstanding any other provision of this Plan, Excess Aggregate
Contributions, plus any income and minus any loss allocable thereto, shall be
forfeited, if forfeitable, or if
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not forfeitable, distributed no later than the last day of each Plan Year to
Participants to whose accounts such Excess Aggregate Contributions were
allocated for the preceding Plan Year. Excess Aggregate Contributions shall be
allocated to Participants who are subject to the family member aggregation rules
of Code Section 414(q)(6) among the family members in proportion to the Employee
Contributions and Matching Contributions of each family member that are combined
to determine the Actual Contribution Percentage in accordance with Treasury
regulations. If such Excess Aggregate Contributions are distributed more than 2
1/2 months after the last day of the Plan Year in which such excess amounts
arose, a ten (10%) percent excise tax will be imposed on the Employer
maintaining the Plan with respect to those amounts. Excess Aggregate
Contributions shall be treated as annual additions under the Plan.
Excess Aggregate Contributions shall be adjusted for any income or loss up
to the date of distributions. The income or loss allocable to Excess Aggregate
Contributions is the sum of: (a) income or loss allocable to the Participant's
Employee Contribution account, Matching Contribution account (if any, and if all
amounts therein are not used in the ADP test) and, if applicable, qualified Non-
Elective Contribution account and Elective Deferral account for the Plan Year
multiplied by a fraction, the numerator of which is such Participant's Excess
Aggregate Contributions for the year and the denominator is the Participant's
account balance(s) attributable to Contribution Percentage Amounts without
regard to any income or loss occurring during such Plan Year; and (b) ten (10%)
percent of the amount determined
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under (a) multiplied by the number of whole calendar months between the end of
the Plan Year and the date of distribution, counting the month of distribution
if distribution occurs after the 15th of such month.
Forfeitures of Excess Aggregate Contributions shall be applied to reduce
Employer contributions.
Excess Aggregate Contributions shall be forfeited, if forfeitable or
distributed on a pro-rata basis from the Participant's Employee Contribution
account, Matching Contribution account, and Qualified Matching Contribution
account (and, if applicable, the Participant's Qualified Non-Elective
Contribution account or Elective Deferral account, or both).
When used in this Plan, the following terms shall have the indicated
meanings:
(a) "Excess Aggregate Contributions" shall mean, with respect to any plan
Year, the excess of:
(i) The aggregate Contribution Percentage Amounts taken into account
in computing the numerator of the Contribution percentage
actually made on behalf of Highly Compensated Employees for such
Plan Year, over
(ii) The maximum Contribution Percentage Amounts permitted by the ACP
test (determined by reducing contributions made on behalf of
Highly Compensated Employees in order of their Contribution
Percentages beginning with the highest of such percentages).
Such determination shall be made after first determining Excess Elective
Deferrals and then determining Excess Contributions.
22.13 In lieu of distributing Excess Contributions, or Excess Aggregate
Contributions, the Employer may make Qualified Non-Elective Contributions on
behalf of Non-Highly Compensated. Employees that are sufficient to satisfy
either the Actual Deferral Percentage test or the Average Contribution
Percentage test,
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or both, pursuant to regulations under the Code. "Qualified NonElective
Contributions" shall mean contributions (other than Matching Contributions or
Qualified Matching Contributions) made by the Employer and allocated to
Participants' Accounts that the Participants may not elect to receive in cash
until distributed from the Plan; that are nonforfeitable when made; and that are
distributable only in accordance with the distribution provisions that are
applicable to Elective Deferrals and Qualified Matching Contributions. Further,
after December 31, 1988 Qualified NonElective Contributions may not be
distributed to a Participant or Beneficiary because of Hardship, if Hardship
distributions are otherwise specifically permitted in this Plan and Trust.
22.14 The Participant's Accrued Benefit derived from Elective Deferrals,
Qualified Non-Elective Contributions, Employee Contributions, and Qualified
Matching Contributions is nonforfeitable. Separate accounts for Elective
Deferrals, Qualified Non-Elective Contributions, Employees Contributions,
Matching Contributions, and Qualified Matching Contributions will be maintained
for each Participant. Each account will be credited with the applicable
contributions and earnings thereon.
22.15 Elective Deferrals, Qualified Non-Elective Contributions, and
Qualified Matching Contributions, and income allocable to each are not
distributable to a Participant or his Beneficiary, in accordance with such
Participant's or Beneficiary's selection, earlier than upon separation from
service, death, or disability. Such amounts may also be distributed upon:
(a) Termination of the plan without the establishment of another defined
contribution plan.
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(b) The disposition by a corporation to an unrelated corporation of
substantially all of the assets (within the meaning of Code Section
409(d)(2)) used in a trade or business of such corporation if such
corporation continues to maintain this Plan after the disposition, but
only with respect to Employees who continue employment with the
corporation acquiring such assets.
(c) The disposition by a corporation to an unrelated entity of such
corporation's interest in a subsidiary (within the meaning of Code
Section 401(d)(3)) if such corporation continues to maintain this
Plan, but only with respect to Employees who continue employment with
such subsidiary.
(d) The attainment of age 59 1/2 in the case of a profit sharing plan if
otherwise specifically permitted in this Plan and Trust.
(e) The Hardship of the Participant if Hardship distributions are
otherwise specifically permitted in this Plan and Trust; provided,
however, that after December 31, 1988 only Elective Deferrals (and
earnings thereon accrued as of December 31, 1988) may be-distributed
because of Hardship.
SECTION 23 - Investment Direction By Participant
---------- -----------------------------------
23.1 A Participant shall direct the Trustee in writing to invest the total
amount credited to his Account in such investments as shall be established by
the Committee from time to time. The Committee may establish minimum and/or
maximum limitations with regard to the amount a Participant may invest in an
investment. Such investment direction shall be made to the Trustee in writing on
a form prescribed and in the manner designated by the Committee. At such times
as the Committee shall permit (but not less than once each Plan Year), a
Participant shall be permitted to change his investment direction and transfer
Account balances between investments pursuant to the terms and conditions of
this Investment Direction By Participant Section. The Trustee shall carry out
the Participant's investment direction as soon as
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reasonably practical. The Committee shall have the sole authority for
establishing the investments.
23.2 In the event a Participant does not make a subsequent investment
direction of his Accounts then the prior investment direction shall continue to
apply.
23.3 Any investment direction made by a Participant shall remain in effect
until another valid written direction has been made by the Participant. The
Participant shall be responsible for his investment directions and the
Committee, the Trustee and the Employer shall be relieved of any liability of
any kind therefor. Any investment direction made by a Participant shall apply to
present or future contributions, earnings or losses in such fund until the
investment direction is changed as provided herein. The Participant's directed
investment Accounts shall not share in any earnings, gains, profits or losses of
the Trust Fund, but instead any earnings, gains, profits or losses shall be
credited or debited to the directed investment Accounts as appropriate to
properly reflect such directed investments.
IN WITNESS WHEREOF, the Employer, by its duly authorized officer, and the
Trustee, have caused this amended and restated Plan and Trust Agreement to be
executed as of the day and year first above written.
HERITAGE FEDERAL SAVINGS & LOAN
Witnesses: ASSOCIATION
/s/ Gail S. Whitman By: /s/ J. Edward Wells
- ---------------------------------- -----------------------------------
J. Edward Wells, President
/s/ Amelia H. Chumley
- ---------------------------------- /s/ DEBRA C. GARRETT
-----------------------------------
DEBRA C. GARRETT, Trustee
Witnesses:
/s/ Gail S. Whitman /s/ J. EDWARD WELLS
- ---------------------------------- -----------------------------------
J. EDWARD WELLS, Trustee
/s/ Amelia H. Chumley
- ---------------------------------- /s/ EDWIN I. SHEALY
-----------------------------------
EDWIN I. SHEALY, Trustee
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EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement
No. 333-41857 of Heritage Bancorp, Inc. on Form S-1 of our report date
November 7, 1997, appearing in the Prospectus, which is part of such
Registration Statement.
We also consent to the filing of our state tax opinion as an exhibit and
to the reference to us under the headings "Heritage Federal Savings & Loan
Association Statements of Income," "Legal and Tax Opinions" and "Experts"
in such Prospectus.
/s/ Deloitte & Touche LLP
Greenville, South Carolina
January 23, 1998
<PAGE>
EXHIBIT 99.4
CONVERSION APPRAISAL REPORT
HERITAGE BANCORP, INC.
PROPOSED HOLDING COMPANY FOR
HERITAGE FEDERAL SAVINGS AND LOAN ASSOCIATION
LAURENS, SOUTH CAROLINA
DATED AS OF:
NOVEMBER 28, 1997
PREPARED BY:
RP FINANCIAL, LC.
1700 NORTH MOORE STREET
SUITE 2210
ARLINGTON, VIRGINIA 22209
<PAGE>
[LETTERHEAD OF RP FINANCIAL, LC.]
November 28, 1997
Board of Directors
Heritage Savings and Loan Association
201 West Main Street
Laurens, South Carolina 29360
Gentlemen:
At your request, we have completed and hereby provide an independent
appraisal ("Appraisal") of the estimated pro forma market value of the common
stock which is to be issued in connection with the mutual-to-stock conversion of
Heritage Federal Savings and Loan Association, Laurens, South Carolina
("Heritage Federal" or the "Association"). The common stock issued in connection
with the Association's conversion will simultaneously be acquired by a holding
company, Heritage Bancorp, Inc. (the "Holding Company"), and the Association
intends to change its name to Heritage Federal Bank. Pursuant to the Plan of
Conversion, the common stock is first being offered in the Subscription Offering
with nontransferable subscription rights being granted to Eligible Account
Holders, the ESOP, Supplemental Eligible Account Holders and Other Members. To
the extent shares remain available for purchase after filling all orders
received in the Subscription Offering, the Common Stock will be offered in a
Direct Community Offering to the general public, with preference given to
residents of the counties in which the Association maintains office locations.
This Appraisal is furnished pursuant to the conversion regulations
promulgated by the Office of Thrift Supervision ("OTS"). This Appraisal has been
prepared in accordance with the written valuation guidelines promulgated by the
OTS, most recently updated as of October 21, 1994. Specifically, this Appraisal
has been prepared in accordance with the "Guidelines for Appraisal Reports for
the Valuation of Savings and Loan Associations Converting from Mutual to Stock
Form of Organization" of the OTS, as successor to the Federal Home Loan Bank
Board ("FHLBB"), dated as of October 21, 1994; and applicable regulatory
interpretations thereof.
Description of Reorganization
- -----------------------------
The Board of Directors of the Association has adopted a Plan of
Conversion pursuant to which the Association will convert from a federally
chartered mutual savings and loan association to a federally chartered stock
savings bank and issue all of its outstanding shares to the Holding Company. The
Holding Company will sell in the Subscription Offering and, if necessary, in the
Direct Community Offering Holding Company stock in the amount equal to the
appraised value of the Association. Immediately following the conversion, the
only significant assets of the Holding Company will be the capital stock of the
Association and the net conversion proceeds remaining after purchase of the
Association's common stock by the Holding Company. The Holding Company will use
50 percent of the net conversion proceeds to purchase the Association's common
stock. A portion of the remaining 50 percent of the net conversion proceeds will
be used to fund a loan to the ESOP with the remainder to be used as general
working capital.
<PAGE>
RP Financial, LC.
Board of Directors
November 28, 1997
Page 2
RP Financial, LC.
- -----------------
RP Financial, LC. ("RP Financial") is a financial consulting firm
serving the financial services industry nationwide that, among other things,
specializes in financial valuations and analyses of business enterprises and
securities, including the pro forma valuation for savings institutions
converting from mutual-to-stock form. The background and experience of RP
Financial is detailed in Exhibit V-1. We believe that, except for the fee we
will receive for our appraisal and assisting the Association in the preparation
of its business plan, we are independent of the Association and the other
parties engaged by the Association to assist in the stock conversion process.
Valuation Methodology
- ---------------------
In preparing our appraisal, we have reviewed Heritage Federal's
application for Approval of Conversion, including the Proxy Statement, as filed
with the OTS, and the Holding Company's Form S-1 registration statement as filed
with the Securities Exchange Commission. We have conducted a financial analysis
of the Association that has included due diligence related discussions with the
Association's management; Deloitte & Touche LLP, the Association's independent
auditor; Breyer and Aguggia, the Association's conversion counsel; and Trident
Securities, Inc., which has been retained by the Association as a financial and
marketing advisor in connection with the Holding Company's stock offering. All
conclusions set forth in the appraisal were reached independently from such
discussions. In addition, where appropriate, we have considered information
based on other available published sources that we believe are reliable. While
we believe the information and data gathered from all these sources are
reliable, we cannot guarantee the accuracy and completeness of such information.
We have investigated the competitive environment within which the
Association operates and have assessed the Association's relative strengths and
weaknesses. We have kept abreast of the changing regulatory and legislative
environment and analyzed the potential impact on the Association and the
industry as a whole. We have analyzed the potential effects of conversion on the
Association's operating characteristics and financial performance as they relate
to the pro forma market value of Heritage Federal. We have reviewed the economy
in the Association's primary market area and have compared the Association's
financial performance and condition with selected publicly-traded thrift
institutions with similar characteristics as the Association's, as well as all
publicly-traded thrifts. We have reviewed conditions in the securities markets
in general and in the market for thrift stocks in particular, including the
market for existing thrift issues and the market for initial public offerings by
thrifts.
Our appraisal is based on the Association's representation that the
information contained in the regulatory applications and additional information
furnished to us by the Association and its independent auditors are truthful,
accurate and complete. We did not independently verify the financial statements
and other information provided by the Association and its independent auditors,
nor did we independently value the assets or liabilities of the Association. The
valuation considers the Association only as a going concern and should not be
considered as an indication of the liquidation value of Heritage Federal.
<PAGE>
RP Financial, LC.
Board of Directors
November 28, 1997
Page 3
Our appraised value is predicated on a continuation of the current
operating environment for the Association and for all thrifts. Changes in the
local and national economy, the legislative and regulatory environment, the
stock market, interest rates, and other external forces (such as natural
disasters or significant world events) may occur from time to time, often with
great unpredictability and may materially impact the value of thrift stocks as a
whole or the Association's value alone. It is our understanding that Heritage
Federal intends to remain an independent institution and there are no current
plans for selling control of the Association as a converted institution. To the
extent that such factors can be foreseen, they have been factored into our
analysis.
Pro forma market value is defined as the price at which Heritage
Federal's stock, immediately upon completion of the conversion offering, would
change hands between a willing buyer and a willing seller, neither being under
any compulsion to buy or sell and both having reasonable knowledge of relevant
facts.
Valuation Conclusion
- --------------------
It is our opinion that, as of November 28, 1997, the aggregate pro forma
market value of the shares to be issued was $52,500,000 at the midpoint, equal
to 3,500,000 shares offered at a per share value of $15.00. Pursuant to the
conversion guidelines, the 15 percent offering range indicates a minimum value
of $44,625,000 and a maximum value of $60,375,000. Based on the $15.00 per share
offering price, this valuation range equates to an offering of 2,975,000 shares
at the minimum to 4,025,000 shares at the maximum. In the event that the
Association's appraised value is subject to an increase, up to 4,628,750 shares
may be sold at an issue price of $15.00 per share, for an aggregate market value
of $69,431,250, without a resolicitation.
Limiting Factors and Considerations
- -----------------------------------
Our valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing shares of the
common stock. Moreover, because such valuation is necessarily based upon
estimates and projections of a number of matters, all of which are subject to
change from time to time, no assurance can be given that persons who purchase
shares of common stock in the conversion will thereafter be able to buy or sell
such shares at prices related to the foregoing valuation of the pro forma market
value thereof.
RP Financial's valuation was determined based on the financial condition
and operations of the Association as of September 30, 1997, the date of the
financial data included in the Holding Company's prospectus.
RP Financial is not a seller of securities within the meaning of any
federal and state securities laws and any report prepared by RP Financial shall
not be used as an offer or solicitation with respect to the purchase or sale of
any securities. RP Financial maintains a policy which prohibits the company, its
principals or employees from purchasing stock of its client institutions.
<PAGE>
RP Financial, LC.
Board of Directors
November 28, 1997
Page 4
The valuation will be updated as provided for in the conversion
regulations and guidelines. These updates will consider, among other things, any
developments or changes in the Association's financial performance and
condition, management policies, and current conditions in the equity markets for
thrift shares. These updates may also consider changes in other external factors
which impact value including, but not limited to: various changes in the
legislative and regulatory environment, the stock market and the market for
thrift stocks, and interest rates. Should any such new developments or changes
be material, in our opinion, to the valuation of the shares, appropriate
adjustments to the estimated pro forma market value will be made. The reasons
for any such adjustments will be explained in the update at the date of the
release of the update.
Respectfully submitted,
RP FINANCIAL, LC.
William E. Pommerening
Chief Executive Officer
James J. Oren
Vice President
<PAGE>
RP Financial, LC.
TABLE OF CONTENTS
HERITAGE FEDERAL SAVINGS AND LOAN ASSOCIATION
Laurens, South Carolina
PAGE
DESCRIPTION NUMBER
- ----------- ------
CHAPTER ONE OVERVIEW AND FINANCIAL ANALYSIS
- -----------
Introduction 1.1
Strategic Discussion 1.1
Balance Sheet Trends 1.4
Income and Expense Trends 1.7
Interest Rate Risk Management 1.10
Lending Activities and Strategy 1.11
Asset Quality 1.13
Funding Composition and Strategy 1.13
Subsidiary Operations 1.14
Legal Proceedings 1.14
CHAPTER TWO MARKET AREA
- -----------
Introduction 2.1
National Economic Factors 2.2
Market Area Demographics 2.5
Economy 2.6
Deposit Trends and Competition 2.7
Summary 2.9
CHAPTER THREE PEER GROUP ANALYSIS
- -------------
Selection of Peer Group 3.1
Financial Condition 3.5
Income and Expense Components 3.7
Loan Composition 3.10
Credit Risk 3.10
Interest Rate Risk 3.13
Summary 3.13
<PAGE>
RP Financial, LC.
TABLE OF CONTENTS
HERITAGE FEDERAL SAVINGS AND LOAN ASSOCIATION
Laurens, South Carolina
(continued)
PAGE
DESCRIPTION NUMBER
- ----------- ------
CHAPTER FOUR VALUATION ANALYSIS
- ------------
Introduction 4.1
Appraisal Guidelines 4.1
Valuation Analysis 4.2
1. Financial Condition 4.2
2. Profitability, Growth and Viability of Earnings 4.3
3. Asset Growth 4.4
4. Primary Market Area 4.5
5. Dividends 4.5
6. Liquidity of the Shares 4.7
7. Marketing of the Issue 4.8
A. The Public Market 4.8
B. The New Issue Market 4.13
C. The Acquisition Market 4.16
8. Management 4.16
9. Effect of Government Regulation and Regulatory Reform 4.16
Summary of Adjustments 4.17
Valuation Approaches 4.17
1. Price-to-Tangible Book ("P/TB") 4.18
1. Price-to-Earnings ("P/E") 4.19
3. Price-to-Assets ("P/A") 4.19
Valuation Conclusion 4.20
<PAGE>
RP Financial, LC.
LIST OF TABLES
HERITAGE FEDERAL SAVINGS AND LOAN ASSOCIATION
Laurens, South Carolina
TABLE
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
1.1 Historical Balance Sheets 1.5
1.2 Historical Income Statements 1.8
2.1 Major Employers-Laurens County 2.6
2.2 Market Area Unemployment Trends 2.7
2.3 Deposit Summary 2.8
3.1 Peer Group of Publicly-Traded Thrifts 3.3
3.2 Balance Sheet Composition and Growth Rates 3.6
3.3 Income as a Percent of Average Assets and Yields, Costs, Spreads 3.8
3.4 Loan Portfolio Composition Comparative Analysis 3.11
3.5 Peer Group Credit Risk Comparative Analysis 3.12
3.6 Interest Rate Risk Comparative Analysis 3.14
4.1 Peer Group Comparative Market Area Analysis 4.6
4.2 Conversion Pricing Characteristics 4.14
4.3 Market Pricing Comparatives 4.15
4.4 Public Market Pricing 4.21
<PAGE>
RP Financial, LC.
Page 1.1
I. OVERVIEW AND FINANCIAL ANALYSIS
Heritage Federal Savings and Loan Association ("Heritage Federal" or the
"Association") is a federally-chartered mutual savings and loan association
headquartered in Laurens, Laurens County, South Carolina. The Association also
operates three other branch offices in the central and western South Carolina
counties of Anderson, Greenwood and Greenville. The Association considers its
primary market for deposits to consist of the four counties mentioned above, in
particular the areas surrounding the office locations, and to a lesser extent
the rest of central and western South Carolina. Lending activities are also
concentrated in the four market area counties, although additional lending
activities are performed in other areas of South Carolina such as Columbia,
South Carolina metropolitan area. (see Exhibit I-1). The Association was
chartered as a federal mutual savings and loan association in 1948, obtaining
federal deposit insurance in that same year. The Association is currently a
member of the Federal Home Loan Bank ("FHLB") system. The Association's
deposits are insured up to the regulatory maximums by the Savings Association
Insurance Fund ("SAIF") of the Federal Deposit Insurance Corporation ("FDIC").
As of September 30, 1997, the Association maintained $247.5 million in assets,
$215.4 million in deposits and $29.2 million in equity, equal to 11.8 percent of
assets.
Heritage Bancorp, Inc. ("Heritage Bancorp" or the "Holding Company"), a
Delaware corporation, was recently organized to facilitate the conversion of
Heritage Federal. In the course of the conversion, the Holding Company will
acquire all of the capital stock that the Association will issue upon its
conversion from the mutual to stock form of ownership. Going forward, Heritage
Bancorp will own 100 percent of the Association's stock, and the Association
will be Heritage Bancorp's sole subsidiary. Approximately 50 percent of the net
proceeds received from the sale of common stock will be used to purchase all of
the then to be issued and outstanding capital stock of the Association, with the
balance of the proceeds being retained by the Holding Company. At this time, no
other activities are contemplated for Heritage Bancorp other than the ownership
of the Association, a loan to the newly-formed employee stock ownership plan
("ESOP") and investment of the cash retained at the holding company in
investment securities. In the future Heritage Bancorp may acquire or organize
other operating subsidiaries.
Strategic Discussion
- --------------------
The Association is a community-oriented financial institution dedicated
to meeting the borrowing, savings and financial services needs of its market
area served. The market area served by the Association (the four county market
area, and to a lesser extent, other sections of central and western South
Carolina), has been experiencing growth in population and households in recent
years. The economy and employment base is relatively diversified into most
economic sectors, although the market area continues to maintain a higher
<PAGE>
RP Financial, LC.
Page 1.2
concentration of manufacturing employment in comparison to statewide and
national averages. Operating in both slower growth rural areas (Laurens and
Greenwood Counties), and more populated, higher growth areas (Anderson and
Greenville Counties and the Columbia metropolitan area), Heritage Federal faces
notable competition from a number of other community oriented banks and savings
institutions, as well as from larger regional and superregional financial
institutions. In this operating environment the Association has pursued a
strategy of increasing the asset base in order to more effectively compete.
Throughout its history, the Association has pursued a traditional
operating strategy of mortgage lending secured by 1-4 family residential
properties (including residential construction and home equity lending) in the
central and western South Carolina market areas, with only a minimal amount of
diversification into other lending types such as commercial real estate loans
and non-mortgage loans. The Association has recorded loan growth in recent
years, reflecting greater marketing activities, competitive pricing and
additional sources of loans (the Association has recently begun purchasing loans
from mortgage companies in both Greenville and Columbia, South Carolina. Such
loan growth has also been facilitated through developing a more customer-
oriented approach and developing business relations with real estate brokers.
The recent increase in loans receivable has been funded internally through a
reduction in mortgage-backed securities ("MBS") and externally through deposit
growth and FHLB advances (although no advances were outstanding as of September
30, 1997). The Association retains a majority of the 1-4 family loan
originations in portfolio. The Association expects the majority of its loan
activity in the future to be within the current market areas.
The Association's emphasis on originating 1-4 family permanent mortgage
loans in local and familiar markets and strong underwriting criteria on loans
originated has resulted in generally adequate credit quality measures. The
Association's allowance for loan losses relative to loans is somewhat below
industry averages, although Heritage Federal added to the reserve balance during
fiscal 1997 following a review of the loan portfolio. The Association has also
added to the allowance recently primarily in view of the recent loan portfolio
growth (the portfolio has grown by 9 percent since September 30, 1995). The
ratio of non-performing assets ("NPAs"), consisting of real estate owned and
other repossessed assets, non-accruing loans, delinquent accruing loans and
restructured loans to assets has dropped since fiscal 1993, and was 0.84 percent
of assets as of September 30, 1997.
The Association's lending strategies to limit exposure to interest rate
risk have involved originating adjustable rate residential mortgage loans
("ARMs"), adjustable rate commercial real estate loans and shorter-term
construction and consumer loans. Liability strategies have involved attempts to
lengthen the maturity of deposits and building a capital base in excess of 11
percent of assets. The Association originates residential ARM loans that are
fixed for the first one, three or ten years and then adjust every year after the
initial period. Heritage Federal's ARM loans adjust based on the National
Monthly Median Cost of Funds Index ("NMMCOF"), which is
<PAGE>
RP Financial, LC.
Page 1.3
a lagging index. The effect of these two factors results in a negative effect on
the Association's exposure to interest rate risk. As calculated by the OTS, the
change in the Association's net portfolio value ("NPV") upon a 200 basis point
rise in interest rates was a negative 20 percent as of September 30, 1997.
Heritage Federal anticipates the conversion proceeds will facilitate improvement
in the interest rate risk analysis as the net capital raised in the conversion
will increase the ratio of interest-earning assets ("IEA") to interest-bearing
liabilities ("IBL") and the proceeds will increase the proportion of shorter-
term or adjustable rate assets.
Heritage Federal's main source of net income, the net interest margin,
has declined in recent years due to a lower level of interest income and a
higher level of interest expense. While interest income as a percent of assets
has declined in the overall declining and low interest rate environment in
recent years, increased competition has caused a noticeable increase in funding
costs. The Association's funding costs also face upward pressure due to a high
proportion of higher costing certificates of deposit ("CDs") in portfolio,
including a balance of jumbo CDs. Core profitability has been maintained by a
relatively constant level of operating expenses. Future core profitability is
projected to improve moderately with the reinvestment benefit of the new capital
raised, although expenses from the employee benefit plans to be implemented at
conversion are expected to add to the expense base.
Heritage Federal's Board of Directors has determined that a conversion
to stock form is an attractive business strategy for several reasons. First, the
new structure will provide the ability to diversify business activities, provide
greater flexibility in structuring acquisitions and increase the future access
to capital markets. Second, it will provide the capital necessary to improve the
overall competitive position of the Association in its market area, with regard
to rates and services offered and ability to expand. Third, the conversion may
provide the opportunity for expanded local stock ownership which could enhance
the financial success of the Association as local shareholders promote the
Association's products and services. As disclosed in the prospectus, the
proceeds from stock conversion are anticipated to be invested as follows.
o Heritage Bancorp. Approximately 50 percent of the conversion
----------------
proceeds will be retained by Heritage Bancorp, with the balance to be
invested in the Association. Such holding company funds are
anticipated to be invested initially into high-quality short- to
intermediate-term securities and a loan to the Association's ESOP to
fund stock purchases in the conversion. The Holding Company funds
will be utilized for various corporate purposes, including funding
expansion through diversification or acquisition, stock repurchase
programs, funding stock purchases for the MRP and/or payment of
regular or special dividends, although there are no specific plans at
present.
o Heritage Federal. The net proceeds infused into the Association
----------------
will be exchanged for all of the Association's newly issued stock.
The Association's proceeds are anticipated to initially be held in
short-term cash and investments until such funds are redeployed into
lending and investment activities consistent with the Association's
plan.
<PAGE>
RP Financial, LC.
Page 1.4
On a pro forma basis, Heritage Federal is expected to have a capital
ratio above both regulatory requirements and industry averages. The Board of
Directors has determined to pursue a strategy of controlled growth in order to
maintain well-capitalized status, with growth expected to be funded primarily
through local retail deposit growth.
Balance Sheet Trends
- --------------------
Table 1.1 shows key balance sheet items at the close of the last five
fiscal years. Heritage Federal's audited financial statements are incorporated
by reference as Exhibit I-2, while historical key operating ratios are presented
in Exhibit I-3. From September 30, 1993 through September 30, 1997, Heritage
Federal exhibited annual asset growth of 3.6 percent, with the asset growth
channelled into increases in loans receivable and cash and investments. The loan
growth has been relatively steady, with the balance of loans receivable
increasing each fiscal year. While the Association historically invested in MBS,
no MBS have been purchased in recent years as Heritage Federal has opted to
invest available funds into whole loans receivable, and the balance of MBS have
declined through repayments and pre-payments. The proportion of cash and
investments as a percent of assets has remained essentially stable since 1993
although the absolute balance has increased. Heritage Federal's annual deposit
growth totaled 3.2 percent over the past four fiscal years, as the Association
has attracted new funds primarily through competitive rate offerings.
Borrowings, consisting of FHLB advances, have been used as a supplemental
funding source in fiscal 1995 and 1996 to support lending operations.
The balance of loans receivable increased consistently since fiscal
1993, with the balance increasing overall by 22 percent since September 30,
1993, and the loans-to-deposit ratio increased from 83 to 90 percent over the
same time period. Since that time, the Association has been successful in
expanding its residential loan origination efforts in the local market and has
utilized additional loan sources such as mortgage companies or mortgage brokers
in other metropolitan areas. At September 30, 1997, loans receivable totaled
$193.7 million, or 78.3 percent of total assets. The composition of the loan
portfolio reflects the concentration on residential lending, as 1-4 family
permanent first mortgage loans constituted $180.6 million, or 90.0 percent of
the gross loan portfolio at September 30, 1997, equal to the ratio reported at
fiscal year end 1993. This balance included $8.1 million of construction loans
to the owner of the property, whereby the construction loan will convert to a
permanent loan at the end of the construction period. At the same date, builder
construction loans, or loans made to qualified builders in the local markets,
totaled $2.6 million, or 1.3 percent of the loan portfolio. The largest
expansion in the loan portfolio has occurred in the area of home equity loans
($8.1 million), originated in the form of equity lines of credit. Heritage
Federal also maintains a balance of commercial real estate loans, which totaled
$8.1 million, or 4.0 percent of the gross loan portfolio, as Heritage Federal
has targeted smaller non-residential properties in the market area for lending
opportunities. These loans are attractive for their higher
<PAGE>
RP Financial, LC.
TABLE 1.1
HERITAGE FEDERAL SAVINGS AND LOAN ASSOCIATION
HISTORICAL BALANCE SHEETS
(AMOUNT AND PERCENT OF ASSETS)
<TABLE>
<CAPTION> 9/30/93-
As of September 30, 9/30/97
------------------------------------------------------------------------------------ Annual
1993 1994 1995 1996 1997 Growth Rate
---------------- ---------------- ---------------- ---------------- ---------------- -----------
Amount Pct Amount Pct Amount Pct Amount Pct Amount Pct Pct
-------- ------- -------- ------- -------- ------- -------- ------- -------- -------
($000) (%) ($000) (%) ($000) (%) ($000) (%) ($000) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Amount of:
Assets $211,493 100.00% $214,817 100.00% $233,780 100.00% $244,659 100.00% $247,499 100.00% 3.60%
Cash and Investments 35,234 16.66% 37,553 17.48% 37,788 16.16% 45,055 18.42% 41,079 16.60% 2.27%
Loans Receivable (net) 158,536 74.96% 159,682 74.33% 178,259 76.25% 182,950 74.78% 193,708 78.27% 4.95%
Mortgage-Backed Securities (net) 13,356 6.32% 14,097 6.56% 11,989 5.13% 9,726 3.98% 6,665 2.69% (17.08)%
Deposits 190,728 90.18% 189,922 88.41% 201,473 86.18% 209,730 85.72% 215,412 87.04% 3.20%
FHLB Advances 0 0.00% 0 0.00% 5,000 2.14% 5,000 2.04% 0 0.00% N/M
Stockholders' Equity 19,599 9.27% 23,600 10.99% 25,691 10.99% 26,740 10.93% 29,235 11.81% 5.50%
AFS Adjustment --- --- 288 0.13% 634 0.27% 923 0.38% 1,466 0.59% N/M
Loans Serviced for Others $ 2,000 $ 7,000 $ 6,600 $ 6,000 $ 5,400
Loans/Deposits 83.12% 84.08% 88.48% 87.23% 89.42%
</TABLE>
Source: Prospectus, audited financial reports and RP Financial calculations.
<PAGE>
RP Financial, LC.
Page 1.6
yields, shorter-terms, and higher average balances which require less personnel
for monitoring and servicing. Consumer loans totaled $1.4 million, or 0.7
percent of loans receivable, consisting entirely of loans on savings accounts.
The Association does not make commercial business loans.
MBS totaled $6.7 million at September 30, 1997, the third largest
component of interest-earning assets. The balance of MBS has declined noticeably
since fiscal 1993, as the Association has opted to invest available funds into
whole loans receivable. The MBS portfolio consists of FNMA and FHLMC pass-
through certificates, a majority of which carried short term balloon terms. The
entire MBS portfolio was classified as "held-to-maturity" ("HTM") at September
30, 1997, and is carried on the balance sheet at historical cost. There was an
unrealized pre-tax loss of $30,000 as of September 30, 1997 in the MBS
portfolio. The Association utilizes a portion of its MBS portfolio to satisfy
regulatory liquidity requirements, preferring to maintain such funds in MBS
instead of lower yielding cash and investments. Going forward, the Association
intends to reinvest available funds into whole loans receivable and does not
intend to emphasize investment in MBS.
The portfolio of cash and investment securities totaled $41.1 million,
or 16.6 percent of assets, at September 30, 1997 (see Exhibit I-4). The cash and
investments portfolio consisted of cash and equivalents, including interest-
earning deposits in other financial institutions ($14.7 million), U.S.
Government and agency securities ($22.0 million), FHLB stock ($2.0 million) and
FHLMC stock ($2.4 million). Over the past five fiscal years, Heritage Federal
has maintained a balance of cash and investment securities in the range of 16 to
19 percent of assets. Management utilizes the portfolio of cash and investments
for liquidity purposes and as part of the asset-liability management strategy,
as the investments portfolio consists of short- to intermediate-term
instruments. The Association classifies a portion of the U.S. Government and
Agency securities and the FHLMC stock as "available-for-sale", and as of
September 30, 1997, an unrealized pretax gain of $2,327,000 was tax adjusted and
added to stated equity on the Association's audited financial statements. Going
forward, the Association intends to continue to purchase generally low risk
investments and the composition of the cash and investments portfolio is not
anticipated to change significantly, although the level will initially increase
on a post-conversion basis. Going forward, the Association intends to continue a
focus on investment into whole loans.
As noted previously, deposits have traditionally met most of the
Association's funding needs, and all of the Association's deposits are generated
through its four office locations. The Association has achieved growth in
deposits primarily by being rate competitive and offering to negotiate terms for
large balance CDs. The Association has a relatively large balance of CDs with
balances above $50,000, and has established a practice of negotiating the rates
paid on these CDs. This strategy facilitated deposit growth, but also increased
funding costs. Currently, savings rates offered by Heritage Federal are
generally in line or higher than the local competition, with certificates of
deposits ("CDs") accounting for the majority of total deposits (over 90 percent
of deposits).
<PAGE>
RP Financial, LC.
Page 1.7
The Association has only a small portfolio of savings and transaction accounts
totaling approximately 7 percent of deposits, providing only a minimal base of
stable lower costing deposits for operations.
As stated previously, borrowings have also been used by the Association
in recent periods for the purpose of funding certain loan originations. During
fiscal 1995 and 1996, the Association borrowed approximately $5.0 million in
short- to intermediate-term advances from the FHLB of Atlanta to meet the demand
for loans, however as of September 30, 1997 there were no borrowings
outstanding. Going forward, while borrowings may be utilized to support
operations, deposits are expected to continue to comprise the majority of
funding liabilities.
Positive earnings from fiscal 1993 to fiscal 1997 and a positive
adjustment for FAS 122 resulted in an increase in the Association's capital
ratio to $29.2 million, or 11.8 percent of assets, as of September 30, 1997. The
Association's capital ratio has increased only moderately since fiscal 1993 due
to the continued growth in assets. Heritage Federal is currently in compliance
with respect to all of its fully phased-in capital requirements. The addition of
conversion proceeds will enhance the Association's capital position and
strengthen Heritage Federal's competitive posture within its market area.
Income and Expense Trends
- -------------------------
Table 1.2 displays the Association's earnings over the past five fiscal
years and reveals that earnings for the past five fiscal years have fluctuated
between 1.63 and 0.32 percent of average assets, and totaled 0.80 percent for
fiscal 1997, an increase from the lower level in fiscal 1996. The more recent
lower earnings have been attributable to a lower net interest margin, primarily
due to higher levels of interest expense, and for fiscal 1996, expense related
to payment of the SAIF assessment. The reinvestment of offering proceeds is
expected to improve net income in future periods.
As shown in Table 1.2, the Association's net interest income declined
from a high of 3.43 percent of average assets in fiscal 1993 to 2.01 percent in
fiscal 1996, before increasing to 2.27 percent in fiscal 1997. The decrease in
the net interest margin has resulted from both a decrease in interest income and
an increase in interest expense, and Exhibit I-5 highlights the changes in the
Association's asset yields and cost of funds over the past three fiscal years,
which have influenced the level of net interest income. The general decline in
interest income from 1993 levels reflects the overall lower interest rate
environment of the mid-1990s compared to earlier years, although the
Association's yield on interest-earning assets increased between fiscal 1995 and
1997 as increasing balances of higher yielding whole loans receivable increased
the Association's asset yields by 19 basis points in fiscal 1997.
<PAGE>
RP Financial, LC.
Table 1.2
Heritage Federal Savings and Loan Association
Historical Income Statements
<TABLE>
<CAPTION>
For the Year Ended September 30,
----------------------------------------------------------------------------------
1993 1994 1995 1996 1997
-------------- -------------- -------------- -------------- --------------
Amount Pct(1) Amount Pct(1) Amount Pct(1) Amount Pct(1) Amount Pct(1)
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
($000) (%) ($000) (%) ($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income $16,474 7.96% $15,361 7.18% $16,164 7.11% $16,974 7.16% $17,773 7.28%
Interest Expense (9,382) (4.53)% (8,550) (4.00)% (10,431) (4.59)% (12,212) (5.15)% (12,230) (5.01)%
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Net Interest Income $7,092 3.43% $6,811 3.18% $5,733 2.52% $4,762 2.01% $5,543 2.27%
Provision for Loan Losses (35) (0.02)% (62) (0.03)% (47) (0.02)% 7 0.00% (337) (0.14)%
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Net Interest Income after Provisions $7,057 3.41% $6,749 3.15% $5,686 2.50% $4,769 2.01% $5,206 2.13%
Other Operating Income $251 0.12% $139 0.06% $215 0.09% $209 0.09% $209 0.09%
Operating Expense (2,347) (1.13)% (2,226) (1.04)% (2,302) (1.01)% (2,730) (1.15)% (2,529) (1.04)%
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Net Operating Income $4,961 2.40% $4,662 2.18% $3,599 1.58% $2,248 0.95% $2,886 1.18%
Gain(Loss) on Sale of Loans and Securities $0 0.00% $0 0.00% $3 0.00% $18 0.01% ($7) (0.00)%
Gain(Loss) on REO Operations (53) (0.03)% (61) (0.03)% (77) (0.03)% 120 0.05% 167 0.07%
SAIF Assessment Fee 0 0.00% 0 0.00% 0 0.00% (1,267) (0.53)% 0 0.00%
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Net Non-Operating Income/Expense ($53) (0.03)% ($61) (0.03)% ($74) (0.03)% ($1,129) (0.48)% $160 0.07%
Net Income Before Tax $4,908 2.37% $4,601 2.15% $3,525 1.55% $1,119 0.47% $3,046 1.25%
Income Taxes (1,763) (0.85)% (1,691) (0.79)% (1,546) (0.68)% (360) (0.15)% (1,094) (0.45)%
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Net Inc(Loss) Before Extraordinary Items $3,145 1.52% $2,910 1.36% $1,979 0.87% $759 0.32% $1,952 0.80%
Cumulative Effect of Change in
Accounting For Income Taxes $0 0.00% $570 0.27% $0 0.00% 0 0.00% 0 0.00%
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Net Income (Loss) $3,145 1.52% $3,480 1.63% $1,979 0.87% $759 0.32% $1,952 0.80%
Adjusted Earnings
- -----------------
Net Operating Income $4,961 2.40% $4,662 2.18% $3,599 1.58% $2,248 0.95% $2,886 1.18%
Tax Effect (2) (1,782) (0.86)% (1,713) (0.80)% (1,578) (0.69)% (723) (0.30)% (1,037) (0.42)%
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Adjusted Earnings $3,179 1.54% $2,949 1.38% $2,021 0.89% $1,525 0.64% $1,849 0.76%
Memo:
Efficiency Ratio 31.96% 32.03% 38.70% 54.92% 43.97%
Effective Tax Rate 35.92% 36.75% 43.86% 32.17% 35.92%
</TABLE>
(1) Ratios are as a percent of average assets.
(2) Based on effective tax rate for each year.
Source: Prospecus, audited financial reports and RP Financial calculations.
<PAGE>
RP Financial, LC.
Page 1.9
Interest expense has risen by a total of 101 basis points since fiscal
1994, narrowing the net interest margin. Costs of deposits and borrowings
increased by 56 basis points between fiscal 1995 and 1996 while asset yields
remained relatively stable, as customers generally sought to lengthen the term
to maturity of CDs and the Association followed a practice of negotiated rates
on large balance CDs which increased deposit funding costs. The Association has
also been rate competitive for deposit funds in the most recent periods in order
to fund the desired growth. The more recent (fiscal 1997) increase in the
yield/cost spread indicates that the Association has been successful improving
the net interest margin, however, the Association's net interest income is still
influenced by the high proportion of higher costing CDs in the funding base.
Heritage Federal has historically derived only minimal levels of income
from non-interest sources due to the non-diversified operations, which has
provided some protection from changes in the net interest margin due to interest
rate fluctuations. For the most recent twelve month period, non-interest
operating income totaled $209,000, or 0.09 percent of average assets, a 0.03
percent of average assets decline from fiscal 1993. A majority of this income
results from the Association's deposit base in the form of various fees and
charges on deposit accounts and transactions. Going forward, the Association
anticipates that non-interest income will remain primarily related to the
deposit base, as other significant income sources are not expected to be
developed.
Heritage Federal's operating expenses have historically been below
industry averages (also due to the non-diversified operating strategy) and a
high deposits/branch ratio which has resulted in leveraged operations. Operating
expenses increased in absolute terms over the time period shown in Table 1.2 due
to the growth in the asset base and related operations, including costs related
to the opening of the new headquarters office building during fiscal 1996.
However, the continued asset growth has resulted in a relatively stable
operating expense ratio, which has remained between 1.00 and 1.15 percent of
average assets since fiscal 1993, and totaled 1.04 percent for fiscal 1997. The
opening of the new headquarters office in fiscal 1996 resulted in an increase in
depreciation expense of approximately $200,000, an expense that will continue
into the future. The Association's operating expenses are expected to initially
increase from current levels following the conversion as a result of the
following items. The ESOP and MRP purchases in the offering and in the year
following conversion, respectively, will increase annual expenses. In addition,
as a full stock institution, the Association will incur additional legal,
accounting, printing/mailing and related costs.
Provisions for loan losses have generally had a small impact on earnings
in recent years, although such provisions increased to $337,000, or 0.14 percent
of assets during the twelve months ended September 30, 1997, as Heritage Federal
added to the allowance for loan losses in recognition of the growth in the
overall loan portfolio, and in recognition of estimated losses on certain
problem loans. As of September 30, 1997 the allowance for loan losses balance
was equal to $874,000, or 0.45 percent of net loans receivable and 93.58
<PAGE>
RP Financial, LC.
Page 1.10
percent of non-performing loans, as compared to $590,000, or 0.33 percent of net
loans and 63.10 percent of non-performing loans at fiscal year end 1995 (see
Exhibit I-6).
Historically, non-operating gains and losses have been limited to gains
or losses on the sale of investment securities, loans receivable or resolution
of real estate owned properties ("REO"). During the most recent twelve month
period, Heritage Federal reported net gains of $160,000, primarily from the
resolution of REO properties. Heritage Federal, as was the case with all SAIF-
insured thrifts, was required to pay the recapitalization assessment fee to the
SAIF for during the September 30, 1996 quarter. The Association's fee totaled
$1.267 million on a pre-tax basis.
Interest Rate Risk Management
- -----------------------------
Heritage Federal attempts to manage exposure to interest rate
fluctuations on both the asset and liability side of the balance sheet, and has
attempted to enhance the interest sensitivity of its operations through several
means, including: (1) increasing the portfolio of ARMs held in the loan
portfolio (primarily permanent residential, residential construction and
commercial real estate-related); (2) originating shorter-term fixed-rate
residential mortgages (10 to 15 year terms) for portfolio while selling longer-
term fixed rate residential mortgages in the secondary market; (3) holding
short-term investment securities generally with maturities between one and five
years; (4) extending whenever possible the term to maturity of the certificate
of deposit base; and, (6) building a strong level of interest-free capital to
fund operations. Exhibit I-7 displays the distribution of the Association's
fixed and adjustable rate loans.
Heritage Federal monitors its exposure to interest rate risk using a
calculation provided by the OTS which models the change in net portfolio value
("NPV") over a variety of interest rate scenarios, with NPV defined as the
present value of expected cash flows from assets, liabilities and off-balance
sheet assets. The calculation is intended to illustrate the change in NPV that
will occur in the event of an immediate change in interest rates of at least 200
basis points. As shown in Exhibit I-8, according to the most recent calculation
available as of June 30, 1997, the Association's NPV would be expected to
declined by 20 percent upon an instantaneous increase in interest rates of 200
basis points. Although this measure is within the Board-established limits of
the Association, Heritage Federal is seeking to reduce exposure to interest rate
risk, and the reinvestment of conversion proceeds is expected to contribute to
reduced exposure.
As shown in Exhibit I-7, although Heritage Federal has been successful
in building a relatively significant balance of ARM loans, the use of the NMMCOF
index (a lagging index), for a majority of the Association's residential
mortgage loans, has resulted in a loan portfolio that is not as sensitive to
interest rates as a similar portfolio that would utilize a current market index
such as the U.S. Treasury rates. In addition, the
<PAGE>
RP Financial, LC.
Page 1.11
Association's ARM loans are generally underwritten which one percent maximum
rate adjustment terms, which reduces the interest rate sensitivity of the loan
portfolio.
Lending Activities and Strategy
- -------------------------------
The Association's historical lending activities emphasize the
origination of 1-4 family mortgage loans (see Exhibits I-9 and I-10, loan
composition and maturity). To a much lesser extent, Heritage Federal has
originated commercial real estate loans and consumer loans in an effort to
enhance overall portfolio yields and expand the Association's products and
services offered. Underscoring the prevalence of traditional residential
mortgage loans in portfolio, 1-4 family residential mortgage loans remained at
approximately 90 percent of gross loans receivable between fiscal 1993 and 1997,
with essentially all loans secured by properties within the state of South
Carolina.
As of September 30, 1997, residential mortgage loans secured by 1-4
family properties totaled $180.6 million, or 90.0 percent of total loans
receivable, including $8.1 million of residential construction loans that will
convert to permanent loans upon completion of the construction phase. The
Association originates both ARMs and fixed-rate residential mortgages with
essentially all loans underwritten to FHLMC guidelines. Residential loans made
by the Association are generally originated with maximum loan-to-value ("LTV")
ratios of 80 percent, with loans with LTV ratios in excess of 80 percent
requiring private mortgage insurance ("PMI") coverage. Fixed-rate mortgages are
offered with maturities of up to 30 years, with essentially all loans with
maturities in excess of 15 years sold in the secondary market (primarily to the
FHLMC), and loans with shorter terms held in portfolio.
Approximately 85 percent of the Association's 1-4 family residential
mortgages consisted of ARMs at September 30, 1997, which are retained for
portfolio as part of the asset/liability management strategy. Heritage Federal
offers ARMs with one- three- or ten-year adjustment periods that are indexed to
the NMMCOF index. This index is a lagging market index, which means that upward
adjustments in this index may occur more slowly than changes in the
Association's cost of interest-bearing liabilities. The majority of ARMs are
originated with annual adjustment caps of 1.0 percent, lifetime adjustment caps
of up to 4.0 percentage points, and are originated at discounted rates.
Included in the above balance of residential loans are loans to
individuals for the construction and acquisition of their personal residences.
Such loans are attractive to the Association due to their generally higher
yields and shorter terms in comparison to permanent residential mortgage loans
and also as they provide a source for permanent portfolio loans. These loans are
generally made on the same terms as the Association's 1-4 family mortgage loans,
but provide for payment of interest only during the construction phase, which is
usually six
<PAGE>
RP Financial, LC.
Page 1.12
months. At the end of the construction phase, the loan converts to a permanent
loan. In addition, Heritage Federal originates construction loans to local home
builders which whom the Association has an established relationship. This type
of loan totaled $2.6 million, or 1.3 percent of gross loans receivable, at
September 30, 1997, primarily for residential property. These construction loans
are structured as interest-only during the construction period, which generally
equals a maximum of one year. These loans are generally made either on a pre-
sold or speculative basis, although the Association generally limits the number
of loans outstanding to a single builder, with the amount dependent on the
financial strength of the builder, the present exposure of the builder and the
prior history of the builders' operations. These loans have maximum LTV ratios
equal to 80 percent of the permanent loans.
Heritage Federal also originates commercial real estate loans in order
to diversify the loan portfolio and increase overall asset yields, although such
lending has not been emphasized in recent periods. As of September 30, 1997,
commercial real estate loans totaled $8.1 million, or 4.0 percent of gross loans
receivable. The Association's commercial real estate portfolio consists
primarily of loans secured by the buildings in which various small businesses
conduct their operations, such as small office buildings, churches, retail shops
and warehouses, essentially all of which are located in South Carolina.
Commercial real estate loans originated by Heritage Federal are predominantly
adjustable rate loans that generally have terms of up to 15 years, and are
indexed to the prime rate of interest or the U.S. Treasury rate of a similar
term as the adjustment period. LTVs on income property loans typically do not
exceed 80 percent. The Association seeks to manage credit risk on such loans by
lending primarily on local property, to borrowers with whom management is
familiar, and obtaining personal guarantees.
Heritage Federal also offers consumer loans in the form of loans on
savings accounts and home equity loans, which totaled 9.5 million, or 4.7
percent of gross loans receivable, at September 30, 1997. Loans on savings
accounts totaled $1.4 million as of September 30, 1997, similar to fiscal 1995
level. Such loans are made up to 90 percent of the amount on deposit at the
Association. Home equity loans represent an area of growth for Heritage Federal
in recent years, and usually consist of lines of credit for up to 90 percent of
the appraised value of a home after considering both the first and second
mortgages. Home equity loans are offered at adjustable rates of interest, with
the adjustable rate based on the prime rate of interest.
Heritage Federal has not historically originated commercial business
loans, and reported a zero balance of such loans as of September 30, 1997.
As shown in Exhibit I-11, Heritage Federal's overall loan origination
volume remained relatively constant at $47.1 million in 1995 to $45.1 million
for fiscal 1997. The table highlights the prevalence of 1-4 family residential
lending, which averaged 86 percent of total originations over the three fiscal
years shown in
<PAGE>
RP Financial, LC.
Page 1.13
Exhibit I-11 (inclusive of home equity loans). Other loan originations remained
only a minor portion of overall activity. Heritage Federal has not historically
purchased loans, but began to purchase loans from a mortgage company in
Greenville, South Carolina during fiscal 1997 in the amount of $3.0 million.
Loans sold in the secondary market, primarily to FHLMC, have been minimal in
recent years.
Asset Quality
- -------------
Exhibit I-12 displays Heritage Federal's NPAs (consisting of non-accrual
loans, REO and restructured loans) from fiscal 1995 to 1997, and shows that the
level of NPAs has increased from 0.70 to 0.84 percent of total assets. The
Association had REO totaling $410,000 at September 30, 1997, consisting of three
single family residences. At September 30, 1997, non-accrual loans consisted of
residential, construction, commercial real estate and home equity loans on non-
accrual status. As of the same date, the Association maintained valuation
allowances of $874,000, equal to 0.45 percent of net loans receivable and 42.10
percent of NPAs. Heritage Federal had classified assets of $2,977,000 at
September 30, 1997, were classified as loss, doubtful, substandard and special
mention (see Exhibit I-13).
Funding Composition and Strategy
- --------------------------------
Exhibit I-14 provides data pertaining to Heritage Federal's deposit
composition at fiscal year ends 1995 through 1997. Heritage Federal's deposits
consist primarily of CD accounts, which totaled $200.2 million, or 92.9 percent
of total deposits, and a base of core deposits (passbook accounts, NOW accounts
MMDAs) which totaled $15.2 million, or 7.1 percent of total deposits. Passbook
accounts were the largest component of core deposits and totaled $11.4 million,
or 5.3 percent of total deposits, at September 30, 1997, followed by NOW
accounts totaling $2.8 million, and money market deposits totaling $0.9 million.
Going forward, the Association intends to try to increase the core deposit base
to lower the overall cost of funds.
CDs accounted for approximately 92.9 percent of Heritage Federal's
deposit base at September 30, 1997, and approximately 74 percent of the CD
portfolio was scheduled to mature in one year or less. Jumbo CDs, which tend to
be more rate sensitive than lower balance CDs, accounted for $40.3 million, or
18.7 percent of deposits, at September 30, 1997. The level of jumbo CDs in the
Association's CD portfolio is significant in that jumbo CDs tend to be more rate
sensitive than smaller denomination CDs, increasing the Association's interest
rate risk to a degree, and are also generally higher cost funds, thereby
increasing the Association's overall cost of funds. On a certain portion of the
jumbo CD portfolio, Heritage Federal follows a practice of negotiating the
interest rates paid. While this practice allows the Association to maintain a
deposit base with a relatively low number of deposit accounts, the overall
funding costs and volatility of the deposit base are increased.
<PAGE>
RP Financial, LC.
Page 1.14
Heritage Federal has the ability to use advances from the FHLB of
Atlanta to supplement the supply of deposit funds used for operations, and the
Association utilized borrowings from the FHLB of Atlanta during fiscal years
1995 and 1996 to fund operations and replace certain deposit outflows. These
advances, which averaged $7.8 million in balance outstanding during fiscal 1995
and $5.0 million in balance outstanding during fiscal 1996, were secured by the
Association's stock in the FHLB and a portion of Heritage Federal's mortgage
loans. As of September 30, 1997, the Association had no FHLB advances
outstanding, while during fiscal 1997 Heritage Federal had an average of $3.1
million of such advances outstanding at an average rate of 7.33 percent. The
advances were paid off during fiscal 1997 utilizing available liquid funds.
Subsidiary Operations
- ---------------------
Under OTS regulations, the Association generally may invest up to 3% of
assets in service corporations, provided that at least one-half of the
investment in excess of 1% is used primarily for community, inner-city and
community development projects. As of September 30, 1997, the Association did
not have any subsidiary operations.
Legal Proceedings
- -----------------
Other than the routine legal proceedings that occur in the Association's
ordinary course of business, the Association is not involved in litigation which
is expected to have a material impact on the Association's financial condition
or operations.
<PAGE>
RP Financial, LC.
Page 2.1
II. MARKET AREA
Introduction
- ------------
Heritage Federal conducts operations out of a headquarters office in
Laurens, Laurens County, South Carolina and three branch offices in the central
and western region of South Carolina in the counties of Anderson (city of
Belton), Greenwood (city of Ware Shoals), and Greenville (city of Simpsonville).
Exhibit I-1 details the locations of the Association's offices, while Exhibit
II-1 details the general characteristics of the Association's offices. Laurens
County is a rural county located to the east of the Greenville-Spartanburg-
Anderson metropolitan statistical area ("MSA") and west of the Columbia, South
Carolina MSA. Laurens County has an estimated 1997 population of 62,000, while
the Greenville-Spartanburg-Anderson has an estimated population of 900,000 and
the Columbia MSA has an estimated population of 500,000. While the more rural
nature of Laurens County area has historically limited overall population
levels, the completion of U.S. Interstate Routes I-26 and I-385 have provided
access to the larger population and employment centers of Columbia and
Greenville-Spartanburg-Anderson. Anderson and Greenville Counties, the location
of two of the Association's branch offices, are contained in the Greenville-
Spartanburg-Anderson MSA, providing access to the population base in this area.
Greenwood County remains a mostly rural county also outside of any MSA, and
similar to Laurens County, has a much smaller demographic and economic base.
The local areas surrounding the Association's offices represent the primary
market area for deposit generation as most of the Association's depositors live
in the areas surrounding the office locations. Heritage Federal's sources for
loans includes the counties in which branch offices are located, and in addition
the Columbia MSA, due to the large population in that MSA.
South Carolina's employment base, historically led by the textile industry,
has been diversified into a broad variety of employment sectors in recent years
as the textile industry has declined. In Laurens and Greenwood Counties, the
employment base is relatively broad-based in most economic sectors. The I-85
corridor between Atlanta, Georgia and Charlotte, North Carolina (Anderson and
Greenville Counties), has been a particularly high growth area in terms of
population and employment, as this strategic location along a major east coast
transportation route, coupled with a "business friendly" government and low cost
of living and labor has resulted in strong growth. These characteristics, along
with aggressive marketing by the local and state governments have also resulted
in an influx of industrial investment including such prominent companies as BMW
Manufacturing Corp. and Hoechst Celanese Corporation. The Columbia MSA also has
reported steady growth and a diversified economy in light of the location of the
state capital in Columbia. The Association's market areas have in general
reported relatively strong increases in population, households and income in
recent years, with Anderson and Greenville Counties recording higher growth than
the more rural Laurens and Greenwood Counties.
<PAGE>
RP Financial, LC.
Page 2.2
Competition from other financial institutions operating in the
Association's market area includes a number of both large and small commercial
banks and savings institutions. The Association maintains a market share of
approximately 25 percent of overall financial institution deposits in the
headquarters county of Laurens, and market shares of less than 5 percent in the
remaining three counties. The other financial institutions are both locally-
owned community-oriented and subsidiaries of larger regional and superregional
institutions. The Association has experienced growth in deposits in recent
years primarily due to a rate-competitive pricing strategy for deposits and
growth in the overall market area. However, competition remains high in the
marketplace.
Future business and growth opportunities will be partially influenced by
economic and demographic characteristics of the market served, particularly the
future growth and stability of the regional economy, demographic growth trends,
and the nature and intensity of the competitive environment for financial
institutions. These factors have been briefly examined in the following pages
to help determine the growth potential that exists, the relative economic health
of the market area and the relative impact on value.
National Economic Factors
- -------------------------
Over the past year, national economic growth has been mixed. While the
November 1996 unemployment rate climbed to 5.4 percent from 5.2 percent in
October 1996, inflation concerns were heightened somewhat by an unexpectedly
sharp $0.09 jump in average hourly earnings. However, most of the economic data
released at the close of 1996, which included jobless claims rising to a five
month high in November and a decline in November durable goods orders, suggested
that the economy was sluggish and non-inflationary.
While fourth quarter GDP growth came in at a stronger than expected 4.7
percent annual growth rate (subsequently revised to 3.9 percent), most of the
economic data released during the beginning of the first quarter of 1997
indicated a continuation of moderate economic growth. Such measures as a 1.9
percent decline in December durable goods orders and a modest uptick in the
January 1997 unemployment rate to 5.4 percent, versus 5.3 percent in December
1996, eased concerns that the economy was overheating. However, the increase in
the unemployment rate was attributable to more people who entered the job force,
and some markets have been experiencing labor shortages. In congressional
testimony at the end of February 1997, the Federal Reserve Chairman indicated
that he anticipated recent signs of lower job insecurity among workers would
lead to upward pressure in wages, which could possibly trigger the Federal
Reserve to boost interest rates. Signs of inflation became more notable during
March and April, with most economic indicators posting month-to-month increases
from January to February. Most notably, during February industrial production
increased 0.5 percent, housing starts rose 12.2 percent and the sale of existing
homes jumped 9.0 percent. Accelerating economic growth was
<PAGE>
RP Financial, LC.
Page 2.3
further indicated by a decline in the March unemployment rate to 5.2 percent,
versus 5.3 percent for February, and a higher than expected rise in the March
"core" producer price index, which posted its largest increase in 18 months.
The revised first quarter GDP growth rate, released in late May 1997, was an
annual rate of 5.8 percent, far exceeding analysts' projections, and gave more
evidence of the strong economy. The unemployment rate for April 1997 declined
to 4.9 percent, also an indicator of a strong economy.
More recent economic data released in June 1997 indicates a potential
slowing of the economy, as retail sales have slowed to an estimated 2 percent
annual growth rate in the second quarter, and business inventories have also
increased, which added to the first quarter GDP growth figures. New home sales
also dropped by 7.7 percent in April 1997, the sharpest decline in six months.
Automobile sales for April and May 1997 have declined from year-earlier levels,
and discounting and other sales efforts are becoming more common by automakers.
Overall, GDP growth for the second quarter of 1997 is estimated at 2.0 to 2.5
percent, a significant drop from the first quarter 1997 results.
Economic data released in August 1997 provided mixed signals of economic
growth, as a decline in the July unemployment rate and an unexpectedly sharp
decline in the U.S. trade deficit provided indications of a robust economy. At
the same time, a modest increase in the July consumer price index and a decline
in July wholesale prices suggested that inflation remained non-threatening. At
the end of August, second quarter GDP was revised upward to a 3.6 percent annual
growth rate compared to a 2.2 percent original estimate. In early-September, a
slight increase in the August unemployment rate did little to alleviate
inflation concerns, as the employment data indicated that the job market
remained tight and wages continued to rise. Comparatively, only a slight
increase in the August consumer price index provided stronger evidence that
inflation remained tame in mid-September. September employment data served to
further the rally in bond prices in early October 1997, as the September
unemployment rate was unchanged at 4.9 percent and fewer jobs than expected were
added to the economy during September. Congressional testimony by the Federal
Reserve Chairman, in which he indicated that it would be difficult to maintain
the current balance between tight labor markets and low inflation, caused stock
and bond prices to skid in mid-October. Disappointing third quarter earnings in
the technology sector sharpened the sell-off in the stock market, with the DJIA
posting consecutive losses of more than 1.0 percent on October 16 and 17.
Throughout the rest of October and November, the stock market reacted noticeably
to declines in a number of foreign stock markets, particularly the Hong Kong
market, experiencing declines of over 100 points in the DJIA on a number of
occasions. Bond prices declined sharply as investors pulled stock market to
reinvest in the Treasury market.
Consistent with recent economic activity, interest rate trends have been
varied as well over the past year. Interest rates continued to edge lower
through November 1996, as the October economic data suggested that
<PAGE>
RP Financial, LC.
Page 2.4
inflationary pressures were non-threatening. Bond prices declined slightly in
early-December, as investors focused on weakness in the dollar and rising oil
prices. Concern over Japanese investors slowing their buying of U.S. Treasury
notes caused bond prices to slide in mid-December, despite economic data which
continued to indicate mild inflation. Interest rates were somewhat trendless at
the close of 1996, as the Federal Reserve elected not to change interest rates
at its December meeting.
With few inflationary signs, interest rates held steady at the beginning of
1997, which was followed by a mild easing in interest rates during the first
half of February. Indications of slowing economic growth and the Federal
Reserve's decision to leave rates unchanged at its early-February meeting
spurred the downward trend in interest rates. However, interest rates edged
higher in late-February, following renewed concerns by the Federal Reserve
Chairman over the sharp rise in the stock market during the past two years.
After stabilizing briefly, the strengthening economy and growing expectations of
a rate increase by the Federal Reserve propelled interest rates higher in late-
March 1997.
Inflation concerns pushed interest rates higher during the first half of
April 1997, which was followed by a slight decline in interest rates on rumors
of a national budget accord. News of the budget agreement and favorable
inflation data sustained the rally in bond prices through early-May. Interest
rates stabilized in mid-May, as the Federal Reserve opted not to raise interest
rates at its May meeting. The high level of consumer confidence indicated by
the May reading caused the 30-year bond yield to edge above 7.0 percent in
late-May. However, the increase was short-lived, as signs of slowing economic
growth provided for a lower interest rate environment during June.
The downward trend in interest rates became more pronounced during July
1997, following the Federal Reserve's decision to leave rates unchanged at its
early-July meeting and the release of new economic data that indicated inflation
was under control. Slower economic growth indicated by the second quarter GDP
growth rate of 2.2 percent sustained the rally in bond prices at the end of
July. However, in early-August, the stronger than expected job growth reflected
in the July employment data and a falling U.S. dollar against the yen and mark
caused bond prices to tumble. After recovering briefly on the favorable
inflation data indicated by July wholesale and retail prices, bond prices
declined in late-August on news of the narrower than expected June trade
deficit. Bond prices rallied briefly at the end August and in early-September,
due to technical pressures and economic data that showed manufacturing growth
cooled in August. Bond prices eased in mid-September, reflecting investor fears
that the August economic data would show a strengthening economy and higher
prices. However, the August consumer price report ignited a bond market rally,
with the yield on the 30-year bond posting its second largest decline in the
1990s on September 16, 1997.
<PAGE>
RP Financial, LC.
Page 2.5
Following the sharp increase, bond prices stabilized through the end of
September as investors awaited the release of economic data for September and
the outcome of the Federal Reserve's meeting at the end of September. Interest
rates continued a variable trend in October 1997, as rates were affected by
various news regarding inflation and economic indicators. The broad sell-offs
in the stock markets during late October and November 1997 resulted in declines
in interest rates to the lowest levels of the past two years, along with a
flattening of the yield curve. As of late-November 1997, one- and thirty-year
U.S. Government bonds were yielding approximately 5.6 percent and 6.1 percent,
respectively. Exhibit II-2 provides historical interest rate trends from 1991
through November 28, 1997.
Market Area Demographics
- ------------------------
Demographic growth trends in the four market area counties have been
measured by changes in population, number of households and median household
income and other data, with trends in those areas summarized by the data
presented in Exhibit II-3, while additional data concerning sources of personal
income and employment sectors is presented in Exhibit II-4. South Carolina,
Greenville-Spartanburg-Anderson and U.S. data is provided for comparative
purposes, and trends in this data provide some indication of future levels of
business activities for financial institutions.
As shown in Exhibit II-3, Heritage Federal operates in a four county
market area with an estimated population of 635,000 as of 1997. Illustrating
the rural nature of Laurens and Greenwood Counties, only 125,000 residents, or
20 percent of this four county market area population is located in Laurens and
Greenwood Counties. As of 1997, all four market area counties are experiencing
growth in population and households, although the more populated Anderson and
Greenville Counties are recording growth above the state and national averages,
while the more rural Laurens and Greenwood Counties are expanding at rates that
approximate the statewide averages. These growth trends are projected to
continue through the year 2002, and indicate a favorable environment for
business expansion.
Income levels in the primary market area generally approximate the
statewide averages, with the exception of Greenville County, which reports
higher income levels. Estimated per capita annual income and median household
income for 1997 in Laurens, Greenwood and Anderson Counties were all below
statewide averages, while Greenville County's per capita income was over 17
higher than the state average and median household income was over 10 percent
higher. Income distribution levels are similar to per capita income figures,
revealing Laurens, Greenwood and Anderson Counties have a higher proportion of
lower income households (below $100,000 annually), reflecting the lower income
nature of the area. Based on the positive population
<PAGE>
RP Financial, LC.
Page 2.6
trends and comparable or higher income levels, growth opportunities in the
primary market area counties can be expected, with growth achievable through
overall increases in financial institution deposits.
Economy
- -------
The Association's deposit gathering activities and a substantial portion
of the lending operations are conducted in the four county market area
described above. Employment in these counties is generally diversified,
containing employment in services, state and local government, wholesale and
retail trade and manufacturing. On average, the four county market area has a
higher proportion of employment in manufacturing than the state as a whole, 28
percent versus 19 percent, respectively, with Greenville County having the
lowest proportion of manufacturing employment. As indicated previously, the
I-85 corridor containing Anderson and Greenville Counties has developed a
diversified employment base that is expanding relatively quickly. In Laurens
County, the location of Heritage Federal's headquarters, manufacturing
employment represents over 30 percent of the employment base. Major
manufacturing industries include textiles, warehousing/distribution, machinery,
fabricated metal products and rubber/plastic products. Table 2.1 below
presents the major employers within Laurens County. As shown by this list of
employers, the Association's headquarters market area county contains a
relatively well diversified employment base.
Table 2.1
Heritage Federal Savings and Loan Association
Major Employers-Laurens County
<TABLE>
<CAPTION>
Employer Industry Employees
-------- -------- ---------
<S> <C> <C>
Wal-Mart, Inc. Retailing - Distribution Center 1,500
Torrington Co. Bearing Products 1,315
CMI Industries, Inc. Textiles 1,091
Asten, Inc. Wet Felt Products 240
Teknor Apex Carolina Co. Rubber Hoses 220
B.F. Shaw, Inc. Fabricated Metal Products 347
Alsimag Technical Ceramics, Inc. Ceramic Products 290
Allibert Industries, Inc. Transportation Equipment/Plastics 300
Dispoz-O-Plastics Plastic Products 275
Avery Dennison Printing/Publishing 350
Anderson Hardwood Floors Wood Products 225
Jostens', Inc. Apparel 350
JPS Converters and Industrial Equipment Textiles 282
Flowers Baking Company Baking Products 243
Source: Local Area Chamber of Commerce.
</TABLE>
<PAGE>
RP Financial, LC.
Page 2.7
Table 2.2 displays unemployment data in the local market area as of August
1996 and August 1997. The unemployment rates have declined in all comparative
areas over the most recent twelve month period, with the state of South Carolina
improving to equal the national average over this time period. Within the
Association's market area, all four market area counties recorded noticeable
improvements in the employment rates, and all counties except for Greenwood
County reported unemployment rates lower than state and national averages. This
data reflects in part the overall strong economy within the market area and the
attractiveness of the area to employers, and the trends are significant in light
of the strong population gains recorded in the market area.
Table 2.2
Heritage Federal Savings and Loan Association
Market Area Unemployment Trends
<TABLE>
<CAPTION>
Region Aug. 1996 Aug. 1997
------ --------- ---------
<S> <C> <C>
United States 5.1% 4.8%
South Carolina 6.2 4.8
Laurens County 8.0 4.0
Anderson County 5.0 3.1
Greenwood County 8.1 5.6
Greenville County 3.6 2.5
Source: U.S. Bureau of Labor Statistics.
</TABLE>
Deposit Trends and Competition
- ------------------------------
The market area (defined as the four county market area for deposits), is
characterized by the presence of both locally-based and locally-owned financial
institutions and larger, regional and superregional institutions. Major
competitors include local commercial banks such as Palmetto Bank of Laurens,
Bailey Financial Corporation of Clinton and County Bank of Greenwood, and larger
regional and superregional banks such as Nationsbank Corp., First Union Corp.
and Wachovia Corporation.
Table 2.3 displays deposit market trends for the State of South Carolina
and the primary market area from June 30, 1994 to June 30, 1996. Overall,
financial institution deposits showed an increase statewide, with commercial
banks showing growth while savings institutions lost deposits. This trend of
moderate increases in overall deposits, similar to the rest of the nation,
reflects in part disintermediation whereby banking customers have also placed
available funds into other types of financial intermediaries such as mutual
funds, investment firms, brokerage houses, and insurance companies. Deposit
trends in all four market area counties exhibited similar trends as the state,
with Greenville County recording relatively strong deposit growth overall and
the other
<PAGE>
Table 2.3
Heritage Federal Savings and Loan Association
Deposit Summary
<TABLE>
<CAPTION>
As of June 30,
-------------------------------------------------------------------
1994 1996
-------------------------------- -------------------------------- Deposit
Market Number of Market No. of Growth Rate
Deposits Share Branches Deposits Share Branches 1994-1996
----------- ------ --------- ----------- ------ -------- -----------
(Dollars In Thousands) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
State of South Carolina $28,444,287 100.0% 1,228 $30,859,861 100.0% 1,175 4.2%
Commercial Banks/Savings Banks 22,295,708 78.4% 1,015 25,072,731 81.2% 973 6.0%
Savings Institutions 6,148,579 21.6% 213 5,787,130 18.8% 202 (3.0)%
Laurens County $392,163 100.0% 16 $415,094 100.0% 16 2.9%
Commercial Banks/Savings Banks 283,691 72.3% 14 297,705 71.7% 14 2.4%
Savings Institutions 108,472 27.7% 2 117,389 28.3% 2 4.0%
Heritage Federal 94,531 24.1% 1 102,655 24.7% 1 4.2%
Anderson County $1,295,082 100.0% 55 $1,383,593 100.0% 54 3.4%
Commercial Banks/Savings Banks 791,610 61.1% 39 856,380 61.9% 37 4.0%
Savings Institutions 503,472 38.9% 16 527,213 38.1% 17 2.3%
Heritage Federal 55,537 4.3% 1 60,661 4.4% 1 4.5%
Greenwood County $607,534 100.0% 28 $641,682 100.0% 27 2.8%
Commercial Banks/Savings Banks 363,152 59.8% 21 579,001 90.2% 24 26.3%
Savings Institutions 244,382 40.2% 7 62,681 9.8% 3 (49.4)%
Heritage Federal 21,930 3.6% 1 22,979 3.6% 1 2.4%
Greenville County $3,913,709 100.0% 145 $4,624,296 100.0% 140 8.7%
Commercial Banks/Savings Banks 3,269,128 83.5% 121 4,015,971 86.8% 118 10.8%
Savings Institutions 644,581 16.5% 24 608,325 13.2% 22 (2.9)%
Heritage Federal 18,317 0.5% 1 22,845 0.5% 1 11.7%
</TABLE>
Source: FDIC; OTS.
<PAGE>
RP Financial, LC.
Page 2.9
three market area counties reporting growth less than the state average.
Savings institutions lost deposits in Greenwood and Greenville Counties, due
primarily to acquisitions, and reported growth in Laurens and Anderson Counties.
Commercial banks hold a majority of financial institution deposits in all four
counties, ranging from a 62 percent market share in Anderson County to over 90
percent of deposits in Greenwood County.
Heritage Federal has recorded increases in deposits over the time period
shown in Table 2.3 at a higher rate than the county average for all four market
area counties, resulting in an increase in deposit market share since June 30,
1994. Data available subsequent to June 30, 1996 reveals a continued increase
in deposit funds for the Association. This increase in deposits reveals
success in raising additional retail deposit funds for business operations. The
Association's market share is almost one-fourth of deposits in Laurens County,
and less than five percent in the other three counties, indicating a potential
for deposit market share increases.
