<PAGE>
As filed with the Securities and Exchange Commission on February 4, 1998
Registration No. 333-42517
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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
(INCLUDING EXHIBITS)
SOUTHBANC SHARES, INC.
---------------------------------------------
(Exact name of registrant in its charter)
Delaware 6035 58-2361245
------------------------------ ------------------ -------------
(State or other jurisdiction of (Primary SIC No.) (I.R.S. Employer
incorporation or organization) Identification No.)
907 N. MAIN STREET
ANDERSON, SOUTH CAROLINA 29621
(864) 225-0241
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(Address and telephone number of principal executive offices and place of
business)
Paul M. Aguggia, Esquire
Victor L. Cangelosi, Esquire
BREYER & AGUGGIA
1300 I Street, N.W.
Suite 470 East
Washington, D.C. 20005
(202) 737-7900
---------------------------------------
(Name, address and telephone number 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 this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
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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 4,302,763 $20.00 $86,055,260 $26,078(3)
Participation interests 59,883 -- -- (2)
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</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 are subject to adjustment based upon the estimated pro forma market
value of the registrant and market and financial conditions.
(2) The securities of the Registrant to be purchased by the Perpetual Bank, A
Federal Savings Bank 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 paid.
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Cross Reference Sheet showing the location in the Prospectus
of the Items of Form S-1
1. Front of Registration Front of Registration Statement;
Statement and Outside Front Outside Front Cover Page
Cover of Prospectus
2. Inside Front and Outside Back Inside Front Cover Page; Outside
Cover Pages of Prospectus Back Cover Page
3. Summary Information and Risk Factors Prospectus Summary; Risk Factors
4. Use of Proceeds Use of Proceeds; Capitalization
5. Determination of Offering Price Market for Common Stock; The
Conversion and Reorganization --
Stock Pricing, Exchange Ratio and
Number of Shares to be Issued
6. Dilution *
7. Selling Security-Holders *
8. Plan of Distribution The Conversion and Reorganization
9. Legal Proceedings Business of the Savings Bank --
Legal Proceedings
10. Directors, Executive Officers, Management of the Holding Company;
Promoters and Control Persons Management of the Savings Bank
11. Security Ownership of Certain *
Beneficial Owners and Management
12. Description of Securities Description of Capital Stock of the
Holding Company
13. Interest of Named Experts and Legal and Tax Opinions; Experts
Counsel
14. Disclosure of Commission Position Part II -- Item 17
on Indemnification for Securities
Act Liabilities
15. Organization Within Last Business of the Savings Bank
Five Years
16. Description of Business Business of the Holding Company;
Business of the Savings Bank
17. Management's Discussion and Management's Discussion and
Analysis or Plan of Operation Analysis of Financial Condition and
Results of Operations
18. Description of Property Business of the Savings Bank --
Properties
<PAGE>
19. Certain Relationships and Management of the Savings Bank --
Related Transactions Transactions with the Savings Bank
20. Market Price for Common Equity Outside Front Cover Page; Market for
and Related Stockholder Matters Common Stock; Dividend Policy
21. Executive Compensation Management of the Savings Bank --
Executive Compensation; and --
Benefits
22. Financial Statements Financial Statements; Pro Forma Data
23. Changes in and Disagreements *
with Accountants on Accounting
and Financial Disclosure
- --------------------
*Item is omitted because answer is negative or item inapplicable.
<PAGE>
PROSPECTUS SUPPLEMENT
SOUTHBANC SHARES, INC.
PERPETUAL BANK, A FEDERAL SAVINGS BANK
401(K) PLAN
This Prospectus Supplement relates to the offer and sale to participants
("Participants") in the Perpetual Bank, A Federal Savings Bank 401(k) Plan
("Plan" or "401(k) Plan") of participation interests and shares of SouthBanc
Shares, Inc. common stock, par value $.01 per share ("Common Stock"), as set
forth herein.
In connection with the proposed reorganization of Perpetual Bank, A Federal
Savings Bank ("Savings Bank" or "Employer") from the mutual holding company form
of organization to a wholly owned subsidiary of a stock savings and loan holding
company, SouthBanc Shares, Inc. ("Holding Company") has been formed. The
reorganization of the Savings Bank as a wholly-owned subsidiary of the Holding
Company, the exchange of shares of Savings Bank common stock ("Savings Bank
Common Stock") by public stockholders of the Savings Bank ("Public
Stockholders") for Common Stock and the sale of Common Stock to the public
("Conversion Offerings") are herein referred to as the "Conversion and
Reorganization." Applicable provisions of the 401(k) Plan permit the investment
of the Plan assets in Common Stock 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 and Reorganization.
The Prospectus, dated _________, 1998, of the Holding Company ("Prospectus"),
which is attached to this Prospectus Supplement includes detailed information
with respect to the Conversion and Reorganization, the Conversion Offerings, the
Common Stock and the financial condition, results of operation and business of
the Savings Bank 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 WHO ELECTS TO PURCHASE COMMON STOCK IN THE CONVERSION AND
REORGANIZATION 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 AND REORGANIZATION" 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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("SEC"), THE OFFICE OF THRIFT SUPERVISION ("OTS"), THE
FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC") OR ANY OTHER FEDERAL AGENCY OR
ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC, THE OTS, THE FDIC OR ANY OTHER
AGENCY OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus Supplement is _________, 1998.
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained in the Prospectus or this Prospectus
Supplement in connection with the offering made hereby, and, if given or made,
such information and representations must not be relied upon as having been
authorized by the Holding Company, the Savings Bank or the Plan. This
Prospectus Supplement does not constitute an offer to sell or solicitation of an
offer to buy any securities in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction. Neither the
delivery of this Prospectus Supplement and the Prospectus nor any sale made
hereunder shall under any circumstances create any implication that there has
been no change in the affairs of the Savings Bank or the Plan since the date
hereof, or that the information herein contained or incorporated by reference is
correct as of any time subsequent to the date hereof. This Prospectus
Supplement should be read only in conjunction with the Prospectus that is
attached herein and should be retained for future reference.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
<S> <C>
The Offering
Securities Offered.......................................................... S-1
Election to Purchase Common Stock in the Conversion and Reorganization...... 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
Treatment of Savings Bank Common Stock Held in the Plan..................... S-2
Direction to Purchase Common Stock After the Conversion and Reorganization.. S-2
Purchase Price of Common Stock.............................................. S-3
Nature of a Participant's Interest in the Common Stock...................... S-3
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-9
Benefits Under the Plan..................................................... S-9
Withdrawals and Distributions from the Plan................................. S-9
Administration of the Plan.................................................. S-10
Reports to Plan Participants................................................ S-11
Plan Administrator.......................................................... S-11
Amendment and Termination................................................... S-11
Merger, Consolidation or Transfer........................................... S-12
Federal Income Tax Consequences............................................. S-12
Restrictions on Resale...................................................... S-15
Legal Opinions................................................................. S-15
Investment Form S-16
</TABLE>
i
<PAGE>
THE OFFERING
SECURITIES OFFERED
The securities offered hereby are participation interests in the Plan and
up to 59,883 shares, at the actual purchase price of $20.00 per share, of Common
Stock which may be acquired by the Plan for the accounts of employees
participating in the Plan. The Holding Company is the issuer of the Common
Stock. Only employees and former employees of the Savings Bank 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 Reorganization and the financial condition, results of operation
and business of the Savings Bank and the Holding Company is contained in the
attached Prospectus. The address of the principal executive office of the
Savings Bank is 907 N. Main Street, Anderson, South Carolina 29621-5526. The
Savings Bank's telephone number is (864) 225-0241.
ELECTION TO PURCHASE COMMON STOCK IN THE CONVERSION AND REORGANIZATION
In connection with the Savings Bank's Conversion and Reorganization, each
Participant in the 401(k) Plan may direct the trustees of the Plan (the
"Trustees") to transfer up to 100% of a Participant's beneficial interest in the
assets of the Plan to the Employer Stock Fund and to use such funds to purchase
Common Stock issued in connection with the Conversion and Reorganization.
Amounts transferred may include salary deferral, Employer matching and profit
sharing contributions. The Employer Stock Fund consists of investments in the
Common Stock. Funds not transferred to the Employer Stock Fund may be invested
at the Participant's discretion in the other investment options available under
the Plan. See "DESCRIPTION OF THE PLAN -- INVESTMENT OF CONTRIBUTIONS" below.
A PARTICIPANT'S ABILITY TO TRANSFER FUNDS TO THE EMPLOYER STOCK FUND IN THE
CONVERSION OFFERINGS IS SUBJECT TO THE PARTICIPANT'S GENERAL ELIGIBILITY TO
PURCHASE SHARES OF COMMON STOCK IN THE CONVERSION OFFERINGS. FOR GENERAL
INFORMATION AS TO THE ABILITY OF THE PARTICIPANTS TO PURCHASE SHARES IN THE
CONVERSION OFFERINGS, SEE "THE CONVERSION AND REORGANIZATION-- 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 a
periodic basis. This value represents the market value of past contributions to
the Plan by the Savings Bank 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
S-1
<PAGE>
Offerings, the Participant should indicate that decision in Part 2 of the
Investment Form. If a Participant does not wish to make such an election, he or
she does not need to take any action.
TIME FOR DIRECTING TRANSFER
THE DEADLINE FOR SUBMITTING A DIRECTION TO TRANSFER AMOUNTS TO THE EMPLOYER
STOCK FUND IN ORDER TO PURCHASE COMMON STOCK ISSUED IN CONNECTION WITH THE
CONVERSION OFFERINGS IS ___________, 1998. The Investment Form should be
returned to ___________ at the Savings Bank 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 Offerings
shall be irrevocable. Participants, however, will be able to direct the sale of
Common Stock, as explained below.
TREATMENT OF SAVINGS BANK COMMON STOCK HELD IN THE PLAN
Shares of Savings Bank Common Stock held in the Employer Stock Fund prior
to the consummation of the Conversion and Reorganization will treated in the
same manner as shares held by other Public Stockholders. Such shares will be
exchanged for shares of Common Stock pursuant to the Exchange Ratio.
Application of the Exchange Ratio will result in the holders of the outstanding
Savings Bank Common Stock owning, in the aggregate, approximately the same
percentage of the Common Stock to be outstanding upon the completion of the
Conversion and Reorganization as the percentage of Savings Bank Common Stock
owned by them, in the aggregate, immediately prior to the consummation of the
Conversion. FOR ADDITIONAL INFORMATION REGARDING THE TREATMENT OF SAVINGS BANK
COMMON STOCK, SEE "THE CONVERSION AND REORGANIZATION" IN THE PROSPECTUS.
DIRECTION TO PURCHASE COMMON STOCK AFTER THE CONVERSION AND REORGANIZATION
After the Conversion and Reorganization, a Participant will be able to
direct that a certain percentage of such Participant's interests in the trust
assets ("Trust") be transferred to the Employer Stock Fund and invested in
Common Stock or to the other investment funds available under the Plan.
Alternatively, a Participant may direct that a certain percentage of such
Participant's interest in the Employer Stock Fund be transferred from the
Employer Stock Fund to other investment funds available under the Plan.
Participants will be permitted to direct that future contributions made to the
Plan by or on their behalf be invested in Common Stock. Following the initial
election, the allocation of a Participant's interest in the Employer Stock Fund
may be changed by the Participant on a periodic basis in accordance with rules
established by the Employer. Special restrictions may apply to transfers
directed by those Participants who are executive officers, directors and
principal stockholders of the Holding Company who are
S-2
<PAGE>
subject to the provisions of Section 16(b) of the Securities and Exchange Act of
1934, as amended ("Exchange Act").
PURCHASE PRICE OF COMMON STOCK
The funds transferred to the Employer Stock Fund for the purchase of Common
Stock in connection with the Conversion will be used by the 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 Offerings.
NATURE OF A PARTICIPANT'S INTEREST IN THE COMMON STOCK
The Holding Company Stock purchased for an account of a Participant will be
held 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.
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 Savings Bank adopted the Plan effective _____________ as an amendment
and restatement of the Savings Bank's prior retirement plan. The Plan is a cash
or deferred arrangement established in accordance with the requirement under
Section 401(a) and Section 401(k) of the Internal Revenue Code of 1986, as
amended ("Code").
The Savings Bank intends that the Plan, in operation, will comply with the
requirements under Section 401(a) and Section 401(k) of the Code. The Savings
Bank 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 Savings Bank 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.
S-3
<PAGE>
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.
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 SAVINGS BANK. 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 SAVINGS BANK OR AFTER
TERMINATION OF EMPLOYMENT.
REFERENCE TO FULL TEXT OF PLAN. THE FOLLOWING STATEMENTS ARE SUMMARIES OF
THE MATERIAL PROVISIONS OF THE PLAN. THEY ARE NOT COMPLETE AND ARE QUALIFIED IN
THEIR ENTIRETY BY THE FULL TEXT OF THE PLAN, WHICH IS FILED AS AN EXHIBIT TO THE
REGISTRATION STATEMENT FILED WITH THE SEC. COPIES OF THE PLAN ARE AVAILABLE TO
ALL EMPLOYEES BY FILING A REQUEST WITH THE PLAN ADMINISTRATOR. EACH EMPLOYEE IS
URGED TO READ CAREFULLY THE FULL TEXT OF THE PLAN.
ELIGIBILITY AND PARTICIPATION
Any employee of the Savings Bank is eligible to participate and will become
a Participant in the Plan following completion of 1,000 hours of service with
the Savings Bank within a consecutive 12 month period of employment and the
attainment of age 21. The Plan fiscal year is the period October 1 to September
30 ("Plan Year"). Directors who are not employees of the Savings Bank 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 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"
S-4
<PAGE>
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 generally
transferred by the Savings Bank to the Trustees of the Plan on a periodic basis.
EMPLOYER CONTRIBUTIONS. The Savings Bank currently matches __% of a
Participant's monthly deferral contributions to a maximum of __% of
Compensation. However, the rate of matching contributions is discretionary and
subject to change on an annual basis. In addition, the Employer may make a
discretionary contribution in proportion to a 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 periodically 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 Savings Bank 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 periodically
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
S-5
<PAGE>
in any Plan Year on behalf of Highly Compensated Employees (defined below) in
relation to the amount of deferred compensation contributed by or on behalf of
all other employees eligible to participate in the Plan. Specifically, the
actual deferral percentage for a Plan Year (i.e., the average of the ratios,
----
calculated separately for each eligible employee in each group, by dividing the
amount of salary reduction contributions credited to the salary reduction
contribution account of such eligible employee by such employee's compensation
for the Plan Year) of the Highly Compensated Employees may not exceed the
greater of (a) 125% of the actual deferred percentage of all other eligible
employees, or (b) the lesser of (i) 200% of the actual deferred percentage of
all other eligible employees, or (ii) the actual deferral percentage of all
other eligible employees plus two percentage points. In addition, the actual
contribution percentage for a Plan Year (i.e., the average of the ratios
----
calculated separately for each eligible employee in each group, by dividing the
amount of employer contributions credited to the Matching contributions account
of such eligible employee by each eligible employee's compensation for the Plan
Year) of the Highly Compensated Employees may not exceed the greater of (a) 125%
of the actual contribution percentage of all other eligible employees, or (b)
the lesser of (i) 200% of the actual contributions percentage of all other
eligible employees, or (ii) the actual contribution percentage of all other
eligible employees plus two percentage points.
In general, a Highly Compensated Employee includes any employee who, during
the Plan Year or the preceding Plan Year, (1) was at any time a 5% owner (i.e.,
----
owns directly or indirectly more than 5% of the stock of the Employer, or stock
possessing more than 5% of the total combines voting power of all stock of the
Employer) or, (2) during the preceding Plan Year, received Section 415
Compensation in excess of $80,000 (as adjusted periodically under applicable
Code provisions) and, if elected by the Savings Bank, 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 Savings Bank 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 Savings
Bank 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 Savings Bank may be required to make
certain minimum contributions to the Plan on behalf of non-key employees (as
defined below), and (ii) certain
S-6
<PAGE>
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 Savings Bank.
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 Savings Bank
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., owns directly or indirectly
----
more than 5% of the stock of the employer, or stock possessing more than 5% of
the total combined voting power of all stock of the employer), or (4) a 1% of
owner of the employer having compensation in excess of $150,000.
INVESTMENT OF CONTRIBUTIONS
All amounts credited to Participant's Accounts under the Plan are held in
the Trust which is administered by the Trustees. The Trustees 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
managed investment portfolios, as described below. A Participant may
periodically elect to change his or her investment directions with respect to
both past contributions and for more additions to the Participant's accounts
invested in these investment alternatives.
Under the Plan, the Accounts of Participant held in the Trust will be
invested by the Trustees at the direction of the Participant in the following
investment funds:
[PLEASE PROVIDE CURRENT PLAN INVESTMENT OPTIONS]
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 periodic 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 consists of investments in Common Stock. In
connection with the Conversion Offerings, pursuant to the attached Investment
Form, Participants will be able to change their investments at a time other than
the normal election intervals. Any cash dividends paid on Common Stock held in
the Employer Stock Fund will be credited to a cash dividend
S-7
<PAGE>
subaccount for each Participant investing in the Employer Stock Fund. To the
extent practicable, all amounts held in the Employer Stock Fund (except the
amounts credited to cash dividend subaccounts) will be used to purchase shares
of Common Stock. It is expected that all purchases will be made at prevailing
market prices. Pending investment in Common Stock, assets held in the Employer
Stock Fund will be placed in bank deposits and other short-term investments.
When Common Stock is purchased or sold, the cost or net proceeds are
charged or credited to the Accounts of Participants affected by the purchase or
sale. A Participant's Account will be adjusted to reflect changes in the value
of shares of Common Stock resulting from stock dividends, stock splits and
similar changes.
To the extent dividends are not paid on Common Stock held in the Employer
Stock Fund, the return on any investment in the Employer Stock Fund will consist
only of the market value appreciation of the Common Stock subsequent to its
purchase.
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 deferred contributions and the earnings thereon
under the Plan. A Participant is at all times 100% vested in his or her
matching contributions account. Employer discretionary contribuions are fully
vested after five years of service.
WITHDRAWALS AND DISTRIBUTIONS FROM THE PLAN
APPLICABLE FEDERAL LAW REQUIRES THE PLAN TO IMPOSE SUBSTANTIAL RESTRICTIONS
ON THE RIGHT OF A PLAN PARTICIPANT TO WITHDRAW AMOUNTS HELD FOR HIS OR HER
BENEFIT UNDER THE PLAN PRIOR TO THE PARTICIPANT'S ATTAINMENT OF AGE 59 1/2
UNLESS A PARTICIPANT RETIRES AS PERMITTED UNDER THE PLAN REGARDLESS OF WHETHER
SUCH A WITHDRAWAL OCCURS DURING HIS OR HER EMPLOYMENT WITH THE ASSOCIATION.
DISTRIBUTION UPON RETIREMENT, DEATH, DISABILITY OR TERMINATION OF
EMPLOYMENT. The distribution of benefits under the 401(k) Plan to a
Participant who retires may be made in the form of a lump-sum payment,
installment payments or an annuity payable 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)
S-8
<PAGE>
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 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.
DISTRIBUTION UPON DEATH. A Participant who dies prior to the benefit
commencement date for retirement, disability or termination of employment, and
who has a surviving spouse, shall have his or her benefits paid to the surviving
spouse in a lump sum, or if the payment of his or her benefits had commenced
before his or her death, in accordance with the distribution method in effect at
his or her death. With respect to an unmarried Participant, and in the case of
a married Participant with spousal consent to the designation of another
beneficiary, payment of benefits to the beneficiary, payments of benefits to the
beneficiary of a deceased Participant shall be made in the form of a lump sum
payment in cash or in Common Stock, or if the payment of his or her benefit had
commenced before his or her death, in accordance with the distribution method if
effect at death.
NONALIENATION OF BENEFITS. Except with respect to federal income tax
withholding and as provided with respect to a qualified domestic relations order
(as defined in the Code), benefits payable under the Plan shall not be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution, or levy of any kind, either
voluntary or involuntary, and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, charge or otherwise dispose of any rights to
benefits payable under the Plan shall be void.
ADMINISTRATION OF THE PLAN
TRUSTEES. The Trustees with respect to Plan assets are currently
___________________________________.
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.
S-9
<PAGE>
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.
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 administrator will furnish to each Participant a statement at least
semiannually showing (i) the balance in the Participant's Account as of the end
of that period, (ii) the amount of contributions allocated to such Participant's
Account for that period, and (iii) the adjustments to such Participant's Account
to reflect earnings or losses (if any).
PLAN ADMINISTRATOR
The Savings Bank 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 Savings Bank 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 Savings Bank 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).
S-10
<PAGE>
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 DOES NOT PURPORT TO BE COMPLETE.
MOREOVER, STATUTORY PROVISIONS ARE SUBJECT TO CHANGE, AS ARE THEIR
INTERPRETATIONS, AND THEIR APPLICATION MAY VARY IN INDIVIDUAL CIRCUMSTANCES.
FINALLY, THE CONSEQUENCES UNDER APPLICABLE STATE AND LOCAL INCOME TAX LAWS MAY
NOT BE THE SAME AS UNDER THE FEDERAL INCOME TAX LAWS.
PARTICIPANTS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO ANY
DISTRIBUTION FROM THE PLAN AND TRANSACTIONS INVOLVING THE PLAN.
The Plan has received a determination from the IRS that it is qualified
under Section 401(a) and 401(k) of the Code, and that the related Trust is
exempt from tax under Section 501(a) of the Code. A plan that is "qualified"
under these sections of the Code is afforded special tax treatment which include
the following: (1) the sponsoring employer is allowed an immediate tax deduction
for the amount contributed to the Plan of each year; (2) Participants pay no
current income tax on amounts contributed by the employer on their behalf; and
(3) earnings of the Plan are tax-exempt thereby permitting the tax-free
accumulation of income and gains on investments. The Plan will be administered
to comply in operation with the requirements of the Code as of the applicable
effective date of any change in the law. The Savings Bank 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
S-11
<PAGE>
to the credits of the Participant under the Plan and all other profit sharing
plans, if any, maintained by the Savings Bank. 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 Savings Bank which is included in such
distribution.
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.
S-12
<PAGE>
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
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.
S-13
<PAGE>
RESTRICTIONS ON RESALE
Any person receiving shares of the Common Stock under the Plan who is an
"affiliate" of the Savings Bank 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 Savings Bank) may reoffer or resell such shares only pursuant to a
registration statement filed under the Securities Act (the Holding Company and
the Savings Bank 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 Savings Bank or the Holding Company may wish to consult
with counsel before transferring any Common Stock owned by him or her. In
addition, Participants are advised to consult with counsel as to the
applicability of the reporting and short-swing profit liability rules of Section
16 of the Exchange Act which may affect the purchase and sale of the Common
Stock where acquired 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 Savings Bank's Conversion and
Reorganization from the mutual holding company form of organization to a wholly-
owned subsidiary of the Holding Company.
S-14
<PAGE>
Investment Form
(Employer Stock Fund)
PERPETUAL BANK, A FEDERAL SAVINGS BANK
401(K) PLAN
Name of
Participant:__________________________________
Social Security
Number:_______________________________________
1. Instructions. In connection with the proposed reorganization of
Perpetual Bank, A Federal Savings Bank ("Savings Bank") from the mutual holding
form of organization to a wholly-owned subsidiary of a savings and loan holding
company ("Conversion and Reorganization"), participants in the Perpetual Bank, A
Federal Savings Bank Employees' Savings and Profit Sharing Plan ("Plan") may
elect to direct the investment of up to 100% of their account balances 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 SouthBanc Shares, Inc. ("Common Stock"), the
proposed holding company for the Savings Bank. 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 OFFERINGS AND
THE MAXIMUM AND MINIMUM LIMITATIONS SET FORTH IN THE PLAN OF 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
Offerings. To direct such a transfer to the Employer Stock Fund, you should
complete this form and return it to ________________ at the Savings Bank, NO
LATER THAN THE CLOSE OF BUSINESS ON _________________, 1998. The Savings Bank
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 $10) to the Employer Stock Fund to be
applied to the purchase of Common Stock in the Conversion Offerings. Please
transfer this amount from the following investments as 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 and Reorganization. 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>
[LOGO]
PROSPECTUS SOUTHBANC SHARES, INC.
(PROPOSED HOLDING COMPANY FOR PERPETUAL BANK, A FEDERAL SAVINGS BANK)
UP TO 4,301,736 SHARES OF COMMON STOCK
$20.00 PURCHASE PRICE PER SHARE
SouthBanc Shares, Inc. ("Holding Company"), a Delaware corporation, is
offering up to 3,740,640 shares (which may be increased to 4,301,736 shares
under circumstances described in footnote 4 of the table below) of its common
stock, par value $.01 per share ("Common Stock"), in connection with (i) the
Exchange Offering, described below, to effect the reorganization of Perpetual
Bank, A Federal Savings Bank ("Savings Bank") as a wholly-owned subsidiary of
the Holding Company and (ii) the Conversion Offerings, described below, to
effect the conversion of SouthBanc Shares, M.H.C. ("MHC") from a mutual holding
company to a stock holding company. The Holding Company, Savings Bank and MHC
are collectively referred to herein as the "Primary Parties." The transactions
contemplated by the Exchange Offering and the Conversion Offerings, which are
collectively referred to herein as the "Conversion and Reorganization," are
undertaken pursuant to an Amended Plan of Conversion and Agreement and Plan of
Reorganization ("Plan of Conversion") adopted by the Boards of Directors of the
Primary Parties.
THE EXCHANGE OFFERING. Pursuant to the Plan of Conversion, each share of
common stock, par value $1.00 per share, of the Savings Bank ("Savings Bank
Common Stock") held by the MHC (800,000 shares, or 53.02% of the outstanding
shares, as of the date of this Prospectus) will be canceled and each share of
Savings Bank Common Stock held by the Savings Bank's public stockholders
("Public Savings Bank Shares" and "Public Stockholders," respectively) (708,873
shares, or 46.98% of the outstanding shares, as of the date of this Prospectus)
will be exchanged for shares of Common Stock ("Exchange Shares") pursuant to a
ratio ("Exchange Ratio") that will result in the Public Stockholders' aggregate
ownership of approximately 46.98% of the outstanding shares of Common Stock
before giving effect to any (i) payment of cash in lieu of issuing fractional
Exchange Shares and (ii) Conversion Shares (as defined below) purchased by the
Public Stockholders in the Conversion Offerings, described below. As discussed
under "Independent Valuation" below, the final Exchange Ratio will be based on
the Public Stockholders' ownership interest and not on the market value of the
Public Savings Bank Shares.
FOR INFORMATION ON HOW TO SUBSCRIBE FOR SHARES OF COMMON STOCK,
CALL THE STOCK INFORMATION CENTER AT (864) ___-____.
FOR A DISCUSSION OF CERTAIN RISKS THAT SHOULD BE CONSIDERED BY EACH
PROSPECTIVE INVESTOR, SEE "RISK FACTORS" BEGINNING ON PAGE 1.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR ACCOUNTS AND WILL NOT BE
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE SAVINGS
ASSOCIATION INSURANCE FUND ("SAIF") OR ANY OTHER GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("SEC"), THE OFFICE OF THRIFT SUPERVISION ("OTS"), THE
FDIC OR ANY OTHER FEDERAL AGENCY OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SEC, THE OTS, THE FDIC OR ANY OTHER AGENCY OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
(cover continued on following page)
SANDLER, O'NEILL & PARTNERS, L.P.
The date of this Prospectus is _____________, 1998.
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Estimated Underwriting
Purchase Commissions and Estimated Net
Price(1) Other Fees and Expenses(2) Proceeds
------------------------- -------------------------- -------------
<S> <C> <C> <C>
Minimum Price Per Share.................. $ 20.00 $ 0.68 $ 19.32
- ---------------------------------------------------------------------------------------------------------------
Midpoint Price Per Share................. $ 20.00 $ 0.62 $ 19.38
- ---------------------------------------------------------------------------------------------------------------
Maximum Price Per Share.................. $ 20.00 $ 0.58 $ 19.42
- ---------------------------------------------------------------------------------------------------------------
Maximum Price Per Share, as adjusted(3).. $ 20.00 $ 0.54 $ 19.46
- ---------------------------------------------------------------------------------------------------------------
Minimum Total(4)......................... $29,325,000 $ 990,000 $28,335,000
- ---------------------------------------------------------------------------------------------------------------
Midpoint Total(5)........................ $34,500,000 $1,070,000 $33,430,000
- ---------------------------------------------------------------------------------------------------------------
Maximum Total(6)......................... $39,675,000 $1,150,000 $38,525,000
- ---------------------------------------------------------------------------------------------------------------
Maximum Total, as adjusted(3)(7)......... $45,626,250 $1,240,000 $44,386,250
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Determined in accordance with an independent appraisal prepared by RP
Financial, LC., Arlington, Virginia ("RP Financial"). See "Independent
Valuation" on the cover page of this Prospectus and "THE CONVERSION AND
REORGANIZATION -- Stock Pricing, Exchange Ratio and Number of Shares to be
Issued."
(2) Consists of estimated expenses of the Primary Parties arising from the
Conversion and Reorganization, including fees payable to Sandler, O'Neill &
Partners, L.P. ("Sandler O'Neill") in connection with the Conversion
Offerings. Such fees may be deemed underwriting fees and Sandler O'Neill
may be deemed an underwriter. The Primary Parties have agreed to indemnify
Sandler O'Neill against certain liabilities, including liabilities that
might arise under the Securities Act of 1933, as amended ("Securities
Act"). See "USE OF PROCEEDS" and "THE CONVERSION AND REORGANIZATION --
Plan of Distribution and Selling Commissions."
(3) Gives effect to an increase in the number of shares that could be sold in
the Conversion Offerings resulting from an increase in the pro forma market
value of the MHC and the Savings Bank, as converted, up to 15% above the
maximum of the Estimated Valuation Range, without the resolicitation of
subscribers or any right of cancellation. See "THE CONVERSION AND
REORGANIZATION -- Stock Pricing, Exchange Ratio and Number of Shares to be
Issued."
(4) Assumes the issuance of 1,466,250 Conversion Shares at $20.00 per share.
(5) Assumes the issuance of 1,725,000 Conversion Shares at $20.00 per share.
(6) Assumes the issuance of 1,983,750 Conversion Shares at $20.00 per share.
(7) Assumes the issuance of 2,281,312 Conversion Shares at $20.00 per share.
THE CONVERSION OFFERINGS. Pursuant to the Plan of Conversion,
nontransferable rights to subscribe ("Subscription Rights") for up to 1,983,750
shares (which may be increased to 2,281,312 shares under circumstances described
in footnote 4 of the table appearing on the cover page of this Prospectus) of
Common Stock ("Conversion Shares") have been granted, in order of priority, to
(i) depositors with $50.00 or more on deposit at the Savings Bank as of the
close of business on June 30, 1996 ("Eligible Account Holders"), (ii) depositors
with $50.00 or more on deposit at the Savings Bank as of the close of business
on December 31, 1997 ("Supplemental Eligible Account Holders"), and (iii)
depositors of the Savings Bank (other than Eligible Account Holders and
Supplemental Eligible Account Holders) as of the close of business on
____________, 1998 ("Voting Record Date"), and borrowers of the Savings Bank
with loans outstanding as of the close of business on October 26, 1993 which
continue to be outstanding as of the close of business on the Voting Record Date
("Other Members"), subject to the priorities and purchase limitations set forth
in the Plan of Conversion ("Subscription Offering"). SUBSCRIPTION RIGHTS ARE
NONTRANSFERABLE. PERSONS SELLING OR OTHERWISE TRANSFERRING THEIR RIGHTS TO
SUBSCRIBE FOR COMMON STOCK IN THE SUBSCRIPTION OFFERING OR SUBSCRIBING FOR
COMMON STOCK ON BEHALF OF ANOTHER PERSON WILL BE SUBJECT TO FORFEITURE OF SUCH
RIGHTS AND POSSIBLE FURTHER SANCTIONS AND PENALTIES IMPOSED BY THE OTS OR OTHER
AGENCY OF THE U.S. GOVERNMENT. Concurrently, but subject to the prior rights of
Subscription Rights holders, the Holding Company is offering the Conversion
Shares for sale to members of the general public through a direct community
offering ("Direct Community Offering") with preference given first to Public
Stockholders as of the close of business on the Voting Record Date (who are not
Eligible Account Holders, Supplemental Eligible Account Holders or Other
Members) and then to natural persons and trusts of natural persons who are
permanent residents of Anderson or Oconee Counties of South Carolina ("Local
Community"). It is anticipated that any Conversion Shares not
<PAGE>
subscribed for in the Subscription Offering or purchased in the Direct Community
Offering will be offered to eligible members of the general public on a best
efforts basis by a selling group of broker-dealers managed by Sandler O'Neill in
a syndicated community offering ("Syndicated Community Offering"). The
Subscription Offering, Direct Community Offering and the Syndicated Community
Offering are referred to collectively as the "Conversion Offerings."
THE SUBSCRIPTION OFFERING WILL EXPIRE AT NOON, EASTERN TIME, ON
____________, 1998 ("EXPIRATION DATE"), UNLESS EXTENDED BY THE PRIMARY PARTIES
FOR UP TO ___ DAYS TO _________, 1998. SUCH EXTENSION MAY BE GRANTED WITHOUT
ADDITIONAL NOTICE TO SUBSCRIBERS. The Direct Community Offering is also
expected to terminate at Noon, Eastern Time, on ____________, 1998 or at a date
thereafter, however, in no event later than ________ __, 1998. The Holding
Company must receive a properly completed and signed stock order form ("Order
Form") and certification, along with full payment (or appropriate instructions
authorizing a withdrawal from a deposit account at the Savings Bank) of $20.00
per share ("Purchase Price") for all Conversion Shares subscribed for or
ordered. Funds so received will be placed in a segregated account created for
this purpose at the Savings Bank, and interest will be paid at the Savings
Bank's passbook rate from the date payment is received until the Conversion and
Reorganization is consummated or terminated; these funds will be otherwise
unavailable to the depositor until such time. Payments authorized by
withdrawals from deposit accounts will continue to earn interest at their
contractual rate until the Conversion and Reorganization is consummated or
terminated. ONCE TENDERED, ORDERS CANNOT BE REVOKED OR MODIFIED WITHOUT THE
CONSENT OF THE PRIMARY PARTIES. The Primary Parties are not obligated to accept
orders submitted on photocopied or telecopied Order Forms. If the Conversion
and Reorganization is not consummated within 45 days after the last day of the
Subscription Offering and Direct Community Offering (which date will be no later
than ___________, 1998) and the OTS consents to an extension of time to
consummate the Conversion and Reorganization, subscribers will be notified in
writing of the time period within which the subscriber must notify the Primary
Parties of their intention to increase, decrease or rescind their orders. Such
extensions may not go beyond ____________, 2000.
The Primary Parties have engaged Sandler O'Neill to consult with and advise
them in the sale of the Conversion Shares in the Conversion Offerings. In
addition, in the event the Conversion Shares are not fully subscribed for in the
Subscription Offering and Direct Community Offering, Sandler O'Neill will manage
the Syndicated Community Offering. Neither Sandler O'Neill nor any other
registered broker-dealer is obligated to take or purchase any Conversion Shares
in the Conversion Offerings. The Primary Parties reserve the right, in their
absolute discretion, to accept or reject, in whole or in part, any or all orders
in the Direct Community Offering or Syndicated Community Offerings either at the
time of receipt of an order or as soon as practicable following the termination
of the Conversion Offering. If an order is rejected in part, the purchaser does
not have the right to cancel the remainder of the order. See "THE CONVERSION
AND REORGANIZATION -- Plan of Distribution and Selling Commissions."
INDEPENDENT VALUATION. OTS regulations require that the offering of
Conversion Shares in the Conversion Offerings be based on an independent
valuation of the pro forma market value of the Savings Bank and the MHC, as
converted. OTS policy requires that the independent valuation be multiplied by
approximately 53.02%, which represents the MHC's percentage ownership interest
in the Savings Bank. Accordingly, RP Financial's independent appraisal as of
December 5, 1997 states that the aggregate pro forma market value of the Savings
Bank and the MHC, as converted, ranged from $55.3 million to $74.8 million, with
a midpoint of $65.1 million ("Estimated Valuation Range").
The Primary Parties' Boards of Directors determined that the Conversion
Shares would be sold at the Purchase Price ($20.00 per share), resulting in a
range of 1,466,250 to 1,983,750 shares of Conversion Shares, with a midpoint of
1,725,000 Conversion Shares. Upon consummation of the Conversion and
Reorganization, the Conversion Shares and the Exchange Shares will represent
approximately 53.02% and 46.98%, respectively, of the total outstanding shares
of Common Stock. Based upon the Estimated Valuation Range, the Exchange Ratio
is expected to range from 1.83281 to 2.47969, resulting in a range of 1,299,231
Exchange Shares to 1,757,783 Exchange Shares to be issued in the Exchange
Offering. The 3,741,533 shares of Common Stock offered hereby include up to
1,983,750 Conversion Shares (subject to adjustment up to 2,281,312 shares as
described herein) and up to 1,757,783 Exchange Shares (subject to adjustment up
to 2,021,451 shares as described herein). The Estimated
<PAGE>
Valuation Range may be increased or decreased to reflect changes in the
financial condition or results of operations of the Savings Bank or changes in
market conditions or general financial, economic or regulatory conditions prior
to completion of the Conversion and Reorganization, and under certain
circumstances specified herein subscribers will be resolicited and given the
right to modify or cancel their orders. See "THE CONVERSION AND REORGANIZATION
- -- Stock Pricing, Exchange Ratio and Number of Shares to be Issued."
PURCHASE LIMITATIONS ON CONVERSION SHARES. The Plan of Conversion provides
for the following purchase limitations: (i) no person may purchase in either the
Subscription Offering, Direct Community Offering or Syndicated Community
Offering more than 50,000 Conversion Shares, (ii) no person, together with
associates of or persons acting in concert with such person, may purchase in
either the Subscription Offering, Direct Community Offering or Syndicated
Community Offering more than 50,000 Conversion Shares, (iii) the maximum number
of Conversion Shares which may be subscribed for or purchased in all categories
in the Conversion Offerings by any person, when combined with any Exchange
Shares received, shall not exceed 50,000 shares of Common Stock to be issued in
the Conversion and Reorganization, and (iv) the maximum number of Conversion
Shares which may be subscribed for or purchased in all categories in the
Conversion Offerings by any person, together with any associate or any group of
persons acting in concert, when combined with any Exchange Shares received,
shall not exceed 50,000 shares of Common Stock to be issued in the Conversion
and Reorganization. The minimum order is 25 Conversion Shares. BECAUSE OTS
POLICY REQUIRES THAT THE MAXIMUM PURCHASE LIMITATION INCLUDES EXCHANGE SHARES TO
BE ISSUED TO PUBLIC STOCKHOLDERS IN EXCHANGE FOR THEIR PUBLIC SAVINGS BANK
SHARES, CERTAIN PUBLIC STOCKHOLDERS MAY BE LIMITED IN THEIR ABILITY TO PURCHASE
CONVERSION SHARES, OR EVEN PREVENTED FROM PURCHASING CONVERSION SHARES. See
"THE CONVERSION AND REORGANIZATION -- The Subscription, Direct Community and
Syndicated Community Offerings," "-- Procedure for Purchasing Conversion Shares
in the Subscription and Direct Community Offerings" and "-- Limitations on
Purchases of Conversion Shares."
MARKET FOR THE COMMON STOCK. The Holding Company has received preliminary
approval to list the Common Stock on the Nasdaq National Market under the symbol
"PERT." Prior to the Conversion and Reorganization, the Public Savings Bank
Shares have been listed on the Nasdaq SmallCap Market under the same trading
symbol. There can be no assurance that an active and liquid trading market for
the Common Stock will develop or, if developed, will be maintained. See "RISK
FACTORS -- Absence of Prior Market for the Common Stock" and "MARKET FOR COMMON
STOCK."
<PAGE>
PERPETUAL BANK, A FEDERAL SAVINGS BANK
ANDERSON, SOUTH CAROLINA
[Map]
THE CONVERSION AND REORGANIZATION IS CONTINGENT UPON APPROVAL OF THE PLAN OF
CONVERSION BY AT LEAST A MAJORITY OF THE MHC'S ELIGIBLE VOTING MEMBERS, BY THE
HOLDERS OF TWO-THIRDS OF THE OUTSTANDING SHARES OF SAVINGS BANK COMMON STOCK AND
BY THE HOLDERS OF A MAJORITY OF THE PUBLIC SAVINGS BANK SHARES PRESENT IN PERSON
OR BY PROXY, THE SALE OF AT LEAST 1,466,250 CONVERSION SHARES PURSUANT TO THE
PLAN OF CONVERSION, AND THE RECEIPT OF ALL APPLICABLE REGULATORY APPROVALS.