Summary
- -------
The overall condition of the primary market area can be characterized as
positive with a growing population and household base. The local economy is
relatively diversified and is attractive to new businesses. In order to support
the Association's desired level of business operations, lending activities have
been pursued in a larger geographical area including the city of Columbia, South
Carolina, the location of the state capital. Going forward, in view of the
local demographic and economic trends and the numbers and types of competitors
in the market area, the competition for deposits is expected to remain
substantial, which will result in Heritage Federal having to pay competitive
deposit rates to maintain local market share. The reinvestment of stock
proceeds from the conversion may mitigate to some extent the potentially higher
funding costs to attract deposits through anticipated loyalty of local
shareholders and referrals from local shareholders.
<PAGE>
RP Financial, LC.
Page 3.1
III. PEER GROUP ANALYSIS
This chapter presents an analysis of Heritage Federal's operations versus a
group of comparable public companies (the "Peer Group") selected from the
universe of all publicly-traded savings institutions. The primary basis of the
pro forma market valuation of the Association is provided by these public
companies. Factors affecting Heritage Federal's pro forma market value such as
financial condition, credit risk, interest rate risk, and recent operating
results can be readily assessed in relation to the Peer Group. Current market
pricing of the Peer Group, subject to appropriate adjustments to account for
differences between the Heritage Federal and the Peer Group, will then be used
as a basis for the valuation of the Association's to-be-issued common stock.
Selection of Peer Group
- -----------------------
We consider the appropriate Peer Group to be comprised of only those
publicly-traded savings institutions whose common stock is either listed on a
national exchange or is NASDAQ listed, since the market for companies trading
in this fashion is regular and reported. We believe non-listed institutions are
inappropriate since the trading activity for thinly-traded stocks is typically
highly irregular in terms of frequency and price and may not be a reliable
indicator of market value. We have excluded from the Peer Group all publicly-
traded subsidiary institutions of mutual holding companies, because their
pricing ratios are distorted by the minority issuance of their shares. We have
also excluded from the Peer Group those companies under acquisition and/or
companies whose market prices appear to be distorted by speculative factors or
unusual operating conditions. The universe of all publicly-traded institutions
is included as Exhibit III-1. Pricing characteristics of all thrift
institutions are included as Exhibit IV-1 (institutions excluded from the
calculation of averages are denoted with a footnote (8)).
Under ideal circumstances, the Peer Group would be comprised of a minimum
of ten publicly-traded South Carolina thrifts with capital, earnings, asset
sizes, balance sheet composition, risk profiles, operating strategies and
market areas comparable to the Association. Since 10 such institutions do not
exist, it was necessary to expand the search beyond state boundaries and with
search criteria for similarly sized, well capitalized institutions located in
other Southeastern states. Thus, in the selection process we applied the two
primary "screens" to the universe of all public companies as follows:
o Screen #1. South Carolina institutions with assets less than $500
------------------------------------------------------------------
million and market values less than $100 million. One company, South
-------------------------------------------------
Carolina Community Bancshares, Inc. (SCCB) met the criteria for this
screen and was included in the Peer Group (see Exhibit III-2). The
remaining South Carolina institutions were excluded due to the
companies being under acquisition, being in MHC form or asset or
market value considerations.
<PAGE>
RP Financial, LC.
Page 3.2
o Screen #2. Institutions operating in the Southeastern U.S. with
----------------------------------------------------------------
market values less than $100 million, equity/assets between 12 and 30
---------------------------------------------------------------------
percent, assets greater than $75 million, and ROA's greater than 65
-------------------------------------------------------------------
basis points. Ten companies met the criteria for this screen and all
-------------
ten were included in the Peer Group (see Exhibit III-3).
Table 3.1 lists key characteristics of the Peer Group companies. In
general, the Peer Group is comprised of relatively seasoned publicly-traded
institutions operating in South Carolina or other Southeastern U.S. state with
a moderately lower average asset size. While the Peer Group is not exactly
comparable to the Association, we believe that it provides a reasonable
representation of publicly-traded thrifts with operations comparable to those
of the Association and thus forms a sound basis for valuation. A summary
description of the key characteristics of each of the Peer Group companies
selected is detailed below.
o TECHE HOLDING COMPANY OF LA. Teche Holding Company, the largest member of
the Peer Group with over $400 million in assets, is traded on the AMEX and
was selected due to its meeting the selection criteria described above.
Teche Holding operates with a relatively high percentage of assets in loans
receivable and utilizes borrowings to fund operations. Teche Holding also
reported net income below the Peer Group averages, and also reported
relatively low levels of non-performing assets along with comparatively
high reserve coverage ratios.
o FIRST SB, SSB OF MOORE COUNTY OF NC. First SB is a $295 million
institution operating 5 offices in central North Carolina. First SB
converted to stock form in January 1994, and is a well-seasoned public
company. First SB reported relatively high investment in cash and
investments and a loan portfolio dominated by 1-4 family loans. First SB
reported a high equity/assets ratio and the highest income of the Peer
Group, which was supported by low operating expenses.
o COMMUNITY FEDERAL BANCORP OF MS. Community Federal, a $216 million thrift,
operates from a single office in northern Mississippi. Community Federal,
in addition to satisfying the selection criteria, reported relatively high
investment in cash and investments and MBS, along with a loan portfolio
with some diversification. Community Federal reported a relatively high
equity/assets ratio and income which was supported by low operating
expenses. Reserve coverage ratios were lower than the Peer Group averages.
o COMMUNITY FINANCIAL CORP. OF VA. Community Financial operates in a rural
section of western Virginia from three offices. Maintaining an asset base
of $175 million, Community Financial is also a seasoned institution that
converted in 1988. Community Financial reported the highest proportion of
assets invested into loans receivable, with diversification into commercial
real estate and non-mortgage lending, resulting in a comparatively high
risk-weighted assets-to-assets ratio. Community Financial also reported
relatively strong reserve coverage ratios.
o TEXARKANA FIRST FINANCIAL CORP. OF AR. Texarkana First, traded on the
AMEX, is a $171 million thrift operating 5 offices in Arkansas. Similar to
Community Financial, Texarkana First reported loan diversification into
commercial real estate and non-mortgage lending, which resulted in one of
the highest risk-weighted assets-to-assets ratio of the Peer Group.
Texarkana's profitability was supported by a strong net interest margin and
operating expenses lower than the Peer Group average. Texarkana also
reported a the second largest portfolio of loans serviced for others of the
Peer Group members.
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Table 3.1
Peer Group of Publicly-Traded Thrifts
December 5, 1997(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ -------
($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TSH Teche Holding Company of LA AMEX Southern LA Thrift 406 J 9 09-30 04/95 21.88 75
SOPN First SB, SSB, Moore Co. of NC OTC Central NC Thrift 295 5 06-30 01/94 24.37 90
CFTP Community Fed. Bancorp of MS OTC Northeast MS Thrift 216 1 09-30 03/96 17.12 79
CFFC Community Fin. Corp. of VA OTC Central VA Thrift 175 J 3 03-31 03/88 24.75 32
FTF Texarkana Fst. Fin. Corp of AR AMEX Southwest AR Thrift 171 J 5 09-30 07/95 24.75 44
BFSB Bedford Bancshares of VA OTC Southern VA Thrift 139 3 09-30 08/94 28.25 32
FFBS FFBS Bancorp of Columbus MS OTC Columbus MS Thrift 135 3 06-30 07/93 22.50 35
KSAV KS Bancorp of Kenly NC OTC Central NC Thrift 110 3 12-31 12/93 22.50 20
TWIN Twin City Bancorp of TN OTC Northeast TN Thrift 107 3 12-31 01/95 13.62 17
SSM Stone Street Bancorp of NC AMEX Central NC Thrift 105 2 12-31 04/96 20.25 38
SCCB S. Carolina Comm. Bnshrs of SC OTC Central SC Thrift 46 1 06-30 07/94 23.00 16
</TABLE>
NOTES: (1) Or most recent date available (M=March, S=September, D=December,
J=June, E=Estimated, and P=Pro Forma)
(2) Operating strategies are: Thrift=Traditional Thrift,
M.B.=Mortgage Banker, R.E.=Real Estate Developer,
Div.=Diversified, and Ret.=Retail Banking.
(3) FDIC savings bank institution.
Source: Corporate offering circulars, data derived from information
published in SNL Securities Quarterly Thrift Report, and financial
reports of publicly-traded thrifts.
Date of Last Update: 12/05/97
<PAGE>
RP Financial, LC.
Page 3.4
o BEDFORD BANCSHARES OF VA Bedford Bancshares is the second Virginia
institution included in the Peer Group, and operates three offices in
southwestern Virginia in a rural area. Bedford Bancshares reported a high
investment in loans receivable, no investment in MBS, and one of the
highest use of borrowed funds of all Peer Group members. Bedford
Bancshares profitability was affected by an operating expense ratio that
exceeded the Peer Group average.
o FFBS BANCORP OF COLUMBUS, MS. FFBS is the second Mississippi institution
included in the Peer Group, and operates three offices in Mississippi.
FFBS reported investment in cash and investments, MBS and loans receivable,
with relatively strong profitability supported by low operating expenses
and other operating income. FFBS's loan portfolio showed diversification
into commercial real estate and commercial business loans, and asset
quality figures were less favorable than the Peer Group averages in terms
of non-performing assets as a percent of assets. Reserves as a percent of
non-performing assets were also low in comparison to Peer Group averages.
o KS BANCORP OF KENLY, NC. KS Bancorp is a $110 million asset company
operating out of three offices in North Carolina. KS Bancorp maintained a
majority of earning assets in loans receivable, and little in terms of loan
portfolio diversification away from 1-4 family lending. KS Bancorp
reported income that approximated Peer Group averages, with the net
interest margin and operating expenses very similar to the Peer Group as a
whole.
o TWIN CITY BANCORP OF TN. Twin City has $107 million in assets and operates
out of three offices in northeastern Tennessee. Twin City converted in
1995 and thus is well seasoned in the marketplace. Twin City reported
investment in cash and investments, MBS and loans receivable, with
profitability negatively affected by the highest level of operating
expenses of all Peer Group members. Income was supported by the largest
loans serviced for others portfolio, which resulted in other operating
income above Peer Group averages. Twin City's loan portfolio revealed the
highest diversification of all Peer Group members, primarily into
commercial business lending. Asset quality figures were more favorable
that Peer Group averages in terms of non-performing assets to total assets.
o STONE STREET BANCORP OF NC. Stone Street represents the most recently
converted company in the Peer Group, having converted in April of 1996.
Stone Street has $105 million in assets and operates out of two offices in
central North Carolina. Stone Street operates with the highest capital
position (due to the recent conversion) and a loan portfolio concentrated
in residential lending. Income was supported by a strong net interest
margin, although Stone Street reported relatively low levels of non-
interest income from the non-diversified operations. Asset quality figures
were more favorable than the Peer Group averages.
o SOUTH CAROLINA COMMUNITY BANCSHARES OF SC. South Carolina Bancshares, the
only South Carolina company in the Peer Group, is the smallest Peer Group
company, maintaining $46 million in assets and operating from a single
office in Winnsboro, South Carolina within approximately 45 miles of
Laurens in central South Carolina. South Carolina Community is a seasoned
thrift, having converted in 1994. South Carolina Community reported a
relatively high level of capital comparison to other Peer Group members, a
relatively strong net interest margin and a high level of operating
expenses in comparison to the Peer Group averages. Similar to Heritage
Federal, South Carolina Community reported a high proportion of 1-4 family
loans in portfolio and a low risk-weighted assets ratio. Asset quality and
reserve coverage ratios were also similar to the Association.
In aggregate, the Peer Group companies have an average capital ratio that
is higher than the industry average (18.68 percent of assets versus 13.05
percent for the all SAIF average), and higher core profitability (1.31 percent
versus 0.88 percent for all SAIF-insured publicly-traded institutions). The
Peer Group's much
<PAGE>
RP Financial, LC.
Page 3.5
higher capital ratio combined with higher earnings results in a lower core ROE
of 7.07 percent versus 7.81 percent for the all SAIF average. In terms of
pricing, the Peer Group on average trades at a lower price/book ("P/B")
multiple and a similar price/earnings ("P/E") multiple relative to the industry
(see the following table).
<TABLE>
<CAPTION>
As of November 28, 1997
------------------------
Peer All SAIF
Group Insured
----------- -----------
<S> <C> <C>
Equity-to-Assets 18.68% 13.05%
Return on Assets ("ROA")-Core 1.31% 0.88%
Return on Equity ("ROE")-Core 7.07% 7.81%
Market Capitalization ($Mil) $ 43.60 $175.34
Price-to-Tangible Book Ratio ("P/TB") 140.58% 161.26%
Price-to-Earnings Multiple ("P/E")-Core 19.75x 19.93x
Price-to-Assets Ratio ("P/A") 25.92% 19.07%
Source: Chapter IV tables.
</TABLE>
The following sections present a comparison of the Association's financial
condition, income and expense trends, loan composition, interest rate risk and
credit risk versus the Peer Group. The conclusions drawn from the comparative
analysis are then factored into the valuation analysis discussed in the final
chapter.
Financial Condition
- -------------------
Table 3.2 shows comparative balance sheet measures for the Association and
the Peer Group, reflecting the expected similarities and some differences given
the selection procedures outlined above. Information for Heritage Federal is
as of September 30, 1997, and as of the latest available (September 30 or June
30) for the Peer Group. The Association's pre-conversion net worth of 11.8
percent was below the Peer Group's average net worth ratio of 18.7 percent,
although the Association's capital level can be expected to exceed the Peer
Group average on a pro forma basis. The increase in the Association's capital
on a pro forma basis can also be expected to reduce its ROE. Neither the
Association or the Peer Group had a balance of goodwill. The Association and
all of the Peer Group companies were in compliance with all fully phased-in
regulatory capital requirements and were considered to be well-capitalized by
FDICIA standards.
In terms of asset composition, the Association's ratio of loans to assets
was only slightly higher than the Peer Group's ratio (78.3 percent of assets
versus 77.8 percent for the Peer Group), while the Peer Group recorded a higher
level of MBS (4.2 percent versus 2.7 percent for the Association). The
Association maintains a similar balance of cash and investments as part of its
operating strategy, and the portfolio totaled 16.6 percent of total
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.2
Balance Sheet Composition and Growth Rates
Comparable Institution Analysis
As of September 30, 1997
<TABLE>
<CAPTION>
Balance Sheet as a Percent of Assets
----------------------------------------------------------------------------------------
Cash and Borrowed Subd. Net Goodwill Tng Net MEMO:
Investments Loans MBS Deposits Funds Debt Worth & Intang Worth Pref.Stock
----------- ------ ------ -------- -------- ------- -------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Heritage FS&LA of Laurens SC
- ----------------------------
September 30, 1997 16.6 78.3 2.7 87.0 0.0 0.0 11.8 0.0 11.8 0.0
SAIF-Insured Thrifts 17.4 68.3 11.1 70.0 15.3 0.2 12.8 0.2 12.6 0.0
State of SC 13.3 80.8 3.4 69.2 12.7 0.0 16.5 0.0 16.5 0.0
Comparable Group Average 15.6 77.8 4.2 72.8 7.1 0.0 18.7 0.0 18.7 0.0
South-East Companies 15.6 77.8 4.2 72.8 7.1 0.0 18.7 0.0 18.7 0.0
Comparable Group
- ----------------
South-East Companies
- --------------------
BFSB Bedford Bancshares of VA 14.5 83.4 0.0 74.4 10.8 0.0 14.1 0.0 14.1 0.0
CFTP Community Fed. Bancorp of MS 27.7 59.0 10.9 62.0 8.5 0.0 26.7 0.0 26.7 0.0
CFFC Community Fin. Corp. of VA(1) 9.0 88.2 0.0 66.8 18.2 0.0 13.7 0.0 13.7 0.0
FFBS FFBS Bancorp of Columbus MS 19.8 70.6 7.4 78.4 3.4 0.0 16.7 0.0 16.7 0.0
SOPN First SB, SSB, Moore Co. of NC 30.0 66.5 2.2 69.9 6.1 0.0 23.0 0.0 23.0 0.0
KSAV KS Bancorp of Kenly NC 11.8 84.3 1.2 78.6 7.3 0.0 13.2 0.0 13.2 0.0
SCCB S. Carolina Comm. Bnshrs of SC 18.6 78.8 0.1 72.5 0.0 0.0 26.6 0.0 26.6 0.0
SSM Stone Street Bancorp of NC 9.9 85.5 2.4 63.7 4.8 0.0 29.6 0.0 29.6 0.0
TSH Teche Holding Company of LA(1) 6.0 84.1 7.7 68.6 17.3 0.0 13.1 0.0 13.1 0.0
FTF Texarkana Fst. Fin. Corp of AR(1) 11.7 84.1 1.8 81.8 0.9 0.0 15.7 0.0 15.7 0.0
TWIN Twin City Bancorp of TN 13.0 70.9 12.4 83.8 0.9 0.0 12.9 0.0 12.9 0.0
<CAPTION>
Balance Sheet Annual Growth Rates Regulatory Capital
------------------------------------------------------------- -------------------------
Cash and Loans Borrows. Net Tng Net
Assets Investments & MBS Deposits &Subdebt Worth Worth Tangible Core Reg.Cap.
------ ----------- ------ -------- -------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Heritage FS&LA of Laurens SC
- ----------------------------
September 30, 1997 1.16 (8.82) 5.88 2.71 0.00 9.33 9.33 11.30 11.30 23.30
SAIF-Insured Thrifts 11.00 4.74 12.85 7.76 15.24 3.01 2.42 11.02 11.07 22.62
State of SC 18.05 (7.11) 12.76 6.22 20.24 8.48 8.48 13.55 13.55 25.75
Comparable Group Average 7.03 (4.26) 9.94 7.29 15.32 (3.74) (3.74) 15.63 17.29 32.11
South-East Companies 7.03 (4.26) 9.94 7.29 15.32 (3.74) (3.74) 15.63 17.29 32.11
Comparable Group
- ----------------
South-East Companies
- --------------------
BFSB Bedford Bancshares of VA 9.28 31.14 6.63 8.63 25.00 7.65 7.65 12.40 12.40 22.83
CFTP Community Fed. Bancorp of MS 5.85 (0.76) 6.83 1.66 NM (14.06) (14.06) 24.09 24.09 57.37
CFFC Community Fin. Corp. of VA(1) 10.44 29.00 9.33 6.58 28.00 7.86 7.86 11.34 11.34 17.23
FFBS FFBS Bancorp of Columbus MS 7.34 (25.27) 20.30 6.52 NM (8.47) (8.47) 14.04 14.04 26.11
SOPN First SB, SSB, Moore Co. of NC 12.20 18.48 9.50 7.30 NM 1.40 1.40 NM 22.92 50.87
KSAV KS Bancorp of Kenly NC 14.34 0.18 16.80 12.11 100.00 5.35 5.40 NM NM 12.99
SCCB S. Carolina Comm. Bnshrs of SC 5.52 (2.37) 7.82 9.13 NM (2.10) (2.10) 23.70 23.70 49.80
SSM Stone Street Bancorp of NC (1.50) (50.79) 10.38 (0.14) NM (17.13) (17.13) NM 25.00 45.54
TSH Teche Holding Company of LA(1) 9.58 (22.13) 12.20 14.88 4.35 (6.31) (6.31) 11.60 11.60 21.93
FTF Texarkana Fst. Fin. Corp of AR 4.45 (27.89) 10.74 8.93 NM (18.57) (18.57) 15.69 15.69 26.24
TWIN Twin City Bancorp of TN (0.13) 3.50 (1.20) 4.57 (80.77) 3.20 3.20 12.14 12.14 22.32
</TABLE>
(1) Financial information is for the quarter ending June 30, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 3.7
assets. In contrast, the Peer Group maintained a ratio of cash and investments
of 15.6 percent of assets. Following the conversion, the Association's level of
cash and investments is expected to initially increase, pending the
Association's deployment of the proceeds into loans. Overall, the Association's
IEA totaled 97.6 percent of assets which was identical to the Peer Group's
ratio.
While the Association utilized deposits as the primary source to fund
operations, the Peer Group relied on both deposits and borrowings as funding
sources, as reflected in the current deposits to assets ratios of 87.0 percent
and 72.8 percent, respectively, and borrowings to assets ratios of 0.0 percent
and 7.1 percent, respectively. Total interest-bearing liabilities ("IBL")
maintained by the Association and the Peer Group equaled 87.0 percent and 79.9
percent, respectively, with the Peer Group's lower ratio attributable to its
higher capital ratio. On a pro forma basis, the Association's IBL ratio is
expected to decline as a result of the Association's enhanced capital base and
potential deposit withdrawals to fund stock purchases.
The growth rate section of Table 3.2 shows growth rates for key balance
sheet items. The growth rates for the Association are for the year ended
September 30, 1997 while growth rates for the Peer Group are for the latest
trailing twelve months available. The Association reported a slight increase
in assets since September 30, 1996, while the Peer Group reported asset growth
equal to 7.0 percent. Changes in the Association's balance sheet occurred in
the area of loans receivable and MBS (an increase of 5.9 percent), offset by a
decrease in cash and investments of 8.8 percent. The Peer Group also funded
increases in loans and MBS through available cash and investments. The
Association's slight asset growth was supported by growth in deposits and
equity. The Peer Group funded asset growth through a combination of deposits
and borrowings. Heritage Federal's profitable operations resulted in growth
in the capital account equal to 9.3 percent, while various capital management
strategies employed by Peer Group members (such as stock repurchases and
dividends), resulted in a decline in the Peer Group's capital of 3.7 percent
on average.
Income and Expense Components
- -----------------------------
For the twelve months ended September 30, 1997, the Association's net
income amounted to 0.80 percent of average assets, below the 1.25 percent
average return posted by the Peer Group (see Table 3.3). Net interest income
was the primary component of the Association's and the Peer Group's earnings,
however Heritage Federal's net interest margin was substantially below the
Peer Group average (2.27 and 3.85 percent of average assets, respectively).
Heritage Federal reported a lower level of interest income and a higher level
of interest expense, with the greatest difference reported in interest expense.
The Association's higher interest expense results from both a higher ratio of
interest-bearing liabilities to assets than the Peer Group, and from an
unfavorable yield/cost spread. As shown in the "yields, costs, and spreads"
section of Table 3.3, the Association
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.3
Income as a Percent of Average Assets and Yields, Costs, Spreads
Comparable Institution Analysis
For the Twelve Months Ended September 30, 1997
<TABLE>
Net Interest Income Other Income
----------------------------- --------------------
Loss NII Total
Net Provis. After Loan R.E. Other Other
Income Income Expense NII on IEA Provis. Fees Oper. Income Income
------ ------ ------- ------ ------- ------- ---- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Heritage FS&LA of Laurens SC
- ----------------------------
September 30, 1997 0.80 7.28 5.01 2.27 0.14 2.13 0.00 0.00 0.09 0.09
SAIF-Insured Thrifts 0.89 7.42 4.13 3.29 0.13 3.16 0.12 0.01 0.30 0.43
State of SC 1.16 7.45 3.83 3.62 0.09 3.52 0.11 0.01 0.39 0.50
Comparable Group Average 1.25 7.68 3.84 3.85 0.07 3.78 0.09 0.01 0.24 0.33
South-East Companies 1.25 7.68 3.84 3.85 0.07 3.78 0.09 0.01 0.24 0.33
Comparable Group
- ----------------
South-East Companies
- --------------------
BFSB Bedford Bancshares of VA 1.20 7.75 3.90 3.86 0.08 3.78 0.22 0.00 0.23 0.46
CFTP Community Fed. Bancorp of MS 1.46 6.95 3.37 3.58 0.01 3.57 0.11 0.00 0.07 0.18
CFFC Community Fin. Corp. of VA(1) 1.01 7.84 4.00 3.84 0.10 3.73 0.01 0.00 0.34 0.35
FFBS FFBS Bancorp of Columbus MS 1.41 7.47 3.83 3.64 0.00 3.64 0.10 0.00 0.40 0.50
SOPN First SB, SSB, Moore Co. of NC 1.75 7.50 3.69 3.81 0.00 3.81 0.00 0.00 0.16 0.16
KSAV KS Bancorp of Kenly NC 1.21 8.21 4.36 3.85 0.02 3.83 0.00 0.05 0.14 0.19
SCCB S. Carolina Comm. Bnshrs of SC 1.15 7.78 3.63 4.15 0.00 4.15 0.00 0.00 0.23 0.23
SSM Stone Street Bancorp of NC 1.55 7.87 3.23 4.64 0.06 4.58 0.02 0.00 0.13 0.15
TSH Teche Holding Company of LA(1) 0.69 7.54 4.19 3.35 0.07 3.29 0.00 0.01 0.58 0.59
FTF Texarkana Fst. Fin. Corp of AR(1) 1.41 7.91 4.08 3.83 0.00 3.83 0.18 0.01 0.24 0.44
TWIN Twin City Bancorp of TN 0.85 7.72 3.95 3.77 0.40 3.37 0.31 0.03 0.09 0.43
<CAPTION>
G&A/Other Exp. Non-Op. Items Yields, Costs, and Spreads
---------------- -------------- -------------------------
MEMO: MEMO:
G&A Goodwill Net Extrao. Yield Cost Yld-Cost Assets/ Effective
Expense Amort. Gains Items On Assets Of Funds Spread FTE Emp. Tax Rate
------- ------- ------- ------- --------- -------- ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Heritage FS&LA of Laurens SC
- ----------------------------
September 30, 1997 1.04 0.00 0.07 0.00 7.47 5.71 1.76 6,689 35.92
SAIF-Insured Thrifts 2.20 0.02 0.01 0.00 7.58 4.77 2.81 4,223 37.04
State of SC 2.24 0.00 0.07 0.00 7.65 4.84 2.81 3,832 37.36
Comparable Group Average 2.03 0.00 (0.10) 0.00 7.87 4.89 2.98 4,459 37.19
South-East Companies 2.03 0.00 (0.10) 0.00 7.87 4.89 2.98 4,459 37.19
Comparable Group
- ----------------
South-East Companies
- --------------------
BFSB Bedford Bancshares of VA 2.32 0.00 0.01 0.00 7.92 4.59 3.33 3,762 37.97
CFTP Community Fed. Bancorp of MS 1.47 0.00 0.01 0.00 7.06 5.04 2.02 6,544 36.26
CFFC Community Fin. Corp. of VA(1) 2.05 0.00 (0.41) 0.00 8.08 4.70 3.38 3,654 37.48
FFBS FFBS Bancorp of Columbus MS 1.91 0.00 0.00 0.00 7.63 4.79 2.84 4,217 36.58
SOPN First SB, SSB, Moore Co. of NC 1.24 0.00 0.00 0.00 7.61 4.93 2.68 6,868 35.85
KSAV KS Bancorp of Kenly NC 2.00 0.01 0.02 0.00 8.44 5.10 3.34 3,546 40.17
SCCB S. Carolina Comm. Bnshrs of SC 2.51 0.00 0.00 0.00 7.99 5.01 2.98 5,069 38.34
SSM Stone Street Bancorp of NC 2.24 0.00 0.00 0.00 8.03 5.04 2.99 5,821 37.80
TSH Teche Holding Company of LA(1) 2.45 0.00 (0.40) 0.00 7.69 4.91 2.78 2,655 33.09
FTF Texarkana Fst. Fin. Corp of AR(1) 1.56 0.00 (0.50) 0.00 8.10 4.99 3.10 4,896 36.33
TWIN Twin City Bancorp of TN 2.62 0.00 0.21 0.00 7.99 4.63 3.36 2,018 39.23
</TABLE>
(1) Financial information is for the quarter ending June 30, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 3.9
has a much higher cost of funds in comparison to the Peer Group and the industry
as a whole (5.71 percent versus 4.89 percent for the Peer Group and 4.77 for all
SAIF-insured thrifts), resulting from the Association's high proportion of CDs
held in portfolio and the relatively high balance of jumbo and other high
balance CDs that generally carry negotiated rates of interest. The Peer Group's
interest income was supported by the greater loan portfolio diversification (as
described later in this section) into higher yielding commercial real estate,
construction and non-mortgage loans. The reinvestment of the net conversion
proceeds may serve to initially dilute the Association's asset yields due to
current market rates on short- to intermediate-term investment securities but
the net interest margin should increase with an increase in the IEA/IBL ratio.
In another key area of core earnings strength, and offsetting in part the
disadvantage in the net interest margin, the Association operates with a lower
operating expense ratio than the Peer Group (1.04 percent versus 2.03 percent of
assets for the Peer Group), which is attributable to its relatively non-
diversified operations and efficient use of personnel in operations, including
maintaining a deposit base exceeding $200 with only four office locations.
These features have kept the Association's staffing requirements and
compensation expenses in check, as evidenced by the Association's higher assets
per employee ratio relative to the Peer Group average ($6.689 million and $4.459
million, respectively). Going forward, Heritage Federal's operating expenses
will be subject to increase related to operations as a publicly-held company,
stock plan expenses and the expected growth in operations.
Non-interest operating income made a lower contribution to the
Association's earnings than the Peer Group's earnings, offsetting some of the
advantage in the operating expense area. For the trailing twelve months ended
September 30, 1997, the Association recorded non-interest operating income of
0.09 percent of average assets versus a level of 0.33 percent recorded by the
Peer Group. Going forward, the Association anticipates that non-interest
operating income will continue to contribute similar levels to overall revenues.
When viewed together, net interest income, other operating income and
operating expenses provide insight into an institution's earnings strength,
since those sources of income and expense are typically the most prominent
components of earnings and are generally more predictable than losses and
gains realized from the sale of assets or other non-recurring activities. In
this regard, the Association's efficiency ratio of 45.2 percent compares
favorably to the Peer Group's ratio of 48.6 percent. Both ratios are lower
than the industry average of 59.7 percent.
During the most recent fiscal year, Heritage Federal recorded non-operating
income of 0.07 percent of average assets, while the Peer Group as a whole
recorded net non-operating expense of 0.10 percent of average assets, although
most of the Peer Group's non-operating expense was due to three thrifts who are
currently reporting June 30, 1997 financial information; thus the trailing
twelve months income figures continue to reflect
<PAGE>
RP Financial, LC.
Page 3.10
the SAIF assessment charged to income during the quarter ended September 30,
1996. Excluding these three Peer Group members, Heritage Federal and the Peer
Group's net non-operating income or expense was similar. The Association
recorded non-operating income in the form of gains on the sale of loans and
securities and income from the resolution of REO. Heritage Federal reported
higher levels of loan loss provisions than the Peer Group at 0.14 and 0.07
percent of average assets, respectively.
Loan Composition
- ----------------
Table 3.4 presents data related to the loan composition of the Association
and the Peer Group. The greater emphasis on residential lending for the
Association in comparison to the Peer Group was evident, with 1-4 family
permanent mortgage loans and MBS accounting for 96.74 percent and 80.63 percent
of the Association's and the Peer Group's total loan and MBS portfolios,
respectively. Similar to the Association, the Peer Group maintains only a
moderate level of loans serviced for others, representing an additional source
of income.
The Peer Group's loan portfolio exhibited greater diversification into
higher risk weight loans than the Association's loan portfolio. Construction
and commercial real estate lending are the Association's primary methods of
lending diversification, and such loans comprised 3.9 and 2.5 percent of the
total loan and MBS portfolio at September 30, 1997. The Peer Group achieved
their loan portfolio diversification through all other lending categories,
totaling 20.92 percent of total loans and MBS, while Heritage Federal's
combined level of these loan categories totaled only 7.09 percent. The
Association reported a lower risk-weighted assets ratio than the Peer Group at
49.55 and 54.54 percent, respectively.
Credit Risk
- -----------
While Heritage Federal's credit risk exposure appears to be lower than the
Peer Group's exposure based on the Association's lower level of risk-weighted
assets and higher proportion of 1-4 family loans held in portfolio, the
Association's higher level of NPAs and lower reserve coverage ratios indicate
a higher level of credit risk. As shown in Table 3.5, as of September 30,
1997, the Association recorded NPAs of 0.84 percent of assets, higher than the
Peer Group average of 0.45 percent, and maintained a similar ratio of non-
performing loans ("NPLs") to loans of 0.48 percent versus 0.49 percent for the
Peer Group. Most of the Association's and Peer Group's NPAs consist of non-
accruing loans, although Heritage Federal reported a higher level of real
estate owned. The Association maintained a lower level of loss reserves as a
percent of loans receivable (0.45 percent versus 0.58 percent for the Peer
Group), and a lower ratio of reserves as a percent of total NPAs.
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.4
Loan Portfolio Composition and Related Information
Comparable Institution Analysis
As of September 30, 1997
<TABLE>
<CAPTION>
Portfolio Composition as a Percent of MBS and Loans
----------------------------------------------------------
1-4 Constr. 5+Unit Commerc. RWA/ Serviced Servicing
Institution MBS Family & Land Comm RE Business Consumer Assets For Others Assets
- ----------- ------ ------ ------ ------ ------ -------- ------ ---------- ---------
(%) (%) (%) (%) (%) (%) (%) ($000) ($000)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Heritage FS&LA of Laurens SC 3.44 93.30 3.85 2.50 0.00 0.74 49.55 5,402 0
SAIF-Insured Thrifts 14.95 62.12 5.31 11.80 6.30 1.67 52.95 401,107 3,385
State of SC 4.22 72.64 7.90 10.68 4.93 2.67 58.44 96,822 214
Comparable Group Average 4.09 76.54 5.48 7.75 6.04 1.65 59.05 8,728 56
Comparable Group
- ----------------
BFSB Bedford Bancshares of VA 0.44 74.18 12.64 5.45 7.65 2.82 56.55 2,903 0
CFTP Community Fed. Bancorp of MS 11.69 76.07 2.63 5.35 3.15 2.43 42.46 1,519 0
CFFC Community Fin. Corp. of VA(1) 0.00 63.50 3.72 26.84 5.34 1.64 71.58 9,947 7
FFBS FFBS Bancorp of Columbus MS 2.74 69.36 5.75 10.36 9.88 1.95 54.02 354 0
SOPN First SB, SSB, Moore Co. of NC 1.45 88.27 1.27 7.86 1.14 0.00 45.35 0 0
KSAV KS Bancorp of Kenly NC 1.73 91.60 5.31 1.00 0.35 0.00 104.09 0 0
SCCB S. Carolina Comm. Bnshrs of SC 0.17 92.16 4.79 4.66 0.84 0.00 48.04 0 0
SSM Stone Street Bancorp of NC 3.76 81.14 8.41 2.93 0.36 4.61 55.35 0 0
TSH Teche Holding Company of LA(1) 9.18 82.57 4.72 2.87 4.43 0.00 55.63 0 0
FTF Texarkana Fst. Fin. Corp of AR(1) 1.11 70.86 7.08 13.94 7.31 2.36 61.50 23,267 19
TWIN Twin City Bancorp of TN 12.69 52.27 3.91 3.99 26.03 2.38 54.93 58,017 595
</TABLE>
(1) Financial information is for the quarter ending June 30, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.5
Credit Risk Measures and Related Information
Comparable Institution Analysis
As of September 30, 1997 or Most Recent Date Available
<TABLE>
<CAPTION>
NPAs & Rsrves/
REO/ 90+Del/ NPLs/ Rsrves/ Rsrves/ NPAs & Net Loan NLCs/
Institution Assets Assets Loans Loans NPLs 90+Del Chargoffs Loans
- ----------- ------ ------ ------ ------ ------ -------- --------- ----------
(%) (%) (%) (%) (%) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Heritage FS&LA of Laurens SC 0.17 0.84 0.48 0.45 93.58 42.10 133 0.07
SAIF-Insured Thrifts 0.26 0.78 0.85 0.78 159.80 122.06 310 0.09
State of SC 0.24 0.79 0.55 0.83 102.89 285.59 199 0.06
Comparable Group Average 0.07 0.45 0.49 0.58 123.66 117.52 40 0.13
Comparable Group
- ----------------
BFSB Bedford Bancshares of VA 0.15 0.52 NA 0.58 NA 92.88 0 0.00
CFTP Community Fed. Bancorp of MS 0.05 0.50 0.75 0.46 61.14 54.53 0 0.00
CFFC Community Fin. Corp. of VA(1) 0.10 0.56 0.51 0.67 129.84 105.58 297 0.75
FFBS FFBS Bancorp of Columbus MS 0.00 0.58 0.04 0.59 NA 72.88 9 0.04
SOPN First SB, SSB, Moore Co. of NC 0.00 0.29 0.44 0.31 70.15 70.15 0 0.00
KSAV KS Bancorp of Kenly NC 0.06 0.53 0.56 0.35 62.21 55.44 0 0.00
SCCB S. Carolina Comm. Bnshrs of SC 0.22 0.87 0.82 0.81 98.65 73.62 0 0.00
SSM Stone Street Bancorp of NC 0.00 0.23 NA 0.62 NA 229.34 1 0.00
TSH Teche Holding Company of LA(1) 0.01 0.27 0.30 0.96 319.98 304.97 21 0.02
FTF Texarkana Fst. Fin. Corp of AR(1) 0.12 0.46 NA 0.79 NA 145.12 0 0.00
TWIN Twin City Bancorp of TN 0.08 0.16 NA 0.20 NA 88.17 115 0.60
</TABLE>
(1) Financial information is for the quarter ending June 30, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 3.13
Interest Rate Risk
- ------------------
Table 3.6 reflects the relative interest rate risk exposure of Heritage
Federal and the Peer Group. The Association's lower capital level was the key
factor contributing to its lower IEA/IBL ratio relative to the Peer Group (112.2
percent versus 123.0 percent, respectively). The Association's lower capital
and IEA/IBL ratios increases its funding costs relative to the Peer Group.
However, the Association's capital ratio and IEA/IBL ratio will increase on a
post-conversion basis. The Association maintained a similar ratio of non-
interest earning assets to the Peer Group.
In the absence of available or comparable gap and rate shock analyses for
the Peer Group, the change in the quarterly net interest income ratio to average
assets for the Association and the Peer Group has been examined in relation to
the change in market interest rates. As shown in Table 3.6, the Association's
net interest margin has recently shown similar sensitivity to changing market
interest rates in comparison to the Peer Group's average net interest margin.
On a pro forma basis, the Association's higher capital position and reinvestment
of proceeds in short- to intermediate-term securities can be expected to lower
exposure to changes in interest rates.
Summary
- -------
Based on the above analysis and the criteria employed by in the Peer Group
selection process, the Peer Group appears to form a reasonable basis for
determining the pro forma market value of the Association, subject to the
adjustments noted in the following section.
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.6
Interest Rate Risk Measures and Net Interest Income Volatility
Comparable Institution Analysis
As of September 30, 1997 or Most Recent Date Available
<TABLE>
<CAPTION>
Balance Sheet Measures
-------------------------- Quarterly Change in Net Interest Income
Non-Earn. ----------------------------------------------------------
Equity/ IEA/ Assets/
Institution Assets IBL Assets 09/30/97 06/30/97 03/31/97 12/31/96 09/30/96 06/30/96
- ----------- ------ ------ ------ -------- -------- -------- -------- -------- --------
(%) (%) (%) (change in net interest income is annualized in basis points)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Heritage FS&LA of Laurens SC 11.8 112.2 2.4 21 2 9 9 0 0
SAIF-Insured Thrifts 12.6 113.6 3.2 (3) 1 0 (0) (1) 11
State of SC 16.5 120.7 2.6 15 (9) (8) 10 (5) 11
Comparable Group Average 18.7 123.0 2.4 (11) 2 2 (3) 1 5
Comparable Group
- ----------------
BFSB Bedford Bancshares of VA 14.1 114.9 2.0 2 (7) 23 (19) (13) (4)
CFTP Community Fed. Bancorp of MS 26.7 138.6 2.3 (38) (21) 5 (3) 8 NA
CFFC Community Fin. Corp. of VA(1) 13.7 114.2 2.8 NA (2) (2) (2) 9 1
FFBS FFBS Bancorp of Columbus MS 16.7 119.6 2.2 (12) 7 (12) 2 13 7
SOPN First SB, SSB, Moore Co. of NC 23.0 129.8 1.4 (5) 2 6 (5) 6 8
KSAV KS Bancorp of Kenly NC 13.2 113.2 2.7 (21) 19 2 8 (10) 8
SCCB S. Carolina Comm. Bnshrs of SC 26.6 134.5 2.5 (18) 33 (25) 11 4 20
SSM Stone Street Bancorp of NC 29.6 142.8 2.2 1 (29) 32 (3) 30 NA
TSH Teche Holding Company of LA(1) 13.1 113.8 2.2 NA (5) (2) (8) (13) (12)
FTF Texarkana Fst. Fin. Corp of AR(1) 15.7 118.0 2.5 NA 9 13 (11) (3) 3
TWIN Twin City Bancorp of TN 12.9 113.6 3.7 2 18 (15) 1 (23) 14
</TABLE>
(1) Financial information is for the quarter ending June 30, 1997.
NA=Change is greater than 100 basis points during the quarter.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 4.1
IV. VALUATION ANALYSIS
Introduction
- ------------
This chapter presents the valuation analysis, prepared pursuant to the
approved valuation methodology promulgated by the OTS, and valuation factors
used to determine the estimated pro forma market value of the common stock of
the Holding Company. The common stock will be issued in conjunction with the
conversion of Heritage Federal from the mutual-to-stock form of ownership. The
valuation has been prepared utilizing the pro forma valuation methodology
promulgated by the OTS, most recently set forth in their 1994 valuation
guidelines.
Appraisal Guidelines
- --------------------
The OTS appraisal guidelines, originally released in October 1983, specify
the methodology for estimating the pro forma market value of an institution.
The methodology included: (1) selection of a peer group of comparable seasoned
publicly-traded institutions whose pricing is not distorted due to a variety of
factors; (2) a fundamental analysis of the subject company to the peer group;
and (3) a pro forma valuation analysis of the subject company based on the
market pricing of the peer group as of the date of valuation. The amended
valuation guidelines also limit the amount of a new issue discount which may be
incorporated into the valuation and thereby curtail the potential price
appreciation in the after-market.
RP Financial's valuation analysis complies with the October 1983 OTS
appraisal guidelines as revised on October 21, 1994, incorporating a
"fundamental analysis" relative to the Peer Group and a "technical analysis"
of final conversion pricing and trading levels of recently completed
conversions (given the emphasis of limiting after-market appreciation). It
should be noted that such analysis cannot possibly fully account for all the
market forces which impact after-market trading activity and pricing
characteristics of a stock on a given day.
The pro forma market value determined herein is a preliminary value for the
Holding Company's to-be-issued stock. Throughout the conversion process, RP
Financial will: (1) review changes in the Association's operations and
financial condition; (2) monitor the Association's operations and financial
condition relative to the Peer Group to identify any fundamental changes; (3)
monitor the external factors affecting value including, but not limited to,
local and national economic conditions, interest rates, and the stock market
environment, including the market for thrift stocks; and (4) monitor pending
initial and second step conversion offerings (including those in the offering
phase) both regionally and nationally. If material changes should occur during
the conversion process, RP Financial will prepare updated valuation reports
reflecting such changes and their related impact on value, if any, over the
course of the conversion process. RP Financial will also prepare a final
valuation update at the closing of the conversion offering to determine if the
preliminary range of value continues to be appropriate.
<PAGE>
RP Financial, LC.
Page 4.2
The appraised value determined herein is based on the current market and
operating environment for the Association and for all thrifts. Subsequent
changes in the local and national economy, the legislative and regulatory
environment, the stock market, interest rates, and other external forces (such
as natural disasters or major world events), which may occur from time to time
(often with great unpredictability), may materially impact the market value of
all savings institution stocks, including Heritage Federal, or Heritage
Federal's value alone. To the extent a change in factors impacting the
Association's value can be reasonably anticipated and/or quantified, RP
Financial has incorporated the estimated impact into its analysis.
Valuation Analysis
- ------------------
A fundamental analysis discussing similarities and differences relative
to the Peer Group was presented in Chapter III. The following sections
summarize such differences between the Association and the Peer Group and how
those differences affect the pro forma valuation. Emphasis is placed on the
specific strengths and weaknesses of the Association relative to the Peer Group
in such key areas as financial condition, profitability, growth and viability of
earnings, asset growth, primary market area, dividends, liquidity of the issue,
marketing of the issue, management, and the effect of government regulations
and/or regulatory reform. We have also considered the market for savings
institution stocks, and in particular new issues, to assess the impact on value
of Heritage Federal coming to market at this time.
1. Financial Condition
-------------------
The financial strength of an institution is an important determinant in pro
forma market value, because investors typically look to such factors as
liquidity, capital, asset composition and quality, and funding sources in
assessing investment attractiveness. The similarities and differences in the
Association's financial strength can be summarized as follows:
o Overall A/L Composition. Permanent residential mortgage loans funded
-----------------------
by retail deposits were the primary components of both Heritage
Federal's and the Peer Group's balance sheets, and both maintain a
similar proportion of overall loans receivable as a percent of assets,
along with similar investment in cash and investments and investment
in MBS. Heritage Federal reported a much lower level of
diversification into higher credit risk types of loans relative to the
Peer Group. The Peer Group relied on borrowed funds to a greater
extent than the Association, although retail deposits comprised the
major portion of the respective funding needs.
Heritage Federal maintained a deposit base with a high concentration
of CDs (over 90 percent of total dollars of deposits), along with a
relatively significant balance of high balance jumbo CDs, which tend
to be more volatile in nature than savings and transaction accounts
and lower balance CDs. A portion of the Association's CD base is
typically renewed based on negotiated rates, which also increases the
"rate sensitivity" or volatility of the deposit base.
<PAGE>
RP Financial, LC.
Page 4.3
o Credit Risk. Heritage Federal maintains comparatively higher
-----------
REO/assets and NPAs/assets, despite a lower credit risk profile in
the loan portfolio and a lower risk-weighted assets ratio. In
addition, reserve coverage ratios are less favorable than the Peer
Group. The Association has a similar loans/assets ratio to the Peer
Group.
o Liquidity. Heritage Federal and the Peer Group maintained similar
---------
levels of cash and investments and MBS in comparison to the Peer
Group. The Association's proportion of cash and investments is likely
to initially increase on a pro forma basis. Borrowings were utilized
to a higher degree by the Peer Group, and both maintain ample
borrowings capacity. The Association's loans meet secondary market
standards for sale.
o Capital. While the Association maintains a lower capital position in
-------
relation to the Peer Group, following the infusion of conversion
proceeds, the Association's capital position is expected to exceed the
Peer Group average. As a result, the Association is expected to have
more leverage capacity than the Peer Group. The Association's pro
forma return on equity ("ROE") is not expected to exceed the Peer
Group average due to lower profitability.
On balance, RP Financial applied a slight downward adjustment for financial
condition.
2. Profitability, Growth and Viability of Earnings
-----------------------------------------------
Earnings are an important factor in determining pro forma market value,
as the level and risk characteristics of an institution's earnings stream and
the prospects and ability to generate future earnings are typically heavily
factored into an investment decision. The historical income statements of
Heritage Federal and the Peer Group were generally reflective of traditional
savings institution operating strategies, with net interest income and operating
expenses being the major determinants of their respective core earnings. The
specific factors considered in the valuation include:
o Reported Earnings. The Association reported net income of 0.80
-----------------
percent of average assets for the most recent twelve month period
versus earnings of 1.25 percent for the Peer Group. The differential
in reported earnings is due to the Association's lower net interest
margin and lower non-operating income, offset in part by lower
operating expenses.
o Core Earnings. The Association also maintains a less favorable core
-------------
earnings posture relative to the Peer Group, as reported earnings were
supported by income in the form of gains on the sale of REO, loans and
investment securities. The Association operated with a lower level of
net interest income, primarily due to a significantly higher level of
interest expense, less favorable non-interest operating income and
more favorable operating expenses than the Peer Group. The effective
tax rates for Heritage Federal and the Peer Group were comparable.
While redeployment of conversion proceeds into interest-earning assets
should enhance Heritage Federal's net interest income, operating
expenses for the Association are expected to increase as well, and any
attempt by the Association to add products or services would likely
result in higher operating expense. On a pro forma basis, Heritage
Federal's core profitability is expected to remain below that of the
Peer Group.
o Interest Rate Risk. Although a majority of loans in portfolio are
------------------
categorized as adjustable rate in nature, Heritage Federal's change in
NPV under a 200 basis point increase in interest rates (as calculated
by the OTS), indicates a relatively high exposure to rising interest
rates, particularly
<PAGE>
RP Financial, LC.
Page 4.4
in light of the Association's use of a lagging market index for
residential ARM products, the use of 1% annual adjustment caps on ARM
loans, and the origination of ARMs that carry repricing periods of
greater than one year (and up to ten years). Although gap data was not
available for the Peer Group, other analyses indicated a comparable
advantage for the Peer Group. The pro forma increase in the IEA/IBL
ratio can be expected to reduce the Association's interest rate risk
exposure, but the Association is expected to remain at a disadvantage.
o Credit Risk. Loss provisions had a higher impact on the earnings of
-----------
the Association in comparison to the Peer Group. In terms of
potential credit quality related losses, the Association maintained
lower reserve coverage ratios as a percent of loans receivable, as a
percent of non-accruing loans and as a percent of total NPAs. The
Association's high proportion of residential loans held in portfolio
lowers the perceived credit risk of the loan portfolio in relation to
the Peer Group.
o Earnings Growth Potential. Several factors were considered in
-------------------------
assessing earnings growth potential. Heritage Federal's internally
generated loan demand has been less than available funds, requiring
the Association to utilize outside sources for loan products, reducing
the spread earned on these assets. In the most recent fiscal years,
the Association's cost of deposits has increased substantially,
narrowing Heritage Federal's yield/cost spread and resultant
profitability; any future attempts to increase the deposit base would
likely further increase funding costs. Heritage Federal currently
operates at a low operating expense ratio and strong efficiency;
operating expenses would likely increase if the Association expands
its products and/or services. Although the higher expected pro forma
capital position is expected to enable the Association to continue on
a growth pattern, expectations of higher operating expenses resulting
from the conversion and the uncertain cost of acquiring new deposit
funds for lending result in the Association's earnings appearing to
have less upside potential than the Peer Group.
o Return on Equity. On a pro forma basis the Association's pro forma
----------------
return on equity will be lower to the Peer Group average, as the lower
pro forma profitability is measured against a comparatively higher
capital position.
Overall, RP Financial made a moderate downward adjustment for
profitability, growth and viability of earnings.
3. Asset Growth
------------
The Association's asset growth in recent periods has been lower than the
Peer Group's, which has been achieved in part by utilizing borrowed funds as
deposit growth has been insufficient. The Association has in place both
internal and external sources of loan products that can be used to reinvest
available liquidity. The Association intends to continue to grow in future
periods, and is expected to have adequate capital post-conversion to support
such growth. We concluded that no adjustment was warranted for the
Association's asset growth potential.
<PAGE>
RP Financial, LC.
Page 4.5
4. Primary Market Area
-------------------
The general condition of a financial institution's market area has an
impact on value, as future success is in part dependent upon opportunities for
profitable activities in the local market area. Summary demographic and deposit
market share data for the Association and the Peer Group is included in Table
4.1. The Association's market area of Laurens County, South Carolina is a rural
market that has been experiencing growing levels of population and households in
recent years, while the Peer Group companies also operate on average in smaller,
rural markets that have been growing at higher rates than that of the
Association. The per capita income in the Association's market is below the
average of the primary markets of the Peer Group members. Heritage Federal has a
greater percentage of the market area deposits in comparison to the Peer Group
on average, indicating that future increases in market share of deposits may be
more difficult than that of the Peer Group. The Association's competitive
position is not dissimilar from the average position of the Peer Group
institutions in their primary market areas. On balance, RP Financial concluded
that a slight downward adjustment was warranted for market area.
5. Dividends
---------
As stated in Heritage Bancorp's offering circular, the Holding Company
intends to implement a cash dividend policy during the first full quarter
following consummation of the conversion at an estimated rate of 2.0 percent, or
$0.30 annually on an estimated $15.00 share price. The ability to pay a
dividend will be based on numerous factors including growth objectives,
financial condition, the amount of net proceeds retained by the Holding Company
in the conversion, investment opportunities available to the Holding Company and
the Association, profitability, tax considerations, minimum capital
requirements, regulatory limitations, stock market characteristics and general
economic conditions.
Historically, savings institutions typically have not established dividend
policies at the time of their conversion to stock ownership. Newly converted
institutions, in general, have preferred to gain market seasoning, establish an
earnings track record and more fully invest the conversion proceeds before
establishing a dividend policy. However, during the late 1980s and early 1990s,
with negative publicity surrounding savings institutions, there was a tendency
for more institutions to initiate moderate dividend policies concurrent with
their conversion as a means of increasing the attractiveness of the stock
offering. Today, fewer institutions are compelled to initially establish
dividend policies at the time of their conversion offering to increase the
attractiveness of the stock issue as: (1) industry profitability has improved,
(2) the number of problem thrift institutions has declined, and (3) the stock
market cycle for thrift stocks is generally more favorable than in the
<PAGE>
Table 4.1
Peer Group Market Area Comparative Analysis
<TABLE>
<CAPTION>
Population Proj.
-------------- Pop. 1990-97 1997-2002
Institution County 1990 1997 2002 % Change % Change
- ----------- --------- ---- ---- ---- -------- ---------
(000) (000)
<S> <C> <C> <C> <C> <C> <C>
Bedford Bancshares of VA Bedford 46 54 59 17.2% 10.3%
Community Federal Bancorp of MS Lee 66 74 81 13.5% 8.2%
Community Financial Corp. of VA Augusta 55 60 64 10.1% 6.3%
FFBS Bancorp of Columbus MS Lowndes 59 62 63 3.9% 2.6%
First SB, SSB of Moore Co. of NC Moore 59 70 78 18.7% 10.9%
KS Bancorp of Kenly NC Johnston 81 102 116 24.9% 13.8%
S. Carolina Comm. Bancshares of SC Fairfield 22 22 22 -0.1% -0.1%
Stone Street Bancorp of NC Davie 28 31 33 10.4% 6.5%
Teche Holding Company of LA St. Mary 58 57 57 -1.1% -0.7%
Texarkana First Fin. Corp. of AR Miller 38 39 39 1.2% 0.8%
Twin City Bancorp of TN Sullivan 144 151 156 5.0% 3.3%
---- ---- ---- ---- ----
AVERAGES: 59.6 65.6 69.7 9.4% 5.6%
MEDIANS: 58 60 63 10.1% 6.3%
HERITAGE FS&LA OF SC LAURENS 58 62 65 7.4% 4.7%
<CAPTION>
Per Capita Income
----------------- Deposit
% State Market
Institution County Median Age Amount Average Share(1)
- ----------- ------ ---------- ------ ------- -------
<S> <C> <C> <C> <C> <C>
Bedford Bancshares of VA Bedford 38.2 15,786 103.1% 16.0%
Community Federal Bancorp of MS Lee 34.0 16,087 119.7% 14.4%
Community Financial Corp. of VA Augusta 37.9 13,088 74.5% 3.5%
FFBS Bancorp of Columbus MS Lowndes 31.5 15,528 115.6% 17.7%
First SB, SSB of Moore Co. of NC Moore 40.9 19,350 110.5% 21.3%
KS Bancorp of Kenly NC Johnston 36.3 17,233 98.4% 9.0%
S. Carolina Comm. Bancshares of SC Fairfield 34.5 12,525 80.9% 23.9%
Stone Street Bancorp of NC Davie 38.7 18,754 107.1% 25.7%
Teche Holding Company of LA St. Mary 31.4 10,562 80.4% 19.3%
Texarkana First Fin. Corp. of AR Miller 33.9 12,612 93.4% 16.8%
Twin City Bancorp of TN Sullivan 38.9 16,588 99.7% 5.2%
---- ------ ---- ----
AVERAGES: 36.0 15,283 98.5% 15.7%
MEDIANS: 36.3 15,786 99.7% 16.8%
HERITAGE FS&LA OF SC LAURENS 35.8 $14,105 91.2% 24.7%
</TABLE>
(1) Total institution deposits in headquarters county as percent of total
county deposits, excludes credit unions.
Sources: CACI, Inc, SNL Securities
<PAGE>
RP Financial, LC.
Page 4.7
early 1990s. At the same time, with ROE ratios under pressure, due to high
equity levels, well-capitalized institutions are subject to increased
competitive pressures to offer dividends and a number of institutions have
instituted special dividends.
As publicly-traded savings institution's capital levels and profitability
have improved and as weakened institutions have been resolved, the proportion of
institutions with cash dividend policies has increased. All eleven institutions
in the Peer Group presently pay regular cash dividends, with implied dividend
yields ranging from 1.75 percent to 3.61 percent. The average dividend yield on
the stocks of the Peer Group institutions was 2.44 percent as of November 28,
1997, representing an average earnings payout ratio of 47.31 percent. As of
November 28, 1997, approximately 84 percent of all publicly-traded savings
institutions had adopted cash dividend policies (see Exhibit IV-1), exhibiting
an average yield of 1.85 percent and an average payout ratio of 35.59 percent.
The dividend paying institutions generally maintain higher than average
profitability ratios, facilitating their ability to pay cash dividends, which
supports a market pricing premium on average relative to non-dividend paying
institutions.
The Holding Company's ability following the completion of the conversion
to pay a dividend would appear to be similar relative to the Peer Group based
on higher pro forma capital, offset by lower post-conversion earnings. The
Company's stated intention to implement a dividend shortly after completion of
the conversion is a favorable comparison to the Peer Group companies and thus no
adjustment is warranted for this valuation factor.
6. Liquidity of the Shares
-----------------------
The Peer Group is by definition composed of companies that are traded in
the public markets, eight of which trade on the NASDAQ system and three that
trade on the AMEX. Typically, the number of shares outstanding and market
capitalization provides an indication of how much liquidity there will be in a
particular stock. The market capitalization of the Peer Group companies ranged
from $16.1 million to $89.9 million as of November 28, 1997, with an average
market value of $43.6 million. The shares outstanding of the Peer Group members
ranged from 0.7 million to 4.6 million, with average shares outstanding of
approximately 2.0 million. The Association's pro forma market value is expected
to be greater than the comparative Peer Group averages, with a higher number of
shares outstanding. The Association's stock is expected to be listed on the
NASDAQ National Market System, and accordingly, we anticipate the liquidity of
the Association's shares will be similar to that of the Peer Group on average,
and thus there has been no valuation adjustment applied for this factor.
<PAGE>
RP Financial, LC.
Page 4.8
7. Marketing of the Issue
----------------------
We believe that three separate markets exists for savings institution
stocks coming to market such as Heritage Federal: (A) the after-market for
public companies, in which trading activity is regular and investment decisions
are made based upon financial condition, earnings, capital, ROE and dividends;
(B) the new issue market in which converting thrifts are evaluated on the basis
of the same factors but on a pro forma basis without the benefit of a stock
trading history and reporting quarterly operating results as a publicly-held
company; and (C) the acquisition market for savings institution franchises in
South Carolina. All of these markets were considered in the valuation of the
Association's conversion.
A. Public Market
-------------
The value of publicly-traded thrift stocks is easily measurable, and
is tracked by most investment houses and related organizations. Exhibit IV-1
provides pricing and financial data on all publicly-traded thrifts. In general,
thrift stock values react to market stimuli such as interest rates, inflation,
perceived industry health, projected rates of economic growth, regulatory issues
and stock market conditions in general. Exhibit IV-2 displays historical stock
market trends for various indices and includes historical stock price index
values for thrifts and commercial banks. Exhibit IV-3 displays historical stock
price indices for thrifts only.
In terms of assessing general stock market conditions, the stock
market has generally trended higher over the past year. The Federal Reserve's
decision not to raise interest rates at its September 1996 meeting, and
generally positive third quarter earnings results sustained the upward momentum
in the stock market during the beginning of the fourth quarter of 1996.
Favorable inflation data and lower interest rates further spurred the upward
trend in the stock market prior to the election. Investors were cheered by the
"status quo" election results, as stocks rallied strongly immediately following
the election with the DJIA posting ten consecutive advances through mid-
November. Economic stability and a rising bond market sustained the stock
market rally through the end of November. For the entire month of November, the
DJIA increased 492.3 points, or 8.2 percent. Following the rapid rise in the
stock market during November, stocks retreated during the first half of
December. Profit taking, concern about speculative excesses in the stock market
and higher interest rates all contributed to the decline in the stock market.
The stock market resumed an upward trend during the end of 1996 and
the first three weeks of 1997, with the DJIA establishing several new highs in
the process. Factors contributing to the rally in the stock market included the
Federal Reserve's decision to leave rates unchanged at its December meeting,
economic data which reflected moderate growth and low inflation, and favorable
fourth quarter earnings particularly in the technology sector. However, a
disappointing fourth quarter earnings report by IBM ignited a sell-off in the
stock market in late-January. Higher interest rates extended the downturn, as
the 30-year bond approached 7.0 percent
<PAGE>
RP Financial, LC.
Page 4.9
at the end of January. A high degree of market volatility was evident
throughout most of February 1997, reflecting concern over speculative excesses
in the stock market; particularly, as the DJIA closed above the 7000 mark in
mid-February. Profit taking, growing expectations of a correction and comments
by the Federal Reserve Chairman pulled the market lower in late-February.
Following a downturn in late-February 1997, the market recovered in
early-March. Despite increasing expectations of an interest rate hike by the
Federal Reserve, the Dow Jones Industrial Average ("DJIA") closed to a new
record high of 7085.16 on March 11, 1997. However, an upward revision to the
January retail sales figure triggered a one day sell-off in stocks and bonds on
March 13, 1997, as the stronger than expected growth heightened expectations of
an interest rate increase by the Federal Reserve. Unease over higher interest
rates, profitability concerns in the technology sector and litigation concerns
for tobacco stocks pulled the stock market lower in mid-March. As expected, the
Federal Reserve increased the rate on short-term funds by 0.25 percent at its
late-March meeting. Following the rate increase, the sell-off in the stock
market became more severe amid further signs of an accelerating economy. Stocks
bottomed-out on news of a stronger than expected rise in core producer prices
for March, with the DJIA closing at 6391.69 on April 11, 1997, or 9.8 percent
below its all-time high recorded a month ago.
Some favorable first quarter earnings reports and news of a possible
settlement by tobacco companies to resolve the threat of liability lawsuits
provided for a modest recovery in the stock market in mid-April 1997. In late-
April, the release of economic data which indicated mild inflationary pressures
furthered the rally in bond and stock prices. News of a budget agreement and a
favorable ruling for tobacco companies sent the stock market soaring to record
highs in early-May. Mixed economic data and the Federal Reserve's decision to
leave its target for the federal funds rate unchanged at its May meeting
sustained a positive trend in the stock market through the end of May. Profit
worries caused a sell-off in high technology stocks in early-June, while
declining interest rates served to stabilize the broader market. Technology
stocks rallied the stock market to new highs in mid-July, as a number of
technology companies posted favorable second quarter earnings. Favorable
inflation data, including second quarter GDP growth slowing to an annual rate of
2.2 percent versus 4.9 percent in the first quarter, and comments by the Federal
Reserve Chairman which indicated that an increase in interest rates was not
imminent, spurred bond and stock prices strongly higher during the second half
of July.
A decline in the July 1997 unemployment rate reversed the positive
bond and stock market trends in early-August, as inflation concerns became more
prominent. A declining dollar against the yen and mark sharpened the decline in
bond prices, with the 30-year U.S. Treasury bond increasing from 6.32 percent at
the end of July to 6.66 percent as of August 8, 1997. The sell-off pulled stock
prices lower as well. While bond prices firmed in mid-August, notable
volatility was evident in the stock market. The DJIA moved at least 100 points
for five consecutive days from August 18, 1997 through August 21, 1997, which
set a record for volatility.
<PAGE>
RP Financial, LC.
Page 4.10
Profit worries among some of the large blue chip companies and mixed inflation
readings were factors contributing to the roller-coaster performance of the
stock market. Despite strengthening bond prices, stocks traded lower through the
end of August. Bond prices moved higher on inflation data which showed that
prices stayed low during the second quarter, even though second quarter GDP
growth was revised upward to annual rate of 3.6 percent compared to an original
estimate of 2.2 percent.
Volatility returned to the stock market in early-September, with the
DJIA posting a record breaking point increase of 257.36 on September 2, 1997.
The rally was sparked by economic data that indicated manufacturing growth
slowed in August, thereby easing investors' inflation worries. However, the
rally was not sustained, as the DJIA pulled back following the one day rally.
The pull back was largely attributed to profit worries, which more than offset
favorable inflation news indicated by a slight increase in the national
unemployment rate for August (4.9 percent in August versus 4.8 percent in July).
Stocks fluctuated in a narrow trading range in mid-September, in anticipation of
third quarter earnings and August economic data. The low inflation reading
indicated by the August consumer price index sent stock and bond prices sharply
higher on September 16, 1997, with the DJIA posting a 175 point increase and the
yield on the 30-year U.S. Treasury bond posting its second largest decline in
the 1990s. Uncertainty over third quarter earnings provided for a mixed stock
market performance towards the end of September, while generally favorable
inflation readings pushed interest rates to their lowest level in two years.
The release of September employment data on October 3, 1997 caused bond and
stock prices to soar in early trading activity, as the September unemployment
rate was unchanged at 4.9 percent and fewer jobs than expected were added to the
economy during September. However, most of the initial gains were erased by
news of rising tensions between Iraq and Iran. On October 3, 1997, the DJIA
closed at 8038.58.
Lower interest rates provided for a positive stock market environment
in the beginning of October 1997. However, congressional testimony by the
Federal Reserve Chairman, in which he indicated that it would be difficult to
maintain the current balance between tight labor markets and low inflation,
caused stock and bond prices to skid in mid-October. Disappointing third
quarter earnings in the technology sector sharpened the sell-off in the stock
market, with the Dow Jones Industrial Average ("DJIA") posting consecutive
losses of more than 1.0 percent on October 16 and 17.
Stocks bounced back in early-week trading the following week,
reflecting positive third quarter earnings surprises posted by some of the blue
chip stocks. However, the recovery was abbreviated by global selling pressure
led by the decline in the Hong Kong stock market, as the DJIA posted a two-day
loss approximating 320 points on October 23 and 24. The sell-off in the world
financial markets turned into a rout on the following Monday, with a 5.8 percent
decline in the Hong Kong stock market fueling the largest ever point decline in
the DJIA. On October 24, the DJIA declined 554 points or 7.2 percent. While
the selling was broad
<PAGE>
RP Financial, LC.
Page 4.11
based, technology stocks sensitive to Asian demand experienced some of the
sharpest declines. The turmoil in the stock market provided for a sharp rally
in U.S. Treasury bonds, reflecting a flight to quality by skittish investors.
The stock market recovered strongly the day after the record breaking point
decline, as the DJIA surged a record breaking 337 points on October 28.
Comparatively, bond prices declined sharply on October 28, as investors pulled
out of the Treasury market to reinvest into the stock market. Market
conditions remained uneven through the week ended October 31, which was
followed by a soaring stock market on November 3. The DJIA posted a 232 point
increase on November 3, which was supported by a resurgence in the Hong Kong
market.
Following the one day rally, volatility returned to the stock market
through mid- and late-November. The market's uneven performance was largely
attributable to the ongoing influence of the international markets, particularly
the Asian and Latin American markets. Bond prices benefitted from the turbulent
stock market environment, despite renewed inflationary pressures indicated by
the October unemployment rate dropping to a 24-year low of 4.7 percent. In mid-
November, the yield on the 30-year bellwether Treasury issue approached 6.0
percent, its lowest level since February 1996. On November 28, 1997, the DJIA
closed at 7823.10, an increase of 20.0 percent from one year earlier.
Similar to the overall stock market, the market for thrift stocks has
generally been favorable during the past twelve months. Thrift prices generally
moved higher during October and November 1996. The upward trend in thrift
prices was supported by lower interest rates, with the slow down in economic
growth pushing the 30-year U.S. bond rate below 6.5 percent during the second
half of November 1996. Investors also reacted positively to the SAIF rescue
legislation, in light of the reduction in deposit insurance premiums to be paid
by SAIF-insured thrifts following the one time special assessment. Similar to
the overall stock market, thrift prices traded lower in early-December. Profit
taking and expectations of higher interest rates were factors contributing to
the pull back in thrift issues.
Bullish sentiment for thrift stocks heightened at the beginning of
1997, as investors reacted positively to the favorable inflation data and
generally strong fourth quarter earnings. The rally in thrift issues was driven
by the large California institutions, reflecting expectations that there would
be further consolidation among the large California thrifts. The acquisition
speculation for the large California thrifts became a reality in mid-February,
as H.F. Ahmanson's unsolicited offer to acquire Great Western Financial sent the
SNL Index soaring in mid-February. Stable interest rates and acquisition
activity supported higher thrift prices in early-March; however, like the stock
market in general, the peak in thrift prices was followed by a sharp sell-off in
mid-March. In fact, interest-rate sensitive issues were among the sectors
hardest hit by the revised January retail sales report, as the 30-year bond
approached 7.0 percent. Interest-rate sensitive issues continued to experience
selling pressure in late-March and early-April, as signs of a strengthening
economy pushed interest rates higher. The sell-off in thrift stocks culminated
on April 11, 1997, as interest rates increased sharply on news of the higher
<PAGE>
RP Financial, LC.
Page 4.12
than expected rise in core producer prices for March. Thrift prices edged
modestly higher in mid-April, reflecting generally favorable first quarter
earnings and a slight decline in interest rates following the release of
economic data which showed that inflation was low. Favorable inflation data and
the budget agreement provided for a more substantial rally in thrift stocks in
late-April and early-May, as interest-rate sensitive issues were bolstered by
declining interest rates.
Thrift stocks continued to trend higher through June and early-July
1997, based on the improved interest rate outlook and an overall positive
outlook for the economy. Generally favorable second quarter earnings and the
30-year U.S. Treasury bond yield declining below 6.50 percent served to further
boost thrift prices in mid-July, with the declining interest rate environment
serving to sustain the rally in thrift prices through the end of July. Thrift
prices generally declined during the first half of August, due to higher
interest rates and profit taking. From July 31, 1997 to August 15, 1997, the
SNL Index declined by 3.7 percent. Thrift prices recovered modestly during the
second half of August, as the Federal Reserve left short-term interest rates
unchanged at its August meeting. Thrift stocks participated in the one day
stock market rally on September 2, 1997, as evidenced by a 1.95 percent increase
in the SNL Index. News of NationsBank's proposed acquisition of Barnett Banks
for more than four times its book value appears to have further contributed to
the one day run-up in thrift prices. In contrast to the overall stock market,
thrift prices continued to move higher following the one day rally in the DJIA.
Stable interest rates and acquisition news sustained the positive market for
thrift issues. The decline in interest rates following the release of the
August consumer price index in mid-September served to further the rally in
thrift prices. During late-September and early-October, interest-rate sensitive
issues in general benefited from the declining interest rate environment and
expectations of strong third quarter earnings. Prices of thrift and bank stocks
also continued to be positively influenced by industry consolidation and rising
acquisition multiples being paid for thrift and bank franchises. The SNL Index
for all publicly-traded thrifts closed at 746.3 on October 3, 1997
Declining interest rates supported an advance in thrift prices in
early-October; however, the upward trend in thrift prices stalled in mid-
October, as interest rates moved higher following warnings by the Federal
Reserve Chairman of inflation creeping back into the economy due to the tight
labor markets. Thrift stocks gyrated in conjunction with the overall market in
late-October, with the SNL index declining by 5.2 percent on October 27 and
increasing by 2.4 percent on October 28. Thrift prices further recovered on
October 29, which was supported by a rally in the bond market. Aided by the
favorable interest rate climate, thrift stocks posted further gains in early-
November and then retreated modestly in mid-November. Thrift and bank issues
retreated on concerns that a slowing U.S. economy could lead to weaker loan
demand and higher delinquency rates. However, led by the strengthening bond
market, thrift and bank issues moved higher during the last half of
<PAGE>
RP Financial, LC.
Page 4.13
November. On November 28, 1997, the SNL Index for all publicly-traded thrifts
closed at 767.4, an increase of 58.0 percent from one year earlier.
B. The New Issue Market
--------------------
In addition to thrift stock market conditions in general, the new
issue market for converting thrifts is also an important consideration in
determining the Association's pro forma market value. Interest in converting
savings institution issues receded somewhat in the second quarter of 1996, as
indicated by fewer oversubscriptions and generally weak aftermarket trading
performance. However, interest returned to converting issues during the second
half of 1996, as most offerings experienced healthy oversubscriptions. Fewer
offerings, more attractive pricing, lower interest rates, and the general
positive trend in thrift prices were among the most prominent factors
contributing to the renewed investor interest shown for converting thrift
issues. The favorable market environment for converting thrift issues has
generally been sustained during the first three quarters of 1997; however, in
comparison to other periods of market strength for thrift stocks, the number of
conversion offerings completed during the past three months has been relatively
low. As shown in Table 4.2, the median one week change in price for offerings
completed during the latest three months equaled positive 55.0 percent.
In examining the current pricing characteristics of institutions
completing their conversions during the last three months (see Table 4.3), we
note there exists a considerable difference in pricing ratios compared to the
universe of all publicly-traded thrifts. Specifically, the current average P/B
ratio of the conversions completed in the most recent three month period of
131.15 percent reflects a discount of 18.7 percent from the average P/B ratio of
all publicly-traded savings institutions (equal to 161.26 percent), and the
average core P/E ratio of 31.45 times reflects a premium of 57.8 percent from
the all public average core P/E ratio of 19.93 times. The pricing ratios of the
better capitalized but lower earning recently converted savings institutions
(based on return on equity measures) suggest that the investment community has
determined to discount their stocks on a book basis until the earnings improve
through redeployment and leveraging of the proceeds over the longer term.
In determining our valuation adjustment for marketing of the issue, we
considered trends in both the overall savings institution market and the new
issue market. The overall market for savings institution stocks is considered
to be healthy, as savings institution stocks are currently exhibiting pricing
ratios that are at or are approaching historically high levels. Investor
interest in the new issue market has been favorable, as most of the recently
completed offerings have been oversubscribed and have recorded price increases
in initial post-conversion trading activity.
<PAGE>
RP Financial, LC.
November 28, 1997
Table 4.2
Recent Conversions (Last Three Months)
Conversion Pricing Characteristics: Sorted Chronologically
<TABLE>
<CAPTION>
INSTITUTIONAL INFORMATION PRE-CONVERSION DATA INSIDER PURCHASES
- --------------------------------------------- ---------------------------- OFFERING ---------------------
FINANCIAL INFO. ASSET QUALITY INFORMATION BENEFIT PLANS
-------------- ------------- -------------------- -------------
CONVERSION EQUITY/ NPAS/ RES. GROSS % OF EXP./ RECOG. MGMT.
INSTITUTION STATE DATE TICKER ASSETS ASSETS ASSETS COV. PROC. MID. PROC. ESOP PLANS & DIRS.
- ----------------------- ----- -------- ----- ------ ------ ------ ---- ----- ---- ----- ---- ------ -------
($Mil) (%) (%)(2) (%) ($Mil) (%) (%) (%) (%) (%)(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First Security Fed Fin., Inc. IL 10/31/97 FSFF 260 11.52% 0.87% 74% 64.1 132% 1.7% 8.0% 4.0% 4.4%
Oregon Trail Financial Corp. OR 10/06/97 OTFC 220 10.08% 0.12% 280% $46.9 132% 2.3% 8.0% 4.0% 3.9%
Riverview Bancorp, Inc. (8) WA *10/01/97 RVSB 230 11.24% 0.14% 245% 35.7 132% 2.8% 8.0% 4.0% 2.9%
SHS Bancorp, Inc. PA 10/01/97 SHSB 83 5.52% 1.41% 36% 8.2 132% 5.7% 8.0% 4.0% 5.2%
Ohio State Financial Serv OH *09/29/97 P. Sheet 34 14.45% 0.47% 86% 6.3 94% 5.7% 8.0% 4.0% 8.3%
Citizens Bancorp IN 09/19/97 P. Sheet 46 12.28% 0.45% 84% 10.6 132% 4.6% 8.0% 4.0% 16.1%
AVERAGES: $146 10.85% 0.58% 134% 28.6 126% 3.8% 8.0% 4.0% 6.8%
MEDIANS: 152 11.38% 0.46% 85% 23.2 132% 3.7% 8.0% 4.0% 4.8%
AVERAGES, EXCLUDING 2ND STEPS $129 10.77% 0.66% 140% $27.2 125% 4.0% 8.0% 4.0% 7.6%
MEDIANS, EXCLUDING 2ND STEPS $83 11.52% 0.47% 84% $10.6 132% 4.6% 8.0% 4.0% 5.2%
<CAPTION>
INSTITUTIONAL INFORMATION PRO FORMA DATA
- ----------------------------------------------------- -------------------------------------------
PRICING RATIOS(4) FIN. CHARACTERISTICS
CONVERSION -------------------- --------------------
INSTITUTION STATE DATE TICKER P/TB P/E(5) P/A ROA TE/A ROE
- ----------------------- ----- -------- ----- ---- ----- ---- --- ---- ---
(%) (x) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First Security Fed Fin.,Inc. IL 10/31/97 FSFF 78.1% 16.5 21.1% 1.3% 27.0% 4.7%
Oregon Trail Financial Corp. OR 10/06/97 OTFC 75.3% 13.6 18.1% 1.0% 20.7% 5.1%
Riverview Bancorp, Inc. (8) WA *10/01/97 RVSB 109.0% 17.7 23.6% 1.3% 21.6% 6.2%
SHS Bancorp, Inc. PA 10/01/97 SHSB 72.3% 24.5 9.1% 0.4% 12.6% 3.0%
Ohio State Financial Serv OH *09/29/97 P. Sheet 62.3% 13.4 16.0% 1.2% 25.7% 4.6%
Citizens Bancorp IN 09/19/97 P. Sheet 72.9% 14.8 14.8% 1.1% 46.3% 2.4%
AVERAGES: 78.3% 16.7 17.1% 1.1% 25.7% 4.3%
MEDIANS: 74.1% 15.6 17.0% 1.2% 23.7% 4.7%
AVERAGES, EXCLUDING 2ND STEPS 72.2% 16.5 15.8% 1.0% 26.5% 4.0%
MEDIANS, EXCLUDING 2ND STEPS 72.9% 14.8 16.0% 1.1% 25.7% 4.6%
<CAPTION>
INSTITUTIONAL INFORMATION POST-IPO PRICING TRENDS
- ----------------------------------------------------- ---------------------------------------------------------
CLOSING PRICE:
--------------------------------------------------
FIRST AFTER AFTER
CONVERSION IPO TRADING % FIRST % FIRST %
INSTITUTION STATE DATE TICKER PRICE DAY CHG. WEEK(6) CHG. MONTH(7) CHG.
- ----------------------- ----- -------- ----- ------ ------- ----- ------- ----- -------- -----
($) ($) (%) ($) (%) ($) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First Security Fed Fin.,Inc. IL 10/31/97 FSFF $10.00 $15.06 50.6% $15.13 51.3% $16.06 60.6%
Oregon Trail Financial Corp OR 10/06/97 OTFC 10.00 16.75 67.5% 16.75 67.5% 15.88 58.8%
Riverview Bancorp, Inc. (8) WA *10/01/97 RVSB 10.00 13.25 32.5% 13.63 36.3% 13.25 32.5%
SHS Bancorp, Inc. PA 10/01/97 SHSB 10.00 14.75 47.5% 16.25 62.5% 16.00 60.0%
Ohio State Financial Serv OH *09/29/97 P. Sheet 10.00 15.50 55.0% 15.50 55.0% 14.88 48.8%
Citizens Bancorp IN 09/19/97 P. Sheet 10.00 14.00 40.0% 14.00 40.0% 15.38 53.8%
AVERAGES: $10.00 $14.89 48.9% $15.21 52.1% $15.24 52.4%
MEDIANS: $10.00 $14.91 49.1% $15.31 53.1% $15.63 56.3%
AVERAGES, EXCLUDING 2ND STEPS $10.00 $15.21 52.1% $15.53 55.3% $15.64 56.4%
MEDIANS, EXCLUDING 2ND STEPS $10.00 $15.06 50.6% $15.50 55.0% $15.88 58.8%
</TABLE>
November 28, 1997
Note: * - Appraisal performed by RP Financial; "NT" - Not Traded;
"NA" - Not Applicable, Not Available.
(1) Non-OTS regulated thrifts.
(2) As reported in summary pages of prospectus.
(3) As reported in prospectus.
(4) Does not take into account the adoption of SOP 93-6.
(5) Excludes impact of special SAIF assessment on earnings
(6) Latest price if offering less than one week old.
(7) Latest price if offering more than one week but less than one month old.
(8) Second-step conversions.
(9) Simultaneously converted to commercial bank charter.
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.3
Market Pricing Comparatives
Prices As of November 28, 1997
<TABLE>
<CAPTION>
Per Share Data
Market ---------------
Capitalization Core Book Pricing Ratios(3)
--------------- ---------------------------------------
Price/ Market 12-Mth Value/
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
------- ------- ------- ------- ------- ------- ------- ------- --------
Financial Institution ($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 23.65 175.34 1.13 15.30 19.16 155.97 19.07 161.26 19.93
Special Selection Grouping(8) 15.77 70.77 0.52 12.37 26.72 129.61 27.50 131.15 26.72
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
FSFF First SecurityFed Fin of IL 16.06 102.91 0.61 12.80 26.33 125.47 33.92 125.47 26.33
OTFC Oregon Trail Fin. Corp of OR 16.00 75.12 0.59 13.29 27.12 120.39 28.91 120.39 27.12
RVSB Riverview Bancorp of WA 15.00 91.92 0.45 9.56 NM 156.90 32.57 163.04 NM
SHSB SHS Bancorp, Inc. of PA 16.00 13.12 0.41 13.83 NM 115.69 14.62 115.69 NM
<CAPTION>
Dividends(4) Financial Characteristics(6)
----------------------- ------------------------------------------------------
Amount/ Payout Total Equity/ NPAs/ Reported Core
---------------- -------------
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
------- ------ ------- ------ ------- ------- ------- ------- ------- -------
Financial Institution
- --------------------- ($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.37 1.60 30.19 1,196 13.05 0.78 0.88 7.92 0.88 7.81
Special Selection Grouping(8) 0.00 0.00 0.00 234 21.11 0.77 0.99 5.33 0.97 5.23
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
FSFF First SecurityFed Fin of IL 0.00 0.00 0.00 303 27.03 1.44 1.29 4.77 1.29 4.77
OTFC Oregon Trail Fin. Corp of OR 0.00 0.00 0.00 260 24.02 0.07 1.07 4.44 1.07 4.44
RVSB Riverview Bancorp of WA 0.00 0.00 0.00 282 20.76 0.14 1.22 9.14 1.17 8.75
SHSB SHS Bancorp, Inc. of PA 0.00 0.00 0.00 90 12.64 1.43 0.37 2.96 0.37 2.96
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is ba sed on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment) on a
tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB =
Price to tangible book value; and P/CORE = Price to estimated core earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month earnings and average equity and assets balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
(8) Includes Converted Last 3 Mths (no MHC);
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 4.16
C. Acquisition Market
------------------
Also considered in the valuation was the potential impact on
Heritage Federal's stock price of recently completed and pending acquisitions of
other thrifts operating in Heritage Federal's market area. As shown in Exhibit
IV-4, there were five South Carolina savings institutions acquired since the
beginning of 1996. The recent acquisition activity involving South Carolina
savings institutions may imply a certain degree of acquisition speculation for
the Association's stock. To the extent that acquisition speculation may impact
the Association's offering, we have largely taken this into account in selecting
primarily South Carolina or Southeastern U.S. savings institutions that also
experience a degree of acquisition speculation.
Taking these factors and trends into account, RP Financial concluded that a
slight upward adjustment was appropriate in the valuation analysis for purposes
of marketing of the issue.
8. Management
----------
Heritage Federal's management team has experience and expertise in all of
the key areas of the Association's operations. Exhibit IV-5 lists Heritage
Federal's Board of Directors and executive management with summary resumes. The
Association's operations to date indicates that Heritage Federal's management
team, in conjunction with the Board, has developed and implemented an effective
operating philosophy. Heritage Federal has no apparent senior management or
Board vacancies and there appears to be a well-defined organizational structure.
Similarly, the financial results of the Peer Group companies indicate that
they have been effectively managed, as all of the Peer Group companies
maintained capital positions in compliance with regulatory requirements, solid
core earnings and favorable credit quality measures. We have therefore
concluded that, in general, Heritage Federal is currently being operated at
least as effectively as the Peer Group companies and no adjustment for this
factor was necessary.
9. Effect of Government Regulation and Regulatory Reform
-----------------------------------------------------
The 1996 recapitalization of the SAIF insurance fund has removed the
difference in deposit insurance costs between BIF and SAIF-insured
institutions. As a fully-converted SAIF-insured institution, Heritage Federal
will operate in substantially the same regulatory environment as the Peer Group
members -- all of whom are adequately capitalized institutions and are
operating with no apparent restrictions. Exhibit IV-6 reflects the
Association's pro forma regulatory capital ratios. On balance, RP Financial
concluded that no adjustment to the Association's value was warranted for this
factor.
<PAGE>
RP Financial, LC.
Page 4.17
Summary of Adjustments
- ----------------------
Overall, we believe the Association's pro forma market value should take
into account the valuation adjustments relative to the Peer Group:
Key Valuation Parameters: Valuation Adjustment
------------------------ --------------------
Financial Condition Slight Downward
Profitability, Growth and Viability of Earnings Moderate Downward
Asset Growth No Adjustment
Primary Market Area Slight Downward
Dividends No Adjustment
Liquidity of the Shares No Adjustment
Marketing of the Issue Slight Upward
Management No Adjustment
Effect of Government Regulations and
Regulatory Reform No Adjustment
Valuation Approaches
- --------------------
In applying the accepted valuation methodology promulgated by the OTS and
adopted by the FDIC, i.e., the pro forma market value approach, we considered
the three key pricing ratios in valuing Heritage Federal's to-be-issued stock --
the price/earnings ("P/E"), price/book ("P/B"), and price/assets ("P/A")
approaches -- all performed on a pro forma basis including the effects of the
conversion proceeds. In computing the pro forma impact of the conversion and
the related pricing ratios, we have incorporated the valuation parameters
disclosed in Heritage Federal's prospectus for offering expenses, and the
effective tax rate and stock benefit plan assumptions (summarized in Exhibits
IV-7 and IV-8). We have utilized the reinvestment rate set forth in the
prospectus, the one year T-Bill rate as of September 30, 1997 of 5.68 percent,
after comparing this rate to the rate derived from the OTS's suggested formula
(6.58 percent). With regard to the employee stock ownership plan and stock
reward plans, we have performed the valuation assuming the ESOP purchases an
amount equal to 8.0 percent of the offering (15 year amortization) and the MRP
acquires 4.0 percent of the offering. In our estimate of value, we assessed the
relationship of the pro forma pricing ratios relative to the Peer Group and the
recent conversions.
RP Financial's valuation placed emphasis on the following:
o P/E Approach. The P/E approach is generally the best indicator of
long-term value for a stock. Since the Association and the Peer Group
reported pro forma core profitability, the P/E approach was heavily
considered in this valuation. In applying this approach, we took into
account primarily estimated core earnings.
<PAGE>
RP Financial, LC.
Page 4.18
o P/B Approach. P/B ratios have generally served as a useful benchmark
------------
in the valuation of savings institution stocks, with the greater
determinant of long term value being earnings. We have also modified
the P/B approach to exclude the impact of intangible assets (i.e.,
price/tangible book value or "P/TB"). RP Financial considered the P/TB
approach to be a reliable indicator of value given current market
conditions, particularly the market for new conversions, which often
exhibit a willingness to pay premium P/E multiples in the expectation
that such institutions will implement leveraging strategies to promote
earnings growth. At the same time, with lower ROE ratios, new
conversions are typically discounted on a book value basis relative to
the market at least until there is partial realization of leveraging
strategies.
o P/A Approach. P/A ratios are generally a less reliable indicator of
------------
market value, as investors do not place exclusive weight simply on the
size of total assets as a determinant of market value. Furthermore,
this approach does not take into account the amount of stock purchases
funded by deposit withdrawals, thus understating the pro forma P/A
ratio. Investors place significantly greater weight on book value and
earnings -- which have received greater weight in our valuation
analysis. At the same time, the P/A ratio is an indicator of
franchise value and, in the case of a highly capitalized institution,
a high P/A ratio limits the investment community's willingness to pay
average market multiples for earnings and book value when ROE is low.
The Association intends to adopt Statement of Position ("SOP" 93-6), which
will cause earnings per share computations to be based on shares issued and
outstanding excluding shares owned by an ESOP where there is not a commitment to
release such shares. For the purpose of preparing the pro forma pricing tables
and exhibits, we have reflected all shares issued in the offering including
shares purchased by the ESOP as outstanding to capture the full dilutive impact
of such stock to the Association's shareholders. However, we have considered
the impact of adoption of SOP 93-6 on the Association in the determination of
the Association's pro forma value.
Based on the application of the three valuation approaches, taking into
consideration the valuation adjustments discussed above, and placing the
greatest weight on the P/TB and P/E approaches, followed by the P/A approach, RP
Financial concluded that the pro forma market value of the Association's
conversion stock is $52,500,000 at the midpoint at this time.
1. Price-to-Tangible Book ("P/TB"). The application of the P/TB valuation
-------------------------------
method requires calculating the Association's pro forma market value by applying
a valuation P/TB ratio to Heritage Federal's pro forma tangible book value.
Based on the $52,500,000 midpoint valuation, Heritage Federal's pro forma P/TB
ratio was 70.73 percent. In comparison to the average P/TB ratio for the Peer
Group of 140.58 percent, Heritage Federal's valuation reflected a discount of
49.69 percent. RP Financial considered a discount under the P/TB approach to be
reasonable in light of the valuation adjustments discussed previously. Given
the historically high P/TB pricing for thrifts in today's market, a valuation
discount under the P/TB approach could only be expected and is consistent with
the aftermarket trading of new conversion issues.
<PAGE>
RP Financial, LC.
Page 4.19
Given the emphasis on limiting near term aftermarket trading in the revised
appraisal guidelines, RP Financial also considered the pro forma P/TB ratios of
recent conversions in its valuation analysis. It is these companies that
provide a proxy for aftermarket trading for new thrift issues. At the midpoint
value of $52,500,000, Heritage Federal's pro forma P/TB ratio of 70.73 percent
represented a discount of 46.1 percent from the 131.15 percent average P/TB
ratio of the recently converted thrifts (see Table 4.3). At the super maximum
of the valuation range, Heritage Federal's pro forma P/B ratio of 78.00 percent
is discounted by approximately 40.5 percent from the new conversions.
2. Price-to-Earnings ("P/E"). The application of the P/E valuation method
-------------------------
requires calculating the Association's pro forma market value by applying a
valuation P/E multiple times the pro forma earnings base. Ideally, the pro
forma earnings base is composed principally of the Association's recurring
earnings base, that is, earnings adjusted to exclude any one-time non-operating
items, plus the estimated after-tax earnings benefit of the reinvestment of net
conversion proceeds. Heritage Federal reported net income of $1,952,000 for
fiscal 1997, which included a minimal amount of net non-operating items such as
gains on the sale of REO and other interest earning assets. We utilized the
Association's reported earnings as the valuation core earnings base (Note: the
adjustments applied to the Peer Group's earnings in the calculation of core
earnings are shown in Exhibit IV-9, including the SAIF assessment).
Based on Heritage Federal's trailing twelve month core earnings, and
incorporating the impact of the pro forma assumptions previously discussed, the
Association's pro forma core P/E multiple at the $52,500,000 midpoint value
equaled 16.77 times. Comparatively, the Peer Group posted an average core P/E
multiple of 19.75 times, which indicates a discount of 15.1 percent in the
Association's pro forma earnings multiple. In reaching the valuation
conclusion, we also evaluated the Association's price/earnings multiple on the
basis of projected earnings as reflected in the business plan.
3. Price-to-Assets ("P/A"). The P/A valuation methodology determines
-----------------------
market value by applying a valuation P/A ratio to the Association's pro forma
asset base, conservatively assuming no deposit withdrawals are made to fund
stock purchases. In all likelihood there will be deposit withdrawals, which
results in understating the pro forma P/A ratio which is computed herein. At
the midpoint of the valuation range, Heritage Federal's value equaled 17.95
percent of pro forma assets. Comparatively, the Peer Group companies exhibited
an average P/A ratio of 25.92 percent, which implies a 30.8 percent discount
being applied to the Association's pro forma P/A ratio.
<PAGE>
RP Financial, LC.
Page 4.20
Valuation Conclusion
- --------------------
Based on the foregoing, it is our opinion that, as of November 28, 1997,
the aggregate pro forma market value of the Association was $52,500,000 at the
midpoint, equal to 3,500,000 shares offered at $15.00 per share. Pursuant to
the conversion guidelines, the 15 percent offering range includes a minimum of
$44,625,000 and a maximum of $60,375,000. Based on the $15.00 per share
offering price, this valuation range equates to an offering of 2,975,000 shares
at the minimum to 4,025,000 shares at the maximum. The Holding Company's
offering also includes a provision for a super maximum, which would result in an
offering size of $69,431,250, equal to 4,628,750 shares at the $15.00 per share
offering price. The comparative pro forma valuation ratios relative to the Peer
Group are shown in Table 4.4, and the key valuation assumptions are detailed in
Exhibit IV-7. The pro forma calculations for the range are detailed in Exhibit
IV-8.
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.4
Public Market Pricing
Heritage FS&LA of Laurens SC and the Comparables
As of November 28, 1997
<TABLE>
<CAPTION>
Per Share Data
Market ---------------
Capitalization Core Book Pricing Ratios(3)
--------------- ---------------------------------------
Price/ Market 12-Mth Value/
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
------- ------- ------- ------- ------- ------- ------- ------- -------
($) ($Mil) ($) ($) (X) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Heritage FS&LA of Laurens SC
- ----------------------------
Superrange 15.00 69.43 0.76 19.23 19.72 78.00 22.60 78.00 19.72
Range Maximum 15.00 60.37 0.82 20.14 18.24 74.49 20.17 74.49 18.24
Range Midpoint 15.00 52.50 0.89 21.21 16.77 70.73 17.95 70.73 16.77
Range Minimum 15.00 44.63 0.99 22.66 15.12 66.20 15.62 66.20 15.12
SAIF-Insured Thrifts(7)
- -----------------------
Averages 23.65 175.34 1.13 15.30 19.16 155.97 19.07 161.26 19.93
Medians --- --- --- --- 18.91 150.17 17.55 151.58 19.50
All Non-MHC State of SC(7)
- --------------------------
Averages 31.66 140.92 1.31 17.49 22.61 213.31 26.84 213.31 23.75
Medians --- --- --- --- 19.42 197.35 28.04 197.35 21.30
Comparable Group Averages
- -------------------------
Averages 22.09 43.60 1.13 15.71 20.86 140.57 25.92 140.58 19.75
Medians --- --- --- --- 19.29 136.78 25.85 136.86 19.83
State of SC
- -----------
CFCP Coastal Fin. Corp. of SC 23.00 106.88 1.08 6.97 18.40 329.99 21.63 329.99 21.30
FFCH First Fin. Holdings Inc. of SC 43.12 274.59 2.16 16.45 19.42 262.13 16.03 262.13 19.96
FSFC First So.east Fin. Corp. of SC(7) 15.12 66.35 0.81 8.20 18.67 184.39 18.95 184.39 18.67
FSPT FirstSpartan Fin. Corp. of SC 37.50 166.13 1.25 29.17 30.00 128.56 34.44 128.56 30.00
PALM Palfed, Inc. of Aiken SC(7) 27.00 143.07 0.84 10.74 NM 251.40 21.40 251.40 NM
SCCB S. Carolina Comm. Bnshrs of SC 23.00 16.08 0.75 17.35 NM 132.56 35.24 132.56 NM
Comparable Group
- ----------------
BFSB Bedford Bancshares of VA 28.25 32.26 1.38 17.18 20.32 164.44 23.18 164.44 20.47
CFTP Community Fed. Bancorp of MS 17.12 79.25 0.65 12.47 25.94 137.29 36.70 137.29 26.34
CFFC Community Fin. Corp. of VA 24.75 31.56 1.67 18.86 18.75 131.23 17.99 131.23 14.82
FFBS FFBS Bancorp of Columbus MS 22.50 35.37 1.16 14.34 19.40 156.90 26.21 156.90 19.40
SOPN First SB, SSB, Moore Co. of NC 24.37 89.85 1.32 18.43 18.46 132.23 30.42 132.23 18.46
KSAV KS Bancorp of Kenly NC 22.50 19.91 1.39 16.45 16.07 136.78 18.11 136.86 16.19
SCCB S. Carolina Comm. Bnshrs of SC 23.00 16.08 0.75 17.35 NM 132.56 35.24 132.56 NM
SSM Stone Street Bancorp of NC 20.25 38.43 0.86 16.32 23.55 124.08 36.68 124.08 23.55
TSH Teche Holding Company of LA 21.88 75.22 1.08 15.53 28.05 140.89 18.52 140.89 20.26
FTF Texarkana Fst. Fin. Corp of AR 24.75 44.30 1.62 15.03 18.89 164.67 25.85 164.67 15.28
TWIN Twin City Bancorp of TN 13.62 17.32 0.60 10.88 19.18 125.18 16.20 125.18 22.70
<CAPTION>
Dividends(4) Financial Characteristics(6)
----------------------- -------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ --------------- ---------------
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Heritage FS&LA of Laurens SC
- ----------------------------
Superrange 0.30 2.00 39.45 307 28.97 0.44 1.15 3.95 1.15 3.95
Range Maximum 0.30 2.00 36.48 299 27.08 0.45 1.11 4.08 1.11 4.08
Range Midpoint 0.30 2.00 33.54 292 25.38 0.46 1.07 4.22 1.07 4.22
Range Minimum 0.30 2.00 30.24 286 23.60 0.47 1.03 4.38 1.03 4.38
SAIF-Insured Thrifts(7)
- -----------------------
Averages 0.37 1.60 30.19 1,196 13.05 0.78 0.88 7.92 0.88 7.81
Medians --- --- --- --- --- --- --- --- --- ---
All Non-MHC State of SC(7)
- --------------------------
Averages 0.60 1.93 40.07 684 16.51 0.79 1.05 11.07 1.00 10.31
Medians --- --- --- --- --- --- --- --- --- ---
Comparable Group Averages
- -------------------------
Averages 0.54 2.44 47.31 173 18.68 0.45 1.24 6.65 1.31 7.07
Medians --- --- --- --- --- --- --- --- --- ---
State of SC
- -----------
CFCP Coastal Fin. Corp. of SC 0.36 1.57 33.33 494 6.56 0.10 1.21 19.41 1.05 16.77
FFCH First Fin. Holdings Inc. of SC 0.84 1.95 38.89 1,713 6.12 1.49 0.87 14.24 0.85 13.86
FSFC First So.east Fin. Corp. of SC(7) 0.24 1.59 29.63 350 10.28 0.24 1.05 10.32 1.05 10.32
FSPT FirstSpartan Fin. Corp. of SC 0.60 1.60 48.00 482 26.79 0.69 0.96 6.28 0.96 6.28
PALM Palfed, Inc. of Aiken SC(7) 0.12 0.44 14.29 669 8.51 2.04 0.39 4.82 0.67 8.26
SCCB S. Carolina Comm. Bnshrs of SC 0.60 2.61 NM 46 26.59 0.87 1.15 4.34 1.15 4.34
Comparable Group
- ----------------
BFSB Bedford Bancshares of VA 0.56 1.98 40.58 139 14.10 0.52 1.20 8.41 1.19 8.35
CFTP Community Fed. Bancorp of MS 0.30 1.75 46.15 216 26.73 0.50 1.47 4.77 1.45 4.70
CFFC Community Fin. Corp. of VA 0.56 2.26 33.53 175 13.71 0.56 1.01 7.32 1.28 9.26
FFBS FFBS Bancorp of Columbus MS 0.50 2.22 43.10 135 16.70 0.58 1.41 7.48 1.41 7.48
SOPN First SB, SSB, Moore Co. of NC 0.88 3.61 66.67 295 23.01 0.29 1.75 7.26 1.75 7.26
KSAV KS Bancorp of Kenly NC 0.60 2.67 43.17 110 13.24 0.53 1.21 8.81 1.20 8.74
SCCB S. Carolina Comm. Bnshrs of SC 0.60 2.61 NM 46 26.59 0.87 1.15 4.34 1.15 4.34
SSM Stone Street Bancorp of NC 0.45 2.22 52.33 105 29.57 0.23 1.54 4.69 1.54 4.69
TSH Teche Holding Company of LA 0.50 2.29 46.30 406 13.14 0.27 0.69 5.03 0.96 6.96
FTF Texarkana Fst. Fin. Corp of AR 0.56 2.26 34.57 171 15.70 0.46 1.41 8.40 1.74 10.38
TWIN Twin City Bancorp of TN 0.40 2.94 66.67 107 12.94 0.16 0.85 6.65 0.72 5.62
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) EPS (core basis) is based on actual trailing twelve month data,
adjusted to omit the impact of non-operating items (including the SAIF
assessment) on a tax effected basis, and is shown on a pro forma basis
where appropriate.
(3) P/E = Price to Earnings; P/B = Price to Book; P/A = Price to Assets;
P/TB = Price to Tangible Book; and P/CORE = Price to Core Earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend
declared.
(5) Indicated twelve month dividend as a percent of trailing twelve month
estimated core earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common
equity and total assets balances.
(7) Excludes from averages and medians those companies the subject of
actual or rumored acquisition activities or unusual operating
characteristics.
Source: Corporate reports, offering circulars, and RP Financial, Inc.
calculations. The information provided in this report has been
obtained from sources we believe are reliable, but we cannot
guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBITS
<PAGE>
RP Financial, LC.
LIST OF EXHIBITS
Exhibit
Number Description
- ------- -----------
I-1 Map of Office Locations
I-2 Heritage Federal's Audited Financial Statements
I-3 Key Operating Ratios
I-4 Investment Portfolio Composition
I-5 Yields and Costs
I-6 Loan Loss Allowance Activity
I-7 Fixed Rate and Adjustable Rate Loans
I-8 Gap Analysis
I-9 Loan Portfolio Composition
I-10 Contractual Maturity By Loan Type
I-11 Loan Originations, Purchases, and Sales
I-12 Non-Performing Assets
I-13 Classified Assets
I-14 Deposit Composition
II-1 List of Branch Offices
II-2 Historical Interest Rates
II-3 Demographic/Economic Reports
II-4 Sources of Personal Income/Employment Sectors
III-1 General Characteristics of Publicly-Traded
Institutions
III-2 South Carolina Savings Institutions
III-3 Selected Southeast Savings Institutions
<PAGE>
RP Financial, LC.
LIST OF EXHIBITS (continued)
IV-1 Stock Prices: November 28, 1997
IV-2 Historical Stock Price Indices
IV-3 Historical Thrift Stock Indices
IV-4 Market Area Acquisition Activity
IV-5 Directors and Management Summary Resumes
IV-6 Pro Forma Regulatory Capital Ratios
IV-7 Pro Forma Analysis Sheet
IV-8 Pro Forma Effect of Conversion Proceeds
IV-9 Peer Group Core Earnings Analysis
V-1 Firm Qualifications Statement
<PAGE>
EXHIBIT I-1
Heritage Federal Savings and Loan Association
Map of Office Locations
<PAGE>
[MAP OF SOUTH CAROLINA APPEARS HERE]
<PAGE>
EXHIBIT I-2
Heritage Federal Savings and Loan Association
Audited Financial Statements
[Incorporated by Reference]
<PAGE>
EXHIBIT 1-3
Heritage Federal Savings and Loan Association
Key Operating Ratios
<TABLE>
<CAPTION>
At September 30,
--------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL RATIOS:
Performance Ratios:
Return on average assets(1) 0.80% 0.32% 0.87% 1.36% 1.52%
Return on average equity(2) 6.93 2.87 8.08 13.47 17.61
Average equity as a percent of average assets 11.49 10.99 10.79 10.09 8.62
Interest rate spread(3) 1.76 1.51 2.09 2.84 3.14
Net interest margin(4) 2.33 2.04 2.59 3.24 3.51
Average interest-earning assets to
average interest-bearing liabilities 1.11 1.10 1.10 1.10 1.08
Other operating expenses as a
percent of average total assets 0.96 1.61 1.05 1.07 1.16
Capital Ratios:
Tangible 11.3 10.6 10.8 10.9 9.3
Core 11.3 10.6 10.8 10.9 9.3
Risk-based 23.3 22.2 23.1 23.6 20.5
Asset Qaulity Ratios:
Nonperforming loans as a percent of loans
receivable, net(5) 0.48 0.56 0.52 0.84 1.25
Nonperforming assets as a percent of total
assets(6) 0.54 0.45 0.44 0.81 1.28
Allowance for loan losses as a percent of
gross loans receivable 0.44 0.35 0.32 0.37 0.34
Allowance for loan losses as a percent of
nonperforming loans 93.58 65.24 63.10 46.28 28.18
Net charge-offs as a percent of average
outstanding loans 0.07 (0.05) 0.05 0.00 0.00
</TABLE>
- ---------------------
(1) Net income divided by average total assets.
(2) Net income divided by average total equity.
(3) Difference between weighted average yield on interest-earning assets and
weighted average cost of interest-bearing liabilities.
(4) Net interest income as a percentage of average interest-earning assets.
(5) Nonperforming loans consist of loans accounted for on a nonaccrual basis.
(6) Nonperforming assets consist of nonperforming loans and real estate acquired
in settlement of loans, but exclude restructured loans. See "BUSINESS OF THE
ASSOCIATION - Lending Activities - Nonperforming Assets and Delinquencies."
<PAGE>
EXHIBIT I-4
Heritage Federal Savings and Loan Association
Investment Portfolio Composition
<TABLE>
<CAPTION>
At September 30,
--------------------------------------------------------------------
1997 1996 1995
--------------------- --------------------- --------------------
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
--------- ------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
AVAILABLE FOR SALE:
Investment securities:
U.S. Treasury obligations.................... $ 2,010 $ 2,008 $ 7,536 $ 7,472 $10,061 $ 9,944
U.S. Government Agency obligations........... 3,996 3,976 7,841 7,761 -- --
Freddie Mac common stock...................... 57 2,406 57 1,666 57 1,180
------- ------- ------- ------- ------- -------
Total available for sale.............. 6,063 8,390 15,434 16,899 10,118 11,124
------- ------- ------- ------- ------- -------
HELD TO MATURITY:
Investment securities:
U.S. Government Agency obligations........... 15,988 15,954 20,993 20,778 18,699 18,349
Mortgage-backed securities:
Fannie Mae................................... 788 781 1,142 1,117 1,455 1,423
Freddie Mac.................................. 5,877 5,854 8,584 8,467 10,534 10,363
------- ------- ------- ------- ------- -------
Total held to maturity................ 22,653 22,589 30,719 30,362 30,688 30,135
------- ------- ------- ------- ------- -------
Total................................. $28,716 $30,979 $46,153 $47,261 $40,806 $41,259
======= ======= ======= ======= ======= =======
Less Than One to
One Year Five Years Totals
---------------------- ------------------- ------------------
Weighted Weighted Weighted
Amortized Average Amortized Average Amortized Average
Cost Yield Cost Yield Cost Yield
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
AVAILABLE FOR SALE:
Investment securities:
U.S. Treasury obligations.................... $ 501 6.03% $ 1,509 5.44% $ 2,010 5.52%
U.S. Government Agency obligations........... 2,496 5.30 1,500 5.46 3,996 5.36
-------- ---- ------- ---- ------- ----
Total available for sale.............. 2,997 6.49 3,009 5.45 6,006 5.41
HELD TO MATURITY:
Investment securities:
U.S. Government Agency obligations........... 2,002 5.09 13,986 6.16 15,988 6.07
Mortgage-backed securites:
Fannie Mae................................... -- -- 788 5.75 788 5.75
Freddie Mac.................................. 3,574 5.39 2,303 5.06 5,877 5.21
-------- ---- ------- ---- ------- ----
Total held to maturity................ 5,576 5.26 17,077 5.99 22,653 5.88
-------- ---- ------- ---- ------- ----
Total................................. $ 8,573 5.82 $20,086 5.91 $28,659 5.89
======== ======= =======
</TABLE>
<PAGE>
EXHIBIT I-5
Heritage Federal Savings and Loan Association
Yields and Costs
<TABLE>
<CAPTION>
Years Ended September 30,
------------------------------------------------------------------------------------
1997 1996 1995
---------------------------- -------------------------- --------------------------
Interest Interest Interest
Average and Yield/ Average and Yield/ Average and Yield/
Balance Dividends Cost Balance Dividends Cost Balance Dividends Cost
-------- --------- ------- -------- --------- ------ --------- --------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable, net (1)................. $189,689 $15,034 7.93% $178,081 $14,038 7.88% $172,133 $13,549 7.87%
Mortgage-backed securities................ 8,401 450 5.36 11,192 626 5.59 13,020 749 5.75
Investment securities..................... 32,397 1,856 5.73 35,684 1,815 5.09 31,882 1,580 4.96
FHLB stock................................ 2,042 148 7.25 2,042 147 7.20 2,042 153 7.49
Federal funds sold and overnight deposits. 5,335 285 5.34 6,317 348 5.51 2,202 133 6.04
-------- ------- ---- -------- ------- ---- -------- ------- ----
Total interest-earning assets........... 237,864 17,773 7.47 233,316 16,974 7.28 221,279 16,164 7.30
-------- ------- ---- -------- ------- ---- -------- ------- ----
Non-interest-earning assets............... 7,315 7,328 5,632
-------- -------- --------
Total average assets.................... $245,179 $240,644 $226,911
======== ======== ========
Interest-bearing liabilities (2):
Passbook accounts......................... $ 11,561 340 2.94 $ 12,270 362 2.95 $ 13,343 393 2.95
NOW and money market accounts............. 3,751 89 2.37 3,784 92 2.43 3,751 94 2.51
Certificates of deposit................... 195,853 11,575 5.91 190,572 11,431 6.00 175,431 9,454 5.39
-------- ------- ---- -------- ------- ---- -------- ------- ----
Total deposits.......................... 211,165 12,004 5.68 206,626 11,885 5.75 192,525 9,941 5.16
FHLB advances............................. 3,082 226 7.33 5,000 327 6.54 7,812 490 6.27
-------- ------- ---- -------- ------- ---- -------- ------- ----
Total interest-bearing liabilities...... 214,247 12,230 5.71 211,626 12,212 5.77 200,337 10,431 5.21
-------- ------- ---- -------- ------- ---- -------- ------- ----
Noninterest-bearing liabilities........... 2,759 2,570 2,091
-------- -------- --------
Total average liabilities............... 217,006 214,196 202,428
-------- -------- --------
Average equity............................ 28,173 26,448 24,483
-------- -------- --------
Total average liabilities and equity.... $245,179 $240,644 $226,911
======== ======== ========
Net interest income....................... $ 5,543 $ 4,762 $ 5,733
======= ======= =======
Interest rate spread...................... 1.76% 1.51% 2.09%
Net interest margin....................... 2.33% 2.04% 2.59%
Ratio of average interest-earning
assets to average interest-
bearing liabilities...................... 1.11x 1.10x 1.10x
</TABLE>
- ------------------------
(1) Includes loans held-for-sale. Does not include interest on nonaccrual loans.
(2) Does not include escrow balances.
<PAGE>
EXHIBIT I-6
Heritage Federal Savings and Loan Association
Loan Loss Allowance Activity
<TABLE>
<CAPTION>
Years Ended September 30,
-----------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Allowance at beginning of period................... $670 $590 $622 $560 $525
Provision for loan losses.......................... 337 (7) 47 62 35
Recoveries:
Mortgage loans:
One- to four-family............................... -- -- -- -- --
Builder construction.............................. -- -- -- -- --
Commercial........................................ -- 115 -- -- --
Savings account loans.............................. -- -- -- -- --
Home equity loans.................................. -- -- -- -- --
---- ---- ---- ---- ----
Total recoveries................................ -- 115 -- -- --
---- ---- ---- ---- ----
Charge-offs:
Mortgage loans:
One- to four-family............................... -- 28 -- -- --
Builder construction.............................. -- -- -- -- --
Commercial........................................ 133 -- 79 -- --
Savings account loans.............................. -- -- -- -- --
Home equity loans.................................. -- -- -- -- --
---- ---- ---- ---- ----
Total charge-offs............................... 133 28 79 -- --
---- ---- ---- ---- ----
Net charge-offs................................. 133 (87) 79 -- --
---- ---- ---- ---- ----
Balance at end of period........................ $874 $670 $590 $622 $560
==== ==== ==== ==== ====
Allowance for loan losses as a percentage
of total loans outstanding at the end of
the period........................................ 0.44% 0.35% 0.32% 0.37% 0.34%
Net charge-offs (recoveries) as a percentage of average
loans outstanding during the period............... 0.07% (0.05%) 0.05% 0.00% 0.00%
Allowance for loan losses as a percentage of
nonperforming loans at end of period.............. 93.58% 65.24% 63.10% 46.28% 28.18%
</TABLE>
<PAGE>
EXHIBIT 1-7
Heritage Federal Savings and Loan Association
Fixed Rate and Adjustable Rate Loans
<TABLE>
<CAPTION>
Fixed- Floating- or
Rates Adjustable-Rates
------- ----------------
(In thousands)
<S> <C> <C>
Mortgage loans:
One- to- four family.. $26,348 $154,115
Builder construction.. -- --
Commercial............ 1,494 6,642
Savings account loans.. -- --
Home equity loans...... -- --
------- --------
Total............... $27,842 $160,757
======= ========
</TABLE>
<PAGE>
EXHIBIT I-8
Heritage Federal Savings and Loan Association
Gap Analysis
<TABLE>
<CAPTION>
Basis Point ("bp") Estimated Change in
Change in Rates Net Portfolio Value
------------------ ----------------------
(Dollars in thousands)
<S> <C>
+400 ($15,494)
+300 (10,826)
+200 (6,391)
+100 (2,645)
0 0
(100) 1,360
(200) 2,285
(300) 3,283
(400) 4,712
</TABLE>
<PAGE>
EXHIBIT 1-9
Heritage Federal Savings and Loan Association
Loan Portfolio Composition
<TABLE>
<CAPTION>
At September 30,
-------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------------ ----------------- ------------------ ----------------- -----------------
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
-------- -------- -------- ------- --------- ------- -------- -------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans:
One- to four-family...... $180,609 90.0% $173,925 90.4% $167,092 90.2% $151,238 89.9% $147,968 90.0%
Builder construction..... 2,601 1.3 3,836 2.0 2,735 1.5 2,763 1.6 1,871 1.1
Commercial............... 8,136 4.0 6,450 3.3 7,573 4.1 7,536 4.5 7,731 4.7
-------- ------- -------- ------ -------- ------- -------- ------- ------- ------
Total mortgage loans.... 191,346 95.3 184,211 95.7 177,400 95.8 161,537 96.0 157,570 95.8
Savings account loans.... 1,419 0.7 1,146 0.6 1,439 0.9 1,133 0.7 1,444 0.9
Home equity loans........ 8,124 4.0 7,050 3.7 6,429 3.4 5,607 5,476 3.3
-------- ------- -------- ------ -------- ------- -------- ------- ------- ------
Total loans receivable.. 200,889 100.0% 192,407 100.0% 185,268 100.0% 168,277 100.0% 164,490 100.0%
======= ====== ======= ======= ======
Less:
Undisbursed loan funds... 6,989 8,375 5,995 7,584 4,980
Deferred loan
origination fees........ 363 412 424 389 414
Allowance for loan
losses.................. 874 670 590 622 560
-------- -------- -------- -------- -------
Loans receivable, net... $192,663 $182,950 $178,259 $159,682 $158,536
======== ======== ======== ======== ========
</TABLE>
<PAGE>
EXHIBIT 1-10
Heritage Federal Savings and Loan Association
Contractual Maturity By Loan Type
<TABLE>
<CAPTION>
After After After
One Year 3 Years 5 Years
Within Through Through Through Beyond
One Year 3 Years 5 Years 10 Years 10 Years Total
-------- ------- ------- ------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans:
One- to four-family... $ 146 $1,085 $4,888 $18,032 $156,458 $180,609
Builder construction.. 2,601 -- -- -- -- 2,601
Commercial............ -- 589 2,088 857 4,602 8,136
Savings account loans.. 1,419 -- -- -- -- 1,419
Home equity loans...... 8,124 -- -- -- -- 8,124
-------- ------- -------- ------- -------- --------
Total.............. $12,290 $1,674 $6,976 $18,889 $161,060 $200,889
======== ======= ======= ======= ======== ========
</TABLE>
<PAGE>
EXHIBIT I-11
Heritage Federal Savings and Loan Association
Loan Originations, Purchases, and Sales
<TABLE>
<CAPTION>
Years Ended September 30,
-------------------------------
1997 1996 1995
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Loans originated:
Mortgage loans:
One- to four-family..................... $ 37,020 $ 36,450 $ 39,444
Builder construction.................... 2,901 5,255 4,175
Commercial.............................. 1,958 1,739 543
Savings account LOANS................... 1,128 572 1,079
Home equity loans....................... 2,139 2,243 1,871
-------- -------- --------
Total loans originated................. 45,146 46,259 47,112
-------- -------- --------
Loans purchased:
Mortgage loans:
One- to four-family..................... 2,975 -- --
Builder construction.................... -- -- --
Commercial.............................. 541 -- --
-------- -------- --------
Total loans purchased.................. 3,516 -- --
-------- -------- --------
Loans sold............................... (479) (954) --
Principal repayments..................... (35,198) (42,970) (26,764)
Transfer to real estate owned............ (996) (92) (185)
Increase (decrease) in other items, net.. (1,231) 2,448 (1,586)
-------- -------- --------
Net increase (decrease) in loans
receivable, net......................... $ 10,758 $ 4,691 $ 18,577
======== ======== ========
</TABLE>
<PAGE>
EXHIBIT I-12
Heritage Federal Savings and Loan Association
Non-Performing Assets
<TABLE>
<CAPTION>
At September 30,
--------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Loans accounted for on
a nonaccrual basis:
Mortgage loans:
One- to four-family............... $ 444 $ 679 $ 867 $ 1,010 $ 1,329
Builder construction.............. 411 348 40 121 103
Commercial........................ 33 -- 28 187 539
Savings account loans............. -- -- -- -- --
Home equity loans................. 46 -- -- 26 16
------- ------- ------- ------- -------
Total of nonaccnial loans...... 934 1,027 935 1,344 1,987
Real estate owned................. 410 86 104 388 724
------- ------- ------- ------- -------
Total nonperforming assets..... $ 1,344 $ 1,113 $ 1,039 $ 1,732 $ 2,711
======= ======= ======= ======= =======
Restructured loans................ $ 732 $ 769 $ 588 $ 479 $ 481
======= ======= ======= ======= =======
Nonaccrual loans as a percentage
of loans receivable, net......... 0.48% 0.56% 0.52% 0.84% 1.25%
Nonaccrual loans as a percentage
of total assets.................. 0.38% 0.42% 0.40% 0.63% 0.94%
Nonperforming assets as a
percentage of total assets....... 0.54% 0.45% 0.44% 0.81% 1.28%
</TABLE>
<PAGE>
EXHIBIT I-13
Heritage Federal Savings and Loan Association
Classified Assets
<TABLE>
<CAPTION>
At September 30,
------------------------
1997 1996
------ ------
(In thousands)
<S> <C> <C>
Classified assets:
Loss......................... $ 123 $ 120
Doubtful..................... 592 264
Substandard.................. 1,190 881
Special mention.............. 1,072 1,549
</TABLE>
<PAGE>
EXHIBIT I-14
Heritage Federal Savings and Loan Association
Deposit Composition
<TABLE>
<CAPTION>
Weighted Percentage
Average Minimum of Total
Interest Rate Term Checking and Savings Deposits Amount Balance Deposits
- ------------- ------ ----------------------------- -------- ------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C>
3.00% None Passbook accounts $ 200 $ 11,423 5.3%
1.34 None NOW accounts 250 2,833 1.3
3.00 None Money market deposit accounts 2,500 939 0.4
Certificate Accounts
--------------------
5.44 Within 6 months Fixed term, fixed rate 2,500 91,350 42.5
5.83 7 - 12 months Fixed term, fixed rate 2,500 57,509 26.7
6.11 13 - 36 months Fixed term, fixed rate 500 48,943 22.7
5.96 37 - 60 months Fixed term, fixed rate 500 2,415 1.1
-------- -----
TOTAL $215,412 100.0%
======== =====
</TABLE>
<TABLE>
<CAPTION>
At September 30,
----------------------------
1997 1996 1995
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
3.01 - 4.00%....... $ 5,575 $ 6,826 $ 3,262
4.01 - 5.00%....... 1,218 2,216 17,716
5.0l - 6.00%....... 95,528 97,960 59,427
6.01 - 7.00%....... 92,245 81,430 98,864
7.01 - 8.00%....... 5,651 5,510 5,958
8.01 - 9.00%....... -- -- 105
-------- -------- --------
Total............. $200,217 $193,942 $185,332
======== ======== ========
</TABLE>
<PAGE>
EXHIBIT II-1
Heritage Federal Savings and Loan Association
List of Office Locations
<TABLE>
<CAPTION>
Approximate
Location Year Opened Square Footage Deposits
- -------- ----------- -------------- --------------
(In thousands)
<S> <C> <C> <C>
Main Office 1995(1) 24,500 $104,187
201 West Main Street
Laurens, SC 29360
Belton Office 1962 1,800 63,380
208 Anderson Street
Belton, SC 29627
Ware Shoals Office 1968 1,444 23,570
81 North Greenwood Avenue
Ware Shoals, SC 29692
Simpsonville Office 1977 3,668 24,275
514 North Main Street
Simpsonville, SC 29681
</TABLE>
- -----------------------
(1) The Association occupied a smaller facility at the same location from 1955
to 1995.
<PAGE>
EXHIBIT II-2
HISTORICAL INTEREST RATES(1)
<TABLE>
<CAPTION>
Prime 90 Day One Year 30 Year
Year/Qtr. Ended Rate T-Bill T-Bill T-Bond
--------------- ----- ------- --------- --------
<S> <C> <C> <C> <C>
1991: Quarter 1 8.75% 5.92% 6.24% 8.26%
Quarter 2 8.50% 5.72% 6.35% 8.43%
Quarter 3 8.00% 5.22% 5.38% 7.80%
Quarter 4 6.50% 3.95% 4.10% 7.47%
1992: Quarter 1 6.50% 4.15% 4.53% 7.97%
Quarter 2 6.50% 3.65% 4.06% 7.79%
Quarter 3 6.00% 2.75% 3.06% 7.38%
Quarter 4 6.00% 3.15% 3.59% 7.40%
1993: Quarter 1 6.00% 2.95% 3.18% 6.93%
Quarter 2 6.00% 3.09% 3.45% 6.67%
Quarter 3 6.00% 2.97% 3.36% 6.03%
Quarter 4 6.00% 3.06% 3.59% 6.34%
1994: Quarter 1 6.25% 3.56% 4.44% 7.09%
Quarter 2 7.25% 4.22% 5.49% 7.61%
Quarter 3 7.75% 4.79% 5.94% 7.82%
Quarter 4 8.50% 5.71% 7.21% 7.88%
1995: Quarter 1 9.00% 5.86% 6.47% 7.43%
Quarter 2 9.00% 5.57% 5.63% 6.63%
Quarter 3 8.75% 5.42% 5.68% 6.51%
Quarter 4 8.50% 5.09% 5.14% 5.96%
1996: Quarter 1 8.25% 5.14% 5.38% 6.67%
Quarter 2 8.25% 5.16% 5.68% 6.87%
Quarter 3 8.25% 5.03% 5.69% 6.92%
Quarter 4 8.25% 5.18% 5.49% 6.64%
1997: Quarter 1 8.50% 5.32% 6.00% 7.10%
Quarter 2 8.50% 5.17% 5.66% 6.78%
Quarter 3 8.50% 5.10% 5.44% 6.40%
November 28, 1997 8.50% 5.20% 5.50% 6.05%
</TABLE>
(1) End of period data.
Source: SNL Securities.
<PAGE>
EXHIBIT II-3
Heritage Federal Savings and Loan Association
Demographic/Economic Reports
<PAGE>
STATE DEMOGRAPHIC REPORT
<TABLE>
<CAPTION>
STATE 00
STATE NAME UNITED STATES
Population 1997 Age Distribution 1997 Average Disposable Income
---------- ----------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C>
1980 226,542,204 0-4 7.2 Total $35,584
1990 248,709,873 5-9 7.4 Householder Less Than 35 $30,999
1997 267,805,150 10-14 7.1 Householder 35-44 $40,281
2002 281,208,787 15-19 7.1 Householder 45-54 $45,940
20-24 6.5 Householder 55-64 $39,611
Population Growth Rate 1 25-44 31.4 Householder 65+ $22,603
45-64 20.5
Households 65-84 11.3
---------- 85+ 1.4 Spending Potential Index*
1990 91,947,410 18+ 74.3 -----------------------------------
1997 99,019,931 Auto Loan 100
2002 104,000,643 Home Loan 100
Median Age Investments 100
Household Growth Rate 1 ---------- Retirement Plans 100
Average Household Size 2.64 1990 32.9 Home Repair 100
1997 34.8 Lawn & Garden 100
Families Remodeling 100
-------- Male/Female Ratio 95.9 Appliances 100
1990 64,517,947 Electronics 100
1997 68,999,546 Per Capita Income $18,100 Furniture 100
Restaurants 100
Family Growth Rate 0.9 Sporting Goods 100
1997 Household Income* Theater/Concerts 100
----------------------------- Toys & Hobbies 100
Race 1990 1997 Base 99,019,225 Travel 100
---- ---- ---- % Less Than $15K 17.7 Video Rental 100
% White 80.3 78.4 % $15K-25K 14.4 Apparel 100
% Black 12.1 12.4 % $25K-50K 33.5 Auto Aftermarket 100
% Asian % $50K-100K 26.5 Health Insurance 100
/Pacific Isl. 2.9 3.7 % 100K-150K 5.4 Pets & Supplies 100
% Greater Than $150K 2.6
% Hispanic* 9 10.8
Median Household Income
-----------------------------
1997 $36,961
2002 $42,042
</TABLE>
- ------------------------------------------------------------------------------
* Persons of Hispanic Origin may be of any race.
* Income represents the annual income for the preceding year in current
dollars, including an adjustment for inflation or cost-of-living increase.
* The Spending Potential Index (SPI) is calculated by CACI from the Consumer
Expenditure Survey, Bureau of Labor Statistics. The index represents the
ratio of the average amount spent locally to the average U.S. spending for
a product or service, multiplied by 100.
- ------------------------------------------------------------------------------
Copyright 1997 CACI (800) 292-CACI FAX: (703) 243-6272 10/27/97
<PAGE>
STATE DEMOGRAPHIC REPORT
<TABLE>
<CAPTION>
STATE 45
STATE NAME SOUTH CAROLINA
Population 1997 Age Distribution 1997 Average Disposable Income
---------- ----------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C>
1980 3,120,729 0-4 7.1 Total $35,584
1990 3,486,703 5-9 7.4 Householder Less Than 35 $30,999
1997 3,728,002 10-14 7.1 Householder 35-44 $40,281
2002 3,903,439 15-19 7.4 Householder 45-54 $45,940
20-24 6.8 Householder 55-64 $39,611
Population Growth Rate 0.9 25-44 31 Householder 65+ $22,603
45-64 21.2
Households 65-84 10.9
---------- 85+ 1.1 Spending Potential Index*
1990 1,258,044 18+ 74.3 -----------------------------------
1997 1,382,405 Auto Loan 99
2002 1,468,512 Home Loan 87
Median Age Investments 91
Household Growth Rate 1.3 ---------- Retirement Plans 91
Average Household Size 2.63 1990 32 Home Repair 98
1997 34.4 Lawn & Garden 96
Families Remodeling 104
-------- Male/Female Ratio 94 Appliances 99
1990 928,206 Electronics 97
1997 992,446 Per Capita Income $15,474 Furniture 94
Restaurants 92
Family Growth Rate 0.9 Sporting Goods 98
1997 Household Income* Theater/Concerts 94
----------------------------- Toys & Hobbies 99
Race 1990 1997 Base 1,382,401 Travel 90
---- ---- ---- % Less Than $15K 20.4 Video Rental 99
% White 69 68.6 % $15K-25K 16.1 Apparel 94
% Black 29.8 30.1 % $25K-50K 35.6 Auto Aftermarket 96
% Asian % $50K-100K 23.1 Health Insurance 100
/Pacific Isl. 0.6 0.8 % $100K-150K 3.6 Pets & Supplies 99
% Greater Than $150K 1.3
% Hispanic* 0.9 1.1
Median Household Income
-----------------------------
1997 $32,771
2002 $37,972
</TABLE>
- ------------------------------------------------------------------------------
* Persons of Hispanic Origin may be of any race.
* Income represents the annual income for the preceding year in current
dollars, including an adjustment for inflation or cost-of-living increase.
* The Spending Potential Index (SPI) is calculated by CACI from the Consumer
Expenditure Survey, Bureau of Labor Statistics. The index represents the
ratio of the average amount spent locally to the average U.S. spending for
a product or service, multiplied by 100.
- ------------------------------------------------------------------------------
Copyright 1997 CACI (800) 292-CACI FAX: (703) 243-6272 10/27/97
<PAGE>
STATE DEMOGRAPHIC REPORT
<TABLE>
<CAPTION>
MSA 3160
MSA NAME GREENVL-SPAR'BG-ANDR
Population 1997 Age Distribution 1997 Average Disposable Income
---------- ----------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C>
1980 744,428 0-4 6.4 Total $32,523
1990 830,563 5-9 6.9 Householder Less Than 35 $29,357
1997 908,409 10-14 6.8 Householder 35-44 $38,100
2002 962,096 15-19 7.4 Householder 45-54 $41,801
20-24 6.8 Householder 55-64 $34,811
Population Growth Rate 1.2 25-44 30.2 Householder 65+ $19,096
45-64 22.6
Households 65-84 11.6
---------- 85+ 1.3 Spending Potential Index*
1990 312,740 18+ 76 -----------------------------------
1997 348,858 Auto Loan 100
2002 374,714 Home Loan 88
Median Age Investments 92
Household Growth Rate 1.5 ---------- Retirement Plans 92
Average Household Size 2.54 1990 33.5 Home Repair 98
1997 35.9 Lawn & Garden 96
Families Remodeling 106
-------- Male/Female Ratio 93.5 Appliances 99
1990 228,567 Electronics 97
1997 247,664 Per Capita Income $16,336 Furniture 93
Restaurants 92
Family Growth Rate 1.1 Sporting Goods 98
1997 Household Income* Theater/Concerts 94
----------------------------- Toys & Hobbies 99
Race 1990 1997 Base 348,858 Travel 91
---- ---- ---- % Less Than $15K 19.3 Video Rental 99
% White 81.6 80.9 % $15K-25K 15.8 Apparel 94
% Black 17.4 18 % $25K-50K 36.3 Auto Aftermarket 96
% Asian % $50K-100K 23.5 Health Insurance 100
/Pacific Isl. 0.6 0.8 % $100K-150K 3.7 Pets & Supplies 99
% Greater Than $150K 1.4
% Hispanic* 0.7 1
Median Household Income
-----------------------------
1997 $33,776
2002 $38,785
</TABLE>
- ------------------------------------------------------------------------------
* Persons of Hispanic Origin may be of any race.
* Income represents the annual income for the preceding year in current
dollars, including an adjustment for inflation or cost-of-living increase.
* The Spending Potential Index (SPI) is calculated by CACI from the Consumer
Expenditure Survey, Bureau of Labor Statistics. The index represents the
ratio of the average amount spent locally to the average U.S. spending for
a product or service, multiplied by 100.
- ------------------------------------------------------------------------------
Copyright 1997 CACI (800) 292-CACI FAX: (703) 243-6272 10/27/97
<PAGE>
STATE DEMOGRAPHIC REPORT
<TABLE>
<CAPTION>
MSA 1760
MSA NAME COLUMBIA, SC
Population 1997 Age Distribution 1997 Average Disposable Income
---------- ----------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C>
1980 409,953 0-4 6.7 Total $35,370
1990 453,331 5-9 7.2 Householder Less Than 35 $29,844
1997 493,711 10-14 7 Householder 35-44 $39,216
2002 521,149 15-19 7.4 Householder 45-54 $44,332
20-24 7.4 Householder 55-64 $38,707
Population Growth Rate 1.2 25-44 33.8 Householder 65+ $23,326
45-64 20.8
Households 65-84 8.8
---------- 85+ 0.9 Spending Potential Index*
1990 163,223 18+ 75.1 -----------------------------------
1997 183,459 Auto Loan 100
2002 195,621 Home Loan 99
Median Age Investments 95
Household Growth Rate 1.6 ---------- Retirement Plans 98
Average Household Size 2.59 1990 31.2 Home Repair 99
1997 33.8 Lawn & Garden 98
Families Remodeling 100
-------- Male/Female Ratio 95.2 Appliances 100
1990 114,878 Electronics 100
1997 127,221 Per Capita Income $17,417 Furniture 101
Restaurants 100
Family Growth Rate 1.4 Sporting Goods 100
1997 Household Income* Theater/Concerts 99
----------------------------- Toys & Hobbies 101
Race 1990 1997 Base 183,459 Travel 96
---- ---- ---- % Less Than $15K 15 Video Rental 101
% White 67.8 67.9 % $15K-25K 14.5 Apparel 102
% Black 30.4 30 % $25K-50K 36.3 Auto Aftermarket 101
% Asian % $50K-100K 28.1 Health Insurance 98
/Pacific Isl. 1.1 1.3 % 100K-150K 4.7 Pets & Supplies 100
% Greater Than $150K 1.5
% Hispanic* 1.3 1.6
Median Household Income
-----------------------------
1997 $37,548
2002 $42,951
</TABLE>
- ------------------------------------------------------------------------------
* Persons of Hispanic Origin may be of any race.
* Income represents the annual income for the preceding year in current
dollars, including an adjustment for inflation or cost-of-living increase.
* The Spending Potential Index (SPI) is calculated by CACI from the Consumer
Expenditure Survey, Bureau of Labor Statistics. The index represents the
ratio of the average amount spent locally to the average U.S. spending for
a product or service, multiplied by 100.
- ------------------------------------------------------------------------------
Copyright 1997 CACI (800) 292-CACI FAX: (703) 243-6272 10/27/97
<PAGE>
STATE DEMOGRAPHIC REPORT
<TABLE>
<CAPTION>
STATE/COUNTY 45059
COUNTY NAME LAURENS SC
Population 1997 Age Distribution 1997 Average Disposable Income
---------- ----------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C>
1980 52,214 0-4 6.6 Total $29,953
1990 58,092 5-9 7 Householder Less Than 35 $28,149
1997 62,370 10-14 6.8 Householder 35-44 $35,808
2002 65,323 15-19 7.6 Householder 45-54 $37,623
20-24 7 Householder 55-64 $31,083
Population Growth Rate 1 25-44 28.8 Householder 65+ $18,107
45-64 22.6
Households 65-84 12.1
---------- 85+ 1.5 Spending Potential Index*
1990 20,660 18+ 75.3 -----------------------------------
1997 22,661 Auto Loan 97
2002 24,083 Home Loan 74
Median Age Investments 80
Household Growth Rate 1.3 ---------- Retirement Plans 81
Average Household Size 2.63 1990 34 Home Repair 95
1997 35.8 Lawn & Garden 91
Families Remodeling 107
-------- Male/Female Ratio 93.5 Appliances 97
1990 15,584 Electronics 92
1997 16,577 Per Capita Income $14,105 Furniture 85
Restaurants 83
Family Growth Rate 0.9 Sporting Goods 94
1997 Household Income* Theater/Concerts 86
----------------------------- Toys & Hobbies 95
Race 1990 1997 Base 22,661 Travel 82
---- ---- ---- % Less Than $15K 20.4 Video Rental 97
% White 71.4 70.5 % $15K-25K 16 Apparel 86
% Black 28.2 29.1 % $25K-50K 39 Auto Aftermarket 91
% Asian % $50K-100K 21.4 Health Insurance 100
/Pacific Isl. 0.2 0.2 % 100K-150K 2.4 Pets & Supplies 96
% Greater Than $150K 0.7
% Hispanic* 0.4 0.5
Median Household Income
-----------------------------
1997 $31,451
2002 $36,241
</TABLE>
- ------------------------------------------------------------------------------
* Persons of Hispanic Origin may be of any race.
* Income represents the annual income for the preceding year in current
dollars, including an adjustment for inflation or cost-of-living increase.
* The Spending Potential Index (SPI) is calculated by CACI from the Consumer
Expenditure Survey, Bureau of Labor Statistics. The index represents the
ratio of the average amount spent locally to the average U.S. spending for
a product or service, multiplied by 100.
- ------------------------------------------------------------------------------
Copyright 1997 CACI (800) 292-CACI FAX: (703) 243-6272 10/27/97
<PAGE>
STATE DEMOGRAPHIC REPORT
<TABLE>
<CAPTION>
STATE/COUNTY 45007
STATE NAME ANDERSON SC
Population 1997 Age Distribution 1997 Average Disposable Income
---------- ----------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C>
1980 133,235 0-4 6.2 Total $29,411
1990 145,196 5-9 6.7 Householder Less Than 35 $28,096
1997 158,524 10-14 6.8 Householder 35-44 $35,289
2002 167,721 15-19 7.2 Householder 45-54 $38,168
20-24 5.9 Householder 55-64 $31,473
Population Growth Rate 1.2 25-44 29.1 Householder 65+ $16,158
45-64 23.9
Households 65-84 12.8
---------- 85+ 1.4 Spending Potential Index*
1990 55,481 18+ 76.1 -----------------------------------
1997 61,648 Auto Loan 99
2002 66,066 Home Loan 80
Median Age Investments 87
Household Growth Rate 1.5 ---------- Retirement Plans 87
Average Household Size 2.54 1990 34.8 Home Repair 97
1997 37.4 Lawn & Garden 94
Families Remodeling 109
-------- Male/Female Ratio 92.4 Appliances 99
1990 41,495 Electronics 96
1997 44,859 Per Capita Income $14,799 Furniture 89
Restaurants 88
Family Growth Rate 1.1 Sporting Goods 97
1997 Household Income* Theater/Concerts 90
----------------------------- Toys & Hobbies 99
Race 1990 1997 Base 61,648 Travel 86
---- ---- ---- % Less Than $15K 22.5 Video Rental 99
% White 82.9 82.2 % $15K-25K 17.5 Apparel 90
% Black 16.6 17.2 % $25K-50K 36.7 Auto Aftermarket 93
% Asian % $50K-100K 19.8 Health Insurance 101
/Pacific Isl. 0.2 0.3 % $100K-150K 2.6 Pets & Supplies 98
% Greater Than $150K 0.9
% Hispanic* 0.4 0.5
Median Household Income
-----------------------------
1997 $30,210
2002 $35,101
</TABLE>
- ------------------------------------------------------------------------------
* Persons of Hispanic Origin may be of any race.
* Income represents the annual income for the preceding year in current
dollars, including an adjustment for inflation or cost-of-living increase.
* The Spending Potential Index (SPI) is calculated by CACI from the Consumer
Expenditure Survey, Bureau of Labor Statistics. The index represents the
ratio of the average amount spent locally to the average U.S. spending for
a product or service, multiplied by 100.
- ------------------------------------------------------------------------------
Copyright 1997 CACI (800) 292-CACI FAX: (703) 243-6272 10/27/97
<PAGE>
STATE DEMOGRAPHIC REPORT
<TABLE>
<CAPTION>
STATE/COUNTY 45047
STATE NAME GREENWOOD SC
Population 1997 Age Distribution 1997 Average Disposable Income
---------- ----------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C>
1980 55,859 0-4 6.7 Total $28,914
1990 59,567 5-9 7 Householder Less Than 35 $25,697
1997 63,397 10-14 7.1 Householder 35-44 $34,477
2002 66,040 15-19 7.4 Householder 45-54 $39,219
20-24 6.6 Householder 55-64 $30,048
Population Growth Rate 0.9 25-44 28.8 Householder 65+ $17,514
45-64 21.8
Households 65-84 12.9
---------- 85+ 1.6 Spending Potential Index*
1990 22,730 18+ 75 -----------------------------------
1997 24,739 Auto Loan 99
2002 26,160 Home Loan 84
Median Age Investments 95
Household Growth Rate 1.2 ---------- Retirement Plans 91
Average Household Size 2.5 1990 33.7 Home Repair 100
1997 35.8 Lawn & Garden 97
Families Remodeling 106
-------- Male/Female Ratio 88.9 Appliances 98
1990 16,300 Electronics 95
1997 17,165 Per Capita Income $14,502 Furniture 92
Restaurants 90
Family Growth Rate 0.7 Sporting Goods 96
1997 Household Income* Theater/Concerts 93
----------------------------- Toys & Hobbies 98
Race 1990 1997 Base 24,739 Travel 91
---- ---- ---- % Less Than $15K 25.7 Video Rental 98
% White 69.2 68.3 % $15K-25K 16.9 Apparel 92
% Black 30.2 30.9 % $25K-50K 34.2 Auto Aftermarket 94
% Asian % $50K-100K 19.7 Health Insurance 100
/Pacific Isl. 0.4 0.5 % $100K-150K 2.3 Pets & Supplies 98
% Greater Than $150K 1.2
% Hispanic* 0.4 0.5
Median Household Income
-----------------------------
1997 $28,743
2002 $32,926
</TABLE>
- ------------------------------------------------------------------------------
* Persons of Hispanic Origin may be of any race.
* Income represents the annual income for the preceding year in current
dollars, including an adjustment for inflation or cost-of-living increase.
* The Spending Potential Index (SPI) is calculated by CACI from the Consumer
Expenditure Survey, Bureau of Labor Statistics. The index represents the
ratio of the average amount spent locally to the average U.S. spending for
a product or service, multiplied by 100.
- ------------------------------------------------------------------------------
Copyright 1997 CACI (800) 292-CACI FAX: (703) 243-6272 10/27/97
<PAGE>
STATE DEMOGRAPHIC REPORT
<TABLE>
<CAPTION>
STATE/COUNTY 45045
STATE NAME GREENVILLE SC
Population 1997 Age Distribution 1997 Average Disposable Income
---------- ----------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C>
1980 287,895 0-4 6.6 Total $35,156
1990 320,167 5-9 7.2 Householder Less Than 35 $30,856
1997 350,169 10-14 7 Householder 35-44 $40,339
2002 370,857 15-19 7.1 Householder 45-54 $45,295
20-24 6.4 Householder 55-64 $37,869
Population Growth Rate 1.2 25-44 31.1 Householder 65+ $20,877
45-64 22.3
Households 65-84 11.1
---------- 85+ 1.2 Spending Potential Index*
1990 122,878 18+ 75.3 ------------------------------------
1997 136,478 Auto Loan 101
2002 146,350 Home Loan 96
Median Age Investments 97
Household Growth Rate 1.5 ---------- Retirement Plans 99
Average Household Size 2.51 1990 33.4 Home Repair 100
1997 35.7 Lawn & Garden 100
Families Remodeling 104
-------- Male/Female Ratio 93.2 Appliances 101
1990 87,897 Electronics 100
1997 95,311 Per Capita Income $18,132 Furniture 99
Restaurants 98
Family Growth Rate 1.1 Sporting Goods 101
1997 Household Income* Theater/Concerts 99
----------------------------- Toys & Hobbies 101
Race 1990 1997 Base 136,478 Travel 96
---- ---- ---- % Less Than $15K 17.3 Video Rental 100
% White 80.9 80.1 % $15K-25K 15 Apparel 100
% Black 18 18.6 % $25K-50K 35.1 Auto Aftermarket 100
% Asian % $50K-100K 25.6 Health Insurance 100
/Pacific lsl. 0.7 0.8 % $100K-150K 4.9 Pets & Supplies 100
% Greater Than $150K 2.1
% Hispanic* 0.9 1.3
Median Household Income
-----------------------------
1997 $36,132
2002 $40,951
</TABLE>
- ------------------------------------------------------------------------------
* Persons of Hispanic Origin may be of any race.
* Income represents the annual income for the preceding year in current
dollars, including an adjustment for inflation or cost-of-living increase.
* The Spending Potential Index (SPI) is calculated by CACI from the Consumer
Expenditure Survey, Bureau of Labor Statistics. The index represents the
ratio of the average amount spent locally to the average U.S. spending for
a product or service, multiplied by 100.
- ------------------------------------------------------------------------------
Copyright 1997 CACI (800) 292-CACI FAX: (703) 243-6272 10/27/97
<PAGE>
EXHIBIT II-4
Heritage Federal Savings and Loan Association
Sources of Personal Income/Employment Sectors
<PAGE>
REGIONAL ECONOMIC PROFILE
for State totals only
<TABLE>
<CAPTION>
South Carolina [45.000]
- -----------------------------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Place of residence profile
Personal income (thousands of dollars) 55,969,870 59,180,558 62,159,029 65,746,152 69,809,514
Nonfarm personal income 55,583,919 58,817,462 61,799,708 65,252,011 69,440,947
Farm income 385,951 363,096 359,321 494,141 368,567
Derivation of personal income
Net earnings/1/ 37,915,395 40,104,724 41,986,147 44,221,622 46,864,850
Transfer payments 9,612,727 10,672,590 11,380,117 12,220,153 13,056,159
Income maintenance /2/ 786,185 976,394 1,037,386 1,099,399 1,176,739
Unemployment insurance 254,732 335,370 289,679 209,164 193,751
Retirement and other 8,571,810 9,360,826 10,053,052 10,911,590 11,685,669
Dividends, interest, and rent 8,441,748 8,403,244 8,792,765 9,304,377 9,888,505
Population (number of persons) /3/ 3,555,544 3,594,586 3,628,502 3,642,968 3,667,000
Per capita incomes (dollars) /4/
Per capita personal income 15,742 16,464 17,131 18,047 19,037
Per capita net earnings 10,664 11,157 11,571 12,139 12,7BO
Per capita transfer payments 2,704 2,969 3,136 3,354 3,560
Per capita income maintenance 221 272 286 302 321
Per capita unemployment insurance 72 93 80 57 53
Per capita retirement & other 2,411 2,604 2,771 2,995 3,187
Per capita dividends, interest, & rent 2,374 2,338 2,423 2,554 2,697
Place of work profile
Total earnings (place of work, $000) 40,272,002 42,577,162 44,616,139 46,992,615 49,772,164
Wages and salary disbursements 33,514,483 35,214,860 36,723,755 38,474,100 40,790,254
Other labor income 3,724,889 4,118,975 4,497,451 4,750,054 5,047,929
Proprietors' income 3,032,630 3,243,327 3,394,933 3,768,461 3,933,981
Nonfarm proprietors' income 2,737,519 2,965,796 3,132,546 3,368,954 3,665,416
Farm proprietors' income 295,111 277,531 262,387 399,507 268,565
Total full- and part- time employment 1,903,249 1,916,774 1,954,022 1,997,964 2,037,407
Wage and salary jobs 1,658,913 1,669,847 1,701,832 1,741,418 1,778,498
Number of proprietors 244,336 246,927 252,190 256,546 258,909
Number of nonfarm proprietors /5/ 219,123 221,644 227,596 233,238 236,613
Number of farm proprietors 25,213 25,283 24,594 23,308 22,296
Average earnings per job (dollars) 21,160 22,213 22,833 23,520 24,429
Wage & salary earnings per job 20,203 21,089 21,579 22,094 22,935
Average earnings per nonfarm proprietor 12,493 13,381 13,764 14,444 15,491
See footnotes at end of table.
Table CA30 August 1997 REGIONAL ECONOMIC INFORMATION SYSTEM
BUREAU OF ECONOMIC ANALYSIS
</TABLE>
<PAGE>
Footnotes for Table CA30, Regional Economic Profiles
/1/ Total earnings less personal contributions for social insurance adjusted
to place of residence.
/2/ Consists largely of supplemental security income payments, payments to
families with dependent children (AFDC), general assistance payments, food
stamp payments, and other assistance payments, including emergency
assistance.
/3/ Census Bureau midyear population estimates. Estimates for 1990-95 reflect
county population estimates available as of March 1997. The population
estimates for the United States, Utah, and Cache, UT, 1991-94, have been
adjusted by BEA for consistency with a special, upward adjustment made by
the Census Bureau to its 1995 estimate for Cache County.
Additionally, as a result of special and test censuses conducted in
1995, the Census Bureau reduced substantially the 1995 population estimates
for Yuma, AZ; DeSoto, LA; Dorchester, SC; and Montgomery, TN, but made no
adjustments to the estimates for the other years. For these counties, BEA
was unable to make adjustments to the population estimates in time for this
release, and the estimates of per capita personal income are discontinuous
between 1994 and 1995. BEA's further adjustments to the population
estimates for 1991-94 will be reflected in the release of State per capita
personal income on September 19, 1997 and in the release of local area per
capita personal income in the Spring of 1998.
/4/ Type of income divided by population yields a per capita for that type
of income.
/5/ Excludes limited partners.
/6/ Cibola, NM was separated from Valencia in June 1981, but in these estimates
Valencia includes Cibola through the end of 1981.
/7/ La Paz county, AZ was separated from Yuma county on January 1, 1983. The
Yuma, AZ MSA includes La Paz, AZ through 1982.
/8/ Estimates for 1979 forward reflect Alaska Census Areas as defined in the
1980 Decennial Census; those for prior years reflect Alaska Census Divisions
as defined in the 1970 Decennial Census. Estimates from 1988 forward
separate Aleutian Islands Census Area into Aleutians East Borough and
Aleutians West Census Area. Estimates for 1991 forward separate Denali
Borough from Yukon-Koyukuk Census Area and Lake and Peninsula Borough from
Dillingham Census Area. Estimates from 1993 forward separate
Skagway-Yakutat-Angoon Census Area into Skagway-Hoonah-Angoon Census Area
and Yakutat Borough.
/9/ Shawano, WI and Menominee, WI are combined as Shawano (incl. Menominee),
WI for the years prior to 1989.
(L) Less than $50,000 or less than 10 jobs, as appropriate. Estimates are
included in totals.
(N) Data not available for this year.