<PAGE>
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR ACCOUNTS AND WILL NOT BE
INSURED OR GUARANTEED BY THE FDIC, THE SAIF OR ANY OTHER GOVERNMENT AGENCY.
PROSPECTUS SUMMARY
The information set forth below should be read in conjunction with and is
qualified in its entirety by the more detailed information and Consolidated
Financial Statements (including the Notes thereto) presented elsewhere in this
Prospectus. The purchase of Common Stock is subject to certain risks. See
"RISK FACTORS."
SOUTHBANC SHARES, INC.
The Holding Company was organized on November 6, 1997 under Delaware law at
the direction of the Savings Bank to acquire the Savings Bank as a wholly-owned
subsidiary upon consummation of the Conversion and Reorganization. The Holding
Company has only engaged in organizational activities to date. The Holding
Company has received conditional OTS approval to become a savings and loan
holding company through the acquisition of 100% of the issued and outstanding
capital stock of the Savings Bank, which, along with 50% of the net proceeds of
the Conversion Offerings (see table under "PRO FORMA DATA") as permitted by the
OTS to be retained by it, and a note receivable evidencing a loan to the Savings
Bank's Employee Stock Ownership Plan ("ESOP"), will be the only significant
assets of the Holding Company. Funds retained by the Holding Company will be
used for general business activities. See "USE OF PROCEEDS." Upon consummation
of the Conversion and Reorganization, the Holding Company will be classified as
a unitary savings and loan holding company subject to OTS regulation. See
"REGULATION -- Savings and Loan Holding Company Regulations." The main office
of the Holding Company is located at 907 N. Main Street, Anderson, South
Carolina 29621, and its telephone number is (864) 225-0241.
SOUTHBANC SHARES, M.H.C.
The MHC is the federally-chartered mutual holding company of the Savings
Bank. The MHC was formed in October 1993 as a result of the reorganization of
the Savings Bank into a federally chartered mutual holding company ("MHC
Reorganization"). The members of the MHC consist of depositors of the Savings
Bank and those current borrowers of the Savings Bank who had loans outstanding
as of the consummation date of the MHC Reorganization (October 26, 1993). The
MHC's sole business activity is holding the 800,000 shares of Savings Bank
Common Stock, which represents 53.02% of the outstanding shares as of the date
of this Prospectus. The MHC's main office is located at 907 N. Main Street,
Anderson, South Carolina 29621, and its telephone number is (864) 225-0241. As
part of the Conversion and Reorganization, the MHC will convert to a federally-
chartered interim stock savings bank and simultaneously merge with and into the
Savings Bank, with the Savings Bank as the surviving entity.
PERPETUAL BANK, A FEDERAL SAVINGS BANK
The Savings Bank is a federally chartered stock savings bank headquartered
in Anderson, South Carolina. The Savings Bank was originally chartered in 1906
and operated as a mutual institution without stockholders until October 1993, at
which time it reorganized into the mutual holding company structure. The
Savings Bank's deposits are insured by the FDIC up to applicable legal limits
under the SAIF. The Savings Bank, a member of the Federal Home Loan Bank
("FHLB") system, is regulated by the OTS and the FDIC. At September 30, 1997,
the Savings Bank had total assets of $257.0 million, total deposits of $201.0
million, and total stockholders' equity of $30.6 million, on a consolidated
basis.
On October 26, 1993, the MHC Reorganization was consummated and the Savings
Bank completed its initial stock offering by issuing 1,500,000 shares of Savings
Bank Common Stock at $10.00 per share, 1,385,000 shares
<PAGE>
(92.3%) of which were sold to the MHC. The remaining 115,000 shares (7.7%) were
issued to members of the MHC, including officers, directors and employees of the
Savings Bank.
In September 1996, the Savings Bank completed an additional offering of
Savings Bank Common Stock through the issuance of 585,000 shares at a price of
$19.25 to then existing members of the MHC ("Additional Offering"). In
connection with the closing of the Additional Offering, 585,000 shares of
Savings Bank Common Stock held by the MHC were canceled. Accordingly, upon
consummation of the Additional Offering on September 30, 1996, there were
1,504,601 shares of Savings Bank Common Stock issued and outstanding, of which
800,000 (53.2%) were held by the MHC and 704,601 shares (46.8%) were held by the
Public Stockholders. Currently, there are 708,803 shares (46.98%) held by the
Public Stockholders as a result of the exercise of stock options since the
consummation of the Additional Offering.
The Savings Bank considers Anderson and Oconee Counties in the northwestern
corner of South Carolina as its primary market area because a substantial
portion of its loan portfolio is secured by properties located in those
counties. See "RISK FACTORS -- Certain Lending Risks -- Geographic
Concentration of Credit and Investment Risk." The Savings Bank faces strong
competition within its primary market area. See "RISK FACTORS --Competition."
The Savings Bank also invests in loans secured by properties located outside of
its primary market area (predominately in Hilton Head Island, South Carolina,
and in the greater Greenville, South Carolina, area) as a result of loan
purchases from other lenders, including a mortgage banking company known as
"First Trust Mortgage Corporation of the South" in which a service corporation
subsidiary of the Savings Bank has a one-third equity interest. See "BUSINESS
OF THE SAVINGS BANK -- Lending Activities" and "-- Subsidiary Activities."
The Savings Bank is primarily engaged in the business of attracting
deposits from the general public and using those funds, along with FHLB
advances, to originate and purchase one- to- four family mortgage loans. The
Savings Bank originates and purchases commercial real estate and construction
loans, as well as consumer loans and, to a lesser extent, commercial business
loans and multi-family real estate loans. See "BUSINESS OF THE SAVINGS BANK --
Lending Activities." Such latter type loans, which totalled $71.7 million, or
40.1%, of net loans receivable at September 30, 1997, are inherently riskier
than one- to- four-family mortgage loans. See "RISK FACTORS -- Certain Lending
Risks." As a complement to its lending activities, the Savings Bank services
mortgage loans and invests in mortgage servicing rights. See "BUSINESS OF THE
SAVINGS BANK -- Lending Activities -- Loan Purchases and, Sales and Servicing."
In addition to its lending activities, the Savings Bank, through a service
corporation subsidiary, develops residential and commercial properties located
in its primary market area. See "BUSINESS OF THE SAVINGS BANK -- Subsidiary
Activities." The Savings Bank also invests in short- and intermediate-term
mortgage-backed securities, including collateralized mortgage obligations
("CMOs"). See "BUSINESS OF THE SAVINGS BANK -- Investment Activities."
The Savings Bank's principal office is located at 907 North Main Street,
Anderson, South Carolina 29621, and the telephone number at that office is (864)
225-0241. The Savings Bank also operates five branch offices. See "BUSINESS OF
THE SAVINGS BANK -- Properties."
THE CONVERSION AND REORGANIZATION
PURPOSES OF THE CONVERSION AND REORGANIZATION. The Boards of Directors of
the Primary Parties believe that the Conversion and Reorganization is in the
best interests of the MHC and its members, the Savings Bank and its
stockholders, and the communities served by the MHC and the Savings Bank. In
their decision to pursue the Conversion and Reorganization, the Boards of
Directors considered the various regulatory uncertainties associated with the
mutual holding company structure, including the MHC's future ability to waive
any dividends from the Savings Bank and the uncertain future of the federal
thrift charter. In addition, the Boards of Directors considered the various
advantages of the stock holding company form of organization, including: (i) the
Holding Company's ability to repurchase shares of its common stock without
adverse tax consequences, unlike the Savings Bank; (ii) the
(ii)
<PAGE>
Holding Company's greater flexibility under current law and regulations relative
to the MHC to acquire other financial institutions and diversify its operations;
(iii) the larger capital base of the Holding Company relative to the Savings
Bank that will result from the Conversion Offering; and (iv) the potential
increased liquidity in the Common Stock relative to the Public Savings Bank
Shares because of the larger number of shares of Common Stock to be outstanding
upon consummation of the Conversion and Reorganization. Currently, the Boards
of Directors of the Primary Parties have no specific plans, arrangements or
understandings, written or oral, regarding any stock repurchases, acquisitions
or diversification of operations. See "THE CONVERSION AND REORGANIZATION --
Purposes of Conversion and Reorganization."
DESCRIPTION OF THE CONVERSION AND REORGANIZATION. The Conversion and
Reorganization are being undertaken pursuant to the Plan of Conversion that was
adopted by the Boards of Directors of the Savings Bank and the MHC on September
22, 1997, and subsequently amended on December 22, 1997. Under the Plan of
Conversion, (i) the MHC will convert to an interim federal stock savings bank
("Interim A") and simultaneously merge with and into the Savings Bank, pursuant
to which the MHC will cease to exist and the outstanding shares of Savings Bank
Common Stock held by the MHC (800,000 shares, or 53.02% of the outstanding
Savings Bank Common Stock as of the date of this Prospectus) will be canceled,
and (ii) an interim federal stock savings bank ("Interim B") will be formed as a
wholly-owned subsidiary of the Holding Company and will merge with and into the
Savings Bank, resulting in the Savings Bank becoming a wholly-owned subsidiary
of the Holding Company and the outstanding Public Savings Bank Shares (708,873
shares, or 46.98% of the outstanding Savings Bank Common Stock as of the date of
this Prospectus) will be converted into the Exchange Shares pursuant to the
Exchange Ratio. The Exchange Ratio will result in the holders of the
outstanding Public Savings Bank Shares owning in the aggregate approximately the
same percentage of the Common Stock to be outstanding upon the completion of the
Conversion and Reorganization (i.e., the Conversion Shares and the Exchange
----
Shares) as the percentage of Savings Bank Common Stock owned by them in the
aggregate immediately before the consummation of the Conversion and
Reorganization, before giving effect to any (i) payment of cash in lieu of
issuing fractional Exchange Shares and (ii) Conversion Shares purchased by the
Stockholders in the Conversion Offerings.
The following diagram outlines the pre-Conversion and Reorganization
organizational structure of the Primary Parties' and their ownership interests:
------------------- -------------------
MHC Public
Stockholders
------------------- -------------------
53.02% 46.98%
-------------------
Savings Bank
-------------------
100%
-------------------
Holding Company
-------------------
100%
-------------------
Interim B
(in formation)
-------------------
(iii)
<PAGE>
The following diagram reflects the post-Conversion and Reorganization
organizational structure of the Holding Company and the Savings Bank and their
ownership interests. The ownership interests presented assume no fractional
Exchange Shares are issued, and does not give effect to purchases of any
Conversion Shares by the Public Stockholders or the exercise of outstanding
stock options.
------------------- -------------------
Purchasers of Former Public
Conversion Shares Stockholders
------------------- -------------------
53.02% 46.98%
-------------------
Holding Company
-------------------
100%
-------------------
Savings Bank
-------------------
REQUIRED APPROVALS. The OTS has approved the Plan of Conversion subject to
(i) the approval of the holders of at least a majority of the total number of
votes eligible to be cast by the members of the MHC as of the close of business
on the Voting Record Date (___________, 1998) at a special meeting of members
called for the purpose of submitting the Plan of Conversion for approval
("Members' Special Meeting"), (ii) the approval of the holders of at least two-
thirds of the outstanding shares of Savings Bank Common Stock (including those
shares held by the MHC) as of the close of business on the Voting Record Date at
a meeting of stockholders called for the purpose of considering the Plan
("Stockholders' Meeting"), and (iii) the approval of the holders of at least a
majority of the Public Savings Bank Shares as of the close of business on the
Voting Record Date present in person or by proxy at the Stockholders' Meeting.
The MHC intends to vote its shares of Savings Bank Common Stock, which amounts
to 53.02% of the outstanding shares, in favor of the Plan of Conversion at the
Stockholders' Meeting. In addition, as of September 30, 1997, directors and
executive officers of the Primary Parties as a group (13 persons) beneficially
owned 90,711, or 6.01%, of the outstanding shares of Savings Bank Common Stock,
which they intend to vote in favor of the Plan of Conversion at the
Stockholders' Meeting.
THE CONVERSION OFFERINGS
The Conversion Offerings, which consist of the Subscription Offering, the
Direct Community Offering and the Syndicated Community Offering (if any), are
being undertaken pursuant to the Plan of Conversion. The Holding Company is
offering up to 1,983,750 Conversion Shares in the Conversion Offerings.
Conversion Shares are first being offered in the Subscription Offering through
the exercise of Subscription Rights issued, in order of priority, to (i)
Eligible Account Holders; (ii) Supplemental Eligible Account Holders; and (iii)
Other Members. In light of the anticipated additional compensation expense to
the Savings Bank that would result with the purchase of Conversion Shares, the
ESOP will not subscribe for Conversion Shares. The Subscription Offering will
expire at Noon, Eastern Time, on ____________, 1998, unless extended.
Subject to the prior rights of holders of Subscription Rights, Conversion
Shares not subscribed for in the Subscription Offering are being offered in the
Direct Community Offering to members of the general public with preference given
first to Public Stockholders as of the close of business on the Voting Record
Date (who are not Eligible Account Holders, Supplemental Eligible Account
Holders or Other Members) and then to natural persons and trusts of natural
persons who are permanent residents of the Local Community. It is anticipated
that shares not subscribed for in the Subscription Offering and Direct Community
Offering may be offered to certain members of
(iv)
<PAGE>
the general public in the Syndicated Community Offering. The Primary Parties
reserve the absolute right to reject or accept any orders in the Direct
Community Offering or the Syndicated Community Offering (if any), in whole or in
part, either at the time of receipt of an order or as soon as practicable
following the Expiration Date. The closing with respect to all shares sold in
the Conversion Offerings will occur simultaneously, and all Conversion Shares
will be sold at a uniform price of $20.00 per share.
The Primary Parties have retained Sandler O'Neill as their consultant and
advisor and to assist in soliciting subscriptions in the Conversion Offerings on
a best efforts basis. See "THE CONVERSION AND REORGANIZATION -- The
Subscription, Direct Community and Syndicated Community Offerings."
THE EXCHANGE OFFERING
The Exchange Offering is being undertaken pursuant to the Plan of
Conversion, which must be approved by the members of the MHC at a Special
Meeting of Members and by the stockholders of the Savings Bank at the Annual
Meeting of Stockholders, both to be held on March ___, 1998. In the Exchange
Offering, each share of Savings Bank Common Stock held by the MHC (800,000
shares, or 53.02% of the outstanding shares, as of the date of this Prospectus)
will be canceled and each Public Savings Bank Share (708,873 shares, or 46.98%
of the outstanding shares, as of the date of this Prospectus) will be exchanged
for Exchange Shares pursuant the final Exchange Ratio that will result in the
Public Stockholders' aggregate ownership of approximately 46.98% of the
outstanding shares of Common Stock before giving effect to any (i) payment of
cash in lieu of issuing fractional Exchange Shares and (ii) Conversion Shares
purchased by the Public Stockholders in the Conversion Offerings. The final
Exchange Ratio will be based on the Public Stockholders' ownership interest and
not on the market value of the Public Savings Bank Shares. See "-- Stock
Pricing and Number of Shares to be Issued in the Conversion and Reorganization."
The Exchange Offering is an integral part of the Conversion and
Reorganization. Pursuant to OTS regulations, holders of Savings Bank Common
Stock do not have dissent and appraisal rights with respect to the Conversion
and Reorganization because the Savings Bank Common Stock is listed on The Nasdaq
Stock Market. Accordingly, the exchange of each Public Savings Bank Share for
Exchange Shares is mandatory. PUBLIC STOCKHOLDERS SHOULD NOT SEND THEIR
CERTIFICATES FOR EXCHANGE AT THIS TIME. The Holding Company will mail to each
Public Stockholder to their address of record exchange instructions and a
transmittal letter after the consummation of the Conversion and Reorganization.
See "THE CONVERSION AND REORGANIZATION -- Delivery and Exchange of Stock
Certificates -- Exchange Shares."
BENEFITS OF THE CONVERSION AND REORGANIZATION TO MANAGEMENT
GENERAL. The Savings Bank has existing stock benefit plans that were
implemented in connection with the MHC Reorganization and the Additional
Offering. The Savings Bank's 1993 Stock Option Plan ("1993 Stock Option Plan")
and the ESOP were implemented in connection with the MHC Reorganization. The
Savings Bank's 1996 Management Development and Recognition Plan ("1996 MRP") and
the Savings Bank's 1996 Stock Option Plan ("1996 Stock Option Plan") were
implemented in connection with the Additional Offering. These plans will be
assumed by the Holding Company upon consummation of the Conversion and
Reorganization. See "MANAGEMENT OF THE SAVINGS BANK -- Benefits" for a
discussion of these existing plans. The following discussion relates to new
stock benefit plans that are expected to be implemented in connection with the
Conversion and Reorganization, as well as to employment agreements that will be
entered into with certain executive officers of the Holding Company and the
Savings Bank.
MRP. The Holding Company expects to seek stockholder approval of the
SouthBanc Shares, Inc. 1998 Management Recognition Plan ("1998 MRP"). The 1998
MRP will reserve a number of shares equal to 4% of the number of Conversion
Shares issued in the Conversion Offerings. Under current OTS regulations, the
approval of a majority vote of the Holding Company's outstanding shares of
Common Stock is required prior to the implementation of the 1998 MRP within one
year of the consummation of the Conversion and Reorganization. If
(v)
<PAGE>
stockholder approval of the 1998 MRP is obtained, it is expected that awards of
restricted stock of up to 79,350 shares of Common Stock (based on the issuance
of Conversion Shares at the maximum of the Estimated Valuation Range) will be
made to key employees of the Holding Company and the Savings Bank at no cost to
the recipient. Although no specific award determinations have been made at this
time, the Holding Company and the Savings Bank anticipate that, if stockholder
approval is obtained it would provide awards to key employees. Under current
OTS regulations, if the 1998 MRP is implemented within one year of the
consummation of the Conversion and Reorganization, (i) no officer or employee
may receive an award covering in excess of 25% of the number of shares reserved
for issuance under the 1998 MRP, (ii) no nonemployee director may receive in
excess of 5% of the number of shares reserved for issuance under the 1998 MRP,
(iii) nonemployee directors, as a group, may not receive in excess of 30% of the
number of shares reserved for issuance under the 1998 MRP, and (iv) all awards
would be subject to vesting at a maximum rate of 20% per year. See "PRO FORMA
DATA" and "MANAGEMENT OF THE SAVINGS BANK -- Benefits -- Management Recognition
Plan." Assuming stockholder approval of the 1998 MRP, if the 1998 MRP is funded
with authorized but unissued shares of Common Stock contributed by the Holding
Company, rather than by acquiring shares of Common Stock in the open market, the
voting control of stockholders of the Holding Company would be diluted by 2.08%.
See "RISK FACTORS -- Possible Dilutive Effect of Benefit Programs" and "PRO
FORMA DATA."
STOCK OPTION PLAN. The Holding Company expects to seek stockholder
approval of the SouthBanc Shares, Inc. 1998 Stock Option Plan ("1998 Stock
Option Plan"). The 1998 Stock Option Plan will reserve a number of shares equal
to 10% of the number of Conversion Shares issued in the Conversion Offerings.
Under current OTS regulations, the approval of a majority vote of the Holding
Company's outstanding shares of Common Stock is required prior to the
implementation of the 1998 Stock Option Plan within one year of the consummation
of the Conversion and Reorganization. If stockholder approval of the 1998 Stock
Option Plan is obtained, it is expected that options to acquire up to 198,375
shares of Common Stock of the Holding Company (based on the issuance of
Conversion Shares at the maximum of the Estimated Valuation Range) will be
awarded to key employees and directors of the Holding Company and the Savings
Bank. The exercise price of such options will be 100% of the fair market value
of the Common Stock on the date the option is granted. Although no specific
award determinations have been made at this time, the Holding Company and the
Savings Bank anticipate that if stockholder approval is obtained it would
provide awards to its directors, officers and employees to the extent permitted
by applicable regulations. Under current OTS regulations, if the 1998 Stock
Option Plan is implemented within one year of the consummation of the Conversion
and Reorganization, (i) no officer or employees may receive an award of options
covering in excess of 25% of the number of shares reserved for issuance under
the 1998 Stock Option Plan, (ii) no nonemployee director may receive in excess
of 5% of the number of shares reserved for issuance under the 1998 Stock Option
plan, (iii) nonemployee directors, as a group, may not receive in excess of 30%
of the number of shares reserved for issuance under the 1998 Stock Option Plan,
and (iv) all awards would be subject to vesting at a maximum rate of 20% per
year. Options are valuable only to the extent that they are exercisable and the
market price for the underlying share of Common Stock is in excess of the
exercise price. An option effectively eliminates the market risk of holding the
underlying securities since no consideration is paid for the option until it is
exercised. Therefore, the recipient may, within the limits of the term of the
option, wait to exercise the option until the market price exceeds the exercise
price. See "MANAGEMENT OF THE SAVINGS BANK -- Benefits -- 1998 Stock Option
Plan." Assuming stockholder approval of the 1998 Stock Option Plan, it is
expected that the 1998 Stock Option Plan will be funded with authorized but
unissued shares of Common Stock contributed by the Holding Company, which,
together with the 1996 Stock Option Plan, would dilute the voting interests of
stockholders of the Holding Company by 8.25%. See "RISK FACTORS -- Possible
Dilutive Effect of Benefit Programs" and "PRO FORMA DATA."
EMPLOYMENT AGREEMENTS. The MHC and the Savings Bank maintain employment
agreements with Robert W. Orr (President and Managing Officer of the Savings
Bank and President and Chief Executive Officer of the Holding Company), Thomas
C. Hall (Senior Vice President and Treasurer of the Savings Bank and Treasurer
and Chief Financial Officer of the Holding Company) and Barry C. Visioli (Senior
Vice President of the Savings Bank and Secretary of the Holding Company) that
were entered into in connection with the MHC Reorganization. In connection with
the Conversion and Reorganization, the Holding Company and the Savings Bank will
enter into
(vi)
<PAGE>
three-year employment agreements with Messrs. Orr, Hall and Visioli, which have
substantially the same terms as and will replace the existing agreements. The
agreements will provide certain benefits in the event of the officers'
termination of employment following a change in control of the Holding Company
or the Savings Bank. In the event of a change in control of the Holding Company
or the Savings Bank, as defined in the agreement, each executive officer will be
entitled to a package of cash and/or benefits with a maximum value equal to 2.99
times their average annual compensation during the five-year period preceding
the change in control. Assuming a change of control occurred as of September
30, 1997, the aggregate value of the severance benefits payable to Messrs. Orr,
Hall and Visioli under the agreements would have been approximately $583,000.
See "MANAGEMENT OF THE SAVINGS BANK -- Executive Compensation -- Employment
Agreements."
For information concerning the possible voting control of officers,
directors and employees following the Conversion and Reorganization, see "RISK
FACTORS -- Anti-takeover Considerations -- Voting Control by Insiders."
PROSPECTUS DELIVERY AND PROCEDURE FOR PURCHASING CONVERSION SHARES
To ensure that each purchaser receives a prospectus at least 48 hours prior
to the Expiration Date in accordance with Rule 15c2-8 of the Securities Exchange
Act of 1934, as amended ("Exchange Act"), no prospectus will be mailed any later
than five days prior to the Expiration Date or hand delivered later than two
days prior to such date. Execution of the Order Form will confirm receipt of
the Prospectus in accordance with Rule 15c2-8. Order Forms will be distributed
only with a prospectus. The Primary Parties are not obligated to accept for
processing orders not submitted on original Order Forms. Order Forms
unaccompanied by an executed certification form will not be accepted. Payment
by check, money order, bank draft, cash or debit authorization to an existing
account at the Savings Bank must accompany the order and certification forms.
No wire transfers will be accepted. The Savings Bank is prohibited from lending
funds to any person or entity for the purpose of purchasing shares of Common
Stock in the Conversion. See "THE CONVERSION AND REORGANIZATION -- Procedure
for Purchasing Shares in the Subscription and Direct Community Offerings."
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 close of business on June 30, 1996
("Eligibility Record Date"), December 31, 1997 ("Supplemental Eligibility Record
Date") or the Voting Record Date (_________, 1998) and borrowers with loans
outstanding on October 26, 1993 which continue to be outstanding as of the
Voting Record Date must list all deposit and/or loan accounts on the Order Form,
giving all names on each account and the account numbers. Failure to list all
account numbers may result in the inability of the Holding Company or the
Savings Bank to fill all or part of a subscription order. In addition,
registration of shares in a name or title different from the names or titles
listed on the account may adversely affect such subscriber's purchase priority.
See "THE CONVERSION AND REORGANIZATION -- Procedure for Purchasing Shares in the
Subscription and Direct Community Offerings."
RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS
No person may transfer or enter into any agreement or understanding to
transfer the legal or beneficial ownership of the Subscription Rights issued
under the Plan of Conversion or the Conversion Shares to be issued upon their
exercise. Each person exercising Subscription Rights will be required to
certify that a purchase of Conversion Shares is solely for the purchaser's own
account and that there is no agreement or understanding regarding the sale or
transfer of such shares. THE PRIMARY PARTIES WILL PURSUE ANY AND ALL LEGAL AND
EQUITABLE REMEDIES IN THE EVENT THEY BECOME AWARE OF THE TRANSFER OF
SUBSCRIPTION RIGHTS AND WILL NOT HONOR ORDERS KNOWN BY THEM TO INVOLVE THE
TRANSFER OF SUCH RIGHTS.
(vii)
<PAGE>
PURCHASE LIMITATIONS
The Plan of Conversion provides for the following purchase limitations: (i)
no person may purchase in either the Subscription Offering, Direct Community
Offering or Syndicated Community Offering more than 50,000 Conversion Shares;
(ii) no person, together with associates of or persons acting in concert with
such person, may purchase in either the Subscription Offering, Direct Community
Offering or Syndicated Community Offering more than 50,000 Conversion Shares;
(iii) the maximum number of Conversion Shares which may be subscribed for or
purchased in all categories in the Conversion Offerings by any person, when
combined with any Exchange Shares received, shall not exceed 50,000 shares of
Common Stock to be issued in the Conversion and Reorganization; and (iv) the
maximum number of Conversion Shares which may be subscribed for or purchased in
all categories in the Conversion Offerings by any person, together with any
associate or any group of persons acting in concert, when combined with any
Exchange Shares received, shall not exceed 50,000 shares of Common Stock to be
issued in the Conversion and Reorganization. The minimum order is 25 Conversion
Shares. At any time during the Conversion Offerings, and without further
approval by the MHC members or the Public Stockholders, the Primary Parties, in
their sole discretion, may increase any of the purchase limitations to up to 5%
of the Conversion Shares issued in the Conversion and Reorganization. Under
certain circumstances, subscribers may be resolicited in the event of such an
increase and given the opportunity to increase, decrease or rescind their
orders. If there is an oversubscription in the Conversion Offerings, Conversion
Shares will be allocated as set forth in the Plan of Conversion. See "THE
CONVERSION AND REORGANIZATION -- The Subscription, Direct Community and
Syndicated Community Offerings," "-- Procedure for Purchasing Shares in the
Subscription and Direct Community Offerings" and "--Limitations on Purchases of
Conversion Shares." BECAUSE OTS POLICY REQUIRES THAT THE MAXIMUM PURCHASE
LIMITATION SET FORTH IN THE PLAN OF CONVERSION TAKE INTO ACCOUNT THE EXCHANGE
SHARES TO BE ISSUED TO THE PUBLIC STOCKHOLDERS FOR THEIR PUBLIC SAVINGS BANK
SHARES, CERTAIN PUBLIC STOCKHOLDERS MAY BE LIMITED IN THEIR ABILITY TO PURCHASE
CONVERSION SHARES, OR EVEN PREVENTED FROM PURCHASING CONVERSION SHARES.
STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED IN THE CONVERSION AND
REORGANIZATION
OTS regulations require the aggregate purchase price of the Conversion
Shares be consistent with the independent appraisal of the estimated pro forma
market value of the MHC and the Savings Bank, as converted, which was estimated
by RP Financial to range from $55.3 million to $74.8 million as of December 5,
1997, or from 2,765,481 shares to 3,741,533 shares based on the Purchase Price.
Because the Public Stockholders will continue to hold approximately the same
aggregate percentage ownership interest in the Holding Company as they held in
the Savings Bank before the Conversion and Reorganization, before giving effect
to the payment of cash in lieu of issuing fractional Exchange Shares and any
Conversion Shares purchased by the Public Stockholders in the Conversion
Offerings, the independent appraisal valuation was multiplied by 53.02% (which
represents the MHC's percentage interest in the Savings Bank to determine the
midpoint of the Estimated Valuation Range, which is $65.1 million, or 3,253,507
shares based on the Purchase Price). The full text of the independent appraisal
describes the procedures followed, the assumptions made, limitations on the
review undertaken and matters considered, which included but did not depend on
the trading market for the Savings Bank Common Stock (see "MARKET FOR COMMON
STOCK"). The appraisal will be updated or confirmed at the completion of the
Conversion Offerings. The maximum of the Estimated Valuation Range may be
increased by up to 15% and the number of Conversion Shares may be increased to
2,281,312 shares due to material changes in the financial condition or results
of operations of the Savings Bank or changes in market conditions or general
financial, economic or regulatory conditions. No resolicitation of subscribers
will be made and subscribers will not be permitted to modify or cancel their
subscriptions unless the gross proceeds from the sale of the Conversion Shares
are less than the minimum or more than 15% above the maximum of the current
Estimated Valuation Range. All Conversion Shares will be sold at the uniform
Purchase Price ($20.00 per share), which was established by the Boards of
Directors of the Primary Parties. Any increase or decrease in the number of
shares of Conversion Stock will result in a corresponding change in the number
of Exchange Shares, so that upon consummation of the Conversion and
Reorganization, the Conversion Shares and the Exchange Shares will represent
approximately 53.02% and 46.98%, respectively, of the total outstanding shares
of Common Stock. See "PRO FORMA DATA" and "THE CONVERSION AND REORGANIZATION --
Stock Pricing, Exchange Ratio and Number of Shares to be Issued."
(viii)
<PAGE>
THE APPRAISAL IS NOT INTENDED TO BE AND SHOULD NOT BE CONSTRUED AS A
RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF PURCHASING COMMON STOCK IN
THE CONVERSION OFFERINGS NOR CAN ASSURANCE BE GIVEN THAT PURCHASERS OF THE
COMMON STOCK IN THE CONVERSION OFFERINGS WILL BE ABLE TO SELL SUCH SHARES AFTER
CONSUMMATION OF THE CONVERSION AND REORGANIZATION AT A PRICE THAT IS EQUAL TO OR
ABOVE THE PURCHASE PRICE. Furthermore, the pro forma stockholders' equity is not
intended to represent the fair market value of the Common Stock and may be
greater than amounts that would be available for distribution to stockholders in
the event of liquidation. A complete copy of the appraisal is available in the
manner set forth under "ADDITIONAL INFORMATION."
Based on the 708,873 Public Savings Bank Shares outstanding at the date of
this Prospectus, and assuming a minimum of 1,466,250 and a maximum of 1,983,750
Conversion Shares are issued in the Conversion Offerings, the Exchange Ratio is
expected to range from approximately 1.83281 Exchange Shares to 2.47969 Exchange
Shares for each Public Savings Bank Share issued and outstanding immediately
prior to the consummation of the Conversion and Reorganization. The final
Exchange Ratio will be affected if any stock options to purchase shares of
Savings Bank Common Stock are exercised after the date of this Prospectus and
before the consummation of the Conversion and Reorganization. If any stock
options are outstanding immediately before the consummation of the Conversion
and Reorganization, they will be converted into options to purchase shares of
Common Stock, with the number of shares subject to the option and the exercise
price per share to be adjusted based upon the Exchange Ratio so that the
aggregate exercise price remains unchanged. The duration of the options will
also be unchanged. As of the date of this Prospectus, there were outstanding
options to purchase 63,100 shares of Savings Bank Common Stock at a weighted-
average exercise price of $24.14 per share. The Savings Bank has no plans to
grant additional stock options before the consummation of the Conversion and
Reorganization.
<TABLE>
<CAPTION>
Conversion Shares to Exchange Stock to Shares
Be Issued(1) Be Issued(1) of Common
--------------------- ------------------- Stock to be Exchange
Amount Percent Amount Percent Outstanding(1) Ratio(1)
---------- --------- --------- -------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Minimum.... 1,466,250 53.02% 1,299,231 46.98% 2,765,481 1.83281
Midpoint... 1,725,000 53.02 1,528,507 46.98 3,253,507 2.15625
Maximum.... 1,983,750 53.02 1,757,783 46.98 3,741,533 2.47969
15% above
Maximum... 2,281,312 53.02 2,021,451 46.98 4,302,763 2.85164
- -----------------
</TABLE>
(1) Assumes that outstanding options to purchase 63,100 shares of Savings Bank
Common Stock at September 30, 1997 are not exercised before consummation of
the Conversion and Reorganization. However, assuming exercise, the
percentages represented by the Conversion Shares and the Exchange Shares
would be 50.89% and 49.11%, respectively, and the Exchange Ratio would be
1.75924, 2.06970, 2.38015, and 2.73717, at the minimum, midpoint, maximum
and 15% above the maximum of the Estimated Valuation Range, respectively.
THE VALUE OF THE EXCHANGE SHARES TO BE RECEIVED FOR EACH PUBLIC SAVINGS BANK
SHARE MAY BE LESS THAN THE MARKET VALUE OF THE PUBLIC SAVINGS BANK SHARES AT THE
TIME OF EXCHANGE BASED ON THE FINAL EXCHANGE RATIO AND THE MARKET PRICE AT THE
TIME OF THE EXCHANGE.
DIFFERENCES IN STOCKHOLDER RIGHTS
The Holding Company is a Delaware corporation subject to the provisions of
the Delaware General Corporation Law ("DGCL"), and the Savings Bank is a
federally-chartered savings bank subject to federal laws and regulations. Upon
consummation of the Conversion and Reorganization, the Public Stockholders will
become stockholders of the Holding Company and their rights will be governed by
the Holding Company's Certificate of Incorporation and Bylaws and Delaware law,
rather than the Savings Bank's Federal Stock Charter and Bylaws, federal law and
OTS regulations. The rights of stockholders of the Savings Bank are materially
different in certain
(ix)
<PAGE>
respects from the rights of stockholders of the Holding Company. See
"COMPARISON OF STOCKHOLDERS' RIGHTS" and "DESCRIPTION OF CAPITAL STOCK OF THE
HOLDING COMPANY."
USE OF PROCEEDS
The net proceeds from the sale of the Conversion Shares are estimated to
range from $28.3 million to $38.5 million, or to $44.4 million if the Estimated
Valuation Range is increased by 15%, depending upon the number of shares sold
and the expenses of the Conversion and Reorganization. The Holding Company has
received conditional OTS approval to purchase all of the capital stock of the
Savings Bank to be issued in the Conversion and Reorganization in exchange for
50% of the net proceeds of the Conversion Offerings. This will result in the
Holding Company retaining approximately $14.2 million to $19.3 million of the
net proceeds, or up to $22.2 million if the Estimated Valuation Range is
increased by 15%, and the Savings Bank receiving an equal amount. See "PRO
FORMA DATA."
Receipt of 50% of the net proceeds of the sale of the Common Stock will
increase the Savings Bank's capital and will support the expansion of the
Savings Bank's existing business activities. The Savings Bank 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 and
mortgage-backed securities.
The proceeds retained by the Holding Company initially will be invested
primarily in short-term U.S. Government and agency obligations and mortgage-
backed securities. Such proceeds will be available for additional contributions
to the Savings Bank in the form of debt or equity, to support future growth and
diversification of activities, as a source of dividends to the stockholders of
the Holding Company and for future repurchases of Common Stock (including
possible repurchases to fund the 1998 MRP), or to provide shares to be issued
upon exercise of stock options) to the extent permitted under Delaware law and
OTS regulations. The Holding Company also intends to use a portion of the net
proceeds retained by it to refinance the ESOP's third party loan, which had an
outstanding balance of $804,000 at September 30, 1997. See "PRO FORMA DATA."
The Holding Company may also consider exploring opportunities to use such
funds to expand operations through acquiring or establishing additional branch
offices and the acquisition of other financial institutions. In addition, the
Holding Company may consider exploring opportunities to expand into non-
traditional lines of business, such as securities brokerage, insurance agency
and real estate development activities, to the extent permitted by applicable
law. Currently, there are no specific plans, arrangements, agreements or
understandings, written or oral, regarding any such activities.
MARKET FOR COMMON STOCK
The Holding Company has never issued capital stock to the public and,
consequently, there is no existing market for the Common Stock. The Holding
Company has received conditional approval to have the Common Stock listed on the
Nasdaq National Market System under the symbol "PERT" (the current symbol for
the Public Savings Bank Shares, which are listed on the Nasdaq SmallCap Market).
Sandler O'Neill has agreed to act as a market maker for the Common Stock
following consummation of the Conversion and Reorganization. No assurance can
be given that an active and liquid trading market for the Common Stock will
develop or, if developed, will be maintained. Further, no assurance can be
given that purchasers will be able to sell their shares at or above the Purchase
Price after the Conversion and Reorganization. See "RISK FACTORS -- Absence of
Prior Market for the Common Stock" and "MARKET FOR COMMON STOCK."
DIVIDEND POLICY
The Savings Bank's Board of Directors has adopted a policy of paying regular
cash dividends on the Public Savings Bank Shares. The MHC has waived receipt of
all cash dividends paid by the Savings Bank to date. See "MARKET FOR COMMON
STOCK" for additional information. The Board of Directors intends to declare
and
(x)
<PAGE>
pay a regular cash dividend for the first calendar quarter of 1998 to holders of
Savings Bank Common Stock. The MHC does not intend to waive receipt of this
dividend, in order to avoid the expense of obtaining regulatory approval to
waive the dividend. The record date for determining the holders of Savings Bank
Common Stock entitled to receive the dividend is expected to pre-date the
consummation of the Conversion and Reorganization. Consequently, dividends, if
any, would not be paid on the Common Stock until after the consummation of the
Conversion and Reorganization, and may not occur before the first full quarter
following the consummation of the Conversion and Reorganization.
Following consummation of the Conversion and Reorganization, the Holding
Company's Board of Directors intends to declare cash dividends on the Common
Stock at an initial quarterly rate equal to $0.35 per share divided by the final
Exchange Ratio, resulting in intended economic parity with the dividends
currently paid on the Public Savings Bank Shares. The first dividend on the
Common Stock is expected during the month following the end of the quarter in
which the Conversion and Reorganization is consummated. Based upon the
Estimated Valuation Range, the Exchange Ratio is expected to be 1.83281,
2.15625, 2.47969 and 2.85164 at the minimum, midpoint, maximum and 15% above the
maximum of the Estimated Valuation Range, respectively, resulting in an initial
quarterly dividend rate of $0.19, $0.16, $0.14 and $0.12 per share,
respectively, following consummation of the Conversion and Reorganization.
Declarations of dividends by the Holding Company's Board of Directors will
depend upon a number of factors, including the amount of the net proceeds from
the Conversion Offerings retained by the Holding Company, investment
opportunities available to the Holding Company or the Savings Bank, capital
requirements, regulatory limitations, the Holding Company's and the Savings
Bank's financial condition and results of operations, tax considerations and
general economic conditions. Consequently, there can be no assurance that any
dividends will be paid on the Common Stock or that, if paid, such dividends will
not be reduced or eliminated in future periods. The Savings Bank intends to
continue to pay regular quarterly dividends through either the date of
consummation of the Conversion and Reorganization (on a pro rata basis) or the
end of the fiscal quarter during which the Conversion and Reorganization is
consummated. See "DIVIDEND POLICY."
OFFICERS' AND DIRECTORS' COMMON STOCK PURCHASES AND BENEFICIAL OWNERSHIP
At September 30, 1997, officers and directors of the Savings Bank (21
persons) beneficially owned 104,052 shares of Savings Bank Common Stock. See
"MANAGEMENT OF THE SAVINGS BANK -- Beneficial Ownership of Savings Bank Common
Stock by Directors and Executive Officers." Such shares of Savings Bank Common
Stock will be exchanged for Exchange Shares based on the final Exchange Ratio.