<PAGE>
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY /1/
for State totals only
(number of Jobs)
<TABLE>
<CAPTION>
South Carolina (45.000]
- -----------------------------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Employment by place of work
Total full- and part-time employment 1,903,249 1,916,774 1,954,022 1,997,964 2,037,407
By type
Wage and salary employment 1,658,913 1,669,847 1,701,832 1,741,418 1,778,498
Proprietors' employment 244,336 246,927 252,190 256,546 258,909
Farm proprietors' employment 25,213 25,283 24,594 23,308 22,296
Nonfarm proprietors' employment /2/ 219,123 221,644 227,596 233,238 236,613
By industry
Farm employment 35,524 35,006 33,831 31,925 30,693
Nonfarm employment 1,867,725 1,881,768 1,920,191 1,966,039 2,006,714
Private employment 1,502,464 1,512,946 1,555,368 1,604,499 1,654,076
Ag. serv., forestry, fishing,
and other /3/ 16,301 16,243 18,068 18,839 20,446
Mining 2,416 2,319 2,277 2,301 2,361
Construction 120,101 112,860 116,047 119,592 123,002
Manufacturing 376,436 378,300 381,663 385,354 384,770
Transportation and public utilities 73,166 71,940 74,767 78,087 80,718
Wholesale trade 64,439 63,022 63,034 65,173 70,005
Retail trade 326,934 334,757 343,893 359,747 376,062
Finance, insurance, and real estate 111,035 108,158 108,606 111,745 112,167
Services 411,636 425,347 447,013 463,661 484,545
Government and government enterprises 365,261 368,822 364,823 361,540 352,638
Federal, civilian 37,753 35,889 33,973 32,085 29,923
Military 84,339 82,268 74,881 69,350 58,907
State and local 243,169 250,665 255,969 260,105 263,808
State 96,184 99,180 100,815 100,663 100,760
Local 146,985 151,485 155,154 159,442 163,048
See footnotes at and of table. August 1997 REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA25 BUREAU OF ECONOMIC ANALYSIS
</TABLE>
<PAGE>
Footnotes for Table CA25, Total Full- and Part-time Employment by Major Industry
/1/ 1969-74 based on 1967 SIC. 1975-87 based on 1972 SIC. 1988-95 based on
1987 SIC.
/2/ Excludes limited partners.
/3/ "Other" consists of the number of jobs held by U.S. residents employed by
international organizations and foreign embassies and consulates in the
United States.
/4/ Cibola, NM was separated from Valencia in June 1981, but in these estimates
Valencia includes Cibola through the end of 1981.
/5/ La Paz county, AZ was separated from Yuma county on January 1, 1983. The
Yuma, AZ MSA includes La Paz, AZ through 1982.
/6/ Estimates for 1979 forward reflect Alaska Census Areas as defined in the
1980 Decennial Census; those for prior years reflect Alaska Census Divisions
as defined in the 1970 Decennial Census. Estimates from 1988 forward
separate Aleutian Islands Census Area into Aleutians East Borough and
Aleutians West Census Area. Estimates for 1991 forward separate Denali
Borough from Yukon-Koyukuk Census Area and Lake and Peninsula Borough from
Dillingham Census Area. Estimates from 1993 forward separate
Skagway-Yakutat-Angoon Census Area into Skagway-Hoonah-Angoon Census Area
and Yakutat Borough.
/7/ Shawano, WI and Menominee, WI are combined as Shawano (incl. Menominee), WI
for the years prior to 1989.
/8/ Estimate shown constitutes the major portion of the true estimate.
(D) Not shown to avoid disclosure of confidential information. Estimates are
included in totals.
(L) Less than 10 jobs. Estimates are included in totals.
(N) Data not available for this year.
<PAGE>
PERSONAL INCOME BY MAJOR SOURCE AND EARNINGS BY INDUSTRY /1/
for State totals only
(thousands of dollars)
<TABLE>
<CAPTION>
South Carolina [45.000]
- ----------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income by place of residence
Personal income (thousands of dollars) 55,969,870 59,180,558 62,159,029 65,746,152 69,809,514
Nonfarm personal income 55,583,919 58,817,462 61,799,708 65,252,011 69,440,947
Farm income /2/ 385,951 363,096 359,321 494,141 368,567
Population (number of persons) /3/ 3,555,544 3,594,586 3,628,502 3,642,968 3,667,000
Per capita personal income (dollars) 15,742 16,464 17,131 18,047 19,037
Derivation of personal income
Earnings by place of work 40,272,002 42,577,162 44,616,139 46,992,615 49,772,164
Less: Personal cont. for social insurance /4/ 2,846,063 2,986,677 3,156,087 3,380,888 3,590,919
Plus: Adjustment for residence /5/ 489,456 514,239 526,095 609,895 683,605
Equals: Not earnings by place of residence 37,915,395 40,104,724 41,986,147 44,221,622 46,864,850
Plus; Dividends, interest, and rent /6/ 8,441,748 8,403,244 8,792,765 9,304,377 9,888,505
Plus: Transfer payments 9,612,727 10,672,590 11,380,117 12,220,153 13,056,159
Earnings by place of work
Components of earnings
Wage and salary disbursements 33,514,483 35,214,860 36,723,755 38,474,100 40,790,254
Other labor income 3,724,889 4,118,975 4,497,451 4,750,054 5,047,929
Proprietors' income /7/ 3,032,630 3,243,327 3,394,933 3,766,461 3,933,981
Farm proprietors' income 295,111 277,531 262,387 399,507 268,565
Nonfarm proprietors' income 2,737,519 2,965,796 3,132,546 3,368,954 3,665,416
Earnings by industry
Farm earnings 385,951 363,096 359,321 494,141 368,567
Nonfarm earnings 39,886,051 42,214,066 44,256,818 46,498,474 49,403,597
Private earnings 31,413,660 33,457,858 35,315,660 37,523,130 40,298,875
Ag. serv., forestry, fishing, and other /8/ 232,588 241,894 252,062 267,933 307,485
Mining 72,721 64,290 70,735 72,962 78,796
Construction 2,808,684 2,659,487 2,825,138 3,017,757 3,184,688
Manufacturing 10,756,266 11,605,997 12,084,872 12,591,462 13,100,741
Durable goods 3,897,297 4,251,323 4,509,093 4,865,277 5,247,475
Nondurable goods 6,858,969 7,354,674 7,575,779 7,726,185 7,853,266
Transportation and public utilities 2,332,868 2,413,398 2,542,425 2,729,087 2,906,351
Wholesale trade 1,785,888 1,858,920 1,926,137 2,071,219 2,341,452
Retail trade 4,119,334 4,402,643 4,679,738 5,017,717 5,454,832
Finance, insurance, and real estate 1,778,518 1,945,086 2,122,179 2,241,546 2,421,749
Services 7,526,793 8,266,143 B,812,374 9,513,447 10,502,781
Government and government enterprises 8,472,391 8,756,208 8,941,158 8,975,344 9,104,722
Federal, civilian 1,318,869 1,301,117 1,332,832 1,287,152 1,227,599
Military 1,565,351 1,590,837 1,444,388 1,326,886 1,182,868
State and local 5,588,171 5,864,254 6,163,938 6,361,306 6,694,255
State 2,244,103 2,347,693 2,446,505 2,489,806 2,599,272
Local 3,344,068 3,516,561 3,717,433 3,871,500 4,094,983
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA05.1 August 1997 BUREAU OF ECONOMIC ANALYSIS
</TABLE>
<PAGE>
Footnotes. for table CA05, Personal Income by major source and Earnings by
Major Industry
/1/ 1969-74 based on 1967 SIC. 1975-87 based on 1972 SIC. 1988-95 based on 1987
SIC.
/2/ Farm income consists of proprietors' net income; the cash wages,
pay-in-kind, and other labor income of hired farm workers; and the salaries
of officers of corporate farms.
/3/ Census Bureau midyear population estimates. Estimates for 1990-95 reflect
county population estimates available as of March 1997. The population
estimates for the United States, Utah, and Cache, UT, 1991-94, have been
adjusted by BEA for consistency with a special, upward adjustment made by
the Census Bureau to its 1995 estimate for Cache County.
Additionally, as a result of special and test censuses conducted in 1995,
the Census Bureau reduced substantially the 1995 population estimates for
Yuma, AZ; DeSoto, LA; Dorchester, SC; and Montgomery, TN, but made no
adjustments to the estimates for the other years. For these counties, BEA
was unable to make adjustments to the population estimates in time for this
release, and the estimates of per capita personal income are discontinuous
between 1994 and 1995. BEA's further adjustments to the population estimates
for 1991-94 will be reflected in the release of State per capita personal
income on September 19, 1997 and in the release of local area per capita
personal income in the Spring of 1998.
/4/ Personal contributions for social insurance are included in earnings by
type and industry but excluded from personal income.
/5/ The adjustment for residence is the net inflow of the earnings of interarea
commuters. For the United States, it consists of adjustments for border
workers: Earnings of U.S. residents commuting outside U.S. borders to work
less earnings of foreign residents commuting inside U.S. borders to work and
of certain Caribbean seasonal workers.
/6/ Includes the capital consumption adjustment for rental income of persons.
/7/ Includes the inventory valuation and capital consumption adjustments.
/8/ "Other" consists of wage and salary disbursements of U.S. residents
employed by international organizations and foreign embassies and consulates
in the United States.
/13/ Estimates for 1979 forward reflect Alaska Census Areas as defined in the
1980 Decennial Census; those for prior years reflect Alaska Census
Divisions as defined in the 1970 Decennial Census. Estimates from 1988
forward separate Aleutian Islands Census Area into Aleutians East Borough
and Aleutians West Census Area. Estimates for 1991 forward separate Denali
Borough from Yukon-Koyukuk Census Area and Lake and Peninsula Borough from
Dillingham Census Area. Estimates from 1993 forward separate Skagway-
Yakutat-Angoon Census Area into Skagway-Hoonah-Angoon Census Area and
Yakutat Borough.
/14/ Cibola, NM was separated from Valencia in June 1981, but in these
estimates, Valencia includes Cibola through the end of 1981.
/15/ La Paz county, AZ was separated from Yuma county on January 1, 1983. The
Yuma, AZ MSA contains La Paz, AZ through 1982.
/16/ Shawano, WI and Menominee, WI are combined as Shawano (incl. Menominee),
WI for the years prior to 1989.
E The estimate shown here constitutes the major portion of the true estimate.
(D) Not shown to avoid disclosure of confidential information. Estimates are
included in totals.
(L) Less than $50,000. Estimates are included in totals.
(N) Data not available for this year.
<PAGE>
PERSONAL INCOME BY MAJOR SOURCE AND EARNINGS BY INDUSTRY /1/
for states-and counties
(thousands of dollars)
<TABLE>
<CAPTION>
Laurens, South Carolina [45.059]
- -------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income by place of residence
Personal income (thousands of dollars) 892,051 953,000 1,004,408 1,062,968 1,131,240
Nonfarm personal income 888,692 948,095 998,990 1,057,523 1,133,054
Farm income /2/ 3,359 4,905 5,418 5,445 -1,814
Population (number of persons) /3/ 58,630 59,031 59,470 60,030 60,731
Per capita personal income (dollars) 15,215 16,144 16,889 17,707 18,627
Derivation of personal income
Earnings by place of work 474,269 509,410 537,243 563,914 599,348
Loss: Personal cont. for social insurance /4/ 34,956 37,131 39,512 42,373 45,615
Plus: Adjustment for residence /5/ 98,712 102,269 107,848 114,242 124,644
Equals: Net earnings by place of residence 538,025 574,548 605,579 635,783 678,377
Plus: Dividends, interest, and rent /6/ 123,116 120,315 122,836 124,326 132,357
Plus: Transfer payments 230,910 258,137 275,993 302,859 320,506
Earnings by place of work
Components of earnings
Wage and salary disbursements 395,614 422,247 444,431 466,641 500,619
Other labor income 46,830 52,798 57,911 60,805 65,535
Proprietors' income /7/ 31,825 34,365 34,901 36,468 33,194
Farm proprietors' income 2,162 3,798 4,164 4,222 -3,107
Nonfarm proprietors' income 29,663 30,567 30,737 32,246 36,301
Earnings by industry
Farm earnings 3,359 4,905 5,418 5,445 -1,814
Nonfarm earnings 470,910 504,505 531,825 558,469 601,162
Private earnings 379,107 409,429 433,627 456,519 495,262
Ag. serv., forestry, fishing, and other /8/ (D) 2,028 2,058 2,241 (D)
Mining (D) (L) 463 784 (D)
Construction 20,274 21,589 23,456 27,276 28,614
Manufacturing 181,262 203,253 217,384 224,406 232,775
Durable goods 90,031 99,729 104,450 110,959 115,208
Nondurable goods 91,231 103,524 112,934 113,447 117,567
Transportation and public utilities 16,941 17,952 20,114 25,963 32,137
Wholesale trade 7,883 8,824 7,079 7,664 11,810
Retail trade 77,629 79,422 78,249 78,758 83,245
Finance, insurance, and real estate 12,239 13,156 13,608 13,483 14,347
Services 57,438 63,174 71,216 75,944 88,790
Government and government enterprises 91,803 95,076 98,198 101,950 105,900
Federal, civilian 3,669 3,915 4,021 4,052 4,172
Military 2,924 3,286 3,301 3,382 3,258
State and local 85,210 87,875 90,876 94,516 98,470
State 40,341 41,127 41,754 41,623 41,273
Local 44,869 46,748 49,122 52,893 57,197
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA05.1 August 1997 BUREAU OF ECONOMIC ANALYSIS
</TABLE>
<PAGE>
PERSONAL INCOME BY MAJOR SOURCE AND EARNINGS BY INDUSTRY /1/
for States and counties
(thousands of dollars)
<TABLE>
<CAPTION>
Anderson, South Carolina [45.007]
- ------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income by place of residence
Personal income (thousands of dollars) 2,267,182 2,400,709 2,531,645 2,695,522 2,888,543
Nonfarm personal income 2,255,173 2,384,930 2,516,761 2,673,985 2,811,573
Farm income /2/ 12,009 15,779 14,884 21,537 16,970
Population (number of persons) /3/ 146,313 148,111 150,798 152,545 154,472
Per capita personal income (dollars) 15,495 16,209 16,788 17,670 18,699
Derivation of personal income
Earnings by place of work 1,328,339 1,444,897 1,551,740 1,666,814 1,774,783
Less: Personal cont. for social insurance /4/ 98,388 105,732 114,354 124,589 133,096
Plus: Adjustment for residence /5/ 341,985 336,370 341,430 345,269 385,415
Equals: Net earnings by place of residence 1,571,936 1,675,535 1,778,816 1,887,494 2,027,102
Plus: Dividends, interest, and rent /6/ 310,266 303,678 307,952 326,133 347,510
Plus: Transfer payments 384,980 421,496 444,877 481,895 513,931
Earnings by place of work
Components of earnings
Wage and salary disbursements 1,074,421 1,154,326 1,235,009 1,318,736 1,400,958
Other labor income 127,953 145,348 162,815 173,977 183,715
Proprietors' income /7/ 125,965 145,223 153,916 174,099 190,110
Farm proprietors' income 7,563 11,397 9,903 16,674 11,838
Nonfarm proprietors' income 118,402 133,826 144,013 157,425 178,272
Earnings by industry
Farm earnings 12,009 15,779 14,884 21,537 16,970
Nonfarm earnings 1,316,330 1,429,118 1,536,856 1,645,277 1,757,813
Private earnings 1,114,950 1,217,387 1,310,842 1,409,266 1,507,507
Ag. serv., forestry, fishing, and other /8/ 6,621 8,943 (D) (D) 10,239
Mining 139 183 (D) (D) 5,237
Construction 84,784 84,039 85,103 96,543 102,253
Manufacturing 528,507 581,120 632,137 672,293 705,264
Durable goods 162,997 189,244 235,332 263,793 291,870
Nondurable goods 365,510 391,876 396,805 408,500 413,394
Transportation and public utilities 49,814 50,006 55,574 60,941 65,503
Wholesale trade 41,760 49,397 54,948 61,504 73,639
Retail trade 156,756 175,653 185,465 200,746 214,825
Finance, insurance, and real estate 36,714 41,085 45,652 47,088 50,002
Services 209,855 226,961 240,788 257,248 280,545
Government and government enterprises 201,380 211,731 226,014 236,011 250,306
Federal, civilian 13,547 14,414 15,198 15,541 16,063
Military 6,635 7,221 7,285 7,861 7,597
State and local 181,198 190,096 203,531 212,609 226,646
State 38,699 40,402 43,429 45,372 48,607
Local 142,499 149,694 160,102 167,237 178,039
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA05.1 August 1997 BUREAU OF ECONOMIC ANALYSIS
</TABLE>
<PAGE>
PERSONAL INCOME BY MAJOR SOURCE AND EARNINGS BY INDUSTRY /1/
for States and counties
(thousands of dollars)
<TABLE>
<CAPTION>
Greenwood, South Carolina [45.047]
- ------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income by place of residence
Personal income (thousands of dollars) 929,398 993,419 1,038,194 1,103,068 1,192,586
Nonfarm personal income 926,093 990,955 1,035,553 1,102,025 1,191,759
Farm income /2/ 3,305 2,464 2,641 1,043 827
Population (number of persons) /3/ 60,139 60,526 61,039 61,544 62,102
Per capita personal income (dollars) 15,454 16,413 17,009 17,923 19,204
Derivation of personal income
Earnings by place of work 735,333 783,541 821,571 875,344 954,046
Less: Personal cont. for social insurance /4/ 53,145 56,263 59,394 64,501 70,030
Plus: Adjustment for residence /5/ (52,776) (56,043) (59,396) (63,401) (71,615)
Equals: Net earnings by place of residence 629,412 671,235 702,781 747,442 812,401
Plus: Dividends, interest, and rent /6/ 140,570 143,490 148,285 156,156 166,346
Plus: Transfer payments 159,416 178,694 187,128 199,470 213,839
Earnings by place of work
Components of earnings
Wage and salary disbursements 611,153 648,610 676,858 723,013 788,135
Other labor income 73,408 81,714 88,820 95,241 104,856
Proprietors' income /7/ 50,772 53,217 55,893 57,090 61,055
Farm proprietors' income 2,878 2,079 2,210 623 379
Nonfarm proprietors' income 47,894 51,138 53,683 56,467 60,676
Earnings by industry
Farm earnings 3,305 2,464 2,641 1,043 827
Nonfarm earnings 732,028 781,077 818,930 874,301 953,219
Private earnings 598,744 646,562 679,353 727,516 798,493
Ag. serv., forestry, fishing, and other /8/ (D) 3,019 2,917 3,054 3,652
Mining (D) 613 721 844 797
Construction 60,163 54,993 58,840 57,121 58,109
Manufacturing 300,309 336,833 351,828 380,793 422,953
Durable goods 103,487 110,442 114,243 127,721 136,300
Nondurable goods 196,822 226,391 237,585 253,072 286,653
Transportation and public utilities 25,705 27,033 28,668 30,612 32,854
Wholesale trade 11,209 12,184 13,200 16,898 17,737
Retail trade 73,906 77,199 79,765 85,943 94,662
Finance, insurance, and real estate 21,894 23,618 25,864 26,996 27,834
Services 101,636 111,070 117,550 125,255 139,895
Government and government enterprises 133,284 134,515 139,577 146,785 154,726
Federal, civilian 5,846 6,260 6,271 6,797 6,869
Military 2,727 2,957 2,937 3,153 3,037
State and local 124,711 125,298 130,369 136,835 144,820
State 33,597 34,662 36,203 38,092 40,557
Local 91,114 90,636 94,166 98,743 104,263
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CAO5.1 August 1997 BUREAU OF ECONOMIC ANALYSIS
</TABLE>
<PAGE>
PERSONAL INCOME BY MAJOR SOURCE AND EARNINGS BY INDUSTRY /1/
for states-and counties
(thousands of dollars)
<TABLE>
<CAPTION>
Greenville, South Carolina [45.045]
- -----------------------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income by place of residence
Personal income (thousands of dollars) 5,992,750 6,293,216 6,674,946 7,116,838 7,686,848
Nonfarm personal income 5,988,318 6,287,193 6,666,896 7,107,872 7,679,777
Farm income /2/ 4,432 6,023 8,050 8,966 7,071
Population (number of persons) /3/ 324,085 326,949 330,711 335,182 339,655
Per capita personal income (dollars) 18,491 19,248 20,184 21,233 22,631
Derivation of personal income
Earnings by place of work 5,375,114 5,559,270 5,932,852 6,311,741 6,890,338
Less: Personal cont. for social insurance /4/ 392,221 401,582 429,994 464,789 505,271
Plus: Adjustment for residence /5/ -782,722 -750,874 -810,068 -836,738 -941,309
Equals: Not earnings by place of residence 4,200,171 4,406,814 4,692,790 5,010,214 5,443,758
Plus: Dividends, interest, and rent /6/ 999,580 1,003,623 1,044,066 1,102,346 1,174,058
Plus: Transfer payments 792,999 882,779 938,090 1,004,278 1,069,032
Earnings by place of work
Components of earnings
Wage and salary disbursements 4,543,220 4,657,270 4,950,495 5,256,934 5,752,354
Other labor income 523,350 561,082 622,135 659,631 715,415
Proprietors' income /7/ 308,544 340,918 360,222 395,176 422,569
Farm proprietors' income 2,754 4,307 6,098 7,059 5,060
Nonfarm proprietors' income 305,790 336,611 354,124 386,117 417,509
Earnings by industry
Farm earnings 4,432 6,023 8,050 8,966 7,071
Nonfarm earnings 5,370,682 5,553,247 5,924,802 6,302,775 6,883,267
Private earnings 4,825,448 4,988,975 5,338,355 5,688,702 6,236,950
Ag. serv., forestry, fishing, and other /8/ 24,094 26,714 27,971 28,735 32,708
Mining 4,076 4,100 4,153 3,704 4,422
Construction 497,686 397,900 455,595 529,156 549,204
Manufacturing 1,514,973 1,608,648 1,677,829 1,754,787 1,894,554
Durable goods 593,666 672,711 704,731 749,668 817,588
Nondurable goods 921,307 935,937 973,098 1,005,119 1,076,966
Transportation and public utilities 361,260 353,107 373,625 395,689 424,886
Wholesale trade 400,221 426,129 433,667 470,856 543,742
Retail trade 548,438 586,899 643,727 693,577 754,515
Finance, insurance, and real estate 295,366 324,999 361,018 372,661 402,639
Services 1,179,334 1,260,479 1,360,770 1,439,537 1,630,280
Government and government enterprises 545,234 564,272 586,447 614,073 646,317
Federal, civilian 54,488 60,255 60,577 63,830 68,679
Military 15,451 16,937 16,914 18,156 17,648
State and local 475,295 487,080 508,956 532,087 559,990
State 71,617 73,600 77,446 83,089 88,829
Local 403,678 413,480 431,510 448,998 471,161
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA05.1 August 1997 BUREAU OF ECONOMIC ANALYSIS
</TABLE>
<PAGE>
1/ 1969-74 based on 1967 SIC. 1975-87 based on 1972 SIC. 1988-95 based on 1987
SIC.
2/ Farm income consists of proprietors' net income; the cash wages, pay-in-
kind, and other labor income of hired farm workers; and the salaries of
officers of corporate farms.
3/ Census Bureau midyear population estimates. Estimates for 1990-95 reflect
county population estimates available as of March 1997. The population
estimates for the United States, Utah, and Cache, UT, 1991-94, have been
adjusted by BEA for consistency with a special, upward adjustment made by
the Census Bureau to its 1995 estimate for Cache County. Additionally, as a
result of special and test censuses conducted in 1995, the Census Bureau
reduced substantially the 1995 population estimates for Yuma, AZ; DeSoto,
LA; Dorchester, SC; and Montgomery, TN, but made no adjustments to the
estimates for the other years. For these counties, BEA was unable to make
adjustments to the population estimates in time for this release, and the
estimates of per capita personal income are discontinuous between 1994 and
1995. BEA's further adjustments to the population estimates for 1991-94 will
be reflected in the release of State per capita personal income
on September 19, 1997 and in the release of local area per capita personal
income in the Spring of 1998.
4/ Personal contributions for social insurance are included in earnings by type
and industry but excluded from personal income.
5/ The adjustment for residence is the net inflow of the earnings of interarea
commuters. For the United States, it consists of adjustments for border
workers: Earnings of U.S. residents commuting outside U.S. borders to work
less earnings of foreign residents commuting inside U.S. borders to work and
of certain Caribbean seasonal workers.
6/ Includes the capital consumption adjustment for rental income of persons.
7/ Includes the inventory valuation and capital consumption adjustments.
8/ "Other" consists of wage and salary disbursements of U.S. residents employed
by international organizations and foreign embassies and consulates in the
United States.
13/ Estimates for 1979 forward reflect Alaska Census Areas as defined in the
1980 Decennial Census; those for prior years reflect Alaska Census Divisions
as defined in the 1970 Decennial Census. Estimates from 1988 forward
separate Aleutian Islands Census Area into Aleutians East Borough and
Aleutians West Census Area. Estimates for 1991 forward separate Denali
Borough from Yukon-Koyukuk Census Area and Lake and Peninsula Borough from
Dillingham Census Area. Estimates from 1993 forward separate Skagway-
Yakutat-Angoon Census Area into Skagway-Hoonah-Angoon Census Area and
Yakutat Borough.
14/ Cibola, NM was separated from Valencia in June 1981, but in these estimates,
Valencia includes Cibola through the end of 1981.
15/ La Paz county, AZ was separated from Yuma county on January 1, 1983. The
Yuma, AZ MSA contains La Paz, AZ through 1982.
16/ Shawano, WI and Menominee, WI are combined as Shawano (incl. Menominee), WI
for the years prior to 1989.
E The estimate shown here constitutes the major portion of the true estimate.
(D) Not shown to avoid disclosure of confidential information. Estimates are
included in totals.
(L) Less than $50,000. Estimates are included in totals.
(N) Data not available for this year.
<PAGE>
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY 1/
for States and counties
(number of jobs)
<TABLE>
<CAPTION>
Laurens, South Carolina (45.059)
- ------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Employment by place of work
Total full- and part-time employment 25,177 25,702 26,378 26,353 27,330
By type
Wage and salary employment 21,765 22,242 22,959 23,110 24,081
Proprietors' employment 3,412 3,460 3,419 3,243 3,249
Farm proprietors' employment 842 847 824 781 747
Nonfarm proprietors' employment 2/ 2,570 2,613 2,595 2,462 2,502
By industry
Farm employment 989 989 959 907 870
Nonfarm employment 24,188 24,713 25,419 25,446 26,460
Private employment 19,293 19,834 20,580 20,580 21,537
Ag. serv., forestry, fishing, and other 3/ (D) 204 222 230 (D)
Mining (D) 0 12 22 (D)
Construction 957 979 1,033 1,130 1,179
Manufacturing 7,497 7,943 8,209 8,050 8,082
Transportation and public utilities 447 465 563 762 921
Wholesale trade 370 324 335 316 400
Retail trade 4,949 4,932 4,850 4,767 4,980
Finance, insurance, and real estate 728 731 723 751 755
Services 4,063 4,256 4,633 4,552 4,943
Government and government enterprises 4,895 4,879 4,839 4,866 4,923
Federal, civilian 105 105 104 101 103
Military 429 426 416 402 377
State and local 4,361 4,348 4,319 4,363 4,443
State 2,126 2,083 2,067 2,021 1,936
Local 2,235 2,265 2,252 2,342 2,507
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA25 August 1997 BUREAU OF ECONOMIC ANALYSIS
</TABLE>
<PAGE>
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY 1/
for States and counties
(number of jobs)
Anderson, South Carolina [45.007]
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Item 1991 1992 1993 1994 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Employment by place of work
Total full- and part-time employment 67,111 68,821 71,228 73,186 74,151
By type
Wage and salary employment 57,312 58,776 61,000 62,797 63,666
Proprietors' employment 9,799 10,045 10,228 10,389 10,485
Farm proprietors' employment 1,305 1,320 1,284 1,217 1,164
Nonfarm proprietors' employment 2/ 8,494 8,725 8,944 9,172 9,321
By industry
Farm employment 1,677 1,721 1,665 1,572 1,510
Nonfarm employment 65,434 67,100 69,563 71,614 72,641
Private employment 55,681 57,142 59,551 61,562 62,674
Ag. serv., forestry, fishing, and other 3/ 366 434 (D) (D) 526
Mining 29 31 (D) (D) 183
Construction 3,950 3,901 3,768 4,088 4,253
Manufacturing 19,191 19,361 20,843 21,228 21,351
Transportation and public utilities 1,665 1,556 1,687 1,916 1,916
Wholesale trade 1,810 1,941 2,143 2,195 2,500
Retail trade 13,139 13,973 13,964 14,530 14,866
Finance, Insurance, and real estate 2,919 2,917 2,956 3,039 2,990
Services 12,612 13,028 13,597 13,903 14,089
Government and government enterprises 9,753 9,958 10,012 10,052 9,967
Federal, civilian 359 355 363 352 361
Military 1,056 1,047 1,033 1,005 942
State and local 8,338 8,556 8,616 8,695 8,664
State 1,995 1,937 1,997 1,987 2,043
Local 6,343 6,619 6,619 6,708 6,621
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA25 August 1997 BUREAU OF ECONOMIC ANALYSIS
</TABLE>
<PAGE>
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY 1/
for States and counties
(number of jobs)
<TABLE>
<CAPTION>
Greenwood, South Carolina [45.047]
- ------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Employment by place of work
Total full- and part-time employment 34,404 34,799 35,942 37,033 38,876
By type
Wage and salary employment 30,382 30,873 31,945 33,039 34,848
Proprietors' employment 4,022 3,926 3,997 3,994 4,028
Farm proprietors' employment 457 465 452 429 410
Nonfarm proprietors' employment 2/ 3,565 3,461 3,545 3,565 3,618
By industry
Farm employment 534 541 524 496 476
Nonfarm employment 33,870 34,258 35,418 36,537 38,400
Private employment 27,862 28,164 29,233 30,296 32,008
Ag. serv., forestry, fishing, and other 3/ (D) 218 217 217 235
Mining (D) 22 22 20 20
Construction 2,296 2,038 2,128 2,062 2,071
Manufacturing 10,767 11,249 11,723 12,047 12,855
Transportation and public utilities 795 767 852 878 990
Wholesale trade 456 486 536 695 654
Retail trade 6,180 6,226 6,278 6,591 6,975
Finance, insurance, and real estate 1,448 1,352 1,406 1,439 1,403
Services 5,669 5,806 6,071 6,347 6,805
Government and government enterprises 6,008 6,094 6,185 6,241 6,392
Federal, civilian 190 184 177 184 183
Military 434 428 418 404 378
State and local 5,384 5,482 5,590 5,653 5,831
State 1,621 1,615 1,664 1,706 1,788
Local 3,763 3,867 3,926 3,947 4,043
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA25 August 1997 BUREAU OF ECONOMIC ANALYSIS
</TABLE>
<PAGE>
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY 1/
for States and counties
(number of jobs)
<TABLE>
<CAPTION>
Greenville, South Carolina [45.045]
- -------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Employment by place of work
Total full- and part-time employment 226,491 224,428 234,733 244,254 252,749
By type
Wage and salary employment 200,738 198,312 207,560 214,778 222,949
Proprietors' employment 25,753 26,116 27,173 29,476 29,800
Farm proprietors' employment 833 841 818 775 742
Nonfarm proprietors' employment 2/ 24,920 25,275 26,355 28,701 29,058
By industry
Farm employment 980 981 951 899 863
Nonfarm employment 225,511 223,447 233,782 243,355 251,886
Private employment 202,952 200,699 210,694 219,920 228,273
Ag. serv., forestry, fishing, and other 3/ 1,454 1,575 1,614 1,717 1,803
Mining 199 185 185 166 160
Construction 18,885 15,880 17,487 19,029 18,855
Manufacturing 48,110 47,175 47,541 48,218 48,654
Transportation and public utilities 10,957 10,423 10,774 11,102 11,912
Wholesale trade 12,505 12,354 12,316 13,182 14,408
Retail trade 40,055 40,833 42,657 44,759 46,684
Finance, Insurance, and real estate 14,733 14,481 14,902 15,527 15,667
Services 56,054 57,793 63,218 66,220 70,130
Government and government enterprises 22,559 22,748 23,088 23,435 23,613
Federal, civilian 1,373 1,429 1,406 1,452 1,535
Military 2,367 2,344 2,295 2,238 2,103
State and local 18,819 18,975 19,387 19,745 19,975
State 3,416 3,467 3,543 3,676 3,723
Local 15,403 15,508 15,844 16,069 16,252
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA25 August 1997 BUREAU OF ECONOMIC ANALYSIS
</TABLE>
<PAGE>
Footnotes for Table CA25, Total Full- and Part-time Employment by Major Industry
1/ 1969-74 based on 1967 SIC. 1975-87 based on 1972 SIC. 1988-95 based on
1987 SIC.
2/ Excludes limited partners.
3/ "Other" consists of the number of jobs hold by U.S. residents employed by
international organizations and foreign embassies and consulates in the
United States.
4/ Cibola, NM was separated from Valencia in June 1981, but in these estimates
Valencia includes Cibola through the end of 1981.
5/ La Paz county, AZ was separated from Yuma county on January 1, 1983. The
Yuma, AZ MSA includes La Paz, AZ through 1962.
6/ Estimates for 1979 forward reflect Alaska Census Areas as defined in the
1980 Decennial Census; those for prior years reflect Alaska Census Divisions
as defined in the 1970 Decennial Census. Estimates from 1988 forward
separate Aleutian Islands Census Area into Aleutians East Borough and
Aleutians West Census Area. Estimates for 1991 forward separate Denali
Borough from Yukon-Koyukuk Census Area and Lake and Peninsula Borough from
Dillingham Census Area. Estimates from 1993 forward separate Skagway-
Yakutat-Angoon Census Area into Skagway-Hoonah-Angoon Census Area and
Yakutat Borough.
7/ Shawano, WI and Menominee, WI are combined as Shawano (incl. Menominee), WI
for the years prior to 1989.
E Estimate shown constitutes the major portion of the true estimate.
(D) Not shown to avoid disclosure of confidential information. Estimates are
included in totals.
(L) Less than 10 jobs. Estimates are included in totals.
(N) Data not available for this year.
<PAGE>
REGIONAL ECONOMIC PROFILE
for States-and counties
<TABLE>
<CAPTION>
Laurens, South Carolina [45.059]
- -------------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Place of residence profile
Personal income (thousands of dollars) 892,051 953,000 1,004,408 1,062,968 1,131,240
Nonfarm personal income 888,692 948,095 998,990 1,057,523 1,133,054
Farm income 3,359 4,905 5,418 5,445 (1,814)
Derivation of personal income
Net earnings 1/ 538,025 574,548 605,579 635,783 678,377
Transfer payments 230,910 258,137 275,993 302,859 320,506
Income maintenance 2/ 12,767 15,103 16,442 16,998 17,796
Unemployment insurance 4,357 5,750 4,822 3,325 2,867
Retirement and other 213,116 237,284 254,729 282,536 299,843
Dividends, interest, and rent 123,116 120,315 122,836 124,326 132,357
Population (number of persons) 3/ 58,630 59,031 59,470 60,030 60,731
Per capita incomes (dollars) 4/
Per capita personal income 15,215 16,144 16,889 17,707 18,627
Per capita net earnings 9,177 9,733 10,183 10,591 11,170
Per capita transfer payments 3,938 4,373 4,641 5,045 5,277
Per capita income maintenance 218 256 276 283 293
Per capita unemployment insurance 74 97 81 55 47
Per capita retirement & other 3,646 4,020 4,283 4,707 4,937
Per capita dividends, interest, & rent 2,100 2,038 2,066 2,071 2,179
Place of work profile
Total earnings (place of work, $000) 474,269 509,410 537,243 563,914 599,348
Wages and salary disbursements 395,614 422,247 444,431 466,641 500,619
other labor income 46,830 52,798 57,911 60,805 65,535
Proprietors' income 31,825 34,365 34,901 36,468 33,194
Nonfarm proprietors' income 29,663 30,567 30,737 32,246 36,301
Farm proprietors' income 2,162 3,798 4,164 4,222 (3,107)
Total full- and part- time employment 25,177 25,702 26,378 26,353 27,330
Wage and salary jobs 21,765 22,242 22,959 23,110 24,081
Number of proprietors 3,412 3,460 3,419 3,243 3,249
Number of nonfarm proprietors 5/ 2,570 2,613 2,595 2,462 2,502
Number of farm proprietors 842 847 824 781 747
Average earnings per job (dollars) 18,837 19,820 20,367 21,398 21,930
Wage & salary earnings per job 18,177 18,984 19,358 20,192 20,789
Average earnings per nonfarm proprietor 11,542 11,698 11,845 13,097 14,509
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA30 August 1997 BUREAU OF ECONOMIC ANALYSIS
</TABLE>
<PAGE>
REGIONAL ECONOMIC PROFILE
for States-and counties
<TABLE>
<CAPTION>
Laurens, South Carolina [45.059]
- -------------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Place of residence profile
Personal income (thousands of dollars) 2,267,182 2,400,709 2,531,645 2,695,522 2,888,543
Nonfarm personal income 2,255,173 2,384,930 2,516,761 2,673,985 2,871,573
Farm income 12,009 15,779 14,884 21,537 16,970
Derivation of personal income
Net earnings 1/ 1,571,936 1,675,535 1,778,816 1,887,494 2,027,102
Transfer payments 384,980 421,496 444,877 481,895 513,931
Income maintenance 2/ 22,399 27,402 28,745 30,286 31,769
Unemployment insurance 11,836 14,303 11,247 9,377 7,795
Retirement and other 350,745 379,791 404,885 442,232 474,367
Dividends, interest, and rent 310,266 303,678 307,952 326,133 347,510
Population (number of persons) 3/ 146,313 148,111 150,798 152,545 154,472
Per capita incomes (dollars) 4/
Per capita personal income 15,495 16,209 16,788 17,610 18,699
Per capita net earnings 10,744 11,313 11,796 12,373 13,123
Per capita transfer payments 2,631 2,846 2,950 3,159 3,327
Per capita income maintenance 153 185 191 199 206
Per capita unemployment insurance 81 97 75 61 50
Per capita retirement & other 2,397 2,564 2,685 2,899 3,071
Per capita dividends, interest, & rent 2,121 2,050 2,042 2,138 2,250
Place of work profile
Total earnings (place of work, $000) 1,328,339 1,444,897 1,551,740 1,666,814 1,774,783
Wages and salary disbursements 1,074,421 1,154,326 1,235,009 1,318,738 1,400,958
Other labor income 127,953 145,348 162,815 173,977 183,715
Proprietors' income 125,965 145,223 153,916 174,099 190,110
Nonfarm proprietors' income 118,402 133,826 144,013 157,425 178,272
Farm proprietors' income 7,563 11,397 9,903 16,674 11,838
Total full- and part- time employment 67,111 68,821 71,228 73,186 74,151
Wage and salary jobs 57,312 58,776 61,000 62,797 63,666
Number of proprietors 9,799 10,045 10,228 10,389 10,485
Number of nonfarm proprietors 5/ 8,494 8,725 8,944 9,172 9,321
Number of farm proprietors 1,305 1,320 1,284 1,217 1,164
Average earnings per job (dollars) 19,793 20,995 21,786 22,775 23,935
Wage & salary earnings per job 18,747 19,639 20,246 21,000 22,005
Average earnings per nonfarm proprietor 13,939 15,338 16,102 17,164 19,126
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA30 August 1997 BUREAU OF ECONOMIC ANALYSIS
</TABLE>
<PAGE>
REGIONAL ECONOMIC PROFILE
for States and counties
<TABLE>
<CAPTION>
Greenwood, South Carolina [45.047]
- -------------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Place of residence profile
Personal income (thousands of dollars) 929,398 993,419 1,038,194 1,103,068 1,192,586
Nonfarm personal income 926,093 990,955 1,035,553 1,102,025 1,191,759
Farm income 3,305 2,464 2,641 1,043 827
Derivation of personal income
Net earnings 1/ 629,412 671,235 702,781 747,442 812,401
Transfer payments 159,416 178,694 187,128 199,470 213,839
Income maintenance 2/ 12,435 14,662 15,215 15,965 17,627
Unemployment insurance 4,114 5,097 4,220 4,253 3,807
Retirement and other 142,867 158,935 167,693 179,252 192,405
Dividends, interest, and rent 140,570 143,490 148,285 156,156 166,346
Population (number of persons) 3/ 60,139 60,526 61,039 61,544 62,102
Per capita incomes (dollars) 4/
Per capita personal income 15,454 16,413 17,009 17,923 19,204
Per capita net earnings 10,466 11,090 11,514 12,145 13,082
Per capita transfer payments 2,651 2,952 3,066 3,241 3,443
Per capita income maintenance 207 242 249 259 284
Per capita unemployment insurance 68 84 69 69 61
Per capita retirement & other 2,376 2,626 2,747 2,913 3,098
Per capita dividends, interest, & rent 2,337 2,371 2,429 2,537 2,679
Place of work profile
Total earnings (place of work, $000) 735,333 783,541 821,571 875,344 954,046
Wages and salary disbursements 611,153 648,610 676,858 723,013 788,135
Other labor income 73,408 81,714 88,820 95,241 104,856
Proprietors' income 50,772 53,217 55,893 57,090 61,055
Nonfarm proprietors' income 47,894 51,138 53,683 56,467 60,676
Farm proprietors' income 2,878 2,079 2,210 623 379
Total full- and part- time employment 34,404 34,799 35,942 37,033 38,876
Wage and salary jobs 30,382 30,873 31,945 33,039 34,848
Number of proprietors 4,022 3,926 3,997 3,994 4,028
Number of nonfarm proprietors 5/ 3,565 3,461 3,545 3,565 3,618
Number of farm proprietors 457 465 452 429 410
Average earnings per job (dollars) 21,373 22,516 22,858 23,637 24,541
Wage & salary earnings per job 20,116 21,009 21,188 21,884 22,616
Average earnings per nonfarm proprietor 13,435 14,775 15,143 15,839 16,771
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA30 August 1997 BUREAU OF ECONOMIC ANALYSIS
</TABLE>
<PAGE>
EXHIBIT III-1
Heritage Federal Savings and Loan Association
General Characteristics of Publicly-Traded Institutions
<PAGE>
REGIONAL ECONOMIC PROFILE
for States and counties
<TABLE>
<CAPTION>
Greenville, South Carolina [45.045]
- -------------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Place of residence profile
Personal income (thousands of dollars) 5,992,750 6,293,216 6,674,946 7,116,838 7,686,848
Nonfarm personal income 5,988,318 6,287,193 6,666,896 7,107,872 7,679,777
Farm income 4,432 6,023 8,050 8,966 7,071
Derivation of personal income
Net earnings 1/ 4,200,171 4,406,814 4,692,790 5,010,214 5,443,758
Transfer payments 792,999 882,779 938,090 1,004,278 1,069,032
Income maintenance 2/ 49,830 63,616 68,391 71,723 75,209
Unemployment insurance 20,483 27,604 21,394 17,573 12,780
Retirement and other 722,686 791,559 848,305 914,982 981,043
Dividends, interest, and rent 999,580 1,003,623 1,044,066 1,102,346 1,174,058
Population (number of persons) 3/ 324,085 326,949 330,711 335,182 339,655
Per capita incomes (dollars) 4/
Per capita personal income 18,491 19,248 20,184 21,233 22,631
Per capita net earnings 12,960 13,479 14,190 14,948 16,027
Per capita transfer payments 2,447 2,700 2,837 2,996 3,147
Per capita income maintenance 154 195 207 214 221
Per capita unemployment insurance 63 84 65 52 38
Per capita retirement & other 2,230 2,421 2,565 2,730 2,888
Per capita dividends, interest, & rent 3,084 3,070 3,157 3,289 3,457
Place of work profile
Total earnings (place of work, $000) 5,375,114 5,559,270 5,932,852 6,311,741 6,890,338
Wages and salary disbursements 4,543,220 4,657,270 4,950,495 5,256,934 5,752,354
Other labor income 523,350 561,082 622,135 659,631 715,415
Proprietors' income 308,544 340,918 360,222 395,176 422,569
Nonfarm proprietors' income 305,790 336,611 354,124 388,117 417,509
Farm proprietors' income 2,754 4,307 6,098 7,059 5,060
Total full- and part- time employment 226,491 224,428 234,733 244,254 252,749
Wage and salary jobs 200,738 198,312 207,560 214,778 222,949
Number of proprietors 25,753 26,116 27,173 29,476 29,800
Number of nonfarm proprietors 5/ 24,920 25,275 26,355 28,701 29,058
Number of farm proprietors 833 841 818 775 742
Average earnings per job (dollars) 23,732 24,771 25,275 25,841 27,262
Wage & salary earnings per job 22,633 23,485 23,851 24,476 25,801
Average earnings per nonfarm proprietor 12,271 13,318 13,437 13,523 14,368
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA30 August 1997 BUREAU OF ECONOMIC ANALYSIS
</TABLE>
<PAGE>
Footnotes for Table CA30, Regional Economic Profiles
1/ Total earnings less personal contributions for social insurance adjusted to
place of residence.
2/ Consists largely of supplemental security income payments, payments to
families with dependent children (AFDC), general assistance payments, food
stamp payments, and other assistance payments, including emergency
assistance.
3/ Census Bureau midyear population estimates. Estimates for 1990-95 reflect
county population estimates available as of March 1997. The population
estimates for the United States, Utah, and Cache, UT, 1991-94, have been
adjusted by BEA for consistency with a special, upward adjustment made by
the Census Bureau to its 1995 estimate for Cache County. Additionally, as
a result of special and test censuses conducted in 1995, the Census Bureau
reduced substantially the 1995 population estimates for Yuma, AZ; DeSoto,
LA; Dorchester, SC; and Montgomery, TN, but made no adjustments to the
estimates for the other years. For these counties, BEA was unable to make
adjustments to the population estimates in time for this release, and the
estimates of per capita personal income are discontinuous between 1994 and
1995. BEA's further adjustments to the population estimates for 1991-94 will
be reflected in the release of State per capita personal income on September
19, 1997 and in the release of local area per capita personal income in the
Spring of 1998.
4/ Type of income divided by population yields a per capita for that type of
income.
5/ Excludes limited partners.
6/ Cibola, NM was separated from Valencia in June 1981, but in these estimates
Valencia includes Cibola through the end of 1981.
7/ La Paz county, AZ was separated from Yuma county on January 1, 1983. The
Yuma, AZ MSA includes La Paz, AZ through 1982.
8/ Estimates for 1979 forward reflect Alaska Census Areas as defined in the
1980 Decennial Census; those for prior years reflect Alaska Census Divisions
as defined in the 1970 Decennial Census. Estimates from 1988 forward
separate Aleutian Islands Census Area into Aleutians East Borough and
Aleutians West Census Area. Estimates for 1991 forward separate Denali
Borough from Yukon-Koyukuk Census Area and Lake and Peninsula Borough from
Dillingham Census Area. Estimates from 1993 forward separate Skagway-
Yakutat-Angoon Census Area into Skagway-Hoonah-Angoon Census Area and
Yakutat Borough.
9/ Shawano, WI and Menominee, WI are combined as Shawano (incl. Menominee), WI
for the years prior to 1989.
(L) Less than $50,000 or less than 10 jobs, as appropriate. Estimates are
included in totals.
(N) Data not available for this year.
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 5, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ --------------------- ------ ------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
California Companies
--------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AHM Ahmanson and Co. H.F. of CA NYSE Nationwide M.B. 46,800 391 12-31 10/72 59.50 5,617
GDW Golden West Fin. Corp. of CA NYSE Nationwide M.B. 39,229 246 12-31 05/59 89.62 5,088
GSB Glendale Fed. Bk, FSB of CA NYSE CA Div. 16,433 154 06-30 10/83 33.31 1,681
CSA Coast Savings Financial of CA NYSE California R.E. 9,040 92 12-31 12/85 60.00 1,119
DSL Downey Financial Corp. of CA NYSE Southern CA Thrift 5,854 82 12-31 01/71 27.50 736
FED FirstFed Fin. Corp. of CA NYSE Los Angeles CA R.E. 4,105 25 12-31 12/83 36.50 386
BPLS Bank Plus Corp. of CA OTC Los Angeles CA R.E. 3,920 33 12-31 / 11.12 215
WES Westcorp Inc. of Orange CA NYSE California Div. 3,757 26 12-31 05/86 17.00 446
BVCC Bay View Capital Corp. of CA OTC San Francisco CA M.B. 3,162 45 12-31 05/86 33.75 419
PFFB PFF Bancorp of Pomona CA OTC Southern CA Thrift 2,615 23 03-31 03/96 18.37 329
CENF CENFED Financial Corp. of CA OTC Los Angeles CA Thrift 2,305 18 12-31 10/91 40.75 243
AFFFZ America First Fin. Fund of CA OTC San Francisco CA Div. 2,251 36 12-31 / 47.12 283
HEMT HF Bancorp of Hemet CA OTC Southern CA Thrift 1,050 19 06-30 06/95 16.75 105
REDF RedFed Bancorp of Redlands CA OTC Southern CA Thrift 967 14 12-31 04/94 20.00 144
ITLA Imperial Thrift & Loan of CA (3) OTC Los Angeles CA R.E. 902 9 12-31 / 18.00 141
HTHR Hawthorne Fin. Corp. of CA OTC Southern CA Thrift 891 6 12-31 / 21.00 65
QCBC Quaker City Bancorp of CA OTC Los Angeles CA R.E. 847 8 06-30 12/93 20.50 96
PROV Provident Fin. Holdings of CA OTC Southern CA M.B. 641 9 06-30 06/96 20.00 97
HBNK Highland Federal Bank of CA OTC Los Angeles CA R.E. 516 8 12-31 / 32.00 74
MBBC Monterey Bay Bancorp of CA OTC West Central CA Thrift 410 7 12-31 02/95 19.00 61
SGVB SGV Bancorp of W. Covina CA OTC Los Angeles CA Thrift 409 8 06-30 06/95 17.12 40
BYFC Broadway Fin. Corp. of CA OTC Los Angeles CA Thrift 122 J 3 12-31 01/96 13.00 11
<CAPTION>
Florida Companies
-----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OCN Ocwen Financial Corp. of FL OTC Southeast FL Div. 2,956 1 12-31 / 24.25 1,467
BANC BankAtlantic Bancorp of FL OTC Southeastern FL M.B. 2,845 56 12-31 11/83 14.37 320
BKUNA BankUnited SA of FL OTC Miami FL Thrift 2,145 14 09-30 12/85 12.94 123
FFPB First Palm Beach Bancorp of FL OTC Southeast FL Thrift 1,808 40 09-30 09/93 38.75 196
HARB Harbor FSB, MHC of FL (46.6) OTC Eastern FL Thrift 1,131 23 09-30 01/94 65.00 323
</TABLE>
<PAGE>
RP FINANCIAL, LC.
-------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 5, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ --------------------- ------ ------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Florida Companies (continued)
-----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFFL Fidelity FSB, MHC of FL (47.7) OTC Southeast FL Thrift 999 J 20 12-31 01/94 27.87 189
CMSV Commty. Svgs, MHC of FL (48.5) OTC Southeast FL Thrift 709 19 12-31 10/94 35.00 178
FFLC FFLC Bancorp of Leesburg FL OTC Central FL Thrift 383 9 12-31 01/94 22.50 86
<CAPTION>
Mid-Atlantic Companies
----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DME Dime Bancorp, Inc. of NY (3) NYSE NY,NJ,FL M.B. 19,413 86 12-31 08/86 24.25 2,461
SVRN Sovereign Bancorp of PA OTC PA,NJ,DE M.B. 14,601 120 12-31 08/86 18.94 1,691
GPT GreenPoint Fin. Corp. of NY (3) NYSE New York City NY Thrift 13,094 74 12-31 01/94 66.62 2,853
ASFC Astoria Financial Corp. of NY OTC NY Thrift 7,904 45 12-31 11/93 55.12 1,139
LISB Long Island Bancorp, Inc of NY OTC Long Island NY M.B. 5,931 36 09-30 04/94 47.12 1,132
ALBK ALBANK Fin. Corp. of Albany NY OTC Upstate NY,MA,VT Thrift 3,717 70 12-30 04/92 46.25 595
ROSE T R Financial Corp. of NY (3) OTC New York City NY Thrift 3,692 15 12-31 06/93 32.87 578
RSLN Roslyn Bancorp, Inc. of NY (3) OTC Long Island NY M.B. 3,474 6 12-31 01/97 21.75 949
NYB New York Bancorp, Inc. of NY NYSE Southeastern NY Thrift 3,244 29 09-30 01/88 35.37 754
MLBC ML Bancorp of Villanova PA OTC Philadelphia PA M.B. 2,316 18 03-31 08/94 28.75 341
CMSB Cmnwealth Bancorp of PA OTC Philadelphia PA M.B. 2,278 39 06-30 06/96 20.37 331
HARS Harris SB, MHC of PA (24.3) OTC Southeast PA Thrift 2,110 31 12-31 01/94 19.00 642
NWSB Northwest SB, MHC of PA (30.7) OTC Pennsylvania Thrift 2,101 53 06-30 11/94 14.00 655
RELY Reliance Bancorp, Inc. of NY OTC New York City NY Thrift 2,035 28 06-30 03/94 33.12 289
HAVN Haven Bancorp of Woodhaven NY OTC New York City NY Thrift 1,833 20 12-31 09/93 43.00 189
QCSB Queens County Bancorp of NY (3) OTC New York City NY Thrift 1,541 13 12-31 11/93 35.00 529
JSB JSB Financial, Inc. of NY NYSE New York City NY Thrift 1,531 13 12-31 06/90 46.62 461
WSFS WSFS Financial Corp. of DE (3) OTC DE Div. 1,496 16 12-31 11/86 19.62 244
OCFC Ocean Fin. Corp. of NJ OTC Eastern NJ Thrift 1,448 J 10 12-31 07/96 37.12 303
DIME Dime Community Bancorp of NY OTC New York City NY Thrift 1,385 15 06-30 06/96 23.25 294
PFSB PennFed Fin. Services of NJ OTC Northern NJ Thrift 1,364 17 06-30 07/94 33.19 160
MFSL Maryland Fed. Bancorp of MD OTC MD Thrift 1,157 J 25 02-28 06/87 26.62 172
YFED York Financial Corp. of PA OTC PA,MD Thrift 1,156 22 06-30 02/84 26.50 233
FSLA First SB SLA MHC of NJ (47.5) OTC Eastern NJ Thrift 1,045 16 12-31 07/92 40.37 323
PVSA Parkvale Financial Corp of PA OTC Southwestern PA Thrift 1,005 28 06-30 07/87 29.75 152
FFIC Flushing Fin. Corp. of NY (3) OTC New York City NY Thrift 960 7 12-31 11/95 22.25 178
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 5, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ --------------------- ------ ------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Mid-Atlantic Companies (continued)
----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PSBK Progressive Bank, Inc. of NY (3) OTC Southeast NY Thrift 885 17 12-31 08/84 33.75 129
PKPS Poughkeepsie Fin. Corp. of NY OTC Southeast NY Thrift 884 13 12-31 11/85 9.94 125
PWBC PennFirst Bancorp of PA OTC Western PA Thrift 822 9 12-31 06/90 18.25 97
MBB MSB Bancorp of Middletown NY (3) AMEX Southeastern NY Thrift 814 J 16 12-31 09/92 29.00 82
GAF GA Financial Corp. of PA AMEX Pittsburgh PA Thrift 802 13 12-31 03/96 19.25 153
IBSF IBS Financial Corp. of NJ OTC Southwest NJ Thrift 735 10 09-30 10/94 17.44 191
SFIN Statewide Fin. Corp. of NJ OTC Northern NJ Thrift 703 16 12-31 10/95 21.50 99
FBBC First Bell Bancorp of PA OTC Pittsburgh PA Thrift 681 7 12-31 06/95 17.25 112
TSBS Peoples Bcrp, MHC of NJ (35.9) OTC Central NJ Thrift 639 14 12-31 08/95 34.75 314
THRD TF Financial Corp. of PA OTC Philadelphia PA Thrift 625 14 06-30 07/94 28.00 114
FSNJ Bayonne Banchsares of NJ OTC Northern NJ Thrift 609 4 03-31 08/97 12.00 108
FMCO FMS Financial Corp. of NJ OTC Southern NJ Thrift 582 18 12-31 12/88 29.37 70
PULS Pulse Bancorp of S. River NJ OTC Central NJ Thrift 526 4 09-30 09/86 24.50 75
FSPG First Home Bancorp of NJ OTC NJ,DE Thrift 525 10 12-31 04/87 23.75 64
LVSB Lakeview SB of Paterson NJ OTC Northern NJ Thrift 506 J 8 07-31 12/93 24.12 109
AHCI Ambanc Holding Co., Inc. of NY (3) OTC East-Central NY Thrift 485 J 9 12-31 12/95 17.00 73
PFNC Progress Financial Corp. of PA OTC Southeastern PA M.B. 437 9 12-31 07/83 15.50 62
CNY Carver Bancorp, Inc. of NY AMEX New York, NY Thrift 416 7 03-31 10/94 17.06 39
RARB Raritan Bancorp. of Raritan NJ (3) OTC Central NJ Thrift 407 6 12-31 03/87 27.25 65
SHEN First Shenango Bancorp of PA OTC Western PA Thrift 401 4 12-31 04/93 33.75 70
FKFS First Keystone Fin. Corp of PA OTC Philadelphia PA Thrift 373 5 09-30 01/95 32.00 39
PBCI Pamrapo Bancorp, Inc. of NJ OTC Northern NJ Thrift 372 8 12-31 11/89 23.87 68
FSBI Fidelity Bancorp, Inc. of PA OTC Southwestern PA Thrift 363 J 8 09-30 06/88 26.62 41
FOBC Fed One Bancorp of Wheeling WV OTC Northern WV,OH Thrift 358 9 12-31 01/95 24.87 59
HARL Harleysville SA of PA OTC Southeastern PA Thrift 345 4 09-30 08/87 29.37 49
LFBI Little Falls Bancorp of NJ OTC New Jersey Thrift 324 6 12-31 01/96 20.00 52
CVAL Chester Valley Bancorp of PA OTC Southeastern PA Thrift 322 6 06-30 03/87 26.25 57
YFCB Yonkers Fin. Corp. of NY OTC Yonkers NY Thrift 313 4 09-30 04/96 18.50 56
EQSB Equitable FSB of Wheaton MD OTC Central MD Thrift 308 J 4 09-30 09/93 45.00 27
FIBC Financial Bancorp, Inc. of NY OTC New York, NY Thrift 297 5 09-30 08/94 24.81 42
CATB Catskill Fin. Corp. of NY (3) OTC Albany NY Thrift 290 4 09-30 04/96 17.62 82
LFED Leeds FSB, MHC of MD (36.3) OTC Baltimore MD Thrift 285 1 06-30 05/94 21.50 111
FBER First Bergen Bancorp of NJ OTC Northern NJ Thrift 285 4 09-30 04/96 18.62 53
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 5, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ --------------------- ------ ------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Mid-Atlantic Companies (continued)
----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WVFC WVS Financial Corp. of PA (3) OTC Pittsburgh PA Thrift 282 5 06-30 11/93 31.50 55
PHFC Pittsburgh Home Fin. of PA OTC Pittsburgh PA Thrift 273 6 09-30 04/96 20.69 41
WSB Washington SB, FSB of MD AMEX Southeastern MD Thrift 268 J 4 07-31 / 7.37 32
WYNE Wayne Bancorp of NJ OTC Northern NJ Thrift 267 0 12-31 06/96 22.75 46
IFSB Independence FSB of DC OTC Washington DC Ret. 258 J 2 12-31 06/85 13.78 18
GDVS Greater DV SB,MHC of PA (19.9) (3) OTC Southeast PA Thrift 249 7 12-31 03/95 31.00 101
ESBK The Elmira SB FSB of Elmira NY (3) OTC NY,PA Thrift 228 6 12-31 03/85 30.00 21
SBFL SB Fngr Lakes MHC of NY (33.1) OTC Western NY Thrift 228 4 04-30 11/94 29.25 52
HRBF Harbor Federal Bancorp of MD OTC Baltimore MD Thrift 217 9 03-31 08/94 21.75 37
LARL Laurel Capital Group of PA OTC Southwestern PA Thrift 210 6 06-30 02/87 27.75 40
PHSB Ppls Home SB, MHC of PA (45.0) OTC Western PA Thrift 206 9 12-31 07/97 18.62 51
PBHC OswegoCity SB, MHC of NY (46.) (3) OTC NY Thrift 193 5 12-31 11/95 28.50 55
PEEK Peekskill Fin. Corp. of NY OTC Southeast NY Thrift 181 3 06-30 12/95 17.50 56
PLSK Pulaski SB, MHC of NJ (46.0) OTC New Jersey Thrift 179 6 12-31 04/97 18.75 39
SFED SFS Bancorp of Schenectady NY OTC Eastern NY Thrift 174 3 12-31 06/95 22.12 27
AFED AFSALA Bancorp, Inc. of NY OTC Central NY Thrift 159 J 4 09-30 10/96 19.12 28
SKBO First Carnegie,MHC of PA(45.0) OTC Western PA Thrift 147 J 3 03-31 04/97 18.62 43
PRBC Prestige Bancorp of PA OTC Thrift 138 0 12-31 06/96 18.41 17
TPNZ Tappan Zee Fin., Inc. of NY OTC Southeast NY Thrift 119 S 1 03-31 10/95 19.75 29
GOSB GSB Financial Corp. of NY OTC Southeast NY Thrift 114 P 2 09-30 07/97 15.63 35
WWFC Westwood Fin. Corp. of NJ OTC Northern NJ Thrift 110 2 03-31 06/96 27.62 18
AFBC Advance Fin. Bancorp of WV OTC Northern Neck WV Thrift 106 2 06-30 01/97 17.75 19
WHGB WHG Bancshares of MD OTC Baltimore MD Thrift 100 J 5 09-30 04/96 16.25 24
SHSB SHS Bancorp, Inc. of PA OTC Pittsburgh Thrift 90 P 4 12/31 10/97 16.00 13
ALBC Albion Banc Corp. of Albion NY OTC Western NY Thrift 71 2 09-30 07/93 29.00 7
PWBK Pennwood SB of PA (3) OTC Pittsburgh PA Thrift 48 3 12-31 07/96 18.94 11
<CAPTION>
Mid-West Companies
------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COFI Charter One Financial of OH OTC OH,MI Div. 15,197 155 12-31 01/88 59.25 2,937
CFB Commercial Federal Corp. of NE NYSE NE,CO,KS,OK,IA M.B. 7,207 107 06-30 12/84 48.06 1,037
SPBC St. Paul Bancorp, Inc. of IL OTC Chicago IL Div. 4,549 52 12-31 05/87 24.50 836
</TABLE>
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 5, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ --------------------- ------ ------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MAFB MAF Bancorp of IL OTC Chicago IL Thrift 3,371 20 12-31 01/90 32.50 496
CTZN CitFed Bancorp of Dayton OH OTC Dayton OH M.B. 3,295 33 03-31 01/92 50.62 438
GTFN Great Financial Corp. of KY OTC Kentucky M.B. 2,894 45 12-31 03/94 48.00 664
FLGS Flagstar Bancorp, Inc of MI OTC MI Thrift 2,033 15 12/31 / 18.25 249
ABCW Anchor Bancorp Wisconsin of WI OTC Wisconsin M.B. 1,955 33 03-31 07/92 31.50 285
DNFC D&N Financial Corp. of MI OTC MI Ret. 1,754 37 12-31 02/85 24.12 199
STFR St. Francis Cap. Corp. of WI OTC Milwaukee WI Thrift 1,646 J 23 09-30 06/93 38.25 200
FTFC First Fed. Capital Corp. of WI OTC Southern WI M.B. 1,560 44 12-31 11/89 27.87 255
FISB First Indiana Corp. of IN OTC Central IN M.B. 1,547 28 12-31 08/83 26.25 277
ABCL Allied Bancorp of IL OTC Chicago IL M.B. 1,371 14 09-30 07/92 26.25 211
JSBA Jefferson Svgs Bancorp of MO OTC St. Louis MO,TX Thrift 1,297 M 32 12-31 04/93 43.25 217
AADV Advantage Bancorp of WI OTC WI,IL Thrift 1,037 15 09-30 03/92 62.25 201
OFCP Ottawa Financial Corp. of MI OTC Western MI Thrift 867 26 12-31 08/94 27.50 147
CFSB CFSB Bancorp of Lansing MI OTC Central MI Thrift 860 17 12-31 06/90 35.50 181
NASB North American SB of MO OTC KS,MO M.B. 737 J 7 09-30 09/85 49.94 111
GSBC Great Southern Bancorp of MO OTC Southwest MO Thrift 728 25 06-30 12/89 21.88 177
HOMF Home Fed Bancorp of Seymour IN OTC Southern IN Thrift 694 16 06-30 01/88 27.50 140
SFSL Security First Corp. of OH OTC Northeastern OH R.E. 681 13 03-31 01/88 19.50 148
FNGB First Northern Cap. Corp of WI OTC Northeast WI Thrift 657 20 12-31 12/83 13.50 119
MSBK Mutual SB, FSB of Bay City MI OTC Michigan M.B. 654 22 12-31 07/92 13.00 56
FFYF FFY Financial Corp. of OH OTC Youngstown OH Thrift 611 10 06-30 06/93 29.75 123
EMLD Emerald Financial Corp of OH OTC Cleveland OH Thrift 604 13 12-31 / 19.25 98
AVND Avondale Fin. Corp. of IL OTC Chicago IL Ret. 597 5 12-31 04/95 16.00 56
HFFC HF Financial Corp. of SD OTC South Dakota Thrift 575 19 06-30 04/92 26.00 73
FDEF First Defiance Fin.Corp. of OH OTC Northwest OH Thrift 574 9 06-30 10/95 15.25 137
HMNF HMN Financial, Inc. of MN OTC Southeast MN Thrift 569 7 12-31 06/94 25.87 109
FFBH First Fed. Bancshares of AR OTC Northern AR Thrift 547 12 12-31 05/96 21.37 105
FFOH Fidelity Financial of OH OTC Cincinnati OH Thrift 529 4 12-31 03/96 15.00 84
HFGI Harrington Fin. Group of IN OTC Eastern IN Thrift 521 3 06-30 / 12.37 40
CAFI Camco Fin. Corp. of OH OTC Eastern OH M.B. 502 7 12-31 / 24.00 77
FBCI Fidelity Bancorp of Chicago IL OTC Chicago IL Thrift 498 5 09-30 12/93 23.25 65
CBCI Calumet Bancorp of Chicago IL OTC Chicago IL Thrift 488 5 06-30 02/92 31.87 101
FFSX First FS&LA. MHC of IA (46.1) OTC Western IA Thrift 457 13 06-30 07/92 31.87 90
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 5, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ --------------------- ------ ------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PERM Permanent Bancorp of IN OTC Southwest IN Thrift 434 12 03-31 04/94 25.62 54
SFSB SuburbFed Fin. Corp. of IL OTC IL,IN Thrift 427 J 12 12-31 03/92 34.87 44
HALL Hallmark Capital Corp. of WI OTC Milwaukee WI Thrift 418 3 06-30 01/94 15.25 44
MCBS Mid Continent Bancshares of KS OTC Central KS M.B. 409 J 9 09-30 06/94 41.25 81
CASH First Midwest Fin. Corp. of IA OTC IA,SD R.E. 405 12 09-30 09/93 20.50 55
FMBD First Mutual Bancorp of IL OTC Central IL Thrift 402 12 12-31 07/95 20.25 71
PMFI Perpetual Midwest Fin. of IA OTC EastCentral IA Thrift 402 5 12-31 03/94 27.00 51
WOFC Western Ohio Fin. Corp. of OH OTC Western OH Thrift 396 J 6 12-31 07/94 25.75 61
CBSB Charter Financial Inc. of IL OTC Southern IL Thrift 393 J 8 09-30 12/95 22.00 91
ASBI Ameriana Bancorp of IN OTC Eastern IN,OH Thrift 393 8 12-31 03/87 19.50 63
FFHH FSF Financial Corp. of MN OTC Southern MN Thrift 388 11 09-30 10/94 20.00 60
PFSL Pocahnts Fed, MHC of AR (47.0) OTC Northeast AR Thrift 383 6 09-30 04/94 34.00 55
PVFC PVF Capital Corp. of OH OTC Cleveland OH R.E. 383 9 06-30 12/92 20.50 53
FFKY First Fed. Fin. Corp. of KY OTC Central KY Thrift 383 8 06-30 07/87 22.00 91
SWBI Southwest Bancshares of IL OTC Chicago IL Thrift 375 6 12-31 06/92 25.50 68
INBI Industrial Bancorp of OH OTC Northern OH Thrift 354 10 12-31 08/95 18.00 93
SMFC Sho-Me Fin. Corp. of MO OTC Southwest MO Thrift 345 8 12-31 07/94 47.00 70
HBEI Home Bancorp of Elgin IL OTC Northern IL Thrift 343 5 12-31 09/96 18.00 123
KNK Kankakee Bancorp of IL AMEX Illinois Thrift 340 9 12-31 01/93 33.87 48
HBFW Home Bancorp of Fort Wayne IN OTC Northeast IN Thrift 335 J 9 09-30 03/95 27.37 69
HMCI Homecorp, Inc. of Rockford IL OTC Northern IL Thrift 327 9 12-31 06/90 25.00 43
WFI Winton Financial Corp. of OH OTC Cincinnati OH R.E. 317 J 4 09-30 08/88 20.00 40
WCBI WestCo Bancorp of IL OTC Chicago IL Thrift 309 1 12-31 06/92 27.50 68
FSFF First SecurityFed Fin of IL OTC Chicago Thrift 303 P 5 12-31 10/97 16.06 103
GFCO Glenway Financial Corp. of OH OTC Cincinnati OH Thrift 293 6 06-30 11/90 19.00 43
PFDC Peoples Bancorp of Auburn IN OTC Northeastern IN Thrift 288 J 6 09-30 07/87 22.00 75
CBK Citizens First Fin.Corp. of IL AMEX Central IL Thrift 278 6 12-31 05/96 18.25 47
EFBI Enterprise Fed. Bancorp of OH OTC Cincinnati OH Thrift 275 5 09-30 10/94 27.75 55
FCBF FCB Fin. Corp. of Neenah WI OTC Eastern WI Thrift 271 M 6 03-31 09/93 27.25 106
FBCV 1st Bancorp of Vincennes IN OTC Southwestern IN M.B. 261 1 06-30 04/87 40.00 28
MFBC MFB Corp. of Mishawaka IN OTC Northern IN Thrift 256 4 09-30 03/94 23.25 38
WAYN Wayne S&L Co. MHC of OH (47.8) OTC Central OH Thrift 250 6 03-31 06/93 31.00 70
CAPS Capital Savings Bancorp of MO OTC Central MO Thrift 242 8 06-30 12/93 22.37 42
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 5, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ --------------------- ------ ------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFED Fidelity Fed. Bancorp of IN OTC Southwestern IN Thrift 235 4 06-30 08/87 10.00 28
OHSL OHSL Financial Corp. of OH OTC Cincinnati, OH Thrift 235 4 12-31 02/93 27.75 34
FFHS First Franklin Corp. of OH OTC Cincinnati OH Thrift 231 7 12-31 01/88 26.00 31
LARK Landmark Bancshares of KS OTC Central KS Thrift 228 J 5 09-30 03/94 24.00 41
MBLF MBLA Financial Corp. of MO OTC Northeast MO Thrift 224 2 06-30 06/93 27.00 34
BFFC Big Foot Fin. Corp. of IL OTC Chicago IL Thrift 215 3 07-31 12/96 18.50 46
FFFD North Central Bancshares of IA OTC Central IA Thrift 215 4 12-31 03/96 18.87 61
GFED Guarnty FS&LA,MHC of MO (31.0) OTC Southwest MO Thrift 210 4 06-30 04/95 23.75 74
MFFC Milton Fed. Fin. Corp. of OH OTC Southwest OH Thrift 210 2 09-30 10/94 15.00 35
CMRN Cameron Fin. Corp. of MO OTC Northwest MO Thrift 208 J 3 09-30 04/95 19.62 52
MWFD Midwest Fed. Fin. Corp of WI OTC Central WI Thrift 207 J 9 12-31 07/92 26.50 43
WEFC Wells Fin. Corp. of Wells MN OTC Southcentral MN Thrift 205 7 12-31 04/95 17.75 35
FFBZ First Federal Bancorp of OH OTC Eastern OH Thrift 204 6 09-30 06/92 19.25 30
HCBB HCB Bancshares of AR OTC Southern AR Thrift 200 J 6 06-30 05/97 13.62 36
LSBI LSB Fin. Corp. of Lafayette IN OTC Central IN Thrift 200 4 12-31 02/95 26.00 24
NEIB Northeast Indiana Bncrp of IN OTC Northeast IN Thrift 190 3 12-31 06/95 20.00 35
FFWC FFW Corporation of Wabash IN OTC Central IN Thrift 181 3 06-30 04/93 37.75 27
PULB Pulaski SB, MHC of MO (29.8) OTC St. Louis MO Thrift 180 J 5 09-30 05/94 30.50 64
MARN Marion Capital Holdings of IN OTC Central IN Thrift 180 2 06-30 03/93 26.50 47
PFED Park Bancorp of Chicago IL OTC Chicago IL Thrift 175 3 12-31 08/96 17.87 43
EGLB Eagle BancGroup of IL OTC Central IL Thrift 172 3 12-31 07/96 19.75 24
FFWD Wood Bancorp of OH OTC Northern OH Thrift 167 6 06-30 08/93 18.50 39
BWFC Bank West Fin. Corp. of MI OTC Southeast MI Thrift 165 3 06-30 03/95 22.00 39
JXSB Jcksnville SB,MHC of IL (45.6) OTC Central IL Thrift 164 4 12-31 04/95 26.75 34
SMBC Southern Missouri Bncrp of MO OTC Southeast MO Thrift 163 8 06-30 04/94 19.00 31
FBSI First Bancshares of MO OTC Southcentral MO Thrift 163 6 06-30 12/93 26.25 29
HMLK Hemlock Fed. Fin. Corp. of IL OTC Chicago IL Thrift 162 3 12-31 04/97 17.25 36
QCFB QCF Bancorp of Virginia MN OTC Northeast MN Thrift 157 J 2 06-30 04/95 28.50 39
MWBI Midwest Bancshares, Inc. of IA OTC Southeast IA Thrift 150 4 12-31 11/92 18.50 19
WEHO Westwood Hmstd Fin Corp of OH OTC Cincinnati OH Thrift 143 2 12-31 09/96 17.50 49
RIVR River Valley Bancorp of IN OTC Southeast IN Thrift 140 J 3 12-31 12/96 18.75 22
GTPS Great American Bancorp of IL OTC East Central IL Thrift 140 3 12-31 06/95 19.00 32
FKKY Frankfort First Bancorp of KY OTC Frankfort KY Thrift 133 3 06-30 07/95 9.25 30
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 5, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ --------------------- ------ ------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLAS Classic Bancshares of KY OTC Eastern KY Thrift 132 M 3 03-31 12/95 17.12 22
MIFC Mid Iowa Financial Corp. of IA OTC Central IA Thrift 126 J 6 09-30 10/92 10.62 18
MFCX Marshalltown Fin. Corp. of IA OTC Central IA Thrift 125 3 09-30 03/94 17.25 24
PTRS Potters Financial Corp of OH OTC Northeast OH Thrift 123 4 12-31 12/93 34.00 16
NBSI North Bancshares of Chicago IL OTC Chicago IL Thrift 122 2 12-31 12/93 26.50 25
HFSA Hardin Bancorp of Hardin MO OTC Western MO Thrift 117 3 03-31 09/95 17.50 15
FFSL First Independence Corp. of KS OTC Southeast KS Thrift 113 2 09-30 10/93 15.00 15
ASBP ASB Financial Corp. of OH OTC Southern OH Thrift 112 1 06-30 04/95 13.12 22
BDJI First Fed. Bancorp. of MN OTC Northern MN Thrift 111 5 09-30 04/95 28.00 19
HFFB Harrodsburg 1st Fin Bcrp of KY OTC Central KY Thrift 109 J 2 09-30 10/95 17.12 35
DCBI Delphos Citizens Bancorp of OH OTC Northwest OH Thrift 108 1 09-30 11/96 17.50 34
CBES CBES Bancorp of MO OTC Western MO Thrift 107 2 06-30 09/96 20.37 21
FTNB Fulton Bancorp of MO OTC Central MO Thrift 104 2 06-30 10/96 20.25 35
AMFC AMB Financial Corp. of IN OTC Northwest IN Thrift 103 4 12-31 04/96 16.00 15
PSFC Peoples Sidney Fin. Corp of OH OTC WestCentral OH Thrift 103 2 06-30 04/97 17.25 31
MONT Montgomery Fin. Corp. of IN OTC Westcentral IN Thrift 102 4 06-30 07/97 12.31 20
FTSB Fort Thomas Fin. Corp. of KY OTC Northern KY Thrift 98 2 09-30 06/95 14.75 22
CNSB CNS Bancorp of MO OTC Central MO Thrift 97 5 12-31 06/96 20.00 33
NWEQ Northwest Equity Corp. of WI OTC Northwest WI Thrift 97 3 03-31 10/94 19.00 16
INCB Indiana Comm. Bank, SB of IN OTC Central IN Ret. 96 3 06-30 12/94 20.50 19
THR Three Rivers Fin. Corp. of MI AMEX Southwest MI Thrift 95 J 4 06-30 08/95 19.75 16
GFSB GFS Bancorp of Grinnell IA OTC Central IA Thrift 94 1 06-30 01/94 16.87 17
WCFB Wbstr Cty FSB MHC of IA (45.2) OTC Central IA Thrift 94 1 12-31 08/94 20.25 43
CIBI Community Inv. Bancorp of OH OTC NorthCentral OH Thrift 94 3 06-30 02/95 15.75 14
FFDF FFD Financial Corp. of OH OTC Northeast OH Thrift 88 1 06-30 04/96 18.37 27
KYF Kentucky First Bancorp of KY AMEX Central KY Thrift 88 2 06-30 08/95 14.50 19
HZFS Horizon Fin'l. Services of IA OTC Central IA Thrift 88 3 06-30 06/94 11.00 9
SFFC StateFed Financial Corp. of IA OTC Des Moines IA Thrift 88 2 06-30 01/94 13.50 21
PFFC Peoples Fin. Corp. of OH OTC Northeast OH Thrift 86 J 2 09-30 09/96 14.00 21
LOGN Logansport Fin. Corp. of IN OTC Northern IN Thrift 86 1 12-31 06/95 15.25 19
PSFI PS Financial of Chicago IL OTC Chicago IL Thrift 86 1 12-31 11/96 17.25 37
SOBI Sobieski Bancorp of S. Bend IN OTC Northern IN Thrift 84 3 06-30 03/95 19.62 15
FFBI First Financial Bancorp of IL OTC Northern IL M.B. 84 2 12-31 10/93 19.00 8
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 5, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ --------------------- ------ ------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HHFC Harvest Home Fin. Corp. of OH OTC Southwest OH Thrift 83 M 3 09-30 10/94 14.75 13
PCBC Perry Co. Fin. Corp. of MO OTC EastCentral MO Thrift 81 J 1 09-30 02/95 23.25 19
MSBF MSB Financial Corp. of MI OTC Southcentral MI Thrift 77 2 06-30 02/95 19.50 24
HCFC Home City Fin. Corp. of OH OTC Southwest OH Thrift 70 1 06-30 12/96 18.00 16
MIVI Miss. View Hold. Co. of MN OTC Central MN Thrift 70 J 1 09-30 03/95 18.25 14
ATSB AmTrust Capital Corp. of IN OTC Northcentral IN Thrift 70 2 06-30 03/95 14.00 7
GWBC Gateway Bancorp of KY OTC Eastern KY Thrift 63 2 12-31 01/95 19.62 21
CKFB CKF Bancorp of Danville KY OTC Central KY Thrift 60 1 12-31 01/95 18.50 17
NSLB NS&L Bancorp of Neosho MO OTC Southwest MO Thrift 60 J 2 09-30 06/95 18.75 13
LXMO Lexington B&L Fin. Corp. of MO OTC West Central MO Thrift 59 J 1 09-30 06/96 16.75 19
MRKF Market Fin. Corp. of OH OTC Cincinnati OH Thrift 56 2 09-30 03/97 15.25 20
CSBF CSB Financial Group Inc of IL (3) OTC Centralia IL Thrift 49 J 2 09-30 10/95 12.50 12
FLKY First Lancaster Bncshrs of KY OTC Central KY Thrift 47 1 06-30 07/96 15.75 15
RELI Reliance Bancshares Inc of WI (3) OTC Milwaukee WI Thrift 47 1 06-30 04/96 8.87 22
HBBI Home Building Bancorp of IN OTC Southwest IN Thrift 42 2 09-30 02/95 21.25 7
HWEN Home Financial Bancorp of IN OTC Central IN Thrift 41 1 06-30 07/96 16.44 8
LONF London Financial Corp. of OH OTC Central OH Thrift 38 J 1 09-30 04/96 14.75 8
JOAC Joachim Bancorp of MO OTC Eastern MO Thrift 35 1 03-31 12/95 14.75 11
<CAPTION>
New England Companies
---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PBCT Peoples Bank, MHC of CT (40.1) (3) OTC Southwestern CT Div. 7,731 97 12-31 07/88 33.69 2,059
WBST Webster Financial Corp. of CT OTC Central CT Thrift 6,811 77 12-31 12/86 62.66 849
PHBK Peoples Heritage Fin Grp of ME (3) OTC ME,NH,MA Div. 6,056 132 12-31 12/86 42.62 1,171
CFX CFX Corp of NH (3) AMEX NH,MA M.B. 2,821 43 12-31 02/87 27.75 665
EGFC Eagle Financial Corp. of CT OTC Western CT Thrift 2,097 19 09-30 02/87 51.75 327
SISB SIS Bancorp Inc of MA (3) OTC Central MA Div. 1,453 24 12-31 02/95 33.62 188
ANDB Andover Bancorp, Inc. of MA (3) OTC MA,NH M.B. 1,281 12 12-31 05/86 37.75 194
FESX First Essex Bancorp of MA (3) OTC MA,NH Div. 1,210 15 12-31 08/87 19.87 150
MDBK Medford Bank of Medford, MA (3) OTC Eastern MA Thrift 1,106 16 12-31 03/86 37.00 168
AFCB Affiliated Comm BC, Inc of MA OTC MA Thrift 1,090 J 11 12-31 10/95 28.50 185
FAB FirstFed America Bancorp of MA AMEX MA,RI M.B. 1,036 12 03-31 01/97 20.62 180
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 5, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ --------------------- ------ ------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
New England Companies (continued)
---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFES First FS&LA of E. Hartford CT OTC Central CT Thrift 987 12 12-31 06/87 37.00 99
BFD BostonFed Bancorp of MA AMEX Boston MA M.B. 961 10 12-31 10/95 20.37 115
MASB MassBank Corp. of Reading MA (3) OTC Eastern MA Thrift 933 14 12-31 05/86 45.00 160
DIBK Dime Financial Corp. of CT (3) OTC Central CT Thrift 922 11 12-31 07/86 31.50 163
MECH Mechanics SB of Hartford CT (3) OTC Hartford CT Thrift 831 14 12-31 06/96 25.62 136
NSSB Norwich Financial Corp. of CT (3) OTC Southeastern CT Thrift 701 19 12-31 11/86 29.75 162
NSSY Norwalk Savings Society of CT (3) OTC Southwest CT Thrift 617 M 7 12-31 06/94 38.50 93
BKC American Bank of Waterbury CT (3) AMEX Western CT Thrift 610 15 12-31 12/81 47.12 109
MWBX MetroWest Bank of MA (3) OTC Eastern MA Thrift 586 11 12-31 10/86 8.25 115
PBKB People's SB of Brockton MA (3) OTC Southeastern MA Thrift 549 M 14 12-31 10/86 20.00 66
SOSA Somerset Savings Bank of MA (3) OTC Eastern MA R.E. 520 5 12-31 07/86 4.87 81
SWCB Sandwich Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 512 11 12-31 07/86 41.75 80
ABBK Abington Savings Bank of MA (3) OTC Southeastern MA M.B. 502 7 12-31 06/86 36.00 66
EIRE Emerald Island Bancorp, MA (3) OTC Eastern MA R.E. 443 8 12-31 09/86 32.25 73
BKCT Bancorp Connecticut of CT (3) OTC Central CT Thrift 424 3 12-31 07/86 40.00 102
WRNB Warren Bancorp of Peabody MA (3) OTC Eastern MA R.E. 364 6 12-31 07/86 20.62 78
LSBX Lawrence Savings Bank of MA (3) OTC Northeastern MA Thrift 353 5 12-31 05/86 13.87 59
CEBK Central Co-Op. Bank of MA (3) OTC Eastern MA Thrift 344 J 8 03-31 10/86 26.50 52
NHTB NH Thrift Bancshares of NH OTC Central NH Thrift 319 10 12-31 05/86 21.00 44
NMSB Newmil Bancorp. of CT (3) OTC Eastern CT Thrift 317 13 06-30 02/86 14.25 55
NBN Northeast Bancorp of ME (3) OTC Eastern ME Thrift 265 8 06-30 08/87 27.75 36
ANE Alliance Bancorp of New Englan (3) AMEX Northern CT Thrift 242 7 12-31 12/86 17.50 28
HIFS Hingham Inst. for Sav. of MA (3) OTC Eastern MA Thrift 216 5 12-31 12/88 27.12 35
IPSW Ipswich SB of Ipswich MA (3) OTC Northwest MA Thrift 203 5 12-31 05/93 12.87 31
HPBC Home Port Bancorp, Inc. of MA (3) OTC Southeastern MA Thrift 201 2 12-31 08/88 24.00 44
BSBC Branford SB of CT (3) OTC New Haven CT R.E. 183 5 12-31 11/86 6.00 39
FCME First Coastal Corp. of ME (3) OTC Southern ME Thrift 149 7 12-31 / 13.87 19
KSBK KSB Bancorp of Kingfield ME (3) OTC Western ME M.B. 146 J 8 12-31 06/93 15.25 19
MFLR Mayflower Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 126 J 4 04-30 12/87 24.44 22
NTMG Nutmeg FS&LA of CT OTC CT M.B. 102 J 3 12-31 / 13.00 10
FCB Falmouth Co-Op Bank of MA (3) AMEX Southeast MA Thrift 94 J 2 09-30 03/96 20.25 29
MCBN Mid-Coast Bancorp of ME OTC Eastern ME Thrift 61 2 03-31 11/89 28.75 7
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 5, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ --------------------- ------ ------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WAMU Washington Mutual Inc. of WA (3) OTC WA,OR,ID,UT,MT Div. 95,608 290 12-31 03/83 69.12 17,776
WFSL Washington FS&LA of Seattle WA OTC Western US Thrift 5,720 89 09-30 11/82 32.19 1,529
IWBK Interwest SB of Oak Harbor WA OTC Western WA Div. 2,047 31 12-31 / 39.50 318
STSA Sterling Financial Corp. of WA OTC WA,OR M.B. 1,870 41 06-30 / 21.12 160
FWWB First Savings Bancorp of WA (3) OTC Central WA Thrift 1,008 M 16 03-31 11/95 25.25 259
KFBI Klamath First Bancorp of OR OTC Southern OR Thrift 728 J 7 09-30 10/95 21.88 219
HRZB Horizon Financial Corp. of WA (3) OTC Northwest WA Thrift 531 12 03-31 08/86 16.56 123
FMSB First Mutual SB of Bellevue WA (3) OTC Western WA M.B. 451 6 12-31 12/85 18.25 74
CASB Cascade SB of Everett WA OTC Seattle WA Thrift 426 6 06-30 08/92 12.75 43
RVSB Riverview Bancorp of WA OTC Southwest WA Thrift 282 9 03-31 10/97 15.00 92
OTFC Oregon Trail Fin. Corp of OR OTC Baker City Thrift 260 P 2 06-30 10/97 16.00 75
FBNW FirstBank Corp of Clarkston WA OTC West. WA/East ID Thrift 178 5 03-31 07/97 17.62 35
EFBC Empire Federal Bancorp of MT OTC Southern MT Thrift 110 P 3 12-31 01/97 16.50 43
<CAPTION>
South-East Companies
--------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFCH First Fin. Holdings Inc. of SC OTC CHARLESTON SC Div. 1,713 32 09-30 11/83 43.12 275
LIFB Life Bancorp of Norfolk VA OTC Southeast VA Thrift 1,486 20 12-31 10/94 31.12 306
FLFC First Liberty Fin. Corp. of GA OTC Georgia M.B. 1,289 J 31 9-30 12/83 27.87 215
ISBF ISB Financial Corp. of LA OTC SouthCentral LA Thrift 947 J 27 12-31 04/95 26.25 181
EBSI Eagle Bancshares of Tucker GA OTC Atlanta GA Thrift 873 14 03-31 04/86 19.25 109
HFNC HFNC Financial Corp. of NC OTC Charlotte NC Thrift 867 8 06-30 12/95 14.87 256
VFFC Virginia First Savings of VA OTC Petersburg VA M.B. 858 J 23 06-30 01/78 25.25 147
CNIT Cenit Bancorp of Norfolk VA OTC Southeastern VA Thrift 702 19 12-31 08/92 68.00 112
PALM Palfed, Inc. of Aiken SC OTC Southwest SC Thrift 669 19 12-31 12/85 27.00 143
VABF Va. Beach Fed. Fin. Corp of VA OTC Southeast VA M.B. 605 12 12-31 11/80 16.62 83
FFFC FFVA Financial Corp. of VA OTC Southern VA Thrift 567 11 12-31 10/94 33.37 151
CFCP Coastal Fin. Corp. of SC OTC SC Thrift 494 9 09-30 09/90 23.00 107
FSPT FirstSpartan Fin. Corp. of SC OTC Northwestern SC Thrift 482 5 06-30 07/97 37.50 166
TSH Teche Holding Company of LA AMEX Southern LA Thrift 406 J 9 09-30 04/95 21.88 75
CFBC Community First Bnkg Co. of GA OTC Westcentral GA Thrift 395 12 12-31 07/97 38.37 93
COOP Cooperative Bk.for Svgs. of NC OTC Eastern NC Thrift 360 17 03-31 08/91 17.37 52
FSFC First So.east Fin. Corp. of SC OTC Northwest SC Thrift 350 11 06-30 10/93 15.12 66
FSTC First Citizens Corp of GA OTC Western GA M.B. 337 9 03-31 03/86 24.00 66
</TABLE>
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 5, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ --------------------- ------ ------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
South-East Companies (continued)
--------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SOPN First SB, SSB, Moore Co. of NC OTC Central NC Thrift 295 5 06-30 01/94 24.37 90
UFRM United FS&LA of Rocky Mount NC OTC Eastern NC M.B. 286 9 12-31 07/80 11.50 35
ANA Acadiana Bancshares of LA (3) AMEX Southern LA Thrift 262 M 4 12-31 07/96 23.75 64
PERT Perpetual of SC, MHC (46.8) OTC Northwest SC Thrift 256 J 6 09-30 10/93 51.00 77
SSFC South Street Fin. Corp. of NC (3) OTC South Central NC Thrift 241 2 09-30 10/96 17.50 79
FLAG Flag Financial Corp of GA OTC Western GA M.B. 238 4 12-31 12/86 18.50 38
MERI Meritrust FSB of Thibodaux LA OTC Southeast LA Thrift 233 8 12-31 / 51.22 40
CFTP Community Fed. Bancorp of MS OTC Northeast MS Thrift 216 1 09-30 03/96 17.12 79
ESX Essex Bancorp of VA AMEX VA,NC M.B. 192 4 12-31 07/90 5.00 5
GSFC Green Street Fin. Corp. of NC OTC Southern NC Thrift 178 3 09-30 04/96 18.50 80
CFFC Community Fin. Corp. of VA OTC Central VA Thrift 175 J 3 03-31 03/88 24.75 32
FTF Texarkana Fst. Fin. Corp of AR AMEX Southwest AR Thrift 171 J 5 09-30 07/95 24.75 44
FGHC First Georgia Hold. Corp of GA OTC Southeastern GA Thrift 156 J 9 09-30 02/87 8.37 26
BFSB Bedford Bancshares of VA OTC Southern VA Thrift 139 3 09-30 08/94 28.25 32
FFBS FFBS Bancorp of Columbus MS OTC Columbus MS Thrift 135 3 06-30 07/93 22.50 35
GSLA GS Financial Corp. of LA OTC New Orleans LA Thrift 131 3 12-31 04/97 17.75 61
PDB Piedmont Bancorp of NC AMEX Central NC Thrift 127 2 06-30 12/95 10.37 29
CFNC Carolina Fincorp of NC (3) OTC Southcentral NC Thrift 114 4 06-30 11/96 17.37 32
KSAV KS Bancorp of Kenly NC OTC Central NC Thrift 110 3 12-31 12/93 22.50 20
CCFH CCF Holding Company of GA OTC Atlanta GA Thrift 109 4 12-31 07/95 20.00 16
TWIN Twin City Bancorp of TN OTC Northeast TN Thrift 107 3 12-31 01/95 13.62 17
SRN Southern Banc Company of AL AMEX Northeast AL Thrift 105 J 4 06-30 10/95 16.87 21
SSM Stone Street Bancorp of NC AMEX Central NC Thrift 105 2 12-31 04/96 20.25 38
CENB Century Bancshares of NC (3) OTC Charlotte NC Thrift 101 1 06-30 12/96 80.00 33
SZB SouthFirst Bancshares of AL AMEX Central AL Thrift 97 J 2 09-30 02/95 19.00 16
SFNB Security First Netwrk Bk of GA OTC GA (Internet) Div. 79 J 1 12-31 / 8.00 69
SCBS Southern Commun. Bncshrs of AL OTC NorthCentral AL Thrift 70 J 1 09-30 12/96 18.19 21
SSB Scotland Bancorp of NC AMEX S. Central NC Thrift 64 2 09-30 04/96 10.25 20
SCCB S. Carolina Comm. Bnshrs of SC OTC Central SC Thrift 46 1 06-30 07/94 23.00 16
MBSP Mitchell Bancorp of NC (3) OTC Western NC Thrift 35 1 12-31 07/96 17.50 16
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 5, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ --------------------- ------ ------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
South-West Companies
--------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CBSA Coastal Bancorp of Houston TX OTC Houston TX M.B. 2,930 40 12-31 / 28.87 144
FBHC Fort Bend Holding Corp. of TX OTC Eastcentral TX M.B. 319 5 03-31 06/93 19.62 32
JXVL Jacksonville Bancorp of TX OTC East Central TX Thrift 226 J 6 09-30 04/96 18.75 47
FFDB FirstFed Bancorp of AL OTC Central AL Thrift 176 7 03-31 11/91 22.00 25
ETFS East Texas Fin. Serv. of TX OTC Northeast TX Thrift 116 2 09-30 01/95 20.00 21
GUPB GFSB Bancorp of Gallup NM OTC Northwest NM Thrift 110 1 06-30 06/95 20.25 16
AABC Access Anytime Bancorp of NM OTC Eastern NM Thrift 106 3 12-31 08/86 10.12 12
<CAPTION>
Western Companies (Excl CA)
---------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFBA First Colorado Bancorp of Co OTC Denver CO Thrift 1,513 26 12-31 01/96 22.75 375
WSTR WesterFed Fin. Corp. of MT OTC MT Thrift 999 35 06-30 01/94 23.56 131
GBCI Glacier Bancorp of MT OTC Western MT Div. 574 16 12-31 03/84 20.75 141
UBMT United Fin. Corp. of MT OTC Central MT Thrift 103 4 12-31 09/86 27.00 33
TRIC Tri-County Bancorp of WY OTC Southeastern WY Thrift 88 2 12-31 09/93 27.50 16
CRZY Crazy Woman Creek Bncorp of WY OTC Northeast WY Thrift 60 1 09-30 03/96 15.37 15
</TABLE>
Other Areas
-----------
NOTES: (1) Or most recent date available (M=March, S=September, D=December,
J=June, E=Estimated, and P=Pro Forma)
(2) Operating strategies are: Thrift=Traditional Thrift, M.B.=Mortgage
Banker, R.E.=Real Estate Developer, Div.=Diversified, and
Ret.=Retail Banking.
(3) FDIC savings bank.
Source: Corporate offering circulars, SNL Securities Quarterly Thrift Report,
and financial reports of publicly Traded Thrifts.
Date of Last Update: 12/05/97
<PAGE>
EXHIBIT III-2
Heritage Federal Savings and Loan Association
South Carolina Savings Institutions
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-2
Market Pricing Comparatives
Prices As of November 28, 1997
<TABLE>
<CAPTION>
Per Share Data
Market ---------------
Capitalization Core Book Pricing Ratios(3)
--------------- ---------------------------------------
Price/ Market 12-Mth Value/
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
------- ------- ------- ------- ------- ------- ------- ------- --------
Financial Institution
- --------------------- ($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 23.65 175.34 1.13 15.30 19.16 155.97 19.07 161.26 19.93
State of SC 31.66 140.92 1.31 17.49 22.61 213.31 26.84 213.31 23.75
Comparable Group
- ----------------
State of SC
- -----------
CFCP Coastal Fin. Corp. of SC 23.00 106.88 1.08 6.97 18.40 329.99 21.63 329.99 21.30
FFCH First Fin. Holdings Inc. of SC 43.12 274.59 2.16 16.45 19.42 262.13 16.03 262.13 19.96
FSFC First So.east Fin. Corp. of SC(7) 15.12 66.35 0.81 8.20 18.67 184.39 18.95 184.39 18.67
FSPT FirstSpartan Fin. Corp. of SC 37.50 166.13 1.25 29.17 30.00 128.56 34.44 128.56 30.00
PALM Palfed, Inc. of Aiken SC(7) 27.00 143.07 0.84 10.74 NM 251.40 21.40 251.40 NM
PERT Perpetual of SC, MHC (46.8)(7) 51.00 35.96 1.58 20.13 NM 253.35 29.96 253.35 NM
SCCB S. Carolina Comm. Bnshrs of SC 23.00 16.08 0.75 17.35 NM 132.56 35.24 132.56 NM
<CAPTION>
Dividends(4) Financial Characteristics(6)
----------------------- ------------------------------------------------------
Amount/ Payout Total Equity/ NPAs/ Reported Core
---------------- -------------
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
------- ------ ------- ------ ------- ------ ------ ------- ------- -------
Financial Institution
- --------------------- ($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.37 1.60 30.19 1,196 13.05 0.78 0.88 7.92 0.88 7.81
State of SC 0.60 1.93 40.07 684 16.51 0.79 1.05 11.07 1.00 10.31
Comparable Group
- ----------------
State of SC
- -----------
CFCP Coastal Fin. Corp. of SC 0.36 1.57 33.33 494 6.56 0.10 1.21 19.41 1.05 16.77
FFCH First Fin. Holdings Inc. of SC 0.84 1.95 38.89 1,713 6.12 1.49 0.87 14.24 0.85 13.86
FSFC First So.east Fin. Corp. of SC(7) 0.24 1.59 29.63 350 10.28 0.24 1.05 10.32 1.05 10.32
FSPT FirstSpartan Fin. Corp. of SC 0.60 1.60 48.00 482 26.79 0.69 0.96 6.28 0.96 6.28
PALM Palfed, Inc. of Aiken SC(7) 0.12 0.44 14.29 669 8.51 2.04 0.39 4.82 0.67 8.26
PERT Perpetual of SC, MHC (46.8)(7) 1.40 2.75 NM 256 11.82 0.12 0.78 6.37 1.05 8.60
SCCB S. Carolina Comm. Bnshrs of SC 0.60 2.61 NM 46 26.59 0.87 1.15 4.34 1.15 4.34
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment) on a
tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB =
Price to tangible book value; and P/CORE = Price to estimated core earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month earnings and average equity and assets balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT III-3
Heritage Federal Savings and Loan Association
Selected Southeast Savings Institutions
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-3
Market Pricing Comparatives
Prices As of November 28, 1997
<TABLE>
<CAPTION>
Market
Capitalization Per Share Data
---------------- --------------
Core Book Pricing Ratios(3)
Price/ Market 12-Mth Value/ ---------------------------------------
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
- --------------------- -------- ------- ------ ------ ------- ------- ------- ------- -------
($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 23.65 175.34 1.13 15.30 19.16 155.97 19.07 161.26 19.93
Special Selection Grouping(8) 23.59 64.14 1.00 17.82 22.87 136.19 28.32 137.44 22.70
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
ANA Acadiana Bancshares of LA 23.75 64.05 0.48 16.91 NM 140.45 24.48 140.45 NM
BFSB Bedford Bancshares of VA 28.25 32.26 1.38 17.18 20.32 164.44 23.18 164.44 20.47
- ------------------------------------ -----------------------------------------------------------------------
CFNC Carolina Fincorp of NC 17.37 32.15 0.68 13.92 24.81 124.78 28.18 124.78 25.54
CENB Century Bancshares of NC 80.00 32.56 4.20 75.12 19.09 106.50 32.26 106.50 19.05
CFTP Community Fed. Bancorp of MS 17.12 79.25 0.65 12.47 25.94 137.29 36.70 137.29 26.34
- ------------------------------------ -----------------------------------------------------------------------
CFFC Community Fin. Corp. of VA 24.75 31.56 1.67 18.86 18.75 131.23 17.99 131.23 14.82
- ------------------------------------ -----------------------------------------------------------------------
CFBC Community First Bnkg Co. of GA 38.37 92.63 1.29 29.10 29.74 131.86 23.48 133.65 29.74
FFBS FFBS Bancorp of Columbus MS 22.50 35.37 1.16 14.34 19.40 156.90 26.21 156.90 19.40
- ------------------------------------ -----------------------------------------------------------------------
FFFC FFVA Financial Corp. of VA 33.37 150.90 1.63 16.70 19.63 199.82 26.60 203.97 20.47
SOPN First SB, SSB, Moore Co. of NC 24.37 89.85 1.32 18.43 18.46 132.23 30.42 132.23 18.46
- ------------------------------------ -----------------------------------------------------------------------
FSPT FirstSpartan Fin. Corp. of SC 37.50 166.13 1.25 29.17 30.00 128.56 34.44 128.56 30.00
GSLA GS Financial Corp. of LA 17.75 61.02 0.41 16.44 NM 107.97 46.56 107.97 NM
GSFC Green Street Fin. Corp. of NC 18.50 79.51 0.65 14.65 28.46 126.28 44.68 126.28 28.46
HFNC HFNC Financial Corp. of NC 14.87 255.65 0.53 9.48 23.98 156.86 29.49 156.86 28.06
ISBF ISB Financial Corp. of LA 26.25 181.15 1.03 16.52 NM 158.90 19.13 186.70 25.49
KSAV KS Bancorp of Kenly NC 22.50 19.91 1.39 16.45 16.07 136.78 18.11 136.86 16.19
- ------------------------------------ -----------------------------------------------------------------------
MBSP Mitchell Bancorp of NC 17.50 16.29 0.59 15.36 29.66 113.93 47.11 113.93 29.66
PDB Piedmont Bancorp of NC 10.37 28.53 0.25 7.56 NM 137.17 22.54 137.17 NM
SCCB S. Carolina Comm. Bnshrs of SC 23.00 16.08 0.75 17.35 NM 132.56 35.24 132.56 NM
- ------------------------------------ -----------------------------------------------------------------------
SSB Scotland Bancorp of NC 10.25 19.62 0.65 7.61 15.53 134.69 30.46 134.69 15.77
SFNB Security First Netwrk Bk of GA(7) 8.00 68.96 -3.38 3.02 NM 264.90 87.72 269.36 NM
SSFC South Street Fin. Corp. of NC 17.50 78.68 0.65 13.73 27.78 127.46 32.71 127.46 26.92
SZB SouthFirst Bancshares of AL 19.00 16.11 0.25 16.06 NM 118.31 16.56 118.31 NM
SRN Southern Banc Company of AL 16.87 20.75 0.43 14.58 NM 115.71 19.68 116.91 NM
SCBS Southern Commun. Bncshrs of AL 18.19 20.68 0.54 13.20 NM 137.80 29.39 137.80 NM
SSM Stone Street Bancorp of NC 20.25 38.43 0.86 16.32 23.55 124.08 36.68 124.08 23.55
- ------------------------------------ -----------------------------------------------------------------------
TSH Teche Holding Company of LA 21.88 75.22 1.08 15.53 28.05 140.89 18.52 140.89 20.26
- ------------------------------------ -----------------------------------------------------------------------
FTF Texarkana Fst. Fin. Corp of AR 24.75 44.30 1.62 15.03 18.89 164.67 25.85 164.67 15.28
- ------------------------------------ -----------------------------------------------------------------------
TWIN Twin City Bancorp of TN 13.62 17.32 0.60 10.88 19.18 125.18 16.20 125.18 22.70
- ------------------------------------ -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Dividends(4) Financial Characteristics(6)
--------------------- --------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ --------------- ---------------
Financial Institution Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
- --------------------- ------ ------ ------- ------ ------- ------- ------- ------- ------- -------
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.37 1.60 30.19 1,196 13.05 0.78 0.88 7.92 0.88 7.81
Special Selection Grouping(8) 0.51 2.22 49.93 239 21.48 0.66 1.07 5.14 1.16 5.68
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
ANA Acadiana Bancshares of LA 0.36 1.52 NM 262 17.43 0.50 0.50 3.71 0.50 3.71
BFSB Bedford Bancshares of VA 0.56 1.98 40.58 139 14.10 0.52 1.20 8.41 1.19 8.35
- ------------------------------------ ---------------------------------------------------------------------------------
CFNC Carolina Fincorp of NC 0.24 1.38 35.29 114 22.59 0.16 1.17 5.03 1.14 4.89
CENB Century Bancshares of NC 2.00 2.50 47.62 101 30.29 0.25 1.69 5.60 1.70 5.62
CFTP Community Fed. Bancorp of MS 0.30 1.75 46.15 216 26.73 0.50 1.47 4.77 1.45 4.70
- ------------------------------------ ---------------------------------------------------------------------------------
CFFC Community Fin. Corp. of VA 0.56 2.26 33.53 175 13.71 0.56 1.01 7.32 1.28 9.26
- ------------------------------------ ---------------------------------------------------------------------------------
CFBC Community First Bnkg Co. of GA 0.60 1.56 46.51 395 17.80 2.19 0.74 4.46 0.74 4.46
FFBS FFBS Bancorp of Columbus MS 0.50 2.22 43.10 135 16.70 0.58 1.41 7.48 1.41 7.48
- ------------------------------------ ---------------------------------------------------------------------------------
FFFC FFVA Financial Corp. of VA 0.48 1.44 29.45 567 13.31 0.16 1.40 10.28 1.35 9.86
SOPN First SB, SSB, Moore Co. of NC 0.88 3.61 66.67 295 23.01 0.29 1.75 7.26 1.75 7.26
- ------------------------------------ ---------------------------------------------------------------------------------
FSPT FirstSpartan Fin. Corp. of SC 0.60 1.60 48.00 482 26.79 0.69 0.96 6.28 0.96 6.28
GSLA GS Financial Corp. of LA 0.28 1.58 68.29 131 43.13 0.14 1.25 3.81 1.25 3.81
GSFC Green Street Fin. Corp. of NC 0.44 2.38 67.69 178 35.38 0.10 1.59 4.45 1.59 4.45
HFNC HFNC Financial Corp. of NC 0.28 1.88 52.83 867 18.80 0.92 1.23 5.43 1.05 4.64
ISBF ISB Financial Corp. of LA 0.50 1.90 48.54 947 12.04 0.27 0.62 4.52 0.85 6.21
KSAV KS Bancorp of Kenly NC 0.60 2.67 43.17 110 13.24 0.53 1.21 8.81 1.20 8.74
- ------------------------------------ ---------------------------------------------------------------------------------
MBSP Mitchell Bancorp of NC 0.40 2.29 67.80 35 41.35 2.25 1.61 3.77 1.61 3.77
PDB Piedmont Bancorp of NC 0.40 3.86 NM 127 16.43 0.89 -0.24 -1.28 0.55 2.91
SCCB S. Carolina Comm. Bnshrs of SC 0.60 2.61 NM 46 26.59 0.87 1.15 4.34 1.15 4.34
- ------------------------------------ ---------------------------------------------------------------------------------
SSB Scotland Bancorp of NC 0.30 2.93 46.15 64 22.62 NA 1.86 5.47 1.83 5.39
SFNB Security First Netwrk Bk of GA(7) 0.00 0.00 NM 79 33.11 NA -29.36 NM -30.07 NM
SSFC South Street Fin. Corp. of NC 0.40 2.29 61.54 241 25.66 0.31 1.21 5.34 1.25 5.51
SZB SouthFirst Bancshares of AL 0.50 2.63 NM 97 14.00 0.75 -0.03 -0.19 0.23 1.62
SRN Southern Banc Company of AL 0.35 2.07 NM 105 17.01 NA 0.14 0.79 0.50 2.84
SCBS Southern Commun. Bncshrs of AL 0.30 1.65 55.56 70 21.33 2.48 0.55 3.24 0.90 5.30
SSM Stone Street Bancorp of NC 0.45 2.22 52.33 105 29.57 0.23 1.54 4.69 1.54 4.69
- ------------------------------------ ---------------------------------------------------------------------------------
TSH Teche Holding Company of LA 0.50 2.29 46.30 406 13.14 0.27 0.69 5.03 0.96 6.96
- ------------------------------------ ---------------------------------------------------------------------------------
FTF Texarkana Fst. Fin. Corp of AR 0.56 2.26 34.57 171 15.70 0.46 1.41 8.40 1.74 10.38
- ------------------------------------ ---------------------------------------------------------------------------------
TWIN Twin City Bancorp of TN 0.40 2.94 66.67 107 12.94 0.16 0.85 6.65 0.72 5.62
- ------------------------------------ ---------------------------------------------------------------------------------
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment) on a
tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB =
Price to tangible book value; and P/CORE = Price to estimated core earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month earnings and average equity and assets balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
(8) Includes South-East Companies; Equity/Assets (greater than) 12%;
Source: Copyright reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT IV-1
Heritage Federal Savings and Loan Association
Stock Prices:
As of November 28, 1997
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A
Weekly Thrift Market Line - Part One
Prices As Of November 28, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
-------------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------ ---------- ------- ------- ------- ------- ------- -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHC)
- ---------------------------------------------
SAIF-Insured Thrifts(300) 23.60 5,828 182.2 25.04 15.57 23.58 0.24 242.71 45.34
NYSE Traded Companies(10) 45.35 33,668 1,732.6 48.11 28.17 45.95 -1.19 330.14 47.84
AMEX Traded Companies(16) 17.98 3,147 56.6 20.34 12.89 17.87 0.19 300.42 32.59
NASDAQ Listed OTC Companies(274) 23.07 4,879 127.9 24.40 15.22 23.03 0.30 229.78 45.99
California Companies(21) 30.34 18,713 848.5 32.40 18.78 30.51 -0.32 161.38 50.01
Florida Companies(5) 22.56 20,239 438.5 24.64 13.59 23.02 -1.73 191.87 51.35
Mid-Atlantic Companies(59) 25.35 6,651 183.5 26.46 15.92 25.28 0.25 224.85 55.99
Mid-West Companies(144) 21.99 3,577 100.1 23.16 14.72 21.91 0.43 269.50 41.96
New England Companies(9) 28.99 5,017 186.0 30.60 17.51 29.01 0.75 447.76 61.03
North-West Companies(8) 23.54 11,774 339.9 25.33 17.41 23.33 0.97 182.66 36.15
South-East Companies(41) 22.86 3,451 78.3 25.18 16.17 22.89 0.17 223.14 36.52
South-West Companies(7) 19.94 1,905 42.5 21.98 13.50 20.00 -0.52 49.93 45.99
Western Companies (Excl CA)(6) 22.82 5,273 118.6 24.08 16.16 22.95 -0.61 358.71 35.18
Thrift Strategy(241) 22.49 3,693 93.8 23.79 15.09 22.43 0.26 222.24 44.00
Mortgage Banker Strategy(36) 28.96 14,581 600.6 30.79 17.99 29.01 0.51 303.59 54.34
Real Estate Strategy(9) 26.74 7,823 242.8 28.27 16.19 26.97 0.12 234.36 51.31
Diversified Strategy(10) 32.71 30,268 1,012.6 36.02 20.42 33.08 -1.22 210.32 43.50
Retail Banking Strategy(4) 17.97 4,340 90.8 19.79 11.66 17.91 0.17 382.33 36.57
Companies Issuing Dividends(253) 23.95 5,538 181.5 25.41 15.85 23.90 0.36 255.82 43.92
Companies Without Dividends(47) 21.59 7,489 186.4 22.87 13.95 21.73 -0.45 161.04 54.82
Equity/Assets (greater than) 6%(23) 30.07 19,015 661.9 31.88 18.00 30.16 0.26 206.22 57.08
Equity/Assets 6-12%(142) 25.94 5,707 201.0 27.24 16.08 25.85 0.49 259.34 53.65
Equity/Assets (greater than) 12%(135) 20.32 3,727 84.0 21.82 14.68 20.33 0.00 200.38 34.41
Converted Last 3 Mths (no MHC)(3) 16.02 3,974 63.7 16.39 15.13 16.08 -0.35 0.00 0.00
Actively Traded Companies(39) 34.03 18,235 770.6 35.59 20.89 34.10 0.13 278.06 58.40
Market Value Below $20 Million(50) 18.02 864 14.5 19.20 12.57 18.04 -0.29 288.91 40.11
Holding Company Structure(266) 23.66 5,578 179.4 25.11 15.74 23.61 0.27 229.80 43.75
Assets Over $1 Billion(60) 33.98 18,928 708.4 35.89 21.18 34.00 0.12 270.84 50.15
Assets $500 Million-$1 Billion(48) 23.65 5,489 116.6 25.13 14.86 23.75 -0.04 285.33 51.60
Assets $250-$500 Million(66) 23.40 2,792 61.6 24.69 15.43 23.31 0.57 223.45 51.22
Assets less than $250 Million(126) 18.90 1,468 26.5 20.17 13.31 18.84 0.24 156.51 37.30
Goodwill Companies(121) 27.52 10,008 323.5 29.07 17.35 27.53 0.20 266.04 50.60
Non-Goodwill Companies(178) 21.06 3,109 90.4 22.40 14.41 21.00 0.30 209.81 41.70
Acquirors of FSLIC Cases(10) 42.61 35,626 1,876.4 44.73 26.57 42.87 -0.25 351.12 50.81
</TABLE>
<TABLE>
<CAPTION>
Current Per Share Financials
-----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- --------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHC)
- ---------------------------------------------
SAIF-Insured Thrifts(300) 1.16 1.16 15.53 15.10 149.81
NYSE Traded Companies(10) 2.79 2.65 22.22 21.43 338.78
AMEX Traded Companies(16) 0.57 0.72 14.03 13.83 107.55
NASDAQ Listed OTC Companies(274) 1.13 1.12 15.35 14.93 144.81
California Companies(21) 1.70 1.60 17.44 16.85 265.71
Florida Companies(5) 1.17 0.85 11.42 10.73 171.97
Mid-Atlantic Companies(59) 1.29 1.33 16.23 15.62 167.94
Mid-West Companies(144) 1.06 1.06 15.30 14.99 129.20
New England Companies(9) 1.22 1.45 17.38 16.63 235.52
North-West Companies(8) 1.08 1.07 14.46 14.08 125.97
South-East Companies(41) 0.97 0.97 14.50 14.20 111.94
South-West Companies(7) 1.30 1.30 15.15 14.39 194.42
Western Companies (Excl CA)(6) 1.16 1.16 16.28 15.61 108.86
Thrift Strategy(241) 1.07 1.09 15.62 15.27 133.75
Mortgage Banker Strategy(36) 1.63 1.51 15.72 14.78 228.23
Real Estate Strategy(9) 1.71 1.60 14.81 14.52 225.37
Diversified Strategy(10) 1.93 1.73 14.11 13.56 195.62
Retail Banking Strategy(4) -0.35 -0.45 12.75 12.17 195.11
Companies Issuing Dividends(253) 1.20 1.20 15.67 15.21 146.58
Companies Without Dividends(47) 0.92 0.93 14.73 14.50 168.35
Equity/Assets (greater than) 6%(23) 1.71 1.74 14.77 13.80 296.86
Equity/Assets 6-12%(142) 1.40 1.36 15.62 14.99 185.38
Equity/Assets (greater than) 12%(135) 0.84 0.87 15.58 15.43 91.72
Converted Last 3 Mths (no MHC)(3) 0.54 0.54 13.31 13.31 70.71
Actively Traded Companies(39) 1.94 1.95 17.26 16.62 228.67
Market Value Below $20 Million(50) 0.81 0.84 14.83 14.79 116.11
Holding Company Structure(266) 1.13 1.13 15.75 15.34 146.69
Assets Over $1 Billion(60) 1.82 1.81 17.56 16.34 249.27
Assets $500 Million-$1 Billion(48) 1.25 1.18 14.32 13.82 154.21
Assets $250-$500 Million(66) 1.16 1.16 15.85 15.47 151.74
Assets less than $250 Million(126) 0.82 0.84 14.90 14.84 101.23
Goodwill Companies(121) 1.47 1.43 16.06 14.98 198.07
Non-Goodwill Companies(178) 0.96 0.98 15.19 15.19 118.54
Acquirors of FSLIC Cases(10) 2.56 2.52 20.88 19.72 332.65
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month common earnings and average common equity and
assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by public
(non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of November 28, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHC)
- --------------------------------------------
BIF-Insured Thrifts(60) 27.04 7,954 236.6 28.39 16.96 26.97 0.36 257.78 54.53
NYSE Traded Companies(2) 45.44 72,159 2,657.1 47.69 30.12 45.88 -0.65 141.05 52.33
AMEX Traded Companies(6) 27.52 2,187 62.7 28.42 15.90 27.45 0.55 160.90 64.92
NASDAQ Listed OTC Companies(52) 26.21 5,835 152.1 27.57 16.51 26.11 0.38 273.45 53.50
California Companies(1) 18.00 7,847 141.2 21.25 14.00 18.62 -3.33 0.00 20.00
Mid-Atlantic Companies(15) 28.49 17,474 554.1 30.10 17.82 28.56 -0.06 181.00 53.60
Mid-West Companies(2) 10.69 1,707 16.9 10.88 8.25 10.75 -0.29 0.00 27.46
New England Companies(33) 27.76 4,429 128.9 28.91 16.52 27.61 0.63 288.58 62.63
North-West Companies(4) 20.02 7,249 152.0 21.51 13.09 19.75 1.11 149.35 50.17
South-East Companies(5) 31.22 2,076 44.7 32.92 23.24 31.10 0.62 0.00 32.10
Thrift Strategy(43) 27.16 4,853 164.2 28.42 17.03 27.04 0.50 252.35 53.98
Mortgage Banker Strategy(7) 27.60 31,238 749.0 29.55 16.85 27.77 -0.27 272.43 67.09
Real Estate Strategy(5) 19.31 5,823 109.8 21.31 14.38 19.31 -0.11 511.87 28.73
Diversified Strategy(5) 28.93 13,256 438.1 30.19 17.56 29.03 -0.22 193.39 60.80
Companies Issuing Dividends(52) 28.68 8,402 258.4 30.02 17.97 28.57 0.51 259.28 54.57
Companies Without Dividends(8) 16.05 4,948 90.4 17.48 10.13 16.20 -0.65 236.91 54.24
Equity/Assets (greater than) 6%(5) 19.19 29,899 700.4 20.09 10.03 19.30 -0.47 182.79 89.94
Equity/Assets 6-12%(39) 29.85 6,297 234.0 31.24 17.93 29.78 0.36 274.62 59.31
Equity/Assets (greater than) 12%(16) 23.04 5,990 126.0 24.41 16.63 22.92 0.56 45.01 34.25
Actively Traded Companies(18) 29.24 11,760 328.2 30.73 18.17 29.10 0.67 290.30 54.56
Market Value Below $20 Million(5) 15.70 951 14.4 16.38 10.69 15.74 -0.27 0.00 40.76
Holding Company Structure(40) 26.35 6,498 176.9 27.71 16.78 26.20 0.67 243.44 52.15
Assets Over $1 Billion(14) 33.02 24,469 812.0 34.75 20.66 32.97 0.48 233.49 57.07
Assets $500 Million-$1 Billion(16) 29.54 5,007 120.2 30.92 17.96 29.53 -0.03 235.02 55.62
Assets $250-$500 Million(13) 23.20 3,131 66.3 24.22 14.08 22.97 0.82 301.71 57.84
Assets less than $250 Million(17) 22.85 1,549 28.9 24.12 15.30 22.81 0.28 266.74 48.93
Goodwill Companies(30) 30.21 11,423 367.4 31.44 18.45 30.11 0.37 254.64 58.09
Non-Goodwill Companies(30) 23.88 4,486 105.8 25.35 15.46 23.82 0.34 264.07 51.10
</TABLE>
<TABLE>
<CAPTION>
Current Per Share Financials
-----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHC)
- --------------------------------------------
BIF-Insured Thrifts(60) 1.60 1.53 16.01 15.14 153.44
NYSE Traded Companies(2) 2.34 2.29 20.01 12.88 248.52
AMEX Traded Companies(6) 1.24 1.06 17.53 15.15 172.03
NASDAQ Listed OTC Companies(52) 1.60 1.55 15.67 15.24 147.41
California Companies(1) 1.52 1.52 12.32 12.27 114.89
Mid-Atlantic Companies(15) 1.34 1.30 16.10 14.20 170.74
Mid-West Companies(2) 0.21 0.26 11.08 10.73 35.43
New England Companies(33) 1.95 1.84 15.00 14.43 170.02
North-West Companies(4) 1.02 0.99 11.07 10.68 93.56
South-East Companies(5) 1.32 1.32 27.01 27.01 99.46
Thrift Strategy(43) 1.57 1.50 16.65 15.72 149.07
Mortgage Banker Strategy(7) 1.58 1.55 14.32 13.84 180.63
Real Estate Strategy(5) 1.78 1.67 11.27 11.24 105.38
Diversified Strategy(5) 1.80 1.75 13.54 12.55 190.42
Companies Issuing Dividends(52) 1.58 1.51 16.77 15.80 162.36
Companies Without Dividends(8) 1.69 1.67 10.85 10.74 93.52
Equity/Assets (greater than) 6%(5) 1.19 1.01 7.80 7.57 140.95
Equity/Assets 6-12%(39) 1.97 1.88 15.85 14.59 185.28
Equity/Assets (greater than) 12%(16) 0.90 0.92 18.38 18.22 88.89
Actively Traded Companies(18) 1.96 1.86 15.76 14.94 180.63
Market Value Below $20 Million(5) 1.53 1.53 13.58 13.41 70.48
Holding Company Structure(40) 1.53 1.48 16.25 15.53 138.23
Assets Over $1 Billion(14) 1.82 1.77 15.78 14.05 186.74
Assets $500 Million-$1 Billion(16) 1.92 1.81 16.87 15.51 187.91
Assets $250-$500 Million(13) 1.22 1.16 13.54 13.24 127.00
Assets less than $250 Million(17) 1.39 1.35 17.29 17.18 113.47
Goodwill Companies(30) 1.74 1.65 16.68 14.95 192.05
Non-Goodwill Companies(30) 1.45 1.41 15.33 15.33 114.82
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month common earnings and average common equity and
assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by public
(non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A(continued)
Weekly Thrift Market Line - Part One
Prices As Of November 28, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- -------- ------- ------- ------- ------- ------- -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(20) 24.50 8,361 40.1 26.91 12.98 24.86 -1.95 377.81 97.87
BIF-Insured Thrifts(3) 31.06 22,105 289.7 33.12 12.38 30.17 3.39 328.08 159.26
NASDAQ Listed OTC Companies(23) 25.66 10,786 84.2 28.01 12.88 25.79 -1.01 352.95 111.02
Florida Companies(3) 31.44 5,933 88.2 36.13 17.50 31.44 0.10 0.00 63.87
Mid-Atlantic Companies(11) 22.14 11,091 33.6 23.94 10.12 22.41 -1.99 0.00 156.46
Mid-West Companies(7) 28.07 2,111 25.7 30.20 14.96 28.07 0.00 377.81 82.55
New England Companies(1) 33.69 61,126 823.8 37.37 18.00 33.50 0.57 328.08 75.01
Thrift Strategy(22) 25.16 7,640 37.9 27.42 12.56 25.31 -1.10 377.81 113.79
Diversified Strategy(1) 33.69 61,126 823.8 37.37 18.00 33.50 0.57 328.08 75.01
Companies Issuing Dividends(22) 26.10 11,288 88.0 28.52 12.83 26.21 -0.91 352.95 111.02
Companies Without Dividends(1) 18.62 2,760 23.1 19.75 13.62 19.12 -2.62 0.00 0.00
Equity/Assets 6-12%(16) 27.22 14,077 110.3 29.94 13.07 27.35 -1.10 352.95 117.74
Equity/Assets (greater than) 12%(7) 21.90 2,887 21.5 23.37 12.42 22.05 -0.79 0.00 86.37
Holding Company Structure(2) 28.50 1,917 25.1 29.50 9.38 26.00 9.62 0.00 203.84
Assets Over $1 Billion(5) 22.23 47,219 325.3 24.83 10.17 23.54 -7.45 328.08 132.26
Assets $500 Million-$1 Billion(3) 31.44 5,933 88.2 36.13 17.50 31.44 0.10 0.00 63.87
Assets $250-$500 Million(5) 28.12 3,423 33.9 29.92 15.31 28.12 0.00 377.81 84.92
Assets less than $250 Million(10) 24.69 2,174 19.6 26.62 11.94 24.51 0.56 0.00 129.17
Goodwill Companies(9) 25.82 25,530 188.8 28.58 12.94 26.02 -1.97 352.95 120.18
Non-Goodwill Companies(14) 25.57 2,744 27.1 27.69 12.84 25.67 -0.48 0.00 104.15
MHC Institutions(23) 25.66 10,786 84.2 28.01 12.88 25.79 -1.01 352.95 111.02
</TABLE>
<TABLE>
<CAPTION>
Current Per Share Financials
-----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- --------
($) ($) ($) ($) ($)
Market Averages. MHC Institutions
- ---------------------------------
<S> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(20) 0.65 0.67 10.70 10.63 95.33
BIF-Insured Thrifts(3) 1.06 0.85 10.76 10.12 101.07
NASDAQ Listed OTC Companies(23) 0.72 0.70 10.71 10.54 96.34
Florida Companies(3) 0.79 0.89 14.08 14.03 143.39
Mid-Atlantic Companies(11) 0.57 0.56 9.17 8.86 76.90
Mid-West Companies(7) 0.82 0.85 12.01 11.98 106.48
New England Companies(1) 1.44 0.93 11.41 11.40 126.48
Thrift Strategy(22) 0.68 0.69 10.67 10.48 94.46
Diversified Strategy(1) 1.44 0.93 11.41 11.40 126.48
Companies Issuing Dividends(22) 0.73 0.71 10.74 10.56 97.69
Companies Without Dividends(1) 0.56 0.54 10.22 10.22 74.79
Equity/Assets 6-12%(16) 0.79 0.74 10.87 10.62 109.41
Equity/Assets (greater than) 12%(7) 0.57 0.61 10.33 10.33 64.98
Holding Company Structure(2) 1.05 0.94 12.02 10.10 100.68
Assets Over $1 Billion(5) 0.79 0.59 6.95 6.67 77.96
Assets $500 Million-$1 Billion(3) 0.79 0.89 14.08 14.03 143.39
Assets $250-$500 Million(5) 0.88 0.85 11.27 11.23 109.10
Assets less than $250 Million(10) 0.64 0.65 11.03 10.82 87.76
Goodwill Companies(9) 0.85 0.78 9.89 9.39 107.23
Non-Goodwill Companies(14) 0.65 0.67 11.16 11.16 90.40
MHC Institutions(23) 0.72 0.70 10.71 10.54 96.34
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month common earnings and average common equity and
assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by public
(non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of November 28, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- ---------------------- ------- ------- -------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA 59.50 94,411 5,617.5 62.06 31.50 61.50 -3.25 217.33 83.08
CSA Coast Savings Financial of CA 60.00 18,644 1,118.6 61.44 34.75 61.37 -2.23 419.03 63.84
CFB Commercial Federal Corp. of NE 48.06 21,582 1,037.2 51.19 29.75 47.69 0.78 ***.** 50.19
DME Dime Bancorp, Inc. of NY* 24.25 101,492 2,461.2 26.00 14.62 24.25 0.00 141.05 64.41
DSL Downey Financial Corp. of CA 27.50 26,754 735.7 27.56 17.62 26.81 2.57 153.22 47.14
FED FirstFed Fin. Corp. of CA 36.50 10,585 386.4 39.44 21.50 39.44 -7.45 126.01 65.91
GSB Glendale Fed. Bk, FSB of CA 33.31 50,456 1,680.7 36.12 20.62 32.37 2.90 104.98 43.27
GDW Golden West Fin. Corp. of CA 89.62 56,770 5,087.7 93.81 59.87 89.87 -0.28 242.19 41.98
GPT GreenPoint Fin. Corp. of NY* 66.62 42,826 2,853.1 69.37 45.62 67.50 -1.30 N.A. 40.25
JSB JSB Financial, Inc. of NY 46.62 9,898 461.4 49.56 36.00 47.12 -1.06 305.39 22.68
NYB New York Bancorp, Inc. of NY 35.37 21,319 754.1 36.31 16.81 36.00 -1.75 398.87 82.60
WES Westcorp Inc. of Orange CA 17.00 26,256 446.4 23.62 13.25 17.37 -2.13 131.92 -22.30
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 23.75 2,697 64.1 24.75 14.19 23.37 1.63 N.A. 59.72
ANE Alliance Bancorp of New Englan* 17.50 1,627 28.5 18.00 8.72 17.25 1.45 141.38 94.44
BKC American Bank of Waterbury CT* 47.12 2,313 109.0 47.87 27.37 47.50 -0.80 151.31 68.29
BFD BostonFed Bancorp of MA 20.37 5,650 115.1 22.31 14.37 20.56 -0.92 N.A. 38.10
CFX CFX Corp of NH(8)* 27.75 23,977 665.4 27.75 14.29 27.50 0.91 133.19 79.03
CNY Carver Bancorp, Inc. of NY 17.06 2,314 39.5 17.06 7.75 16.50 3.39 172.96 106.79
CBK Citizens First Fin.Corp. of IL 18.25 2,584 47.2 19.50 13.50 18.12 0.72 N.A. 27.00
ESX Essex Bancorp of VA(8) 5.00 1,058 5.3 7.94 1.00 4.87 2.67 -70.15 128.31
FCB Falmouth Co-Op Bank of MA* 20.25 1,455 29.5 22.00 12.87 20.25 0.00 N.A. 54.34
FAB FirstFed America Bancorp of MA 20.62 8,707 179.5 22.12 13.62 20.25 1.83 N.A. N.A.
GAF GA Financial Corp. of PA 19.25 7,973 153.5 19.69 14.50 19.69 -2.23 N.A. 27.31
KNK Kankakee Bancorp of IL 33.87 1,426 48.3 34.62 23.37 31.75 6.68 238.70 36.85
KYF Kentucky First Bancorp of KY 14.50 1,303 18.9 14.62 10.56 14.62 -0.82 N.A. 33.39
MBB MSB Bancorp of Middletown NY* 29.00 2,844 82.5 29.50 16.37 28.87 0.45 190.00 47.81
PDB Piedmont Bancorp of NC 10.37 2,751 28.5 18.12 9.25 10.62 -2.35 N.A. -1.24
SSB Scotland Bancorp of NC 10.25 1,914 19.6 19.25 10.19 10.31 -0.58 N.A. -27.41
SZB SouthFirst Bancshares of AL 19.00 848 16.1 20.87 12.50 19.37 -1.91 N.A. 43.40
SRN Southern Banc Company of AL 16.87 1,230 20.8 17.37 13.12 16.87 0.00 N.A. 28.58
SSM Stone Street Bancorp of NC 20.25 1,898 38.4 27.25 19.25 20.50 -1.22 N.A. -1.22
TSH Teche Holding Company of LA 21.88 3,438 75.2 23.50 13.00 21.50 1.77 N.A. 52.26
FTF Texarkana Fst. Fin. Corp of AR 24.75 1,790 44.3 27.00 13.62 24.87 -0.48 N.A. 58.35
THR Three Rivers Fin. Corp. of MI 19.75 824 16.3 20.50 13.62 20.06 -1.55 N.A. 41.07
WSB Washington SB, FSB of MD 7.37 4,348 32.0 8.25 4.75 7.37 0.00 489.60 51.33
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 40.00 692 27.7 41.00 27.14 40.00 0.00 N.A. 40.35
AFED AFSALA Bancorp, Inc. of NY 19.12 1,455 27.8 19.50 11.37 18.75 1.97 N.A. 59.33
ALBK ALBANK Fin. Corp. of Albany NY 46.25 12,872 595.3 47.75 30.50 45.50 1.65 98.92 47.43
AMFC AMB Financial Corp. of IN 16.00 964 15.4 17.75 12.50 16.06 -0.37 N.A. 20.75
ASBP ASB Financial Corp. of OH 13.12 1,700 22.3 18.25 11.50 13.25 -0.98 N.A. 0.92
ABBK Abington Savings Bank of MA* 36.00 1,840 66.2 36.75 19.00 36.75 -2.04 443.81 84.62
AABC Access Anytime Bancorp of NM 10.12 1,217 12.3 10.62 5.15 10.53 -3.89 49.93 87.76
AFBC Advance Fin. Bancorp of WV 17.75 1,084 19.2 17.87 12.75 17.75 0.00 N.A. N.A.
AADV Advantage Bancorp of WI(8) 62.25 3,236 201.4 62.25 31.75 62.00 0.40 576.63 93.02
AFCB Affiliated Comm BC, Inc of MA 28.50 6,493 185.1 32.12 17.10 29.00 -1.72 N.A. 66.67
ALBC Albion Banc Corp. of Albion NY 29.00 250 7.3 30.50 16.50 29.00 0.00 123.08 73.13
ABCL Allied Bancorp of IL 26.25 8,020 210.5 28.37 16.08 26.50 -0.94 293.55 57.47
</TABLE>
<TABLE>
<CAPTION>
Current Per Share Financials
-----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- --------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA 3.94 3.37 20.17 17.13 495.70
CSA Coast Savings Financial of CA 2.94 3.14 25.21 24.92 484.90
CFB Commercial Federal Corp. of NE 3.02 3.02 20.59 18.42 333.94
DME Dime Bancorp, Inc. of NY* 1.30 1.28 10.38 9.88 191.28
DSL Downey Financial Corp. of CA 1.49 1.43 15.61 15.41 218.81
FED FirstFed Fin. Corp. of CA 2.19 2.18 20.01 19.82 387.78
GSB Glendale Fed. Bk, FSB of CA 1.76 2.11 18.39 16.46 325.68
GDW Golden West Fin. Corp. of CA 5.93 5.83 45.36 45.36 691.01
GPT GreenPoint Fin. Corp. of NY* 3.38 3.30 29.63 15.88 305.75
JSB JSB Financial, Inc. of NY 2.97 2.64 35.91 35.91 154.68
NYB New York Bancorp, Inc. of NY 2.40 2.46 7.93 7.93 152.17
WES Westcorp Inc. of Orange CA 1.31 0.27 13.00 12.97 143.10
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 0.48 0.48 16.91 16.91 97.03
ANE Alliance Bancorp of New Englan* 1.15 1.06 10.95 10.68 148.69
BKC American Bank of Waterbury CT* 3.27 2.76 23.23 22.38 263.69
BFD BostonFed Bancorp of MA 1.16 1.05 14.48 13.94 170.04
CFX CFX Corp of NH(8)* 0.58 0.78 10.25 9.88 117.66
CNY Carver Bancorp, Inc. of NY -0.26 0.02 15.09 14.50 179.59
CBK Citizens First Fin.Corp. of IL 0.63 0.56 14.79 14.79 107.57
ESX Essex Bancorp of VA(8) 0.20 0.18 0.03 -0.14 181.37
FCB Falmouth Co-Op Bank of MA* 0.52 0.49 15.40 15.40 64.55
FAB FirstFed America Bancorp of MA 0.06 0.54 14.52 14.52 118.99
GAF GA Financial Corp. of PA 0.94 0.91 14.72 14.58 100.63
KNK Kankakee Bancorp of IL 2.15 2.11 27.25 25.69 238.38
KYF Kentucky First Bancorp of KY 0.78 0.77 11.29 11.29 67.60
MBB MSB Bancorp of Middletown NY* 0.79 0.52 21.15 10.38 286.18
PDB Piedmont Bancorp of NC -0.11 0.25 7.56 7.56 46.00
SSB Scotland Bancorp of NC 0.66 0.65 7.61 7.61 33.65
SZB SouthFirst Bancshares of AL -0.03 0.25 16.06 16.06 114.72
SRN Southern Banc Company of AL 0.12 0.43 14.58 14.43 85.72
SSM Stone Street Bancorp of NC 0.86 0.86 16.32 16.32 55.20
TSH Teche Holding Company of LA 0.78 1.08 15.53 15.53 118.17
FTF Texarkana Fst. Fin. Corp of AR 1.31 1.62 15.03 15.03 95.73
THR Three Rivers Fin. Corp. of MI 0.62 0.90 15.54 15.48 115.45
WSB Washington SB, FSB of MD 0.25 0.35 5.16 5.16 61.61
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 2.76 1.37 32.62 32.00 377.07
AFED AFSALA Bancorp, Inc. of NY 0.82 0.82 14.74 14.74 109.40
ALBK ALBANK Fin. Corp. of Albany NY 2.89 2.87 26.69 23.51 288.76
AMFC AMB Financial Corp. of IN 0.98 0.69 14.95 14.95 107.25
ASBP ASB Financial Corp. of OH 0.64 0.60 10.30 10.30 66.15
ABBK Abington Savings Bank of MA* 2.29 2.04 19.43 17.61 272.62
AABC Access Anytime Bancorp of NM 1.26 1.17 7.51 7.51 86.80
AFBC Advance Fin. Bancorp of WV 0.83 0.81 15.02 15.02 97.52
AADV Advantage Bancorp of WI(8) 3.30 2.96 30.59 28.46 320.60
AFCB Affiliated Comm BC, Inc of MA 1.52 1.74 16.42 16.33 167.94
ALBC Albion Banc Corp. of Albion NY 1.31 1.29 24.26 24.26 283.24
ABCL Allied Bancorp of IL 1.06 1.18 16.10 15.90 170.97
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of November 28, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- -------- ------ -------- ------- ------- ------- ------- ------- -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
ATSB AmTrust Capital Corp. of IN 14.00 526 7.4 14.50 10.00 14.50 -3.45 N.A. 40.00
AHCI Ambanc Holding Co., Inc. of NY* 17.00 4,306 73.2 17.37 10.50 17.06 -0.35 N.A. 51.11
ASBI Ameriana Bancorp of IN 19.50 3,231 63.0 22.00 15.25 19.75 -1.27 111.27 21.88
AFFFZ America First Fin. Fund of CA(8) 47.12 6,011 283.2 50.56 28.75 48.62 -3.09 151.31 55.77
ABCW Anchor Bancorp Wisconsin of WI 31.50 9,054 285.2 32.25 17.37 30.50 3.28 114.43 76.27
ANDB Andover Bancorp, Inc. of MA* 37.75 5,149 194.4 40.50 25.00 38.37 -1.62 251.16 47.35
ASFC Astoria Financial Corp. of NY 55.12 20,666 1,139.1 56.62 34.75 56.25 -2.01 109.98 49.50
AVND Avondale Fin. Corp. of IL 16.00 3,495 55.9 18.87 12.75 16.12 -0.74 N.A. -6.54
BKCT Bancorp Connecticut of CT* 40.00 2,543 101.7 40.00 21.50 38.87 2.91 357.14 77.78
BPLS Bank Plus Corp. of CA 11.12 19,341 215.1 13.75 9.62 11.50 -3.30 N.A. -3.30
BWFC Bank West Fin. Corp. of MI 22.00 1,753 38.6 22.50 10.50 22.12 -0.54 N.A. 107.16
BANC BankAtlantic Bancorp of FL 14.37 22,276 320.1 17.12 12.12 13.87 3.60 245.43 7.48
BKUNA BankUnited SA of FL 12.94 9,533 123.4 13.75 8.50 13.25 -2.34 138.31 29.40
BVCC Bay View Capital Corp. of CA 33.75 12,421 419.2 35.81 19.50 33.87 -0.35 70.89 59.27
FSNJ Bayonne Banchsares of NJ 12.00 8,993 107.9 13.06 5.63 12.25 -2.04 N.A. 53.06
BFSB Bedford Bancshares of VA 28.25 1,142 32.3 28.75 17.50 28.75 -1.74 169.05 60.33
BFFC Big Foot Fin. Corp. of IL 18.50 2,513 46.5 19.62 12.31 18.37 0.71 N.A. 42.31
BSBC Branford SB of CT(8)* 6.00 6,559 39.4 6.31 3.62 6.25 -4.00 183.02 55.04
BYFC Broadway Fin. Corp. of CA 13.00 831 10.8 13.00 9.12 13.00 0.00 N.A. 40.54
CBES CBES Bancorp of MO 20.37 1,025 20.9 22.37 13.31 20.00 1.85 N.A. 42.95
CCFH CCF Holding Company of GA 20.00 820 16.4 21.00 14.50 19.75 1.27 N.A. 35.59
CENF CENFED Financial Corp. of CA 40.75 5,959 242.8 42.25 25.45 38.75 5.16 159.89 53.25
CFSB CFSB Bancorp of Lansing MI 35.50 5,087 180.6 35.75 16.59 35.50 0.00 294.44 100.23
CKFB CKF Bancorp of Danville KY 18.50 903 16.7 20.50 17.50 18.37 0.71 N.A. -8.64
CNSB CNS Bancorp of MO 20.00 1,653 33.1 20.00 14.00 18.00 11.11 N.A. 32.28
CSBF CSB Financial Group Inc of IL* 12.50 942 11.8 12.75 10.00 12.75 -1.96 N.A. 23.52
CBCI Calumet Bancorp of Chicago IL 31.87 3,166 100.9 34.00 21.67 32.87 -3.04 138.37 43.75
CAFI Camco Fin. Corp. of OH 24.00 3,214 77.1 24.00 14.05 24.00 0.00 N.A. 58.73
CMRN Cameron Fin. Corp. of MO 19.62 2,627 51.5 19.87 15.00 19.00 3.26 N.A. 22.63
CAPS Capital Savings Bancorp of MO(8) 22.37 1,892 42.3 22.50 12.75 18.75 19.31 68.83 72.08
CFNC Carolina Fincorp of NC* 17.37 1,851 32.2 17.87 13.00 17.37 0.00 N.A. 29.92
CASB Cascade SB of Everett WA(8) 12.75 3,385 43.2 16.80 10.40 13.25 -3.77 -0.39 -1.16
CATB Catskill Fin. Corp. of NY* 17.62 4,657 82.1 19.12 13.75 17.50 0.69 N.A. 25.86
CNIT Cenit Bancorp of Norfolk VA 68.00 1,654 112.5 71.00 39.00 69.00 -1.45 328.21 63.86
CEBK Central Co-Op. Bank of MA* 26.50 1,965 52.1 26.50 15.87 26.00 1.92 404.76 51.43
CENB Century Bancshares of NC* 80.00 407 32.6 84.00 62.00 80.00 0.00 N.A. 23.08
CBSB Charter Financial Inc. of IL(8) 22.00 4,150 91.3 22.00 12.50 21.50 2.33 N.A. 76.00
COFI Charter One Financial of OH 59.25 49,563 2,936.6 61.91 36.91 60.62 -2.26 238.57 48.12
CVAL Chester Valley Bancorp of PA 26.25 2,189 57.5 27.50 14.10 26.50 -0.94 131.69 86.17
CTZN CitFed Bancorp of Dayton OH 50.62 8,656 438.2 55.50 28.25 50.50 0.24 462.44 53.39
CLAS Classic Bancshares of KY 17.12 1,300 22.3 17.25 11.50 16.75 2.21 N.A. 47.33
CMSB Cmnwealth Bancorp of PA 20.37 16,243 330.9 20.37 13.50 20.06 1.55 N.A. 35.80
CBSA Coastal Bancorp of Houston TX 28.87 4,992 144.1 33.25 22.37 29.00 -0.45 N.A. 26.24
CFCP Coastal Fin. Corp. of SC 23.00 4,647 106.9 27.75 14.44 22.75 1.10 130.00 46.03
CMSV Commty. Svgs, MHC of FL (48.5) 35.00 5,095 86.5 39.75 18.00 35.25 -0.71 N.A. 70.73
CFTP Community Fed. Bancorp of MS 17.12 4,629 79.2 20.00 16.37 16.75 2.21 N.A. 0.71
CFFC Community Fin. Corp. of VA 24.75 1,275 31.6 24.75 20.50 23.62 4.78 253.57 19.28
CFBC Community First Bnkg Co. of GA 38.37 2,414 92.6 40.00 31.87 38.37 0.00 N.A. N.A.
CIBI Community Inv. Bancorp of OH 15.75 916 14.4 17.00 10.33 16.37 -3.79 N.A. 39.01
COOP Cooperative Bk.for Svgs. of NC 17.37 2,983 51.8 17.75 10.00 17.00 2.18 247.40 71.64
CRZY Crazy Woman Creek Bncorp of WY 15.37 955 14.7 15.50 11.25 15.31 0.39 N.A. 28.08
DNFC D&N Financial Corp. of MI 24.12 8,244 198.8 25.37 14.87 23.87 1.05 175.66 44.00
DCBI Delphos Citizens Bancorp of OH 17.50 1,960 34.3 18.25 11.75 17.75 -1.41 N.A. 45.83
DIME Dime Community Bancorp of NY 23.25 12,625 293.5 23.62 14.06 22.94 1.35 N.A. 57.63
DIBK Dime Financial Corp. of CT* 31.50 5,162 162.6 32.00 16.50 30.25 4.13 200.00 82.61
</TABLE>
<TABLE>
<CAPTION>
Current Per Share Financials
-----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- --------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
ATSB AmTrust Capital Corp. of IN 0.54 0.31 14.48 14.33 132.48
AHCI Ambanc Holding Co., Inc. of NY* -0.65 -0.68 14.57 14.57 112.63
ASBI Ameriana Bancorp of IN 1.13 1.02 13.63 13.63 121.64
AFFFZ America First Fin. Fund of CA(8) 7.31 7.39 31.32 30.99 374.40
ABCW Anchor Bancorp Wisconsin of WI 2.09 1.95 13.82 13.58 215.90
ANDB Andover Bancorp, Inc. of MA* 2.51 2.45 20.20 20.20 248.71
ASFC Astoria Financial Corp. of NY 2.96 2.80 29.51 24.96 382.48
AVND Avondale Fin. Corp. of IL -3.37 -3.43 13.18 13.18 170.79
BKCT Bancorp Connecticut of CT* 2.23 2.04 17.92 17.92 166.65
BPLS Bank Plus Corp. of CA 0.65 0.54 9.16 9.15 202.69
BWFC Bank West Fin. Corp. of MI 0.88 0.48 13.30 13.30 94.04
BANC BankAtlantic Bancorp of FL 1.22 0.64 7.03 5.81 127.72
BKUNA BankUnited SA of FL 0.49 0.44 7.03 5.53 225.05
BVCC Bay View Capital Corp. of CA 1.42 1.59 14.81 12.37 254.59
FSNJ Bayonne Banchsares of NJ 0.25 0.35 10.58 10.58 67.73
BFSB Bedford Bancshares of VA 1.39 1.38 17.18 17.18 121.87
BFFC Big Foot Fin. Corp. of IL 0.04 0.35 14.97 14.97 85.62
BSBC Branford SB of CT(8)* 0.31 0.31 2.69 2.69 27.88
BYFC Broadway Fin. Corp. of CA -0.16 0.30 14.72 14.72 147.11
CBES CBES Bancorp of MO 1.18 1.07 17.60 17.60 104.03
CCFH CCF Holding Company of GA 0.16 -0.18 14.21 14.21 133.34
CENF CENFED Financial Corp. of CA 2.41 2.17 21.51 21.48 386.76
CFSB CFSB Bancorp of Lansing MI 1.98 1.86 13.03 13.03 169.05
CKFB CKF Bancorp of Danville KY 1.22 0.91 15.69 15.69 66.30
CNSB CNS Bancorp of MO 0.47 0.47 14.34 14.34 58.93
CSBF CSB Financial Group Inc of IL* 0.16 0.26 12.98 12.27 51.85
CBCI Calumet Bancorp of Chicago IL 2.27 2.23 25.01 25.01 154.25
CAFI Camco Fin. Corp. of OH 1.73 1.46 14.98 13.87 156.25
CMRN Cameron Fin. Corp. of MO 0.78 0.97 17.18 17.18 79.22
CAPS Capital Savings Bancorp of MO(8) 1.20 1.18 11.70 11.70 128.04
CFNC Carolina Fincorp of NC* 0.70 0.68 13.92 13.92 61.63
CASB Cascade SB of Everett WA(8) 0.65 0.65 8.36 8.36 125.98
CATB Catskill Fin. Corp. of NY* 0.84 0.85 15.41 15.41 62.19
CNIT Cenit Bancorp of Norfolk VA 3.39 3.15 29.47 26.99 424.25
CEBK Central Co-Op. Bank of MA* 1.45 1.47 17.40 15.57 175.28
CENB Century Bancshares of NC* 4.19 4.20 75.12 75.12 248.00
CBSB Charter Financial Inc. of IL(8) 1.05 1.47 13.71 12.13 94.76
COFI Charter One Financial of OH 3.64 3.56 21.63 19.86 306.62
CVAL Chester Valley Bancorp of PA 1.36 1.30 12.75 12.75 147.25
CTZN CitFed Bancorp of Dayton OH 2.97 2.97 23.88 21.70 380.61
CLAS Classic Bancshares of KY 0.45 0.63 14.90 12.57 101.20
CMSB Cmnwealth Bancorp of PA 1.02 0.86 13.02 10.15 140.25
CBSA Coastal Bancorp of Houston TX 2.40 2.47 20.36 17.12 586.85
CFCP Coastal Fin. Corp. of SC 1.25 1.08 6.97 6.97 106.31
CMSV Commty. Svgs, MHC of FL (48.5) 1.07 0.98 15.79 15.79 139.20
CFTP Community Fed. Bancorp of MS 0.66 0.65 12.47 12.47 46.65
CFFC Community Fin. Corp. of VA 1.32 1.67 18.86 18.86 137.58
CFBC Community First Bnkg Co. of GA 1.29 1.29 29.10 28.71 163.45
CIBI Community Inv. Bancorp of OH 1.01 1.01 12.10 12.10 102.98
COOP Cooperative Bk.for Svgs. of NC 0.73 0.73 9.27 9.27 120.53
CRZY Crazy Woman Creek Bncorp of WY 0.72 0.73 14.88 14.88 62.78
DNFC D&N Financial Corp. of MI 1.68 1.55 11.18 11.06 212.77
DCBI Delphos Citizens Bancorp of OH 0.82 0.82 14.65 14.65 55.00
DIME Dime Community Bancorp of NY 1.10 1.07 14.81 12.76 109.73
DIBK Dime Financial Corp. of CT* 3.05 3.04 14.54 14.12 178.52
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of November 28, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- -------- ------ --------- -------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
EGLB Eagle BancGroup of IL 19.75 1,198 23.7 19.75 13.25 18.94 4.28 N.A. 32.82
EBSI Eagle Bancshares of Tucker GA 19.25 5,666 109.1 20.94 13.62 19.25 0.00 165.52 24.19
EGFC Eagle Financial Corp. of CT(8) 51.75 6,316 326.9 52.50 26.75 51.00 1.47 491.43 69.67
ETFS East Texas Fin. Serv. of TX 20.00 1,026 20.5 21.50 15.50 19.37 3.25 N.A. 22.17
EMLD Emerald Financial Corp of OH 19.25 5,072 97.6 19.25 10.62 19.25 0.00 N.A. 71.11
EIRE Emerald Island Bancorp, MA(8)* 32.25 2,250 72.6 32.25 14.20 31.94 0.97 323.23 101.56
EFBC Empire Federal Bancorp of MT 16.50 2,592 42.8 18.25 12.50 16.50 0.00 N.A. N.A.