In addition to receipt of such Exchange Shares, officers and directors as a
group (21 persons) are expected to subscribe for an aggregate of approximately
51,925 Conversion Shares, or approximately 3.5% and 2.6% of the shares based on
the minimum and the maximum of the Estimated Valuation Range, respectively. See
"CONVERSION SHARES TO BE PURCHASED BY MANAGEMENT PURSUANT TO SUBSCRIPTION
RIGHTS" for a discussion of the anticipated number Exchange Shares to be
received by directors and officers and the anticipated number of Conversion
Shares to be subscribed for by such persons.
Upon consummation of the Conversion and Reorganization, directors, officers
and employees of the Holding Company and the Savings Bank would have voting
control, on a fully diluted basis, of 22.6% and 22.1% of the Common Stock, based
on the issuance of the minimum and maximum of the Estimated Valuation Range,
respectively. These percentages include the anticipated number of Exchange
Shares to be received and the anticipated number of Conversion Shares to be
purchased by such individuals, as well as allocation to participants' accounts
of all shares of Common Stock that will be held by the ESOP, the exercise of all
options under the 1993, 1996 and 1998 Stock Option Plans, and the funding of the
1996 and 1998 MRPs with Common Stock purchased in the open market. See "RISK
FACTORS -- Anti-takeover Considerations -- Voting Control by Insiders."
RISK FACTORS
See "RISK FACTORS" beginning on page 1 for a discussion of certain risks
related to the Conversion and Reorganization that should be considered by all
prospective investors.
(xi)
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following tables set forth certain information concerning the
consolidated financial position and results of operations of the Savings Bank
and its subsidiaries at the dates and for the periods indicated. This
information is qualified in its entirety by reference to the detailed
information contained in the Consolidated Financial Statements and Notes thereto
presented elsewhere in this Prospectus.
<TABLE>
<CAPTION>
At September 30,
------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(In Thousands)
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL CONDITION DATA:
Total assets......................................... $256,993 $209,827 $178,304 $171,533 $168,308
Cash and interest-bearing deposits................... 13,499 13,585 6,630 8,700 5,797
Investment in limited partnership(1)................. 5,004 -- -- -- --
Investment securities available for sale............. 11,326 2,494 800 299 --
Mortgage-backed securities available for sale........ 35,863 43,125 46,344 50,064 12,742
Mortgage-backed securities held for investment....... -- -- -- -- 45,935
Loans receivable, net................................ 178,772 140,758 116,539 104,852 97,004
Deposits............................................. 201,002 160,244 148,709 143,380 143,871
Borrowings........................................... 15,000 16,000 8,000 10,500 8,500
Stockholders' equity................................. 30,602 29,091 18,232 14,637 13,921
<CAPTION>
At September 30,
------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(In Thousands)
<S> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Interest income...................................... $ 18,396 $ 14,921 $ 13,543 $ 12,075 $ 12,034
Interest expense..................................... 9,496 7,425 8,761 5,624 6,184
-------- -------- -------- -------- --------
Net interest income.................................. 8,900 7,496 4,782 6,451 5,850
Provision for loan losses............................ 655 349 362 120 364
-------- -------- -------- -------- --------
Net interest income after provision for loan losses.. 8,245 7,147 4,420 6,331 5,486
Other income......................................... 1,855 1,927 3,231 1,565 1,613
General and administrative expenses.................. 7,446 6,894 5,540 4,749 4,414
-------- -------- -------- -------- --------
Income before income taxes, change in accounting
method, and extraordinary item...................... 2,654 2,180 2,111 3,147 2,685
Income taxes......................................... 926 756 194 1,064 947
-------- -------- -------- -------- --------
Income before change in method of
accounting for income taxes......................... 1,728 1,424 1,917 2,083 1,738
Cumulative effect of change in method of
accounting for income taxes......................... -- -- -- 350 --
-------- -------- -------- -------- --------
Net income........................................... $ 1,728 $ 1,424 $ 1,917 $ 2,433 $ 1,738
======== ======== ======== ======== ========
</TABLE>
(footnotes on second following page)
(xii)
<PAGE>
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Earnings per share(2):
Before cumulative effect of change in
accounting for income taxes........... $ 1.15 $ 0.95 $ 1.27 $ 1.39 N/A
Cumulative effect of change in
accounting for income taxes........... $ -- $ -- $ -- $ .23 N/A
---------- ---------- ---------- ----------
Net income............................. $ 1.15 $ 0.95 $ 1.27 $ 1.62 N/A
========== ========== ========== ==========
Dividends per share(3)................... $ 1.35 $ 1.20 $ 1.05 $ 0.76 N/A
========== ========== ========== ==========
Weighted average shares outstanding...... 1,505,432 1,504,601 1,504,059 1,502,418 N/A
<CAPTION>
Year Ended September 30,
------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C>
SELECTED OTHER DATA:
Number of:
Real estate loans outstanding........... 2,645 2,653 2,846 2,889 3,423
Deposit accounts........................ 31,504 26,135 21,490 16,676 16,735
Full-service offices.................... 6 5 5 4 3
</TABLE>
(footnotes on following page)
(xiii)
<PAGE>
<TABLE>
<CAPTION>
KEY OPERATING RATIOS:
At or For the
Year Ended September 30,
----------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Performance Ratios:
Return on average assets (net income divided by
average assets).................................. 0.72% 0.75% 0.92% 1.20%(4) 1.03%
Return on average equity (net income divided by
average equity).................................. 5.78 7.40 11.88 13.84(4) 13.36
Average equity to average assets.................. 12.54 10.16 7.77 8.61 7.75
Interest rate spread (difference between yield
on interest-earning assets and average cost of
interest-bearing liabilities for the period)(5).. 3.57 3.85 3.61 3.54 3.26
Net interest margin (net interest income as a
percentage of average interest-earning assets
for the period)(5)............................... 3.96 4.16 2.90 3.86 3.59
Dividend payout ratio(3).......................... 117.39 126.32 82.68 46.91 N/A
Non-interest expense to average assets............ 3.20 3.72 2.74 2.74 2.63
Average interest-earning assets to average
interest-bearing liabilities..................... 109.36 107.69 86.56 09.36 108.66
Asset Quality Ratios:
Allowance for loan losses to total loans
at end of period................................ 1.04 1.08 1.08 0.92 0.91
Net charge-offs to average outstanding loans
during the period................................ 0.18 0.07 0.04 0.04 0.06
Ratio of non-performing assets to total assets.... 0.20 0.38 0.33 0.73 0.82
Capital Ratios:
Average equity to average assets.................. 12.54 10.16 7.77 8.61 7.75
</TABLE>
- ----------------------------
(1) Represents a 20.625% equity investment in a limited partnership that
invests in mortgage servicing rights. See "BUSINESS OF THE SAVINGS BANK --
Lending Activities -- Loan Purchases and, Sales and Servicing" and Note 3
of Notes to Consolidated Financial Statements.
(2) The Savings Bank was not a public company before fiscal 1994.
(3) Takes into account dividends waived by the MHC. All dividends to the MHC
have been waived since the first quarter of fiscal 1994. See Note 18 of
Notes to Consolidated Financial Statements. The dividend payout ratio
based only on dividends actually paid to Public Stockholders was 55.19%,
22.40%, 6.53% and 3.71% for the years ended September 30, 1997, 1996, 1995
and 1994, respectively.
(4) Excludes the effect of the one-time change in method of accounting for
income taxes in fiscal 1994. Return on assets and return on average equity
were 1.40% and 16.16%, respectively.
(5) Excludes income on mutual funds totalling approximately $1.7 million in
fiscal 1995, which was reported as gains on sale and included in other
income.
(xiv)
<PAGE>
RECENT DEVELOPMENTS
The following tables set forth certain information concerning the consolidated
financial position and results of operations of the Savings Bank and its
subsidiaries at the dates and for the periods indicated. Information at
December 31, 1997 and for the three months ended December 31, 1997 and 1996 are
unaudited, but, in the opinion of management, contain all adjustments (none of
which were other than normal recurring entries) necessary for a fair
presentation of the results of such periods. The selected operating data for
the three months ended December 31, 1997 are not necessarily indicative of the
results of operation for the entire fiscal year. This information should be
read in conjunction with the Consolidated Financial Statements and Notes thereto
presented elsewhere in this Prospectus.
<TABLE>
<CAPTION>
At At
December 31, September 30,
1997 1997
------------ -------------
(In Thousands)
<S> <C> <C>
SELECTED FINANCIAL CONDITION DATA:
Total assets......................................... $292,059 $256,933
Cash and interest-bearing deposits................... 10,827 13,499
Investment in limited partnership(1)................. 5,069 5,004
Investment securities available for sale............. 15,524 11,326
Mortgage-backed securities available for sale........ 57,168 35,863
Loans receivable, net................................ 189,960 178,772
Deposits............................................. 202,558 201,002
Borrowings........................................... 54,780 15,000
Stockholders' equity................................. 30,609 30,602
<CAPTION>
Three Months
Ended December 31,
-----------------------
1997 1996
-------- --------
(In Thousands)
<S> <C> <C>
SELECTED OPERATING DATA:
Interest income...................................... $ 5,072 $ 4,182
Interest expense..................................... 2,741 2,000
-------- --------
Net interest income.................................. 2,331 2,182
Provision for loan losses............................ 88 30
-------- --------
Net interest income after provision for loan losses.. 2,243 2,152
Other income......................................... 719 511
General and administrative expenses.................. 2,000 1,798
-------- --------
Income before income taxes........................... 962 865
Income taxes......................................... 327 294
-------- --------
Net income........................................... $ 635 $ 571
======== ========
</TABLE>
(xv)
<PAGE>
<TABLE>
<CAPTION>
Three Months
Ended December 31,
-------------------
1997 1996
------------------- -----------
<S> <C> <C>
PER SHARE DATA:
Net income per share - basic...................... $ 0.42 $ 0.38
Dividends per share............................... $ 0.35 $ 0.30
Weighted average shares outstanding............... 1,508,873 1,504,601
At or For the
Three Months
Ended December 31,
- --------------------------------------------------
1997 1996
---------- ----------
KEY FINANCIAL RATIOS(2):
Performance Ratios:
Return on average assets (net income
divided by average assets)....................... 0.95% 1.08%
Return on average equity (net income
- --------------------------------------------------
divided by average equity)....................... 8.26 7.68
Interest rate spread (difference between yield
on interest-earning assets and average cost
of interest bearing liabilities for the period).. 3.39 3.77
Net interest margin (net interest income as a
percentage of average interest-earning assets
for the period).................................. 3.73 4.27
Dividend payout ratio(3).......................... 83.14 79.10
Non-interest expense to average assets............ 2.99 3.41
Average interest-earning assets to average
interest-bearing liabilities..................... 107.77 112.57
Asset Quality Ratios:
Allowance for losses to total loans
at end of period................................. 1.02 1.02
Net charge-offs to average outstanding
loans during the period.......................... 0.01 0.01
Ratio of non-performing assets to total assets.... 0.30 0.24
Capital Ratios:
Average equity to average assets.................. 11.51 14.07
- ---------------------
</TABLE>
(1) Represents a 20.625% equity investment in a limited partnership that
invests in mortgage servicing rights. See "BUSINESS OF THE SAVINGS BANK --
Lending Activities -- Loan Purchases and, Sales and Servicing" and Note 3
of Notes to Consolidated Financial Statements.
(2) Annualized where appropriate.
(3) Takes into account dividends waived by the MHC. All dividends to the MHC
have been waived since the first quarter of fiscal 1994. See Note 18 of
Notes to Consolidated Financial Statements. The dividend payout ratio
based only on dividends actually paid to Public Stockholders was 39.06% and
37.04% for the three months ended December 31, 1997 and 1996,
respectively.
(xvi)
<PAGE>
REGULATORY CAPITAL
The table below sets forth the Savings Bank's capital position relative to its
OTS capital requirements at the date indicated. The definitions of the terms
used in the table are those provided in the capital regulations issued by the
OTS. See "REGULATION -- Federal Regulation of the Savings Bank -- Capital
Requirements."
<TABLE>
<CAPTION>
At December 31, 1997
-------------------------------
Percent of Adjusted
Amount Total Assets(1)
------------- ---------------
(In Thousands)
<S> <C> <C>
Tangible capital................ $27,246 9.44%
Tangible capital requirement.... 4,332 1.50
------- -----
Excess.......................... $22,914 7.94%
======= =====
Core capital.................... $27,246 9.44%
Core capital requirement(2)..... 8,663 3.00
------- -----
Excess.......................... $18,583 6.44%
======= =====
Risk-based capital(3)........... $26,980 15.57%
Risk-based capital requirement.. 13,865 8.00
------- -----
Excess.......................... $13,115 7.57%
======= =====
</TABLE>
- -----------------------
(1) Based on total tangible assets of $288.8 million for purposes of the
tangible capital requirement, on total adjusted assets of $288.8 million
for purposes of the core capital requirement, and on risk-weighted assets
of $173.3 million for purposes of the risk-based capital requirement.
(2) The current OTS core capital requirement for savings associations is 3% of
total adjusted assets. The OTS has proposed core capital requirements that
would require a core capital ratio of 3% of total adjusted assets for
thrifts that receive the highest supervisory rating for safety and
soundness and a core capital ratio of 4% to 5% for all other thrifts.
(3) Percentage represents total core and supplementary capital divided by total
risk-weighted assets.
NON-PERFORMING ASSETS AND DELINQUENCIES
At December 31, 1997, the Savings Bank had $742,000 of loans accounted for on
a non-accrual basis ($398,000 in one- to- four family mortgage loans (consisting
of 10 loans), $268,000 in commercial business loans (consisting of four loans)
and $76,000 in consumer loans (consisting of 12 loans)) compared to $403,000 at
September 30, 1997. At December 31, 1997, the Savings Bank had $662,000 of
accruing loans contractually past due 90 days or more ($330,000 in commercial
real estate loans (consisting of one loan), $248,000 in one- to- four family
mortgage loans (consisting of five loans), $80,000 in construction loans
(consisting of two loans) and $4,000 in consumer loans (consisting of one loan))
compared to $479,000 at September 30, 1997. At December 31, 1997, the Savings
Bank had $140,000 of real estate owned, net, compared to $163,000 at September
30, 1997. At December 31, 1997 and September 30, 1997, the Savings Bank had no
restructured loans. Although no assurances can be given regarding future asset
quality, based on management's evaluation of the loan portfolio, the Savings
Bank believes that the increase in non-accrual loans and in accruing loans
contractually past due 90 days or more resulted from normal variances and is not
indicative of a material adverse trend in asset quality.
The allowance for loan losses was $2.0 million at December 31, 1997. Charge-
offs for the three months ended December 31, 1997 were $20,000, compared to
$17,000 for the comparative period in 1996. Recoveries for the three months
ended December 31, 1997 were $4,000, compared to $1,000 for the three months
ended December 31, 1996.
(xvii)
<PAGE>
The following table sets forth the breakdown of the allowance for loan
losses by category at December 31, 1997.
<TABLE>
<CAPTION>
As a Percent Percent of
of Outstanding Loans in Each
Loans in Category to
Amount Category Total Loans
------ --------------- --------------
(in thousands)
<S> <C> <C> <C>
Real estate mortgage............................... $ 766 0.52% 71.0%
Commercial real estate and
commercial business............................... 781 2.41 19.0
Consumer........................................... 411 2.10 10.0
------ ------
Total allowance for loan losses.................. $1,958 1.02% 100.00%
====== ======
</TABLE>
COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 1997 AND SEPTEMBER 30, 1997
Total assets increased 13.6% from $257.0 million at September 30, 1997
to $292.0 million at December 31, 1997, primarily as a result of increases in
investment securities available-for-sale, mortgage backed securities available-
for-sale and loans receivable, net. These increases were funded primarily by
FHLB advances and borrowings in the form of reverse repurchase agreements. The
purchase of investment securities and mortgage-backed securities are part of a
"wholesale leveraging" strategy, providing the Savings Bank the opportunity to
earn income based on the differential between the interest rates earned on such
securities and the interest rates paid on the borrowed funds.
In December 1996, the Savings Bank invested in a limited partnership
that invests in mortgage servicing rights. The investment in the Limited
Partnership increased 2.0% from $5.0 million at September 30, 1997 to $5.1 at
December 31, 1997. The value of this investment would be adversely impacted in
the event of a decrease in market interest rates. See "BUSINESS OF THE SAVINGS
BANK -- Lending Activities -- Equity Investment in Limited Partnership" for
additional information.
Investment securities available-for-sale increased 37.2% from $11.3
million at September 30, 1997 to $15.5 million at December 31, 1997. The
Savings Bank invested $6.2 million to purchase a $12.0 million FHLB Zero Coupon
Bond yielding 7.06%. The bond is callable in August 1998 and has a final
maturity of August 2007.
Mortgaged-backed securities available-for-sale increased 59.3% from
$35.9 million at September 30, 1997 to $57.2 million at December 31, 1997.
During the three months ended December 31, 1997, the Savings Bank invested $5.1
million in a 20-year, fixed-rate FHLMC security with a yield of 7.01% at
December 31, 1997, $5.1 million in a 20-year, fixed-rate FHLMC security with a
yield of 6.93% at December 31, 1997, $7.4 million in a one year adjustable rate
GNMA security yielding 5.69% at December 31, 1997, and $4.5 million in a monthly
adjustable interest rate CMO secured by FHLMC and GNMA obligations, with a yield
of 7.20% at December 31, 1997.
Loans receivable increased 6.3% from $178.8 million at September 30,
1997 to $190.0 million at December 31, 1997, primarily as a result of increased
refinancings of one- to- four family mortgage loans as a result of lower market
interest rates. One- to- four family mortgage loans increased $6.8 million
between September 30, 1997 and December 31, 1997.
Deposits increased $1.6 million from $201.0 million at September 30,
1997 to $202.6 million at December 31, 1997 as a result of normal growth, as
well as the promotion of short-term certificates of deposit.
Borrowings at December 31, 1997 consisted of FHLB advances and reverse
repurchase agreements. FHLB advances increased $19.0 million from $15.0 million
at September 30, 1997 to $34.0 million at December 31, 1997
(xviii)
<PAGE>
and were used to fund loan growth and the purchase of investment and mortgage-
backed securities. Reverse repurchase agreements amounted to $20.0 at December
31, 1997. There were no reverse repurchase agreements outstanding at September
30, 1997. Reverse repurchase agreements are a form of borrowings by the Savings
Bank where the Savings Bank sells securities under the agreement that it will
repurchase them at a later date, for which the Savings Bank receives funds from
the purchaser of the securities at an agreed upon interest rate. At December
31, 1997, there were two reverse repurchase agreements outstanding: (i) $10.0
million at an interest rate of 5.59%, which is callable away from the Savings
Bank after November 13, 2000, and has a maturity date of November 13, 2002, and
(ii) $10.0 million at an interest rate of 5.49%, which is callable away from the
Savings Bank after November 6, 1998, and has a maturity date of November 6,
2000.
Stockholders' equity was $30.6 million at September 30, 1997 and
December 31, 1997. Retained income was offset by dividends paid on the Public
Savings Bank and increased deferred compensation expense for the 1996 MRP. The
Savings Bank paid $248,000 in dividends on the Public Savings Bank Shares during
the three months ended December 31, 1997. Deferred compensation associated with
the 1996 MRP, which is recorded on the Savings Bank's balance sheet as a contra-
equity account, increased $565,000 from $325,000 to $890,000 as a result of open
market purchases by the 1996 MRP trust during the three months ended December
31, 1997 of the remaining 11,415 shares required to fund the plan.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND
1996
NET INCOME. Net income increased 11.2% from $571,000, or $0.38 per
share, for the three months ended December 31, 1996 to $635,000, or $0.42 per
share, for the three months ended December 31, 1997.
INTEREST INCOME. Interest income increased 21.3% from $4.2 million
for the three months ended December 31, 1996 to $5.1 million for the three
months ended December 31, 1997. Interest income on loans increased 23.0% from
$3.3 million to $4.0 million as the average balance of loans receivable, net,
increased 29.6% from $144.5 million for the three months ended December 31, 1996
to $187.2 million for the three months ended December 31, 1997, primarily as a
result of growth in loan originations and purchases. Interest income on
mortgage- backed securities decreased 8.9% from $740,000 for the three months
ended December 31, 1996 to $674,000 for the three months ended December 31,
1997, as the average balance of mortgage backed securities decreased 5.9% from
$43.8 million for the three months ended December 31, 1996 to $41.2 million for
the three months ended December 31, 1997, primarily as a result of restructuring
the mortgage-backed securities portfolio in September 1997. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --
Comparison of Financial Condition at September 30, 1997 and 1996" for further
information regarding the restructuring. Interest income on other investments
increased 124.8% from $161,000 for the three months ended December 31, 1996 to
$362,000 for the three months ended December 31, 1997 as the average balance of
other interest earning assets increased 100.0% from $10.7 million for the three
months ended December 31, 1996 to $21.4 million for the three months ended
December 31, 1997, primarily as the result of the purchase of higher yielding
investment securities to enhance portfolio yield.
INTEREST EXPENSE. Interest expense increased 37.0% from $2.0 million
for the three months ended December 31, 1996 to $2.7 million for the three
months ended December 31, 1997. Interest on deposits increased 30.6% from $1.8
million for the three months ended December 31, 1996 to $2.3 million for the
three months ended December 31, 1997 as the average balance of deposits
increased 25.0% from $161.2 million for the three months ended December 31, 1996
to $201.5 million for the three months ended December 31, 1997, and the weighted
average cost of deposits increased from 4.39% for the three months ended
December 31, 1996 to 4.59% for the three months ended December 31, 1997. The
increase in the average balance of deposits and the increase in the weighted
cost of deposits resulted primarily from the promotion of short-term
certificates of deposits.
Interest expense on borrowings (FHLB advances and reverse repurchase
agreements) increased $200,000 or 86.6% from $231,000 for the three months ended
December 31, 1996 to $431,000 for the three months ended December 31, 1997 as
the average borrowings increased from $16.0 million for the three months ended
December
(xix)
<PAGE>
31, 1996 to $30.3 million for the three months ended December 31, 1997 in order
to fund loan originations and purchases and the purchase of investment
securities and mortgage-backed securities.
PROVISION FOR LOAN LOSSES. Provisions for loan losses are charges to
earnings to bring the total allowance for loan losses to a level considered
adequate by management to provide for management's best estimate of inherent
loan losses. In determining the adequacy of the allowance for loan losses,
management evaluates various factors, including the market value of the
underlying collateral, growth and composition of the loan portfolio, the
relationship of the allowance for loan losses to outstanding loans, loss
experience, delinquency trends and economic conditions. Management evaluates
the carrying value of loans periodically and the allowance for loan losses is
adjusted accordingly. See "BUSINESS OF THE SAVINGS BANK -- Lending Activities -
- - Allowance for Loan Losses" and Note 4 to Notes to Consolidated Financial
Statements.
The provision for loan losses increased from $30,000 for the three
months ended December 31, 1996 to $88,000 for the three months ended December
31, 1997. Management deemed the increase necessary in light of the growth in
the loan portfolio in the three months ended December 31, 1997, particularly in
inherently riskier commercial real estate loans and consumer loans. At December
31, 1997, the allowance for loan losses was 1.02% of total loans and was deemed
adequate by management at that date.
OTHER INCOME. Total other income increased 40.7% from $511,000 for
the three months ended December 31, 1996 to $719,000 for the three months ended
December 31, 1997. Loan and deposit account service charges increased $35,000
as the result of an increase in the number of checking accounts. Gain or loss
on sale of real estate, net was a loss of $7,000 from the sale of one real
estate owned property for the three months ended December 31, 1997 compared to a
gain of $2,000 for the same three months of 1996. The gain or loss on sale of
loans, net increased $4,000 from $8,000 for the three months ended December 31,
1996 to $12,000 for the three months ended December 31, 1997. Other income
increased $178,000 from $67,000 for the three months ended December 31, 1996 to
$245,000 for the three months ended December 31, 1997 as a result of net income
earned from the mortgage banking company and the limited partnership. The
Savings Bank recorded net income from the mortgage banking company of $30,000
for the three months ended December 31, 1997, compared to a start-up loss of
$75,000 for the three months ended December 31, 1996. The Savings Bank recorded
net income of $65,000 from the limited partnership for the three months ended
December 31, 1997. The Savings Bank did not recognize any income from the
limited partnership during the three months ended December 31, 1996 because the
Savings Bank's investment in it commenced in December 1996.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses increased $202,000 from $1.8 million for the three months ended
December 31, 1996 to $2.0 million for the three months ended December 31, 1997.
Salaries and employee benefits increased 20.0% from $912,000 for the three
months ended December 31, 1996 to $1.1 million for the three months ended
December 31, 1997 as a result of staffing a call center ($79,000) and expenses
associated with the ESOP ($51,000) and the 1996 MRP ($52,000). Occupancy
expenses increased $3,000 from $111,000 for the three months ended December 31,
1996 to $114,000 for the three months ended December 31, 1997. Furniture and
equipment expense increased 22.7% or $39,000 from $172,000 for the three months
ended December 31, 1996 to $211,000 for the three months ended December 31, 1997
as the result of the purchase of additional computer hardware and software and
equipping the Perpetual Square Office. The FDIC insurance premiums decreased
$60,000 from $90,000 for the three months ended December 31, 1996 to $30,000 for
the three months ended December 31, 1997 as a result of the SAIF
recapitalization. Effective January 1, 1997, the insurance premium rate
decreased from 0.23% to 0.065% of assessable deposits. See "REGULATION --
Federal Regulation of Savings Associations -- Federal Deposit Insurance
Corporation."
Advertising expenses decreased $28,000 or 31.8% from $88,000 for the
three months ended December 31, 1996 to $60,000 for the three months ended
December 31, 1997 as a result of the winding down of the free checking
advertising campaign that began in October 1994. Data processing increased
$37,000 or 61.7% from $60,000 for the three months ended December 31, 1996 to
$97,000 for the three months ended December 31, 1997 as a result of increased
volume and cost of ATM and debit card processing. Office supplies decreased
$31,000 or 31.6% from
(xx)
<PAGE>
$98,000 for the three months ended December 31, 1996 to $67,000 for the three
months ended December 31, 1997, as the Savings Bank was changing computer
systems in the quarter ended December 31, 1996 that required new internal
processing supplies. Other expenses increased $59,000 or 22.1% from $267,000
for the three months ended December 31, 1996 to $326,000 for the three months
ended December 31, 1997, primarily due to consultant fees for sales training for
the call center.
INCOME TAXES. Income taxes increased $33,000 or 11.2% from $294,000
for the three months ended December 31, 1996 to $327,000 for the three months
ended December 31, 1997 due to an increase in income before taxes. The
effective tax rate was 34% for both three months ended December 31, 1996 and
1997.
(xxi)
<PAGE>
RISK FACTORS
Before investing in shares of the Common Stock offered hereby,
prospective investors should carefully consider the matters presented below, in
addition to matters discussed elsewhere in this Prospectus. The matters
presented below address the material risks associated with an investment in the
Common Stock.
CERTAIN LENDING RISKS
PURCHASED LOAN RISKS. The Savings Bank actively purchases loans,
other than consumer and commercial business loans. At September 30, 1997,
purchased loans totalled $25.2 million and consisted of one- to four-family
mortgage loans ($19.6 million), construction loans ($4.1 million) and commercial
real estate loans ($1.5 million). Such loans have been purchased primarily from
a mortgage company located in Hilton Head Island, South Carolina ($7.2 million),
and a mortgage banking company located in Greenville, South Carolina ($17.5
million), in which a service corporation subsidiary of the Savings Bank has an
equity investment. See "BUSINESS OF THE SAVINGS BANK -- Subsidiary Activities."
For the year ended September 30, 1997, the Savings Bank's purchases of one- to
four- family mortgage loans exceeded originations by approximately 25.5%. See
"BUSINESS OF THE SAVINGS BANK -- Lending Activities -- Loan Purchases and Sales
and Servicing." The Savings Bank expects that future loans will be purchased
primarily from the Greenville-based mortgage banking company because of
increasing competition in the Hilton Head Island market.
In addition to the lending risks discussed below, purchased loans have
added risk because they are originated by a third party to borrowers residing,
and secured by properties located, outside of the Savings Bank's primary market
area. Purchased loans are also more difficult to underwrite and monitor because
of the Savings Bank's unfamiliarity with the economy in which the properties are
located relative to the economy of its primary market area, the higher
probability of lack of personal contact with the borrower, and the distant
location of the collateral, among other things. Furthermore, loans secured by
properties located in an area whose economy is heavily dependent on tourism,
such as Hilton Head Island, South Carolina, are subject to greater risk because
economic downturns often have a greater adverse impact on tourism. See
"BUSINESS OF THE SAVINGS BANK -- Lending Activities -- Commercial Real Estate
Lending."
COMMERCIAL REAL ESTATE LENDING RISKS. At September 30, 1997, the
Savings Bank's commercial real estate loan portfolio amounted to $27.0 million,
or 15.1% of net loans receivable, compared to $2.6 million, or 2.7% of net loans
receivable, at September 30, 1993. Commercial real estate lending is inherently
riskier than one- to four-family mortgage lending. Because payments on loans
secured by commercial properties often depend upon 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, among other things. See
"BUSINESS OF THE SAVINGS BANK -- Lending Activities -- Commercial Real Estate
Loans."
CONSUMER LENDING RISKS. At September 30, 1997, the Savings Bank's
consumer loan portfolio amounted to $19.2 million, or 10.7% of net loans
receivable. Consumer lending is also inherently riskier than one- to four-
family mortgage lending. Collateral such as automobiles, boats and other
personal property depreciate rapidly and are often an inadequate repayment
source if a borrower defaults. In addition, consumer loan repayments depend on
the borrower's continuing financial stability and are more likely to be
adversely affected by job loss, divorce, illness, personal bankruptcy and other
financial hardship. See "BUSINESS OF THE SAVINGS BANK -- Lending Activities --
Consumer Loans."
CONSTRUCTION LENDING RISKS. At September 30, 1997, the Savings Bank's
construction loan portfolio amounted to $17.1 million, or 9.6% of net loans
receivable, of which $6.4 million consisted of speculative construction loans.
Speculative construction loans are so named because there is not a commitment
for permanent financing in place at the time the construction loan is
originated.
1
<PAGE>
Construction lending is inherently riskier than one- to four-family
mortgage lending. Construction loans generally have higher loan balances than
one- to four-family mortgage loans. In addition, the potential for cost
overruns because of the inherent difficulties in estimating construction costs
and, therefore, collateral values and the difficulties and costs associated with
monitoring construction progress, among other things, are major contributing
factors to this greater credit risk. Speculative construction loans have the
added risk that there is not an identified buyer for the completed home when the
loan is originated, with the risk that the builder will have to service the
construction loan debt and finance the other carrying costs of the completed
home for an extended time period until a buyer is identified. Furthermore, the
demand for construction loans and the ability of construction loan borrowers to
service their debt depends highly on the state of the general economy, including
market interest rate levels, and the state of the economy of the Savings Bank's
primary market area. A material downturn in economic conditions would be
expected to have a material adverse effect on the credit quality of the
construction loan portfolio. See "BUSINESS OF THE SAVINGS BANK -- Lending
Activities -- Construction Loans."
COMMERCIAL BUSINESS LENDING RISKS. At September 30, 1997, the Savings
Bank's commercial business loan portfolio amounted to $7.2 million, or 4.0% of
net loans receivable. Subject to market conditions and other factors, the
Savings Bank intends to expand its commercial business lending activities within
its primary market area. Commercial business lending is inherently riskier than
one- to four-family mortgage lending. Although commercial business loans are
often collateralized by equipment, inventory, accounts receivable or other
business assets, the liquidation value of these assets in the event of a
borrower default is often an insufficient source of repayment because accounts
receivable may be uncollectible and inventories and equipment may be obsolete or
of limited use, among other things. See "BUSINESS OF THE SAVINGS BANK --
Lending Activities -- Commercial Business Loans."
GEOGRAPHIC CONCENTRATION OF CREDIT AND INVESTMENT RISK. The Savings
Bank has no significant concentration of credit and investment risk other than
that a substantial portion of its loan portfolio is secured by real estate,
either as primary or secondary collateral, located in its primary market area.
In addition to its lending activities, the Savings Bank, through its investment
in a service corporation subsidiary, engages in commercial and residential
property development in its primary market area. See "BUSINESS OF THE SAVINGS
BANK --Subsidiary Activities." This geographic concentration of credit and
investment risk could have a material adverse effect on the Savings Bank's
financial condition and results of operations to the extent there is a material
deterioration in that area's economy and real estate values. See "BUSINESS OF
THE SAVINGS BANK -- Lending Activities."
INTEREST RATE RISK
GENERAL. The Savings Bank's profitability, like that of most
financial institutions, depends largely on its net interest income, which is the
difference between the interest income received from its interest-earning assets
and the interest expense incurred in connection with its interest-bearing
liabilities. To better control the impact of changes in interest rates, the
Savings Bank has sought to improve the match between asset and liability
maturities or repricing periods and rates by emphasizing the origination and
purchase of adjustable-rate mortgage ("ARM") loans and shorter term
construction, commercial real estate, commercial business and consumer loans.
POTENTIAL ADVERSE IMPACT ON RESULTS OF OPERATIONS. The Savings Bank's
operations would be adversely affected by a material prolonged increase in
market interest rates. At September 30, 1997, assuming an instantaneous 200
basis point increase in market interest rates, the Savings Bank's net portfolio
value ("NPV") would decrease by
2
<PAGE>
approximately $6.5 million or 17%. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Interest Rate Sensitivity
Analysis of Net Portfolio Value."
POTENTIAL ADVERSE IMPACT ON FINANCIAL CONDITION. Changes in the level
of interest rates also affect the volume of loans originated or purchased by the
Savings Bank and, thus, the amount of loan and commitment fees, as well as the
market value of the Savings Bank's investment securities and other interest-
earning assets. Changes in interest rates also can affect the average life of
loans. Decreases in interest rates may result in increased prepayments of loans,
as borrowers refinance to reduce borrowing costs. Under these circumstances, the
Savings Bank is subject to reinvestment risk to the extent that it is not able
to reinvest such prepayments at rates which are comparable to the rates on the
maturing loans or securities. Moreover, volatility in interest rates also can
result in disintermediation, or the flow of funds away from savings institutions
into direct investments, such as U.S. Government and corporate securities and
other investment vehicles which, because of the absence of federal insurance
premiums and reserve requirements, generally pay higher rates of return than
savings institutions.
At September 30, 1997, out of total one-to four-family mortgage loans
of $110.6 million, the Savings Bank had $45.6 million of ARM loans in its
portfolio, the majority of which reprice every year. Furthermore, the Savings
Bank's ARM loans contain periodic and lifetime interest rate adjustment limits
which, in a rising interest rate environment, may prevent such loans from
repricing to market interest rates. While management anticipates that ARM loans
will better offset the adverse effects of an increase in interest rates as
compared to fixed-rate mortgages, the increased mortgage payments required of
ARM borrowers in a rising interest rate environment could potentially cause an
increase in delinquencies and defaults. The Savings Bank has not historically
had an increase in such delinquencies and defaults on ARM loans, but no
assurance can be given that such delinquencies or defaults would not occur in
the future. The marketability of the underlying property also may be adversely
affected in a high interest rate environment. Moreover, the Savings Bank's
ability to originate or purchase ARM loans may be affected by changes in the
level of interest rates and by market acceptance of the terms of such loans. In
a relatively low interest rate environment, as currently exists, borrowers
generally tend to favor fixed-rate loans over ARM loans to hedge against future
increases in interest rates.
Changes in the level of interest rates also affect the Savings Bank's
portfolio of mortgage-backed securities and CMOs. Payments in the Savings
Bank's mortgage-backed securities and CMO portfolios may be affected by
declining and rising interest rate environments. In a low and falling interest
rate environment, prepayments could be expected to increase in future periods.
The Savings Bank's adjustable-rate instruments would be expected to generate
lower yields as a result of the effect of falling interest rates on the indices
for determining payment of interest. Additionally, the increased principal
payments received may be subject to reinvestment at lower rates. Conversely, in
a period of rising interest rates, prepayments would be expected to decrease,
which would make less principal available for reinvestment at higher rates. In
a rising interest rate environment, adjustable-rate instruments generally would
generate higher yields to the extent that the indices for determining payment of
interest did not exceed the lifetime interest rate caps. Such changing interest
rate environment may subject the Savings Bank's mortgage-backed securities and
CMO portfolios to yield and price volatility.
The Savings Bank has an equity investment in a limited partnership
that invests in mortgage servicing rights. The value of that investment was
$5.0 million at September 30, 1997. See "BUSINESS OF THE SAVINGS BANK --
Lending Activities -- Equity Investment in Limited Partnership" for additional
information. The value of this investment would be adversely affected if the
mortgage servicing rights were prematurely extinguished by the prepayment of the
underlying loans. A decrease in market interest rates could be expected to
increase the rate of prepayments as borrowers refinance at lower interest rates.
In that event, the Savings Bank may be required to accelerate its amortization
of this investment, or even write-off the full value of the investment in a
given period, which would have a material adverse effect on the Savings Bank.
3
<PAGE>
COMPETITION
The Savings Bank faces significant competition in its primary market
area (Anderson and Oconee Counties, South Carolina) both in making loans and
attracting deposits. Both counties have a high density of financial
institutions, many of which are branches of Southeastern region bank holding
companies which have greater financial resources than the Savings Bank, all of
which compete with the Savings Bank in varying degrees. The Savings Bank
competes for loans principally with commercial banks, thrift institutions,
credit unions, mortgage banking companies and insurance companies.
Historically, commercial banks, thrift institutions and credit unions have been
the Savings Bank's most direct competition for deposits. The Savings Bank also
competes with short-term money market funds and with other financial
institutions, such as brokerage firms and insurance companies, for deposits. See
"BUSINESS OF THE SAVINGS BANK -- Competition."
ESTIMATED VALUATION RANGE BELOW MARKET VALUE
OTS policy requires that the final Exchange Ratio be determined based
on the number of shares issued in the Conversion Offering in order to maintain
the Public Stockholders' approximate 46.98% ownership interest in the Savings
Bank. THE FINAL EXCHANGE RATIO WILL NOT BE BASED ON THE MARKET VALUE OF THE
PUBLIC SAVINGS BANK SHARES. Based on the Purchase Price ($20.00 per share) and
the Exchange Ratio, an Exchange Share has an equivalent value of $36.66, $43.13,
$49.59 and $57.03 at the minimum, midpoint, maximum, and maximum, as adjusted,
of the Estimated Valuation Range, respectively. As of _________ ____, 1998, the
last trade in the Public Savings Bank Shares as reported by the Nasdaq Stock
Market was at $____ per share. There can be no assurance as to the market price
of a Public Savings Bank Shares at the consummation of the Conversion and
Reorganization. See "THE CONVERSION AND REORGANIZATION -- Stock Pricing,
Exchange ratio and Number of Shares to be Issued."
RETURN ON EQUITY AFTER CONVERSION AND REORGANIZATION
Return on equity (net income for a given period divided by average
equity during that period) is a ratio used by many investors to compare the
performance of a particular financial institution to its peers. The Savings
Bank's return on equity for the year ended September 30, 1997 was, and the
Holding Company's post-Conversion and Reorganization return on equity will be,
less than the average return on equity for publicly traded thrift institutions
and their holding companies. See "SELECTED CONSOLIDATED FINANCIAL INFORMATION"
for numerical information regarding the Savings Bank's historical return on
equity and "CAPITALIZATION" for a discussion of the Holding Company's estimated
pro forma consolidated capitalization as a result of the Conversion and
Reorganization. In order for the Holding Company to achieve a return on equity
comparable to the historical levels of the Savings Bank, the Holding Company
either would have to increase net income or reduce stockholders' equity, or
both, commensurate with the increase in equity resulting from the Conversion and
Reorganization. Reductions in equity could be achieved by, among other things,
the payment of regular or special cash dividends (although no assurances can be
given as to their payment or, if paid, their amount and frequency), the
repurchase of shares of Common Stock subject to applicable regulatory
restrictions, or the acquisition of branch offices, other financial institutions
or related businesses (neither the Holding Company nor the Savings Bank has any
present plans, arrangements, or understandings, written or oral, regarding any
repurchase or acquisitions). See "DIVIDEND POLICY" and "USE OF PROCEEDS."