EFBI Enterprise Fed. Bancorp of OH 27.75 1,986 55.1 27.75 14.12 27.00 2.78 N.A. 91.38
EQSB Equitable FSB of Wheaton MD 45.00 602 27.1 45.75 26.50 44.31 1.56 N.A. 59.29
FCBF FCB Fin. Corp. of Neenah WI 27.25 3,879 105.7 28.13 18.50 28.00 -2.68 N.A. 47.30
FFBS FFBS Bancorp of Columbus MS 22.50 1,572 35.4 26.00 21.00 22.50 0.00 N.A. -2.17
FFDF FFD Financial Corp. of OH 18.37 1,445 26.5 19.50 13.00 18.75 -2.03 N.A. 38.64
FFLC FFLC Bancorp of Leesburg FL 22.50 3,835 86.3 23.50 11.70 23.50 -4.26 N.A. 74.42
FFFC FFVA Financial Corp. of VA 33.37 4,522 150.9 35.12 20.00 33.75 -1.13 N.A. 62.78
FFWC FFW Corporation of Wabash IN 37.75 715 27.0 37.75 20.75 36.00 4.86 N.A. 72.53
FFYF FFY Financial Corp. of OH 29.75 4,122 122.6 30.12 25.00 30.12 -1.23 N.A. 17.54
FMCO FMS Financial Corp. of NJ 29.37 2,388 70.1 31.50 17.00 29.37 0.00 226.33 60.93
FFHH FSF Financial Corp. of MN 20.00 3,010 60.2 21.00 14.25 19.50 2.56 N.A. 32.28
FOBC Fed One Bancorp of Wheeling WV 24.87 2,373 59.0 27.00 15.37 25.75 -3.42 148.70 57.90
FBCI Fidelity Bancorp of Chicago IL 23.25 2,795 65.0 25.75 16.87 23.75 -2.11 N.A. 36.76
FSBI Fidelity Bancorp, Inc. of PA 26.62 1,555 41.4 26.62 16.82 25.50 4.39 244.37 46.42
FFFL Fidelity FSB, MHC of FL (47.7) 27.87 6,771 89.9 32.50 17.00 27.62 0.91 N.A. 57.01
FFED Fidelity Fed. Bancorp of IN 10.00 2,791 27.9 10.50 7.50 9.50 5.26 41.84 2.56
FFOH Fidelity Financial of OH 15.00 5,580 83.7 16.37 11.12 14.62 2.60 N.A. 30.43
FIBC Financial Bancorp, Inc. of NY 24.81 1,710 42.4 25.75 14.25 25.75 -3.65 N.A. 65.40
FBSI First Bancshares of MO 26.25 1,093 28.7 28.00 16.25 26.25 0.00 105.88 57.94
FBBC First Bell Bancorp of PA 17.25 6,511 112.3 18.37 13.12 18.00 -4.17 N.A. 30.19
FBER First Bergen Bancorp of NJ 18.62 2,865 53.3 19.50 11.37 18.75 -0.69 N.A. 61.91
SKBO First Carnegie,MHC of PA(45.0) 18.62 2,300 19.3 19.87 11.62 18.87 -1.32 N.A. N.A.
FSTC First Citizens Corp of GA 24.00 2,742 65.8 27.17 14.17 25.75 -6.80 190.91 42.60
FCME First Coastal Corp. of ME* 13.87 1,359 18.8 15.75 7.25 13.75 0.87 N.A. 78.97
FFBA First Colorado Bancorp of Co 22.75 16,485 375.0 23.50 16.00 23.50 -3.19 589.39 33.82
FDEF First Defiance Fin.Corp. of OH 15.25 8,957 136.6 16.00 11.75 15.37 -0.78 N.A. 23.28
FESX First Essex Bancorp of MA* 19.87 7,527 149.6 20.50 13.12 19.37 2.58 231.17 51.45
FFES First FS&LA of E. Hartford CT 37.00 2,682 99.2 37.50 22.75 37.50 -1.33 469.23 60.87
FFSX First FS&LA. MHC of IA (46.1) 31.87 2,833 41.5 35.00 20.75 31.87 0.00 377.81 63.44
BDJI First Fed. Bancorp. of MN 28.00 673 18.8 28.00 17.00 28.00 0.00 N.A. 51.35
FFBH First Fed. Bancshares of AR 21.37 4,896 104.6 21.75 15.75 21.50 -0.60 N.A. 34.66
FTFC First Fed. Capital Corp. of WI 27.87 9,165 255.4 29.00 15.50 26.87 3.72 271.60 77.86
FFKY First Fed. Fin. Corp. of KY 22.00 4,159 91.5 23.50 17.75 22.00 0.00 39.68 8.64
FFBZ First Federal Bancorp of OH 19.25 1,575 30.3 20.50 14.50 19.25 0.00 92.50 20.31
FFCH First Fin. Holdings Inc. of SC 43.12 6,368 274.6 44.00 22.25 44.00 -2.00 252.00 91.64
FFBI First Financial Bancorp of IL 19.00 415 7.9 20.00 15.50 19.00 0.00 N.A. 19.72
FFHS First Franklin Corp. of OH 26.00 1,192 31.0 26.00 16.00 26.00 0.00 98.17 57.58
FGHC First Georgia Hold. Corp of GA 8.37 3,052 25.5 9.50 5.17 8.25 1.45 118.54 47.62
FSPG First Home Bancorp of NJ 23.75 2,708 64.3 23.75 13.50 23.75 0.00 295.83 71.23
FFSL First Independence Corp. of KS 15.00 978 14.7 15.00 9.81 15.00 0.00 N.A. 44.65
FISB First Indiana Corp. of IN 26.25 10,561 277.2 26.50 17.37 26.50 -0.94 94.44 22.66
FKFS First Keystone Fin. Corp of PA 32.00 1,228 39.3 33.25 19.00 32.12 -0.37 N.A. 66.23
FLKY First Lancaster Bncshrs of KY 15.75 951 15.0 16.37 14.50 15.87 -0.76 N.A. 7.73
FLFC First Liberty Fin. Corp. of GA 27.87 7,725 215.3 28.37 18.25 27.12 2.77 448.62 51.71
CASH First Midwest Fin. Corp. of IA 20.50 2,699 55.3 20.75 15.00 20.31 0.94 N.A. 33.72
FMBD First Mutual Bancorp of IL 20.25 3,507 71.0 21.50 13.75 20.00 1.25 N.A. 35.00
FMSB First Mutual SB of Bellevue WA* 18.25 4,067 74.2 20.17 10.61 18.37 -0.65 253.68 72.01
FNGB First Northern Cap. Corp of WI 13.50 8,840 119.3 14.00 8.00 13.62 -0.88 85.95 66.05
</TABLE>
<TABLE>
<CAPTION>
Current Per Share Financials
-----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- --------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
EGLB Eagle BancGroup of IL 0.46 0.36 17.03 17.03 143.71
EBSI Eagle Bancshares of Tucker GA 0.88 0.89 12.59 12.59 154.03
EGFC Eagle Financial Corp. of CT(8) 0.90 1.30 22.91 18.23 332.04
ETFS East Texas Fin. Serv. of TX 0.75 0.70 20.35 20.35 113.01
EMLD Emerald Financial Corp of OH 1.20 1.11 9.28 9.15 118.99
EIRE Emerald Island Bancorp, MA(8)* 1.60 1.70 13.77 13.77 197.11
EFBC Empire Federal Bancorp of MT 0.35 0.46 14.76 14.76 42.30
EFBI Enterprise Fed. Bancorp of OH 0.82 0.92 15.82 15.81 138.41
EQSB Equitable FSB of Wheaton MD 2.20 3.51 25.80 25.80 511.96
FCBF FCB Fin. Corp. of Neenah WI 0.63 0.75 12.23 12.23 69.91
FFBS FFBS Bancorp of Columbus MS 1.16 1.16 14.34 14.34 85.85
FFDF FFD Financial Corp. of OH 1.16 0.57 14.86 14.86 61.05
FFLC FFLC Bancorp of Leesburg FL 0.94 0.89 13.73 13.73 99.97
FFFC FFVA Financial Corp. of VA 1.70 1.63 16.70 16.36 125.45
FFWC FFW Corporation of Wabash IN 2.43 2.38 24.63 22.36 253.80
FFYF FFY Financial Corp. of OH 1.87 1.84 20.30 20.30 148.22
FMCO FMS Financial Corp. of NJ 2.34 2.32 15.80 15.57 243.58
FFHH FSF Financial Corp. of MN 1.04 1.03 14.41 14.41 128.95
FOBC Fed One Bancorp of Wheeling WV 1.38 1.38 16.85 16.10 150.75
FBCI Fidelity Bancorp of Chicago IL 1.41 1.41 18.66 18.63 178.13
FSBI Fidelity Bancorp, Inc. of PA 1.08 1.71 15.78 15.78 233.63
FFFL Fidelity FSB, MHC of FL (47.7) 0.50 0.79 12.36 12.27 147.58
FFED Fidelity Fed. Bancorp of IN 0.67 0.65 5.15 5.15 84.32
FFOH Fidelity Financial of OH 0.76 0.85 12.34 10.95 94.75
FIBC Financial Bancorp, Inc. of NY 1.46 1.56 15.71 15.63 173.66
FBSI First Bancshares of MO 1.74 1.57 20.73 20.73 148.91
FBBC First Bell Bancorp of PA 1.18 1.15 11.02 11.02 104.63
FBER First Bergen Bancorp of NJ 0.71 0.71 13.57 13.57 99.39
SKBO First Carnegie,MHC of PA(45.0) 0.33 0.33 10.52 10.52 63.97
FSTC First Citizens Corp of GA 2.17 1.94 12.44 9.81 122.97
FCME First Coastal Corp. of ME* 4.52 4.34 10.66 10.66 109.32
FFBA First Colorado Bancorp of Co 1.11 1.10 12.00 11.85 91.76
FDEF First Defiance Fin.Corp. of OH 0.63 0.61 12.61 12.61 64.12
FESX First Essex Bancorp of MA* 1.33 1.14 11.90 10.41 160.71
FFES First FS&LA of E. Hartford CT 1.92 2.18 24.40 24.40 368.16
FFSX First FS&LA. MHC of IA (46.1) 1.18 1.15 14.08 13.96 161.26
BDJI First Fed. Bancorp. of MN 1.05 1.03 17.74 17.74 165.66
FFBH First Fed. Bancshares of AR 1.13 1.08 16.64 16.64 111.75
FTFC First Fed. Capital Corp. of WI 1.17 1.37 11.46 10.80 170.18
FFKY First Fed. Fin. Corp. of KY 1.46 1.45 12.60 11.89 91.99
FFBZ First Federal Bancorp of OH 1.25 1.26 9.92 9.91 129.34
FFCH First Fin. Holdings Inc. of SC 2.22 2.16 16.45 16.45 268.99
FFBI First Financial Bancorp of IL -0.15 0.94 18.10 18.10 202.99
FFHS First Franklin Corp. of OH 1.05 1.24 17.49 17.39 193.95
FGHC First Georgia Hold. Corp of GA 0.32 0.25 4.21 3.86 51.24
FSPG First Home Bancorp of NJ 1.74 1.70 13.31 13.11 193.90
FFSL First Independence Corp. of KS 0.73 0.73 11.79 11.79 115.05
FISB First Indiana Corp. of IN 1.62 1.33 14.13 13.96 146.49
FKFS First Keystone Fin. Corp of PA 2.15 1.97 20.16 20.16 304.10
FLKY First Lancaster Bncshrs of KY 0.53 0.53 14.62 14.62 49.62
FLFC First Liberty Fin. Corp. of GA 1.32 1.08 12.30 11.09 166.85
CASH First Midwest Fin. Corp. of IA 1.35 1.29 16.11 14.31 149.90
FMBD First Mutual Bancorp of IL 0.35 0.32 15.37 11.72 114.74
FMSB First Mutual SB of Bellevue WA* 1.07 1.05 7.53 7.53 110.92
FNGB First Northern Cap. Corp of WI 0.66 0.63 8.24 8.24 74.29
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of November 28, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- ------------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- -------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
FFPB First Palm Beach Bancorp of FL 38.75 5,048 195.6 40.56 23.00 38.87 -0.31 N.A. 64.06
FSLA First SB SLA MHC of NJ (47.5)(8) 40.37 8,007 137.4 47.50 16.36 41.00 -1.54 303.70 140.01
SOPN First SB, SSB, Moore Co. of NC 24.37 3,687 89.9 25.00 17.87 24.37 0.00 N.A. 29.97
FWWB First Savings Bancorp of WA* 25.25 10,247 258.7 26.37 18.00 24.37 3.61 N.A. 37.45
FSFF First SecurityFed Fin of IL 16.06 6,408 102.9 16.06 15.00 15.75 1.97 N.A. N.A.
SHEN First Shenango Bancorp of PA 33.75 2,069 69.8 35.00 21.75 33.75 0.00 N.A. 50.00
FSFC First So.east Fin. Corp. of SC(8) 15.12 4,388 66.3 16.75 9.25 15.12 0.00 N.A. 61.19
FBNW FirstBank Corp of Clarkston WA 17.62 1,984 35.0 19.00 15.50 17.31 1.79 N.A. N.A.
FFDB FirstFed Bancorp of AL 22.00 1,151 25.3 22.75 12.50 22.00 0.00 N.A. 76.00
FSPT FirstSpartan Fin. Corp. of SC 37.50 4,430 166.1 39.00 35.00 38.12 -1.63 N.A. N.A.
FLAG Flag Financial Corp of GA 18.50 2,037 37.7 19.87 10.25 18.00 2.78 88.78 72.09
FLGS Flagstar Bancorp, Inc of MI 18.25 13,670 249.5 21.75 13.00 19.00 -3.95 N.A. N.A.
FFIC Flushing Fin. Corp. of NY* 22.25 7,983 177.6 24.00 17.37 22.25 0.00 N.A. 22.79
FBHC Fort Bend Holding Corp. of TX 19.62 1,656 32.5 24.00 11.00 19.37 1.29 N.A. 53.88
FTSB Fort Thomas Fin. Corp. of KY 14.75 1,495 22.1 14.75 9.25 14.00 5.36 N.A. 0.89
FKKY Frankfort First Bancorp of KY 9.25 3,280 30.3 12.25 8.00 9.62 -3.85 N.A. -18.65
FTNB Fulton Bancorp of MO 20.25 1,719 34.8 26.50 14.12 19.75 2.53 N.A. 31.75
GFSB GFS Bancorp of Grinnell IA 16.87 988 16.7 17.62 10.12 17.25 -2.20 N.A. 58.85
GUPB GFSB Bancorp of Gallup NM 20.25 801 16.2 22.25 14.75 20.25 0.00 N.A. 27.60
GSLA GS Financial Corp. of LA 17.75 3,438 61.0 18.75 13.37 17.25 2.90 N.A. N.A.
GOSB GSB Financial Corp. of NY 15.63 2,248 35.1 16.75 14.25 15.50 0.84 N.A. N.A.
GWBC Gateway Bancorp of KY(8) 19.62 1,076 21.1 19.62 14.00 19.56 0.31 N.A. 37.68
GBCI Glacier Bancorp of MT 20.75 6,816 141.4 22.50 15.33 21.37 -2.90 329.61 27.07
GFCO Glenway Financial Corp. of OH 19.00 2,280 43.3 19.00 9.50 18.25 4.11 N.A. 85.37
GTPS Great American Bancorp of IL 19.00 1,697 32.2 19.50 14.25 19.00 0.00 N.A. 28.29
GTFN Great Financial Corp. of KY(8) 48.00 13,823 663.5 48.12 29.12 46.50 3.23 N.A. 64.84
GSBC Great Southern Bancorp of MO 21.88 8,080 176.8 22.12 16.00 22.12 -1.08 649.32 22.85
GDVS Greater DV SB,MHC of PA (19.9)* 31.00 3,272 20.2 32.50 9.75 31.00 0.00 N.A. 198.94
GSFC Green Street Fin. Corp. of NC 18.50 4,298 79.5 20.75 15.12 18.37 0.71 N.A. 19.35
GFED Guarnty FS&LA,MHC of MO (31.0)(8) 23.75 3,125 23.0 27.87 10.75 24.62 -3.53 N.A. 96.93
HCBB HCB Bancshares of AR 13.62 2,645 36.0 14.25 12.62 13.87 -1.80 N.A. N.A.
HEMT HF Bancorp of Hemet CA 16.75 6,282 105.2 17.12 10.75 16.25 3.08 N.A. 50.63
HFFC HF Financial Corp. of SD 26.00 2,803 72.9 27.00 16.25 25.03 3.88 420.00 50.20
HFNC HFNC Financial Corp. of NC 14.87 17,192 255.6 22.06 13.94 14.87 0.00 N.A. -16.79
HMNF HMN Financial, Inc. of MN 25.87 4,212 109.0 26.50 17.87 26.50 -2.38 N.A. 42.77
HALL Hallmark Capital Corp. of WI 15.25 2,886 44.0 15.37 8.50 14.69 3.81 N.A. 71.93
HARB Harbor FSB, MHC of FL (46.6)(8) 65.00 4,973 150.5 69.75 32.00 64.00 1.56 N.A. 81.82
HRBF Harbor Federal Bancorp of MD 21.75 1,693 36.8 23.50 15.00 21.25 2.35 117.50 38.10
HFSA Hardin Bancorp of Hardin MO 17.50 859 15.0 18.62 12.00 17.50 0.00 N.A. 40.00
HARL Harleysville SA of PA 29.37 1,662 48.8 30.25 14.60 30.25 -2.91 65.46 85.89
HFGI Harrington Fin. Group of IN 12.37 3,257 40.3 13.75 9.75 12.37 0.00 N.A. 15.07
HARS Harris SB, MHC of PA (24.3) 19.00 33,779 51.7 20.75 6.00 20.75 -8.43 N.A. 212.50
HFFB Harrodsburg 1st Fin Bcrp of KY 17.12 2,025 34.7 18.87 14.75 16.62 3.01 N.A. -9.27
HHFC Harvest Home Fin. Corp. of OH 14.75 915 13.5 14.75 9.25 14.25 3.51 N.A. 51.28
HAVN Haven Bancorp of Woodhaven NY 43.00 4,386 188.6 45.37 27.87 43.00 0.00 N.A. 50.24
HTHR Hawthorne Fin. Corp. of CA 21.00 3,088 64.8 21.00 7.37 19.75 6.33 -23.64 158.30
HMLK Hemlock Fed. Fin. Corp. of IL 17.25 2,076 35.8 17.50 12.50 17.25 0.00 N.A. N.A.
HBNK Highland Federal Bank of CA 32.00 2,300 73.6 32.75 17.00 32.00 0.00 N.A. 88.24
HIFS Hingham Inst. for Sav. of MA* 27.12 1,303 35.3 29.00 17.50 27.25 -0.48 494.74 44.64
HBEI Home Bancorp of Elgin IL 18.00 6,856 123.4 19.31 12.75 18.00 0.00 N.A. 33.33
HBFW Home Bancorp of Fort Wayne IN 27.37 2,525 69.1 27.37 18.50 26.06 5.03 N.A. 44.05
HBBI Home Building Bancorp of IN 21.25 312 6.6 23.75 18.00 21.25 0.00 N.A. 7.59
HCFC Home City Fin. Corp. of OH 18.00 905 16.3 18.00 12.00 17.62 2.16 N.A. 35.85
HOMF Home Fed Bancorp of Seymour IN 27.50 5,102 140.3 27.50 15.22 25.90 6.18 314.78 60.16
HWEN Home Financial Bancorp of IN 16.44 465 7.6 17.25 12.75 17.12 -3.97 N.A. 28.94
</TABLE>
<TABLE>
<CAPTION>
Current Per Share Financials
-------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- --------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
FFPB First Palm Beach Bancorp of FL 1.85 1.55 22.39 21.87 358.24
FSLA First SB SLA MHC of NJ (47.5)(8) 1.14 1.19 12.39 11.26 130.45
SOPN First SB, SSB, Moore Co. of NC 1.32 1.32 18.43 18.43 80.10
FWWB First Savings Bancorp of WA* 0.91 0.86 14.51 13.34 98.33
FSFF First SecurityFed Fin of IL 0.61 0.61 12.80 12.80 47.35
SHEN First Shenango Bancorp of PA 2.26 2.25 22.55 22.55 194.02
FSFC First So.east Fin. Corp. of SC(8) 0.81 0.81 8.20 8.20 79.77
FBNW FirstBank Corp of Clarkston WA 0.33 0.15 14.73 14.73 89.65
FFDB FirstFed Bancorp of AL 1.59 1.55 14.77 13.51 153.31
FSPT FirstSpartan Fin. Corp. of SC 1.25 1.25 29.17 29.17 108.87
FLAG Flag Financial Corp of GA 1.01 0.84 10.66 10.66 117.07
FLGS Flagstar Bancorp, Inc of MI 1.66 0.83 8.89 8.54 148.74
FFIC Flushing Fin. Corp. of NY* 0.99 1.04 17.08 16.40 120.27
FBHC Fort Bend Holding Corp. of TX 1.23 1.03 11.88 11.09 192.88
FTSB Fort Thomas Fin. Corp. of KY 0.76 0.76 10.56 10.56 65.45
FKKY Frankfort First Bancorp of KY 0.03 0.26 6.84 6.84 40.63
FTNB Fulton Bancorp of MO 0.73 0.63 14.88 14.88 60.33
GFSB GFS Bancorp of Grinnell IA 1.15 1.15 11.01 11.01 95.64
GUPB GFSB Bancorp of Gallup NM 0.97 0.97 17.60 17.60 137.28
GSLA GS Financial Corp. of LA 0.41 0.41 16.44 16.44 38.12
GOSB GSB Financial Corp. of NY 0.52 0.44 13.78 13.78 50.92
GWBC Gateway Bancorp of KY(8) 0.59 0.59 16.14 16.14 58.19
GBCI Glacier Bancorp of MT 1.22 1.25 8.41 8.21 84.21
GFCO Glenway Financial Corp. of OH 0.99 0.96 12.17 12.03 128.62
GTPS Great American Bancorp of IL 0.42 0.47 16.80 16.80 82.24
GTFN Great Financial Corp. of KY(8) 2.20 1.62 21.08 20.23 209.33
GSBC Great Southern Bancorp of MO 1.57 1.48 7.79 7.79 90.04
GDVS Greater DV SB,MHC of PA (19.9)* 0.68 0.68 8.85 8.85 76.04
GSFC Green Street Fin. Corp. of NC 0.65 0.65 14.65 14.65 41.41
GFED Guarnty FS&LA,MHC of MO (31.0)(8) 0.62 0.60 8.76 8.76 67.24
HCBB HCB Bancshares of AR 0.09 0.10 14.27 13.73 75.75
HEMT HF Bancorp of Hemet CA 0.05 0.28 13.26 11.05 167.20
HFFC HF Financial Corp. of SD 2.05 1.88 19.33 19.33 205.10
HFNC HFNC Financial Corp. of NC 0.62 0.53 9.48 9.48 50.42
HMNF HMN Financial, Inc. of MN 1.34 1.13 20.09 20.09 135.05
HALL Hallmark Capital Corp. of WI 0.91 0.89 10.59 10.59 145.00
HARB Harbor FSB, MHC of FL (46.6)(8) 2.68 2.66 19.47 18.85 227.43
HRBF Harbor Federal Bancorp of MD 0.91 0.91 16.75 16.75 128.29
HFSA Hardin Bancorp of Hardin MO 0.94 0.89 15.76 15.76 136.63
HARL Harleysville SA of PA 2.05 2.06 13.76 13.76 207.73
HFGI Harrington Fin. Group of IN 0.67 0.56 7.74 7.74 159.98
HARS Harris SB, MHC of PA (24.3) 0.52 0.43 5.12 4.53 62.47
HFFB Harrodsburg 1st Fin Bcrp of KY 0.55 0.73 14.49 14.49 53.80
HHFC Harvest Home Fin. Corp. of OH 0.23 0.50 11.35 11.35 90.82
HAVN Haven Bancorp of Woodhaven NY 2.63 2.64 25.07 24.99 417.99
HTHR Hawthorne Fin. Corp. of CA 2.37 2.28 14.01 14.01 288.59
HMLK Hemlock Fed. Fin. Corp. of IL 0.28 0.61 15.06 15.06 77.99
HBNK Highland Federal Bank of CA 2.41 1.83 17.20 17.20 224.34
HIFS Hingham Inst. for Sav. of MA* 1.98 1.98 16.11 16.11 165.96
HBEI Home Bancorp of Elgin IL 0.43 0.43 13.77 13.77 49.96
HBFW Home Bancorp of Fort Wayne IN 0.72 1.15 17.62 17.62 132.62
HBBI Home Building Bancorp of IN 1.05 1.03 18.89 18.89 133.80
HCFC Home City Fin. Corp. of OH 0.92 0.93 15.19 15.19 77.47
HOMF Home Fed Bancorp of Seymour IN 1.74 1.58 11.78 11.43 136.05
HWEN Home Financial Bancorp of IN 0.74 0.64 15.59 15.59 88.84
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of November 28, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- -------- ------- ------- ------- ------- ------- -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
HPBC Home Port Bancorp, Inc. of MA* 24.00 1,842 44.2 25.00 16.12 23.87 0.54 200.00 45.45
HMCI Homecorp, Inc. of Rockford IL(8) 25.00 1,708 42.7 25.00 11.83 23.75 5.26 150.00 96.08
HZFS Horizon Fin'l. Services of IA 11.00 851 9.4 13.00 7.25 11.75 -6.38 N.A. 45.50
HRZB Horizon Financial Corp. of WA* 16.56 7,434 123.1 18.00 10.65 16.50 0.36 45.01 41.06
IBSF IBS Financial Corp. of NJ 17.44 10,949 191.0 18.75 12.94 17.62 -1.02 N.A. 28.33
ISBF ISB Financial Corp. of LA 26.25 6,901 181.2 28.00 17.12 25.62 2.46 N.A. 45.83
ITLA Imperial Thrift & Loan of CA* 18.00 7,847 141.2 21.25 14.00 18.62 -3.33 N.A. 20.00
IFSB Independence FSB of DC 13.78 1,281 17.7 15.12 7.37 13.75 0.22 589.00 72.25
INCB Indiana Comm. Bank, SB of IN(8) 20.50 922 18.9 20.50 15.00 20.37 0.64 N.A. 26.15
INBI Industrial Bancorp of OH 18.00 5,173 93.1 18.25 12.00 17.25 4.35 N.A. 41.18
IWBK Interwest SB of Oak Harbor WA 39.50 8,050 318.0 43.25 27.62 38.75 1.94 295.00 22.48
IPSW Ipswich SB of Ipswich MA* 12.87 2,378 30.6 14.12 5.50 12.75 0.94 N.A. 114.50
JXVL Jacksonville Bancorp of TX 18.75 2,490 46.7 19.50 13.25 19.50 -3.85 N.A. 28.25
JXSB Jcksnville SB,MHC of IL (45.6) 26.75 1,272 15.5 29.50 12.00 26.75 0.00 N.A. 101.89
JSBA Jefferson Svgs Bancorp of MO 43.25 5,006 216.5 44.00 22.75 43.25 0.00 N.A. 66.35
JOAC Joachim Bancorp of MO 14.75 722 10.6 15.63 14.00 14.75 0.00 N.A. 1.72
KSAV KS Bancorp of Kenly NC 22.50 885 19.9 25.50 14.81 22.50 0.00 N.A. 50.91
KSBK KSB Bancorp of Kingfield ME(8)* 15.25 1,238 18.9 16.00 7.67 15.12 0.86 N.A. 98.83
KFBI Klamath First Bancorp of OR 21.88 10,019 219.2 24.25 14.75 20.62 6.11 N.A. 38.92
LSBI LSB Fin. Corp. of Lafayette IN 26.00 916 23.8 27.37 17.62 27.00 -3.70 N.A. 40.01
LVSB Lakeview SB of Paterson NJ 24.12 4,509 108.8 26.00 11.50 24.87 -3.02 N.A. 93.89
LARK Landmark Bancshares of KS 24.00 1,689 40.5 27.25 16.50 24.00 0.00 N.A. 33.33
LARL Laurel Capital Group of PA 27.75 1,446 40.1 28.00 15.87 27.75 0.00 116.80 68.18
LSBX Lawrence Savings Bank of MA* 13.87 4,284 59.4 16.37 7.94 13.75 0.87 303.20 70.60
LFED Leeds FSB, MHC of MD (36.3) 21.50 5,182 27.0 22.75 10.00 21.50 0.00 N.A. 101.50
LXMO Lexington B&L Fin. Corp. of MO 16.75 1,138 19.1 17.25 12.50 16.75 0.00 N.A. 24.07
LIFB Life Bancorp of Norfolk VA(8) 31.12 9,848 306.5 31.12 16.75 30.19 3.08 N.A. 72.89
LFBI Little Falls Bancorp of NJ 20.00 2,608 52.2 20.00 12.19 19.00 5.26 N.A. 56.86
LOGN Logansport Fin. Corp. of IN 15.25 1,261 19.2 16.00 11.12 15.75 -3.17 N.A. 35.56
LONF London Financial Corp. of OH 14.75 515 7.6 21.00 13.00 15.50 -4.84 N.A. 4.46
LISB Long Island Bancorp, Inc of NY 47.12 24,023 1,132.0 47.50 30.62 44.87 5.01 N.A. 34.63
MAFB MAF Bancorp of IL 32.50 15,249 495.6 34.75 22.25 33.50 -2.99 282.35 40.27
MBLF MBLA Financial Corp. of MO 27.00 1,268 34.2 27.00 19.00 25.25 6.93 N.A. 42.11
MFBC MFB Corp. of Mishawaka IN 23.25 1,651 38.4 23.75 16.50 23.05 0.87 N.A. 39.89
MLBC ML Bancorp of Villanova PA(8) 28.75 11,866 341.1 29.06 13.75 28.75 0.00 N.A. 103.61
MSBF MSB Financial Corp. of MI 19.50 1,234 24.1 19.50 9.25 19.50 0.00 N.A. 105.26
MARN Marion Capital Holdings of IN 26.50 1,776 47.1 28.13 19.25 27.00 -1.85 N.A. 37.66
MRKF Market Fin. Corp. of OH 15.25 1,336 20.4 15.75 12.25 15.25 0.00 N.A. N.A.
MFCX Marshalltown Fin. Corp. of IA(8) 17.25 1,411 24.3 17.25 14.25 17.12 0.76 N.A. 16.01
MFSL Maryland Fed. Bancorp of MD 26.62 6,467 172.2 26.62 16.37 24.69 7.82 407.05 53.25
MASB MassBank Corp. of Reading MA* 45.00 3,561 160.2 47.75 27.37 45.62 -1.36 356.39 57.40
MFLR Mayflower Co-Op. Bank of MA* 24.44 890 21.8 26.25 14.75 24.44 0.00 388.80 43.76
MECH Mechanics SB of Hartford CT* 25.62 5,293 135.6 27.25 15.37 25.75 -0.50 N.A. 62.67
MDBK Medford Bank of Medford, MA* 37.00 4,541 168.0 38.50 24.50 36.50 1.37 428.57 43.69
MERI Meritrust FSB of Thibodaux LA(8) 51.22 774 39.6 51.22 31.50 51.22 0.00 N.A. 61.99
MWBX MetroWest Bank of MA* 8.25 13,956 115.1 9.00 4.38 8.25 0.00 100.24 53.63
MCBS Mid Continent Bancshares of KS(8) 41.25 1,958 80.8 43.25 22.37 39.75 3.77 N.A. 76.51
MIFC Mid Iowa Financial Corp. of IA 10.62 1,678 17.8 11.00 6.25 10.62 0.00 112.40 66.72
MCBN Mid-Coast Bancorp of ME 28.75 233 6.7 29.00 18.50 29.00 -0.86 403.50 51.32
MWBI Midwest Bancshares, Inc. of IA 18.50 1,018 18.8 19.50 8.83 18.00 2.78 455.56 109.51
MWFD Midwest Fed. Fin. Corp of WI(8) 26.50 1,628 43.1 27.50 16.75 27.00 -1.85 430.00 43.24
MFFC Milton Fed. Fin. Corp. of OH 15.00 2,305 34.6 15.94 13.25 15.00 0.00 N.A. 3.45
MIVI Miss. View Hold. Co. of MN 18.25 740 13.5 19.75 11.75 17.37 5.07 N.A. 52.08
MBSP Mitchell Bancorp of NC* 17.50 931 16.3 18.00 13.25 17.50 0.00 N.A. 22.81
MBBC Monterey Bay Bancorp of CA 19.00 3,230 61.4 20.50 14.62 19.00 0.00 N.A. 28.81
</TABLE>
<TABLE>
<CAPTION>
Current Per Share Financials
------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- -------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
HPBC Home Port Bancorp, Inc. of MA* 1.75 1.74 11.65 11.65 109.13
HMCI Homecorp, Inc. of Rockford IL(8) 0.99 0.80 13.07 13.07 191.38
HZFS Horizon Fin'l. Services of IA 0.77 0.62 10.27 10.27 103.15
HRZB Horizon Financial Corp. of WA* 1.09 1.07 11.17 11.17 71.43
IBSF IBS Financial Corp. of NJ 0.53 0.53 11.69 11.69 67.11
ISBF ISB Financial Corp. of LA 0.75 1.03 16.52 14.06 137.24
ITLA Imperial Thrift & Loan of CA* 1.52 1.52 12.32 12.27 114.89
IFSB Independence FSB of DC 0.65 0.54 13.89 12.28 201.76
INCB Indiana Comm. Bank, SB of IN(8) 0.53 0.53 12.38 12.38 104.22
INBI Industrial Bancorp of OH 0.98 1.03 11.76 11.76 68.45
IWBK Interwest SB of Oak Harbor WA 2.52 2.32 16.13 15.84 254.25
IPSW Ipswich SB of Ipswich MA* 0.88 0.70 4.78 4.78 85.16
JXVL Jacksonville Bancorp of TX 0.90 1.18 13.55 13.55 90.84
JXSB Jcksnville SB,MHC of IL (45.6) 0.80 0.80 13.63 13.63 129.12
JSBA Jefferson Svgs Bancorp of MO 0.69 1.63 21.23 16.17 259.07
JOAC Joachim Bancorp of MO 0.39 0.39 13.67 13.67 48.58
KSAV KS Bancorp of Kenly NC 1.40 1.39 16.45 16.44 124.22
KSBK KSB Bancorp of Kingfield ME(8)* 1.08 1.10 8.46 8.00 117.84
KFBI Klamath First Bancorp of OR 0.55 0.83 14.20 14.20 72.65
LSBI LSB Fin. Corp. of Lafayette IN 1.61 1.42 18.88 18.88 218.63
LVSB Lakeview SB of Paterson NJ 1.34 0.97 13.71 11.74 112.19
LARK Landmark Bancshares of KS 1.14 1.35 18.62 18.62 135.05
LARL Laurel Capital Group of PA 2.09 2.02 15.20 15.20 145.21
LSBX Lawrence Savings Bank of MA* 1.42 1.41 7.84 7.84 82.39
LFED Leeds FSB, MHC of MD (36.3) 0.64 0.64 9.16 9.16 55.08
LXMO Lexington B&L Fin. Corp. of MO 0.55 0.71 14.74 14.74 52.05
LIFB Life Bancorp of Norfolk VA(8) 1.35 1.25 16.17 15.73 150.93
LFBI Little Falls Bancorp of NJ 0.66 0.60 14.53 13.40 124.40
LOGN Logansport Fin. Corp. of IN 0.91 0.95 12.86 12.86 68.04
LONF London Financial Corp. of OH 0.48 0.73 14.60 14.60 74.25
LISB Long Island Bancorp, Inc of NY 2.06 1.74 22.74 22.53 246.88
MAFB MAF Bancorp of IL 2.48 2.46 17.22 15.13 221.04
MBLF MBLA Financial Corp. of MO 1.45 1.48 22.36 22.36 176.67
MFBC MFB Corp. of Mishawaka IN 1.21 1.21 20.30 20.30 155.01
MLBC ML Bancorp of Villanova PA(8) 1.20 0.86 13.51 12.61 195.16
MSBF MSB Financial Corp. of MI 0.86 0.83 10.32 10.32 62.41
MARN Marion Capital Holdings of IN 1.67 1.65 22.22 22.22 101.25
MRKF Market Fin. Corp. of OH 0.38 0.38 14.89 14.89 42.01
MFCX Marshalltown Fin. Corp. of IA(8) 0.60 0.64 14.37 14.37 88.94
MFSL Maryland Fed. Bancorp of MD 1.08 1.56 15.00 14.81 178.98
MASB MassBank Corp. of Reading MA* 2.78 2.61 28.24 27.82 261.94
MFLR Mayflower Co-Op. Bank of MA* 1.39 1.31 13.67 13.44 141.20
MECH Mechanics SB of Hartford CT* 2.64 2.63 16.33 16.33 156.95
MDBK Medford Bank of Medford, MA* 2.49 2.32 21.96 20.58 243.63
MERI Meritrust FSB of Thibodaux LA(8) 3.42 3.42 24.90 24.90 301.44
MWBX MetroWest Bank of MA* 0.54 0.54 3.13 3.13 41.97
MCBS Mid Continent Bancshares of KS(8) 1.87 2.12 19.59 19.59 208.68
MIFC Mid Iowa Financial Corp. of IA 0.71 1.00 7.00 6.99 74.82
MCBN Mid-Coast Bancorp of ME 1.92 1.82 22.65 22.65 263.83
MWBI Midwest Bancshares, Inc. of IA 1.21 1.07 10.18 10.18 147.20
MWFD Midwest Fed. Fin. Corp of WI(8) 1.39 1.37 11.21 10.81 127.18
MFFC Milton Fed. Fin. Corp. of OH 0.60 0.53 11.45 11.45 91.09
MIVI Miss. View Hold. Co. of MN 0.66 0.97 17.80 17.80 94.29
MBSP Mitchell Bancorp of NC* 0.59 0.59 15.36 15.36 37.15
MBBC Monterey Bay Bancorp of CA 0.58 0.53 14.59 13.53 126.83
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of November 28, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
-------------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- -------- ------ ---------- ------- ------- ------- ------- ------- -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
MONT Montgomery Fin. Corp. of IN 12.31 1,653 20.3 14.00 11.00 12.50 -1.52 N.A. -5.31
MSBK Mutual SB, FSB of Bay City MI 13.00 4,279 55.6 14.62 5.37 13.00 0.00 48.57 136.36
NHTB NH Thrift Bancshares of NH 21.00 2,075 43.6 22.75 11.62 20.75 1.20 354.55 66.40
NSLB NS&L Bancorp of Neosho MO 18.75 707 13.3 19.50 13.25 18.81 -0.32 N.A. 37.67
NMSB Newmil Bancorp. of CT* 14.25 3,835 54.6 14.50 8.50 14.37 -0.84 123.70 46.15
NASB North American SB of MO 49.94 2,229 111.3 55.62 31.00 55.62 -10.21 ***.** 45.81
NBSI North Bancshares of Chicago IL 26.50 962 25.5 27.12 15.75 26.50 0.00 N.A. 60.61
FFFD North Central Bancshares of IA 18.87 3,258 61.5 19.25 13.12 18.87 0.00 N.A. 39.16
NBN Northeast Bancorp of ME* 27.75 1,294 35.9 27.87 13.00 27.37 1.39 136.17 98.21
NEIB Northeast Indiana Bncrp of IN 20.00 1,763 35.3 21.12 13.25 21.00 -4.76 N.A. 46.84
NWEQ Northwest Equity Corp. of WI 19.00 839 15.9 19.00 11.25 19.00 0.00 N.A. 56.77
NWSB Northwest SB, MHC of PA (30.7) 14.00 46,753 100.5 16.37 6.50 16.37 -14.48 N.A. 109.27
NSSY Norwalk Savings Society of CT* 38.50 2,410 92.8 38.50 22.94 37.37 3.02 N.A. 64.74
NSSB Norwich Financial Corp. of CT* 29.75 5,432 161.6 31.62 18.00 29.50 0.85 325.00 51.63
NTMG Nutmeg FS&LA of CT 13.00 738 9.6 13.00 7.00 12.00 8.33 N.A. 73.33
OHSL OHSL Financial Corp. of OH 27.75 1,235 34.3 28.25 20.25 26.50 4.72 N.A. 29.85
OCFC Ocean Fin. Corp. of NJ 37.12 8,176 303.5 38.37 25.12 37.00 0.32 N.A. 45.57
OCN Ocwen Financial Corp. of FL 24.25 60,505 1,467.2 28.28 12.62 25.62 -5.35 N.A. 81.38
OTFC Oregon Trail Fin. Corp of OR 16.00 4,695 75.1 16.75 15.63 16.12 -0.74 N.A. N.A.
PBHC OswegoCity SB, MHC of NY (46.)* 28.50 1,917 25.1 29.50 9.38 26.00 9.62 N.A. 203.84
OFCP Ottawa Financial Corp. of MI 27.50 5,353 147.2 28.25 14.89 27.87 -1.33 N.A. 79.86
PFFB PFF Bancorp of Pomona CA 18.37 17,903 328.9 21.50 13.25 18.28 0.49 N.A. 23.54
PSFI PS Financial of Chicago IL 17.25 2,167 37.4 18.00 11.62 17.25 0.00 N.A. 46.81
PVFC PVF Capital Corp. of OH 20.50 2,590 53.1 21.75 13.18 20.25 1.23 365.91 43.16
PALM Palfed, Inc. of Aiken SC(8) 27.00 5,299 143.1 27.00 13.75 25.75 4.85 75.67 92.86
PBCI Pamrapo Bancorp, Inc. of NJ 23.87 2,843 67.9 26.75 18.50 24.00 -0.54 323.98 19.35
PFED Park Bancorp of Chicago IL 17.87 2,431 43.4 18.12 11.75 18.12 -1.38 N.A. 37.46
PVSA Parkvale Financial Corp of PA 29.75 5,106 151.9 29.75 19.60 29.37 1.29 259.30 43.03
PEEK Peekskill Fin. Corp. of NY 17.50 3,193 55.9 18.25 13.37 18.25 -4.11 N.A. 22.81
PFSB PennFed Fin. Services of NJ 33.19 4,823 160.1 33.50 19.87 32.94 0.76 N.A. 63.90
PWBC PennFirst Bancorp of PA 18.25 5,310 96.9 19.50 12.27 18.25 0.00 128.70 47.30
PWBK Pennwood SB of PA* 18.94 570 10.8 19.00 12.25 18.94 0.00 N.A. 37.75
PBKB People's SB of Brockton MA* 20.00 3,283 65.7 20.25 10.12 20.19 -0.94 236.70 88.32
PFDC Peoples Bancorp of Auburn IN 22.00 3,411 75.0 24.50 13.00 20.84 5.57 109.32 62.96
PBCT Peoples Bank, MHC of CT (40.1)* 33.69 61,126 823.8 37.37 18.00 33.50 0.57 328.08 75.01
TSBS Peoples Bcrp, MHC of NJ (35.9)(8) 34.75 9,046 112.8 39.12 15.63 34.75 0.00 N.A. 117.19
PFFC Peoples Fin. Corp. of OH 14.00 1,491 20.9 19.00 12.25 14.44 -3.05 N.A. 3.70
PHBK Peoples Heritage Fin Grp of ME* 42.62 27,475 1,171.0 43.25 24.87 42.50 0.28 178.38 52.21
PSFC Peoples Sidney Fin. Corp of OH 17.25 1,785 30.8 18.50 12.56 17.25 0.00 N.A. N.A.
PERM Permanent Bancorp of IN 25.62 2,103 53.9 27.37 18.25 25.62 0.00 N.A. 26.52
PMFI Perpetual Midwest Fin. of IA 27.00 1,873 50.6 27.50 18.50 26.00 3.85 N.A. 40.26
PERT Perpetual of SC, MHC (46.8)(8) 51.00 1,505 36.0 58.00 20.75 51.00 0.00 N.A. 110.31
PCBC Perry Co. Fin. Corp. of MO 23.25 828 19.3 25.00 17.00 23.87 -2.60 N.A. 36.76
PHFC Pittsburgh Home Fin. of PA 20.69 1,969 40.7 20.81 12.87 20.50 0.93 N.A. 54.75
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 34.00 1,632 26.1 37.12 16.00 34.00 0.00 N.A. 94.29
PTRS Potters Financial Corp of OH 34.00 482 16.4 34.00 18.75 31.00 9.68 N.A. 70.00
PKPS Poughkeepsie Fin. Corp. of NY(8) 9.94 12,595 125.2 10.56 5.12 9.87 0.71 28.26 89.33
PHSB Ppls Home SB, MHC of PA (45.0) 18.62 2,760 23.1 19.75 13.62 19.12 -2.62 N.A. N.A.
PRBC Prestige Bancorp of PA 18.41 915 16.8 19.37 12.87 18.50 -0.49 N.A. 36.37
PFNC Progress Financial Corp. of PA 15.50 4,010 62.2 16.37 7.68 15.00 3.33 40.78 94.24
PSBK Progressive Bank, Inc. of NY* 33.75 3,828 129.2 38.00 22.67 34.50 -2.17 152.43 48.35
PROV Provident Fin. Holdings of CA 20.00 4,836 96.7 21.12 13.62 20.25 -1.23 N.A. 42.86
PULB Pulaski SB, MHC of MO (29.8) 30.50 2,094 19.0 32.50 14.12 30.50 0.00 N.A. 110.34
PLSK Pulaski SB, MHC of NJ (46.0) 18.75 2,070 17.9 24.50 11.50 18.87 -0.64 N.A. N.A.
PULS Pulse Bancorp of S. River NJ 24.50 3,081 75.5 29.75 15.75 25.75 -4.85 98.06 55.56
</TABLE>
<TABLE>
<CAPTION>
Current Per Share Financials
-----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- --------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
MONT Montgomery Fin. Corp. of IN 0.42 0.42 11.81 11.81 61.70
MSBK Mutual SB, FSB of Bay City MI 0.15 0.08 9.73 9.73 152.87
NHTB NH Thrift Bancshares of NH 0.99 0.80 12.04 10.34 153.90
NSLB NS&L Bancorp of Neosho MO 0.41 0.64 16.52 16.52 84.46
NMSB Newmil Bancorp. of CT* 0.70 0.67 8.42 8.42 82.77
NASB North American SB of MO 4.10 3.86 25.37 24.52 330.46
NBSI North Bancshares of Chicago IL 0.79 0.69 17.04 17.04 126.90
FFFD North Central Bancshares of IA 1.16 1.16 15.13 15.13 66.03
NBN Northeast Bancorp of ME* 1.37 1.13 14.27 12.61 205.13
NEIB Northeast Indiana Bncrp of IN 1.18 1.18 15.51 15.51 107.95
NWEQ Northwest Equity Corp. of WI 1.17 1.13 13.51 13.51 115.56
NWSB Northwest SB, MHC of PA (30.7) 0.41 0.41 4.33 4.09 44.93
NSSY Norwalk Savings Society of CT* 2.42 2.76 20.64 19.90 256.17
NSSB Norwich Financial Corp. of CT* 1.47 1.36 15.05 13.67 129.02
NTMG Nutmeg FS&LA of CT 0.39 0.45 7.72 7.72 138.80
OHSL OHSL Financial Corp. of OH 1.65 1.60 20.74 20.74 189.96
OCFC Ocean Fin. Corp. of NJ 0.04 1.56 28.79 28.79 177.12
OCN Ocwen Financial Corp. of FL 1.34 0.75 6.91 6.73 48.86
OTFC Oregon Trail Fin. Corp of OR 0.59 0.59 13.29 13.29 55.34
PBHC OswegoCity SB, MHC of NY (46.)* 1.05 0.94 12.02 10.10 100.68
OFCP Ottawa Financial Corp. of MI 1.29 1.26 14.15 11.43 161.96
PFFB PFF Bancorp of Pomona CA 0.65 0.66 14.69 14.53 146.09
PSFI PS Financial of Chicago IL 0.72 0.73 14.76 14.76 39.55
PVFC PVF Capital Corp. of OH 1.90 1.82 10.63 10.63 147.98
PALM Palfed, Inc. of Aiken SC(8) 0.49 0.84 10.74 10.74 126.16
PBCI Pamrapo Bancorp, Inc. of NJ 1.73 1.71 16.89 16.77 130.83
PFED Park Bancorp of Chicago IL 0.80 0.83 16.61 16.61 71.79
PVSA Parkvale Financial Corp of PA 2.05 2.05 15.20 15.10 196.91
PEEK Peekskill Fin. Corp. of NY 0.66 0.66 14.81 14.81 56.76
PFSB PennFed Fin. Services of NJ 2.14 2.14 20.72 17.54 282.80
PWBC PennFirst Bancorp of PA 0.95 0.95 12.96 11.53 154.87
PWBK Pennwood SB of PA* 0.83 0.91 15.33 15.33 83.59
PBKB People's SB of Brockton MA* 1.27 0.75 9.38 8.98 167.16
PFDC Peoples Bancorp of Auburn IN 0.92 1.21 12.82 12.82 84.30
PBCT Peoples Bank, MHC of CT (40.1)* 1.44 0.93 11.41 11.40 126.48
TSBS Peoples Bcrp, MHC of NJ (35.9)(8) 0.87 0.61 11.97 10.77 70.63
PFFC Peoples Fin. Corp. of OH 0.53 0.53 15.78 15.78 58.01
PHBK Peoples Heritage Fin Grp of ME* 2.51 2.51 16.42 14.01 220.42
PSFC Peoples Sidney Fin. Corp of OH 0.56 0.56 14.57 14.57 57.61
PERM Permanent Bancorp of IN 1.26 1.25 19.51 19.25 206.17
PMFI Perpetual Midwest Fin. of IA 0.84 0.68 18.24 18.24 214.45
PERT Perpetual of SC, MHC (46.8)(8) 1.17 1.58 20.13 20.13 170.24
PCBC Perry Co. Fin. Corp. of MO 0.90 1.04 18.80 18.80 97.95
PHFC Pittsburgh Home Fin. of PA 1.01 0.90 14.63 14.48 138.80
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 1.46 1.44 14.86 14.86 234.94
PTRS Potters Financial Corp of OH 2.40 2.35 22.43 22.43 254.60
PKPS Poughkeepsie Fin. Corp. of NY(8) 0.37 0.37 5.91 5.91 70.19
PHSB Ppls Home SB, MHC of PA (45.0) 0.56 0.54 10.22 10.22 74.79
PRBC Prestige Bancorp of PA 0.85 0.85 16.88 16.88 150.64
PFNC Progress Financial Corp. of PA 0.90 0.71 5.81 5.18 108.91
PSBK Progressive Bank, Inc. of NY* 2.20 2.16 20.18 18.17 231.09
PROV Provident Fin. Holdings of CA 0.94 0.44 17.66 17.66 132.47
PULB Pulaski SB, MHC of MO (29.8) 0.68 0.90 11.23 11.23 86.07
PLSK Pulaski SB, MHC of NJ (46.0) 0.54 0.54 10.36 10.36 86.47
PULS Pulse Bancorp of S. River NJ 1.84 1.86 14.02 14.02 170.73
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of November 28, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
------------------------ -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- --------- ------- ------- ------- ------- ------- -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
QCFB QCF Bancorp of Virginia MN 28.50 1,382 39.4 28.50 16.00 28.25 0.88 N.A. 56.16
QCBC Quaker City Bancorp of CA 20.50 4,673 95.8 24.56 13.00 20.50 0.00 173.33 34.87
QCSB Queens County Bancorp of NY* 35.00 15,108 528.8 37.75 20.22 35.00 0.00 N.A. 66.27
RARB Raritan Bancorp. of Raritan NJ* 27.25 2,372 64.6 28.62 15.33 27.25 0.00 323.14 75.81
REDF RedFed Bancorp of Redlands CA 20.00 7,179 143.6 21.12 12.37 20.37 -1.82 N.A. 48.15
RELY Reliance Bancorp, Inc. of NY 33.12 8,712 288.5 33.50 18.50 33.00 0.36 N.A. 69.85
RELI Reliance Bancshares Inc of WI* 8.87 2,472 21.9 9.00 6.50 8.75 1.37 N.A. 31.41
RIVR River Valley Bancorp of IN 18.75 1,190 22.3 18.87 13.25 18.75 0.00 N.A. 36.36
RVSB Riverview Bancorp of WA 15.00 6,128 91.9 15.00 5.83 14.06 6.69 N.A. 139.23
RSLN Roslyn Bancorp, Inc. of NY* 21.75 43,642 949.2 24.31 15.00 21.12 2.98 N.A. N.A.
SCCB S. Carolina Comm. Bnshrs of SC 23.00 699 16.1 25.25 15.00 23.87 -3.64 N.A. 53.33
SBFL SB Fngr Lakes MHC of NY (33.1) 29.25 1,785 17.3 29.50 12.75 29.25 0.00 N.A. 112.73
SFED SFS Bancorp of Schenectady NY 22.12 1,231 27.2 24.50 14.75 22.50 -1.69 N.A. 49.97
SGVB SGV Bancorp of W. Covina CA 17.12 2,342 40.1 19.37 10.75 18.00 -4.89 N.A. 52.18
SHSB SHS Bancorp, Inc. of PA 16.00 820 13.1 16.37 14.75 16.37 -2.26 N.A. N.A.