Achievement of increased net income levels will depend on several important
factors outside management's control, such as general economic conditions,
including the level of market interest rates, competition and related factors,
among others. In addition, the expenses associated with the 1996 and 1998 MRPs
(see "-- Expenses Associated with MRP"), along with other post-Conversion and
Reorganization expenses are expected to contribute initially to reduced earnings
levels. Subject to market conditions, initially the Savings Bank intends to
deploy the net proceeds of the Conversion Offerings to support its lending
activities to increase earnings per share and book value per share, with the
goal of achieving a return on equity comparable to the average for publicly
traded thrift institutions and their holding companies. This goal will likely
take a number of years to achieve and no assurances can be given that this goal
can be attained. Consequently, for the foreseeable future, investors should not
expect a return on equity which will meet or exceed the average return on equity
for publicly
4
<PAGE>
traded thrift institutions, many of which are not newly converted institutions
and have had time to deploy their conversion capital.
EXPENSES ASSOCIATED WITH MRP
In addition to the expense that the Savings Bank will recognize in
connection with the 1996 MRP as shares awarded to recipients vest, the Savings
Bank will recognize material employee compensation and benefit expenses assuming
the 1998 MRP is implemented. The actual aggregate amount of these new expenses
cannot be currently predicted because applicable accounting practices require
that they be based on the then fair market value of the shares of Common Stock
on the date on which the shares are acquired. These expenses have been reflected
in the pro forma financial information under "PRO FORMA DATA" assuming the
Purchase Price ($20.00 per share) as fair market value. Actual expenses,
however, will be based on the fair market value of the Common Stock at the time
of recognition, which may be higher or lower than the Purchase Price. See
"MANAGEMENT OF THE SAVINGS BANK -- Benefits -- Management Recognition Plan."
ANTI-TAKEOVER CONSIDERATIONS
PROVISIONS IN THE HOLDING COMPANY'S GOVERNING INSTRUMENTS AND DELAWARE
AND FEDERAL LAW. Certain provisions included in the Holding Company's
Certificate of Incorporation and in the DGCL might discourage potential proxy
contests and other potential takeover attempts, particularly those that have not
been negotiated with the Board of Directors. As a result, these provisions may
preclude takeover attempts that certain stockholders may deem to be in their
best interest and may tend to perpetuate existing management. These provisions
include, among other things, a provision limiting voting rights of beneficial
owners of more than 10% of the Common Stock and supermajority voting
requirements for certain business combinations. In addition, the Certificate of
Incorporation provides for the election of directors to staggered terms of three
years, eliminates cumulative voting for directors, and permits the removal of
directors without cause only upon the vote of holders of 80% of the outstanding
voting shares. Certain provisions of the Certificate of Incorporation of the
Holding Company cannot be amended by stockholders unless an 80% stockholder vote
is obtained. The Certificate of Incorporation also contains provisions
regarding the timing and content of stockholder proposals and nominations and
limiting the calling of special meetings. The existence of these anti-takeover
provisions could result in the Holding Company being less attractive to a
potential acquiror and in stockholders receiving less for their shares than
otherwise might be available in the event of a takeover attempt. Furthermore,
federal regulations prohibit for three years after consummation of the
Conversion and Reorganization the ownership of more than 10% of the Savings Bank
or the Holding Company without prior OTS approval. Federal law also requires
OTS approval prior to the acquisition of "control" (as defined in OTS
regulations) of an insured institution. See "RESTRICTIONS ON ACQUISITION OF THE
HOLDING COMPANY."
VOTING CONTROL BY INSIDERS. Management's potential voting control
alone, as well as together with additional stockholder support, might preclude
or make more difficult takeover attempts that certain stockholders may deem to
be in their best interest and might tend to perpetuate existing management.
Upon consummation of the Conversion and Reorganization, directors, officers and
employees of the Holding Company and the Savings Bank would have voting control,
on a fully diluted basis, of 22.6% and 22.1% of the Common Stock, based on the
issuance of the minimum and maximum of the Estimated Valuation Range,
respectively. These percentages include the anticipated number of Exchange
Shares to be received and the anticipated number of Conversion Shares to be
purchased by such individuals (see "CONVERSION SHARES TO BE PURCHASED BY
MANAGEMENT PURSUANT TO SUBSCRIPTION RIGHTS"), as well as allocation to
participants' accounts of all shares of Common Stock that will be held by the
ESOP, the exercise of all options under the 1993, 1996 and 1998 Stock Option
Plans, and the funding of the 1996 and 1998 MRPs with Common Stock purchased in
the open market. See "MANAGEMENT OF THE SAVINGS BANK -- Benefits" for a
discussion of the ESOP, 1993, 1996 and 1998 Stock Option Plans, and the 1996 and
1998 MRPs.
5
<PAGE>
PROVISIONS OF EMPLOYMENT AGREEMENTS. The employment agreements of
Messrs. Orr, Hall and Visioli 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 Savings Bank. Assuming a change of control occurred as of September 30,
1997, the aggregate value of the severance benefits available to these executive
officers under the agreements would have been approximately $583,000. These
employment agreements 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 Savings Bank.
See "MANAGEMENT OF THE SAVINGS BANK -- Benefits," "RESTRICTIONS ON
ACQUISITION OF THE HOLDING COMPANY" and "DESCRIPTION OF CAPITAL STOCK OF THE
HOLDING COMPANY."
POSSIBLE DILUTIVE EFFECT OF BENEFIT PROGRAMS
The exercise of options under the 1993 and 1996 Stock Option Plans and
the 1998 Stock Option Plan (assuming its implementation) will be dilutive to
stockholders. Furthermore, the implementation of the 1998 MRP will also be
dilutive to stockholders to the extent its is funded with authorized but
unissued shares of Common Stock of the Holding Company. Assuming the exercise
of all outstanding options under the 1993, 1996 and 1998 Stock Option Plans and
the funding of the 1998 MRP with authorized but unissued shares of Common Stock
of the Holding Company, the voting control of stockholders of the Holding
Company would be diluted by 10.4% at each of the minimum, midpoint, maximum, and
maximum, as adjusted, of the Estimated Valuation Range. See "MANAGEMENT OF THE
SAVINGS BANK -- Benefits" for a discussion of these stock benefit plans.
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. Prior to the Conversion and
Reorganization, the Public Savings Bank Shares have been listed on the Nasdaq
Smallcap Market under the symbol "PERT." Although the Holding Company has
received conditional approval to list the Common Stock on the Nasdaq National
Market also under the same symbol, there can be no assurance that an active and
liquid trading market for the Common Stock will develop or, if developed, will
continue. Furthermore, there can be no assurance that purchasers will be able
to sell their shares at or above the Purchase Price. See "MARKET FOR COMMON
STOCK."
POSSIBLE INCREASE IN ESTIMATED VALUATION RANGE AND NUMBER OF SHARES ISSUED
The Estimated Valuation Range may be increased up to 15% to reflect
material changes in the financial condition or results of operations of the
Savings Bank or changes in market conditions or general financial, economic or
regulatory conditions following the commencement of the Conversion Offerings.
If the Estimated Valuation Range is increased, it is expected that the Holding
Company would increase the Estimated Price Range so that up to 2,281,312
Conversion Shares at the Purchase Price would be issued for an aggregate price
of up to $45.6 million. This increase in the number of shares would decrease a
subscriber's pro forma net income 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 income per share. See "PRO FORMA DATA."
6
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Common Stock offered hereby are
estimated to range from $28.3 million to $38.5 million, or up to $44.4 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
Savings Bank to be issued in the Conversion and Reorganization in exchange for
50% of the net proceeds of the Conversion Offerings. This will result in the
Holding Company retaining approximately $14.2 million to $19.3 million of net
proceeds, or up to $22.2 million if the Estimated Valuation Range is increased
by 15%, and the Savings Bank receiving an equal amount. See "PRO FORMA DATA."
Receipt of 50% of the net proceeds of the sale of the Common Stock
will increase the Savings Bank's capital and will support the expansion of the
Savings Bank's existing business activities. The Savings Bank 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 and
mortgage-backed securities.
The net proceeds retained by the Holding Company initially will be
invested primarily in short-term U.S. Government and agency obligations and
mortgage-backed securities or in a deposit account either at the Savings Bank or
another financial institution. Such proceeds will be available for additional
contributions to the Savings Bank 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 also use a portion of the net proceeds retained by it to
refinance the ESOP's third party loan, which had an outstanding balance of
$804,000 at September 30, 1997. See "PRO FORMA DATA."
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. In addition, the Holding
Company may consider exploring opportunities to expand into non-traditional
lines of business, such as securities brokerage, insurance agency and real
estate development activities, to the extent permitted by applicable law.
Currently, there are no specific plans, arrangements, agreements or
understandings, written or oral, regarding any diversification activities.
Following consummation of the Conversion and Reorganization, the
Holding Company's 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 Savings Bank will be
capitalized in excess of all applicable regulatory requirements after any such
repurchases and that capital will be adequate, taking into account, among other
things, the level of nonperforming and classified assets, the Holding Company's
and the Savings Bank's current and projected results of operations and
asset/liability structure, the economic environment and tax and other regulatory
considerations. For a discussion of
7
<PAGE>
the regulatory limitations applicable to stock repurchases and current OTS
policy with respect thereto, see "THE CONVERSION AND REORGANIZATION --
Restrictions on Repurchase of Stock."
DIVIDEND POLICY
GENERAL
The Savings Bank's Board of Directors has adopted a policy of paying
regular cash dividends on the Public Savings Bank Shares. The MHC has waived
receipt of all cash dividends paid by the Savings Bank to date. See "MARKET FOR
COMMON STOCK" for additional information. The Board of Directors intends to
declare and pay a regular cash dividend for the first calendar quarter of 1998
to holders of Savings Bank Common Stock. The MHC does not intend to waive
receipt of this dividend in order to avoid the expense obtaining regulatory
approval to waive the dividend. The record date for determining the holders of
Savings Bank Common Stock entitled to receipt of the dividend is expected to
pre-date the consummation of the Conversion and Reorganization. Consequently,
dividends, if any, would not be paid on the Common Stock until after the
consummation of the Conversion and Reorganization, and may not occur before the
first full quarter following the consummation of the Conversion and
Reorganization.
Upon completion of the Conversion and Reorganization, the Holding
Company's Board of Directors will have the authority to declare dividends on the
Common Stock, subject to statutory and regulatory requirements. The Board of
Directors of the Holding Company intends to pay cash dividends on the Common
Stock at an initial quarterly rate equal to $0.35 per share divided by the final
Exchange Ratio, resulting in intended economic parity with the dividends
currently paid on the Public Savings Bank Shares. The first dividend payment on
the Common Stock is expected during the month following the end of the quarter
in which the Conversion and Reorganization is consummated. Based upon the
Estimated Valuation Range, the Exchange Ratio is expected to be 1.83281,
2.15625, 2.47969 and 2.85164 at the minimum, midpoint, maximum and 15% above the
maximum of the Valuation Price Range, respectively, resulting in an initial
quarterly dividend rate of $0.19, $0.16, $0.14 and $0.12 per share,
respectively, commencing with the first full quarter following consummation of
the Conversion and Reorganization. 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 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 Savings Bank to the Holding Company discussed below. 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 Savings Bank because the Holding Company initially will
have no source of income other than dividends from the Savings Bank and earnings
from the investment of the net proceeds from the Conversion Offerings retained
by the Holding Company. OTS regulations require the Savings Bank 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 Savings Bank 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 Savings Bank 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 Savings Bank 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 Savings Bank below the amount required for the
8
<PAGE>
liquidation account to be established pursuant to the Savings Bank's of
Conversion. See "REGULATION -- Federal Regulation of the Savings Bank --
Limitations on Capital Distributions," "THE CONVERSION AND REORGANIZATION --
effects of Conversion and Reorganization on Depositors and Borrowers of the
Savings Bank -- Liquidation Account" and Note 12 of Notes to the Consolidated
Financial Statements included elsewhere herein.
Under Delaware law, the Holding Company is generally limited to paying
dividends in an amount equal to the excess of its net assets (total assets minus
total liabilities) over its statutory capital or, if no such excess exists, to
its net profits for the current and/or immediately preceding fiscal year.
The Holding Company has committed to the OTS not to make any tax-free
distributions to stockholders in the form of a return of capital, or take any
preliminary action in contemplation of any such distributions, within the first
year following the consummation of the Conversion.
TAX CONSIDERATIONS
In addition to the foregoing, retained earnings of the Savings Bank
appropriated to bad debt reserves and deducted for federal income tax purposes
cannot be used by the Savings Bank to pay cash dividends to the Holding Company
without the payment of federal income taxes by the Savings Bank 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 11 of Notes to the Consolidated
Financial Statements included elsewhere herein. The Holding Company does not
contemplate any distribution by the Savings Bank that would result in a
recapture of the Savings Bank'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 the Common Stock on the Nasdaq
National Market System under the symbol "PERT," there can be no assurance that
the Holding Company will meet Nasdaq National Market System listing
requirements, which include a minimum market capitalization, at least three
market makers and a minimum number of record holders. Sandler O'Neill has agreed
to make a market for the Common Stock following consummation of the Conversion
and Reorganization 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. Based on the level of market making in the Public Savings Bank
Shares, the Holding Company anticipates that prior to the completion of the
Conversion and Reorganization it will be able to obtain the commitment from at
least two additional broker-dealers to act as market maker for the Common Stock.
Additionally, the development of a liquid public market depends on the existence
of willing buyers and sellers, the presence of which is not within the control
of the Holding Company, the Savings Bank or any market maker. There can be no
assurance that an active and liquid trading market for the Common Stock will
develop or that, if developed, it will continue. The number of active buyers and
sellers of the Common Stock at any particular time may be limited. Under such
circumstances, investors in the Common Stock could have difficulty disposing of
their shares on short notice and should not view the Common Stock as a
short-term investment. Furthermore, there can be no assurance that purchasers
will be able to sell their shares at or above the Purchase Price or that
quotations will be available on the Nasdaq National Market System as
contemplated.
Since September 30, 1996 (the consummation date of the Additional
Offering), the Public Savings Bank Shares have been listed on the Nasdaq
SmallCap Market under the symbol "PERT." Before that date, the Public Savings
Bank Shares were unlisted and traded in privately negotiated transactions. At
September 30, 1997, there were 294 record holders of the Public Savings Bank
Shares (not including holders in nominee or "street name") and four market
makers in the Public Savings Bank Shares as reported by the Nasdaq Stock Market.
The following table
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<PAGE>
sets forth the high and low trading prices, as reported by Nasdaq, and cash
dividends paid for each quarter during the fiscal 1997. Market price data for
fiscal 1996 is not presented because the Public Savings Bank Shares traded in
private transactions for which comparable data is unavailable. The Savings Bank
paid a quarterly cash dividend of $0.30 on the outstanding Public Savings Bank
Shares during fiscal 1996.
Cash Dividend
Fiscal 1997 High Lo Declared
- ----------- ---- --- --------
Quarter Ended December 31, 1996.......... $24.25 $20.25 $0.30
Quarter Ended March 31, 1997............. 26.50 22.50 0.35
Quarter Ended June 30, 1997.............. 29.75 24.00 0.35
Quarter Ended September 30, 1997......... 57.0 30.25 0.35
10
<PAGE>
CAPITALIZATION
The following table presents the historical capitalization of the
Savings Bank 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 Conversion
Shares at the minimum, midpoint, maximum and maximum, as adjusted, of the
Estimated Valuation Range. The Conversion 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 Conversion Shares to be issued in the Conversion and
Reorganization would materially affect pro forma consolidated capitalization.
<TABLE>
<CAPTION>
Holding Company Pro Forma Consolidated Capitalization
Savings Based Upon the Sale of
Bank 1,466,250 1,725,000 1,983,750 2,281,312
Capitalization Shares at Shares at Shares at Shares at
at $20.00 $20.00 $20.00 $20.00
September 30, 1997 Per Share(1) Per Share(1) Per Share(1) Per Share(2)
(In thousands)
<S> <C> <C> <C> <C> <C>
Deposits(3)........................... $201,002 $201,002 $201,002 $201,002 $201,002
FHLB advances......................... 15,000 15,000 15,000 15,000 15,000
ESOP debt(4).......................... 804 804 804 804 804
---------- ---------- ---------- ---------- ----------
Total deposits and borrowed funds..... $216,806 $216,806 $216,806 $216,806 $216,806
======== ======== ======== ======== ========
Stockholders' equity:
Preferred stock:
250,000 shares, $.01 par
value per share, authorized;
none issued or outstanding....... -- -- -- -- --
Common Stock:
7,500,000 shares, $.01 par
value per share, authorized;
specified number of shares
assumed to be issued and
outstanding(5)................... 1,509 14 17 20 23
Additional paid-in capital......... 11,652 41,482 46,574 51,666 57,525
Retained earnings(6)............... 18,382 18,382 18,382 18,382 18,382
Unrealized loss on securities
available-for-sale, net of tax.... 188 188 188 188 188
Less:
Savings Bank Common Stock
acquired by ESOP in MHC
Reorganization and
Additional Offering............. (804) (804) (804) (804) (804)
Common Stock to be acquired
by 1996 MRP(7).................. (325) (938) (938) (938) (938)
Common Stock to be acquired
by 1998 MRP(8).................. -- (1,173) (1,380) (1,587) (1,825)
---------- --------- --------- --------- ---------
Total stockholders' equity............ $30,602 $57,151 $62,039 $66,927 $72,551
======= ======= ======= ======= =======
</TABLE>
(footnotes on following page)
11
<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 Savings Bank or changes in market conditions or general
financial, economic and regulatory conditions, or the issuance of
additional shares under the 1998 Stock Option Plan.
(2) This column represents the pro forma capitalization of the Holding Company
if the aggregate number of Conversion Shares issued in the Conversion and
Reorganization 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 Conversion Shares
are not reflected. Such withdrawals will reduce pro forma deposits by the
amounts thereof.
(4) Represents outstanding balance on third party loan used by ESOP to acquire
shares of Savings Bank Common Stock in the MHC Reorganization and the
Additional Offering.
(5) The Savings Bank'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 and Reorganization.
(6) Retained earnings are substantially restricted by applicable regulatory
capital requirements. Additionally, the Savings Bank 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 Eligible Account Holders and Supplemental Eligible Account
Holders at the consummation of the Conversion and Reorganization and
adjusted downward thereafter as such account holders reduce their balances
or cease to be depositors. See "THE CONVERSION AND REORGANIZATION --
Effects of Conversion and Reorganization on Depositors and Borrowers of
the Savings Bank -- Liquidation Account."
(7) Pro forma consolidated capitalization reflects funding of remaining shares
authorized for awards under the 1996 MRP through open market purchases of
Common Stock.
(8) Assumes the purchase in the open market at the Purchase Price, pursuant to
the proposed 1998 MRP, of a number of shares equal to 4% of the shares of
Conversion Shares issued in the Conversion and Reorganization at the
minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range. The issuance of such additional Conversion Shares from
authorized but unissued shares of Common Stock would dilute the ownership
interest of stockholders by 2.08%. 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 SAVINGS BANK --
Benefits -- Management Recognition Plan." The 1998 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
and Reorganization.
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<PAGE>
HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE
The following table presents the Savings Bank's historical and pro
forma capital position relative to its capital requirements at September 30,
1997. The amount of capital infused into the Savings Bank for purposes of the
following table is 50% of the net proceeds of the Conversion Offerings. For
purposes of the table below, the cost of the shares acquired by the 1996 MRP
(completed subsequent to September 30, 1997), and expected to be acquired by the
1998 MRP is 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 OTS capital regulations as
discussed under "REGULATION -- Federal Regulation of the Savings Bank -- Capital
Requirements."
<TABLE>
<CAPTION>
PRO FORMA AT SEPTEMBER 30, 1997
Minimum of Estimated Midpoint of Estimated
Valuation Range Valuation Range
1,466,250 Conversion Shares 1,725,000 Conversion Shares
September 30, 1997 at $20.00 Per Share at $20.00 Per Share
--------------------------- --------------------------- ---------------------------
Percent of Percent of Percent of
Adjusted Adjusted Adjusted
Total Total Total
Amount Assets (1) Amount Assets (1) Amount Assets (1)
------ ----------- ------ ----------- ------ -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
GAAP capital(2).......... $30,602 11.91% $41,811 15.59% $43,945 16.26%
Tangible capital(2)...... 27,321 10.71 38,530 14.47 40,664 15.15
Tangible capital requirement 3,825 1.50 3,994 1.50 4,026 1.50
-------- ----- -------- ----- ------- -----
Excess................... $23,496 9.21% $34,536 12.97% $36,638 13.65%
======= ===== ======= ===== ======= =====
Core capital(2).......... $27,321 10.71% $38,530 14.47% $40,664 15.15%
Core capital requirement(3) 7,651 3.00 7,987 3.00 8,051 3.00
-------- ----- -------- ----- ------- -----
Excess................... $19,670 7.71% $30,543 11.47% $32,613 12.15%
======= ===== ======= ===== ======= =====
Total capital(4)......... $29,067 18.35% $40,276 25.08% $42,410 26.33%
Risk-based
capital requirement..... 12,670 8.00 12,849 8.00 12,883 8.00
------- ----- ------- ----- ------- -----
Excess................... $16,397 10.35% $27,426 17.08% $29,527 18.33%
======= ===== ======= ===== ======= =====
</TABLE>
<TABLE>
<CAPTION>
15% above
Maximum of Estimated Maximum of Estimated
Valuation Range Valuation Range
1,983,750 Conversion Shares 2,281,312 Conversion Shares
at $20.00 Per Share at $20.00 Per Share
--------------------------- -----------------------------
Percent of Percent of
Adjusted Adjusted
Total Total
Amount Assets (1) Amount Assets (1)
------ ----------- ------ -----------
<S> <C> <C> <C> <C>
GAAP capital(2).......... $46,078 16.91% $48,533 17.65%
Tangible capital(2)...... 42,797 15.82 45,252 16.58
Tangible capital requirement 4,058 1.50 4,094 1.50
------- ----- -------- -----
Excess................... $38,739 14.32% $41,158 15.08%
======= ===== ======= =====
Core capital(2).......... $42,797 15.82% $45,252 16.58%
Core capital requirement(3) 8,115 3.00 8,189 3.00
------- ----- -------- -----
Excess................... $34,682 12.82% $37,063 13.58%
======= ===== ======= =====
Total capital(4)......... $44,543 27.59% $46,998 29.02%
Risk-based
capital requirement..... 12,918 8.00 12,957 8.00
------- ----- ------- -----
Excess................... $31,625 19.59% $34,041 21.02%
======= ===== ======= =====
</TABLE>
(1) Based upon total tangible assets of $255.0 million at September 30, 1997
and $266.2 million, $268.4 million, $270.5 million and $273.0 million at
the minimum, midpoint, maximum, and maximum, as adjusted, of the Estimated
Valuation Range, respectively, for purposes of the tangible capital
requirement, upon total adjusted assets of $255.0 million at September 30,
1997 and $266.2 million, $268.2 million, $270.5 million and $273.0 million
at the minimum, midpoint, maximum, and maximum, as adjusted, of the
Estimated Valuation Range, respectively, and upon risk-weighted assets of
$158.4 million at September 30, 1997 and $160.6 million, $161.0 million,
$161.5 million and $162.0 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) A $2.1 million investment in non-includable subsidiaries, a $1.0 million
deduction associated with the limited partnership interest discussed under
"BUSINESS OF THE SAVINGS BANK -- Lending Activities -- Equity Investment in
Limited Partnership" and an unrealized gain on securities
available-for-sale, net of taxes, of $188,000 account for the difference
between generally accepted accounting principals ("GAAP") capital and both
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.
13
<PAGE>
PRO FORMA DATA
Under the Plan of Conversion, the Conversion Shares must be sold at a
price equal to the estimated pro forma market value of the MHC and the Savings
Bank, as converted, based upon an independent valuation. The Estimated Valuation
Range as of December 5, 1997, when multiplied by approximately 53.02%, which
represents the MHC's percentage ownership interest in the Savings Bank, is from
a minimum of $29.3 million to a maximum of $39.7 million with a midpoint of
$34.5 million or, at a price per share of $20.00, a minimum number of 1,466,250
Conversion Shares, a maximum number of 1,983,750 Conversion Shares and a
midpoint of 1,725,000 Conversion Shares. The actual net proceeds from the sale
of the Conversion Shares cannot be determined until the Conversion and
Reorganization is completed. However, net proceeds set forth on the following
table are based upon the following assumptions: (i) Sandler O'Neill will receive
fees of $428,625, $506,250, $583,875 and $673,145 at the minimum, midpoint,
maximum and 15% above the Estimated Valuation Range, respectively (see "THE
CONVERSION AND REORGANIZATION -- Plan of Distribution and Selling Commissions);
(ii) all of the Conversion Shares will be sold in the Subscription and Direct
Community Offerings; and (iii) Conversion and Reorganization expenses, excluding
the fees paid to Sandler O'Neill, will total approximately $560,000 at each of
the minimum, midpoint, maximum and 15% above the Estimated Valuation Range.
Actual expenses may vary from this estimate, and the fees paid will depend upon
the percentages and total number of shares sold in the Subscription, Direct
Community and Syndicated Community Offerings and other factors.
The pro forma consolidated net income of the Savings Bank for the year
ended September 30, 1997 has been calculated as if the Conversion and
Reorganization had been consummated at the beginning of the period and the
estimated net proceeds received by the Holding Company and the Savings Bank had
been invested at 5.68% at the beginning of the period, which represents the
yield on the one-year U.S. Treasury Bill at September 30, 1997. Although OTS
regulations require the use of the arithmetic average of the average yield on
all interest-earning assets and the average rate paid on all deposits in
computing investment returns on net proceeds, the yield on the one-year U.S.
Treasury Bill is used because management believes it more appropriately reflects
a market rate of return. As discussed under "USE OF PROCEEDS," the Holding
Company expects to retain 50% of the net proceeds of the Conversion Offerings
from which it will refinance the existing third-party ESOP loan, with an
outstanding balance of $804,000 at September 30, 1997. The new loan is expected
to have a 10-year term and an interest rate equal to the prime rate as published
in The Wall Street Journal on the closing date of the Conversion and
Reorganization (currently 8.50%). A pro forma after-tax return of 3.69% is used
for both the Holding Company and the Savings Bank for the period, after giving
effect to an incremental combined federal and state income tax rate of 35.0% for
the year ended September 30, 1997. 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 period 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.
The following table summarizes the historical net income and
stockholders' equity of the Savings Bank and the pro forma consolidated net
income and stockholders' equity of the Holding Company for the periods and at
the date indicated, based on the minimum, midpoint and maximum of the Estimated
Valuation Range and based on a 15% increase in the maximum of the Estimated
Valuation Range. No effect has been given to: (i) the shares to be reserved for
issuance under the 1998 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 and Reorganization; (ii) withdrawals from deposit
accounts for the purpose of purchasing Conversion Shares in the Conversion
Offerings; (iii) the issuance of shares from authorized but unissued shares to
the 1998 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 and
Reorganization; or (iv) the establishment of a liquidation account for the
benefit of Eligible Account Holders and Supplemental Eligible Account Holders.
See "MANAGEMENT OF THE SAVINGS BANK -- Benefits -- 1998 Stock Option Plan" and
"THE CONVERSION AND REORGANIZATION -- Stock Pricing, Exchange Ratio and Number
of Shares Issued."
The following pro forma information may not be representative of the
financial effects of the Conversion and Reorganization at the date on which the
Conversion and Reorganization 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 according to 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.
14
<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(1)
--------- --------- --------- ------------------
1,466,250 1,725,000 1,983,750 2,281,312
Shares Shares Shares Shares
at $20.00 at $20.00 at $20.00 at $20.00
Per Share Per Share Per Share Per Share
--------- --------- --------- ---------
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Gross proceeds.............................. $29,325 $34,500 $39,675 $45,626
Less: estimated expenses.................... 990 1,070 1,150 1,240
-------- -------- -------- --------
Estimated net proceeds...................... 28,335 33,430 38,525 44,386
Less: Common Stock to be acquired by
1998 MRP........................... (1,173) (1,380) (1,587) (1,825)
Add: Assets consolidated from MHC(10)..... -- -- -- --
--------- --------- --------- ---------
Net investable proceeds................ $27,162 $32,050 $36,938 $42,561
======= ======= ======= =======
Consolidated net income:
Historical................................. 1,728 1,728 1,728 1,728
Pro forma income on net proceeds(2)........ 1,003 1,183 1,364 1,571
Pro forma 1996 MRP adjustments(3).......... (84) (84) (84) (84)
Pro forma 1998 MRP adjustments(4).......... (152) (179) (206) (237)
-------- -------- -------- --------
Pro forma net income..................... $2,495 $2,648 $2,802 $2,978
====== ====== ====== ======
Consolidated net income per share(5)(6):
Historical................................. $0.64 $0.55 $0.47 $0.41
Pro forma income on net proceeds........... 0.38 0.38 0.37 0.38
Pro forma 1996 MRP adjustments(3).......... (0.03) (0.03) (0.02) (0.02)
Pro forma 1998 MRP adjustments(4).......... (0.06) (0.06) (0.06) (0.06)
------- ------- ------- -------
Pro forma net income per share........... $0.93 $0.84 $0.76 $0.71
===== ===== ===== =====
Consolidated stockholders' equity (book value):
Historical(10)............................. $31,731 $31,731 $31,731 $31,731
Estimated net proceeds..................... 28,335 33,430 38,525 44,386
Less: Common Stock to be acquired by
ESOP............................. (804) (804) (804) (804)
Common Stock acquired by
1996 MRP......................... (938) (938) (938) (938)
Common Stock to be acquired by
1998 MRP(4)...................... (1,173) (1,380) (1,587) (1,825)
--------- --------- --------- ---------
Pro forma stockholders' equity(7)........ $57,151 $62,039 $66,927 $72,550
======= ======= ======= =======
Consolidated stockholders' equity per share(6)(8):
Historical(4)(10).......................... $11.48 $ 9.76 $ 8.48 $ 7.38
Estimated net proceeds..................... 10.24 10.27 10.29 10.32
Less: Common Stock acquired by
ESOP............................. (0.29) (0.25) (0.21) (0.19)
Common Stock acquired by
1996 MRP(3)...................... (0.34) (0.29) (0.25) (0.22)
Common Stock to be acquired by
1998 MRP(3)....................... (0.42) (0.42) (0.42) (0.42)
-------- -------- -------- --------
Pro forma stockholders' equity per share(9)$20.67 $19.07 $17.89 $16.87
====== ====== ====== ======
Purchase Price as a percentage of pro forma
stockholders' equity per share............. 96.76% 104.88% 111.79% 118.55%
===== ====== ====== ======
Purchase Price as a multiple of pro forma
net income per share....................... 21.51x 23.81x 26.32x 28.17x
===== ===== ===== =====
</TABLE>
(footnotes on following page)
15
<PAGE>
(1) Gives effect to the sale of an additional 297,562 Conversion Shares in
the Conversion and Reorganization, which may be issued to cover an
increase in the pro forma market value of the MHC and the Savings Bank, 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 MHC and
the Savings Bank, as converted. See "THE CONVERSION AND REORGANIZATION --
Stock Pricing, Exchange Ratio and Number of Shares to be Issued."
(2) No effect has been given to withdrawals from savings accounts for the
purpose of purchasing Conversion Shares. Since funds on deposit at the
Savings Bank 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 Savings Bank for investment following receipt of
the net proceeds of the Conversion Offerings will be reduced by the amount
of such withdrawals.
(3) In calculating the pro forma effect of the 1996 MRP, the table reflects
the effect of completed open market purchases of all remaining 1996 MRP
shares subsequent to September 30, 1997. Pro forma net income adjustments
reflect additional expenses required for a full-year amortization above
the actual expense (equal to $79,000 on a pre-tax basis) recorded for the
year ended September 30, 1997. Pro forma stockholders' equity adjustments
take into account 1996 MRP stock purchases as of September 30, 1997 and
open market purchases of all remaining shares completed subsequent to
September 30, 1997. As all shares for the 1996 MRP have, subsequent to
September 30, 1997, have been purchased in open market transactions, no
assumptions have been made for the effects of issuing authorized but
unissued shares. The total additional estimated pre-tax 1996 MRP expenses
not already reflected in net income was equal to $129,000 at each of the
minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range for the year ended September 30, 1997. No effect has been
given to the shares reserved for issuance under the 1996 Stock Option
Plan. See footnote 4 for an analysis of the combined effects of the 1996
and 1998 Stock Option Plans.
(4) In calculating the pro forma effect of the 1998 MRP, it is assumed that
the required stockholder approval has been received, that the shares were
acquired by the 1998 MRP at the beginning of the period presented in open
market purchases at the Purchase Price, that 20% of the amount contributed
was an amortized expense during such period, and that the combined federal
and state income tax rate is 35.0%. 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
2.08% and pro forma net income per share would be $0.92, $0.83, $0.77 and
$0.71 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
$20.66, $19.09, $17.94 and $16.93 at the minimum, midpoint, maximum and
15% above the maximum of the Estimated Valuation Range at September 30,
1997, respectively. Shares issued under the 1998 MRP vest 20% per year
and, for purposes of this table, compensation expense is recognized on a
straight-line basis over each vesting period. In the event the fair market
value per share is greater than $20.00 per share on the date shares are
awarded under the 1998 MRP, total 1998 MRP expense would increase. See
"RISK FACTORS --Expenses Associated with MRP." The total estimated 1998
MRP expense was multiplied by 20% (the total percent of shares for which
expense is recognized in the first year) resulting in pre-tax 1998 MRP
expense of $235,000, $276,000, $317,000 and $365,000 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 1996 Stock Option
Plan (previously approved by stockholders) or the proposed 1998 Stock
Option Plan. Under the 1996 Stock Option Plan, 58,500 shares were reserved
for issuance and options have been granted thereunder at an exercise price
of $25.25 per share. If stockholders approve the 1998 Stock Option Plan
following the Conversion and Reorganization, the Holding Company will have
reserved for issuance under the 1998 Stock Option Plan authorized but
unissued shares of Common Stock representing an amount of shares equal to
10% of the Conversion Shares sold in the Conversion Offerings. If all of
the options were to be exercised utilizing these authorized but unissued
shares rather than treasury shares which could be acquired (for both the
1996 and 1998 Stock Option Plans), the voting interests of existing
stockholders would be diluted by approximately 8.25%. Assuming stockholder
approval of the 1998 Stock Option Plan, and that all options under the
1996 and 1998 Stock Option Plans were exercised at
16
<PAGE>
September 30, 1997 at an exercise price of $25.25 (to be adjusted pursuant
to the final Exchange Ratio) and $20.00 per share, respectively, pro forma
net earnings per share would be $0.90, $0.81, $0.75 and $0.70,
respectively, for the year ended September 30, 1997, and pro forma
stockholders' equity per share would be $20.38, $18.87, $17.76 and $16.79,
respectively, for the year ended September 30, 1997 at the minimum,
midpoint, maximum and 15% above the maximum of the Estimated Valuation
Range. See "MANAGEMENT OF THE SAVINGS BANK -- Benefits -- 1998 Stock
Option Plan" and "-- Benefits -- Management Recognition Plan" and "RISK
FACTORS -- Possible Dilutive Effect of Benefit Programs."
(5) Per share amounts are based upon shares outstanding of 2,696,003,
3,171,768, 3,647,533 and 4,194,664 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 Conversion Shares
sold in the Conversion and Reorganization, less the number of shares
assumed to be held by the ESOP not committed to be released within the
first year following the Conversion and Reorganization.
(6) Historical per share amounts have been computed as if the Conversion
Shares expected to be issued in the Conversion and Reorganization 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 and Reorganization, the ongoing ESOP
expense, or the proposed 1998 MRP expense described above.
(7) "Book value" represents the difference between the stated amounts of the
Savings Bank'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 and Reorganization, or the federal income tax consequences of
the restoration to income of the Savings Bank's special bad debt reserves
for income tax purposes which would be required in the unlikely event of
liquidation. See "THE CONVERSION AND REORGANIZATION -- Effects of
Conversion and Reorganization to Stock Form on Depositors and Borrowers of
the Savings Bank" 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 2,765,481,
3,253,507, 3,741,533 and 4,302,763 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.
(10) Assets of the MHC (other than investment in the Savings Bank) consist
solely of $47,000 of cash on deposit at the Savings Bank, which amount is
eliminated in consolidation.
17
<PAGE>
CONVERSION SHARES TO BE PURCHASED
BY MANAGEMENT PURSUANT TO SUBSCRIPTION RIGHTS
The following table sets forth, for each director and executive officer
of the Savings Bank (and their associates) and for all of the directors and
executive officers as a group, (i) Exchange Shares to be held upon consummation
of the Conversion and Reorganization based upon their beneficial ownership of
Public Savings Bank Shares as of September 30, 1997, (ii) proposed purchases of
Conversion Shares, assuming shares available to satisfy their subscriptions, and
(iii) total shares of Common Stock to be held upon consummation of the
Conversion and Reorganization, in each case assuming that 1,725,000 Conversion
Shares are sold at the midpoint of the Estimated Valuation Range. 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 executive officers and their associates may not purchase in excess
of 31% of the shares sold in the Conversion and Reorganization. Directors,
officers and employees will pay the Purchase Price ($20.00 per share) for each
share for which they subscribe.
<TABLE>
<CAPTION>
Number of
Exchange Proposed Purchase of Total Common Stock
Shares to Conversion Shares to be Held
be Held Number Number Percentage
(1)(2) Amount of Shares of Shares of Total
------------ ------ --------- --------- --------
<S> <C> <C> <C> <C> <C>
Harold A. Pickens, Jr. 22,657 $100,000 5,000 27,657 *
Chairman of the Board
Robert W. Orr 31,533 40,000 2,000 33,533 1.0%
President and Managing Officer
Martha S. Clamp 13,485 100,000 5,000 18,485 *
Director
Jack F. McIntosh 12,253 100,000 5,000 17,253 *
Director
Charles W. Fant, Jr. -- -- -- -- --
Director
Cordes G. Seabrook, Jr. 19,082 100,000 5,000 24,082 *
Director
Jim Gray Watson 6,891 100,000 5,000 11,891 *
Director
Richard R. Ballenger 4,801 20,000 1,000 5,801 *
Director
F. Stevon Kay 15,419 100,000 5,000 20,419 *
Director
Thomas C. Hall 25,167 10,000 500 25,667 *
Treasurer and Chief Financial Officer
Barry C. Visioli 22,442 27,500 1,375 23,817 *
Senior Vice President
All officers and directors 214,443 1,038,500 51,925 266,368 8.2
as a group (21 persons)
</TABLE>
- ----------
(1) Excludes shares which may be received upon the exercise of outstanding
stock options granted under the 1993 Stock Option Plan (which are
immediately exercisable) and the 1996 Stock Option Plan (which are
subject to pro rata vesting over a five year period beginning April 8,
1998). Based upon the Exchange Ratio of 2.15625 Exchange Shares for
each Public Savings Bank Share at the midpoint of the Estimated
Valuation Range, the following persons named in the table would have
options to purchase Common Stock as follows: Mr. Pickens, 4,730 shares;
Mr. Orr, 22,101 shares; Ms. Clamp, 4,730 shares; Mr. McIntosh, 4,730
shares; Mr. Fant, 4,730 shares; Mr. Seabrook, 4,730 shares; Mr. Watson,
4,730 shares; Mr. Ballenger, 4,728 shares; Mr. Kay, 4,728 shares; Mr.
Hall, 27,060; Mr. Visioli, 27,060 and all directors and executive
officers as a group, 133,859 shares.
(2) Excludes stock options that may be granted under the 1998 Stock Option
Plan and awards that may be granted under 1998 MRP if such plans are
approved by stockholders at an annual or special meeting at least six
months following the Conversion and Reorganization. See "MANAGEMENT OF
THE SAVINGS BANK -- Benefits."
(*) Less than 1%.
18
<PAGE>
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
The following Consolidated Statements of Operations of Perpetual Bank,
A Federal Savings Bank and Subsidiary for the fiscal years ended September 30,
1997, 1996 and 1995 have been audited by KPMG Peat Marwick LLP, Greenville,
South Carolina, independent auditors, whose report thereon appears elsewhere in
this Prospectus. These statements should be read in conjunction with the
Consolidated Financial Statements and related Notes included elsewhere herein.