SISB SIS Bancorp Inc of MA* 33.62 5,581 187.6 37.00 22.37 34.25 -1.84 N.A. 47.00
SWCB Sandwich Co-Op. Bank of MA* 41.75 1,919 80.1 42.00 27.25 41.00 1.83 384.34 40.34
SFSL Security First Corp. of OH 19.50 7,591 148.0 19.50 10.17 17.62 10.67 87.50 61.42
SFNB Security First Netwrk Bk of GA(8) 8.00 8,620 69.0 13.87 5.50 7.62 4.99 N.A. -21.95
SMFC Sho-Me Fin. Corp. of MO(8) 47.00 1,499 70.5 48.00 21.62 47.00 0.00 N.A. 116.09
SOBI Sobieski Bancorp of S. Bend IN 19.62 779 15.3 19.62 13.75 19.62 0.00 N.A. 35.31
SOSA Somerset Savings Bank of MA(8)* 4.87 16,652 81.1 5.94 1.94 5.12 -4.88 -4.88 147.21
SSFC South Street Fin. Corp. of NC* 17.50 4,496 78.7 20.00 13.75 17.25 1.45 N.A. 25.00
SCBS Southern Commun. Bncshrs of AL 18.19 1,137 20.7 18.50 13.00 18.19 0.00 N.A. 37.28
SMBC Southern Missouri Bncrp of MO 19.00 1,612 30.6 19.50 14.00 18.37 3.43 N.A. 26.67
SWBI Southwest Bancshares of IL 25.50 2,657 67.8 26.00 18.00 25.50 0.00 155.00 39.73
SVRN Sovereign Bancorp of PA 18.94 89,275 1,690.9 19.25 10.62 19.00 -0.32 323.71 73.13
STFR St. Francis Cap. Corp. of WI 38.25 5,238 200.4 41.25 26.00 38.00 0.66 N.A. 47.12
SPBC St. Paul Bancorp, Inc. of IL 24.50 34,133 836.3 28.50 14.73 24.50 0.00 120.13 56.35
SFFC StateFed Financial Corp. of IA 13.50 1,557 21.0 14.12 8.25 13.50 0.00 N.A. 63.64
SFIN Statewide Fin. Corp. of NJ 21.50 4,591 98.7 22.62 13.62 21.25 1.18 N.A. 49.62
STSA Sterling Financial Corp. of WA 21.12 7,567 159.8 22.50 13.50 21.25 -0.61 132.34 49.58
SFSB SuburbFed Fin. Corp. of IL 34.87 1,263 44.0 34.87 19.00 34.50 1.07 422.79 83.53
ROSE T R Financial Corp. of NY* 32.87 17,592 578.2 33.50 14.69 32.37 1.54 N.A. 85.18
THRD TF Financial Corp. of PA 28.00 4,088 114.5 28.00 15.87 26.25 6.67 N.A. 72.31
TPNZ Tappan Zee Fin., Inc. of NY 19.75 1,488 29.4 22.62 13.62 20.50 -3.66 N.A. 45.01
ESBK The Elmira SB FSB of Elmira NY* 30.00 706 21.2 31.00 16.00 30.00 0.00 108.77 64.38
TRIC Tri-County Bancorp of WY 27.50 584 16.1 29.00 18.00 27.50 0.00 N.A. 52.78
TWIN Twin City Bancorp of TN 13.62 1,272 17.3 14.50 11.50 13.62 0.00 N.A. 18.43
UFRM United FS&LA of Rocky Mount NC 11.50 3,074 35.4 12.75 7.75 11.25 2.22 253.85 35.29
UBMT United Fin. Corp. of MT 27.00 1,223 33.0 27.00 18.75 26.00 3.85 157.14 40.26
VABF Va. Beach Fed. Fin. Corp of VA 16.62 4,979 82.8 17.62 9.00 16.37 1.53 254.37 76.06
VFFC Virginia First Savings of VA(8) 25.25 5,814 146.8 25.25 12.37 24.87 1.53 ***.** 98.04
WHGB WHG Bancshares of MD 16.25 1,462 23.8 16.50 12.62 15.75 3.17 N.A. 23.86
WSFS WSFS Financial Corp. of DE* 19.62 12,442 244.1 20.00 9.87 20.00 -1.90 170.62 92.54
WVFC WVS Financial Corp. of PA* 31.50 1,748 55.1 34.00 23.00 31.75 -0.79 N.A. 27.94
WRNB Warren Bancorp of Peabody MA* 20.62 3,798 78.3 21.37 14.75 20.00 3.10 511.87 37.47
WFSL Washington FS&LA of Seattle WA 32.19 47,509 1,529.3 33.31 22.39 32.75 -1.71 120.63 33.62
WAMU Washington Mutual Inc. of WA(8)* 69.12 257,176 17,776.0 72.37 38.62 66.50 3.94 272.41 59.59
WYNE Wayne Bancorp of NJ 22.75 2,014 45.8 24.87 14.00 21.75 4.60 N.A. 49.18
WAYN Wayne S&L Co. MHC of OH (47.8) 31.00 2,255 33.3 32.00 15.17 31.00 0.00 N.A. 89.83
WCFB Wbstr Cty FSB MHC of IA (45.2) 20.25 2,100 19.2 22.00 12.75 20.25 0.00 N.A. 47.27
WBST Webster Financial Corp. of CT 62.66 13,554 849.3 66.00 35.12 63.00 -0.54 563.77 70.50
WEFC Wells Fin. Corp. of Wells MN 17.75 1,959 34.8 19.00 12.50 18.12 -2.04 N.A. 35.29
WCBI WestCo Bancorp of IL 27.50 2,474 68.0 29.25 20.00 27.75 -0.90 175.00 27.91
</TABLE>
<TABLE>
<CAPTION>
Current Per Share Financials
-----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- --------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
QCFB QCF Bancorp of Virginia MN 1.46 1.46 19.84 19.84 113.41
QCBC Quaker City Bancorp of CA 1.20 1.15 15.33 15.33 181.26
QCSB Queens County Bancorp of NY* 1.44 1.45 11.44 11.44 102.00
RARB Raritan Bancorp. of Raritan NJ* 1.63 1.61 12.65 12.45 171.70
REDF RedFed Bancorp of Redlands CA 1.28 1.28 11.21 11.17 134.74
RELY Reliance Bancorp, Inc. of NY 1.96 2.07 19.29 14.17 233.56
RELI Reliance Bancshares Inc of WI* 0.25 0.26 9.18 9.18 19.01
RIVR River Valley Bancorp of IN 0.46 0.62 14.63 14.41 118.02
RVSB Riverview Bancorp of WA 0.47 0.45 9.56 9.20 46.06
RSLN Roslyn Bancorp, Inc. of NY* 0.73 0.93 14.04 13.97 79.61
SCCB S. Carolina Comm. Bnshrs of SC 0.75 0.75 17.35 17.35 65.26
SBFL SB Fngr Lakes MHC of NY (33.1) 0.44 0.51 11.92 11.92 127.71
SFED SFS Bancorp of Schenectady NY 0.94 0.94 17.64 17.64 141.42
SGVB SGV Bancorp of W. Covina CA 0.65 0.71 12.99 12.79 174.63
SHSB SHS Bancorp, Inc. of PA 0.41 0.41 13.83 13.83 109.44
SISB SIS Bancorp Inc of MA* 2.05 2.03 19.16 19.16 260.35
SWCB Sandwich Co-Op. Bank of MA* 2.44 2.39 21.16 20.34 266.68
SFSL Security First Corp. of OH 1.14 1.15 8.31 8.18 89.69
SFNB Security First Netwrk Bk of GA(8) -3.30 -3.38 3.02 2.97 9.12
SMFC Sho-Me Fin. Corp. of MO(8) 2.71 2.57 20.77 20.77 230.05
SOBI Sobieski Bancorp of S. Bend IN 0.64 0.59 15.99 15.99 108.19
SOSA Somerset Savings Bank of MA(8)* 0.32 0.31 2.06 2.06 31.25
SSFC South Street Fin. Corp. of NC* 0.63 0.65 13.73 13.73 53.50
SCBS Southern Commun. Bncshrs of AL 0.33 0.54 13.20 13.20 61.89
SMBC Southern Missouri Bncrp of MO 0.94 0.90 16.36 16.36 101.30
SWBI Southwest Bancshares of IL 1.50 1.45 16.01 16.01 141.14
SVRN Sovereign Bancorp of PA 0.51 0.74 7.23 5.91 163.55
STFR St. Francis Cap. Corp. of WI 1.79 1.97 24.76 21.88 314.15
SPBC St. Paul Bancorp, Inc. of IL 1.39 1.39 11.98 11.95 133.26
SFFC StateFed Financial Corp. of IA 0.69 0.69 9.86 9.86 56.22
SFIN Statewide Fin. Corp. of NJ 1.19 1.19 14.34 14.31 153.15
STSA Sterling Financial Corp. of WA 1.04 0.94 12.98 11.88 247.19
SFSB SuburbFed Fin. Corp. of IL 1.23 1.79 21.90 21.82 337.85
ROSE T R Financial Corp. of NY* 1.88 1.69 13.09 13.09 209.84
THRD TF Financial Corp. of PA 1.22 1.05 17.79 15.71 152.97
TPNZ Tappan Zee Fin., Inc. of NY 0.53 0.49 14.35 14.35 80.07
ESBK The Elmira SB FSB of Elmira NY* 1.34 1.08 20.54 20.00 323.33
TRIC Tri-County Bancorp of WY 1.55 1.58 23.12 23.12 150.98
TWIN Twin City Bancorp of TN 0.71 0.60 10.88 10.88 84.07
UFRM United FS&LA of Rocky Mount NC 0.63 0.50 6.82 6.82 92.96
UBMT United Fin. Corp. of MT 1.22 1.21 20.24 20.24 84.29
VABF Va. Beach Fed. Fin. Corp of VA 0.75 0.61 8.70 8.70 121.61
VFFC Virginia First Savings of VA(8) 0.88 0.76 11.44 11.05 147.64
WHGB WHG Bancshares of MD 0.34 0.34 14.16 14.16 68.56
WSFS WSFS Financial Corp. of DE* 1.31 1.30 6.66 6.62 120.21
WVFC WVS Financial Corp. of PA* 2.08 2.09 19.38 19.38 161.46
WRNB Warren Bancorp of Peabody MA* 2.04 1.81 10.21 10.21 95.87
WFSL Washington FS&LA of Seattle WA 2.21 2.20 15.11 13.87 120.39
WAMU Washington Mutual Inc. of WA(8)* 0.01 1.51 19.65 18.20 371.76
WYNE Wayne Bancorp of NJ 1.07 1.07 16.49 16.49 132.71
WAYN Wayne S&L Co. MHC of OH (47.8) 0.81 0.76 10.58 10.58 110.97
WCFB Wbstr Cty FSB MHC of IA (45.2) 0.64 0.64 10.52 10.52 44.99
WBST Webster Financial Corp. of CT 1.79 2.99 26.82 23.10 502.51
WEFC Wells Fin. Corp. of Wells MN 1.09 1.06 14.86 14.86 104.52
WCBI WestCo Bancorp of IL 1.88 1.78 19.41 19.41 124.93
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of November 28, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- -------- ------ --------- ------- ------- ------- ------- ------- -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
WSTR WesterFed Fin. Corp. of MT 23.56 5,577 131.4 27.00 17.62 24.00 -1.83 N.A. 29.10
WOFC Western Ohio Fin. Corp. of OH 25.75 2,356 60.7 29.25 20.25 26.25 -1.90 N.A. 18.39
WWFC Westwood Fin. Corp. of NJ(8) 27.62 645 17.8 28.00 15.25 27.62 0.00 N.A. 67.39
WEHO Westwood Hmstd Fin Corp of OH 17.50 2,782 48.7 18.00 11.50 17.94 -2.45 N.A. 44.39
WFI Winton Financial Corp. of OH 20.00 1,986 39.7 20.50 11.50 19.75 1.27 N.A. 73.91
FFWD Wood Bancorp of OH 18.50 2,119 39.2 18.75 10.50 18.62 -0.64 N.A. 63.28
YFCB Yonkers Fin. Corp. of NY 18.50 3,021 55.9 22.00 12.12 19.37 -4.49 N.A. 43.75
YFED York Financial Corp. of PA 26.50 8,806 233.4 27.25 12.80 25.12 5.49 180.42 103.85
</TABLE>
<TABLE>
<CAPTION>
Current Per Share Financials
-----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- --------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
WSTR WesterFed Fin. Corp. of MT 1.16 1.11 19.03 15.35 179.16
WOFC Western Ohio Fin. Corp. of OH 0.52 0.71 23.21 21.63 168.29
WWFC Westwood Fin. Corp. of NJ(8) 1.20 1.28 15.95 14.27 171.20
WEHO Westwood Hmstd Fin Corp of OH 0.47 0.54 14.20 14.20 51.36
WFI Winton Financial Corp. of OH 1.60 1.34 11.36 11.12 159.81
FFWD Wood Bancorp of OH 1.07 0.98 9.77 9.77 78.58
YFCB Yonkers Fin. Corp. of NY 0.98 0.99 14.52 14.52 103.59
YFED York Financial Corp. of PA 1.26 1.06 11.62 11.62 131.24
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-18
Weekly Thrift Market Line - Part Two
Prices As Of November 28, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- ------------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------- ------- ------- ------- ------- ------- --------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured
Thrifts(no MHCs)
- -----------------------------
SAIF-Insured Thrifts(300) 13.09 12.86 0.88 7.97 4.69 0.88 7.85 0.80 121.00 0.78
NYSE Traded Companies(10) 7.75 7.54 0.96 14.43 6.20 0.86 13.52 1.14 75.98 1.19
AMEX Traded Companies(16) 14.68 14.57 0.62 3.68 2.99 0.79 4.91 0.66 142.41 0.71
NASDAQ Listed OTC Companies(274) 13.21 12.97 0.89 7.97 4.73 0.89 7.80 0.79 121.73 0.77
California Companies(21) 7.42 7.18 0.62 9.48 5.19 0.56 8.83 1.72 69.82 1.26
Florida Companies(5) 8.55 8.12 1.20 14.66 5.35 0.80 9.61 1.62 86.80 0.76
Mid-Atlantic Companies(59) 11.16 10.83 0.83 8.57 4.86 0.84 8.76 0.81 90.99 0.91
Mid-West Companies(144) 14.28 14.11 0.91 7.35 4.61 0.92 7.27 0.64 135.50 0.66
New England Companies(9) 8.05 7.78 0.56 7.36 4.22 0.66 8.73 0.57 141.95 1.04
North-West Companies(8) 17.00 16.78 0.94 8.22 4.05 0.98 7.99 0.51 205.79 0.59
South-East Companies(41) 15.99 15.80 0.95 7.15 4.05 0.97 7.02 0.86 139.05 0.81
South-West Companies(7) 10.52 10.27 0.87 10.21 6.80 0.88 10.00 0.77 66.48 0.72
Western Companies (Excl CA)(6) 16.12 15.71 1.21 8.16 5.09 1.21 8.18 0.34 130.33 0.71
Thrift Strategy(241) 14.35 14.15 0.90 7.21 4.59 0.92 7.32 0.73 121.60 0.72
Mortgage Banker Strategy(36) 7.47 7.03 0.75 10.80 5.23 0.69 9.99 1.00 123.68 1.01
Real Estate Strategy(9) 7.26 7.08 0.89 12.43 6.65 0.83 11.56 1.23 98.78 1.32
Diversified Strategy(10) 8.42 8.18 1.31 16.29 5.97 1.04 13.51 1.36 117.46 1.05
Retail Banking Strategy(4) 6.62 6.33 -0.24 -0.25 -3.13 -0.29 -1.06 0.73 132.47 0.95
Companies Issuing Dividends(253) 13.39 13.14 0.92 8.06 4.82 0.92 7.99 0.70 121.94 0.75
Companies Without Dividends(47) 11.40 11.27 0.69 7.45 3.90 0.65 7.04 1.33 115.72 0.98
Equity/Assets (lesser than) 6%(23) 5.05 4.72 0.67 13.29 5.87 0.63 12.74 1.39 75.96 1.07
Equity/Assets 6-12%(142) 8.76 8.46 0.81 9.57 5.20 0.78 9.26 0.80 131.01 0.87
Equity/Assets (greater than) 12%(135) 18.50 18.37 0.99 5.57 4.00 1.02 5.70 0.68 119.57 0.66
Converted Last 3 Mths (no MHC)(3) 21.23 21.23 0.91 4.06 3.35 0.91 4.06 0.98 127.30 0.73
Actively Traded Companies(39) 8.95 8.71 0.99 12.25 5.61 0.98 12.36 0.98 123.47 0.95
Market Value Below $20 Million(50) 14.68 14.66 0.82 5.81 4.50 0.85 6.03 0.72 106.60 0.63
Holding Company Structure(266) 13.55 13.34 0.88 7.62 4.56 0.88 7.56 0.79 118.75 0.77
Assets Over $1 Billion(60) 7.92 7.42 0.85 11.73 5.29 0.82 11.27 0.96 107.07 0.98
Assets $500 Million-$1 Billion(48) 10.43 10.11 0.89 9.25 4.93 0.85 8.73 0.87 143.96 0.91
Assets $250-$500 Million(66) 11.87 11.61 0.86 7.97 4.88 0.86 7.91 0.69 136.69 0.73
Assets less than $250 Million(126) 17.13 17.08 0.90 5.74 4.22 0.93 5.90 0.74 110.12 0.67
Goodwill Companies(121) 9.09 8.51 0.84 10.01 5.24 0.81 9.57 0.89 103.36 0.87
Non-Goodwill Companies(178) 15.69 15.69 0.91 6.65 4.34 0.93 6.75 0.73 133.06 0.73
Acquirors of FSLIC Cases(10) 7.27 6.84 0.84 12.30 5.83 0.83 12.06 1.08 60.52 0.82
</TABLE>
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- -------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- -------- ------- ------- ---------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured
Thrifts(no MHCs)
- ------------------------------
SAIF-Insured Thrifts(300) 19.12 152.53 18.62 157.99 19.90 0.36 1.58 30.07
NYSE Traded Companies(10) 16.40 196.03 14.92 208.05 16.87 0.44 1.09 16.58
AMEX Traded Companies(16) 22.00 129.56 18.94 130.93 19.78 0.32 1.87 38.91
NASDAQ Listed OTC Companies(274) 19.13 152.34 18.75 157.81 20.03 0.36 1.58 30.24
California Companies(21) 18.01 165.14 11.49 173.42 18.44 0.16 0.48 7.42
Florida Companies(5) 20.23 181.36 19.99 205.60 25.54 0.20 0.75 14.79
Mid-Atlantic Companies(59) 19.10 155.53 16.64 163.34 19.49 0.37 1.45 28.56
Mid-West Companies(144) 18.81 146.04 19.42 149.44 19.57 0.36 1.68 31.39
New England Companies(9) 18.35 163.91 12.84 173.00 20.66 0.44 1.51 33.55
North-West Companies(8) 19.42 160.93 24.07 166.44 21.52 0.35 1.34 25.04
South-East Companies(41) 21.45 161.50 23.30 165.93 22.26 0.45 2.04 42.67
South-West Companies(7) 16.89 134.62 13.46 142.12 16.99 0.35 1.66 29.63
Western Companies (Excl CA)(6) 19.84 152.63 22.89 158.97 19.88 0.60 2.60 45.88
Thrift Strategy(241) 19.66 144.79 19.63 148.76 20.02 0.37 1.69 32.66
Mortgage Banker Strategy(36) 17.59 186.70 13.40 203.05 20.61 0.32 1.12 21.26
Real Estate Strategy(9) 15.57 176.93 12.74 180.06 16.75 0.14 0.70 10.26
Diversified Strategy(10) 17.00 220.58 20.71 228.72 17.27 0.47 1.44 23.67
Retail Banking Strategy(4) 17.78 145.45 9.18 150.56 20.54 0.14 0.81 22.88
Companies Issuing Dividends(253) 19.08 154.05 19.09 159.86 19.94 0.42 1.85 35.59
Companies Without Dividends(47) 19.40 143.60 15.94 147.04 19.58 0.00 0.00 0.00
Equity/Assets (lesser than) 6%(23) 16.89 196.94 10.56 215.89 19.34 0.22 0.67 13.32
Equity/Assets 6-12%(142) 17.94 167.89 14.38 175.07 18.54 0.37 1.46 26.40
Equity/Assets (greater than) 12%(135) 21.09 130.81 23.95 132.48 21.61 0.37 1.84 37.49
Converted Last 3 Mths (no MHC)(3) 26.72 120.52 25.82 120.52 26.72 0.00 0.00 0.00
Actively Traded Companies(39) 17.69 197.63 16.84 207.98 18.13 0.49 1.53 26.44
Market Value Below $20 Million(50) 19.07 122.93 17.66 123.24 20.34 0.33 1.88 35.21
Holding Company Structure(266) 19.39 150.55 19.06 155.59 20.09 0.37 1.63 31.05
Assets Over $1 Billion(60) 18.08 191.55 15.28 208.49 19.51 0.41 1.17 21.01
Assets $500 Million-$1 Billion(48) 17.66 167.14 16.87 173.03 19.14 0.35 1.46 29.00
Assets $250-$500 Million(66) 19.77 153.76 17.55 158.29 19.74 0.36 1.54 28.21
Assets less than $250 Million(126) 20.06 128.93 21.39 129.60 20.58 0.34 1.84 36.50
Goodwill Companies(121) 18.12 171.78 15.18 185.63 19.25 0.38 1.40 25.65
Non-Goodwill Companies(178) 19.88 140.02 20.84 140.02 20.37 0.35 1.70 33.13
Acquirors of FSLIC Cases(10) 17.44 197.40 13.79 212.75 18.04 0.42 1.29 21.70
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month common earnings and average common equity and
assets balances; ROI (return on investment) is current EPS divided by
current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of November 28, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured
Thrifts(no MHCs)
- ----------------------------
BIF-Insured Thrifts(60) 12.71 12.32 1.15 11.53 6.01 1.12 10.99 0.81 153.52 1.42
NYSE Traded Companies(2) 7.56 5.18 0.89 11.54 5.22 0.87 11.31 1.95 40.15 1.04
AMEX Traded Companies(6) 12.97 12.12 0.74 7.63 4.16 0.66 6.66 1.08 279.72 1.45
NASDAQ Listed OTC Companies(52) 12.90 12.65 1.20 11.94 6.24 1.18 11.43 0.74 147.05 1.44
California Companies(1) 10.72 10.68 1.45 13.02 8.44 1.45 13.02 1.54 79.64 1.45
Mid-Atlantic Companies(15) 11.19 10.50 0.87 8.90 4.42 0.88 8.70 0.85 136.53 1.35
Mid-West Companies(2) 36.66 35.98 0.82 1.90 2.05 0.95 2.33 0.56 57.14 0.56
New England Companies(33) 9.28 9.00 1.29 14.90 7.55 1.21 13.96 0.84 166.83 1.68
North-West Companies(4) 12.39 12.00 1.22 10.54 5.35 1.18 10.27 0.17 241.66 1.04
South-East Companies(5) 27.46 27.46 1.24 4.69 3.65 1.24 4.70 0.69 145.62 0.74
Thrift Strategy(43) 13.77 13.35 1.16 10.91 5.89 1.12 10.35 0.83 150.66 1.36
Mortgage Banker Strategy(7) 9.02 8.82 0.91 11.72 5.52 0.94 11.57 0.48 171.40 1.35
Real Estate Strategy(5) 10.69 10.66 1.80 17.32 9.17 1.68 16.10 1.35 88.34 1.59
Diversified Strategy(5) 6.94 6.42 1.04 15.06 6.34 1.00 14.56 0.76 196.07 2.08
Companies Issuing Dividends(52) 12.07 11.65 1.07 10.61 5.37 1.03 10.03 0.77 158.08 1.36
Companies Without Dividends(8) 17.04 16.83 1.71 17.66 10.34 1.72 17.46 1.10 120.84 1.80
Equity/Assets (lesser than) 6%(5) 5.55 5.41 0.95 17.01 6.31 0.81 14.41 0.92 98.61 1.42
Equity/Assets 6-12%(39) 8.81 8.30 1.23 14.11 7.19 1.18 13.49 0.90 135.17 1.61
Equity/Assets (greater than) 12%(16) 22.80 22.60 1.02 4.67 3.43 1.05 4.82 0.56 209.83 1.04
Actively Traded Companies(18) 9.11 8.68 1.22 13.88 6.90 1.15 13.03 0.73 138.50 1.49
Market Value Below $20 Million(5) 23.62 23.28 1.77 14.62 10.41 1.81 14.46 1.49 57.79 1.18
Holding Company Structure(40) 14.50 14.13 1.21 11.11 5.95 1.18 10.70 0.73 151.62 1.48
Assets Over $1 Billion(14) 9.15 8.43 1.05 12.21 5.50 1.03 11.88 0.82 154.48 1.49
Assets $500 Million-$1 Billion(16) 9.51 8.94 1.16 12.80 6.54 1.11 12.06 0.86 146.60 1.56
Assets $250-$500 Million(13) 11.61 11.44 1.03 10.46 5.20 0.98 9.95 0.67 162.47 1.65
Assets less than $250 Million(17) 19.64 19.51 1.31 10.56 6.54 1.29 10.04 0.87 151.97 1.06
Goodwill Companies(30) 9.58 8.81 0.96 11.23 5.65 0.93 10.61 0.88 136.86 1.46
Non-Goodwill Companies(30) 15.84 15.84 1.33 11.83 6.37 1.30 11.37 0.74 172.35 1.39
</TABLE>
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- -------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- -------- ------- ------- ---------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured
Thrifts(no MHCs)
- ----------------------------
BIF-Insured Thrifts(60) 17.45 177.66 19.92 184.69 18.19 0.49 1.63 29.90
NYSE Traded Companies(2) 19.18 229.23 17.23 245.45 19.57 0.58 1.08 20.95
AMEX Traded Companies(6) 14.81 154.34 19.12 185.15 16.79 0.56 1.75 33.30
NASDAQ Listed OTC Companies(52) 17.49 177.95 20.12 183.35 18.20 0.48 1.65 30.07
California Companies(1) 11.84 146.10 15.67 146.70 11.84 0.00 0.00 0.00
Mid-Atlantic Companies(15) 20.06 185.22 18.80 195.81 19.96 0.50 1.68 33.58
Mid-West Companies(2) 0.00 96.46 35.38 99.25 0.00 0.00 0.00 0.00
New England Companies(33) 14.94 189.24 17.05 196.75 16.24 0.52 1.72 28.04
North-West Companies(4) 20.00 188.21 21.77 193.30 20.74 0.31 1.62 29.94
South-East Companies(5) 25.34 122.62 32.95 122.62 25.29 0.68 1.99 53.33
Thrift Strategy(43) 17.73 170.83 20.77 177.10 18.68 0.52 1.71 32.14
Mortgage Banker Strategy(7) 19.25 200.61 16.97 206.96 18.55 0.36 1.23 23.42
Real Estate Strategy(5) 10.97 174.03 18.59 174.33 11.62 0.26 1.26 12.75
Diversified Strategy(5) 15.82 224.15 15.23 241.73 16.52 0.47 1.51 24.22
Companies Issuing Dividends(52) 18.33 180.77 19.73 188.76 19.15 0.56 1.88 34.66
Companies Without Dividends(8) 9.87 156.79 21.23 157.93 9.94 0.00 0.00 0.00
Equity/Assets (lesser than) 6%(5) 16.00 252.67 14.02 258.45 19.77 0.18 0.95 15.15
Equity/Assets 6-12%(39) 15.69 191.79 16.84 201.99 16.57 0.55 1.73 28.62
Equity/Assets (greater than) 12%(16) 23.23 128.88 27.95 130.57 22.49 0.43 1.60 37.13
Actively Traded Companies(18) 15.15 188.42 16.74 199.32 16.40 0.58 1.88 28.95
Market Value Below $20 Million(5) 18.52 115.97 26.64 117.37 17.89 0.18 0.99 26.59
Holding Company Structure(40) 18.02 171.31 21.70 180.77 18.44 0.50 1.70 31.60
Assets Over $1 Billion(14) 19.24 216.37 19.06 225.55 19.41 0.54 1.57 29.72
Assets $500 Million-$1 Billion(16) 15.39 180.55 16.65 197.01 16.55 0.54 1.70 26.78
Assets $250-$500 Million(13) 16.66 175.82 19.00 179.74 17.48 0.44 1.73 30.54
Assets less than $250 Million(17) 18.70 145.27 24.64 146.37 19.50 0.43 1.55 32.53
Goodwill Companies(30) 17.74 183.69 16.60 198.26 18.84 0.52 1.57 27.33
Non-Goodwill Companies(30) 17.13 171.62 23.25 171.62 17.50 0.46 1.70 32.57
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month common earnings and average common equity and
assets balances; ROI (return on investment) is current EPS divided by
current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of November 28, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------ ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
_________________________________
SAIF-Insured Thrifts(20) 12.20 12.09 0.77 6.97 2.67 0.79 7.08 0.47 142.94 0.71
BIF-Insured Thrifts(3) 10.87 10.23 1.05 10.29 3.38 0.87 8.36 1.16 74.62 1.11
NASDAQ Listed OTC Companies(23) 11.97 11.76 0.82 7.56 2.79 0.80 7.30 0.60 130.13 0.78
Florida Companies(3) 9.86 9.83 0.59 5.60 2.43 0.67 6.50 0.38 76.69 0.46
Mid-Atlantic Companies(11) 12.16 11.79 0.81 7.62 2.63 0.79 7.33 0.73 109.28 0.89
Mid-West Companies(7) 13.05 13.04 0.87 7.00 2.94 0.91 7.26 0.46 181.63 0.52
New England Companies(1) 9.02 9.01 1.16 13.69 4.27 0.75 8.84 0.76 146.25 1.66
Thrift Strategy(22) 12.15 11.93 0.80 7.17 2.70 0.81 7.21 0.59 129.05 0.72
Diversified Strategy(1) 9.02 9.01 1.16 13.69 4.27 0.75 8.84 0.76 146.25 1.66
Companies Issuing Dividends(22) 11.86 11.64 0.83 7.60 2.78 0.81 7.35 0.61 128.93 0.74
Companies Without Dividends(1) 13.66 13.66 0.73 6.80 3.01 0.71 6.55 0.45 148.08 1.37
Equity/Assets 6-12%(16) 10.02 9.73 0.78 8.05 2.86 0.73 7.54 0.70 84.77 0.81
Equity/Assets >12%(7) 16.63 16.63 0.93 6.38 2.63 0.98 6.73 0.31 266.20 0.71
Holding Company Structure(2) 11.94 10.03 1.06 9.22 3.68 0.95 8.25 0.91 43.96 0.67
Assets Over $1 Billion(5) 8.95 8.46 1.01 11.55 3.31 0.82 9.29 0.74 97.60 1.16
Assets $500 Million-$1 Billion(3) 9.86 9.83 0.59 5.60 2.43 0.67 6.50 0.38 76.69 0.46
Assets $250-$500 Million(5) 11.63 11.61 0.88 7.97 3.10 0.86 7.73 0.29 188.56 0.43
Assets less than $250 Million(10) 13.55 13.34 0.79 6.52 2.60 0.81 6.68 0.73 133.77 0.84
Goodwill Companies(9) 9.32 8.73 0.87 9.47 3.19 0.79 8.54 0.61 97.45 0.83
Non-Goodwill Companies(14) 13.41 13.41 0.80 6.51 2.58 0.81 6.63 0.60 149.74 0.75
MHC Institutions(23) 11.97 11.76 0.82 7.56 2.79 0.80 7.30 0.60 130.13 0.78
</TABLE>
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- ------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- -------- ------- ------- ---------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
_________________________________
SAIF-Insured Thrifts(20) 27.01 228.50 28.01 230.23 27.71 0.51 1.97 37.93
BIF-Insured Thrifts(3) 25.27 266.19 31.90 288.85 0.00 0.47 1.47 44.13
NASDAQ Listed OTC Companies(23) 25.85 233.52 28.69 238.05 27.71 0.50 1.88 39.99
Florida Companies(3) 0.00 223.57 22.01 224.40 0.00 0.90 2.90 0.00
Mid-Atlantic Companies(11) 27.14 225.82 29.81 234.96 0.00 0.28 1.27 36.08
Mid-West Companies(7) 27.01 235.94 29.77 236.33 27.71 0.68 2.51 45.34
New England Companies(1) 23.40 295.27 26.64 295.53 0.00 0.76 2.26 52.78
Thrift Strategy(22) 27.08 229.11 28.82 233.94 27.71 0.48 1.86 38.40
Diversified Strategy(1) 23.40 295.27 26.64 295.53 0.00 0.76 2.26 52.78
Companies Issuing Dividends(22) 25.85 237.19 28.93 242.04 27.71 0.53 2.00 44.99
Companies Without Dividends(1) 0.00 182.19 24.90 182.19 0.00 0.00 0.00 0.00
Equity/Assets 6-12%(16) 25.85 244.48 26.19 251.27 27.71 0.48 1.71 44.99
Equity/Assets >12%(7) 0.00 211.60 34.70 211.60 0.00 0.54 2.31 0.00
Holding Company Structure(2) 27.14 237.10 28.31 282.18 0.00 0.28 0.98 26.67
Assets Over $1 Billion(5) 23.40 309.30 29.40 318.91 0.00 0.38 1.52 44.70
Assets $500 Million-$1 Billion(3) 0.00 223.57 22.01 224.40 0.00 0.90 2.90 0.00
Assets $250-$500 Million(5) 27.01 251.36 28.91 252.01 27.71 0.54 1.96 40.68
Assets less than $250 Million(10) 27.14 210.38 29.87 216.01 0.00 0.44 1.75 37.03
Goodwill Companies(9) 25.85 261.51 25.86 275.09 27.71 0.47 1.71 40.29
Non-Goodwill Companies(14) 0.00 219.53 30.24 219.53 0.00 0.52 1.98 39.62
MHC Institutions(23) 25.85 233.52 28.69 238.05 27.71 0.50 1.88 39.99
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month common earnings and average common equity and
assets balances; ROI (return on investment) is current EPS divided by
current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of November 28, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ----------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA 4.07 3.46 0.76 19.09 6.62 0.65 16.33 1.86 43.81 1.22
CSA Coast Savings Financial of CA 5.20 5.14 0.62 12.51 4.90 0.66 13.36 1.23 75.26 1.37
CFB Commercial Federal Corp. of NE 6.17 5.52 0.94 16.03 6.28 0.94 16.03 0.88 75.53 0.90
DME Dime Bancorp, Inc. of NY* 5.43 5.17 0.68 12.66 5.36 0.67 12.46 1.02 51.61 0.81
DSL Downey Financial Corp. of CA 7.13 7.04 0.73 9.96 5.42 0.70 9.56 0.95 55.50 0.58
FED FirstFed Fin. Corp. of CA 5.16 5.11 0.56 11.73 6.00 0.56 11.68 1.20 168.73 2.57
GSB Glendale Fed. Bk, FSB of CA 5.65 5.05 0.57 10.24 5.28 0.68 12.27 1.36 70.96 1.30
GDW Golden West Fin. Corp. of CA 6.56 6.56 0.88 13.91 6.62 0.86 13.68 1.18 47.94 0.67
GPT GreenPoint Fin. Corp. of NY* 9.69 5.19 1.09 10.41 5.07 1.06 10.17 2.88 28.68 1.26
JSB JSB Financial, Inc. of NY 23.22 23.22 1.93 8.61 6.37 1.71 7.65 1.07 35.16 0.61
NYB New York Bancorp, Inc. of NY 5.21 5.21 1.62 31.66 6.79 1.66 32.45 0.88 65.33 0.92
WES Westcorp Inc. of Orange CA 9.08 9.06 0.99 10.57 7.71 0.20 2.18 0.76 121.61 1.78
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 17.43 17.43 0.50 3.71 2.02 0.50 3.71 0.50 201.03 1.32
ANE Alliance Bancorp of New Englan* 7.36 7.18 0.79 11.65 6.57 0.73 10.74 1.99 62.80 2.00
BKC American Bank of Waterbury CT* 8.81 8.49 1.30 15.51 6.94 1.10 13.09 1.77 48.58 1.48
BFD BostonFed Bancorp of MA 8.52 8.20 0.73 7.68 5.69 0.66 6.95 0.34 184.11 0.76
CFX CFX Corp of NH(8)* 8.71 8.40 0.73 8.91 2.09 0.99 11.98 0.55 137.87 1.10
CNY Carver Bancorp, Inc. of NY 8.40 8.07 -0.15 -1.74 -1.52 0.01 0.13 1.31 47.60 1.07
CBK Citizens First Fin.Corp. of IL 13.75 13.75 0.60 4.13 3.45 0.54 3.67 0.61 38.86 0.28
ESX Essex Bancorp of VA(8) 0.02 -0.08 0.12 NM 4.00 0.10 NM 2.11 51.58 1.27
FCB Falmouth Co-Op Bank of MA* 23.86 23.86 0.84 3.43 2.57 0.79 3.23 0.07 806.45 0.98
FAB FirstFed America Bancorp of MA 12.20 12.20 0.05 0.56 0.29 0.48 5.03 0.39 259.57 1.16
GAF GA Financial Corp. of PA 14.63 14.49 1.09 6.28 4.88 1.05 6.08 0.24 63.36 0.41
KNK Kankakee Bancorp of IL 11.43 10.78 0.89 8.28 6.35 0.87 8.12 1.05 60.22 0.90
KYF Kentucky First Bancorp of KY 16.70 16.70 1.16 6.52 5.38 1.14 6.43 0.09 457.83 0.76
MBB MSB Bancorp of Middletown NY* 7.39 3.63 0.27 3.87 2.72 0.18 2.55 NA NA NA
PDB Piedmont Bancorp of NC 16.43 16.43 -0.24 -1.28 -1.06 0.55 2.91 0.89 75.98 0.81
SSB Scotland Bancorp of NC 22.62 22.62 1.86 5.47 6.44 1.83 5.39 NA NA 0.53
SZB SouthFirst Bancshares of AL 14.00 14.00 -0.03 -0.19 -0.16 0.23 1.62 0.75 39.15 0.40
SRN Southern Banc Company of AL 17.01 16.83 0.14 0.79 0.71 0.50 2.84 NA NA 0.20
SSM Stone Street Bancorp of NC 29.57 29.57 1.54 4.69 4.25 1.54 4.69 0.23 229.34 0.62
TSH Teche Holding Company of LA 13.14 13.14 0.69 5.03 3.56 0.96 6.96 0.27 304.97 0.96
FTF Texarkana Fst. Fin. Corp of AR 15.70 15.70 1.41 8.40 5.29 1.74 10.38 0.46 145.12 0.79
THR Three Rivers Fin. Corp. of MI 13.46 13.41 0.57 4.02 3.14 0.82 5.83 0.87 59.98 0.77
WSB Washington SB, FSB of MD 8.38 8.38 0.42 5.04 3.39 0.59 7.06 1.53 30.34 1.01
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 8.65 8.49 0.72 8.75 6.90 0.36 4.34 1.30 34.59 0.65
AFED AFSALA Bancorp, Inc. of NY 13.47 13.47 0.79 6.46 4.29 0.79 6.46 0.45 150.77 1.43
ALBK ALBANK Fin. Corp. of Albany NY 9.24 8.14 1.04 11.41 6.25 1.04 11.33 0.94 75.89 0.97
AMFC AMB Financial Corp. of IN 13.94 13.94 1.02 6.29 6.13 0.72 4.43 0.32 118.29 0.51
ASBP ASB Financial Corp. of OH 15.57 15.57 0.97 5.70 4.88 0.91 5.35 0.96 75.72 1.07
ABBK Abington Savings Bank of MA* 7.13 6.46 0.85 12.38 6.36 0.76 11.03 0.16 269.74 0.71
AABC Access Anytime Bancorp of NM 8.65 8.65 1.44 22.38 12.45 1.34 20.78 1.58 31.35 0.95
AFBC Advance Fin. Bancorp of WV 15.40 15.40 0.89 6.41 4.68 0.87 6.25 0.74 38.01 0.33
AADV Advantage Bancorp of WI(8) 9.54 8.88 1.04 11.55 5.30 0.93 10.36 0.48 117.02 1.02
AFCB Affiliated Comm BC, Inc of MA 9.78 9.72 0.96 9.75 5.33 1.09 11.16 0.34 218.65 1.18
ALBC Albion Banc Corp. of Albion NY 8.57 8.57 0.50 5.53 4.52 0.49 5.45 0.12 321.43 0.53
ABCL Allied Bancorp of IL 9.42 9.30 0.79 8.70 4.04 0.88 9.69 0.21 184.61 0.54
ATSB AmTrust Capital Corp. of IN 10.93 10.82 0.40 3.86 3.86 0.23 2.21 2.20 33.49 1.03
</TABLE>
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- --------- ------- ------- ---------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA 15.10 294.99 12.00 347.34 17.66 0.88 1.48 22.34
CSA Coast Savings Financial of CA 20.41 238.00 12.37 240.77 19.11 0.00 0.00 0.00
CFB Commercial Federal Corp. of NE 15.91 233.41 14.39 260.91 15.91 0.33 0.69 10.93
DME Dime Bancorp, Inc. of NY* 18.65 233.62 12.68 245.45 18.95 0.16 0.66 12.31
DSL Downey Financial Corp. of CA 18.46 176.17 12.57 178.46 19.23 0.32 1.16 21.48
FED FirstFed Fin. Corp. of CA 16.67 182.41 9.41 184.16 16.74 0.00 0.00 0.00
GSB Glendale Fed. Bk, FSB of CA 18.93 181.13 10.23 202.37 15.79 0.00 0.00 0.00
GDW Golden West Fin. Corp. of CA 15.11 197.57 12.97 197.57 15.37 0.50 0.56 8.43
GPT GreenPoint Fin. Corp. of NY* 19.71 224.84 21.79 NM 20.19 1.00 1.50 29.59
JSB JSB Financial, Inc. of NY 15.70 129.82 30.14 129.82 17.66 1.40 3.00 47.14
NYB New York Bancorp, Inc. of NY 14.74 NM 23.24 NM 14.38 0.60 1.70 25.00
WES Westcorp Inc. of Orange CA 12.98 130.77 11.88 131.07 NM 0.40 2.35 30.53
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* NM 140.45 24.48 140.45 NM 0.36 1.52 NM
ANE Alliance Bancorp of New Englan* 15.22 159.82 11.77 163.86 16.51 0.20 1.14 17.39
BKC American Bank of Waterbury CT* 14.41 202.84 17.87 210.55 17.07 1.44 3.06 44.04
BFD BostonFed Bancorp of MA 17.56 140.68 11.98 146.13 19.40 0.28 1.37 24.14
CFX CFX Corp of NH(8)* NM 270.73 23.58 280.87 NM 0.88 3.17 NM
CNY Carver Bancorp, Inc. of NY NM 113.06 9.50 117.66 NM 0.00 0.00 NM
CBK Citizens First Fin.Corp. of IL 28.97 123.39 16.97 123.39 NM 0.00 0.00 0.00
ESX Essex Bancorp of VA(8) 25.00 NM 2.76 NM 27.78 0.00 0.00 0.00
FCB Falmouth Co-Op Bank of MA* NM 131.49 31.37 131.49 NM 0.20 0.99 38.46
FAB FirstFed America Bancorp of MA NM 142.01 17.33 142.01 NM 0.00 0.00 0.00
GAF GA Financial Corp. of PA 20.48 130.77 19.13 132.03 21.15 0.48 2.49 51.06
KNK Kankakee Bancorp of IL 15.75 124.29 14.21 131.84 16.05 0.48 1.42 22.33
KYF Kentucky First Bancorp of KY 18.59 128.43 21.45 128.43 18.83 0.50 3.45 64.10
MBB MSB Bancorp of Middletown NY* NM 137.12 10.13 279.38 NM 0.60 2.07 NM
PDB Piedmont Bancorp of NC NM 137.17 22.54 137.17 NM 0.40 3.86 NM
SSB Scotland Bancorp of NC 15.53 134.69 30.46 134.69 15.77 0.30 2.93 45.45
SZB SouthFirst Bancshares of AL NM 118.31 16.56 118.31 NM 0.50 2.63 NM
SRN Southern Banc Company of AL NM 115.71 19.68 116.91 NM 0.35 2.07 NM
SSM Stone Street Bancorp of NC 23.55 124.08 36.68 124.08 23.55 0.45 2.22 52.33
TSH Teche Holding Company of LA 28.05 140.89 18.52 140.89 20.26 0.50 2.29 64.10
FTF Texarkana Fst. Fin. Corp of AR 18.89 164.67 25.85 164.67 15.28 0.56 2.26 42.75
THR Three Rivers Fin. Corp. of MI NM 127.09 17.11 127.58 21.94 0.40 2.03 64.52
WSB Washington SB, FSB of MD 29.48 142.83 11.96 142.83 21.06 0.10 1.36 40.00
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 14.49 122.62 10.61 125.00 29.20 0.42 1.05 15.22
AFED AFSALA Bancorp, Inc. of NY 23.32 129.72 17.48 129.72 23.32 0.24 1.26 29.27
ALBK ALBANK Fin. Corp. of Albany NY 16.00 173.29 16.02 196.72 16.11 0.72 1.56 24.91
AMFC AMB Financial Corp. of IN 16.33 107.02 14.92 107.02 23.19 0.28 1.75 28.57
ASBP ASB Financial Corp. of OH 20.50 127.38 19.83 127.38 21.87 0.40 3.05 62.50
ABBK Abington Savings Bank of MA* 15.72 185.28 13.21 204.43 17.65 0.40 1.11 17.47
AABC Access Anytime Bancorp of NM 8.03 134.75 11.66 134.75 8.65 0.00 0.00 0.00
AFBC Advance Fin. Bancorp of WV 21.39 118.18 18.20 118.18 21.91 0.32 1.80 38.55
AADV Advantage Bancorp of WI(8) 18.86 203.50 19.42 218.73 21.03 0.40 0.64 12.12
AFCB Affiliated Comm BC, Inc of MA 18.75 173.57 16.97 174.53 16.38 0.60 2.11 39.47
ALBC Albion Banc Corp. of Albion NY 22.14 119.54 10.24 119.54 22.48 0.32 1.10 24.43
ABCL Allied Bancorp of IL 24.76 163.04 15.35 165.09 22.25 0.44 1.68 41.51
ATSB AmTrust Capital Corp. of IN 25.93 96.69 10.57 97.70 NM 0.20 1.43 37.04
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of November 28, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- ------------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------ ------- ------ ------ ------ ------- ------- ------- ------- --------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
AHCI Ambanc Holding Co., Inc. of NY* 12.94 12.94 -0.59 -4.24 -3.82 -0.61 -4.43 0.73 107.99 1.48
ASBI Ameriana Bancorp of IN 11.21 11.21 0.92 8.35 5.79 0.83 7.53 0.52 53.03 0.37
AFFFZ America First Fin. Fund of CA(8) 8.37 8.28 1.99 24.83 15.51 2.01 25.10 0.35 94.92 0.48
ABCW Anchor Bancorp Wisconsin of WI 6.40 6.29 0.99 16.08 6.63 0.93 15.00 0.98 115.36 1.44
ANDB Andover Bancorp, Inc. of MA* 8.12 8.12 1.05 13.16 6.65 1.03 12.85 0.91 107.23 1.33
ASFC Astoria Financial Corp. of NY 7.72 6.53 0.81 10.37 5.37 0.77 9.81 0.46 39.39 0.43
AVND Avondale Fin. Corp. of IL 7.72 7.72 -1.93 -21.53 -21.06 -1.97 -21.92 1.11 86.78 1.65
BKCT Bancorp Connecticut of CT* 10.75 10.75 1.36 12.96 5.58 1.24 11.85 1.04 118.74 2.00
BPLS Bank Plus Corp. of CA 4.52 4.51 0.36 7.51 5.85 0.30 6.24 2.21 67.35 2.02
BWFC Bank West Fin. Corp. of MI 14.14 14.14 1.03 6.69 4.00 0.56 3.65 0.21 69.91 0.21
BANC BankAtlantic Bancorp of FL 5.50 4.55 1.04 18.10 8.49 0.54 9.50 0.92 108.06 1.42
BKUNA BankUnited SA of FL 3.12 2.46 0.31 7.68 3.79 0.28 6.90 0.62 27.63 0.21
BVCC Bay View Capital Corp. of CA 5.82 4.86 0.55 9.13 4.21 0.62 10.22 0.63 195.87 1.62
FSNJ Bayonne Banchsares of NJ 15.62 15.62 0.37 3.86 2.08 0.52 5.41 1.12 47.67 1.38
BFSB Bedford Bancshares of VA 14.10 14.10 1.20 8.41 4.92 1.19 8.35 0.52 92.88 0.58
BFFC Big Foot Fin. Corp. of IL 17.48 17.48 0.05 0.27 0.22 0.41 2.34 0.09 150.75 0.31
BSBC Branford SB of CT(8)* 9.65 9.65 1.12 12.06 5.17 1.12 12.06 1.56 131.46 3.09
BYFC Broadway Fin. Corp. of CA 10.01 10.01 -0.11 -1.03 -1.23 0.21 1.94 1.62 52.84 1.02
CBES CBES Bancorp of MO 16.92 16.92 1.23 6.90 5.79 1.12 6.26 0.59 81.11 0.53
CCFH CCF Holding Company of GA 10.66 10.66 0.14 1.03 0.80 -0.16 -1.16 0.20 288.02 0.70
CENF CENFED Financial Corp. of CA 5.56 5.55 0.64 12.26 5.91 0.58 11.04 0.97 76.38 1.07
CFSB CFSB Bancorp of Lansing MI 7.71 7.71 1.20 15.75 5.58 1.13 14.80 0.19 283.10 0.61
CKFB CKF Bancorp of Danville KY 23.67 23.67 1.83 7.53 6.59 1.37 5.61 1.20 16.62 0.22
CNSB CNS Bancorp of MO 24.33 24.33 0.79 3.21 2.35 0.79 3.21 0.50 80.20 0.58
CSBF CSB Financial Group Inc of IL* 25.03 23.66 0.32 1.22 1.28 0.52 1.98 0.56 57.14 0.57
CBCI Calumet Bancorp of Chicago IL 16.21 16.21 1.45 9.07 7.12 1.42 8.91 1.27 96.64 1.55
CAFI Camco Fin. Corp. of OH 9.59 8.88 1.20 12.96 7.21 1.01 10.94 0.60 41.84 0.29
CMRN Cameron Fin. Corp. of MO 21.69 21.69 1.07 4.43 3.98 1.33 5.51 0.73 111.82 0.97
CAPS Capital Savings Bancorp of MO(8) 9.14 9.14 0.95 10.96 5.36 0.94 10.78 0.37 84.67 0.39
CFNC Carolina Fincorp of NC* 22.59 22.59 1.17 5.03 4.03 1.14 4.89 0.16 226.67 0.50
CASB Cascade SB of Everett WA(8) 6.64 6.64 0.60 9.62 5.10 0.60 9.62 0.28 332.14 1.12
CATB Catskill Fin. Corp. of NY* 24.78 24.78 1.39 5.20 4.77 1.41 5.26 0.40 162.15 1.50
CNIT Cenit Bancorp of Norfolk VA 6.95 6.36 0.80 11.30 4.99 0.74 10.50 0.52 103.38 0.77
CEBK Central Co-Op. Bank of MA* 9.93 8.88 0.87 8.67 5.47 0.88 8.79 0.53 151.19 1.15
CENB Century Bancshares of NC* 30.29 30.29 1.69 5.60 5.24 1.70 5.62 0.25 219.37 0.85
CBSB Charter Financial Inc. of IL(8) 14.47 12.80 1.13 7.49 4.77 1.59 10.49 0.56 104.84 0.79
COFI Charter One Financial of OH 7.05 6.48 1.26 18.64 6.14 1.23 18.23 0.27 159.82 0.68
CVAL Chester Valley Bancorp of PA 8.66 8.66 0.98 11.29 5.18 0.93 10.79 0.53 173.12 1.12
CTZN CitFed Bancorp of Dayton OH 6.27 5.70 0.86 13.53 5.87 0.86 13.53 0.40 136.26 0.86
CLAS Classic Bancshares of KY 14.72 12.42 0.55 3.04 2.63 0.77 4.25 0.67 93.71 0.94
CMSB Cmnwealth Bancorp of PA 9.28 7.24 0.75 7.49 5.01 0.63 6.32 0.47 85.46 0.71
CBSA Coastal Bancorp of Houston TX 3.47 2.92 0.41 12.41 8.31 0.43 12.77 0.62 38.71 0.54
CFCP Coastal Fin. Corp. of SC 6.56 6.56 1.21 19.41 5.43 1.05 16.77 0.10 966.86 1.18
CMSV Commty. Svgs, MHC of FL (48.5) 11.34 11.34 0.80 7.04 3.06 0.73 6.45 0.41 90.57 0.62
CFTP Community Fed. Bancorp of MS 26.73 26.73 1.47 4.77 3.86 1.45 4.70 0.50 54.53 0.46
CFFC Community Fin. Corp. of VA 13.71 13.71 1.01 7.32 5.33 1.28 9.26 0.56 105.58 0.67
CFBC Community First Bnkg Co. of GA 17.80 17.57 0.74 4.46 3.36 0.74 4.46 2.19 25.76 0.75
CIBI Community Inv. Bancorp of OH 11.75 11.75 0.97 8.31 6.41 0.97 8.31 0.53 94.97 0.59
COOP Cooperative Bk.for Svgs. of NC 7.69 7.69 0.63 8.30 4.20 0.63 8.30 0.21 109.36 0.29
CRZY Crazy Woman Creek Bncorp of WY 23.70 23.70 1.27 4.66 4.68 1.29 4.72 0.38 134.22 1.04
DNFC D&N Financial Corp. of MI 5.25 5.20 0.89 15.92 6.97 0.82 14.69 0.35 178.16 0.83
DCBI Delphos Citizens Bancorp of OH 26.64 26.64 1.54 6.13 4.69 1.54 6.13 0.45 21.81 0.13
DIME Dime Community Bancorp of NY 13.50 11.63 1.09 6.91 4.73 1.06 6.72 0.60 135.05 1.39
DIBK Dime Financial Corp. of CT* 8.14 7.91 1.94 23.83 9.68 1.94 23.75 0.37 353.73 3.21
EGLB Eagle BancGroup of IL 11.85 11.85 0.32 2.61 2.33 0.25 2.04 1.48 35.66 0.73
EBSI Eagle Bancshares of Tucker GA 8.17 8.17 0.65 7.67 4.57 0.65 7.75 1.26 54.76 0.94
</TABLE>
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- ------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- -------- ------- ------- ---------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
AHCI Ambanc Holding Co., Inc. of NY* NM 116.68 15.09 116.68 NM 0.20 1.18 NM
ASBI Ameriana Bancorp of IN 17.26 143.07 16.03 143.07 19.12 0.64 3.28 56.64
AFFFZ America First Fin. Fund of CA(8) 6.45 150.45 12.59 152.05 6.38 1.60 3.40 21.89
ABCW Anchor Bancorp Wisconsin of WI 15.07 227.93 14.59 231.96 16.15 0.32 1.02 15.31
ANDB Andover Bancorp, Inc. of MA* 15.04 186.88 15.18 186.88 15.41 0.76 2.01 30.28
ASFC Astoria Financial Corp. of NY 18.62 186.78 14.41 220.83 19.69 0.60 1.09 20.27
AVND Avondale Fin. Corp. of IL NM 121.40 9.37 121.40 NM 0.00 0.00 NM
BKCT Bancorp Connecticut of CT* 17.94 223.21 24.00 223.21 19.61 1.00 2.50 44.84
BPLS Bank Plus Corp. of CA 17.11 121.40 5.49 121.53 20.59 0.00 0.00 0.00
BWFC Bank West Fin. Corp. of MI 25.00 165.41 23.39 165.41 NM 0.32 1.45 36.36
BANC BankAtlantic Bancorp of FL 11.78 204.41 11.25 247.33 22.45 0.13 0.90 10.66
BKUNA BankUnited SA of FL 26.41 184.07 5.75 234.00 29.41 0.00 0.00 0.00
BVCC Bay View Capital Corp. of CA 23.77 227.89 13.26 272.84 21.23 0.32 0.95 22.54
FSNJ Bayonne Banchsares of NJ NM 113.42 17.72 113.42 NM 0.17 1.42 68.00
BFSB Bedford Bancshares of VA 20.32 164.44 23.18 164.44 20.47 0.56 1.98 40.29
BFFC Big Foot Fin. Corp. of IL NM 123.58 21.61 123.58 NM 0.00 0.00 0.00
BSBC Branford SB of CT(8)* 19.35 223.05 21.52 223.05 19.35 0.08 1.33 25.81
BYFC Broadway Fin. Corp. of CA NM 88.32 8.84 88.32 NM 0.20 1.54 NM
CBES CBES Bancorp of MO 17.26 115.74 19.58 115.74 19.04 0.40 1.96 33.90
CCFH CCF Holding Company of GA NM 140.75 15.00 140.75 NM 0.55 2.75 NM
CENF CENFED Financial Corp. of CA 16.91 189.45 10.54 189.71 18.78 0.36 0.88 14.94
CFSB CFSB Bancorp of Lansing MI 17.93 272.45 21.00 272.45 19.09 0.68 1.92 34.34
CKFB CKF Bancorp of Danville KY 15.16 117.91 27.90 117.91 20.33 0.50 2.70 40.98
CNSB CNS Bancorp of MO NM 139.47 33.94 139.47 NM 0.24 1.20 51.06
CSBF CSB Financial Group Inc of IL* NM 96.30 24.11 101.87 NM 0.00 0.00 0.00
CBCI Calumet Bancorp of Chicago IL 14.04 127.43 20.66 127.43 14.29 0.00 0.00 0.00
CAFI Camco Fin. Corp. of OH 13.87 160.21 15.36 173.04 16.44 0.52 2.17 30.06
CMRN Cameron Fin. Corp. of MO 25.15 114.20 24.77 114.20 20.23 0.28 1.43 35.90
CAPS Capital Savings Bancorp of MO(8) 18.64 191.20 17.47 191.20 18.96 0.24 1.07 20.00
CFNC Carolina Fincorp of NC* 24.81 124.78 28.18 124.78 25.54 0.24 1.38 34.29
CASB Cascade SB of Everett WA(8) 19.62 152.51 10.12 152.51 19.62 0.00 0.00 0.00
CATB Catskill Fin. Corp. of NY* 20.98 114.34 28.33 114.34 20.73 0.32 1.82 38.10
CNIT Cenit Bancorp of Norfolk VA 20.06 230.74 16.03 251.95 21.59 1.00 1.47 29.50
CEBK Central Co-Op. Bank of MA* 18.28 152.30 15.12 170.20 18.03 0.32 1.21 22.07
CENB Century Bancshares of NC* 19.09 106.50 32.26 106.50 19.05 2.00 2.50 47.73
CBSB Charter Financial Inc. of IL(8) 20.95 160.47 23.22 181.37 14.97 0.32 1.45 30.48
COFI Charter One Financial of OH 16.28 273.93 19.32 298.34 16.64 1.00 1.69 27.47
CVAL Chester Valley Bancorp of PA 19.30 205.88 17.83 205.88 20.19 0.44 1.68 32.35
CTZN CitFed Bancorp of Dayton OH 17.04 211.98 13.30 233.27 17.04 0.36 0.71 12.12
CLAS Classic Bancshares of KY NM 114.90 16.92 136.20 27.17 0.28 1.64 62.22
CMSB Cmnwealth Bancorp of PA 19.97 156.45 14.52 200.69 23.69 0.28 1.37 27.45
CBSA Coastal Bancorp of Houston TX 12.03 141.80 4.92 168.63 11.69 0.48 1.66 20.00
CFCP Coastal Fin. Corp. of SC 18.40 329.99 21.63 329.99 21.30 0.36 1.57 28.80
CMSV Commty. Svgs, MHC of FL (48.5) NM 221.66 25.14 221.66 NM 0.90 2.57 NM
CFTP Community Fed. Bancorp of MS 25.94 137.29 36.70 137.29 26.34 0.30 1.75 45.45
CFFC Community Fin. Corp. of VA 18.75 131.23 17.99 131.23 14.82 0.56 2.26 42.42
CFBC Community First Bnkg Co. of GA 29.74 131.86 23.48 133.65 29.74 0.60 1.56 46.51
CIBI Community Inv. Bancorp of OH 15.59 130.17 15.29 130.17 15.59 0.32 2.03 31.68
COOP Cooperative Bk.for Svgs. of NC 23.79 187.38 14.41 187.38 23.79 0.00 0.00 0.00
CRZY Crazy Woman Creek Bncorp of WY 21.35 103.29 24.48 103.29 21.05 0.40 2.60 55.56
DNFC D&N Financial Corp. of MI 14.36 215.74 11.34 218.08 15.56 0.20 0.83 11.90
DCBI Delphos Citizens Bancorp of OH 21.34 119.45 31.82 119.45 21.34 0.00 0.00 0.00
DIME Dime Community Bancorp of NY 21.14 156.99 21.19 182.21 21.73 0.24 1.03 21.82
DIBK Dime Financial Corp. of CT* 10.33 216.64 17.65 223.09 10.36 0.44 1.40 14.43
EGLB Eagle BancGroup of IL NM 115.97 13.74 115.97 NM 0.00 0.00 0.00
EBSI Eagle Bancshares of Tucker GA 21.88 152.90 12.50 152.90 21.63 0.60 3.12 68.18
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of November 28, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
----------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- ---------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------- ------- ------- ------ ------ -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
EGFC Eagle Financial Corp. of CT(8) 6.90 5.49 0.34 4.79 1.74 0.48 6.91 0.53 87.59 0.86
ETFS East Texas Fin. Serv. of TX 18.01 18.01 0.68 3.68 3.75 0.63 3.43 0.27 88.06 0.48
EMLD Emerald Financial Corp of OH 7.80 7.69 1.05 13.70 6.23 0.97 12.67 0.24 115.15 0.36
EIRE Emerald Island Bancorp, MA(8)* 6.99 6.99 0.86 12.46 4.96 0.92 13.24 0.17 416.26 0.97
EFBC Empire Federal Bancorp of MT 34.89 34.89 0.83 2.37 2.12 1.09 3.12 0.05 357.14 0.45
EFBI Enterprise Fed. Bancorp of OH 11.43 11.42 0.59 5.18 2.95 0.66 5.82 0.07 297.93 0.30
EQSB Equitable FSB of Wheaton MD 5.04 5.04 0.46 9.09 4.89 0.74 14.50 0.49 36.72 0.26
FCBF FCB Fin. Corp. of Neenah WI 17.49 17.49 0.92 5.20 2.31 1.09 6.19 0.24 277.72 0.85
FFBS FFBS Bancorp of Columbus MS 16.70 16.70 1.41 7.48 5.16 1.41 7.48 0.58 72.88 0.59
FFDF FFD Financial Corp. of OH 24.34 24.34 1.94 7.84 6.31 0.95 3.85 NA NA 0.46
FFLC FFLC Bancorp of Leesburg FL 13.73 13.73 1.00 6.81 4.18 0.94 6.44 0.18 226.46 0.52
FFFC FFVA Financial Corp. of VA 13.31 13.04 1.40 10.28 5.09 1.35 9.86 0.16 361.92 0.99
FFWC FFW Corporation of Wabash IN 9.70 8.81 1.04 10.57 6.44 1.02 10.35 0.18 217.37 0.60
FFYF FFY Financial Corp. of OH 13.70 13.70 1.29 8.85 6.29 1.27 8.70 0.66 72.24 0.63
FMCO FMS Financial Corp. of NJ 6.49 6.39 1.02 15.82 7.97 1.01 15.69 1.15 43.53 0.94
FFHH FSF Financial Corp. of MN 11.17 11.17 0.85 7.05 5.20 0.84 6.98 0.15 148.95 0.33
FOBC Fed One Bancorp of Wheeling WV 11.18 10.68 0.94 8.21 5.55 0.94 8.21 0.45 91.97 0.88
FBCI Fidelity Bancorp of Chicago IL 10.48 10.46 0.81 7.86 6.06 0.81 7.86 0.41 22.74 0.12
FSBI Fidelity Bancorp, Inc. of PA 6.75 6.75 0.51 7.38 4.06 0.81 11.68 NA NA NA
FFFL Fidelity FSB, MHC of FL (47.7) 8.38 8.31 0.38 4.15 1.79 0.60 6.56 0.34 62.82 0.29
FFED Fidelity Fed. Bancorp of IN 6.11 6.11 0.75 14.32 6.70 0.73 13.89 0.13 626.40 0.96
FFOH Fidelity Financial of OH 13.02 11.56 0.91 6.59 5.07 1.02 7.37 0.29 106.32 0.37
FIBC Financial Bancorp, Inc. of NY 9.05 9.00 0.91 9.52 5.88 0.97 10.18 1.75 27.02 0.91
FBSI First Bancshares of MO 13.92 13.92 1.19 8.36 6.63 1.08 7.54 0.67 45.57 0.36
FBBC First Bell Bancorp of PA 10.53 10.53 1.15 9.44 6.84 1.12 9.20 0.09 116.26 0.13
FBER First Bergen Bancorp of NJ 13.65 13.65 0.77 4.97 3.81 0.77 4.97 0.84 127.66 2.47
SKBO First Carnegie,MHC of PA(45.0) 16.45 16.45 0.52 5.53 1.77 0.52 5.53 NA NA 0.83
FSTC First Citizens Corp of GA 10.12 7.98 1.96 20.65 9.04 1.75 18.46 NA NA 1.43
FCME First Coastal Corp. of ME* 9.75 9.75 4.17 48.29 32.59 4.01 46.37 1.65 108.25 2.49
FFBA First Colorado Bancorp of Co 13.08 12.91 1.21 8.92 4.88 1.20 8.84 0.20 141.52 0.39
FDEF First Defiance Fin.Corp. of OH 19.67 19.67 1.03 4.82 4.13 1.00 4.67 0.45 99.07 0.59
FESX First Essex Bancorp of MA* 7.40 6.48 0.90 12.27 6.69 0.77 10.52 0.58 149.29 1.43
FFES First FS&LA of E. Hartford CT 6.63 6.63 0.53 8.37 5.19 0.60 9.51 0.31 87.85 1.44
FFSX First FS&LA. MHC of IA (46.1) 8.73 8.66 0.73 8.79 3.70 0.71 8.56 0.22 185.09 0.53
BDJI First Fed. Bancorp. of MN 10.71 10.71 0.65 5.81 3.75 0.63 5.70 0.32 120.28 0.79
FFBH First Fed. Bancshares of AR 14.89 14.89 1.06 6.78 5.29 1.01 6.48 0.96 23.38 0.29
FTFC First Fed. Capital Corp. of WI 6.73 6.35 0.69 10.21 4.20 0.81 11.95 0.13 395.30 0.64
FFKY First Fed. Fin. Corp. of KY 13.70 12.93 1.64 11.95 6.64 1.62 11.87 0.49 94.29 0.53
FFBZ First Federal Bancorp of OH 7.67 7.66 1.01 13.33 6.49 1.02 13.43 0.52 172.30 1.03
FFCH First Fin. Holdings Inc. of SC 6.12 6.12 0.87 14.24 5.15 0.85 13.86 1.49 45.68 0.82
FFBI First Financial Bancorp of IL 8.92 8.92 -0.07 -0.84 -0.79 0.43 5.28 0.33 178.83 0.87
FFHS First Franklin Corp. of OH 9.02 8.97 0.56 6.21 4.04 0.66 7.33 0.47 90.77 0.64
FGHC First Georgia Hold. Corp of GA 8.22 7.53 0.66 7.98 3.82 0.51 6.23 3.10 20.52 0.75
FSPG First Home Bancorp of NJ 6.86 6.76 0.93 13.99 7.33 0.91 13.67 0.77 95.63 1.36
FFSL First Independence Corp. of KS 10.25 10.25 0.65 5.99 4.87 0.65 5.99 1.25 47.61 0.89
FISB First Indiana Corp. of IN 9.65 9.53 1.14 12.04 6.17 0.93 9.89 1.39 103.20 1.70
FKFS First Keystone Fin. Corp of PA 6.63 6.63 0.82 11.30 6.72 0.75 10.35 1.11 39.39 0.84
FLKY First Lancaster Bncshrs of KY 29.46 29.46 1.23 3.65 3.37 1.23 3.65 2.28 13.93 0.35
FLFC First Liberty Fin. Corp. of GA 7.37 6.65 0.88 12.11 4.74 0.72 9.91 0.81 110.00 1.29
CASH First Midwest Fin. Corp. of IA 10.75 9.55 0.96 8.44 6.59 0.91 8.06 0.75 78.49 0.93
FMBD First Mutual Bancorp of IL 13.40 10.21 0.32 2.12 1.73 0.30 1.94 0.26 138.78 0.47
FMSB First Mutual SB of Bellevue WA* 6.79 6.79 1.02 15.29 5.86 1.00 15.00 0.06 NA 1.31
FNGB First Northern Cap. Corp of WI 11.09 11.09 0.93 8.21 4.89 0.89 7.84 0.08 574.86 0.53
FFPB First Palm Beach Bancorp of FL 6.25 6.10 0.58 8.65 4.77 0.49 7.25 0.57 58.39 0.53
FSLA First SB SLA MHC of NJ (47.5)(8) 9.50 8.63 0.90 9.64 2.82 0.94 10.06 0.54 105.63 1.04
SOPN First SB, SSB, Moore Co. of NC 23.01 23.01 1.75 7.26 5.42 1.75 7.26 0.29 70.15 0.31
</TABLE>
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- -------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- -------- ------- ------- ---------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
EGFC Eagle Financial Corp. of CT(8) NM 225.88 15.59 283.87 NM 1.00 1.93 NM
ETFS East Texas Fin. Serv. of TX 26.67 98.28 17.70 98.28 28.57 0.20 1.00 26.67
EMLD Emerald Financial Corp of OH 16.04 207.44 16.18 210.38 17.34 0.24 1.25 20.00
EIRE Emerald Island Bancorp, MA(8)* 20.16 234.20 16.36 234.20 18.97 0.28 0.87 17.50
EFBC Empire Federal Bancorp of MT NM 111.79 39.01 111.79 NM 0.30 1.82 NM
EFBI Enterprise Fed. Bancorp of OH NM 175.41 20.05 175.52 NM 1.00 3.60 NM
EQSB Equitable FSB of Wheaton MD 20.45 174.42 8.79 174.42 12.82 0.00 0.00 0.00
FCBF FCB Fin. Corp. of Neenah WI NM 222.81 38.98 222.81 NM 0.80 2.94 NM
FFBS FFBS Bancorp of Columbus MS 19.40 156.90 26.21 156.90 19.40 0.50 2.22 43.10
FFDF FFD Financial Corp. of OH 15.84 123.62 30.09 123.62 NM 0.30 1.63 25.86
FFLC FFLC Bancorp of Leesburg FL 23.94 163.87 22.51 163.87 25.28 0.29 1.29 30.85
FFFC FFVA Financial Corp. of VA 19.63 199.82 26.60 203.97 20.47 0.48 1.44 28.24
FFWC FFW Corporation of Wabash IN 15.53 153.27 14.87 168.83 15.86 0.72 1.91 29.63
FFYF FFY Financial Corp. of OH 15.91 146.55 20.07 146.55 16.17 0.80 2.69 42.78
FMCO FMS Financial Corp. of NJ 12.55 185.89 12.06 188.63 12.66 0.28 0.95 11.97
FFHH FSF Financial Corp. of MN 19.23 138.79 15.51 138.79 19.42 0.50 2.50 48.08
FOBC Fed One Bancorp of Wheeling WV 18.02 147.60 16.50 154.47 18.02 0.62 2.49 44.93
FBCI Fidelity Bancorp of Chicago IL 16.49 124.60 13.05 124.80 16.49 0.32 1.38 22.70
FSBI Fidelity Bancorp, Inc. of PA 24.65 168.69 11.39 168.69 15.57 0.36 1.35 33.33
FFFL Fidelity FSB, MHC of FL (47.7) NM 225.49 18.88 227.14 NM 0.90 3.23 NM
FFED Fidelity Fed. Bancorp of IN 14.93 194.17 11.86 194.17 15.38 0.40 4.00 59.70
FFOH Fidelity Financial of OH 19.74 121.56 15.83 136.99 17.65 0.28 1.87 36.84
FIBC Financial Bancorp, Inc. of NY 16.99 157.92 14.29 158.73 15.90 0.00 0.00 0.00
FBSI First Bancshares of MO 15.09 126.63 17.63 126.63 16.72 0.20 0.76 11.49
FBBC First Bell Bancorp of PA 14.62 156.53 16.49 156.53 15.00 0.40 2.32 33.90
FBER First Bergen Bancorp of NJ 26.23 137.21 18.73 137.21 26.23 0.20 1.07 28.17
SKBO First Carnegie,MHC of PA(45.0) NM 177.00 29.11 177.00 NM 0.30 1.61 NM
FSTC First Citizens Corp of GA 11.06 192.93 19.52 244.65 12.37 0.29 1.21 13.36
FCME First Coastal Corp. of ME* 3.07 130.11 12.69 130.11 3.20 0.00 0.00 0.00
FFBA First Colorado Bancorp of Co 20.50 189.58 24.79 191.98 20.68 0.48 2.11 43.24
FDEF First Defiance Fin.Corp. of OH 24.21 120.94 23.78 120.94 25.00 0.32 2.10 50.79
FESX First Essex Bancorp of MA* 14.94 166.97 12.36 190.87 17.43 0.48 2.42 36.09
FFES First FS&LA of E. Hartford CT 19.27 151.64 10.05 151.64 16.97 0.60 1.62 31.25
FFSX First FS&LA. MHC of IA (46.1) 27.01 226.35 19.76 228.30 27.71 0.48 1.51 40.68
BDJI First Fed. Bancorp. of MN 26.67 157.84 16.90 157.84 27.18 0.00 0.00 0.00
FFBH First Fed. Bancshares of AR 18.91 128.43 19.12 128.43 19.79 0.24 1.12 21.24
FTFC First Fed. Capital Corp. of WI 23.82 243.19 16.38 258.06 20.34 0.48 1.72 41.03
FFKY First Fed. Fin. Corp. of KY 15.07 174.60 23.92 185.03 15.17 0.56 2.55 38.36
FFBZ First Federal Bancorp of OH 15.40 194.05 14.88 194.25 15.28 0.24 1.25 19.20
FFCH First Fin. Holdings Inc. of SC 19.42 262.13 16.03 262.13 19.96 0.84 1.95 37.84
FFBI First Financial Bancorp of IL NM 104.97 9.36 104.97 20.21 0.00 0.00 NM
FFHS First Franklin Corp. of OH 24.76 148.66 13.41 149.51 20.97 0.40 1.54 38.10
FGHC First Georgia Hold. Corp of GA 26.16 198.81 16.33 216.84 NM 0.05 0.60 15.63
FSPG First Home Bancorp of NJ 13.65 178.44 12.25 181.16 13.97 0.40 1.68 22.99
FFSL First Independence Corp. of KS 20.55 127.23 13.04 127.23 20.55 0.25 1.67 34.25
FISB First Indiana Corp. of IN 16.20 185.77 17.92 188.04 19.74 0.48 1.83 29.63
FKFS First Keystone Fin. Corp of PA 14.88 158.73 10.52 158.73 16.24 0.20 0.63 9.30
FLKY First Lancaster Bncshrs of KY 29.72 107.73 31.74 107.73 29.72 0.50 3.17 NM
FLFC First Liberty Fin. Corp. of GA 21.11 226.59 16.70 251.31 25.81 0.44 1.58 33.33
CASH First Midwest Fin. Corp. of IA 15.19 127.25 13.68 143.26 15.89 0.48 2.34 35.56
FMBD First Mutual Bancorp of IL NM 131.75 17.65 172.78 NM 0.32 1.58 NM
FMSB First Mutual SB of Bellevue WA* 17.06 242.36 16.45 242.36 17.38 0.20 1.10 18.69
FNGB First Northern Cap. Corp of WI 20.45 163.83 18.17 163.83 21.43 0.32 2.37 48.48
FFPB First Palm Beach Bancorp of FL 20.95 173.07 10.82 177.18 25.00 0.60 1.55 32.43
FSLA First SB SLA MHC of NJ (47.5)(8) NM 325.83 30.95 NM NM 0.48 1.19 42.11
SOPN First SB, SSB, Moore Co. of NC 18.46 132.23 30.42 132.23 18.46 0.88 3.61 66.67
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of November 28, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- ------------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
FWWB First Savings Bancorp of WA* 14.76 13.57 1.05 6.22 3.60 0.99 5.88 0.27 241.66 0.97
FSFF First SecurityFed Fin of IL 27.03 27.03 1.29 4.77 3.80 1.29 4.77 1.44 40.86 0.92
SHEN First Shenango Bancorp of PA 11.62 11.62 1.17 10.45 6.70 1.16 10.40 0.51 149.56 1.17
FSFC First So.east Fin. Corp. of SC(8) 10.28 10.28 1.05 10.32 5.36 1.05 10.32 0.24 164.77 0.50
FBNW FirstBank Corp of Clarkston WA 16.43 16.43 0.39 3.23 1.87 0.18 1.47 1.70 33.83 0.76
FFDB FirstFed Bancorp of AL 9.63 8.81 1.03 10.63 7.23 1.01 10.36 1.31 33.87 0.63
FSPT FirstSpartan Fin. Corp. of SC 26.79 26.79 0.96 6.28 3.33 0.96 6.28 0.69 56.19 0.49
FLAG Flag Financial Corp of GA 9.11 9.11 0.91 9.84 5.46 0.75 8.19 3.92 49.66 2.82
FLGS Flagstar Bancorp, Inc of MI 5.98 5.74 1.41 22.77 9.10 0.70 11.39 3.04 8.02 0.27
FFIC Flushing Fin. Corp. of NY* 14.20 13.64 0.95 5.92 4.45 0.99 6.22 0.39 172.94 1.12
FBHC Fort Bend Holding Corp. of TX 6.16 5.75 0.64 10.48 6.27 0.53 8.77 0.56 89.94 1.08
FTSB Fort Thomas Fin. Corp. of KY 16.13 16.13 1.21 7.27 5.15 1.21 7.27 1.98 24.60 0.53
FKKY Frankfort First Bancorp of KY 16.83 16.83 0.08 0.34 0.32 0.65 2.92 0.09 80.00 0.08
FTNB Fulton Bancorp of MO 24.66 24.66 1.25 5.02 3.60 1.08 4.34 1.62 57.19 1.06
GFSB GFS Bancorp of Grinnell IA 11.51 11.51 1.27 11.03 6.82 1.27 11.03 0.98 67.81 0.78
GUPB GFSB Bancorp of Gallup NM 12.82 12.82 0.86 5.43 4.79 0.86 5.43 0.29 115.79 0.63
GSLA GS Financial Corp. of LA 43.13 43.13 1.25 3.81 2.31 1.25 3.81 0.14 211.96 0.81
GOSB GSB Financial Corp. of NY 27.06 27.06 1.02 3.77 3.33 0.86 3.19 NA NA NA
GWBC Gateway Bancorp of KY(8) 27.74 27.74 0.97 3.68 3.01 0.97 3.68 0.90 14.39 0.38
GBCI Glacier Bancorp of MT 9.99 9.75 1.50 15.56 5.88 1.53 15.94 0.25 243.94 0.84
GFCO Glenway Financial Corp. of OH 9.46 9.35 0.79 8.36 5.21 0.77 8.11 0.25 123.32 0.37
GTPS Great American Bancorp of IL 20.43 20.43 0.53 2.39 2.21 0.59 2.67 0.26 126.83 0.42
GTFN Great Financial Corp. of KY(8) 10.07 9.66 1.04 10.82 4.58 0.76 7.96 3.11 16.32 0.74
GSBC Great Southern Bancorp of MO 8.65 8.65 1.84 20.39 7.18 1.74 19.22 1.91 115.21 2.58
GDVS Greater DV SB,MHC of PA (19.9)* 11.64 11.64 0.93 7.97 2.19 0.93 7.97 1.82 33.64 1.00
GSFC Green Street Fin. Corp. of NC 35.38 35.38 1.59 4.45 3.51 1.59 4.45 0.10 147.40 0.20
GFED Guarnty FS&LA,MHC of MO (31.0)(8) 13.03 13.03 0.99 7.17 2.61 0.96 6.94 0.64 162.46 1.29
HCBB HCB Bancshares of AR 18.84 18.13 0.13 0.92 0.66 0.14 1.02 NA NA 1.44
HEMT HF Bancorp of Hemet CA 7.93 6.61 0.03 0.39 0.30 0.17 2.17 1.65 24.89 0.81
HFFC HF Financial Corp. of SD 9.42 9.42 1.02 11.06 7.88 0.94 10.15 0.48 173.70 1.08
HFNC HFNC Financial Corp. of NC 18.80 18.80 1.23 5.43 4.17 1.05 4.64 0.92 92.55 1.06
HMNF HMN Financial, Inc. of MN 14.88 14.88 1.00 6.87 5.18 0.85 5.79 0.10 465.21 0.71
HALL Hallmark Capital Corp. of WI 7.30 7.30 0.65 9.11 5.97 0.64 8.91 0.13 355.91 0.67
HARB Harbor FSB, MHC of FL (46.6)(8) 8.56 8.29 1.22 14.68 4.12 1.21 14.58 0.43 238.88 1.38
HRBF Harbor Federal Bancorp of MD 13.06 13.06 0.71 5.50 4.18 0.71 5.50 0.10 189.19 0.28
HFSA Hardin Bancorp of Hardin MO 11.53 11.53 0.79 5.83 5.37 0.74 5.52 0.09 195.33 0.36
HARL Harleysville SA of PA 6.62 6.62 1.03 16.07 6.98 1.03 16.14 0.02 NA 0.78
HFGI Harrington Fin. Group of IN 4.84 4.84 0.43 8.95 5.42 0.36 7.48 0.20 20.13 0.21
HARS Harris SB, MHC of PA (24.3) 8.20 7.25 0.92 11.11 2.74 0.76 9.19 0.68 60.65 0.96
HFFB Harrodsburg 1st Fin Bcrp of KY 26.93 26.93 1.03 3.77 3.21 1.36 5.01 0.47 59.81 0.38
HHFC Harvest Home Fin. Corp. of OH 12.50 12.50 0.27 1.87 1.56 0.58 4.07 0.11 117.00 0.26
HAVN Haven Bancorp of Woodhaven NY 6.00 5.98 0.68 11.32 6.12 0.68 11.36 0.76 85.85 1.12
HTHR Hawthorne Fin. Corp. of CA 4.85 4.85 0.86 19.13 11.29 0.82 18.40 8.07 18.43 1.70
HMLK Hemlock Fed. Fin. Corp. of IL 19.31 19.31 0.37 2.51 1.62 0.81 5.47 NA NA 1.22
HBNK Highland Federal Bank of CA 7.67 7.67 1.13 15.28 7.53 0.86 11.60 2.52 63.92 2.00
HIFS Hingham Inst. for Sav. of MA* 9.71 9.71 1.25 13.03 7.30 1.25 13.03 0.89 78.90 0.91
HBEI Home Bancorp of Elgin IL 27.56 27.56 0.83 3.02 2.39 0.83 3.02 0.35 85.96 0.35
HBFW Home Bancorp of Fort Wayne IN 13.29 13.29 0.56 3.93 2.63 0.89 6.27 0.05 835.54 0.51
HBBI Home Building Bancorp of IN 14.12 14.12 0.74 5.77 4.94 0.73 5.66 0.44 44.51 0.28
HCFC Home City Fin. Corp. of OH 19.61 19.61 1.24 6.77 5.11 1.26 6.84 0.82 77.27 0.73
HOMF Home Fed Bancorp of Seymour IN 8.66 8.40 1.34 15.88 6.33 1.21 14.42 0.48 112.57 0.63
HWEN Home Financial Bancorp of IN 17.55 17.55 0.86 4.60 4.50 0.74 3.98 1.70 36.51 0.73
HPBC Home Port Bancorp, Inc. of MA* 10.68 10.68 1.67 15.71 7.29 1.66 15.62 0.13 NA 1.54
HMCI Homecorp, Inc. of Rockford IL(8) 6.83 6.83 0.51 7.94 3.96 0.41 6.42 2.16 22.97 0.61
HZFS Horizon Fin'l. Services of IA 9.96 9.96 0.81 7.86 7.00 0.65 6.33 0.94 44.31 0.67
HRZB Horizon Financial Corp. of WA* 15.64 15.64 1.58 10.12 6.58 1.55 9.94 NA NA 0.85
</TABLE>
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- -------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------ ------ ------ -------- ------- ------- ---------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
FWWB First Savings Bancorp of WA* 27.75 174.02 25.68 189.28 29.36 0.28 1.11 30.77
FSFF First SecurityFed Fin of IL 26.33 125.47 33.92 125.47 26.33 0.00 0.00 0.00
SHEN First Shenango Bancorp of PA 14.93 149.67 17.40 149.67 15.00 0.60 1.78 26.55
FSFC First So.east Fin. Corp. of SC(8) 18.67 184.39 18.95 184.39 18.67 0.24 1.59 29.63
FBNW FirstBank Corp of Clarkston WA NM 119.62 19.65 119.62 NM 0.28 1.59 NM
FFDB FirstFed Bancorp of AL 13.84 148.95 14.35 162.84 14.19 0.50 2.27 31.45
FSPT FirstSpartan Fin. Corp. of SC 30.00 128.56 34.44 128.56 30.00 0.60 1.60 48.00
FLAG Flag Financial Corp of GA 18.32 173.55 15.80 173.55 22.02 0.34 1.84 33.66
FLGS Flagstar Bancorp, Inc of MI 10.99 205.29 12.27 213.70 21.99 0.00 0.00 0.00
FFIC Flushing Fin. Corp. of NY* 22.47 130.27 18.50 135.67 21.39 0.24 1.08 24.24
FBHC Fort Bend Holding Corp. of TX 15.95 165.15 10.17 176.92 19.05 0.40 2.04 32.52
FTSB Fort Thomas Fin. Corp. of KY 19.41 139.68 22.54 139.68 19.41 0.25 1.69 32.89
FKKY Frankfort First Bancorp of KY NM 135.23 22.77 135.23 NM 0.36 3.89 NM
FTNB Fulton Bancorp of MO 27.74 136.09 33.57 136.09 NM 0.20 0.99 27.40
GFSB GFS Bancorp of Grinnell IA 14.67 153.22 17.64 153.22 14.67 0.26 1.54 22.61
GUPB GFSB Bancorp of Gallup NM 20.88 115.06 14.75 115.06 20.88 0.40 1.98 41.24
GSLA GS Financial Corp. of LA NM 107.97 46.56 107.97 NM 0.28 1.58 68.29
GOSB GSB Financial Corp. of NY NM 113.43 30.70 113.43 NM 0.00 0.00 0.00
GWBC Gateway Bancorp of KY(8) NM 121.56 33.72 121.56 NM 0.40 2.04 67.80
GBCI Glacier Bancorp of MT 17.01 246.73 24.64 252.74 16.60 0.48 2.31 39.34
GFCO Glenway Financial Corp. of OH 19.19 156.12 14.77 157.94 19.79 0.40 2.11 40.40
GTPS Great American Bancorp of IL NM 113.10 23.10 113.10 NM 0.40 2.11 NM
GTFN Great Financial Corp. of KY(8) 21.82 227.70 22.93 237.27 29.63 0.60 1.25 27.27
GSBC Great Southern Bancorp of MO 13.94 280.87 24.30 280.87 14.78 0.44 2.01 28.03
GDVS Greater DV SB,MHC of PA (19.9)* NM NM 40.77 NM NM 0.36 1.16 52.94
GSFC Green Street Fin. Corp. of NC 28.46 126.28 44.68 126.28 28.46 0.44 2.38 67.69
GFED Guarnty FS&LA,MHC of MO (31.0)(8) NM 271.12 35.32 271.12 NM 0.44 1.85 70.97
HCBB HCB Bancshares of AR NM 95.44 17.98 99.20 NM 0.00 0.00 0.00
HEMT HF Bancorp of Hemet CA NM 126.32 10.02 151.58 NM 0.00 0.00 0.00
HFFC HF Financial Corp. of SD 12.68 134.51 12.68 134.51 13.83 0.42 1.62 20.49
HFNC HFNC Financial Corp. of NC 23.98 156.86 29.49 156.86 28.06 0.28 1.88 45.16
HMNF HMN Financial, Inc. of MN 19.31 128.77 19.16 128.77 22.89 0.00 0.00 0.00
HALL Hallmark Capital Corp. of WI 16.76 144.00 10.52 144.00 17.13 0.00 0.00 0.00
HARB Harbor FSB, MHC of FL (46.6)(8) 24.25 333.85 28.58 344.83 24.44 1.40 2.15 52.24
HRBF Harbor Federal Bancorp of MD 23.90 129.85 16.95 129.85 23.90 0.48 2.21 52.75
HFSA Hardin Bancorp of Hardin MO 18.62 111.04 12.81 111.04 19.66 0.48 2.74 51.06
HARL Harleysville SA of PA 14.33 213.44 14.14 213.44 14.26 0.44 1.50 21.46
HFGI Harrington Fin. Group of IN 18.46 159.82 7.73 159.82 22.09 0.12 0.97 17.91
HARS Harris SB, MHC of PA (24.3) NM NM 30.41 NM NM 0.22 1.16 42.31
HFFB Harrodsburg 1st Fin Bcrp of KY NM 118.15 31.82 118.15 23.45 0.40 2.34 72.73
HHFC Harvest Home Fin. Corp. of OH NM 129.96 16.24 129.96 29.50 0.44 2.98 NM
HAVN Haven Bancorp of Woodhaven NY 16.35 171.52 10.29 172.07 16.29 0.60 1.40 22.81
HTHR Hawthorne Fin. Corp. of CA 8.86 149.89 7.28 149.89 9.21 0.00 0.00 0.00
HMLK Hemlock Fed. Fin. Corp. of IL NM 114.54 22.12 114.54 28.28 0.24 1.39 NM
HBNK Highland Federal Bank of CA 13.28 186.05 14.26 186.05 17.49 0.00 0.00 0.00
HIFS Hingham Inst. for Sav. of MA* 13.70 168.34 16.34 168.34 13.70 0.48 1.77 24.24
HBEI Home Bancorp of Elgin IL NM 130.72 36.03 130.72 NM 0.40 2.22 NM
HBFW Home Bancorp of Fort Wayne IN NM 155.33 20.64 155.33 23.80 0.20 0.73 27.78
HBBI Home Building Bancorp of IN 20.24 112.49 15.88 112.49 20.63 0.30 1.41 28.57
HCFC Home City Fin. Corp. of OH 19.57 118.50 23.23 118.50 19.35 0.36 2.00 39.13
HOMF Home Fed Bancorp of Seymour IN 15.80 233.45 20.21 240.59 17.41 0.35 1.27 20.11
HWEN Home Financial Bancorp of IN 22.22 105.45 18.51 105.45 25.69 0.20 1.22 27.03
HPBC Home Port Bancorp, Inc. of MA* 13.71 206.01 21.99 206.01 13.79 0.80 3.33 45.71
HMCI Homecorp, Inc. of Rockford IL(8) 25.25 191.28 13.06 191.28 NM 0.00 0.00 0.00
HZFS Horizon Fin'l. Services of IA 14.29 107.11 10.66 107.11 17.74 0.18 1.64 23.38
HRZB Horizon Financial Corp. of WA* 15.19 148.25 23.18 148.25 15.48 0.44 2.66 40.37
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of November 28, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
--------------------------------------------------------- ------------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------- ------ -------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
IBSF IBS Financial Corp. of NJ 17.42 17.42 0.78 4.41 3.04 0.78 4.41 0.13 110.72 0.50
ISBF ISB Financial Corp. of LA 12.04 10.24 0.62 4.52 2.86 0.85 6.21 0.27 196.73 0.80
ITLA Imperial Thrift & Loan of CA* 10.72 10.68 1.45 13.02 8.44 1.45 13.02 1.54 79.64 1.45
IFSB Independence FSB of DC 6.88 6.09 0.32 4.85 4.72 0.27 4.03 NA NA 0.36
INCB Indiana Comm. Bank, SB of IN(8) 11.88 11.88 0.53 4.32 2.59 0.53 4.32 NA NA 0.93
INBI Industrial Bancorp of OH 17.18 17.18 1.51 8.26 5.44 1.58 8.68 0.25 193.84 0.54
IWBK Interwest SB of Oak Harbor WA 6.34 6.23 1.12 16.91 6.38 1.03 15.57 0.58 73.44 0.77
IPSW Ipswich SB of Ipswich MA* 5.61 5.61 1.20 20.28 6.84 0.95 16.13 0.84 97.31 1.09
JXVL Jacksonville Bancorp of TX 14.92 14.92 1.02 6.45 4.80 1.34 8.46 0.78 67.63 0.70
JXSB Jcksnville SB,MHC of IL (45.6) 10.56 10.56 0.65 6.02 2.99 0.65 6.02 0.79 56.34 0.56
JSBA Jefferson Svgs Bancorp of MO 8.19 6.24 0.30 3.91 1.60 0.70 9.25 0.67 101.16 0.89
JOAC Joachim Bancorp of MO 28.14 28.14 0.80 2.74 2.64 0.80 2.74 0.24 95.24 0.32
KSAV KS Bancorp of Kenly NC 13.24 13.23 1.21 8.81 6.22 1.20 8.74 0.53 55.44 0.35
KSBK KSB Bancorp of Kingfield ME(8)* 7.18 6.79 0.97 13.74 7.08 0.99 13.99 1.59 52.04 1.07
KFBI Klamath First Bancorp of OR 19.55 19.55 0.81 3.67 2.51 1.23 5.54 0.03 510.24 0.23
LSBI LSB Fin. Corp. of Lafayette IN 8.64 8.64 0.78 8.67 6.19 0.69 7.65 1.05 69.89 0.83
LVSB Lakeview SB of Paterson NJ 12.22 10.46 1.26 12.10 5.56 0.92 8.76 1.13 59.43 1.50
LARK Landmark Bancshares of KS 13.79 13.79 0.88 5.93 4.75 1.05 7.02 NA NA NA
LARL Laurel Capital Group of PA 10.47 10.47 1.46 14.04 7.53 1.41 13.57 0.43 201.97 1.25
LSBX Lawrence Savings Bank of MA* 9.52 9.52 1.76 20.06 10.24 1.75 19.92 0.66 156.71 2.35
LFED Leeds FSB, MHC of MD (36.3) 16.63 16.63 1.18 7.24 2.98 1.18 7.24 0.06 315.29 0.30
LXMO Lexington B&L Fin. Corp. of MO 28.32 28.32 1.03 3.49 3.28 1.33 4.50 0.48 78.37 0.49
LIFB Life Bancorp of Norfolk VA(8) 10.71 10.42 0.92 8.70 4.34 0.85 8.05 0.41 141.46 1.32
LFBI Little Falls Bancorp of NJ 11.68 10.77 0.57 4.32 3.30 0.52 3.93 0.90 38.49 0.77
LOGN Logansport Fin. Corp. of IN 18.90 18.90 1.41 7.25 5.97 1.48 7.57 0.49 55.66 0.39
LONF London Financial Corp. of OH 19.66 19.66 0.66 3.18 3.25 1.00 4.83 0.80 61.11 0.63
LISB Long Island Bancorp, Inc of NY 9.21 9.13 0.86 9.35 4.37 0.73 7.90 0.91 63.07 0.92
MAFB MAF Bancorp of IL 7.79 6.84 1.16 14.90 7.63 1.15 14.78 0.42 128.75 0.69
MBLF MBLA Financial Corp. of MO 12.66 12.66 0.83 6.49 5.37 0.85 6.62 0.57 50.27 0.50
MFBC MFB Corp. of Mishawaka IN 13.10 13.10 0.84 5.76 5.20 0.84 5.76 0.10 141.76 0.18
MLBC ML Bancorp of Villanova PA(8) 6.92 6.46 0.70 9.91 4.17 0.50 7.10 0.43 178.98 1.71
MSBF MSB Financial Corp. of MI 16.54 16.54 1.49 8.38 4.41 1.44 8.09 1.02 40.20 0.45
MARN Marion Capital Holdings of IN 21.95 21.95 1.69 7.48 6.30 1.67 7.39 1.08 104.36 1.32
MRKF Market Fin. Corp. of OH 35.44 35.44 0.98 3.41 2.49 0.98 3.41 0.34 27.23 0.20
MFCX Marshalltown Fin. Corp. of IA(8) 16.16 16.16 0.67 4.27 3.48 0.72 4.56 NA NA 0.19
MFSL Maryland Fed. Bancorp of MD 8.38 8.27 0.62 7.43 4.06 0.89 10.73 0.47 85.54 0.46
MASB MassBank Corp. of Reading MA* 10.78 10.62 1.10 10.61 6.18 1.03 9.96 0.21 113.84 0.84
MFLR Mayflower Co-Op. Bank of MA* 9.68 9.52 1.03 10.64 5.69 0.97 10.03 0.96 92.14 1.52
MECH Mechanics SB of Hartford CT* 10.40 10.40 1.79 17.75 10.30 1.78 17.69 0.91 188.34 2.53
MDBK Medford Bank of Medford, MA* 9.01 8.45 1.07 11.98 6.73 1.00 11.16 0.27 219.01 1.12
MERI Meritrust FSB of Thibodaux LA(8) 8.26 8.26 1.15 14.65 6.68 1.15 14.65 0.39 70.30 0.52
MWBX MetroWest Bank of MA* 7.46 7.46 1.38 18.49 6.55 1.38 18.49 0.90 131.24 1.55
MCBS Mid Continent Bancshares of KS(8) 9.39 9.39 1.02 9.79 4.53 1.16 11.10 0.15 71.76 0.19
MIFC Mid Iowa Financial Corp. of IA 9.36 9.34 1.00 10.77 6.69 1.40 15.17 NA NA 0.45
MCBN Mid-Coast Bancorp of ME 8.59 8.59 0.76 8.81 6.68 0.72 8.35 0.64 82.14 0.64
MWBI Midwest Bancshares, Inc. of IA 6.92 6.92 0.87 12.62 6.54 0.77 11.16 0.81 59.23 0.79
MWFD Midwest Fed. Fin. Corp of WI(8) 8.81 8.50 1.15 13.20 5.25 1.13 13.01 NA NA 1.02
MFFC Milton Fed. Fin. Corp. of OH 12.57 12.57 0.73 4.95 4.00 0.65 4.38 0.29 91.98 0.44
MIVI Miss. View Hold. Co. of MN 18.88 18.88 0.70 3.78 3.62 1.03 5.55 NA NA NA
MBSP Mitchell Bancorp of NC* 41.35 41.35 1.61 3.77 3.37 1.61 3.77 2.25 23.36 0.63
MBBC Monterey Bay Bancorp of CA 11.50 10.67 0.47 4.06 3.05 0.43 3.71 0.76 51.39 0.60
MONT Montgomery Fin. Corp. of IN 19.14 19.14 0.68 3.57 3.41 0.68 3.57 0.73 24.43 0.20
MSBK Mutual SB, FSB of Bay City MI 6.36 6.36 0.10 1.59 1.15 0.05 0.85 0.05 650.66 0.64
NHTB NH Thrift Bancshares of NH 7.82 6.72 0.70 9.26 4.71 0.56 7.48 0.61 151.10 1.14
NSLB NS&L Bancorp of Neosho MO 19.56 19.56 0.49 2.37 2.19 0.77 3.71 0.03 210.00 0.13
NMSB Newmil Bancorp. of CT* 10.17 10.17 0.85 8.36 4.91 0.82 8.00 1.36 128.18 3.26
</TABLE>
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- -------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------ ------- ------ -------- ------- ------- --------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
IBSF IBS Financial Corp. of NJ NM 149.19 25.99 149.19 NM 0.40 2.29 NM
ISBF ISB Financial Corp. of LA NM 158.90 19.13 186.70 25.49 0.50 1.90 66.67
ITLA Imperial Thrift & Loan of CA* 11.84 146.10 15.67 146.70 11.84 0.00 0.00 0.00
IFSB Independence FSB of DC 21.20 99.21 6.83 112.21 25.52 0.22 1.60 33.85
INCB Indiana Comm. Bank, SB of IN(8) NM 165.59 19.67 165.59 NM 0.36 1.76 67.92
INBI Industrial Bancorp of OH 18.37 153.06 26.30 153.06 17.48 0.56 3.11 57.14
IWBK Interwest SB of Oak Harbor WA 15.67 244.89 15.54 249.37 17.03 0.64 1.62 25.40
IPSW Ipswich SB of Ipswich MA* 14.63 269.25 15.11 269.25 18.39 0.12 0.93 13.64
JXVL Jacksonville Bancorp of TX 20.83 138.38 20.64 138.38 15.89 0.50 2.67 55.56
JXSB Jcksnville SB,MHC of IL (45.6) NM 196.26 20.72 196.26 NM 0.40 1.50 50.00
JSBA Jefferson Svgs Bancorp of MO NM 203.72 16.69 267.47 26.53 0.56 1.29 NM
JOAC Joachim Bancorp of MO NM 107.90 30.36 107.90 NM 0.50 3.39 NM
KSAV KS Bancorp of Kenly NC 16.07 136.78 18.11 136.86 16.19 0.60 2.67 42.86
KSBK KSB Bancorp of Kingfield ME(8)* 14.12 180.26 12.94 190.63 13.86 0.08 0.52 7.41
KFBI Klamath First Bancorp of OR NM 154.08 30.12 154.08 26.36 0.32 1.46 58.18
LSBI LSB Fin. Corp. of Lafayette IN 16.15 137.71 11.89 137.71 18.31 0.34 1.31 21.12
LVSB Lakeview SB of Paterson NJ 18.00 175.93 21.50 205.45 24.87 0.13 0.54 9.70
LARK Landmark Bancshares of KS 21.05 128.89 17.77 128.89 17.78 0.40 1.67 35.09
LARL Laurel Capital Group of PA 13.28 182.57 19.11 182.57 13.74 0.52 1.87 24.88
LSBX Lawrence Savings Bank of MA* 9.77 176.91 16.83 176.91 9.84 0.00 0.00 0.00
LFED Leeds FSB, MHC of MD (36.3) NM 234.72 39.03 234.72 NM 0.51 2.37 NM
LXMO Lexington B&L Fin. Corp. of MO NM 113.64 32.18 113.64 23.59 0.30 1.79 54.55
LIFB Life Bancorp of Norfolk VA(8) 23.05 192.46 20.62 197.84 24.90 0.48 1.54 35.56
LFBI Little Falls Bancorp of NJ NM 137.65 16.08 149.25 NM 0.20 1.00 30.30
LOGN Logansport Fin. Corp. of IN 16.76 118.58 22.41 118.58 16.05 0.40 2.62 43.96
LONF London Financial Corp. of OH NM 101.03 19.87 101.03 20.21 0.24 1.63 50.00
LISB Long Island Bancorp, Inc of NY 22.87 207.21 19.09 209.14 27.08 0.60 1.27 29.13
MAFB MAF Bancorp of IL 13.10 188.73 14.70 214.81 13.21 0.28 0.86 11.29
MBLF MBLA Financial Corp. of MO 18.62 120.75 15.28 120.75 18.24 0.40 1.48 27.59
MFBC MFB Corp. of Mishawaka IN 19.21 114.53 15.00 114.53 19.21 0.32 1.38 26.45
MLBC ML Bancorp of Villanova PA(8) 23.96 212.81 14.73 227.99 NM 0.40 1.39 33.33
MSBF MSB Financial Corp. of MI 22.67 188.95 31.24 188.95 23.49 0.28 1.44 32.56
MARN Marion Capital Holdings of IN 15.87 119.26 26.17 119.26 16.06 0.88 3.32 52.69
MRKF Market Fin. Corp. of OH NM 102.42 36.30 102.42 NM 0.28 1.84 73.68
MFCX Marshalltown Fin. Corp. of IA(8) 28.75 120.04 19.40 120.04 26.95 0.00 0.00 0.00
MFSL Maryland Fed. Bancorp of MD 24.65 177.47 14.87 179.74 17.06 0.42 1.58 38.89
MASB MassBank Corp. of Reading MA* 16.19 159.35 17.18 161.75 17.24 0.96 2.13 34.53
MFLR Mayflower Co-Op. Bank of MA* 17.58 178.79 17.31 181.85 18.66 0.68 2.78 48.92
MECH Mechanics SB of Hartford CT* 9.70 156.89 16.32 156.89 9.74 0.00 0.00 0.00
MDBK Medford Bank of Medford, MA* 14.86 168.49 15.19 179.79 15.95 0.72 1.95 28.92
MERI Meritrust FSB of Thibodaux LA(8) 14.98 205.70 16.99 205.70 14.98 0.70 1.37 20.47
MWBX MetroWest Bank of MA* 15.28 263.58 19.66 263.58 15.28 0.12 1.45 22.22
MCBS Mid Continent Bancshares of KS(8) 22.06 210.57 19.77 210.57 19.46 0.40 0.97 21.39
MIFC Mid Iowa Financial Corp. of IA 14.96 151.71 14.19 151.93 10.62 0.08 0.75 11.27
MCBN Mid-Coast Bancorp of ME 14.97 126.93 10.90 126.93 15.80 0.52 1.81 27.08
MWBI Midwest Bancshares, Inc. of IA 15.29 181.73 12.57 181.73 17.29 0.24 1.30 19.83
MWFD Midwest Fed. Fin. Corp of WI(8) 19.06 236.40 20.84 245.14 19.34 0.34 1.28 24.46
MFFC Milton Fed. Fin. Corp. of OH 25.00 131.00 16.47 131.00 28.30 0.60 4.00 NM
MIVI Miss. View Hold. Co. of MN 27.65 102.53 19.36 102.53 18.81 0.16 0.88 24.24
MBSP Mitchell Bancorp of NC* 29.66 113.93 47.11 113.93 29.66 0.40 2.29 67.80
MBBC Monterey Bay Bancorp of CA NM 130.23 14.98 140.43 NM 0.12 0.63 20.69
MONT Montgomery Fin. Corp. of IN 29.31 104.23 19.95 104.23 29.31 0.22 1.79 52.38
MSBK Mutual SB, FSB of Bay City MI NM 133.61 8.50 133.61 NM 0.00 0.00 0.00
NHTB NH Thrift Bancshares of NH 21.21 174.42 13.65 203.09 26.25 0.50 2.38 50.51
NSLB NS&L Bancorp of Neosho MO NM 113.50 22.20 113.50 29.30 0.50 2.67 NM
NMSB Newmil Bancorp. of CT* 20.36 169.24 17.22 169.24 21.27 0.32 2.25 45.71
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of November 28, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- ------------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------- ------- ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
NASB North American SB of MO 7.68 7.42 1.26 17.18 8.21 1.19 16.18 3.11 27.16 0.98
NBSI North Bancshares of Chicago IL 13.43 13.43 0.64 4.40 2.98 0.56 3.85 NA NA 0.27
FFFD North Central Bancshares of IA 22.91 22.91 1.83 7.47 6.15 1.83 7.47 0.22 446.43 1.16
NBN Northeast Bancorp of ME* 6.96 6.15 0.71 10.01 4.94 0.59 8.26 1.03 93.77 1.22
NEIB Northeast Indiana Bncrp of IN 14.37 14.37 1.20 7.72 5.90 1.20 7.72 0.17 350.00 0.67
NWEQ Northwest Equity Corp. of WI 11.69 11.69 1.02 8.65 6.16 0.99 8.36 1.43 33.84 0.59
NWSB Northwest SB, MHC of PA (30.7) 9.64 9.10 0.96 9.86 2.93 0.96 9.86 0.77 85.90 0.87
NSSY Norwalk Savings Society of CT* 8.06 7.77 0.97 12.53 6.29 1.11 14.29 1.49 69.87 1.54
NSSB Norwich Financial Corp. of CT* 11.66 10.60 1.14 10.24 4.94 1.06 9.48 1.20 158.13 2.71
NTMG Nutmeg FS&LA of CT 5.56 5.56 0.30 5.44 3.00 0.35 6.28 1.19 40.69 0.55
OHSL OHSL Financial Corp. of OH 10.92 10.92 0.90 8.04 5.95 0.88 7.80 0.18 121.89 0.31
OCFC Ocean Fin. Corp. of NJ 16.25 16.25 0.03 0.15 0.11 0.98 5.94 0.52 83.85 0.86
OCN Ocwen Financial Corp. of FL 14.14 13.77 3.10 32.06 5.53 1.73 17.94 5.79 13.48 1.11
OTFC Oregon Trail Fin. Corp of OR 24.02 24.02 1.07 4.44 3.69 1.07 4.44 0.07 307.09 0.54
PBHC OswegoCity SB, MHC of NY (46.)* 11.94 10.03 1.06 9.22 3.68 0.95 8.25 0.91 43.96 0.67
OFCP Ottawa Financial Corp. of MI 8.74 7.06 0.81 9.10 4.69 0.79 8.89 0.35 106.15 0.43
PFFB PFF Bancorp of Pomona CA 10.06 9.95 0.45 4.25 3.54 0.46 4.32 1.62 64.39 1.44
PSFI PS Financial of Chicago IL 37.32 37.32 1.96 4.86 4.17 1.99 4.92 0.68 31.79 0.52
PVFC PVF Capital Corp. of OH 7.18 7.18 1.36 19.67 9.27 1.31 18.84 1.17 57.57 0.72
PALM Palfed, Inc. of Aiken SC(8) 8.51 8.51 0.39 4.82 1.81 0.67 8.26 2.04 53.36 1.30
PBCI Pamrapo Bancorp, Inc. of NJ 12.91 12.82 1.34 9.82 7.25 1.32 9.70 2.39 28.48 1.21
PFED Park Bancorp of Chicago IL 23.14 23.14 1.10 4.80 4.48 1.14 4.98 0.24 118.76 0.72
PVSA Parkvale Financial Corp of PA 7.72 7.67 1.08 14.34 6.89 1.08 14.34 0.26 547.66 1.91
PEEK Peekskill Fin. Corp. of NY 26.09 26.09 1.14 4.30 3.77 1.14 4.30 1.24 28.37 1.35
PFSB PennFed Fin. Services of NJ 7.33 6.20 0.82 10.90 6.45 0.82 10.90 0.61 32.20 0.28
PWBC PennFirst Bancorp of PA 8.37 7.44 0.67 8.85 5.21 0.67 8.85 0.68 87.79 1.45
PWBK Pennwood SB of PA* 18.34 18.34 0.99 5.21 4.38 1.09 5.71 1.49 42.39 1.04
PBKB People's SB of Brockton MA* 5.61 5.37 0.80 14.40 6.35 0.47 8.50 0.53 110.55 1.08
PFDC Peoples Bancorp of Auburn IN 15.21 15.21 1.11 7.27 4.18 1.46 9.57 0.36 83.87 0.38
PBCT Peoples Bank, MHC of CT (40.1)* 9.02 9.01 1.16 13.69 4.27 0.75 8.84 0.76 146.25 1.66
TSBS Peoples Bcrp, MHC of NJ (35.9)(8) 16.95 15.25 1.30 7.51 2.50 0.91 5.27 0.91 55.06 0.80
PFFC Peoples Fin. Corp. of OH 27.20 27.20 0.90 3.32 3.79 0.90 3.32 NA NA 0.39
PHBK Peoples Heritage Fin Grp of ME* 7.45 6.36 1.28 16.08 5.89 1.28 16.08 0.86 121.04 1.55
PSFC Peoples Sidney Fin. Corp of OH 25.29 25.29 1.04 6.27 3.25 1.04 6.27 1.00 40.10 0.45
PERM Permanent Bancorp of IN 9.46 9.34 0.62 6.63 4.92 0.62 6.58 1.07 47.01 1.00
PMFI Perpetual Midwest Fin. of IA 8.51 8.51 0.40 4.65 3.11 0.32 3.76 0.30 240.42 0.86
PERT Perpetual of SC, MHC (46.8)(8) 11.82 11.82 0.78 6.37 2.29 1.05 8.60 0.12 502.32 0.87
PCBC Perry Co. Fin. Corp. of MO 19.19 19.19 0.93 4.93 3.87 1.07 5.70 0.03 104.17 0.19
PHFC Pittsburgh Home Fin. of PA 10.54 10.43 0.84 6.97 4.88 0.75 6.21 1.69 30.77 0.78
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 6.33 6.33 0.63 10.08 4.29 0.62 9.94 0.16 274.52 1.07
PTRS Potters Financial Corp of OH 8.81 8.81 0.96 10.95 7.06 0.94 10.73 0.44 389.09 2.65
PKPS Poughkeepsie Fin. Corp. of NY(8) 8.42 8.42 0.54 6.43 3.72 0.54 6.43 4.19 23.86 1.34
PHSB Ppls Home SB, MHC of PA (45.0) 13.66 13.66 0.73 6.80 3.01 0.71 6.55 0.45 148.08 1.37
PRBC Prestige Bancorp of PA 11.21 11.21 0.63 5.12 4.62 0.63 5.12 0.33 82.34 0.40
PFNC Progress Financial Corp. of PA 5.33 4.76 0.90 17.21 5.81 0.71 13.58 2.07 37.27 1.11
PSBK Progressive Bank, Inc. of NY* 8.73 7.86 0.96 11.35 6.52 0.94 11.15 0.94 115.80 1.65
PROV Provident Fin. Holdings of CA 13.33 13.33 0.75 5.30 4.70 0.35 2.48 1.58 55.80 0.98
PULB Pulaski SB, MHC of MO (29.8) 13.05 13.05 0.80 6.20 2.23 1.06 8.20 0.64 41.41 0.33
PLSK Pulaski SB, MHC of NJ (46.0) 11.98 11.98 0.64 6.99 2.88 0.64 6.99 0.65 83.38 0.95
PULS Pulse Bancorp of S. River NJ 8.21 8.21 1.10 13.94 7.51 1.11 14.09 0.75 59.52 1.82
QCFB QCF Bancorp of Virginia MN 17.49 17.49 1.34 7.36 5.12 1.34 7.36 0.24 345.09 2.00
QCBC Quaker City Bancorp of CA 8.46 8.46 0.71 8.11 5.85 0.68 7.77 1.35 67.38 1.15
QCSB Queens County Bancorp of NY* 11.22 11.22 1.54 11.21 4.11 1.55 11.28 0.69 89.32 0.69
RARB Raritan Bancorp. of Raritan NJ* 7.37 7.25 1.02 13.34 5.98 1.01 13.18 0.39 208.57 1.26
REDF RedFed Bancorp of Redlands CA 8.32 8.29 1.01 12.28 6.40 1.01 12.28 1.80 44.74 0.92
RELY Reliance Bancorp, Inc. of NY 8.26 6.07 0.89 10.80 5.92 0.93 11.40 0.67 41.66 0.62
</TABLE>
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- -------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------ -------- ------- ------- ---------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
NASB North American SB of MO 12.18 196.85 15.11 203.67 12.94 0.80 1.60 19.51
NBSI North Bancshares of Chicago IL NM 155.52 20.88 155.52 NM 0.48 1.81 60.76
FFFD North Central Bancshares of IA 16.27 124.72 28.58 124.72 16.27 0.25 1.32 21.55
NBN Northeast Bancorp of ME* 20.26 194.46 13.53 220.06 24.56 0.32 1.15 23.36
NEIB Northeast Indiana Bncrp of IN 16.95 128.95 18.53 128.95 16.95 0.34 1.70 28.81
NWEQ Northwest Equity Corp. of WI 16.24 140.64 16.44 140.64 16.81 0.56 2.95 47.86
NWSB Northwest SB, MHC of PA (30.7) NM 323.33 31.16 342.30 NM 0.16 1.14 39.02
NSSY Norwalk Savings Society of CT* 15.91 186.53 15.03 193.47 13.95 0.40 1.04 16.53
NSSB Norwich Financial Corp. of CT* 20.24 197.67 23.06 217.63 21.88 0.56 1.88 38.10
NTMG Nutmeg FS&LA of CT NM 168.39 9.37 168.39 28.89 0.20 1.54 51.28
OHSL OHSL Financial Corp. of OH 16.82 133.80 14.61 133.80 17.34 0.88 3.17 53.33
OCFC Ocean Fin. Corp. of NJ NM 128.93 20.96 128.93 23.79 0.80 2.16 NM
OCN Ocwen Financial Corp. of FL 18.10 NM 49.63 NM NM 0.00 0.00 0.00
OTFC Oregon Trail Fin. Corp of OR 27.12 120.39 28.91 120.39 27.12 0.00 0.00 0.00
PBHC OswegoCity SB, MHC of NY (46.)* 27.14 237.10 28.31 282.18 NM 0.28 0.98 26.67
OFCP Ottawa Financial Corp. of MI 21.32 194.35 16.98 240.59 21.83 0.36 1.31 27.91
PFFB PFF Bancorp of Pomona CA 28.26 125.05 12.57 126.43 27.83 0.00 0.00 0.00
PSFI PS Financial of Chicago IL 23.96 116.87 43.62 116.87 23.63 0.48 2.78 66.67
PVFC PVF Capital Corp. of OH 10.79 192.85 13.85 192.85 11.26 0.00 0.00 0.00
PALM Palfed, Inc. of Aiken SC(8) NM 251.40 21.40 251.40 NM 0.12 0.44 24.49
PBCI Pamrapo Bancorp, Inc. of NJ 13.80 141.33 18.25 142.34 13.96 1.00 4.19 57.80
PFED Park Bancorp of Chicago IL 22.34 107.59 24.89 107.59 21.53 0.00 0.00 0.00
PVSA Parkvale Financial Corp of PA 14.51 195.72 15.11 197.02 14.51 0.52 1.75 25.37
PEEK Peekskill Fin. Corp. of NY 26.52 118.16 30.83 118.16 26.52 0.36 2.06 54.55
PFSB PennFed Fin. Services of NJ 15.51 160.18 11.74 189.22 15.51 0.28 0.84 13.08
PWBC PennFirst Bancorp of PA 19.21 140.82 11.78 158.28 19.21 0.36 1.97 37.89
PWBK Pennwood SB of PA* 22.82 123.55 22.66 123.55 20.81 0.32 1.69 38.55
PBKB People's SB of Brockton MA* 15.75 213.22 11.96 222.72 26.67 0.44 2.20 34.65
PFDC Peoples Bancorp of Auburn IN 23.91 171.61 26.10 171.61 18.18 0.43 1.95 46.74
PBCT Peoples Bank, MHC of CT (40.1)* 23.40 295.27 26.64 295.53 NM 0.76 2.26 52.78
TSBS Peoples Bcrp, MHC of NJ (35.9)(8) NM 290.31 49.20 322.66 NM 0.35 1.01 40.23
PFFC Peoples Fin. Corp. of OH 26.42 88.72 24.13 88.72 26.42 0.50 3.57 NM
PHBK Peoples Heritage Fin Grp of ME* 16.98 259.56 19.34 304.21 16.98 0.84 1.97 33.47
PSFC Peoples Sidney Fin. Corp of OH NM 118.39 29.94 118.39 NM 0.28 1.62 50.00
PERM Permanent Bancorp of IN 20.33 131.32 12.43 133.09 20.50 0.40 1.56 31.75
PMFI Perpetual Midwest Fin. of IA NM 148.03 12.59 148.03 NM 0.30 1.11 35.71
PERT Perpetual of SC, MHC (46.8)(8) NM 253.35 29.96 253.35 NM 1.40 2.75 NM
PCBC Perry Co. Fin. Corp. of MO 25.83 123.67 23.74 123.67 22.36 0.40 1.72 44.44
PHFC Pittsburgh Home Fin. of PA 20.49 141.42 14.91 142.89 22.99 0.24 1.16 23.76
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 23.29 228.80 14.47 228.80 23.61 0.90 2.65 61.64
PTRS Potters Financial Corp of OH 14.17 151.58 13.35 151.58 14.47 0.40 1.18 16.67
PKPS Poughkeepsie Fin. Corp. of NY(8) 26.86 168.19 14.16 168.19 26.86 0.20 2.01 54.05
PHSB Ppls Home SB, MHC of PA (45.0) NM 182.19 24.90 182.19 NM 0.00 0.00 0.00
PRBC Prestige Bancorp of PA 21.66 109.06 12.22 109.06 21.66 0.12 0.65 14.12
PFNC Progress Financial Corp. of PA 17.22 266.78 14.23 299.23 21.83 0.12 0.77 13.33
PSBK Progressive Bank, Inc. of NY* 15.34 167.24 14.60 185.75 15.63 0.68 2.01 30.91
PROV Provident Fin. Holdings of CA 21.28 113.25 15.10 113.25 NM 0.00 0.00 0.00
PULB Pulaski SB, MHC of MO (29.8) NM 271.59 35.44 271.59 NM 1.10 3.61 NM
PLSK Pulaski SB, MHC of NJ (46.0) NM 180.98 21.68 180.98 NM 0.30 1.60 55.56
PULS Pulse Bancorp of S. River NJ 13.32 174.75 14.35 174.75 13.17 0.70 2.86 38.04
QCFB QCF Bancorp of Virginia MN 19.52 143.65 25.13 143.65 19.52 0.00 0.00 0.00
QCBC Quaker City Bancorp of CA 17.08 133.72 11.31 133.72 17.83 0.00 0.00 0.00
QCSB Queens County Bancorp of NY* 24.31 305.94 34.31 305.94 24.14 0.80 2.29 55.56
RARB Raritan Bancorp. of Raritan NJ* 16.72 215.42 15.87 218.88 16.93 0.48 1.76 29.45
REDF RedFed Bancorp of Redlands CA 15.63 178.41 14.84 179.05 15.63 0.00 0.00 0.00
RELY Reliance Bancorp, Inc. of NY 16.90 171.70 14.18 233.73 16.00 0.64 1.93 32.65
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of November 28, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- ------------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
RELI Reliance Bancshares Inc of WI* 48.29 48.29 1.32 2.58 2.82 1.38 2.68 NA NA 0.56
RIVR River Valley Bancorp of IN 12.40 12.21 0.46 4.24 2.45 0.62 5.72 0.71 122.47 1.05
RVSB Riverview Bancorp of WA 20.76 19.97 1.22 9.14 3.13 1.17 8.75 0.14 226.93 0.58
RSLN Roslyn Bancorp, Inc. of NY* 17.64 17.55 0.96 5.10 3.36 1.22 6.50 0.27 257.00 2.60
SCCB S. Carolina Comm. Bnshrs of SC 26.59 26.59 1.15 4.34 3.26 1.15 4.34 0.87 73.62 0.81
SBFL SB Fngr Lakes MHC of NY (33.1) 9.33 9.33 0.37 3.83 1.50 0.43 4.44 0.50 103.35 1.10
SFED SFS Bancorp of Schenectady NY 12.47 12.47 0.68 5.36 4.25 0.68 5.36 0.75 57.32 0.58
SGVB SGV Bancorp of W. Covina CA 7.44 7.32 0.39 5.02 3.80 0.43 5.48 1.06 29.26 0.41
SHSB SHS Bancorp, Inc. of PA 12.64 12.64 0.37 2.96 2.56 0.37 2.96 1.43 33.94 0.74
SISB SIS Bancorp Inc of MA* 7.36 7.36 0.83 11.20 6.10 0.82 11.09 0.33 379.00 2.67
SWCB Sandwich Co-Op. Bank of MA* 7.93 7.63 0.97 11.95 5.84 0.95 11.70 0.82 93.38 1.06
SFSL Security First Corp. of OH 9.27 9.12 1.36 14.56 5.85 1.37 14.69 0.33 226.25 0.84
SFNB Security First Netwrk Bk of GA(8) 33.11 32.57 -29.36 NM NM -30.07 NM NA NA 1.28
SMFC Sho-Me Fin. Corp. of MO(8) 9.03 9.03 1.30 13.56 5.77 1.23 12.86 0.29 190.55 0.63
SOBI Sobieski Bancorp of S. Bend IN 14.78 14.78 0.62 3.85 3.26 0.57 3.55 0.13 188.68 0.31
SOSA Somerset Savings Bank of MA(8)* 6.59 6.59 1.03 17.02 6.57 1.00 16.49 5.91 24.16 1.87
SSFC South Street Fin. Corp. of NC* 25.66 25.66 1.21 5.34 3.60 1.25 5.51 0.31 57.66 0.38
SCBS Southern Commun. Bncshrs of AL 21.33 21.33 0.55 3.24 1.81 0.90 5.30 2.48 46.17 1.94
SMBC Southern Missouri Bncrp of MO 16.15 16.15 0.94 5.84 4.95 0.90 5.59 0.88 51.46 0.66
SWBI Southwest Bancshares of IL 11.34 11.34 1.06 9.81 5.88 1.02 9.48 0.20 101.05 0.28
SVRN Sovereign Bancorp of PA 4.42 3.61 0.42 10.16 2.69 0.61 14.74 0.65 99.50 0.92
STFR St. Francis Cap. Corp. of WI 7.88 6.96 0.64 7.33 4.68 0.70 8.07 NA NA 0.83
SPBC St. Paul Bancorp, Inc. of IL 8.99 8.97 1.06 12.12 5.67 1.06 12.12 0.36 210.72 1.10
SFFC StateFed Financial Corp. of IA 17.54 17.54 1.27 7.17 5.11 1.27 7.17 2.55 10.16 0.33
SFIN Statewide Fin. Corp. of NJ 9.36 9.34 0.81 8.36 5.53 0.81 8.36 0.38 104.03 0.84
STSA Sterling Financial Corp. of WA 5.25 4.81 0.48 11.12 4.92 0.43 10.05 0.47 96.70 0.82
SFSB SuburbFed Fin. Corp. of IL 6.48 6.46 0.39 5.88 3.53 0.56 8.56 NA NA 0.30
ROSE T R Financial Corp. of NY* 6.24 6.24 0.97 15.55 5.72 0.87 13.98 0.54 74.97 0.76
THRD TF Financial Corp. of PA 11.63 10.27 0.77 6.96 4.36 0.67 5.99 0.27 128.49 0.82
TPNZ Tappan Zee Fin., Inc. of NY 17.92 17.92 0.70 4.22 2.68 0.65 3.90 1.68 32.52 1.17
ESBK The Elmira SB FSB of Elmira NY* 6.35 6.19 0.42 6.66 4.47 0.34 5.37 0.64 103.23 0.86
TRIC Tri-County Bancorp of WY 15.31 15.31 1.06 6.84 5.64 1.08 6.97 NA NA 1.05
TWIN Twin City Bancorp of TN 12.94 12.94 0.85 6.65 5.21 0.72 5.62 0.16 88.17 0.20
UFRM United FS&LA of Rocky Mount NC 7.34 7.34 0.71 9.49 5.48 0.57 7.53 0.77 101.45 0.92
UBMT United Fin. Corp. of MT 24.01 24.01 1.41 6.09 4.52 1.40 6.04 0.48 15.21 0.22
VABF Va. Beach Fed. Fin. Corp of VA 7.15 7.15 0.61 8.99 4.51 0.50 7.31 1.24 59.40 0.95
VFFC Virginia First Savings of VA(8) 7.75 7.48 0.64 8.04 3.49 0.55 6.95 2.47 46.61 1.27
WHGB WHG Bancshares of MD 20.65 20.65 0.51 2.23 2.09 0.51 2.23 0.15 160.96 0.29
WSFS WSFS Financial Corp. of DE* 5.54 5.51 1.14 20.70 6.68 1.13 20.54 1.27 134.95 2.68
WVFC WVS Financial Corp. of PA* 12.00 12.00 1.30 10.59 6.60 1.31 10.64 0.19 361.83 1.21
WRNB Warren Bancorp of Peabody MA* 10.65 10.65 2.16 21.61 9.89 1.91 19.17 1.15 97.04 1.73
WFSL Washington FS&LA of Seattle WA 12.55 11.52 1.86 15.80 6.87 1.85 15.73 0.69 62.10 0.58
WAMU Washington Mutual Inc. of WA(8)* 5.29 4.90 0.00 0.09 0.01 0.70 13.63 NA NA 0.98
WYNE Wayne Bancorp of NJ 12.43 12.43 0.86 6.10 4.70 0.86 6.10 0.89 88.41 1.18
WAYN Wayne S&L Co. MHC of OH (47.8) 9.53 9.53 0.73 7.89 2.61 0.68 7.40 0.58 65.29 0.46
WCFB Wbstr Cty FSB MHC of IA (45.2) 23.38 23.38 1.43 6.14 3.16 1.43 6.14 0.07 560.00 0.72
WBST Webster Financial Corp. of CT 5.34 4.60 0.46 9.03 2.86 0.77 15.08 0.72 111.52 1.43
WEFC Wells Fin. Corp. of Wells MN 14.22 14.22 1.06 7.49 6.14 1.03 7.29 0.31 114.71 0.39
WCBI WestCo Bancorp of IL 15.54 15.54 1.50 9.72 6.84 1.42 9.20 0.21 139.06 0.37
WSTR WesterFed Fin. Corp. of MT 10.62 8.57 0.81 6.87 4.92 0.77 6.58 0.41 116.74 0.72
WOFC Western Ohio Fin. Corp. of OH 13.79 12.85 0.33 2.26 2.02 0.45 3.08 NA NA 0.66
WWFC Westwood Fin. Corp. of NJ(8) 9.32 8.34 0.73 7.79 4.34 0.78 8.31 0.13 158.78 0.58
WEHO Westwood Hmstd Fin Corp of OH 27.65 27.65 1.01 3.29 2.69 1.16 3.78 0.22 77.88 0.22
WFI Winton Financial Corp. of OH 7.11 6.96 1.00 14.08 8.00 0.84 11.80 0.30 84.06 0.29
FFWD Wood Bancorp of OH 12.43 12.43 1.41 11.10 5.78 1.29 10.17 0.35 101.19 0.44
YFCB Yonkers Fin. Corp. of NY 14.02 14.02 1.05 6.64 5.30 1.06 6.71 0.48 72.05 0.78
</TABLE>
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- -------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------ ------- ------ -------- ------- ------- ---------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
RELI Reliance Bancshares Inc of WI* NM 96.62 46.66 96.62 NM 0.00 0.00 0.00
RIVR River Valley Bancorp of IN NM 128.16 15.89 130.12 NM 0.16 0.85 34.78
RVSB Riverview Bancorp of WA NM 156.90 32.57 163.04 NM 0.00 0.00 0.00
RSLN Roslyn Bancorp, Inc. of NY* 29.79 154.91 27.32 155.69 23.39 0.28 1.29 38.36
SCCB S. Carolina Comm. Bnshrs of SC NM 132.56 35.24 132.56 NM 0.60 2.61 NM
SBFL SB Fngr Lakes MHC of NY (33.1) NM 245.39 22.90 245.39 NM 0.40 1.37 NM
SFED SFS Bancorp of Schenectady NY 23.53 125.40 15.64 125.40 23.53 0.28 1.27 29.79
SGVB SGV Bancorp of W. Covina CA 26.34 131.79 9.80 133.85 24.11 0.00 0.00 0.00
SHSB SHS Bancorp, Inc. of PA NM 115.69 14.62 115.69 NM 0.00 0.00 0.00
SISB SIS Bancorp Inc of MA* 16.40 175.47 12.91 175.47 16.56 0.56 1.67 27.32
SWCB Sandwich Co-Op. Bank of MA* 17.11 197.31 15.66 205.26 17.47 1.40 3.35 57.38
SFSL Security First Corp. of OH 17.11 234.66 21.74 238.39 16.96 0.32 1.64 28.07
SFNB Security First Netwrk Bk of GA(8) NM 264.90 87.72 269.36 NM 0.00 0.00 NM
SMFC Sho-Me Fin. Corp. of MO(8) 17.34 226.29 20.43 226.29 18.29 0.00 0.00 0.00
SOBI Sobieski Bancorp of S. Bend IN NM 122.70 18.13 122.70 NM 0.32 1.63 50.00
SOSA Somerset Savings Bank of MA(8)* 15.22 236.41 15.58 236.41 15.71 0.00 0.00 0.00
SSFC South Street Fin. Corp. of NC* 27.78 127.46 32.71 127.46 26.92 0.40 2.29 63.49
SCBS Southern Commun. Bncshrs of AL NM 137.80 29.39 137.80 NM 0.30 1.65 NM
SMBC Southern Missouri Bncrp of MO 20.21 116.14 18.76 116.14 21.11 0.50 2.63 53.19
SWBI Southwest Bancshares of IL 17.00 159.28 18.07 159.28 17.59 0.80 3.14 53.33
SVRN Sovereign Bancorp of PA NM 261.96 11.58 320.47 25.59 0.08 0.42 15.69
STFR St. Francis Cap. Corp. of WI 21.37 154.48 12.18 174.82 19.42 0.56 1.46 31.28
SPBC St. Paul Bancorp, Inc. of IL 17.63 204.51 18.39 205.02 17.63 0.40 1.63 28.78
SFFC StateFed Financial Corp. of IA 19.57 136.92 24.01 136.92 19.57 0.20 1.48 28.99
SFIN Statewide Fin. Corp. of NJ 18.07 149.93 14.04 150.24 18.07 0.44 2.05 36.97
STSA Sterling Financial Corp. of WA 20.31 162.71 8.54 177.78 22.47 0.00 0.00 0.00
SFSB SuburbFed Fin. Corp. of IL 28.35 159.22 10.32 159.81 19.48 0.32 0.92 26.02
ROSE T R Financial Corp. of NY* 17.48 251.11 15.66 251.11 19.45 0.64 1.95 34.04
THRD TF Financial Corp. of PA 22.95 157.39 18.30 178.23 26.67 0.40 1.43 32.79
TPNZ Tappan Zee Fin., Inc. of NY NM 137.63 24.67 137.63 NM 0.28 1.42 52.83
ESBK The Elmira SB FSB of Elmira NY* 22.39 146.06 9.28 150.00 27.78 0.64 2.13 47.76
TRIC Tri-County Bancorp of WY 17.74 118.94 18.21 118.94 17.41 0.80 2.91 51.61
TWIN Twin City Bancorp of TN 19.18 125.18 16.20 125.18 22.70 0.40 2.94 56.34
UFRM United FS&LA of Rocky Mount NC 18.25 168.62 12.37 168.62 23.00 0.24 2.09 38.10
UBMT United Fin. Corp. of MT 22.13 133.40 32.03 133.40 22.31 1.00 3.70 NM
VABF Va. Beach Fed. Fin. Corp of VA 22.16 191.03 13.67 191.03 27.25 0.20 1.20 26.67
VFFC Virginia First Savings of VA(8) 28.69 220.72 17.10 228.51 NM 0.10 0.40 11.36
WHGB WHG Bancshares of MD NM 114.76 23.70 114.76 NM 0.32 1.97 NM
WSFS WSFS Financial Corp. of DE* 14.98 294.59 16.32 296.37 15.09 0.00 0.00 0.00
WVFC WVS Financial Corp. of PA* 15.14 162.54 19.51 162.54 15.07 1.20 3.81 57.69
WRNB Warren Bancorp of Peabody MA* 10.11 201.96 21.51 201.96 11.39 0.52 2.52 25.49
WFSL Washington FS&LA of Seattle WA 14.57 213.04 26.74 232.08 14.63 0.92 2.86 41.63
WAMU Washington Mutual Inc. of WA(8)* NM NM 18.59 NM NM 1.12 1.62 NM
WYNE Wayne Bancorp of NJ 21.26 137.96 17.14 137.96 21.26 0.20 0.88 18.69
WAYN Wayne S&L Co. MHC of OH (47.8) NM 293.01 27.94 293.01 NM 0.62 2.00 NM
WCFB Wbstr Cty FSB MHC of IA (45.2) NM 192.49 45.01 192.49 NM 0.80 3.95 NM
WBST Webster Financial Corp. of CT NM 233.63 12.47 271.26 20.96 0.80 1.28 44.69
WEFC Wells Fin. Corp. of Wells MN 16.28 119.45 16.98 119.45 16.75 0.48 2.70 44.04
WCBI WestCo Bancorp of IL 14.63 141.68 22.01 141.68 15.45 0.60 2.18 31.91
WSTR WesterFed Fin. Corp. of MT 20.31 123.80 13.15 153.49 21.23 0.46 1.95 39.66
WOFC Western Ohio Fin. Corp. of OH NM 110.94 15.30 119.05 NM 1.00 3.88 NM
WWFC Westwood Fin. Corp. of NJ(8) 23.02 173.17 16.13 193.55 21.58 0.20 0.72 16.67
WEHO Westwood Hmstd Fin Corp of OH NM 123.24 34.07 123.24 NM 0.28 1.60 59.57
WFI Winton Financial Corp. of OH 12.50 176.06 12.51 179.86 14.93 0.46 2.30 28.75
FFWD Wood Bancorp of OH 17.29 189.36 23.54 189.36 18.88 0.40 2.16 37.38
YFCB Yonkers Fin. Corp. of NY 18.88 127.41 17.86 127.41 18.69 0.24 1.30 24.49
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of November 28, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------- ------- ------- ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
YFED York Financial Corp. of PA 8.85 8.85 0.96 11.41 4.75 0.81 9.60 2.50 23.98 0.69
</TABLE>
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------ ------ ------ -------- ------- ------- ---------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
YFED York Financial Corp. of PA 21.03 228.06 20.19 228.06 25.00 0.48 1.81 38.10
</TABLE>
<PAGE>
Exhibit IV-2
Historical Stock Price Indices(1)
<TABLE>
<CAPTION>
SNL SNL
NASDAQ Thrift Bank
Year/Qtr. Ended DJIA S&P 500 Composite Index Index
---------------- ------ ------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
1991: Quarter 1 2881.1 375.2 482.3 125.5 66.0
Quarter 2 2957.7 371.2 475.9 130.5 82.0
Quarter 3 3018.2 387.9 526.9 141.8 90.7
Quarter 4 3168.0 417.1 586.3 144.7 103.1
1992: Quarter 1 3235.5 403.7 603.8 157.0 113.3
Quarter 2 3318.5 408.1 563.6 173.3 119.7
Quarter 3 3271.7 417.8 583.3 167.0 117.1
Quarter 4 3301.1 435.7 677.0 201.1 136.7
1993: Quarter 1 3435.1 451.7 690.1 228.2 151.4
Quarter 2 3516.1 450.5 704.0 219.8 147.0
Quarter 3 3555.1 458.9 762.8 258.4 154.3
Quarter 4 3754.1 466.5 776.8 252.5 146.2
1994: Quarter 1 3625.1 445.8 743.5 241.6 143.1
Quarter 2 3625.0 444.3 706.0 269.6 152.6
Quarter 3 3843.2 462.6 764.3 279.7 149.2
Quarter 4 3834.4 459.3 752.0 244.7 137.6
1995: Quarter 1 4157.7 500.7 817.2 278.4 152.1
Quarter 2 4556.1 544.8 933.5 313.5 171.7
Quarter 3 4789.1 584.4 1,043.5 362.3 195.3
Quarter 4 5117.1 615.9 1,052.1 376.5 207.6
1996: Quarter 1 5587.1 645.5 1,101.4 382.1 225.1
Quarter 2 5654.6 670.6 1,185.0 387.2 224.7
Quarter 3 5882.2 687.3 1,226.9 429.3 249.2
Quarter 4 6442.5 737.0 1,280.7 483.6 280.1
1997: Quarter 1 6583.5 757.1 1,221.7 527.7 292.5
Quarter 2 7672.8 885.1 1,442.1 624.5 333.3
Quarter 3 7945.3 947.3 1,685.7 737.5 381.7
November 28, 1997 7823.1 955.4 1,600.6 767.4 391.3
</TABLE>
(1) End of period data.
Sources: SNL Securities; Wall Street Journal.
<PAGE>
EXHIBIT IV-3
Heritage Federal Savings and Loan Association
Historical Thrift Stock Indices
INDEX VALUES
<TABLE>
<CAPTION>
INDEX VALUES PERCENT CHANGE SINCE
----------------------------------- -------------------------
10/31/97 1 MONTH YTD LTM 1 MONTH YTD LTM
-------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
All Pub. Traded Thrifts 752.4 737.5 483.6 456.7 2.03 55.58 64.74
MHC Index 1,065.7 978.2 538.0 476.5 8.94 98.08 123.67
INSURANCE INDICES
- ---------------------------- -------- ------- ------- ------- ------- ------- -------
SAIF Thrifts 689.6 669.5 439.2 414.5 3.00 57.00 66.37
BIF Thrifts 949.6 945.9 616.8 583.5 0.40 53.96 62.74
STOCK EXCHANGE INDICES
- ---------------------------- -------- ------- ------- ------- ------- ------- -------
AMEX Thrifts 225.8 214.9 156.2 148.5 5.09 44.56 52.05
NYSE Thrifts 464.0 442.7 277.3 265.9 4.82 67.36 74.55
OTC Thrifts 855.8 847.4 569.7 533.0 0.99 50.21 60.55
GEOGRAPHIC INDICES
- ---------------------------- -------- ------- ------- ------- ------- ------- -------
Mid-Atlantic Thrifts 1,533.7 1,466.1 970.7 911.9 4.62 58.01 68.20
Midwestern Thrifts 1,645.0 1,595.0 1,159.3 1,085.4 3.13 41.89 51.56
New England Thrifts 684.3 671.4 428.9 386.6 1.93 59.55 77.02
Southeastern Thrifts 718.1 670.2 447.2 433.9 7.15 60.57 65.50
Southwestern Thrifts 455.4 478.8 315.9 298.2 (4.89) 44.18 52.71
Western Thrifts 759.8 761.3 474.7 455.0 (0.19) 60.06 66.97
ASSET SIZE INDICES
- ---------------------------- -------- ------- ------- ------- ------- ------- -------
Less than $250M 795.7 801.0 586.6 570.6 (0.66) 35.65 39.46
$250M to $500M 1,188.6 1,152.4 789.8 738.1 3.14 50.49 61.02
$500M to $1B 763.2 760.9 521.8 489.0 0.31 46.27 56.06
$1B to $5B 867.3 826.0 546.0 508.9 5.01 58.84 70.44
Over $5B 480.8 475.1 305.8 290.3 1.21 57.23 65.60
COMPARATIVE INDICES
- ---------------------------- -------- ------- ------- ------- ------- ------- -------
Dow Jones Industrials 7,442.1 7,945.3 6,448.3 6,029.4 (6.33) 15.41 23.43
S&P 500 914.6 947.3 740.7 705.3 (3.45) 23.47 29.68
</TABLE>
All SNL indices are market-value weighted; i.e., an institution's effect on an
index is proportionate to that institution's market capitalization. All SNL
thrift indices, except for the SNL MHC index, began at 100 on March 30, 1984.
The SNL MHC Index began at 201.082 on Dec. 31, 1992, the level of the SNL Thrift
Index on that date. On March 30, 1984, the S&P 500 closed at 159.2 and the Dow
Jones Industrials stood at 1164.9.
Mid-Atlantic: DE, DC, MD, NJ, NY, PA, PR; Midwest: IA, IL, IN, KS, KY, MI, MN,
MO, ND, NE, OH, SD, WI;
New England: CT, MA, ME, NH, RI, VT; Southeast: AL, AR, FL, GA, MS, NC, SC, TN,
VA, WV;
Southwest: CO, LA, NM, OK, TX, UT, West: AZ, AK, CA, HI, ID, MT, NV, OR, WA, WY
<PAGE>
Exhibit IV-4
South Carolina Thrift Merger and Acquisition Activity 1996 - Present
<TABLE>
<CAPTION>
Seller Financials at Completion (1)
----------------------------------------------
Total TgEq/ YTD YTD NPAs/ Rsrvs/
Ann'd Comp Assets Assets ROAA ROAE Assets NPLs
Date Date Buyer ST Seller ST ($000) (%) (%) (%) (%) (%)
- -------- -------- -------------------- ---- -------------------- ---- --------- ----- ---- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
09/23/97 Pending Regions Financial AL Palfed, Inc SC 664,863 8.24 0.85 10.54 2.12 90.96
07/01/97 Pending Carolina First Corp SC First SE Fin'l Corp SC 334,751 10.23 0.56 5.55 0.11 476.73
06/25/97 11/10/97 First Fin'l Holdings SC Investors Savings Bk SC 62,021 10.87 1.02 9.10 0.02 NA
02/18/97 08/01/97 CCB Financial Corp NC American Federal Bnk SC 1,394,874 7.22 0.96 12.01 0.51 159.95
01/29/97 07/21/97 Carolina First Corp SC Lowcountry SB SC 75,361 7.97 0.26 3.76 0.56 86.59
-------------------- ---- --------- ----- ---- ----- ---- ------
AVERAGE 506,374 8.91 0.73 8.19 0.66 203.56
MEDIAN 334,751 8.24 0.85 9.10 0.51 125.46
-------------------- ---- --------- ----- ---- ----- ---- ------
</TABLE>
<TABLE>
<CAPTION>
Deal Terms and Pricing at Completion (1)
-----------------------------------------------------------
Deal Deal Deal Deal Pr/ Deal Pr/ Deal Pr/ TgBkPr/
Ann'd Comp Value Pr/Sh Consid Pr/Bk Tg Bk 4-Qtr Assets CoreDp
Date Date Buyer ST Seller ST ($M) ($) Type (%) (%) EPS (x) (%) (%)
- -------- -------- -------------------- ---- -------------------- ---- ----- ----- ----- ------ ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
09/23/97 Pending Regions Financial AL Palfed, Inc SC 150.5 27.39 Stock 264.11 264.11 22.64 18.54
07/01/97 Pending Carolina First Corp SC First SE Fin'l Corp SC 64.7 14.75 Stock 189.10 189.10 19.33 11.95
06/25/97 11/10/97 First Fin'l Holdings SC Investors Savings Bk SC 15.4 55.42 Stock 216.75 216.75 26.55 24.01 20.08
02/18/97 08/01/97 CCB Financial Corp NC American Federal Bnk SC 419.3 37.05 Stock 348.18 373.45 28.07 32.08 33.68
01/29/97 07/21/97 Carolina First Corp SC Lowcountry SB SC 13.5 Mix 216.10 216.10 40.30 17.38 12.60
-------------------- ---- ----- ----- ----- ------ ------- -------- ------- -------
AVERAGE 132.7 33.65 246.85 251.90 31.64 23.09 19.37
MEDIAN 64.7 32.22 216.75 216.75 28.07 22.64 18.54
-------------------- ---- ----- ----- ----- ------ ------- -------- ------- -------
</TABLE>
(1) Pending deals reflect financials, terms and pricing as of announcement date
Source: SNL Securities, LC.
<PAGE>
EXHIBIT IV-5
Heritage Federal Savings and Loan Association
Directors and Management Summary Resumes
J. Edward Wells is the President and Chief Executive Officer of the
Association, positions he has held since 1972. Mr. Wells joined the Association
in 1967.
Aaron H. King retired as Senior Vice President and Branch Manager of the
Association in 1996 after 34 years with the Association.
J. Riley Railes is the retired owner of a retail clothing store in Laurens,
South Carolina.
John H. Lake is a retired dentist.
G. Edwin Owings is the retired owner of Laurens Lumber Co. in Laurens,
South Carolina.
Edwin I. Shealy is the Chief Financial Officer and Treasurer of the
Association, positions he has held since 1990.
John M. Swofford is a Vice President of the Association and manager of the
Association's Laurens branch, positions he has held since 1988. From 1976 to
1988, Mr. Swofford served as the manager of the Association's Simpsonville
branch.
James H. Wasson, Jr. is Secretary and Vice President of the Association
responsible for mortgage lending, positions he has held since 1977. Mr. Wasson
has been employed by the Association since 1968.
Will B. Ferguson is a Vice President of the Association, a position he has
held since 1995. Mr. Ferguson has been employed by the Association since 1984.
<PAGE>
EXHIBIT IV-6
Heritage Federal Savings and Loan Assoeiation
Pro Forma Regulatory Capital Ratios
<TABLE>
<CAPTION>
PRO FORMA AT SEPTEMBER 30, 1997
--------------------------------------------------------------------------------------
15%
above
Minimum of Midpoint of Maximum of Maximum of
Estimated Estimated Estimated Estimated
Valuation Valuation Valuation Valuation
Range Range Range Range
-------------------- -------------------- -------------------- --------------------
2,975,000 Shares 3,500,000 Shares 4,025,000 Shares 4,628,750 Shares
September 30, 1997 at $15.00 Per Share at $15.00 Per Share at $15.00 Per Share at $15.00 Per Share
------------------- -------------------- -------------------- -------------------- --------------------
Percent Percent Percent Percent Percent
of of of of of
Adjusted Adjusted Adjusted Adjusted Adjusted
Total Total Total Total Total
Amount Assets (1) Amount Assets (1) Amount Assets (1) Amount Assets (1) Amount Assets (1)
------- ---------- ------- ---------- ------- ---------- ------- ---------- ------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GAAP capital(2)........ $29,235 11.9% $45,643 17.2% $48,581 18.0% $51,520 18.9% $54,959 19.8%
Tangible capital(2).... $27,769 11.3% $44,177 16.6% $47,115 17.5% $50,054 18.3% $53,493 19.3%
Tangible capital
requirement.......... 3,690 1.5 3,990 1.5 4,044 1.5 4,097 1.5 4,160 1.5
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
Excess................. $24,079 9.8% $40,187 15.1% $43,072 16.0% $45,957 16.8% $49,333 17.8%
======= ==== ======= ==== ======= ==== ======= ==== ======= ====
Core capital(2)........ $27,769 11.3% $44,177 16.6% $47,115 17.5% $50,054 18.3% $53,493 19.3%
Core capital
requirement(3)...... 7,381 3.0 7,980 3.0 8,087 3.0 8,194 3.0 8,319 3.0
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
Excess................. $20,388 8.3% $36,197 13.6% $39,028 14.5% $41,860 15.3% $45,174 16.3%
======= ==== ======= ==== ======= ==== ======= ==== ======= ====
Total capital(4)....... $28,519 23.3% $44,927 35.5% $47,865 37.6% $50,804 39.7% $54,243 42.1%
Risk-based capital
requirement......... 9,796 8.0 10,116 8.0 10,173 8.0 10,230 8.0 10,296 8.0
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
Excess................. $18,723 15.3% $34,811 27.5% $37,693 30.6% $40,574 31.7% $43,946 34.1%
======= ==== ======= ==== ======= ==== ======= ==== ======= ====
</TABLE>
- --------------------
(1) Based upon total adjusted assets of $246.0 million at September 30, 1997
and $267.8 million, $271.7 million, $275.6 million and $280.1 million at
the minimum, midpoint, maximum, and maximum, as adjusted, of the
Estimated Valuation Range, respectively, for purposes of the tangible
and core capital requirements, and upon risk-weighted assets of $122.4
million at September 30, 1997 and $126.8 million, $127.6 million
$128.4 million and $129.3 million at the minimum, midpoint, maximum, and
maximum, as adjusted, of the Estimated Valuation Range, respectively,
for purposes of the risk-based capital requirement.
(2) An unrealized loss on securities available-for-sale, net of taxes,
accounts for the difference between GAAP capital and each of tangible
capital and core capital.
(3) The current OTS core capital requirement for savings associations is 3%
of total adjusted assets. The OTS has proposcd core capital requirements
which would require a core capital ratio of 3% of total adjusted assets
for thrifts that receive the highest supervisory rating for safety and
soundness and a core capital ratio of 4% to 5% for all other thrifts.
(5) Percentage represents total core and supplementary capital divided by
total risk-weighted assets. Assumes net proceeds are invested in assets
that carry a 20% risk-weighting.
<PAGE>
EXHIBIT IV-7
Heritage Federal Savings and Loan Association
Pro Forma Analysis Sheet
<PAGE>
RP Financial, LC.
---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-7
PRO FORMA ANALYSIS SHEET -- PAGE 1
Heritage FS&LA of Laurens SC
Prices as of November 28, 1997
<TABLE>
<CAPTION>
Comparable All SC All SAIF
Companies Companies Companies
-------------- -------------- ---------------
Price Multiple: Symbol Subject(1) Mean Median Mean Median Mean Median
-------------- ------ --------- ------ ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Price-earnings ratio = P/E 16.77x 20.86x 19.29x 22.61x 19.42x 19.16x 18.91x
Price-core earnings = P/CORE 16.77x 19.75x 19.83x 23.75x 21.30x 19.93x 19.50x
Price-book ratio = P/B 70.73% 140.57% 136.78% 213.31% 197.35% 155.97% 150.17%
Price-tng book ratio = P/TB 70.73% 140.58% 136.86% 213.31% 197.35% 161.26% 151.58%
Price-assets ratio = P/A 17.95% 25.92% 25.85% 26.84% 28.04% 19.07% 17.55%
<CAPTION>
Valuation Parameters
--------------------
<S> <C> <C> <C>
Pre-Conv Earnings (Y) $ 1,952,000 Est ESOP Borrowings (E) $ 4,200,000
Pre-Conv Book Value (B) $ 29,235,000 Cost of ESOP Borrowings (S) 0.00% (4)
Pre-Conv Assets (A) $247,499,000 Amort of ESOP Borrowings (T) 15 Years
Reinvestment Rate(2) (R) 3.61% MRP Amount (M) $ 2,100,000
Est Conversion Exp(3) (X) 1,207,000 MRP Expense (N) $ 420,000
Proceeds Not Reinvested (Z) $ 6,300,000
<CAPTION>
Calculation of Pro Forma Value After Conversion
-----------------------------------------------
1. V = P/E (Y-R(X+Z)-ES-(1-TAX)E/T-(1-TAX)N))
------------------------------------- V = $ 52,487,997
1-(P/E)R
2. V = P/B (B-X-E-M)
------------- V = $ 52,505,003
1-P/B
3. V = P/A (A-X-M-E)
------------ V = $ 52,502,820
1-P/A
<CAPTION>
Total Price Total
Conclusion Shares Per Share Value
---------- ---------- --------- ------------
<S> <C> <C> <C>
Appraised Value 3,500,000 $15.00 $ 52,500,000
RANGE:
-----
- Minimum 2,975,000 $15.00 $ 44,625,000
- Maximum 4,025,000 $15.00 $ 60,375,000
- Superrange 4,628,750 $15.00 $ 69,431,250
</TABLE>
(1) Pricing ratios shown reflect the midpoint appraised value.
(2) Net return assumes a reinvestment rate of 5.68 percent, and a tax
rate of 36.50 percent.
(3) Conversion expenses reflect estimated expenses as presented in
offering document.
(4) Assumes a borrowings cost of 0.00 percent and a tax rate of 36.50
percent.
<PAGE>
RP Financial, Inc.
---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-7
PRO FORMA ANALYSIS SHEET -- PAGE 2
Heritage FS&LA of Laurens SC
Prices as of November 28, 1997
<TABLE>
<CAPTION>
Mean Pricing Median Pricing
----------------- -----------------
Valuation Approach Subject Peers (Disc) Peers (Disc)
------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
P/E Price-earnings 16.77x 20.86x (19.61)x 19.29x (13.06)x
P/CORE Price-core earnings 16.77x 19.75x (15.06)x 19.83x (15.41)x
P/B Price-book 70.73% 140.57% (49.68)% 136.78% (48.29)%
P/TB Price-tang. book 70.73% 140.58% (49.69)% 136.86% (48.32)%
P/A Price-assets 17.95% 25.92% (30.75)% 25.85% (30.57)%
Average Premium (Discount) (32.96)% (31.13)%
</TABLE>
<PAGE>
EXHIBIT IV-8
Heritage Federal Savings and Loan Association
Pro Forma Effect of Conversion Proceeds
<PAGE>
RP Financial, LC.
---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Heritage FS&LA of Laurens SC
At the Minimum of the Range
<TABLE>
<CAPTION>
<S> <C> <C>
1. Conversion Proceeds
Pro-forma market value .............................. $ 44,625,000
Less: Estimated offering expenses ............... 1,098,000
-----------
Net Conversion Proceeds ............................. $ 43,527,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ............................. $ 43,527,000
Less: Held in Non-Earning Assets(5)(1) .......... 5,355,000
------------
Net Proceeds Reinvested ............................. $ 38,172,000
Estimated net incremental rate of return ............ 3.61%
------------
Earnings Increase ................................... $ 1,376,788
Less: Estimated cost of ESOP borrowings(1) ...... 0
Less: Amortization of ESOP borrowings(2) ........ 151,130
Less: MRP Expense(4) ............................ 226,695
------------
Net Earnings Increase ............................... $ 998,963
3. Pro-Forma Earnings (rounded)
<CAPTION>
Period Before Conversion After Conversion
------ ----------------- ----------------
<S> <C> <C>
12 Months ended September 30, 1997 $ 1,952,000 $ 2,950,963
12 Months ended September 30, 1997 (Core) $ 1,952,000 $ 2,950,963
4. Pro-Forma Net Worth (rounded)
<CAPTION>
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
<S> <C> <C> <C>
September 30, 1997 $ 29,235,000 $38,172,000 (3)(4) $ 67,407,000
5. Pro-Forma Net Assets (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
<S> <C> <C> <C>
September 30, 1997 $ 247,499,000 $ 38,172,000 $ 285,671,000
</TABLE>
NOTE: Shares for calculating per share amounts: 2,975,000
(1) Estimated ESOP borrowings of $ 3,570,000 with an after-tax cost of
0.00 percent, assuming a borrowing cost of 0.00 percent and a tax
rate of 36.50 percent. ESOP financed by holding company - excluded
from reinvestment and total assets.
(2) ESOP borrowings are amortized over 15 years, amortization is tax-
effected.
(3) ESOP borrowings of $ 3,570,000 are omitted from net worth.
(4) $1,785,000 purchased by the MRP with an estimated pre-tax expense
of $ 357,000 and a tax rate of 36.50 percent.
(5) Stock purchased by MRP does not generate reinvestment income.
<PAGE>
RP Financial, LC.
---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Heritage FS&LA of Laurens SC
At the Midpoint of the Range
<TABLE>
<CAPTION>
<S> <C> <C>
1. Conversion Proceeds
Pro-forma market value .............................. $ 52,500,000
Less: Estimated offering expenses ............... 1,207,000
------------
Net Conversion Proceeds ............................. $ 51,293,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ............................. $ 51,293,000
Less: Held in Non-Earning Assets(5)(1) .......... 6,300,000
------------
Net Proceeds Reinvested ............................. $ 44,993,000
Estimated net incremental rate of return ............ 3.61%
------------
Earnings Increase ................................... $ 1,622,808
Less: Estimated cost of ESOP borrowings(1) ...... 0
Less: Amortization of ESOP borrowings(2) ........ 177,800
Less: MRP Expense(4) ............................ 266,700
------------
Net Earnings Increase ............................... $ 1,178,308
3. Pro-Forma Earnings (rounded)
<CAPTION>
Period Before Conversion After Conversion
------ ----------------- ----------------
<S> <C> <C>
12 Months ended September 30, 1997 $ 1,952,000 $ 3,130,308
12 Months ended September 30, 1997 (Core) $ 1,952,000 $ 3,130,308
4. Pro-Forma Net Worth (rounded)
<CAPTION>
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
<S> <C> <C> <C>
September 30, 1997 $ 29,235,000 $ 44,993,000 (3)(4) $ 74,228,000
5. Pro-Forma Net Assets (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
<S> <C> <C> <C>
September 30, 1997 $ 247,499,000 $ 44,993,000 $ 292,492,000
</TABLE>
NOTE: Shares for calculating per share amounts: 3,500,000
(1) Estimated ESOP borrowings of $ 4,200,000 with an after-tax cost of
0.00 percent, assuming a borrowing cost of 0.00 percent and a tax
rate of 36.50 percent. ESOP financed by holding company - excluded
from reinvestment and total assets.
(2) ESOP borrowings are amortized over 15 years, amortization is tax-
effected.
(3) ESOP borrowings of $ 4,200,000 are omitted from net worth.
(4) $2,100,000 purchased by the MRP with an estimated pre-tax expense
of $ 420,000 and a tax rate of 36.50 percent.
(5) Stock purchased by MRP does not generate reinvestment income.
<PAGE>
RP Financial, LC.
---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Heritage FS&LA of Laurens SC
At the Maximum of the Range
<TABLE>
<CAPTION>
<S> <C> <C>
1. Conversion Proceeds
Pro-forma market value .............................. $ 60,375,000
Less: Estimated offering expenses ............... 1,315,000
------------
Net Conversion Proceeds ............................. $ 59,060,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ............................. $ 59,060,000
Less: Held in Non-Earning Assets(5)(1) .......... 7,245,000
------------
Net Proceeds Reinvested ............................. $ 51,815,000
Estimated net incremental rate of return ............ 3.61%
------------
Earnings Increase ................................... $ 1,868,863
Less: Estimated cost of ESOP borrowings(1) ...... 0
Less: Amortization of ESOP borrowings(2) ........ 204,470
Less: MRP Expense(4) ............................ 306,705
------------
Net Earnings Increase ............................... $ 1,357,688
<CAPTION>
3. Pro-Forma Earnings (rounded)
Period Before Conversion After Conversion
------ ----------------- ----------------
<S> <C> <C>
12 Months ended September 30, 1997 $ 1,952,000 $ 3,309,688
12 Months ended September 30, 1997 (Core) $ 1,952,000 $ 3,309,688
<CAPTION>
4. Pro-Forma Net Worth (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
<S> <C> <C> <C>
September 30, 1997 $ 29,235,000 $ 51,815,000 (3)(4) $ 81,050,000
<CAPTION>
5. Pro-Forma Net Assets (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
<S> <C> <C> <C>
September 30, 1997 $ 247,499,000 $ 51,815,000 $ 299,314,000
</TABLE>
NOTE: Shares for calculating per share amounts: 4,025,000
(1) Estimated ESOP borrowings of $ 4,830,000 with an after-tax cost of
0.00 percent, assuming a borrowing cost of 0.00 percent and a tax
rate of 36.50 percent. ESOP financed by holding company - excluded
from reinvestment and total assets.
(2) ESOP borrowings are amortized over 15 years, amortization is tax-
effected.
(3) ESOP borrowings of $ 4,830,000 are omitted from net worth.
(4) $2,415,000 purchased by the MRP with an estimated pre-tax expense
of $ 483,000 and a tax rate of 36.50 percent.
(5) Stock purchased by MRP does not generate reinvestment income.
<PAGE>
RP Financial, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Heritage FS&LA of Laurens SC
At the Superrange Maximum
<TABLE>
<CAPTION>
<S> <C> <C>
1. Conversion Proceeds
Pro-forma market value .............................. $ 69,431,250
Less: Estimated offering expenses ............... 1,320,000
------------
Net Conversion Proceeds ............................. $ 68,111,250
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ............................. $ 68,111,250
Less: Held in Non-Earning Assets(5)(1) .......... 8,331,750
------------
Net Proceeds Reinvested ............................. $ 59,779,500
Estimated net incremental rate of return ............ 3.61 %
------------
Earnings Increase ................................... $ 2,156,127
Less: Estimated cost of ESOP borrowings(1) ...... 0
Less: Amortization of ESOP borrowings(2) ........ 235,141
Less: MRP Expense(4) ............................ 352,711
------------
Net Earnings Increase ............................... $ 1,568,276
3. Pro-Forma Earnings (rounded)
<CAPTION>
Period Before Conversion After Conversion
------ ----------------- ----------------
<S> <C> <C>
12 Months ended September 30, 1997 $ 1,952,000 $ 3,520,276
12 Months ended September 30, 1997 (Core) $ 1,952,000 $ 3,520,276
<CAPTION>
4. Pro-Forma Net Worth (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
<S> <C> <C> <C>
September 30, 1997 $ 29,235,000 $ 59,779,500 (3)(4) $ 89,014,500
5. Pro-Forma Net Assets (rounded)
<CAPTION>
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
<S> <C> <C> <C>
September 30, 1997 $ 247,499,000 $ 59,779,500 $ 307,278,500
</TABLE>
NOTE: Shares for calculating per share amounts: 4,628,750
(1) Estimated ESOP borrowings of $ 5,554,500 with an after-tax cost of
0.00 percent, assuming a borrowing cost of 0.00 percent and a tax
rate of 36.50 percent. ESOP financed by holding company - excluded
from reinvestment and total assets.
(2) ESOP borrowings are amortized over 15 years, amortization is tax-
effected.
(3) ESOP borrowings of $ 5,554,500 are omitted from net worth.
(4) $2,777,250 purchased by the MRP with an estimated pre-tax expense
of $ 555,450 and a tax rate of 36.50 percent.
(5) Stock purchased by MRP does not generate reinvestment income.
<PAGE>
EXHIBIT IV-9
Heritage Federal Savings and Loan Association
Peer Group Core Earnings Analysis
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Core Earnings Analysis
Comparable Institution Analysis
For the Twelve Months Ended September 30, 1997
<TABLE>
<CAPTION>
Estimated
Net Income Less: Net Tax Effect Less: Extd Core Income Estimated
to Common Gains(Loss) @ 34% Items to Common Shares Core EPS
---------- ----------- ---------- ---------- ----------- ------ ---------
($000) ($000) ($000) ($000) ($000) ($000) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Comparable Group
- ----------------
BFSB Bedford Bancshares of VA 1,591 -16 5 0 1,580 1,142 1.38
CFTP Community Fed. Bancorp of MS 3,037 -21 7 0 3,023 4,629 0.65
CFFC Community Fin. Corp. of VA(l) 1,680 676 -230 0 2,126 1,275 1.67
FFBS FFBS Bancorp of Columbus MS 1,824 0 0 0 1,824 1,572 1.16
SOPN First SB, SSB, Moore Co. of NC 4,878 0 0 0 4,878 3,687 1.32
KSAV KS Bancorp of Kenly NC 1,242 -16 5 0 1,231 885 1.39
SCCB S. Carolina Comm. Bnshrs of SC 526 0 0 0 526 699 0.75
SSM Stone Street Bancorp of NC 1,639 0 0 0 1,639 1,898 0.86
TSH Teche Holding Company of LA(l) 2,679 1,550 -527 0 3,702 3,438 1.08
FTF Texarkana Fst. Fin. Corp of AR(l) 2,348 826 -281 0 2,893 1,790 1.62
TWIN Twin City Bancorp of TN 903 -221 75 0 757 1,272 0.60
</TABLE>
(1) Financial information is for the quarter ending June 30, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The
information provided in this table has been obtained from sources we
believe are reliable, but we cannot guarantee the accuracy or
completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT V-1
RP Financial, LC.
Firm Qualifications Statement
<PAGE>
[LETTERHEAD OF RP FINANCIAL, LC. APPEARS HERE]
FIRM QUALIFICATION STATEMENT
RP Financial provides financial and management consulting and valuation services
to the financial services industry nationwide, particularly federally-insured
financial institutions. RP Financial establishes long-term client relationships
through its wide array of services, emphasis on quality and timeliness, hands-on
involvement by our principals and senior consulting staff, and careful
structuring of strategic plans and transactions. RP Financial's staff draws from
backgrounds in consulting, regulatory agencies and investment banking, thereby
providing our clients with considerable resources.
STRATEGIC AND CAPITAL PLANNING
RP Financial's strategic and capital planning services are designed to provide
effective workable plans with quantifiable results. Through a program known as
SAFE (Strategic Alternatives Financial Evaluations), RP Financial analyzes
strategic options to enhance shareholder value or other established objectives.
Our planning services involve conducting situation analyses; establishing
mission statements, strategic goals and objectives; and identifying strategies
for enhancement of franchise value, capital management and planning, earnings
improvement and operational issues. Strategy development typically includes the
following areas: capital formation and management, asset/liability targets,
profitability, return on equity and market value of stock. Our proprietary
financial simulation model provides the basis for evaluating the financial
impact of alternative strategies and assessing the feasibility/compatibility of
such strategies with regulations and/or other guidelines.
MERGER AND ACQUISITION SERVICES
RP Financial's merger and acquisition (M&A) services include targeting
candidates and potential acquirors, assessing acquisition merit, conducting
detailed due diligence, negotiating and structuring transactions, preparing
merger business plans and financial simulations, rendering fairness opinions and
assisting in implementing post-acquisition strategies. Through our financial
simulations, comprehensive in-house data bases, valuation expertise and
regulatory knowledge, RP Financial's M&A consulting focuses on structuring
transactions to enhance shareholder returns.
VALUATION SERVICES
RP Financial's extensive valuation practice includes valuations for a variety of
purposes including mergers and acquisitions, mutual-to-stock conversions, ESOPs,
subsidiary companies, mark-to-market transactions, loan and servicing
portfolios, non-traded securities, core deposits, FAS 107 (fair market value
disclosure), FAS 122 (loan servicing rights) and FAS 123 (stock options). Our
principals and staff are highly experienced in performing valuation appraisals
which conform with regulatory guidelines and appraisal industry standards. RP
Financial is the nation's leading valuation firm for mutual-to-stock conversions
of thrift institutions.
OTHER CONSULTING SERVICES AND DATA BASES
RP Financial offers a variety of other services including branching strategies,
feasibility studies and special research studies, which are complemented by our
quantitative and computer skills. RP Financial's consulting services are aided
by its in-house data base resources for commercial banks and savings
institutions and proprietary valuation and financial simulation models.
YEAR 2000 SERVICES
RP Financial, through a relationship with a computer research and development
company with a proprietary methodology, offers Year 2000 advisory and conversion
services to financial institutions which are more cost effective and less
disruptive than most other providers of such service.
RP Financial's Key Personnel (Years of Relevant Experience)
Ronald S. Riggins, Managing Director (17)
William E. Pommerening, Managing Director (13)
Gregory E. Dunn, Senior Vice President (15)
James P. Hennessey, Senior Vice President (10)
James J. Oren, Vice President (10)