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Interest income:
Loans................................................. $14,406,160 $11,510,222 $9,828,507
Mortgage-backed securities............................ 3,302,541 3,071,524 3,418,355
Other investment...................................... 687,736 339,222 296,164
----------- ----------- -----------
Total interest income............................... 18,396,437 14,920,968 13,543,026
----------- ----------- -----------
Interest expense:
Interest on deposits:
Transaction accounts................................ 547,795 467,395 361,486
Passbook accounts................................... 590,738 622,008 742,786
Certificate accounts................................ 6,979,888 5,679,186 4,904,477
---------- ---------- ----------
Total interest on deposits.......................... 8,118,421 6,768,589 6,008,749
Interest on borrowings................................ 1,377,960 656,203 2,752,221
---------- ---------- ----------
Total interest expense.............................. 9,496,381 7,424,792 8,760,970
---------- ---------- ----------
Net interest income.................................... 8,900,056 7,496,176 4,782,056
Provision for loan losses.............................. 655,000 349,250 362,000
---------- ---------- -----------
Net interest income after provision for loan losses.... 8,245,056 7,146,926 4,420,056
---------- ---------- ----------
Other income:
Loan and deposit account service charges.............. 1,526,208 1,268,722 770,212
Gain (loss) on sale of securities, net................ (307,534) 53,963 1,777,471
Gain on sale of real estate, net...................... 19,894 79,034 47,544
Gain on sale of loans, net............................ 12,509 (23,328) 66,785
Gain (loss) on sale of fixed assets, net.............. (191,894) 23,724 150
Other................................................. 795,773 548,945 568,607
---------- ---------- ----------
Total other income.................................. 1,854,956 1,927,336 3,230,769
---------- ---------- ----------
General and administrative expenses:
Salaries and employee benefits........................ 3,926,888 3,056,726 2,801,915
Occupancy............................................. 486,776 386,796 343,762
Furniture and equipment expense....................... 746,182 542,481 464,250
FDIC insurance premiums............................... 151,903 1,292,262 330,444
Advertising........................................... 351,694 390,721 475,007
Data processing....................................... 299,951 237,980 204,463
Office supplies....................................... 386,525 332,794 269,302
Other................................................. 1,095,927 654,304 650,902
---------- ---------- ----------
Total general and administrative.................... 7,445,846 6,894,064 5,540,045
---------- ---------- ----------
Income before income taxes............................. 2,654,166 2,180,198 2,110,780
Income taxes........................................... 925,803 755,811 193,742
---------- ---------- ----------
Net income............................................. $1,728,363 $1,424,387 $1,917,038
========== ========== ==========
Earnings per share:
Net income............................................. $1.15 $0.95 $1.27
Weighted average shares outstanding.................... 1,505,432 1,504,601 1,504,059
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
For much of its existence, the Savings Bank's investment powers were
limited primarily to fixed-rate mortgage loans, share loans and investment
securities funded by a limited range of deposit products. Since 1989, however,
when applicable law and regulations permitted savings associations to expand the
scope of their operations, the Savings Bank has gradually refocused operations
to become a retail, community-oriented institution by, among other things, (i)
diversifying its balance sheet by placing increasing emphasis on construction,
commercial real estate, commercial business and consumer lending and (ii)
increasing core deposits through the marketing of checking accounts. The goal of
these strategies is to diversify and maximize the Savings Bank's earnings
stream, while attempting to minimize interest rate risk. See "RISK FACTORS --
Certain lending Risks" and "-- Interest Rate Risk."
The Savings Bank's current business plan is focused on a continuation
of its retail community banking strategy. Key aspects of the business plan
include: (i) continued balance sheet diversification by pursuing commercial real
estate lending, consumer lending and commercial business lending in its primary
market area; (ii) building its retail customer base by increasing consumer
checking accounts and expanding its retail branch network in Anderson, South
Carolina, and surrounding communities; (iii) preserving asset quality by
emphasizing residential mortgage lending in its primary market area, as well as
purchasing loans from selected South Carolina lenders; (iv) maintaining a
substantial portfolio of mortgage-backed securities and investment grade CMOs to
limit credit risk exposure and to earn a spread on excess investable funds; and
(v) offering non-deposit investment products though a wholly-owned service
corporation (see "BUSINESS OF THE SAVINGS BANK -- Subsidiary Activities").
The Savings Bank has taken traditional steps to implement its retail
community banking strategy. The Savings Bank opened a branch office in Seneca,
South Carolina, in December 1996 and a new branch office in Anderson, South
Carolina, in October 1997. Also, during 1996, the Savings Bank established a
customer call center at the main office as a vehicle to cross-sell the Savings
Bank's products and services to its customers. The opening of the Seneca branch
office and the establishment of the customer call center resulted in increased
general and administrative expenses in recent periods. The opening of the new
Anderson branch office is expected to increase general and administrative
expenses in future periods; however, management is unable to quantify accurately
the magnitude of such increases. Furthermore, the Savings Bank has actively
marketed checking accounts through a free checking program, which has led to an
increase in checking account balances and an increase in service charges and fee
income, but has also led to an increase in general and administrative expenses
relating to marketing and promotion of such accounts. See "BUSINESS OF THE
SAVINGS BANK -- Deposit Activities and Other Sources of Funds."
The Savings Bank has also used non-traditional vehicles to implement
its retail community banking strategy. The Savings Bank has an equity
investment, through a service corporation, in a regional mortgage company, from
which the Savings Bank currently purchases one- to four-family mortgage loans
and commercial real estate loans secured by properties located in South
Carolina. See "BUSINESS OF THE SAVINGS BANK -- Subsidiary Activities." In
addition, the Savings Bank has an equity investment in a limited partnership
that invests in mortgage servicing rights. See "BUSINESS OF THE SAVINGS BANK --
Lending Activities -- Equity Investment in Limited Partnership" and "RISK
FACTORS -- Certain Lending Risks -- Purchased Loans and Interest Rate Risk."
Upon consummation of the Conversion and Reorganization, the Holding
Company will be a unitary savings and loan holding company. Under current law, a
unitary saving and loan holding company is not subject to any activity
restrictions. See "REGULATION -- Savings and Loan Holding Company Regulations."
The Holding Company may consider exploring opportunities to expand into
non-traditional lines of business, such as securities brokerage, insurance
agency and real estate development activities, to the extent permitted by
applicable law. Currently, the Holding Company has no definitive plans to expand
into such non-traditional lines of business. The Savings Bank, however,
currently conducts real estate development activities through subsidiaries. See
"BUSINESS OF THE SAVINGS BANK -- Subsidiary Activities."
20
<PAGE>
Average Balance Sheet
The following table sets forth, for the periods indicated, information
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, resultant yields, interest rate
spread, ratio of interest-earning assets to interest-bearing liabilities and net
interest margin. Average balances for 1977 have been calculated using daily
balances, while average balances for 1996 and 1995 have been calculated using
monthly balances. Management does not believe that the use of monthly balances
rather than daily balances for 1996 and 1995 has caused any material
inconsistencies in the information presented.
<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(1):
Mortgage loans.................................... $118,030 $9,790 8.29% $91,535 $7,984 8.72%
Commercial real estate loans...................... 23,098 2,102 9.10 14,045 1,338 9.52
Commercial other.................................. 6,114 592 9.68 4,468 395 8.84
Consumer loans.................................... 17,755 1,922 10.82 18,563 1,793 9.66
--------- -------- --------- -------
Total loans...................................... 164,997 14,406 8.73 128,611 11,510 8.95
Mortgage-backed securities and CMOs................ 48,638 3,303 6.79 44,793 3,072 6.86
Investment securities.............................. 5,271 339 6.43 896 65 7.25
Interest-bearing deposits.......................... 4,485 251 5.60 4,593 193 4.20
Other earning assets............................... 1,311 97 7.40 1,102 81 7.35
--------- -------- --------- -------
Total interest-earning assets................... 224,702 18,396 8.19 179,995 14,921 8.29
Non-interest-earning assets:
Mutual funds(3)................................... -- --
Office properties and equipment, net.............. 5,645 4,048
Real estate, net.................................. 56 20
Other non-interest-earning assets................. 8,072 5,339
--------- ---------
Total assets.................................... $238,475 $189,402
======== ========
Interest-bearing liabilities:
Savings........................................... 22,923 590 2.57 23,482 622 2.65
Negotiable order of withdrawal
("NOW") accounts................................. 35,196 548 1.56 28,412 468 1.65
Certificates of deposit........................... 123,407 6,980 5.56 102,721 5,679 5.53
--------- -------- --------- -------
Total deposits.................................. 181,526 8,118 4.47 154,615 6,769 4.38
Other interest-bearing liabilities................ 23,951 1,378 5.75 12,531 656 5.24
--------- -------- --------- -------
Total interest-bearing liabilities.............. 205,477 9,496 4.62 167,146 7,425 4.44
</TABLE>
(table continued on next page)
<TABLE>
<CAPTION>
1995
-----------------------------
Interest
Average and Yield/
Balance Dividends Cost
------- --------- -----
<S> <C> <C> <C>
Interest-earning assets(1):
Mortgage loans.................................... $88,153 $7,292 8.28%
Commercial real estate loans...................... 5,583 524 9.39
Commercial other.................................. 2,061 219 10.63
Consumer loans.................................... 16,697 1,794 10.74
--------- --------
Total loans...................................... 112,494 9,829 8.74
--------- --------
Mortgage-backed securities and CMOs................ 48,263 3,418 7.08
Investment securities.............................. 246 9 3.66
Interest-bearing deposits.......................... 1,682 127 7.55
Other earning assets............................... 2,205 160 7.26
--------- --------
Total interest-earning assets................... 164,890 13,543 8.21
Non-interest-earning assets:
Mutual funds(3)................................... 33,578
Office properties and equipment, net.............. 3,887
Real estate, net.................................. 382
Other non-interest-earning assets................. 4,801
---------
Total assets.................................... $207,538
========
Interest-bearing liabilities:
Savings........................................... 26,885 743 2.76
Negotiable order of withdrawal
("NOW") accounts................................. 20,923 362 1.73
Certificates of deposit........................... 99,653 4,904 4.92
--------- --------
Total deposits.................................. 147,461 6,009 4.07
Other interest-bearing liabilities................ 43,036 2,752 6.39
--------- --------
Total interest-bearing liabilities.............. 190,497 8,761 4.60
</TABLE>
21
<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>
Non-interest-bearing liabilities:
Non-interest-bearing deposits..................... 397 1,186
Other liabilities................................. 2,693 1,827
--------- ---------
Total liabilities............................... 3,090 170,159
Stockholders' equity............................... 29,908 19,243
--------- ---------
Total liabilities and stockholders' equity...... $238,475 $189,402
======== ========
Net interest income................................ $8,900 $7,496
====== ======
Interest rate spread............................... 3.57% 3.85%
==== ====
Net interest margin................................ 3.96% 4.16%
==== ====
Ratio of average interest-earning assets to
average interest-bearing liabilities............. 109.36% 107.69%
====== ======
</TABLE>
<TABLE>
<CAPTION>
----------------------------------
1995
----------------------------------
Interest
Average and Yield/
Balance Dividends Cost
----------------------------------
<S> <C> <C> <C>
Non-interest-bearing liabilities:
Non-interest-bearing deposits..................... 909
Other liabilities................................. --
--------
Total liabilities............................... 191,406
Stockholders' equity............................... 16,132
--------
Total liabilities and stockholders' equity...... $207,538
========
Net interest income................................ $4,782
======
Interest rate spread............................... 3.61%
====
Net interest margin................................ 2.90%
====
Ratio of average interest-earning assets to
average interest-bearing liabilities............. 86.56%
=====
</TABLE>
- ----------
(1) Excludes interest on loans 90 days or more past due.
(2) Represents mutual funds which do not pay interest or dividends.
22
<PAGE>
Yields Earned and Rates Paid
The following table sets forth for the periods and at the dates
indicated, the weighted average yields earned on the Savings Bank's assets, the
weighted average interest rates paid on the Savings Bank's liabilities, together
with the net yield on interest-earning assets.
<TABLE>
<CAPTION>
At Year Ended
September 30, September 30,
1997 1997 1996 1995
------------ ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average yield earned on:
Loan portfolio........................................... 8.49% 8.73% 8.95% 8.74%
Mortgage-backed securities, CMOs and
adjustable-rate mortgage ("ARM") mutual fund............ 7.25 6.79 6.86 7.08
Investment securities and interest-earning deposits...... 7.03 6.21 4.70 7.05
All interest-earning assets.............................. 8.20 8.19 8.29 8.21
Weighted average rate paid on:
Deposits................................................. 4.64 4.47 4.38 4.07
FHLB advances and other borrowings....................... 6.24 5.53 5.24 6.39
All interest-bearing liabilities......................... 4.75 4.60 4.44 4.60
Interest rate spread (spread between weighted
average rate on all interest-earning assets
and all interest-bearing liabilities).................. 3.45 3.57 3.85 3.61
Interest rate margin (net interest income as a
percentage of average interest-earning assets)......... N/A 3.96 4.16 2.90
</TABLE>
23
<PAGE>
Rate/Volume Analysis
The following table sets forth the effects of changing rates and
volumes on net interest income of the Savings Bank. Information is provided with
respect to (i) effects on interest income attributable to changes in volume
(changes in volume multiplied by prior rate); (ii) effects on interest income
attributable to changes in rate (changes in rate multiplied by prior volume);
(iii) changes in rate/volume (change in rate multiplied by change in volume);
and (iv) the net change (the sum of the prior columns).
<TABLE>
<CAPTION>
Years Ended September 30, Years Ended September 30,
1997 Compared to September 30, 1996 Compared to September 30,
1996 Increase (Decrease) Due to 1995 Increase (Decrease) Due to
--------------------------------- --------------------------------
Rate/ Rate/
--------------------------------- --------------------------------
Volume Rate Volume Net Volume Rate Volume Net
------ ---- ------ --- ------ ---- ------ ---
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Mortgage loans.................. 2,311 (392) (113) 1,806 280 397 15 692
Commercial real estate.......... 862 (60) (39) 763 794 8 12 814
Commercial other................ 146 38 14 198 256 (37) (43) 176
Consumer loans.................. (78) 216 (9) 129 200 (180) (20) --
------- ------ ------ ------- ------ ------- ----- ----
Total loans.................... 3,241 (198) (147) 2,896 1,530 188 (36) 1,682
Mortgage-backed securities and
CMOs........................... 263 (30) (2) 231 (246) (109) 8 (347)
Investment securities........... 320 (8) (38) 274 23 9 25 57
Mutual funds.................... -- -- -- -- -- -- -- --
Interest-earning deposits....... (5) 65 (2) 58 220 (57) (98) 65
Other interest-earning assets... 16 -- -- 16 (80) 2 (1) (79)
------- -------- -------- ------- ------- ------ ------ -------
Total net change in income on
interest-earning assets........ 3,800 (143) (182) 3,475 1,312 89 (23) 1,378
------- ------ ------ ------- ------ ------ ------ -------
Interest-bearing liabilities:
Savings accounts................ (15) (18) -- (33) (94) (31) 4 (121)
NOW accounts.................... 112 (25) (6) 81 129 (17) (6) 106
Certificates of deposit......... 1,144 131 26 1,301 151 605 19 775
------- ------ ------ ------- ------ ------ ----- -------
Total deposits................... 1,241 88 20 1,349 186 557 17 760
------- ------ ------ ------- ------ ------ ----- -------
Other interest-bearing liabilities 648 37 37 722 (1,951) (498) 353 (2,096)
------- ------ ------ ------- -------- ------- ----- --------
Total net change in expense on
interest-bearing liabilities... 1,889 125 57 2,071 (1,765) 59 370 (1,336)
------- ------ ------ ------- ------- ----- ----- --------
Net change in net interest income $1,911 $(268) $(239) $1,404 $3,077 $ 30 $(393) $2,714
====== ===== ===== ====== ====== ===== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Years Ended September 30,
1995 Compared to September 30,
1994 Increase (Decrease) Due to
----------------------------------
Rate/
Volume Rate Volume Net
------ ---- ------ ---
<S> <C>
Interest-earning assets:
Mortgage loans.................. 882 97 14 993
Commercial real estate.......... 313 19 39 371
Commercial other................ 134 8 19 161
Consumer loans.................. (375) 330 (65) (110)
----- ---- ------ ------
Total loans.................... 954 454 7 1,415
Mortgage-backed securities and
CMOs........................... (615) 725 (130) (20)
Investment securities........... 7 (7) (4) (4)
Mutual funds.................... 229 (15) (229) (15)
Interest-earning deposits....... (83) 198 (122) (7)
Other interest-earning assets... 50 27 22 99
------- ------ ------ --------
Total net change in income on
interest-earning assets........ 520 1,439 (491) 1,468
-------- ------ ------- --------
Interest-bearing liabilities:
Savings accounts................ (173) (11) 2 (182)
NOW accounts.................... 189 (24) (21) 144
Certificates of deposit......... 178 784 36 998
------- ------ ------- -------
Total deposits................... 194 749 17 960
------- ------ ------- --------
Other interest-bearing liabilities 1,290 274 613 2,177
------- ------ ------ --------
Total net change in expense on
interest-bearing liabilities... 1,484 1,023 630 3,137
------- ------ ------ --------
Net change in net interest income $ (964) $ 416 $(1,121) $(1,669)
======= ===== ======== ========
</TABLE>
- ----------
(1) Excludes interest on loans 90 days or more past due.
24
<PAGE>
Comparison of Financial Condition at September 30, 1997 and 1996
Total assets increased 22.5% from $209.8 million at September 30, 1996
to $257.0 million at September 30, 1997 primarily as a result of an increase in
loans receivable and an increase in investment securities available- for-sale.
These increases were funded primarily by deposit growth, FHLB advances and
repayment of mortgage-backed securities.
Loans receivable increased 27.0% from $140.8 million at September 30,
1996 to $178.8 million at September 30, 1997. The increase in loans receivable
resulted from growth in all loan categories, except construction loans which
declined slightly from $19.5 million at September 30, 1997 to $17.1 million at
September 30, 1997.
In December 1996, the Savings Bank invested in a limited partnership
that invests in mortgage loan servicing rights. At September 30, 1997, the value
of the limited partnership investment was $5.0 million. See "BUSINESS OF THE
SAVINGS BANK -- Lending Activities -- Equity Investment in Limited Partnership"
for further information. The value of this investment would be adversely
impacted in the event of a decrease in market interest rates. See "RISK FACTORS
- -- Interest Rate Risk."
Investment securities available-for-sale increased from $2.5 million at
September 30, 1996 to $11.3 million at September 30, 1997. In an effort to
increase the average portfolio yield, the Savings Bank purchased additional
investment securities during the year ended September 30, 1997, including a $4.0
million FHLB bond with a yield of 6.30% at September 30, 1997 and a final
maturity of October 2001. The Savings Bank also invested $3.1 million to
purchase a $15.0 million FHLB zero coupon bond with a coupon rate of 8.00%,
callable in July 2000, and with a final maturity of July 2017, and $3.0 million
to purchase a second $15.0 million FHLB zero coupon bond with a coupon rate of
8.20%, callable in September 1998, and with a final maturity of July 2017.
Although these long-term zero coupon bonds offer higher yields, an increase in
market interest rates would have a material adverse effect on their value. The
Savings Bank restructured its mortgage-backed securities portfolio by selling
(i) $19.8 million of fixed-rate CMOs yielding 6.25% and with final maturities
ranging from 2001 through 2005, incurring a loss on sale of $280,000 and (ii)
$3.1 million of fixed-rate mortgage-backed securities yielding 6.32%, incurring
a loss on sale of $28,000. The Savings Bank purchased $8.0 million of adjustable
rate CMOs with a yield of 7.03% at September 30, 1997 and $10.7 million of
fixed-rate mortgage-backed securities with a yield of 7.33% at September 30,
1997. See "RISK FACTORS -- Interest Rate Risk." At September 30, 1997, the
Savings Bank's CMO portfolio consisted of U.S. Government agency issues, as well
as investment grade private issues that are generally riskier because they are
not guaranteed or insured by the U.S. Government. See "BUSINESS OF THE SAVINGS
BANK -- Investment Activities."
Real estate held for development increased from $1.4 million at
September 30, 1996 to $2.3 million at September 30, 1997 primarily as a result
of the acquisition of the Meadows Development project. See "BUSINESS OF THE
SAVINGS BANK -- Subsidiary Activities" for further information regarding the
Meadows Development project.
Premises and equipment, net, increased from $4.9 million at September
30, 1996 to $6.3 million at September 30, 1997 primarily as a result of the
construction of the Perpetual Square branch office in Anderson, South Carolina
($606,000), and the purchase of new hardware and software for the in-house
computer system ($1.1 million). The Perpetual Square branch office was opened in
October 1997 to replace a leased branch office located in a Winn Dixie
supermarket. The lease was scheduled to expire on March 1, 1998. The supermarket
branch office was closed in connection with the opening of the Perpetual Square
branch office and the supermarket branch personnel were transferred to the
Perpetual Square branch office. Although no assurances can be given regarding
the future operations of the Perpetual Square branch office, the Savings Bank
believes that its better facilities and location will contribute to an increase
in both loan and deposit volume. See "BUSINESS OF THE SAVINGS BANK --
Properties."
25
<PAGE>
Deposits increased 25.5% from $160.2 million at September 30, 1996 to
$201.0 million at September 30, 1997 primarily as a result of an increase in
one-year certificate of deposits. The Savings Bank aggressively marketed special
seven-month and 13-month certificates of deposit to attract operating funds.
Although no assurances can be given, based on management's experience and
familiarity with the customers involved and the Savings Bank's pricing policy
relative to that of its competitors, management believes that a significant
portion of such deposits will remain with the Savings Bank.
Stockholders' equity increased from $29.1 million at September 30, 1996
to $30.6 million at September 30, 1997 as a result of retained net income, less
dividends paid on the Public Savings Bank Shares.
Comparison of the Year Ended September 30, 1997 to the Year Ended September 30,
1996
Net Income. Net income increased 21.4% from $1.4 million, or $0.95 per
share, in 1996 to $1.7 million, or $1.15 per share, in 1997. Net income for 1996
was adversely affected by the one-time SAIF recapitalization assessment. See "--
General and Administrative Expenses" below. Without this one-time assessment,
1996 net income would have been $2.0 million, or $1.36 per share.
Net Interest Income. Net interest income increased 18.7% from $7.5
million in 1996 to $8.9 million in 1997. Interest income on loans increased
25.2% from $11.5 million to $14.4 million as the average balance of loans
receivable increased 28.3% from $128.6 million in 1996 to $165.0 in 1997
primarily as a result of growth in loan originations and purchases. Interest
income on mortgage-backed securities increased 6.5% from $3.1 million in 1966 to
$3.3 million in 1997 as the average balance of mortgage-backed securities
increased 8.5% from $44.8 million in 1996 to $48.6 million in 1997. Interest
income on other investments increased 102.9% from $339,000 in 1996 to $688,000
in 1997 as the average balance of other interest earning assets increased 68.2%
from $6.6 million in 1996 to $11.1 million in 1997 primarily as a result of
investment securities purchases.
Interest Expense. Interest expense on deposits increased 19.1% from
$6.8 million in 1996 to $8.1 million in 1997 as the average balance of deposits
increased 17.4% from $154.6 million in 1996 to $181.5 million in 1997 and the
weighted average cost of deposits increased from 4.38% for 1996 to 4.47% for
1997. The increase in the average balance of deposits and the increase in the
weighted average cost of deposits resulted primarily from the promotion of
short-term certificates of deposit. See "-- Comparison of Financial Condition at
September 30, 1997 and 1996" for further discussion.
Interest expense on borrowings increased 110.1% from $656,000 for
fiscal 1996 to $1.4 million for fiscal 1997 as the average borrowings increased
from $12.5 million in 1996 to $24.9 million in 1997 in order to fund loan
originations and purchases.
Provision for Loan Losses. Provisions for loan losses are charges to
earnings to bring the total allowance for loan losses to a level considered
adequate by management to provide for management's best estimate of inherent
loan losses. In determining the adequacy of the allowance for loan losses,
management evaluates various factors, including the market value of the
underlying collateral, growth and composition of the loan portfolio, the
relationship of the allowance for loan losses to outstanding loans, loss
experience, delinquency trends and economic conditions. Management evaluates the
carrying value of loans periodically and the allowance for loan losses is
adjusted accordingly. See "BUSINESS OF THE SAVINGS BANK -- Lending Activities --
Allowance for Loan Losses" and Note 4 to Notes to Consolidated Financial
Statements.
The provision for loan losses increased 87.7% from $349,000 in 1996 to
$655,000 in 1997. Management deemed the increase necessary in light of net
charge-offs of $304,000 and the growth in the loan portfolio during 1997,
particularly in inherently riskier commercial real estate loans and consumer
loans. At September 30, 1997, the allowance for loan losses was 1.04% of total
loans and was deemed adequate by management at that date.
26
<PAGE>
Other Income. Total other income decreased $72,000 from 1996 to 1997.
Loan and deposit account service charges increased $257,000 from $1.3 million in
1996 to $1.5 million in 1997 as a result of an increase in the number of
checking accounts. Other income increased $271,000 from $525,000 in 1996 to
$796,000 in 1997 primarily as a result of income of $185,000 from the investment
in a limited partnership that invests in mortgage servicing rights (see
"BUSINESS OF THE SAVINGS BANK -- Lending Activities -- Loan Purchases and, Sales
and Servicing") and gains from sale of real estate held for development (see
"BUSINESS OF THE SAVINGS BANK -- Subsidiary Activities"). These increases were
offset by losses on sale of investments of $308,000 in connection with the
restructuring of the investment securities portfolio and the write-off of
$192,000 of computer hardware and software as a result of the upgrading of the
computer system. See "-- Comparison of Financial Condition at September 30, 1997
and 1996" for information regarding the restructuring of the investment
securities portfolio.
General and Administrative Expenses. General and administrative
expenses increased $552,000 from $6.9 million in 1996 to $7.4 million in 1997.
Salaries and employee benefits increased 28.5% from $3.1 million in 1996 to $3.9
million in 1997 as a result of the opening of the Seneca branch office, staffing
a call center at the main office, and expenses associated with the ESOP and the
1996 MRP. Occupancy expense increased $100,000, or 25.8%, primarily as a result
of the opening of the Seneca branch office. Furniture and equipment expense
increased 37.6% from $542,000 in 1996 to $746,000 in 1997 as a result of the
purchase of additional computer equipment and equipping the Seneca branch office
and the call center. The FDIC insurance premiums decreased $1.1 million from
$1.3 million in 1996 to $152,000 in 1997, due to the one-time SAIF
recapitalization assessment of $946,000 incurred in September 1996. Prior to the
SAIF recapitalization, the Savings Bank's total annual deposit insurance
premiums amounted to 0.23% of assessable deposits. Effective January 1, 1997,
the rate decreased to 0.065% of assessable deposits. See "REGULATION -- Federal
Regulation of Savings Associations -- Federal Deposit Insurance Corporation."
Advertising expense decreased 10.0% from $391,000 in 1996 to $352,000 in 1997 as
a result of the winding down of the free checking advertising campaign that
began in October 1994. Data processing expense increased 26.1% from $238,000 in
1996 to $300,000 in 1997 primarily as a result of the new Seneca branch office
and the new call center. Office supplies increased 16.2% from $333,000 in 1996
to $387,000 in 1997 primarily as a result of the opening of the Seneca branch
office.
Other operating expenses increased 68.2% from $654,000 in 1996 to $1.1
million in 1997 as a result of acquiring the telephone system for the call
center and sales training for the call center staff ($159,000), closing costs
paid by the Savings Bank as part of a home equity loan promotion ($42,000),
increased professional fees related to regular regulatory and securities
compliance matters ($39,000), the replacement of the Savings Bank's in-house
courier with an armored car courier service in conjunction with the opening of
the Seneca branch office, which is located approximately 30 miles outside of
Anderson ($34,000), and increased postage expense associated with the increased
number of checking accounts ($26,000).
Income Taxes. Income taxes increased 22.5% from $756,000 in 1996 to
$926,000 in 1997 due to an increase in income before taxes. The effective tax
rate was 35% for both 1996 and 1997.
Comparison of the Year Ended September 30, 1996 to the Year Ended September 30,
1995
Net Income. Net income decreased from $1.9 million, or $1.27 per share,
in 1995 to $1.4 million, or $0.95 per share, in 1996 primarily as a result of
the one-time SAIF recapitalization assessment of $946,000 ($615,000 after tax).
Without this one-time assessment, 1996 net income would have been $2.0 million,
or $1.36 per share. Net income for 1995 benefitted from a one-time gain of $1.8
million on the sale of mutual funds.
Net Interest Income. Net interest income increased 56.3% from $4.8
million in 1996 to $7.5 million in 1996 primarily as a result of decreased
interest expense on borrowings used to purchase mutual fund shares in 1995. The
mutual funds were sold in 1995 at a gain of $1.8 million. These funds were
selected for their capital appreciation characteristics; no interest income was
recognized on the mutual fund investments in 1995. Interest
27
<PAGE>
income on loans increased 17.3% from $9.8 million in 1995 to $11.5 in 1996 as
the average balance of loans receivable increased 14.3% from $112.5 million in
1995 to $128.6 million in 1996. Interest income on mortgage-backed securities
decreased 9.7% from $3.4 million in 1995 to $3.1 million in 1996 as the average
balance of mortgage-backed securities decreased 7.8% from $48.3 million in 1995
to $44.8 million in 1996.
Interest Expense. Interest expense on deposits increased 13.3% from
$6.0 million in 1995 to $6.8 million in 1996 as the average balance of deposits
increased from $147.5 million in 1995 to $154.6 million in 1996 and the weighted
average cost of deposits increased from 4.07% in 1995 to 4.38% in 1996 as a
result of an increase in market interest rates. Management attributes the
increase in average deposits to normal deposit growth.
Interest expense on borrowings decreased $2.1 million from $2.8 million
in 1995 to $656,000 in 1996 as the average borrowings decreased from $43.0
million in 1995 to $12.5 million in 1996. The FHLB advances were used to fund
the mutual fund investment in 1995.
Provision for Loan Losses. The provision for loan losses decreased 3.3%
from $362,000 in 1995 to $349,000 in 1996. The provision for loan losses
remained relatively constant between 1995 and 1996, which resulted in a ratio of
allowance for loan losses to total loans of 1.08% at both September 30, 1996 and
1995. At September 30, 1996, the allowance for loan losses was 1.08% of total
loans and was deemed adequate by management at that date .
Other Income. Other income decreased $1.3 million from $3.2 million in
1995 to $1.9 million in 1996, primarily as a result of capital gains on the sale
of mutual funds of $1.8 million in 1995 and a 68.8% increase in loan and deposit
account service charges from $770,000 in 1995 to $1.3 million in 1996 as a
result of an increase in the number of deposit accounts.
General and Administrative Expenses. General and administrative
expenses increased 25.5% from $5.5 million in 1995 to $6.9 million in 1996.
Salaries and employee benefits increased 9.1% primarily as a result of increases
in clerical staff needed to service the increased number of checking accounts.
Office occupancy increased 12.5% primarily as a result of general building
maintenance costs. Furniture and equipment expense increased 16.8% from $464,000
in 1995 to $542,000 in 1996 as a result of an increase in depreciation expense
related to the purchase of check imaging equipment. FDIC insurance premiums
increased 293.9% from $330,000 in 1995 to $1.3 million in 1996 as a result of
the one-time SAIF recapitalization assessment of $946,000. Advertising expense
decreased 17.7% from $475,000 in 1995 to $391,000 in 1996 primarily as a result
of the opening of the Northtowne office in 1995. Office supplies increased 23.4%
from $269,000 in 1995 to $332,000 in 1996 primarily as a result of the increase
in the number of checking accounts.
Income Taxes. Income taxes increased from $194,000 (effective tax rate
of 9.2%) in 1995 to $756,000 (effective tax rate of 35%) in 1996 due to an
increase in income before taxes. The lower effective tax rate in 1995 resulted
from the use of capital loss carryforwards to offset $1.8 million in capital
gains income generated by the sale of mutual funds in 1995.
Market Risk and Asset and Liability Management
Market risk is the risk of loss from adverse changes in market prices
and rates. The Savings Bank's market risk arises principally from interest rate
risk inherent in its lending, investment, deposit and borrowing activities.
Management actively monitors and manages its interest rate risk exposure.
Although the Savings Bank manages other risks, such as credit quality and
liquidity risk, in the normal course of business, management considers interest
rate risk to be its most significant market risk that could potentially have the
largest material effect on the Savings Bank's financial condition and results of
operations. Other types of market risks, such as foreign currency exchange rate
risk and commodity price risk, do not arise in the normal course of the Savings
Bank's business activities.
28
<PAGE>
The Savings Bank's profitability is affected by fluctuations in market
interest rates. Management's goal is to maintain a reasonable balance between
exposure to interest rate fluctuations and earnings. A sudden and substantial
increase in interest rates may adversely impact the Savings Bank's earnings to
the extent that the interest rates on interest-earning assets and interest-
bearing liabilities do not change at the same rate, to the same extent or on the
same basis. The Savings Bank monitors the impact of changes in interest rates on
its net interest income using a test that measures the impact on net interest
income and net portfolio value of an immediate change in interest rates in 100
basis point increments. Net portfolio value is defined as the net present value
of assets, liabilities and off-balance sheet contracts. At September 30, 1997,
the Savings Bank's calculations based on the information and assumptions
produced for the analysis, suggested that a 200 basis point increase in rates
would reduce net interest income over a twelve-month period by 5.0% and reduce
net portfolio value by 17.0% while a 200 basis point decline in rates would
increase net interest income over a twelve-month period by 1.0% and increase net
portfolio value by 13.0% in the same period.
The following table is provided to the Savings Bank by the OTS and
illustrates the percent change in NPV as of September 30, 1997, based on OTS
assumptions. No effect has been given to any steps that the Savings Bank may
take to counteract the effect of the interest rate movements presented in the
table.
<TABLE>
<CAPTION>
Basis
Point ("bp") NPV as Percent of
Change Net Interest Income Net Portfolio Value Present Value of Assets
In Rates Amount % Change Amount $ Change % Change NPV Ratio Change
- -------- ------ -------- ------ -------- -------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
400 bp $7,297 (14)% 24,652 $(14,153) (36)% 9.99% (476)bp
300 bp 7,699 (9) 28,465 (10,340) (27) 11.32 (334)
200 bp 7,998 (5) 32,270 (6,536) (17) 12.60 (207)
100 bp 8,219 (3) 35,681 (3,124) (8) 13.70 (97)
0 bp 8,447 -- 38,806 -- -- 14.66 --
(100 bp) 8,476 -- 41,335 2,529 7 15.41 75
(200 bp) 8,494 1 43,782 4,977 13 16.11 145
(300 bp) 8,305 (2) 46,941 8,136 21 17.00 234
(400 bp) 7,765 (8) 51,390 12,585 32 18.24 358
</TABLE>
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. Furthermore, in the event of a change in interest rates, expected rates
of prepayments on loans and early withdrawals from certificates likely could
deviate significantly from those assumed in calculating the table. Therefore,
the data presented in the table should not be relied upon as necessarily
indicative of actual results.
29
<PAGE>
The following table shows the Savings Bank's financial instruments
that are sensitive to changes in interest rates, categorized by expected
maturity, and the instruments' fair values at September 30, 1997. Market risk
sensitive instruments are generally defined as on- and off-balance sheet
derivatives and other financial instruments.
<TABLE>
<CAPTION>
Average Within One One Year After 3 Years After 5 Years
Rate Year To 3 Years To 5 Years To 10 Years
------- ---------- ---------- ------------- -------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Interest-Sensitive Assets:
Loans receivable..................... 8.49% $78,083 $48,576 $37,552 $11,569
Mortgage-backed securities........... 7.25 15,444 7,597 6,872 5,950
Investments and other
interest-earning assets............. 7.01 14,458 -- 5,004 6,332
FHLB stock........................... 7.25 -- -- -- --
Interest-Sensitive Liabilities:
Checking accounts.................... 1.57 8,043 8,050 2,072 7,471
Savings accounts..................... 2.61 4,855 7,124 3,959 8,422
Certificate accounts................. 5.82 115,651 22,347 665 171
Borrowings........................... 6.24 10,000 5,000 -- --
Off-Balance Sheet Items:
Commitments to extend credit......... 8.75 11,028
Unused lines of credit............... 9.50 16,913
</TABLE>
<TABLE>
<CAPTION>
Beyond 10
Years Total Fair Value
--------- ----- ----------
<S> <C> <C> <C>
Interest-Sensitive Assets:
Loans receivable..................... $5,235 $181,015 $180,718
Mortgage-backed securities........... -- 35,863 35,863
Investments and other
interest-earning assets............. -- 25,794 25,794
FHLB stock........................... 1,650 1,650 1,650
Interest-Sensitive Liabilities:
Checking accounts.................... 11,812 37,808 37,871
Savings accounts..................... -- 24,340 24,397
Certificate accounts................. -- 138,834 139,273
Borrowings........................... -- 15,000 15,070
Off-Balance Sheet Items:
Commitments to extend credit......... 11,028 11,028
Unused lines of credit............... 16,913 16,913
</TABLE>
30
<PAGE>
Liquidity and Capital Resources
The Savings Bank's primary sources of funds are deposits, repayment of
loan principal (including mortgage-backed securities ("MBSs" and CMOs) and, to a
lesser extent, sales of mortgage-backed securities available for sale,
maturities of investment securities, and short-term investments and operations.
While scheduled
31
<PAGE>
loan repayments and maturing investments are relatively predictable, deposit
flows and early loan repayments are more influenced by interest rates, general
economic conditions, and competition. The Savings Bank attempts to price its
deposits to meet its asset/liability objectives discussed above, consistent with
local market conditions. Excess balances are generally invested in overnight
funds. In addition, the Savings Bank is eligible to borrow funds from the FHLB
of Atlanta.
Under OTS regulations, a member thrift 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 of its net withdrawable accounts
plus short-term borrowings. The current liquidity requirement is 4.0%. Monetary
penalties may be imposed for failure to meet liquidity requirements. The Savings
Bank's liquidity ratio at September 30, 1997 was 5.64%.
The primary investing activity of the Savings Bank is lending. During
the years ended September 30, 1997 and 1996, the Savings Bank originated $77.3
million and $68.3 million, respectively, of loans, of which $5.7 million in 1997
and $9.6 million in 1996 were sold to the Federal Home Loan Mortgage Corporation
("FHLMC"). The retained originations were funded by $59.5 million and $27.0
million, respectively, in principal repayments on loans and mortgage-backed
securities.
Liquidity management is both a short-and long-term responsibility of
the Savings Bank's management. The Savings Bank adjusts its investments in
liquid assets based upon management's assessment of (i) expected loan demand,
(ii) projected loan sales, (iii) expected deposit flows, (iv) yields available
on interest-bearing deposits, and (v) liquidity of its asset/liability
management program. Excess liquidity is invested generally in interest-bearing
overnight deposits and other short-term government and agency obligations. If
the Savings Bank requires funds beyond its ability to generate them internally,
it has additional borrowing capacity with the FHLB and collateral eligible for
repurchase agreements.
The Savings Bank anticipates that it will have sufficient funds
available to meet current loan commitments. At September 30, 1997, the Savings
Bank had outstanding commitments to originate loans (including commitments to
fund letters of credit) of $27.9 million. The Savings Bank expects to fund these
commitments with funds received from normal operations. See Note 17 to
Consolidated Financial Statements.
Certificates of deposit scheduled to mature in one year or less at
September 30, 1997 totaled $115.7 million. Although no assurances can be given,
based upon management's experience and familiarity with the customers involved
and the Savings Bank's pricing policy relative to that of its perceived
competitors, management believes that a significant portion of such deposits
will remain with the Savings Bank.
Since 1980, the Savings Bank has diversified its lending to include
home equity, second mortgage and consumer loans. This diversification has been
designed to increase earnings and reduce interest rate risk. The Savings Bank
has also increased the origination of home equity and second mortgage loans
secured by one- to four-family dwellings and intends to reduce the balance of
its MBSs by deploying funds into more profitable whole loans and becoming more
commercial bank-like in lending philosophy and direction. The Savings Bank will
continue to divest itself of mortgage-backed securities, when opportunities
arise to invest such funds in higher yielding whole loans. These changes in
lending and investment strategy will reduce the Savings Bank's liquidity in the
future as lower-yielding, more liquid assets are redeployed into higher-yielding
assets.
The Savings Bank must maintain minimum capital standards as promulgated
by the FDIC and the OTS which are: (1) a leverage limit requiring all thrift
institutions to maintain core capital in an amount not less than 3% of the
institution's total assets; (2) a tangible capital requirement of not less than
1.5% of total assets; and (3) a risk-based capital requirement of not less than
8% of the institution's total assets, substantially the same as the risk-based
capital requirements for national banks. The Savings Bank met all regulatory
capital requirements at
32
<PAGE>
September 30, 1997 and 1996. See "HISTORICAL AND PRO FORMA REGULATORY CAPITAL
COMPLIANCE."
Impact of Accounting Pronouncements and Regulatory Policies
Accounting for Stock-Based Compensation. Statement of Financial
Accounting Standards ("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
Savings Bank uses the intrinsic value method.
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 Savings Bank's results of operations or
financial position.
Deferral of the Effective Date of Certain Provisions of SFAS No. 125.
In December 1996, the Financial Accounting Standards Board ("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. In February 1997, the FASB issued SFAS No. 128,
"Earnings Per Share." SFAS 128 applies to entities with publicly traded common
stock or potential common stock and is effective for financial statements for
periods ending after December 15, 1997, including interim periods. SFAS 128
simplifies the standards for computing earnings per share ("EPS") previously
found in Accounting Principles Board ("APB") Opinion 15, "Earnings Per Share."
It replaces the presentation of primary EPS with a presentation of basic EPS. It
also requires dual presentation of basic and diluted EPS on the face of the
income statement for all companies with complex capital structures and requires
a reconciliation of the numerator and denominator of the basic EPS computation
to the numerator and denominator of the diluted EPS computation. The Savings
Bank's present computation of diluted EPS under APB Opinion 15 is applied
against a materiality test of 3%. For financial statements issued by the Savings
Bank after December 15, 1997, the materiality test will no longer apply and the
Savings Bank will report basic and diluted EPS for each period presented as well
as the further reconciliations required by SFAS 128. Although earlier
application is not permitted, SFAS 128 will require restatement of all prior-
period EPS data presented.
Disclosure of Information about Capital Structure. In February 1997,
the FASB also issued SFAS No. 129, "Disclosure of Information about Capital
Structure." The purpose of SFAS 129 is to consolidate existing disclosure
requirements for ease of retrieval. SFAS 129 contains no change in disclosure
requirements for
33
<PAGE>
companies, such as the Savings Bank that were subject to the previously existing
requirements. It applies to all entities and is effective for financial
statement issued for periods ending after December 15, 1997.
Reporting Comprehensive Income. In June 1997, the FASB issued SFAS No.
130, "Reporting Comprehensive Income." The purpose of SFAS 130 is to address
concerns over the practice of reporting elements of comprehensive income
directly in equity. This SFAS requires all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed in equal prominence with the
other financial statements. This statement is effective for periods beginning
after December 15, 1997. Comparative financial statements are required to be
reclassified to reflect the provisions of this statement. The Savings Bank will
adopt the provisions of this SFAS for fiscal year 1998.
Disclosures about Segments of an Enterprise and Related Information. In
June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This statement applies to all public
entities. The provisions of SFAS 131 require certain disclosures regarding
material industry segments within an entity. SFAS 131 is not expected to have a
material impact on the Savings Bank.
Year 2000 Considerations
Many existing computer programs use only two digits to identify a year
in the date datum field. These programs were designed and developed without
considering the impact of the upcoming change in the century. If uncorrected,
many computer applications could fail or create erroneous results by or at the
Year 2000. The Year 2000 issue affects virtually all companies and
organizations.
The Savings Bank has an in-house computer system to process customer
records and monetary transactions, post deposit and general ledger entries and
record activity in installment lending, loan servicing and loan originations.
Although no assurances can be given, based on internal testing procedures and
conversations with the software provider, the Savings Bank does not expect that
the cost of addressing any Year 2000 issue will be a material event or
uncertainty that would cause its reported financial information not to be
necessarily indicative of future operating results or future financial
condition, or that the costs or consequences of incomplete or untimely
resolution of any Year 2000 issue represent a known material event or
uncertainty that is reasonably likely to affect its future financial results, or
cause its reported financial information not to be necessarily indicative of
future operating results or future financial condition. Incomplete or untimely
compliance, however, would have a material adverse effect on the Savings Bank,
the dollar amount of which cannot be accurately quantified at this time because
of the inherent variables and uncertainties involved.
Effect of Inflation and Changing Prices
The Consolidated Financial Statements and related financial data
presented herein have been prepared in accordance with GAAP which require the
measurement of financial position and operating results in terms of historical
dollars, without considering the changes in relative purchasing power of money
over time due to inflation. The primary impact of inflation on operations of the
Savings Bank is reflected in increased operating costs. 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.
34
<PAGE>
BUSINESS OF THE HOLDING COMPANY
General
The Holding Company was organized as a Delaware business corporation
at the direction of the Savings Bank on November 5, 1997 for the purpose of
becoming a holding company for the Savings Bank upon completion of the
Conversion and Reorganization. As a result of the Conversion and Reorganization,
the Savings Bank will be a wholly-owned subsidiary of the Holding Company and
all of the issued and outstanding capital stock of the Savings Bank will be
owned by the Holding Company.
Business
Prior to the Conversion and Reorganization, the Holding Company has not
engaged and will not engage in any significant activities other than of an
organizational nature. Upon completion of the Conversion and Reorganization, the
Holding Company's primary business activity will be the ownership of the
outstanding capital stock of the Savings Bank. 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 Savings Bank
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 Savings Bank upon consummation of the Conversion and Reorganization, the
competitive conditions applicable to the Holding Company will be the same as
those confronting the Savings Bank. See "BUSINESS OF THE SAVINGS BANK --
Competition."
BUSINESS OF THE SAVINGS BANK
General
The Savings Bank operates, and intends to continue to operate, as a
community oriented financial institution and is devoted to serving the needs of
its customers. The Savings Bank's business consists primarily of attracting
retail deposits from the general public and using those funds to originate real
estate loans. See "-- Lending Activities."
Market Area
The Savings Bank considers Anderson and Oconee Counties, South
Carolina, as its primary market area. Additional loan origination demand is
generated from customers living in contiguous counties. The Savings Bank also
purchases loans secured by properties in South Carolina located outside its
primary market area.
The Savings Bank's main office and four branch offices are located in
the City of Anderson, the county seat and largest city in Anderson County, South
Carolina. Anderson County is included in the Greenville/Spartanburg metropolitan
statistical area. The Cities of Greenville and Spartanburg are located 30 and 60
miles northeast of Anderson, respectively, and Atlanta,the closest major city,
is 120 miles to the southwest.
Much of Anderson County is rural and roughly half of the land area is
used for agricultural purposes. Anderson County has benefitted from the growth
of the Greenville metropolitan area and is experiencing significant residential
and commercial development along Interstate 85, a major transportation route
that crosses through
35
<PAGE>
Anderson County. Major area employers include BMW Manufacturing Corp., Hoechst
Celenese Corporation, Owens Corning and Michelin Tire. Oconee is a smaller but
rapidly growing county located west of Anderson County. According to recent
government statistics, the September 1997 unemployment rates for Anderson and
Oconee Counties were both less than the South Carolina and national averages.
Lending Activities
General. Historically, the Savings Bank's principal lending activity
has been the origination of residential real estate loans for the purpose of
constructing or financing one- to four-family residential properties. At
September 30, 1997, the Savings Bank's loan portfolio consisted of $118.3
million of one- to four-family residential loans, $17.1 million of construction
loans, $19.2 million of consumer loans, $27.0 million of commercial real estate
loans, and $7.2 million of commercial business loans. In recent periods, the
Savings Bank has increased its investment in commercial real estate loans,
commercial business loans and construction loans.
36
<PAGE>
Loan Portfolio Analysis. The following table sets forth the composition
of the Savings Bank's loan portfolio at the dates indicated.
<TABLE>
<CAPTION>
At September 30,
----------------------------------------------------------------------
1997 1996 1995
------------------- --------------------- -------------------
Amount Percent Amount Percent Amount Percent
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans:
One- to four-family(1)........................... $118,279 66.16% $ 91,186 64.78% $ 81,226 69.70%
Multi-family..................................... 1,245 0.70 1,010 0.72 630 0.54
Commercial real estate........................... 26,976 15.09 17,009 12.08 7,355 6.31
Construction..................................... 17,145 9.59 19,509 13.86 11,523 9.89
--------- ------ -------- ------ -------- ------
Total mortgage loans........................ 163,645 91.54 128,714 91.44 100,734 86.44
--------- ------ -------- ------ -------- ------
Commercial business loans........................ 7,182 4.02 5,529 3.93 3,657 3.13
Consumer loans:
Home equity and second mortgage................. 3,405 1.90 5,036 3.58 7,535 6.47
Lines of credit................................. 9,156 5.12 6,713 4.77 6,279 5.39
Automobile loans................................ 3,540 1.98 2,677 1.90 1,438 1.23
Other........................................... 3,072 1.72 2,490 1.77 2,293 1.97
-------- ------ -------- ------ ------- ------
Total consumer loans........................ 19,173 10.72 16,916 12.02 17,545 15.06
-------- ------ -------- ------ ------- ------
Total loans................................. 190,000 106.28 151,159 107.39 121,936 104.63
Less:
Undisbursed proceeds for loans in process........ 8,985 (5.03) 8,866 (6.30) 4,119 (3.53)
Unearned discounts............................... 357 -- -- -- -- --
Allowance for loan losses........................ 1,886 (1.05) 1,535 (1.09) 1,278 (1.10)
-------- ------- --------- ------ --------- -------
Net loans receivable........................ $178,772 100.00% $140,758 100.00% $116,539 100.00%
======== ====== ======== ====== ======== ======
</TABLE>
<TABLE>
<CAPTION>
1994 1993
------------------- ----------------------
Amount Percent Amount Percent
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Mortgage loans:
One- to four-family(1)........................... $ 77,624 74.03% $ 68,461 70.58%
Multi-family..................................... -- -- -- --
Commercial real estate........................... 5,158 4.92 2,584 2.66
Construction..................................... 7,159 6.83 5,112 5.27
-------- ------ -------- ------
Total mortgage loans........................ 89,941 85.78 76,157 78.51
-------- ------ -------- ------
Commercial business loans........................ 1,222 1.17 222 0.23
Consumer loans:
Home equity and second mortgage................. 10,071 9.60 14,956 15.42
Lines of credit................................. 6,045 5.77 5,915 6.10
Automobile loans................................ 735 0.70 942 0.97
Other........................................... 1,837 1.75 2,168 2.23
-------- ------ -------- ------
Total consumer loans........................ 18,688 17.82 23,981 24.72
-------- ------ -------- ------
Total loans................................. 109,851 104.77 100,360 103.46
Less:
Undisbursed proceeds for loans in process........ 4,037 (3.85) 2,471 (2.55)
Unearned discounts............................... -- -- -- --
Allowance for loan losses........................ 962 (0.92) 884 (0.91)
--------- ------- --------- -------
Net loans receivable........................ $104,852 100.00% $ 97,005 100.00%
======== ====== ======== ======
</TABLE>
- ----------
(1) Includes construction loans converted to permanent loans and participation
loans.
37
<PAGE>
One- to Four-Family and Multi-Family Mortgage Loans. The Savings Bank
originates permanent conventional mortgage loans secured by one- to four-family
residential properties with original loan-to-value ratios up to 90% of the
appraised value or the purchase price of the property, whichever is less. At
September 30, 1997, the Savings Bank had $118.3 million, or 66% of total loans,
in one- to four-family mortgage loans. The Savings Bank requires hazard
insurance on the property securing the loan. All one- to four-family mortgage
loans require a title examination or abstract of title. Title insurance is
required on all fixed-rate mortgage loans so that they may be sold in the
secondary market. One- to four-family mortgage loans are generally underwritten
to conform to FHLMC guidelines. Loan to value ratios are limited to 80% but may
be increased to 95%, provided that private mortgage insurance coverage is
obtained for amounts over 80%.
The Savings Bank offers both fixed-rate mortgages and ARM loans with
terms of 15 to 30 years. At September 30, 1997, ARM loans totalled $45.6
million, or 38.5% of the one- to four-family loan portfolio. The Savings Bank
offers four conventional ARM loans: a one year ARM loan with annual adjustment
periods indexed to the One Year Treasury Bill; a three year ARM loan with annual
adjustment periods indexed to the Three Year Treasury Bill; a five year ARM loan
with annual adjustment periods indexed to the One Year Treasury Bill; and a ten
year ARM loan with annual adjustment periods indexed to the One Year Treasury
Bill. The one year ARM loan and the three year ARM loan provide that the amount
of any increase or decrease in the interest rate is limited to two percentage
points (upward or downward) per adjustment period and generally contain a 6%
maximum adjustment over the life of the loan. The five year ARM loan and the ten
year ARM loan provide that the amount of any increase or decrease in the
interest rate is limited to two percentage points (upward or downward) per
adjustment period and generally contain a 5% maximum adjustment over the life of
the loan. At September 30, 1997, the majority of the ARM loans in the Savings
Bank's portfolio, that were originated by the Savings Bank, were the three year
and five year varieties. If market interest rates increase, these rate
adjustment limitations may prevent such ARM loans from repricing to market
interest rates, which would have an adverse effect on net interest income.
Borrower demand for ARMs 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 interest rates and loan fees for fixed-rate
mortgage loans and interest rates and loan fees for ARMs. Fixed-rate loans are
originated for sale in the secondary market, though loans with terms of 15 years
occasionally are retained in the Savings Bank's portfolio. The relative amount
of fixed-rate and ARM loans that can be originated at any time is largely
determined by the demand for each in the prevailing competitive environment.
In recent periods, the Savings Bank has purchased one- to four-family
mortgage loans from a mortgage banking company located in Hilton Head Island,
South Carolina, and a mortgage banking company located in Greenville, South
Carolina. These purchases account for a substantial portion of the growth in the
one- to four-family loan portfolio in recent periods. During the year ended
September 30, 1997, the Savings Bank purchased $23.6 million of one- to
four-family mortgage loans. Substantially all of these purchases were from the
Greenville mortgage company. In future periods, the Savings Bank expects that a
substantial portion of purchased loan volume will come from that company, rather
than the Hilton Head Island mortgage company, because of the increasing
competition in the Hilton Head Island market.
At September 30, 1997, the Savings Bank had $4.1 million of purchased
loans secured by residential properties on Hilton Head Island, South Carolina,
all of which were one year ARM loans. These loans were all purchased from the
same mortgage company, located on Hilton Head Island. Prior to purchase, the
Savings Bank reviews each loan for conformance to the Savings Bank's
underwriting criteria. At September 30, 1997, the average size of such loans was
approximately $238,000 and the largest loan had an outstanding balance of $1.3
million. Although all such loans were performing according to their terms at
September 30, 1997, they do possess certain risks due to the average size of
such loans and the location of the properties outside the Savings Bank's primary
market area. Subject to market conditions, the Savings Bank expects to purchase
additional such loans.
At September 30, 1997, the Savings Bank had $23.7 million of purchased
one- to four-family mortgage loans secured by residential properties located
primarily in Greenville, South Carolina. These loans were all
38
<PAGE>
purchased from the mortgage company in which a service corporation subsidiary of
the Savings Bank has an equity investment. See "-- Subsidiary Activities." Prior
to purchase, the Savings Bank reviews each loan for conformity with the Savings
Bank's underwriting criteria. At September 30, 1997, the average size of such
loans was approximately $126,000. Subject to market conditions, the Savings Bank
expects to purchase additional such loans.
The Savings Bank does not actively solicit multi-family loans but
extends them as an accommodation to existing customers. At September 30, 1997,
multi-family loans totalled $1.2 million, or 0.7% of net loans receivable, and
consisted of two loans, the largest of which had an outstanding balance of
$240,000. All such loans are secured by properties located in the Savings Bank's
primary market area. At September 30, 1997, all multi-family loans were
performing according to their terms.
Construction Loans. The construction loan portfolio was $17.1 million,
or 9.6% of the total loan portfolio at September 30, 1997. The Savings Bank
intends to continue emphasizing and expanding this type of lending. Such loans
are primarily combined construction and permanent mortgage loans. The
construction portion of the loan is for a period of up to 12 months on an
interest only basis and at a maximum loan to value ratio of 95%. The permanent
mortgage is made for up to 30 years. Construction-permanent loans are made at
the same fixed- or adjustable-rates of interest that are offered for permanent
residential mortgage loans made by the Savings Bank. The majority of
construction loans are made against binding sales contracts for the home being
built. The Savings Bank also originates speculative construction loans to a
small number of residential builders in its primary market area well known to
the Savings Bank. At September 30, 1997, the Savings Bank had $17.1 million, or
9.59% of total loans, in construction loans, of which $6.4 million were
speculative constructive loans. During the year ended September 30, 1997, the
Savings Bank purchased speculative construction loans secured by one- to
four-family properties located on Hilton Head Island, South Carolina, in the
aggregate amount of $2.5 million, of which $343,000 was outstanding as of
September 30, 1997. All of these purchased construction loans were performing
according to their terms at September 30, 1997.
Construction lending generally is considered to involve a higher degree
of credit risk than long-term financing of residential properties. The risk of
loss on a construction loan is dependent largely upon the accuracy of the
initial estimate of the property's value at completion of construction or
development and the estimated cost (including interest) of construction. If the
estimate of construction cost and the marketability of the property upon
completion of the project prove to be inaccurate, the Savings Bank may be
compelled to advance additional funds to complete the development. If the
borrower is unable to sell the completed project in a timely manner or obtain
adequate proceeds to repay the loan, the loan may become non-performing.
Furthermore, if the estimate of value proves to be inaccurate, the Savings Bank
may be confronted with, at or prior to the maturity of the loan, a project with
a value which is insufficient to assure full repayment. The ability of the
developer or builder to sell developed lots or completed dwelling units will
depend on, among other things, demand, pricing and availability of comparable
properties, and economic conditions.
The Savings Bank's underwriting criteria are designed to evaluate and
minimize the risks of each construction loan. Among other things, the Savings
Bank considers evidence of the availability of permanent financing for the
borrower, the reputation of the borrower, the amount of the borrower's equity in
the project, the independent appraisal and review of cost estimates, the
pre-construction sale and leasing information, and the cash flow projections of
the borrower. In addition, except for the purchased construction loans on Hilton
Head Island, South Carolina, the majority of the construction loans granted by
the Savings Bank are secured by property in the Savings Bank's primary market
area. The Savings Bank reviews such purchased construction loans for conformity
with the Savings Bank's underwriting criteria before purchase.
Commercial Real Estate Loans. The Savings Bank originates and purchases
commercial real estate loans. Commercial real estate loans totalled $27.0
million, or 15.1% of the total loan portfolio, at September 30, 1997. Currently,
the Savings Bank originates commercial real estate loans only to select
borrowers known to the Savings Bank and secured by properties in its primary
market area and generally in amounts between $100,000 and
39
<PAGE>
$500,000. The commercial real estate loan portfolio has increased in recent
periods from $17.0 million, or 12.1% of the total loan portfolio at September
30, 1996, to $27.0 million, or 15.1%, at September 30, 1997. The Savings Bank
intends to continue emphasizing and expanding this type of lending. At September
30, 1997, the largest commercial real estate loan originated by the Savings Bank
had an outstanding balance of $2.0 million and was secured by multiple units of
one- to- four family dwellings and land located in Anderson. The loan was
performing according to its terms at that date. At September 30, 1997, the
largest purchased commercial real estate loan had an outstanding balance of $1.5
million and was secured by a sub-division development located in Greenville,
South Carolina. The loan was performing according to its terms at that date.
Of primary concern in commercial real estate lending is the borrower's
creditworthiness and the feasibility and cash flow potential of the project. The
Savings Bank's income property collateral is not concentrated in any one
industry or area. Examples of the types of collateral securing the income
property loans include office buildings and residential rental properties. Loans
secured by income properties are generally larger and involve greater risks than
residential mortgage loans because payments on loans secured by income
properties are often dependent on successful operation or management of the
properties. As a result, repayment of such loans may be subject, to a greater
extent than residential real estate loans, to supply and demand in the market in
the type of property securing the loan and, therefore, may be subject to adverse
conditions in the real estate market or the economy. If the cash flow from the
project is reduced, the borrowers ability to repay the loan may be impaired.
Commercial Business Loans. At September 30, 1997, the Savings Bank had
$7.2 million of commercial business loans, which represented 4.0% of total
loans. Commercial business loans generally include equipment loans with terms of
up to five years and lines of credit secured by savings accounts and unsecured
line of credit. Such loans are generally made in amounts up to $100,000 and
carry adjustable rates of interest. The Savings Bank generally requires annual
financial statements from its commercial business borrowers and personal
guarantees if the borrower is a corporation. At September 30, 1997, the largest
outstanding commercial business loan was a $500,000 line of credit with an
outstanding balance of $237,000 that was secured by an assignment of residential
mortgages. The loan was performing according to its terms at that date.
Commercial business lending generally involves greater risk than
residential mortgage lending and involves risks that are different from those
associated with residential, commercial and multi-family real estate lending.
Real estate lending is generally considered to be collateral based lending with
loan amounts based on predetermined loan to collateral values and liquidation of
the underlying real estate collateral is viewed as the primary source of
repayment in the event of borrower default. Although commercial business loans
are often collateralized by equipment, inventory, accounts receivable or other
business assets, the liquidation of collateral in the event of a borrower
default is often not a sufficient source of repayment because accounts
receivable may be uncollectible and inventories and equipment may be obsolete or
of limited use, among other things. Accordingly, the repayment of a commercial
business loan depends primarily on the creditworthiness of the borrower (and any
guarantors), while liquidation of collateral is a secondary and often
insufficient source of repayment.
Consumer Loans. The Savings Bank originates a wide variety of consumer
loans, which are made primarily on a secured basis to existing customers.
Consumer loans include savings account loans, direct automobile loans, direct
boat loans, renewable lines of credit and unsecured loans. These loans are made
at both fixed- and variable-rates of interest, adjustable annually, and with
varying terms depending on the type of loan. In addition, the Savings Bank
offers unsecured consumer loans. Consumer loans totalled $19.2 million at
September 30, 1997, or 11% of the Savings Bank's total loan portfolio.
At September 30, 1997, the largest components of the consumer loan
portfolio were home equity and second mortgage loans and lines of credit. At
September 30, 1997, such loans totalled $12.6 million, or 7.0% of the total loan
portfolio. At September 30, 1997, commitments to extend credit under lines of
credit totalled $10.3 million.
40
<PAGE>
Home equity and second mortgage loans are generally for the improvement
of residential properties. The majority of these loans are made to existing loan
customers and are secured by a first or second mortgage on residential property.
The Savings Bank actively solicits these types of loans by contacting their
borrowing customers directly. The loan-to-value ratio on these properties is
typically below 80%, including the first mortgage and home equity or second
mortgage loan. Home equity and second mortgage loans are typically variable rate
loans with a fixed payment that matures over 15 years. Rates adjust monthly;
however, the payment remains constant over the loan term and any rate adjustment
is reflected in an increase in the loan term. The interest rate is tied to the
prime lending rate.
Lines of credit are generally secured by a second mortgage on
residential property and are generally made to existing customers. Credit lines
are generally 80% of the appraised value of the collateral property. Terms range
from five to 15 years and the interest rate is generally tied to the prime
lending rate.
The Savings Bank views consumer lending as an important component of
its business operations because consumer loans generally have shorter-terms and
higher yields, thus reducing exposure to changes in interest rates. In addition,
the Savings Bank believes that offering consumer loans helps to expand and
create stronger ties to its customer base. The Savings Bank intends to continue
emphasizing this type of lending.
The Savings Bank employs strict underwriting standards for consumer
loans. These procedures include an assessment of the applicant's payment history
on other debts and ability to meet existing obligations and payments on the
proposed loans. Although the applicant's creditworthiness is a primary
consideration, the underwriting process also includes a comparison of the value
of the security, if any, to the proposed loan amount. The Savings Bank
underwrites and originates all of its consumer loans internally, which
management believes limits exposure to credit risks relating to loans
underwritten or purchased from brokers or other outside sources.
Consumer loans entail greater risk than do residential mortgage loans,
particularly in the case of consumer loans which are unsecured or secured by
assets that depreciate rapidly, such as automobiles. In the latter case,
repossessed collateral for a defaulted consumer loan may not provide an adequate
source of repayment for the outstanding loan and the remaining deficiency often
does not warrant further substantial collection efforts against the borrower. In
addition, consumer loan collections are dependent on the borrower's continuing
financial stability, and thus are more likely to be adversely affected by job
loss, divorce, illness or personal bankruptcy. Furthermore, the application of
various federal and state laws, including federal and state bankruptcy and
insolvency laws, may limit the amount which can be recovered on such loans. Such
loans may also give rise to claims and defenses by the borrower against the
Savings Bank as the holder of the loan, and a borrower may be able to assert
claims and defenses which it has against the seller of the underlying
collateral.
Loan Maturity
The following table sets forth certain information at September 30,
1997 regarding the dollar amount of loans maturing in the Savings Bank's
portfolio based on their contractual terms to maturity. Demand loans, loans
having no stated schedule of repayments and no stated maturity, and overdrafts
are reported as due in one year or less. Loan balances do not include
undisbursed loan proceeds, unearned discounts, unearned income and allowance for
loan losses.
41
<PAGE>
<TABLE>
<CAPTION>
Within One Year After 3 Years After 5 Years
One Year Through 3 Years Through 5 Years Through 10 Years Beyond 10 Years Total
-------- --------------- --------------- ---------------- --------------- -----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Residential mortgage(1).. $29,718 $34,977 $30,489 $10,267 $5,132 $110,583
Commercial real estate... 13,365 7,884 5,024 568 91 26,932
Commercial business...... 5,491 1,691 -- -- -- 7,182
Construction............. 16,698 447 -- -- -- 17,145
Automobile............... 203 1,350 1,939 48 -- 3,540
Savings account loans.... 1,089 144 88 12 12 1,345
Other.................... 11,519 2,083 12 674 -- 14,288
--------- --------- --------- --------- --------- ----------
Total loans......... $78,083 $48,576 $37,552 $11,569 $5,235 $181,015
======= ======= ======= ======= ====== ========
</TABLE>
- ----------
(1) Includes one- to four-family and multi-family loans.
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>
Residential mortgage(1)....... $48,713 $32,152
Commercial real estate........ 12,101 1,466
Commercial business........... 1,220 471
Construction.................. 447 --
Automobile.................... 3,337 --
Savings account loans......... 256 --
Other......................... 748 2,021
------- -------
Total.................... $66,822 $36,110
======= =======
</TABLE>
- ----------
(1) Includes one- to four-family and multi-family loans.
Loan Soliciting and Processing. Loan originations come from a number of
sources. The Savings Bank's customary sources of loans are from realtors,
walk-in customers, referrals and existing customers. A formal business
development program has been implemented where loan officers and sales personnel
make regular sales calls on building contractors and realtors.
The Savings Banks' Loan Committee approves loan applications up to and
including $500,000. The Loan Committee is composed of Robert W. Orr, President,
Managing Officer and Director, Barry C. Visioli, Senior Vice President, John
Dawkins, Vice President, and David Peters, Vice President. Loan applications in
excess of $500,000 must be approved by the full Board of Directors.
Loan Purchases and Sales and Servicing. The Savings Bank is an active
purchaser of loans. In recent periods, the Savings Bank has purchased ARM loans,
construction loans and lot loans secured by properties on Hilton Head Island,
South Carolina. See "-- Lending Activities -- One- to Four-Family and
Multi-Family Mortgage Loans" and "-- Lending Activities -- Construction Loans."
In addition, the Savings Bank purchases one- to four-family, commercial real
estate and construction loans from a mortgage company in which a service
corporation subsidiary of the Savings Bank has an equity investment.
Furthermore, the Savings Bank purchases periodically participation interests in
permanent real estate loans and construction loans. Any participation interest
purchased must meet the Savings Bank's own underwriting standards. The Savings
Bank purchases loans from institutions in the State of South Carolina.
42
<PAGE>
The Savings Bank periodically sells one- to four-family mortgage loans
to the FHLMC in order to comply with the regulations limiting the amount of
loans to one borrower or to reduce the amount of fixed-rate loans in the Savings
Bank's portfolio. The Savings Bank generally sells all fixed-rate, 30-year
residential mortgage loans.
The Savings Bank participates in loan servicing activities both
directly and indirectly. Direct servicing activities arise in connection with
loans that the Savings Bank originates but sells with servicing rights retained.
The Savings Bank generally receives a fee payable monthly of 1/4% to 3/8% per
annum of the unpaid balance of each loan for which it retains servicing rights.
At September 30, 1997, the Savings Bank was servicing loans for others
aggregating $62.1 million. During the year ended September 30, 1997, the Savings
Bank earned servicing fee income of $198,000.
The Savings Bank participates indirectly in loan servicing activities
through its equity investment, through a service corporation subsidiary, in a
mortgage banking company (see "-- Subsidiary Activities") and through an
investment in a limited partnership. At September 30, 1997, the mortgage banking
company was servicing 226 loans for others aggregating $28.0 million.
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
------- ------ ------
(Dollars in Thousands)
<S> <C> <C> <C>
Total loans at beginning of
period............................. $151,159 $121,936 $109,851
-------- -------- --------
Loans originated:
One- to four-family................ 25,836 30,065 16,167
Multi-family....................... 240 1,312 526
Commercial real estate............. 11,912 7,113 5,804
Construction loans................. 10,934 12,816 12,169
Commercial business................ 10,731 6,302 4,735
Consumer........................... 24,739 10,696 14,984
-------- --------- --------
Total loans originated........... $84,397 $ 68,304 54,385
------- -------- --------
Loans purchased:
One- to four-family................ 23,581 18,242 6,543
Commercial real estate(1).......... 3,146 -- 813
-------- ------- --------
Total loans purchased............ 26,727 18,242 7,356
-------- ------- --------
Loans sold:
Total whole loans sold............. (5,747) (9,556) (9,614)
-------- ------- -------
Total loans sold................ (5,747) (9,556) (9,614)
Mortgage loan principal
repayments......................... (66,531) (47,767) (40,042)
Net loan activity................... 38,841 29,223 12,085
--------- --------- ---------
Total loans at end of period........ $190,000 $151,159 $121,936
======== ======== ========
</TABLE>
- ----------
(1) In 1997, includes a $2.3 million purchased loan secured by single-
family lots located in Greenville, South Carolina.
43
<PAGE>
Equity Investment in Limited Partnership. In December 1996, the Savings
Bank purchased a 20.625% interest in a limited partnership that invests in
mortgage servicing rights. Through this limited partnership, the Savings Bank
invests in servicing rights tied to a national portfolio of residential mortgage
loans. For the year ended September 30, 1997, the Savings Bank's return on
investment was approximately 5.89%. For the year ended September 30, 1997, the
Savings Bank recorded other income of $185,000 on its investment based on the
net income of the limited partnership as audited by independent certified public
accountants. See Note 3 of Notes to Consolidated Financial Statements. The value
of the Savings Bank's investment in the limited partnership would be adversely
affected by credit quality deterioration of the underlying mortgage loans. The
value of the investment would also be adversely affected by an increase in
market interest rates because of accelerated prepayments of the underlying
mortgage loans. See "RISK FACTORS -- Interest Rate Risk."
Loan Commitments. The Savings Bank issues commitments for fixed- and
adjustable-rate single-family residential 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. The Savings Bank had outstanding loan commitments
(including commitments to fund letters of credit) of approximately $27.9 million
at September 30, 1997. See Note 17 of Notes to Consolidated Financial
Statements.
Loan Origination and Other Fees. The Savings Bank, in most instances,
receives loan origination fees and discount "points." Loan fees and points are a
percentage of the principal amount of the mortgage loan that are charged to the
borrower for funding the loan. The Savings Bank usually charges origination fees
of 0.5% to 1.0% on one- to four-family residential real estate loans and 1.0% to
2.0% on long-term commercial real estate loans. Current accounting standards
require fees received for originating loans to be deferred and amortized into
interest income over the contractual life of the loan. Deferred fees associated
with loans that are sold are recognized as income at the time of sale.
The Savings Bank offsets all loan origination fees and certain related
direct loan origination costs against all fees and costs associated with loan
origination. The resulting net amount is deferred and amortized over the
contractual life of the related loans as an adjustment to the yield on such
loans, unless prepayments of a large group of similar loans are probable and the
timing and amount of prepayments can be reasonably estimated. The Savings Bank
offsets commitment fees against related direct costs and the resulting net
amount is recognized over the contractual life of the related loans as an
adjustment of yield if the commitment is exercised. If the commitment expires
unexercised, the fees collected are recognized as non-interest income upon
expiration of the commitment.
Delinquencies. The Savings Bank's collection procedures provide for a
series of contacts with delinquent borrowers. After a delinquency of 15 days, a
late charge is assessed. If the delinquency continues, subsequent efforts will
be made to contact the delinquent borrower. The Savings Bank's collection
procedures provide that when a loan is 30 days overdue, and again on the 45th
day, the borrower will be contacted by mail and payment will be requested. If a
loan continues in a delinquent status for 90 days or more, the Savings Bank
generally initiates foreclosure proceedings. In certain instances, however, the
Board may decide to modify the loan or grant a limited moratorium on loan
payments to enable the borrower to reorganize his financial affairs.
44
<PAGE>
The following table sets forth information with respect to the Savings
Bank's non-performing assets for the periods indicated. During the periods
shown, the Savings Bank had no restructured loans within the meaning of SFAS No.
15.
<TABLE>
<CAPTION>
At September 30,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Loans accounted for on a non-accrual basis:
Mortgage.............................. $ 220 $190 $348 $ 435 $ --
Consumer.............................. -- -- 124 163 448
Commercial............................ 183 126 -- -- --
------- ----- ------ -------- ---------
403 316 472 598 448
------- ----- ----- ------- -------
Accruing loans which are contractually
past due 90 days or more: Real estate:
Residential.......................... 6 467 82 60 826
Consumer.............................. 8 2 9 17 17
Commercial............................ 465 10 -- -- --
------- ----- ----- ------- -------
479 479 91 77 843
------- ----- ----- ------- -------
Total of non-accrual and
past due 90 days or more............. 882 795 563 675 1,291
------- ----- ----- ------- -------
Real estate owned, net................ 163 3 32 575 87
------- ----- ----- ------- -------
Total non-performing assets........... $1,045 $798 $595 $1,250 $1,378
====== ==== ==== ====== ======
Total loans delinquent 90 days
or more to net loans................ 0.49% 0.56% 0.48% 0.64% 1.33%
Total loans delinquent 90 days
or more to total assets............. 0.34% 0.38% 0.32% 0.39% 0.77%
Total non-performing assets to
total assets......................... 0.41% 0.38% 0.33% 0.73% 0.82%
</TABLE>
The increase in non-performing assets at September 30, 1997 resulted
primarily from an increase in accruing commercial real estate loans
contractually past due 90 days or more. At September 30, 1997, accruing
commercial real estate loans contractually past due 90 days or more consisted
primarily of one loan with an outstanding balance of $330,000, which was secured
by a commercial property located in the Savings Bank's primary market area.
The Savings Bank does not accrue interest on loans, including impaired
loans under SFAS No. 114, for which management deems the collection of
additional interest to be doubtful. If interest on these non-accrual loans had
been accrued, interest income of approximately $19,000 would have been recorded
for the year ended September 30, 1997.
Asset Classification. OTS 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 must have one or more defined weaknesses
and are characterized by the distinct possibility that the insured institution
will sustain some loss if the deficiencies
45
<PAGE>
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 "loss" is considered uncollectible and of such little value that
continuance as an asset of the institution is not warranted. The regulations
have also created a "special mention" category, described as assets which do not
currently expose an insured institution to a sufficient degree of risk to
warrant classification but do possess credit deficiencies or potential
weaknesses deserving management's close attention. Assets classified as
substandard or doubtful require the institution to establish general allowances
for loan losses. If an asset or portion thereof is classified loss, the insured
institution must either establish specific allowances for loan losses in the
amount of 100% of the portion of the asset classified loss or charge-off such
amount. A portion of general loss allowances established to cover possible
losses related to assets classified substandard or doubtful may be included in
determining an institution's regulatory capital, while specific valuation
allowances for loan losses generally do not qualify as regulatory capital.
The aggregate amounts of the Savings Bank's classified assets and of
the Savings Bank's general and specific loss allowances and charge-offs for the
period then ended, were as follows:
At or For the Years
Ended September 30,
----------------------------------
1997 1996 1995
---- ---- ----
(In Thousands)
Loss..................... $ 140 $ 125 $ 86
Doubtful................. 8 32 --
Substandard assets....... 1,227 598 575
Special mention.......... 58 -- --
------ ------ ------
$1,433 $ 755 $ 661
====== ====== ======
General loss allowances.. 1,746 1,410 1,192
Specific loss allowances. 140 125 86
Net charge-offs.......... 304 92 46
At September 30, 1997, loss assets consisted of one commercial real
estate loan ($10,000), five one- to four-family mortgage loans ($34,000), one
secured commercial business loan ($9,000), and one unsecured commercial business
loan ($87,000); doubtful assets consisted of an unsecured consumer loan;
substandard assets consisted of 18 one- to four-family mortgage loans
($662,000), two commercial real estate loans ($370,000), two secured commercial
business loan ($168,000), four secured consumer loans ($16,000) and seven
unsecured consumer loan ($11,000); and special mention assets consisted of one
commercial real estate loan ($3,000) and a one- to four-family mortgage loan
($55,000).
Real Estate Owned. Real estate acquired by the Savings Bank as a result
of foreclosure or by deed-in- lieu of foreclosure is classified as real estate
owned until it is sold. When property is acquired it is recorded at the fair
value of the property received. Subsequently, it is carried at the lower of its
new cost basis or fair value, less estimated selling costs. The Savings Bank had
$163,000 of real estate owned at September 30, 1997.
Allowance for Loan Losses. The Savings Bank's management evaluates the
need to establish allowances against losses on loans each year based on
estimated losses on specific loans when a decline in value has occurred. Such
evaluation includes a review of all loans for which full collectibility may not
be reasonably assured and considers, among other matters, the estimated market
value of the underlying collateral of problem loans, prior loss experience,
economic conditions and overall portfolio quality. The provision for loan losses
is charged against earnings in the year it is established. In recent periods,
the Savings Bank has increased the provision for loan losses in recognition of
the changing composition of the loan portfolio toward an increased emphasis on
commercial real estate loans, construction loans, and other types of lending
that carry a greater degree of credit risk than one- to
46
<PAGE>
four-family mortgage lending. At September 30, 1997, the Savings Bank had an
allowance for loan losses of $1.9 million, or 1.04% of total loans. Based on
past experience and future expectations, management believes that the allowance
for loan losses is adequate at September 30, 1997.
While the Savings Bank believes it has established its existing
allowance for loan losses in accordance with GAAP, the allowance is based on
estimates which are subject to change based upon changes in the loan portfolio
and economic conditions, among other things. Furthermore, there can be no
assurance that the Savings Bank's regulators, in reviewing the Savings Bank's
loan portfolio, will not request that the Savings Bank increase its allowance
for loan losses, thereby negatively affecting the Savings Bank's financial
condition and earnings based upon information available to the regulators at the
time of their examination.
The following table sets forth an analysis of the Savings Bank's gross
allowance for loan losses for the periods indicated. Where specific loan loss
reserves have been established, any difference between the loss reserve and the
amount of loss realized has been charged or credited to current income.
<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............ $1,535 $1,278 $ 962 $884 $624
------ ------ ------ ---- ----
Provision for loan losses................... 655 349 362 120 364
Transfers to real estate owned
valuation allowance....................... -- -- -- -- 50
Recoveries:
Residential mortgage...................... 4 6 -- -- --
Consumer.................................. 24 17 6 6 7
Total recoveries........................ 28 23 6 6 7
------- ------- ------- ----- -----
Charge-offs:
Residential mortgage...................... 4 18 -- 13 4
Consumer.................................. 100 97 52 35 57
Commercial................................ 228 -- -- -- --
------- -------- -------- ------ --
Total charge-offs....................... 332 115 52 48 61
------- ------- ------- ----- -----
Net charge-offs......................... 304 92 46 42 54
------- ------- ------- ----- -----
Allowance at end of period.................. $1,886 $1,535 $1,278 $962 $884
====== ====== ====== ==== ====
Ratio of allowance to total loans
outstanding at the end of the period....... 1.04% 1.08% 1.08% 0.92% 0.91%
Ratio of net charge-offs to average
loans outstanding during the period....... 0.18% 0.07% 0.04% 0.84% 0.06%
</TABLE>
47
<PAGE>
The following table sets forth the breakdown of the allowance for loan
losses by loan category for the dates indicated.
<TABLE>
<CAPTION>
At September 30,
----------------------------------------------------------------------------------
1997 1996 1995
---------------------------- ------------------------- ---------------------------
As a % % of As a % % of As a % % of
of Out- Loans in of Out- Loans in of Out- Loans in
standing Category standing Category standing Category
Loans in to Total Loans in to Total Loans in to Total
Amount Category Loans Amount Category Loans Amount Category Loans
------ -------- -------- ------ -------- --------- ------ -------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate -
mortgage............................ $ 766 0.60% 70 $ 726 0.71% 72% $ 573 0.57% 83%
Commercial real estate
and commercial
business............................ 737 2.16 19 465 2.06 16 297 8.12 3
Consumer............................. 383 2.00 11 344 2.03 12 408 2.32 14
------- ---- ------- ---- ------- ----
Total allowance for loan
losses.............................. $1,886 1.04% 100% $1,535 1.08% 100% $1,278 1.08% 100%
====== === ====== === ====== ===
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------
1994 1993
--------------------------- ----------------------------
As a % % of As a % % of
of Out- Loans in of Out- Loans in
standing Category standing Category
Loans in to Total Loans in to Total
Amount Category Loans Amount Category Loans
------ -------- --------- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C>
Real estate -
mortgage............................ $493 0.48% 51% $506 0.67% 76%
Commercial real estate
and commercial
business............................ 100 1.94 10 -- -- --
Consumer............................. 369 1.70 39 378 1.56 24
----- ---- ------ ----
Total allowance for loan
losses.............................. $962 0.92% 100% $884 0.91% 100%
==== === ==== ===
</TABLE>
48
<PAGE>
Investment Activities
The Savings Bank has made significant investments in mortgage-backed
securities, including CMOs. The Savings Bank had mortgage-backed securities with
an amortized cost of $35.7 million and a market value of $35.9 million at
September 30, 1997, all of which were invested in U.S. Government agency
securities, investment grade securities, and securities guaranteed by the
funding arm of the Resolution Trust Corporation ("RTC").
In an effort to increase the average portfolio yield, the Savings Bank
restructured its investment securities portfolio during the year ended September
30, 1997 by, in part, investing in callable, U.S. Government agency zero coupon
bonds with maturities exceeding ten years. See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Comparison of
Financial Condition at September 30, 1997 and 1996" for further discussion.
Although these bonds offer higher yields, an increase in market interest rates
would have a material adverse effect on their value. See "RISK FACTORS --
Interest Rate Risk."
At September 30, 1997, the Savings Bank had invested $22.0 million in
CMOs ($10.3 million in U.S. Government agency issues and $11.7 million in
investment grade private issues) with an average estimated life varying from six
months to five years and ranging in original principal amount from $2.0 million
to $6.0 million. The weighted average yield to expected maturity on the CMOs at
September 30, 1997 was 7.30%. At September 30, 1997, CMOs consisted of Federal
National Mortgage Association ("FNMA") issues, as well as investment grade
private issues that are generally riskier because they are not guaranteed or
insured by the U.S. Government. CMOs may be used as collateral for borrowings
and, through repayments, as a source of liquidity. Management considers CMOs to
be advantageous since they offer yields above those available for investments of
comparable credit quality and duration and qualify as thrift investments under
the qualified thrift lender ("QTL") test. See "REGULATION -- Federal Regulation
of Savings Associations -- Qualified Thrift Lender Test." At September 30, 1997,
the CMO portfolio consisted of various tranches but no residuals. In recent
years, the Savings Bank has used the proceeds from the paydown of CMOs to invest
in one- to four-family and other types of lending, and expects to continue to do
so in the future, subject to market conditions.
CMOs are subject to repayment by the mortgagors of the underlying
collateral at any time. Such prepayment may subject the Savings Bank's CMOs to
yield and price volatility. To assess this volatility, the OTS requires the
Savings Bank to test annually its CMOs to determine whether they are high-risk
or non-high-risk securities. The policy established a three-part risk
measurement test for fixed-rate and a one-part test for floating-rate CMOs and
other mortgage derivative securities. Securities failing any one of the tests
are deemed to be high-risk securities. The OTS may require an institution to
dispose of one or all of the CMOs failing such tests. At September 30, 1997, all
of the Savings Bank's CMOs met the criteria established by the policy designated
as non-high-risk securities for continuing classification as suitable
investments. However, changes in interest rates may cause one or more of the
Savings Bank's CMOs to fail a stress test. The OTS may then require the Bank to
dispose of the CMOs failing the test. This may affect the classification of such
securities under SFAS No. 115.
Changes in the level of interest rates can have an adverse effect on
the mortgage-backed securities and CMO portfolio, thereby exposing the Savings
Bank to repayment risk and reinvestment risk. See "RISK FACTORS -- Interest Rate
Risk."
Investment decisions are made by the Savings Bank's Asset/Liability
Committee which consists of Senior Vice President Thomas C. Hall (Chairman),
President Robert W. Orr, Senior Vice President Barry C. Visioli, Vice President
David L. Peters, Vice President Teresa Hix, Vice President Quinnette Morrison
and Assistant Treasurer Brad Jones. The Savings Bank's investment objectives
are: (i) to provide and maintain liquidity within regulatory guidelines; (ii) to
maintain a balance of high quality, diversified investments to minimize risk;
(iii) to serve as a balance to earnings; and (iv) to maximize returns.
49
<PAGE>
The following table sets forth the composition of the Savings Bank's
investment portfolio at the dates indicated.
<TABLE>
<CAPTION>
At September 30,
1997 1996 1995
------------------------- ---------------------------- -----------------------
Amortized Percent of Amortized Percent of Amortized Percent of
Cost(1) Portfolio Cost(1) Portfolio Cost(1) Portfolio
------- --------- ------- --------- ------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. agency securities........... $10,191 22% $ -- --% $ -- --%
Certificates of deposit.......... -- -- 100 -- -- --
U.S. Treasury securities......... 998 2 2,395 5 798 2
Mortgage-backed securities
and CMOs....................... 35,714 76 44,362 95 47,269 98
-------- ---- -------- ---- ------- ---
Total............................ $46,903 100% $46,857 100% $48,067 100%
======= === ======= === ======= ===
</TABLE>
(1) The market value of the Savings Bank's investment portfolio amounted
to $47.2 million, $45.6 million and $47.1 million at September 30,
1997, 1996, and 1995, respectively.
The following table sets forth the maturities and weighted average
yields of the debt securities in the Savings Bank's investment securities
portfolio at September 30, 1997.
<TABLE>
<CAPTION>
Less Than One to Five to Over Ten
One Year Five Years Ten Years Years
--------------- ---------------- ----------------- ----------------
Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. agency securities.......................$ -- --% $4,003 6.26% $ -- --% $ 6,188 8.10%
U.S. Treasury securities..................... 998 5.17 -- -- -- -- -- --
Mortgage-backed securities
and CMOs................................... 395 6.65 1,455 7.56 11,666 7.55 22,198 7.08
------- ------- ------- --------
Total........................................ $1,393 5.59 $5,458 6.61 $11,666 7.55 $28,386 7.30
====== ====== ======= =======
</TABLE>
The following table sets forth certain information with respect to
each security (other than U.S. Government and agency securities) which had an
aggregate amortized cost in excess of 10% of the Savings Bank's stockholders'
equity at the dates indicated.
<TABLE>
<CAPTION>
At September 30,
1997 1996 1995
------------------------ --------------------------- --------------------
Carrying Market Carrying Market Carrying Market
Value Value Value Value Value Value
----- ----- ----- ----- ----- -----
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
RTC mortgage-backed
securities.................... $ 889 $ 888 $ 1,447 $ 1,414 $ 1,479 $ 1,430
CMOs........................... 21,138 21,211 34,836 33,804 36,743 35,900
-------- -------- ------- ------- ------- -------
Total....................... $22,027 $22,099 $36,283 $35,218 $38,222 $37,330
======= ======= ======= ======= ======= =======
</TABLE>
50
<PAGE>
Deposit Activities and Other Sources of Funds
General. Deposits are the major source of the Savings Bank's funds for
lending and other investment purposes. In addition to deposits, the Savings Bank
derives funds from loan principal repayments. Loan repayments are a relatively
stable source of funds while deposit inflows and outflows may be significantly
influenced by general interest rates and money market conditions. The Savings
Bank also has access to advances from the FHLB-Atlanta. These advances can be
used on a short-term basis to compensate for reductions in the availability of
funds from other sources or they may be used on a longer-term basis for general
business purposes. The Savings Bank has also on occasion utilized repurchase
agreements.
Deposit Accounts. Local deposits are and traditionally have been the
primary source of the Savings Bank's funds for use in lending and other general
business purposes. The Savings Bank offers a number of deposit accounts,
including passbook, individual retirement accounts ("IRAs"), money market
deposits and certificate accounts currently ranging in maturity from three
months to five years. Deposit accounts vary as to terms, with the principal
differences being the minimum balance required, the time period the funds must
remain on deposit and the interest rate. From time to time, the Savings Bank
offers premiums to attract deposits. The Savings Bank is a member of an
automated teller machine network, which is available to the Savings Bank's
checking account depositors.
In recent years, the Savings Bank has offered newly authorized types of
short-term accounts and other savings alternatives that are more responsive to
changes in market rates of interest than passbook accounts and longer maturity
fixed-rate, fixed-term certificates that were the Savings Bank's primary source
of deposits prior to 1978. There has been some shifting of deposit mix which has
primarily resulted from the progressive elimination of federally imposed rate
ceilings on various types of deposits offered by federally insured financial
institutions such as the Savings Bank. The deregulation of various federal
controls on insured deposits has allowed the Savings Bank to be more competitive
in obtaining funds and has given it more flexibility to meet the threat of net
deposit outflows. The Savings Bank reviews the interest rates offered on various
savings accounts periodically so as to remain competitive with other financial
institutions in its market area.
Since early 1995, the Savings Bank has increased its core deposit base
by aggressively promoting checking accounts. At September 30, 1997, checking
account balances totalled $37.8 million.
At September 30, 1997, certificate of deposits scheduled to mature
within one year totalled $115.7 million. Although no assurances can be given,
based on past experience, the Savings Bank believes that a substantial portion
of these certificates of deposit will be renewed.
At September 30, 1997, the Savings Bank had no brokered deposits.
51
<PAGE>
The following table sets forth information concerning the Savings
Bank's deposits at September 30, 1997.
<TABLE>
<CAPTION>
Percentage
Interest Minimum of Total
Rate Term Category Amount Balance Deposits
- ---- ---- -------- ------ ------- --------
(In Thousands)
<S> <C> <C> <C> <C> <C>
2.28% None NOW accounts $ 100 $ 25,996 12.93%
-- None Non-interest-bearing accounts 100 11,812 5.88
2.67 None Savings accounts 100 24,360 12.12
Certificates of Deposit
-----------------------
5.71 Within 6 months Fixed-term, fixed-rate 1,000 75,002 37.31
5.89 7 - 12 months Fixed-term, fixed-rate 1,000 40,649 20.22
6.00 13 - 36 months Fixed-term, fixed-rate 1,000 22,347 11.12
6.06 37 - 120 months Fixed-term, fixed-rate 1,000 836 0.42
-------- ------
$201,002 100.00%
======== =======
</TABLE>
The following table indicates the amount of jumbo certificates of
deposit by time remaining until maturity at September 30, 1997. Jumbo
certificates of deposit require minimum deposits of $100,000 and have negotiable
interest rates.
Certificates
Maturity Period of Deposits
- --------------- -----------
(In Thousands)
Three months or less............................. $ 4,677
Over three through six months.................... 5,721
Over six through twelve months................... 5,061
Over twelve months............................... 3,081
--------
Total....................................... $18,540
========
52
<PAGE>
Deposit Flow
The following table sets forth the balances of deposits in the various
types of accounts offered by the Savings Bank at 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>
Non-interest-bearing............. $ 11,812 5.88% $ 3,464 $ 8,957 5.59% $ 4,885 $ 4,072 2.74%
NOW checking..................... 25,996 12.93 1,703 24,293 15.16 4,401 19,892 13.37
Regular savings accounts......... 24,360 12.12 1,249 23,111 14.42 80 23,031 15.49
Fixed-rate certificates which
mature in the year ending(1)(2):
Within 1 year.................. 115,651 57.53 31,881 83,770 52.28 2,148 81,622 54.89
After 1 year, but within 2 years 16,999 8.46 1,148 15,851 9.89 3,311 12,540 8.43
After 2 years, but within 5 years 6,184 3.08 1,922 4,262 2.66 (3,290) 7,552 5.08
-------- ------- -------- --------- ------- --------- ---------- -------
Total....................... $201,002 100.00% $41,367 $160,244 100.00% $11,535 $148,709 100.00%
======== ====== ======= ======== ====== ======= ======== ======
</TABLE>
(1) At September 30, 1997, 1996 and 1995, jumbo certificates amounted to
$18.5 million, $13.7 million and $11.8 million, respectively.
(2) IRA accounts included in certificate balances are $18.8 million, $15.7
million and $14.8 million at September 30, 1997, 1996 and 1995,
respectively.
Time Deposits by Rates and Maturities
The following table sets forth the time deposits in the Savings Bank
classified by rates at the dates indicated.
<TABLE>
<CAPTION>
At September 30,
----------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
(In Thousands)
Below 3.00%................... $ 194 $ -- $ 503
3.00 - 5.00%................. 2,012 4,119 18,623
5.01 - 7.00%................. 136,400 99,182 81,903
7.01 - 9.00%................. 228 582 685
--------- ---------- ----------
Total..................... $138,834 $103,883 $101,714
======== ======== ========
</TABLE>
53
<PAGE>
The following table sets forth the amount and maturities of time
deposits at September 30, 1997.
<TABLE>
<CAPTION>
Amount Due
---------------------------------------------------------------------
Percent
One to Over Two Over Three Over Five of Total
Less Than Two to Three to Five to Ten Certificate
One Year Years Years Years Years Total Accounts
-------- ----- ----- ----- ----- ----- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
2.50 - 5.00%.................. $ 2,206 $ -- $ -- $ -- $ -- $ 2,206 1.58%
5.01 - 7.00%.................. 113,445 17,017 5,330 506 102 136,400 98.26
7.01 - 9.00%.................. -- -- -- 159 69 228 0.16
------------ ---------- -------- ----- ----- --------- -------
Total......................... $115,651 $17,017 $5,330 $665 $171 $138,834 100.00%
======== ======= ====== ==== ==== ======== ======
</TABLE>
Deposit Activity
The following table sets forth the savings activities of the Savings
Bank for the periods indicated.
<TABLE>
<CAPTION>
Years Ended September 30,
-------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
(In Thousands)
Beginning balance.......................... $160,244 $148,709 $143,380
-------- -------- --------
Net increase (decrease) before
interest credited........................ 32,599 4,724 (496)
Interest credited.......................... 8,159 6,811 5,825
Net increase in savings deposits........... 40,758 11,535 5,329
--------- --------- ---------
Ending balance............................. $201,002 $160,244 $148,709
======== ======== ========
</TABLE>
Borrowings. Historically, the Savings Bank has relied on repurchase
agreements as a source of borrowings to finance the purchase of investment
securities. Funding for lending activities has been provided from deposits and
borrowings from the FHLB-Atlanta. Under repurchase agreements, the Savings Bank
"sells" securities (generally U.S. Treasury securities and federal agency
obligations and mortgage-backed securities) under an agreement to buy them back
at a specified price at a later date. Repurchase agreements are subject to
renewal, and are deemed to be borrowings collateralized by the securities sold.
The Savings Bank had no repurchase agreements outstanding at September 30, 1997.
The Savings Bank has issued retail and commercial repurchase agreements
and would consider issuing them again in the future in an appropriate interest
rate environment. Under commercial repurchase agreements, the Savings Bank sells
the investment security to broker dealers who may then loan the security to
other parties in the normal course of operations. Commercial repurchase
agreements generally mature within 90 days from the date of the transaction.
Advances from the FHLB are typically secured by the Savings Bank's
first mortgage loans. At September 30, 1997, the Savings Bank was eligible to
borrow up to $55.0 million from the FHLB-Atlanta. The Savings Bank had FHLB
advances of $15.0 million outstanding at September 30, 1997. See Note 9 of Notes
to Consolidated Financial Statements.
54
<PAGE>
The FHLB functions as a central reserve bank providing credit for
savings and loan associations and certain other member financial institutions.
As a member, the Savings Bank is required to own capital stock in the FHLB and
is authorized to apply for advances on the security of such stock and certain of
its mortgage loans and other assets (principally securities which are
obligations of, or guaranteed by, the U.S. Government) provided certain
standards related to creditworthiness have been met. Advances are made pursuant
to several different 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 either on a fixed percentage of an institution's net worth or
on the FHLB's assessment of the institution's creditworthiness. Under its
current credit policies, the FHLB generally limits advances to 20% of a member's
assets, and short-term borrowings of less than one year may not exceed 10% of
the institution's assets. The FHLB determines specific lines of credit for each
member institution.
The following table sets forth certain information regarding borrowings
by the Savings Bank at the end of and during the periods indicated:
<TABLE>
At September 30,
-------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Weighted average rate paid on:
FHLB-Atlanta advances.................. 6.24% 5.30% 5.77%
</TABLE>
<TABLE>
<CAPTION>
Years Ended September 30,
------------------------------
1997 1996 1995
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
Maximum amount of borrowings outstanding at any month end:
Securities sold under agreements to repurchase.................... $ -- $ -- $ 5,907
FHLB-Atlanta advances............................................. 15,000 19,000 57,500
Approximate average borrowings outstanding with respect to:
Securities sold under agreements to repurchase.................... -- -- 1,338
FHLB-Atlanta advances............................................. 23,951 12,531 39,222
Approximate weighted average rate paid on:
Securities sold under agreements to repurchase.................... -- -- 5.73%
FHLB-Atlanta advances............................................. 5.75% 5.24% 6.22
</TABLE>
Competition
Anderson and Oconee Counties have a relatively large number of
financial institutions, many of which are branches of large southeast regional
financial institutions, and thus the Savings Bank faces strong competition in
the attraction of savings deposits (its primary source of lendable funds) and in
the origination of loans. Its most direct competition for savings deposits and
loans has historically come from other thrift institutions, credit unions and
commercial banks located in its market area. Particularly in times of high
interest rates, the Savings Bank has faced additional significant competition
for investors' funds from short-term money market securities and other corporate
and government securities and mutual funds. The Savings Bank's competition for
loans comes principally from other thrift institutions, credit unions,
commercial banks, finance companies, mortgage banking companies and mortgage
brokers.
Subsidiary Activities
The Savings Bank had an ownership interest in three service
corporations at September 30, 1997. Under OTS regulations, the Savings Bank is
authorized to invest up to 3% of its assets in service corporations, with
55
<PAGE>
amounts in excess of 2% only if used primarily for community purposes. At
September 30, 1997, the Savings Bank's net investment of approximately $2.1
million in its service corporations did not exceed this investment authority.
The Savings Bank has three service corporations: United Service
Corporation of Anderson, Inc. ("United Service"), United Investments Services,
Inc. ("United Investments") and Mortgage First Service Corporation ("Mortgage
First").
United Service is a wholly-owned subsidiary of the Savings Bank. At
September 30, 1997, United Service had assets of $2.4 million. United Service is
involved in the following residential and commercial real estate development
projects:
Perpetual Square. A 33-acre commercial development in Anderson County
purchased in January 1996 for a purchase price of $970,000. The purchase price
and infrastructure improvement costs (i.e., installation of roads, utilities,
etc.) were financed by a loan from the Savings Bank that had an outstanding
balance of $375,000 at September 30, 1997. As of September 30, 1997,
approximately eight acres have been sold and the Savings Bank did not have loans
outstanding to any of the purchasers. In October 1997, the Savings Bank
established a branch office at this location. See "-- Properties." At September
30, 1997, the Savings Bank's net investment in this project was approximately
$566,000.
The Meadows Development. A 99-acre residential subdivision consisting
of approximately 108 lots located in Anderson County purchased in October 1996
for a purchase price of $600,000. The purchase price and infrastructure
improvement costs were financed by a loan from the Savings Bank that had an
outstanding balance of $1.0 million at September 30, 1997. The Savings Bank has
entered into a contractual agreement with the local office of a national realtor
to market the subdivision lots, and marketing began in September 1997. The
realtor has no investment in the project. As of September 30, 1997, three lots
were sold and the Savings Bank had outstanding loans to purchasers totaling
$21,000. At September 30, 1997, the Savings Bank's net investment in this
project was approximately $1.1 million.
Ashton Place Subdivision. A 24-acre multi-family housing development
consisting of 44 lots located in Anderson County purchased in January 1996 for a
purchase price of $164,000. The purchase price and infrastructure improvement
costs were financed by a loan from the Savings Bank that had an outstanding
balance of $82,000 as of September 30, 1997. The lots are being developed in
four phases of 11 lots each. As of September 30, 1997, 29 lots have been sold,
four lots remain unsold in phase III and all 11 lots remain unsold in phase IV.
At September 30, 1997, the Savings Bank had loans outstanding to purchasers
totaling $397,000. At September 30, 1997, the Savings Bank's net investment in
this project was approximately $271,000.
North Park. A 57-acre industrial park located in Anderson County
purchased in June 1996 at a purchase price of $248,000. The purchase price and
infrastructure improvement costs were financed by a loan from the Savings Bank
that had an outstanding balance of $203,000 as of September 30, 1997. As of
September 30, 1997, 12 acres had been sold and the Savings Bank had outstanding
loans to purchasers totaling $573,000, all of which were permanent mortgage
loans. At September 30, 1997, the Savings Bank's net investment in this project
was approximately $389,000.
United Investments, a wholly-owned subsidiary of United Service, offers
full service brokerage services. On a consolidated basis United Service and
United Investments had net income of $395,000 for the year ended September 30,
1997.
Mortgage First is a wholly-owned subsidiary of the Savings Bank. In
August 1996, Mortgage First made a $400,000 equity investment in a start-up
regional mortgage banking company known as "First Trust Mortgage
56
<PAGE>
Corporation of the South" ("First Trust"), with offices in Rock Hill, Columbia,
Clemson and Greenville, South Carolina. During the year ended September 30,
1997, First Trust closed 810 loans totalling $100.6 million.
The Savings Bank has purchased loans from First Trust in recent
periods. See "-- Lending Activities -- Loan Purchases and Sales and Servicing."
All loans are purchased from First Trust subject to the Savings Bank's
underwriting standards. The Savings Bank intends to purchase at least $18.0
million of loans from First Trust monthly. At September 30, 1997, the Savings
Bank's financial commitment to First Trust and its maximum exposure to share in
any losses incurred by First Trust were limited solely to the amount of its
equity investment through Mortgage First. The Savings Bank, either directly or
through Mortgage First, may undertake future additional financial commitments
that would increase its loss exposure to First Trust's operations; however,
there are no such agreements, plans or understandings at present. The Savings
Bank recorded a loss of approximately $100,000 related to First Trust's
operations for the year ended September 30, 1997. Robert W. Orr and Barry C.
Visioli are directors of First Trust. See "MANAGEMENT OF THE SAVINGS BANK --
Directors and Executive Officers and Directors."
Properties
The following table sets forth certain information relating to the
Savings Bank's offices as of March 31, 1997. All offices are owned by the
Savings Bank except as noted in the table.
<TABLE>
<CAPTION>
Lease
Year Owned or Square Expiration
Location Opened Leased Footage Date
- -------- ------ ------ ------- ----
<S> <C> <C> <C> <C>
Main Office:
907 N. Main Street 1979 Owned 50,000 --
Anderson, South Carolina
Branch Offices:
104 Whitehall Road 1975 Building owned 2,000 December 31, 2004, with
Anderson, South Carolina Land leased two renewal options for ten
years each
2821 South Main Street 1976 Building owned 2,500 April 30, 2000, with five
Anderson, South Carolina Land leased renewal options for five years
each
Windsor Place Winn Dixie(1) 1993 Leased 450 March 1, 1998, with two
SC Highway 81 renewal options for five
Anderson, South Carolina years each
Northtowne 1994 Owned 2,800 --
3898 Liberty Highway
Anderson, South Carolina
1007 By-Pass 123 1996 Owned 2,900 --
Seneca, South Carolina
</TABLE>
- -----------------
(1) In October 1997, this branch office was closed in conjunction with the
opening of a new 2,700 square foot branch office on SC Highway 81,
Anderson, South Carolina in the Perpetual Square complex. The Savings
57
<PAGE>
Bank owns the building and real estate of this new branch office. See
"-- Subsidiary Activities" for additional information regarding
Perpetual Square.
The Savings Bank has an in-house computer system to process customer
records and monetary transactions, post deposit and general ledger entries and
record activity in installment lending, loan servicing and loan originations.
See "MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Year 2000 Considerations."
Personnel
As of September 30, 1997, the Savings Bank had 96 full-time employees
and 33 part-time employees. The employees are not represented by a collective
bargaining unit. The Savings Bank believes its relationship with its employees
are good.
Legal Proceedings
Periodically, there have been various claims and lawsuits involving the
Savings Bank, such as claims to enforce liens, condemnation proceedings on
properties in which the Savings Bank holds security interests, claims involving
the making and servicing of real property loans and other issues incident to the
Savings Bank's business. The Savings Bank 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 Savings Bank.
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, at the first annual meeting of stockholders following the
consummation of the Conversion and Reorganization. The Holding Company's Board
of Directors consists of nine persons, divided into three classes, each of which
will contain approximately one third of the Board. One class will have a term of
office expiring at the first annual meeting of stockholders; a second class will
have a term of office expiring at the second annual meeting of stockholders; and
a third class will have a term of office expiring at the third annual meeting of
stockholders.
The executive officers of the Holding Company are elected annually and
hold office until their respective successors have been elected and qualified or
until death, resignation or removal by the Board of Directors. The executive
officers of the Holding Company are:
Name Position
---- --------
Cordes G. Seabrook, Jr. Chairman of the Board
Robert W. Orr President and Chief Executive Officer
Thomas C. Hall Treasurer and Chief Financial Officer
Barry C. Visioli Senior Vice President
Sylvia B. Reed Corporate Secretary
Since the formation of the Holding Company, none of the executive
officers, directors or other personnel has received remuneration from the
Holding Company. For information concerning the principal occupations,
employment and compensation of the directors and executive officers of the
Holding Company during the past five years, see "MANAGEMENT OF THE SAVINGS BANK
- -- Biographical Information."
58
<PAGE>
MANAGEMENT OF THE SAVINGS BANK
Directors and Executive Officers
The Board of Directors of the Savings Bank is presently composed of
nine members who are elected for terms of three years, approximately one-third
of whom are elected annually in accordance with the Bylaws of the Savings Bank.
The Savings Bank also has two non-voting Directors Emeriti. The executive
officers of the Savings Bank 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 Savings Bank, all of
whom will continue to serve as directors and executive officers of the Savings
Bank and the Holding Company.
<TABLE>
<CAPTION>
Directors
Current
Director Term
Name Age (1) Position Since Expires
- ---- ------- -------- ----- -------
<S> <C> <C> <C> <C>
Harold A. "Drew" Pickens, 64 Chairman of Board 1977 1998
Jr.
Robert W. "Lujack" Orr 49 President, Managing Officer 1989 1998
and a Director
Jack F. McIntosh 69 Director 1988 1999
Charles W. Fant, Jr. 71 Director 1977 1999
Cordes G. Seabrook, Jr. 70 Director 1976 1999
Richard C. Ballenger 49 Director 1996 1999
F. Stevon Kay 46 Director 1996 1999
Jim Gray Watson 68 Director 1976 1998
Martha S. Clamp 55 Director 1988 1997
J. Roy Martin, Jr. 79 Director Emeritus 1988 --
Wade A. Watson, Jr. 79 Director Emeritus 1989 --
Executive Officers Who Are Not Directors
Thomas C. Hall 50 Senior Vice President -- --
and Treasurer
Barry C. Visioli 49 Senior Vice President -- --
Sylvia B. Reed 57 Corporate Secretary -- --
</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 Savings Bank. Unless otherwise stated, each Director
and executive officer has held his or her current occupation for the last five
years. There are no family relationships among or between the Directors or
executive officers except as noted below.
60
<PAGE>
Harold A. "Drew" Pickens, Jr. joined the Board of Directors of the
Savings Bank in 1997 and has served as Chairman of the Board since January 1996.
He is the owner of Harold A. Pickens and Sons, Inc., a commercial construction
contractor, with which he has been affiliated since 1956. Mr. Pickens serves as
an Elder at First Presbyterian Church, serves on the Anderson Area Medical
Center's Board of Directors, and is associated with the Boy Scouts.
Robert W. "Lujack" Orr has been employed by the Savings Bank since 1974
and has held a variety of positions, such as Senior Vice President/Funds
Acquisition and Executive Vice President, prior to assuming his current position
as President and Managing Officer on January 1, 1991. Mr. Orr has been a member
of the Board of Directors of the Savings Bank since 1989. Mr. Orr is past
President of the YMCA and an Elder of Central Presbyterian Church. He is a
director of First Trust, the mortgage banking company in which a service
corporation subsidiary of the Savings Bank has an equity investment.
Jack F. McIntosh is a partner in the law firm of McIntosh and Sherard,
Anderson, South Carolina, with which he has been affiliated for 41 years. Mr.
McIntosh joined the Board of Directors of the Savings Bank in 1998 and has
served as General Counsel for the Savings Bank's wholly-owned subsidiary, United
Service, since 1984. Mr. McIntosh is active in community affairs related to
health and education.
Charles W. Fant, Jr. joined the Board of Directors of the Savings Bank
in 1970 and served as Chairman of the Board from 1990 until 1996. Mr. Fant is a
partner in the architectural firm of Fant & Fant Architects, Anderson, South
Carolina, with which he has been affiliated since 1956. Mr. Fant is active in
community affairs and is a member of the Board of Adjustment and Appeals for
both the City of Anderson and Anderson County, a member of the Rotary Club,
Anderson College Board of Visitors, and a Trustee of Wilmary Apartments (Housing
Ministry).
61
<PAGE>
Cordes G. Seabrook, Jr. joined the Board of Directors of the Savings
Bank in 1976. He is retired from Value Systems located in Anderson, South
Carolina, owns a small business mentoring, and is a partner in Juno Investors, a
real estate holding company.
Richard C. Ballenger was appointed to the Board of Directors of the
Savings Bank in May 1996. Mr. Ballenger is the President of City Glass Company
and D&B Glass Company, Inc., with which he has been affiliated since 1972. He is
an Elder of First Presbyterian Church, a member of the Anderson Rotary Club, and
is on the Advisory Board of the Salvation Army.
F. Stevon Kay was elected to the Board of Directors of the Savings Bank
in May 1996. Mr. Kay is the President of Hill Electric Company, Inc., with which
he has been affiliated since 1969. He is a Board member of the Salvation Army
Boys and Girls Club and the President of the Anderson Youth Association. He is a
member of Concord Baptist Church.
Jim Gray Watson, the Savings Bank's former President and Chief
Executive Officer, was employed by the Savings Bank for 31 years prior to his
retirement in December 1990. Mr. Watson continues to serve as a member of the
Savings Bank's Board of Directors. He is involved in numerous charitable and
community organizations. He is an Elder of Central Presbyterian Church. He is a
brother to Wade A. Watson, Jr., Director Emeritus of the Savings Bank.
Martha C. Clamp, a semi-retired certified public accountant, joined the
Board of Directors of the Savings Bank in 1988. Ms. Clamp was employed for six
years as a staff accountant for the accounting firm of Cole, Hook & Cleary,
CPAs, Anderson, South Carolina, and was self-employed as an accountant from 1988
to 1995. She is a member of the Board of Directors of the Greater Anderson
Rotary Club.
J. Roy Martin, Jr. served as a member of the Savings Bank's Board of
Directors from 1970 until 1988. Since 1988, Mr. Martin has served as a Director
Emeritus of the Savings Bank.
Wade A. Watson, Jr., former President of the Savings Bank, served as a
member of the Savings Bank's Board of Directors from 1960 until 1989. Mr. Watson
has served as a Director Emeritus of the Savings Bank since 1989. He is an Elder
of Central Presbyterian Church and the brother of Jim Gray Watson, former
President and Chief Executive Officer of the Savings Bank.
Thomas C. Hall has been employed by the Savings Bank since 1975 and
currently serves as Senior Vice President, Treasurer and Chief Financial Officer
responsible for areas of accounting, investments, data processing and deposits.
Mr. Hall is a member of the Financial Managers Society and a Board member of the
Foothills United Way.
Barry C. Visioli has been affiliated with the Savings Bank since 1973.
He serves as Senior Vice President and is responsible for Lending Operations. He
is a Council Member of the Salvation Army Boys and Girls Club, serves on the
Anderson County Board of Assessment Appeals, and is on the Industry Advisory
Council for School District Five. Mr. Visioli is also a director of First Trust,
the mortgage banking company in which a service corporation subsidiary of the
Savings Bank has an equity investment.
Sylvia B. Reed joined the Savings Bank in 1986 and currently serves as
Corporate Secretary and Assistant Vice President. Ms. Reed is a member and past
President and past Treasurer of the Anderson Chapter of the American Business
Women's Association, which furnishes college scholarships for students. She is a
member of the choir at Taylor Memorial Church.
62
<PAGE>
Beneficial Ownership of Savings Bank Common Stock by Directors and Executive
Officers
The following table sets forth, as of September 30, 1997, certain
information as to the beneficial ownership of Savings Bank Common Stock by: (i)
persons known by the Savings Bank to beneficially own more than 5% of the
outstanding shares of Common Stock, (ii) the directors of the Savings Bank,
(iii) the executive officers of the Savings Bank, and (iv) by all officers and
directors as a group. For purposes of this table, an individual is considered to
beneficially own shares of Savings Bank Common Stock if he or she has or shares
voting power (which includes the power to vote or direct the voting of the
shares) or investment power (which includes the power to dispose of or direct
the disposition of the shares). Unless otherwise indicated, all shares are owned
directly by the officers and directors or by the officers and directors
indirectly through a trust, corporation or association, or by the officers and
directors or their spouses as custodians or trustees for the shares of minor
children. The officers and directors effectively exercise sole voting and
investment power over such shares. Shares which are subject to stock options
that are exercisable within 60 days of September 30, 1997 are deemed to be
beneficially owned. For information regarding proposed purchases of Conversion
Shares by the directors and officers and their anticipated ownership of Common
Stock upon consummation of the Conversion and Reorganization, see "CONVERSION
SHARES TO BE PURCHASED BY MANAGEMENT PURSUANT TO SUBSCRIPTION RIGHTS."
63
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially
Owned at
September 30, 1997
-----------------------------------
Number(1) Percent
--------- -------
<S> <C> <C>
SouthBanc Shares, M.H.C. 800,000 53.02%
Harold A. Pickens, Jr. 10,508 0.70
Martha S. Clamp 6,254 0.41
Jack F. McIntosh 5,683 0.38
Charles W. Fant, Jr. -- --
Cordes G. Seabrook, Jr. 8,850 0.59
Jim Gray Watson 3,196 0.21
Richard C. Ballenger 2,227 0.15
F. Stevon Kay 7,151 0.47
J. Roy Martin, Jr. -- --
Wade A. Watson, Jr. 5,538 0.23
Robert W. Orr 14,624 0.97
Thomas C. Hall 13,972(2) 0.93
Barry C. Visioli 12,708(3) 0.84
All Officers and
Directors as a
Group (21 persons) 104,052(4) 6.90%
</TABLE>
- ---------------
(1) In accordance with Rule 13d-3 under the Exchange Act, a person is
deemed to be the beneficial owner, for purposes of this table, of any
shares of Common Stock if he or she has voting and/or investment power
with respect to such security. The table includes shares owned by
spouses, other immediate family members in trust, shares held in
retirement accounts or funds for the benefit of the named individuals,
and other forms of ownership, over which shares the persons named in
the table may possess voting and/or investment power. Shares which are
subject to stock options that are exercisable within 60 days of
September 30, 1997 are deemed to be beneficially owned.
(2) Includes 2,300 shares of Common Stock which may be received upon the
exercise of stock options that are exercisable within 60 days of
September 30, 1997.
(3) Includes 2,300 shares of Common Stock which may be received upon the
exercise of stock options that are exercisable within 60 days of
September 30, 1997.
(4) Includes 4,600 shares of Common Stock which may be received upon the
exercise of stock options that are exercisable within 60 days of
September 30, 1997.
Meetings and Committees of the Board of Directors
The business of the Savings Bank is conducted through meetings and
activities of its Board of Directors and its committees. During the fiscal year
ended September 30, 1997, the Board of Directors held 12 regular meetings and no
director attended fewer than 75% of the total meetings of the Board of Directors
of the Savings Bank and committees on which such director served.
The Executive Committee of the Board of Directors, which consists of
Directors Fant (Chairman), Pickens, Seabrook, Watson and Orr, meets as necessary
in between meetings of the full Board of Directors. All actions of the Executive
Committee must be ratified by the full Board of Directors. The Executive
Committee reviews directors' and officers' compensation and makes
recommendations to the full Board of Directors in this regard. The Executive
Committee also recommends prospective new Board members to the full Board of
Directors and insures
64
<PAGE>
that all directors, directors emeriti and officers are acting in compliance with
the Savings Bank's Charter and Bylaws. The Executive Committee met once during
the fiscal year ended September 30, 1997.
The Audit Committee of the Savings Bank consists of Directors Pickens
(Chairman), Clamp, Orr and Watson and Thomas C. Hall, Senior Vice President, and
Doris Hoover, a Savings Bank staff member. This committee is responsible for
developing and monitoring the Savings Bank's audit program. The committee
selects the Savings Bank's outside auditor and meets with them to discuss the
results of the annual audit and any related matters. The members of the
committee also receive and review all the reports and findings and other
information presented to them by the Savings Bank's officers regarding financial
reporting policies and practices. In addition, the Savings Bank's Internal
Auditor and Compliance Coordinator operate under the direction of the Audit
Committee and report quarterly to the committee. The committee meets quarterly.
The Audit Committee met four times during the fiscal year ended September 30,
1997.
The Savings Bank's full Board of Directors serves as a Nominating
Committee. The Board of Directors met once in its capacity as the nominating
committee during the 1997 fiscal year.
The Savings Bank also has standing Loan, Pension Plan, Strategic
Planning and Asset/Liability Management Committees.
Directors' Compensation
Directors (including Directors Emeriti, but excluding directors who are
full-time employees) receive annual compensation of $10,800, payable $900
monthly, and $100 for each committee meeting attended. No fees are paid for
attending special meetings of the Board. The Savings Bank's Chairman of the
Board receives compensation of $12,000 per year. The Savings Bank paid a total
of $109,000 in directors' and committee fees for the fiscal year ended September
30, 1997. Director compensation is deducted by $100 for each meeting absence.
Directors also participate in the Savings Bank's stock option programs.
65
<PAGE>
Executive Compensation
Summary Compensation Table. The following information is furnished for
the named executive officers.
<TABLE>
<CAPTION>
=================================================================================================================================
SUMMARY COMPENSATION TABLE
- ---------------------------------------------------------------------------------------------------------------------------------
Long-Term Compensation
Annual Compensation
---------------------------------------------------
Awards Payouts
- ---------------------------------------------------------------------------------------------------------------------------------
Name and Other
Principal Annual Restricted All Other
Position Compen- Stock LTIP Compensa-
with the Salary Bonus sation Awards Options Payouts tion
Savings Bank Year ($)(1) ($) ($) ($)(2) (#) ($) ($)(3)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert W. Orr, 1997 $95,000 $59,299 $ -- 330,525 10,250 -- $14,658
President and
Managing Officer 1996 71,350 61,017 5,750 -- -- -- 13,085
1995 69,077 58,889 5,750 -- -- -- 12,185
Thomas C. Hall, 1997 80,000 50,616 -- 330,525 10,250 -- 12,409
Senior Vice
President 1996 60,902 52,082 2,880 -- -- -- 10,904
1995 58,962 50,265 2,870 -- -- -- 10,218
Barry C. Visioli 1997 70,000 48,552 -- 330,525 10,250 -- 11,263
Senior Vice
President 1996 58,418 49,958 2,880 -- -- -- 10,483
1995 56,557 48,216 2,870 -- -- -- 9,844
=================================================================================================================================
</TABLE>
- ----------------------------------
(1) Includes salary and directors' fees.
(2) Represents the value of shares of Savings Bank Common Stock awarded
under the 1996 MRP that vested in equal installment over a five-year
period beginning on April 7, 1998. Dividends are paid on such awards if
and when dividends are declared and paid by the Savings Bank. At
September 30, 1997, the value of the awards were $330,525 for each of
Mr. Orr, Mr. Hall and Mr. Visioli (5,850 shares at $56.50 per share).
(3) Represents employer 401(k) Plan contributions.
66
<PAGE>
Employment Agreements
The MHC and the Savings Bank currently maintain employment agreements
with Messrs. Orr, Hall and Visioli that were entered into in connection with the
MHC Reorganization. In connection with the Conversion and Reorganization, the
Holding Company and the Savings Bank (collectively, the "Employers") will enter
into three-year employment agreements ("Employment Agreements") with these same
individuals (individually, the "Executive"), which have substantially the same
terms as and will replace the existing agreements.
Under the Employment Agreements, the initial salary levels for Messrs.
Orr, Hall and Visioli will be $98,800, $83,200 and $72,800, respectively, which
amounts will be paid by the Savings Bank and may be increased at the discretion
of the Board of Directors. On each anniversary of the commencement date of the
Employment Agreements, the term of each agreement may be extended for an
additional year at the discretion of the Board. The agreement is terminable by
the Employers at any time, by the Executive if the Executive is assigned duties
inconsistent with his initial position, duties, responsibilities and status, or
upon the occurrence of certain events specified by federal regulations. In the
event that an Executive's employment is terminated without cause or upon the
Executive's voluntary termination in certain circumstances, the Savings Bank
would be required to honor the terms of the agreement through the expiration of
the then current term, including payment of current cash compensation and
continuation of employee benefits.
The Employment Agreements also provide for severance payments and other
benefits in the event of involuntary termination of employment in connection
with any change in control of the Employers. Severance payments also will be
provided on a similar basis in connection with a voluntary termination of
employment where, subsequent to a change in control, an Executive is assigned
duties inconsistent with his position, duties, responsibilities and status
immediately prior to such change in control. The term "change in control" is
defined in the agreement as having occurred when, among other things, (a) a
person other than the Holding Company purchases shares of Common Stock pursuant
to a tender or exchange offer for such shares, (b) any person (as such term is
used in Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the
beneficial owner, directly or indirectly, of securities of the Holding Company
representing 25% or more of the combined voting power of the Holding Company's
then outstanding securities, (c) the membership of the Board of Directors
changes as the result of a contested election, or (d) shareholders of the
Holding Company approve a merger, consolidation, sale or disposition of all or
substantially all of the Holding Company's assets, or a plan of partial or
complete liquidation.
The maximum value of the severance benefits under the Employment
Agreements is 2.99 times the Executive's average annual compensation during the
five-year period preceding the effective date of the change in control (the
"base amount"). The Employment Agreements provide that the value of the maximum
benefit may be distributed, at the Executive's election, (i) in the form of a
lump sum cash payment equal to 2.99 times the Executive's 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 present 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 each Executive elected to receive a lump sum cash
payment, Messrs. Orr, Hall and Visioli would be entitled to payments of
approximately $220,000, $187,000 and $176,000, respectively. 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 Agreements restrict the Executive's right to compete
against the Employers for a period of one year from the date of termination of
the agreement if an Executive's employment is terminated without cause, except
if such termination occurs after a change in control.
67
<PAGE>
Option Grants Table. The following table sets forth all grants of
options to the named executive officers for the fiscal year ended September 30,
1997.
<TABLE>
<CAPTION>
================================================================================================================================
OPTION GRANTS IN LAST FISCAL YEAR
- --------------------------------------------------------------------------------------------------------------------------------
Individual Grants
- --------------------------------------------------------------------------------------------------------------------------------
Percent of
Total Options
Number of Granted to Exercise
Options Employees in Price Expiration
Name Granted Fiscal Year Per Share Date
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Robert W. Orr 10,250 26% $25.25 April 2007
- --------------------------------------------------------------------------------------------------------------------------------
Thomas C. Hall 10,250 26% $25.25 April 2007
- --------------------------------------------------------------------------------------------------------------------------------
Barry C. Visioli 10,250 26% $25.25 April 2007
================================================================================================================================
Option Exercise/Value Table. The following table sets forth all
exercises of options by the named executive officers for the fiscal year ended
September 30, 1997.
=================================================================================================================================
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
- ---------------------------------------------------------------------------------------------------------------------------------
Value of
Number of Unexercised
Number of Unexercised In-the-Money
Shares Options at Options at
Acquired Dollar Fiscal Year End Fiscal Year End
on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------------------------
Robert W. Orr 2,956 $57,642 --/-- $--/$--
- ---------------------------------------------------------------------------------------------------------------------------------
Thomas C. Hall -- -- 2,300/-- $106,950/$--
- ---------------------------------------------------------------------------------------------------------------------------------
Barry C. Visioli -- -- 2,300/-- $106,950/$--
=================================================================================================================================
</TABLE>
Benefits
Insurance. Full-time employees are provided, with minimal contribution
or expense to them, with group plan insurance that covers hospitalization,
dependent coverage, long-term disability and life insurance. This insurance is
available generally and on the same basis to all full-time employees. Long-term
disability insurance is available after completion of a minimum of one year of
service, while the other benefits are available immediately.
Cafeteria Plan. The Savings Bank offers full-time employees the ability
to enroll in a cafeteria or flexible benefit plan which allows employees to set
aside a portion of their pre-tax salary to be used for, among other things,
68
<PAGE>
medical expenses not covered by insurance and child care expenses. The decision
to enroll in the Cafeteria Plan and the benefits selected is at each employee's
discretion.
Profit Sharing and 401(k) Plan. The Savings Bank sponsors a
tax-qualified cash or deferred profit sharing plan ("401(k) Plan") for the
benefit of its employees. Employees become eligible to participate under the
401(k) Plan on the first day of October following their date of employment.
Benefits under the 401(k) Plan are determined based upon annual employee salary
reduction and employer discretionary contributions to the 401(k) Plan. Employer
discretionary contributions are allocated to participant accounts as a
percentage of total compensation of such participant to the compensation of all
participants. At the end of each year the Board of Directors determines whether
to make a discretionary contribution and the amount of the contribution to the
401(k) Plan, based upon a number of factors, such as the Savings Bank's retained
earnings, profits, regulatory capital and employee performance. In addition, the
Board of Directors may authorize a discretionary matching contribution not to
exceed 4.5% of each participants compensation for the 401(k) Plan year. Each
year participants are permitted to contribute voluntarily up to $10,000 (as
indexed for inflation). However, each participant's salary deferrals and
employee and employer contributions when added to other defined contribution
plan contributions each year cannot exceed the lessor of 25% of compensation or
$30,000 for each 401(k) Plan year.
Benefits are payable upon termination of employment, retirement, death,
disability or 401(k) Plan termination. Additionally, under certain financial
hardship circumstances, early withdrawal of salary deferrals may be authorized
by the Savings Bank. Benefits are normally paid in a lump-sum payment or under
various installment payment or annuity alternatives. Normal retirement age under
the 401(k) Plan is age 65. Early retirement age under the 401(k) Plan is age 55
with at least ten years of service.
Employer discretionary contributions under the 401(k) Plan are fully
vested upon the completion of five years of service. Employees are always 100%
vested in their salary deferrals and in the employer matching contributions. The
Savings Bank's total contribution to the 401(k) Plan for all employees for the
fiscal year ended September 30, 1997 was $219,000.
Participants in the 401(k) Plan self-direct the investment of plan
assets credited to their account. The available investment options include
mutual funds and Common Stock. In connection with the Conversion and
Reorganization, eligible Participants will have the opportunity to direct the
investment of their 401(k) Plan account balance to purchase shares of the Common
Stock. A participant in the 401(k) Plan who elects to purchase Common Stock in
the Conversion and Reorganization 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 AND REORGANIZATION -- Limitations on Purchases of Conversion
Shares."
Employee Stock Ownership Plan. In connection with the MHC
Reorganization, the Savings Bank established an ESOP for the exclusive benefit
of participating employees. In order to participate under the ESOP, employees
must be 21 years old and complete one year of service with the Savings Bank. The
ESOP acquired 8,050 shares of Savings Bank Common Stock in the MHC
Reorganization with the proceeds of a loan obtained from a third party lender.
The ESOP debt was retired on January 24, 1996 and all shares were allocated to
the accounts of participating employees. In connection with the Additional
Offering, the ESOP acquired 46,800 shares of Savings Bank Common Stock with the
proceeds of a loan obtained from an unrelated third party lender. The loan is
repaid principally from the Savings Bank's contributions to the ESOP and
dividends payable on Savings Bank Common Stock held by the ESOP over the term of
the loan. In connection with the Conversion and Reorganization, it is
anticipated that the Holding Company will lend sufficient funds to the ESOP to
enable the ESOP to repay the outstanding principal balance of the loan ($804,000
at September 30, 1997) and accrued interest thereon through the closing date of
the Conversion and Reorganization. Shares of Common Stock acquired by the ESOP
in the Additional Offering will, to the extent not yet allocated to ESOP
participants, serve as collateral for the Holding Company loan and be held in a
suspense account pending repayment of the loan. It is anticipated that the
interest
69
<PAGE>
rate on the Holding Company loan will be equal to the prime rate reported in The
Wall Street Journal on the closing date of the Conversion and Reorganization.
In connection with the Conversion and Reorganization, the shares of
Savings Bank Common Stock held by the ESOP will be converted into Exchange
Shares based on the final Exchange Ratio. In light of management's evaluation of
the anticipated compensation expense associated with the ESOP, the ESOP does not
intend to purchase any Conversion Shares in the Conversion Offerings.
Contributions to the ESOP and shares released from the suspense account
will be allocated among participants based on compensation. Except for
participants who retire, become disabled or die during the Plan year, all other
participants will be required to have completed at least 1,000 hours of service
and be employed on the last day of the Plan year in order to receive an
allocation. Participant benefits vest over a seven-year period with 20% vested
after three years of service and 100% vested after seven years of service. All
years of service are counted toward vesting. Vesting will be accelerated upon
retirement, death, disability or termination of the ESOP. Forfeitures are
applied to reduce future contributions by the Savings Bank or reallocated to
other participants to reduce future funding costs. Benefits may be payable upon
retirement, death, disability or separation from service. Contributions to the
ESOP are not fixed, so benefits payable under the ESOP cannot be estimated.
Under the ESOP, participating employees may vote shares of Common Stock
allocated to their account. Shares for which employees do not give instructions
and unallocated shares will be voted by the ESOP Trustee in the same proportion
as determined by the vote of participants with respect to allocated shares.
The Board of Directors has appointed Directors Fant, Jim Gray Watson,
Orr and McIntosh and Director Emeritus Wade Watson as the committee ("ESOP
Committee") to administer the ESOP and the serve as ESOP trustees. The Board of
Directors may amend the ESOP in any manner which it deems desirable, except that
the ESOP may not be amended in any way to deprive any participant or beneficiary
of any benefits to which he is entitled with respect to contributions previously
made.
Although the ESOP will not purchase any Conversion Shares in the
Conversion Offerings, the ESOP may purchase Common Stock in the open market at
then prevailing prices from time to time following the Conversion and
Reorganization. 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, market
conditions.
Stock Option Plans. In connection with the MHC Reorganization, the
Savings Bank adopted the 1993 Option Plan for the benefit of key employees and
nonemployee directors, pursuant to which 11,504 shares of Savings Bank Common
Stock were reserved for issuance upon the exercise of stock options awarded
thereunder. In connection with the Additional Offering, the Savings Bank adopted
the 1996 Option Plan for the benefit of key employees and nonemployee directors,
pursuant to which 58,500 shares of Savings Bank Common Stock were reserved for
issuance upon the exercise of stock options awarded thereunder. As of September
30, 1997, stock options have been awarded with respect to all shares reserved
under the 1993 Option Plan, and with respect to 58,500 shares reserved under the
1996 Stock Option Plan, including 10,250 options to each of Mr. Orr, Mr. Hall
and Mr. Visioli. The Holding Company will assume the 1993 and 1996 Stock Option
Plans in connection with the Conversion and Reorganization, and appropriate
adjustments to the exercise price and the number of shares subject to stock
options outstanding under each plan will be made in accordance with the final
Exchange Ratio.
The 1998 Option Plan will be designed to attract and retain qualified
management personnel and nonemployee directors, to provide such 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 Savings
Bank, and to reward officers and key employees for outstanding performance. The
1998 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
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nonqualified stock options ("NQOs"). Upon receipt of stockholder approval of the
1998 Option Plan, stock options may be granted to nonemployee directors and key
employees of the Holding Company and its subsidiaries. Unless sooner terminated,
the 1998 Option Plan will continue in effect for a period of ten years from the
date the 1998 Option Plan is approved by stockholders. 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 1998 Option
Plan within one year of the consummation of the Conversion and Reorganization.
A number of authorized shares of Common Stock equal to 10% of the
number of Conversion Shares issued in connection with the Conversion and
Reorganization will be reserved for future issuance under the 1998 Option Plan
(198,375 shares based on the issuance of 1,983,750 Conversion 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 1998 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 1998 Option Plan will be administered and interpreted by the Board
of Directors. Subject to applicable OTS regulations, the Board will determine
which nonemployee directors 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.
It is anticipated that all options granted under the 1998 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 and Reorganization 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 1998 Option
Plan) of the Holding Company or the Savings Bank to the extent authorized or not
prohibited by applicable law or regulations. OTS regulations currently provide
that, if the 1998 Option Plan is implemented prior to the first anniversary of
the Conversion and Reorganization, vesting may not be accelerated upon a change
in control of the Holding Company or the Savings Bank.
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 Board. 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. Except as authorized by the Board,
all stock options are nontransferable except by will or the laws of descent or
distribution.
Under current provisions of the Code, the federal tax treatment of ISOs
and NQOs is different. With respect to ISOs, an optionee who satisfies certain
holding period requirements will not recognize income at the time the option is
granted or at the time the option is exercised. If the holding period
requirements are satisfied, the optionee will generally recognize capital gain
or loss upon a subsequent disposition of the shares of Common Stock received
upon the exercise of a stock option. If the holding period requirements are not
satisfied, the difference between the fair market value of the Common Stock on
the date of grant and the option exercise price, if any, will be taxable to the
optionee at ordinary income tax rates. A federal income tax deduction generally
will not be available to the Holding Company as a result of the grant or
exercise of an ISO, unless the optionee fails to satisfy the holding period
requirements. With respect to NQOs, the grant of an NQO generally is not a
taxable event for the optionee and no tax deduction will be available to the
Holding Company. However, upon the exercise of an NQO, the difference
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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 Savings Bank anticipate that if stockholder approval
is obtained it would provide awards to its directors and key employees to the
extent and under terms and conditions permitted by applicable regulations. Under
current OTS regulations, if the 1998 Option Plan is implemented within one year
of the consummation of the Conversion and Reorganization, (i) no officer or
employee may 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, may not receive in excess of 30% of the number of shares
reserved for issuance under the 1998 Option Plan.
Management Recognition Plans. In connection with the MHC
Reorganization, the Savings Bank adopted the 1993 MRP for the benefit of key
employees, pursuant to which 3,450 shares of Savings Bank Common Stock were
reserved for issuance in the form of restricted stock. In connection with the
Additional Offering, the Savings Bank adopted the 1996 MRP for the benefit of
key employees, pursuant to which 23,400 shares of Savings Bank Common Stock were
reserved for issuance in the form of restricted stock. As of September 30, 1997,
all shares under the 1993 MRP have been awarded and are fully vested, and such
shares will be converted into Exchange Shares based on the final Exchange Ratio
in the same manner as shares held by other Public Stockholders. As of September
30, 1997, awards for 23,400 shares of Savings Bank Common Stock have been
awarded under the 1996 MRP, including 5,850 shares to Mr. Orr, 5,850 shares to
Mr. Hall and 5,850 shares to Mr. Visioli, subject to a five-year vesting period.
Such shares will be converted into Exchange Shares based on the final Exchange
Ratio in the same manner as shares held by other Public Stockholders. The
Holding Company will assume and continue the 1996 MRP in connection with the
Conversion and Reorganization.
The Board of Directors believes that continuation of the MRP is
important to the Savings Bank's overall compensation strategy, which emphasizes
providing appropriate incentives to attract and retain capable employees.
Specifically, the continuation of the MRP will enable the Holding Company to
provide participants with a proprietary interest in the Holding Company as an
incentive to contribute to the success of the Holding Company. Accordingly, the
Holding Company's Board of Directors intends to adopt the 1998 MRP for officers
and employees of the Holding Company.
The 1998 MRP will be submitted to stockholders for approval at a
meeting to be held no earlier than six months following consummation of the
Conversion and Reorganization. The approval of a majority vote of the Holding
Company's stockholders is required prior to implementation of the 1998 MRP
within one year of the consummation of the Conversion and Reorganization. The
1998 MRP expects to acquire a number of shares of Common Stock equal to 4% of
the Conversion Shares issued in the Conversion Offerings (79,350 shares based on
the issuance of 1,983,750 Conversion Shares at the maximum of the Estimated
Valuation Range). Such shares will be acquired on the open market, if available,
with funds contributed by the Savings Bank to a trust which the Holding Company
may establish in conjunction with the 1998 MRP ("1998 MRP Trust") or from
authorized but unissued shares or treasury shares of the Holding Company.
The Board of Directors will administer the 1998 MRP, members of which
will also serve as trustees of the 1998 MRP Trust, if formed. The trustees will
be responsible for the investment of all funds contributed by the Savings Bank
to the 1998 MRP Trust.
It is anticipated that shares of Common Stock granted pursuant to the
1998 MRP will be in the form of restricted stock payable ratably over a
five-year 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 1998 MRP
Trust. If a recipient terminates employment for reasons other than death or
disability, the recipient will forfeit all rights to allocated shares that are
then subject to restriction. In the event of the recipient's death or
disability, all restrictions will expire and all allocated shares will become
unrestricted. In addition, all allocated shares will become unrestricted in the
event of
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a change in control (as defined in the 1998 MRP) of the Holding Company to the
extent authorized or not prohibited by applicable law or regulations. Current
OTS regulations, however, do not permit accelerated vesting of 1998 MRP awards
in the event of a change in control. Compensation expense in the amount of the
fair market value of the Common Stock at the date of the grant to the recipient
will be recognized during the years in which the shares vest.
The Board of Directors may terminate the 1998 MRP at any time and, upon
termination, all unallocated shares of Common Stock will revert to the Savings
Bank.
A recipient of a 1998 MRP award in the form of restricted stock
generally will not recognize income upon an award of shares of Common Stock, and
the Holding Company will not be entitled to a federal income tax deduction,
until the termination of the restrictions. Upon such termination, the recipient
will recognize ordinary income in an amount equal to the fair market value of
the Common Stock at the time and the Holding Company will be entitled to a
deduction in the same amount after satisfying federal income tax withholding
requirements. However, the recipient may elect to recognize ordinary income in
the year the restricted stock is granted in an amount equal to the fair market
value of the shares at that time, determined without regard to the restrictions.
In that event, the Holding Company will be entitled to a deduction in such year
and in the same amount. Any gain or loss recognized by the recipient upon
subsequent disposition of the stock will be either a capital gain or capital
loss.
Although no specific award determinations have been made, the Savings
Bank anticipates that if stockholder approval is obtained it would provide
awards to its directors, officers and employees to the extent permitted by
applicable regulations. OTS regulations currently provide that no individual
officer or employee may receive more than 25% of the shares reserved for
issuance under any stock compensation plan and that non-employee directors may
not receive more than 5% of such shares individually or 30% in the aggregate for
all non employee directors.
Transactions with the Savings Bank
Federal regulations require that all loans or extensions of credit by
the Savings Bank 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 Savings Bank's policy is
not to make any new loans or extensions of credit to the Savings Bank'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 or her related interests, are in excess of the greater of
$25,000, or 5% of the Savings Bank'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 the Savings
Bank -- Transactions with Affiliates." The aggregate amount of loans by the
Savings Bank to its executive officers and directors and their associates was
$926,000 at September 30, 1997, or approximately 1.4% of the Holding Company's
pro forma stockholders' equity (based on the issuance of Conversion Shares at
the maximum of the Estimated Valuation Range).
REGULATION
General
The Savings Bank 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 ("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 Savings Bank's
relationship with its depositors and borrowers is also regulated to a
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great extent, especially in such matters as the ownership of deposit accounts
and the form and content of the Savings Bank's mortgage documents. The Savings
Bank 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 Savings Bank's compliance with various regulatory
requirements. The regulatory structure also gives the regulatory authorities
extensive discretion in connection with their supervisory and enforcement
activities and examination policies, including policies with respect to the
classification of assets and the establishment of adequate loan loss reserves
for regulatory purposes. Any change in such policies, whether by the OTS, the
FDIC or Congress, could have a material adverse impact on the Holding Company,
the Savings Bank and their operations. The Holding Company, as a savings and
loan holding company, will also be required to file certain reports with, and
otherwise comply with the rules and regulations of, the OTS and the SEC.
Federal Regulation of the Savings Bank
Office of Thrift Supervision. The OTS is an office in the Department of
the Treasury subject to the general oversight of the Secretary of the Treasury.
The OTS generally possesses the supervisory and regulatory duties and
responsibilities formerly vested in the Federal Home Loan Bank Board. Among
other functions, the OTS issues and enforces regulations affecting federally
insured savings associations and regularly examines these institutions.
Federal Home Loan Bank System. The FHLB System, consisting of 12 FHLBs,
is under the jurisdiction of the Federal Housing Finance Board ("FHFB"). The
designated duties of the FHFB are to: supervise the FHLBs; ensure that the FHLBs
carry out their housing finance mission; ensure that the FHLBs remain adequately
capitalized and able to raise funds in the capital markets; and ensure that the
FHLBs operate in a safe and sound manner. The Savings Bank, as a member of the
FHLB-Atlanta, is required to acquire and hold shares of capital stock in the
FHLB-Atlanta in an amount equal to the greater of (i) 1.0% of the aggregate
outstanding principal amount of residential mortgage loans, home purchase
contracts and similar obligations at the beginning of each year, or (ii) 1/20 of
its advances (borrowings) from the FHLB-Atlanta. At September 30, 1997, the
Savings Bank complied with this requirement with an investment in FHLB-Atlanta
stock of $1.7 million. Among other benefits, the FHLB-Atlanta provides a central
credit facility primarily for member institutions. It is funded primarily from
proceeds derived from the sale of consolidated obligations of the FHLB System.
It makes advances to members in accordance with policies and procedures
established by the FHFB and the Board of Directors of the FHLB-Atlanta.
Federal Deposit Insurance Corporation. The FDIC is an independent
federal agency established originally to insure the deposits, up to prescribed
statutory limits, of federally insured banks and to preserve the safety and
soundness of the banking industry. The FDIC maintains two separate insurance
funds: the Bank Insurance Fund ("BIF") and the SAIF. As insurer of the Savings
Bank's deposits, the FDIC has examination, supervisory and enforcement authority
over all savings associations.
The Savings Bank's deposit accounts are insured by the FDIC under the
SAIF to the maximum extent permitted by law. The Savings Bank pays deposit
insurance premiums to the FDIC based on a risk-based assessment system
established by the FDIC for all SAIF-member institutions. Under applicable
regulations, institutions are assigned to one of three capital groups that are
based solely on the level of an institution's capital ("well capitalized,"
"adequately capitalized" or "undercapitalized"), which are defined in the same
manner as the regulations establishing the prompt corrective action system under
the FDIA as discussed below. The Savings Bank's assessments expensed for the
year ended September 30, 1997 equaled $152,000.
Pursuant to the Deposit Insurance Fund ("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 Savings Bank, paying 0%. This
assessment schedule is the same as that for the BIF, which reached its
designated reserve ratio in
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1995. In addition, since January 1, 1997, SAIF members are charged an assessment
of 0.065% 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.
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
elimination of federal savings association charter, and would require all
federal savings associations to become national banks or state-chartered
institutions. It is not known what effect, if any, the adoption of such
legislation would have on the operation of the Savings Bank.
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 Savings Bank.
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. At
September 30, 1997, the Savings Bank's liquidity ratio was 5.64%.
Prompt Corrective Action. Each federal banking agency is required to
implement a system of prompt corrective action for institutions that it
regulates. The federal banking agencies have promulgated substantially similar
regulations to implement this system of prompt corrective action. Under the
regulations, an institution shall be deemed to be (i) "well capitalized" if it
has a total risk-based capital ratio of 10.0% or more, has a Tier I risk-based
capital ratio of 6.0% or more, has a leverage ratio of 5.0% or more and is not
subject to specified requirements to meet and maintain a specific capital level
for any capital measure; (ii) "adequately capitalized" if it has a total
risk-based capital ratio of 8.0% or more, a Tier I risk-based capital ratio of
4.0% or more and a leverage ratio of 4.0% or more (3.0% under certain
circumstances) and does not meet the definition of "well capitalized;" (iii)
"undercapitalized" if it has a total risk-based capital ratio that is less than
8.0%, a Tier I risk-based capital ratio that is less than 4.0% or a leverage
ratio that is less than 4.0% (3.0% under certain circumstances); (iv)
"significantly undercapitalized" if it has a total risk-based capital ratio that
is less than 6.0%, a Tier I risk-based capital ratio that is less than 3.0% or a
leverage ratio that is less than 3.0%; and (v) "critically undercapitalized" if
it has a ratio of tangible equity to total assets that is equal to or less than
2.0%.
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
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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 Savings Bank was categorized as "well
capitalized" under the prompt corrective action regulations of the OTS.
Standards for Safety and Soundness. The FDIA requires the federal
banking regulatory agencies to prescribe, by regulation, standards for all
insured depository institutions relating to: (i) internal controls, information
systems and internal audit systems; (ii) loan documentation; (iii) credit
underwriting; (iv) interest rate risk exposure; (v) asset growth; and (vi)
compensation, fees and benefits. The federal banking agencies recently adopted
final regulations and Interagency Guidelines Prescribing Standards for Safety
and Soundness ("Guidelines"). 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 Savings Bank fails to meet any standard prescribed by the
Guidelines, the agency may require the Savings Bank 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 QTL test to avoid certain restrictions on their operations. A savings
institution that fails to become or remain a QTL shall either become a national
bank or be subject to the following restrictions on its operations: (i) the
association may not make any new investment or engage in activities that would
not be permissible for national banks; (ii) the association may not establish
any new branch office where a national bank located in the savings institution's
home state would not be able to establish a branch office; (iii) the association
shall be ineligible to obtain new advances from any FHLB; and (iv) the payment
of dividends by the association shall be subject to the statutory and regulatory
dividend restrictions applicable to national banks. Also, beginning three years
after the date on which the savings institution ceases to be a QTL, the savings
institution would be prohibited from retaining any investment or engaging in any
activity not permissible for a national bank and would be required to repay any
outstanding advances to any FHLB. In addition, within one year of the date on
which a savings association controlled by a company ceases to be a QTL, the
company must register as a bank holding company and become subject to the rules
applicable to such companies. A savings institution may requalify as a QTL if it
thereafter complies with the QTL test.
Currently, the QTL test requires that either an institution qualify as
a domestic building and loan association under the Code or that 65% of an
institution's "portfolio assets" (as defined) consist of certain housing and
consumer-related assets on a monthly average basis in nine out of every 12
months. Assets that qualify without limit for inclusion as part of the 65%
requirement are loans made to purchase, refinance, construct, improve or repair
domestic residential housing and manufactured housing; home equity loans;
mortgage-backed securities (where the mortgages are secured by domestic
residential housing or manufactured housing); FHLB stock; direct or indirect
obligations of the FDIC; and loans for educational purposes, loans to small
businesses and loans made through credit cards. In addition, the following
assets, among others, may be included in meeting the test subject to an overall
limit of 20% of the savings institution's portfolio assets: 50% of residential
mortgage loans originated and sold within 90 days of origination; 100% of
consumer loans; and stock issued by FHLMC or FNMA. 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 qualified thrift investments of the Savings Bank were approximately
88.8% of its portfolio assets.
Capital Requirements. Under OTS regulations a savings association must
satisfy three minimum capital requirements: core capital, tangible capital and
risk-based capital. Savings associations must meet all of the standards in order
to comply with the capital requirements. The Holding Company is not subject to
any minimum capital requirements.
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OTS capital regulations establish a 3% core capital or leverage ratio
(defined as the ratio of core capital to adjusted total assets). Core capital is
defined to include common stockholders' equity, noncumulative perpetual
preferred stock and any related surplus, and minority interests in equity
accounts of consolidated subsidiaries, less (i) any intangible assets, except
for certain qualifying intangible assets; (ii) certain mortgage servicing
rights; and (iii) equity and debt investments in subsidiaries that are not
"includable subsidiaries," which is defined as subsidiaries engaged solely in
activities not impermissible for a national bank, engaged in activities
impermissible for a national bank but only as an agent for its customers, or
engaged solely in mortgage-banking activities. In calculating adjusted total
assets, adjustments are made to total assets to give effect to the exclusion of
certain assets from capital and to account appropriately for the investments in
and assets of both includable and nonincludable subsidiaries. An institution
that fails 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 the Savings Bank -- Prompt Corrective Action."
Savings associations also must maintain "tangible capital" not less
than 1.5% of the Savings Bank's adjusted total assets. "Tangible capital" is
defined, generally, as core capital minus any "intangible assets" other than
purchased mortgage servicing rights. The prompt corrective action standards also
establish, in effect, a 2% tangible capital standard.
Each savings institution must maintain Tier 1 (core) capital to
risk-weighted assets of at least 4% and 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
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assets. That dollar amount is deducted from an association's total capital in
calculating compliance with its risk- based capital requirement. Under the rule,
there is a two quarter lag between the reporting date of an institution's
financial data and the effective date for the new capital requirement based on
that data. A savings association with assets of less than $300 million and
risk-based capital ratios in excess of 12% is not subject to the interest rate
risk component, unless the OTS determines otherwise. The rule also provides that
the Director of the OTS may waive or defer an association's interest rate risk
component on a case-by-case basis. Under certain circumstances, a savings
association may request an adjustment to its interest rate risk component if it
believes that the OTS-calculated interest rate risk component overstates its
interest rate risk exposure. In addition, certain "well-capitalized"
institutions may obtain authorization to use their own interest rate risk model
to calculate their interest rate risk component in lieu of the OTS-calculated
amount. Presently, 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 Savings Bank'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 Savings Bank 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). A 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. A Tier 3 savings association
has capital below the minimum capital requirement (either before or after the
proposed capital distribution). A Tier 3 savings association may not make any
capital distributions without prior approval from the OTS.
The Savings Bank 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 Savings Bank'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 Savings Bank's
largest aggregate amount of loans to one borrower was $2.0 million, which
represented 6.5% of the Savings Bank's unimpaired capital and surplus at
September 30, 1997.
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Activities of Savings Banks and Their Subsidiaries. When a savings
association establishes or acquires a subsidiary or elects to conduct any new
activity through a subsidiary that the association controls, the savings
association must notify the FDIC and the OTS 30 days in advance and provide the
information each agency may, by regulation, require. Savings associations also
must conduct the activities of subsidiaries in accordance with existing
regulations and orders.
The OTS may determine that the continuation by a savings association of
its ownership control of, or its relationship to, the subsidiary constitutes a
serious risk to the safety, soundness or stability of the association or is
inconsistent with sound banking practices or with the purposes of the FDIA.
Based upon that determination, the FDIC or the OTS has the authority to order
the savings association to divest itself of control of the subsidiary. The FDIC
also may determine by regulation or order that any specific activity poses a
serious threat to the SAIF. If so, it may require that no SAIF member engage in
that activity directly.
Transactions with Affiliates. Savings associations must comply with
Sections 23A and 23B of the Federal Reserve Act ("Sections 23A and 23B")
relative to transactions with affiliates in the same manner and to the same
extent as if the savings association were a Federal Reserve member bank. A
savings and loan holding company, its subsidiaries and any other company under
common control are considered affiliates of the subsidiary savings association
under the HOLA. Generally, Sections 23A and 23B: (i) limit the extent to which
the insured association or its subsidiaries may engage in certain covered
transactions with an affiliate to an amount equal to 10% of such institution's
capital and surplus and place an aggregate limit on all such transactions with
affiliates to an amount equal to 20% of such capital and surplus, and (ii)
require that all such transactions be on terms substantially the same, or at
least as favorable to the institution or subsidiary, as those provided to a
non-affiliate. The term "covered transaction" includes the making of loans, the
purchase of assets, the issuance of a guarantee and similar types of
transactions. Any loan or extension of credit by the Savings Bank to an
affiliate must be secured by collateral in accordance with Section 23A.
Three additional rules apply to savings associations: (i) a savings
association may not make any loan or other extension of credit to an affiliate
unless that affiliate is engaged only in activities permissible for bank holding
companies; (ii) a savings association may not purchase or invest in securities
issued by an affiliate (other than securities of a subsidiary); and (iii) the
OTS may, for reasons of safety and soundness, impose more stringent restrictions
on savings associations but may not exempt transactions from or otherwise
abridge Section 23A or 23B. Exemptions from Section 23A or 23B may be granted
only by the Federal Reserve Board, as is currently the case with respect to all
FDIC-insured banks. The Savings Bank has not been significantly affected by the
rules regarding transactions with affiliates.
The Savings Bank's authority to extend credit to executive officers,
directors and 10% shareholders, as well as entities controlled by such persons,
is governed by Sections 22(g) and 22(h) of the Federal Reserve Act, and
Regulation O thereunder. Among other things, these regulations generally require
that such loans be made on terms and conditions substantially the same as those
offered to unaffiliated individuals and not involve more than the normal risk of
repayment. Generally, Regulation O also places individual and aggregate limits
on the amount of loans the Savings Bank may make to such persons based, in part,
on the Savings Bank's capital position, and requires certain board approval
procedures to be followed. The OTS regulations, with certain minor variances,
apply Regulation O to savings institutions.
Community Reinvestment Act. Under the federal Community Reinvestment
Act ("CRA"), all federally-insured financial institutions have a continuing and
affirmative obligation consistent with safe and sound operations to help meet
all the credit needs of its delineated community. The CRA does not establish
specific lending requirements or programs nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to meet all the credit needs of its delineated community. The CRA
requires the federal banking agencies, in connection with regulatory
examinations, to assess an institution's record of meeting the credit needs of
its delineated community and to take such record into account in evaluating
regulatory applications to establish a new branch office that will accept
deposits, relocate an existing office, or merge or consolidate with, or
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acquire the assets or assume the liabilities of, a federally regulated financial
institution, among others. The CRA requires public disclosure of an
institution's CRA rating. The Savings Bank received an "outstanding" rating as a
result of its latest evaluation.
Regulatory and Criminal Enforcement Provisions. The OTS has primary
enforcement responsibility over savings institutions and has the authority to
bring action against all "institution-affiliated parties," including
stockholders, and any attorneys, appraisers and accountants who knowingly or
recklessly participate in wrongful action likely to have an adverse effect on an
insured institution. Formal enforcement action may range from the issuance of a
capital directive or cease and desist order to removal of officers or directors,
receivership, conservatorship or termination of deposit insurance. Civil
penalties cover a wide range of violations and can amount to $27,500 per day, or
$1.1 million per day in especially egregious cases. Under the FDIA, the FDIC has
the authority to recommend to the Director of the OTS that enforcement action be
taken with respect to a particular savings institution. If action is not taken
by the Director, the FDIC has authority to take such action under certain
circumstances. Federal law also establishes criminal penalties for certain
violations.
Savings and Loan Holding Company Regulations
Holding Company Acquisitions. The HOLA and OTS regulations issued
thereunder generally prohibit a savings and loan holding company, without prior
OTS approval, from acquiring more than 5% of the voting stock of any other
savings association or savings and loan holding company or controlling the
assets thereof. They also prohibit, among other things, any director or officer
of a savings and loan holding company, or any individual who owns or controls
more than 25% of the voting shares of such holding company, from acquiring
control of any savings association not a subsidiary of such savings and loan
holding company, unless the acquisition is approved by the OTS.
Holding Company Activities. As a unitary savings and loan holding
company, the Holding Company generally is not subject to activity restrictions
under the HOLA. If the Holding Company acquires control of another savings
association as a separate subsidiary other than in a supervisory acquisition, it
would become a multiple savings and loan holding company. There generally are
more restrictions on the activities of a multiple savings and loan holding
company than on those of a unitary savings and loan holding company. The HOLA
provides that, among other things, no multiple savings and loan holding company
or subsidiary thereof which is not an insured association shall commence or
continue for more than two years after becoming a multiple savings and loan
association holding company or subsidiary thereof, any business activity other
than: (i) furnishing or performing management services for a subsidiary insured
institution, (ii) conducting an insurance agency or escrow business, (iii)
holding, managing, or liquidating assets owned by or acquired from a subsidiary
insured institution, (iv) holding or managing properties used or occupied by a
subsidiary insured institution, (v) acting as trustee under deeds of trust, (vi)
those activities previously directly authorized by regulation as of March 5,
1987 to be engaged in by multiple holding companies or (vii) those activities
authorized by the Federal Reserve Board as permissible for bank holding
companies, unless the OTS by regulation, prohibits or limits such activities for
savings and loan holding companies. 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 the Savings Bank - 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.
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TAXATION
Federal Taxation
General. Upon consummation of the Conversion and Reorganization, the
Holding Company and the Savings Bank 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 Savings Bank'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
Savings Bank or the Holding Company. For additional information regarding income
taxes, see Note 11 of Notes to Consolidated Financial Statements.
Bad Debt Reserve. Historically, savings institutions such as the
Savings Bank 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 Savings Bank'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 Savings Bank's actual loss experience, or a percentage equal
to 8% of the Savings Bank's taxable income, computed with certain modifications
and reduced by the amount of any permitted additions to the non-qualifying
reserve. Due to the Savings Bank's loss experience, the Savings Bank generally
recognized a bad debt deduction equal to 8% of taxable income.
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 Savings Bank has previously recorded a
deferred tax liability equal to the bad debt recapture and as such the new rules
will have no effect on the net income or federal income tax expense. For taxable
years beginning after December 31, 1995, the Savings Bank'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 Savings Bank is a "large"
association (assets in excess of $500 million) on the basis of net charge-offs
during the taxable year. The new rules allow an institution to suspend bad debt
reserve recapture for the 1996 and 1997 tax years if the institution's lending
activity for those years is equal to or greater than the institutions average
mortgage lending activity for the six taxable years preceding 1996 adjusted for
inflation. For this purpose, only home purchase or home improvement loans are
included and the institution can elect to have the tax years with the highest
and lowest lending activity removed from the average calculation. If an
institution is permitted to postpone the reserve recapture, it must begin its
six year recapture no later than the 1998 tax year. The unrecaptured base year
reserves will not be subject to recapture as long as the institution continues
to carry on the business of banking. In addition, the balance of the pre-1988
bad debt reserves continue to be subject to 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 Savings Bank 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 Savings Bank'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 Savings Bank's taxable income. Nondividend distributions
include distributions in excess of the Savings Bank'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 Savings
Bank'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
Savings Bank'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 Savings Bank makes a "nondividend
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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
Savings Bank. The Savings Bank 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 Savings Bank'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 Savings Bank, 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 Savings Bank 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 Savings Bank will not file a consolidated
tax return, except that if the Holding Company or the Savings Bank owns more
than 20% of the stock of a corporation distributing a dividend, then 80% of any
dividends received may be deducted.
Audits. The Savings Bank's federal income tax returns have not been
audited within the last five years.
State Taxation
South Carolina Taxation. South Carolina has adopted the Code, with
certain modifications, as it relates to savings and loan associations, effective
for taxable years beginning after December 31, 1984. The Savings Bank is subject
to South Carolina income tax at the rate of 6%. This rate of tax is imposed on
savings and loan associations and savings banks in lieu of the general state
business corporation income tax.
At September 30, 1997, the Savings Bank had net operating loss
carryforwards for state tax purposes of approximately $62.0 million, which
expire in varying amounts between fiscal years 1998 and 2006.
The Savings Bank's state income tax returns have not been audited
within the last five years.
Delaware. As a Delaware holding company not earning income in Delaware,
the Holding Company is exempt from Delaware corporate income tax, but is
required to file an annual report with and pay an annual franchise tax to the
State of Delaware.
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THE CONVERSION AND REORGANIZATION
The OTS has approved the Plan of Conversion subject to its approval by
the members of the Savings Bank and the stockholders of the Savings Bank
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 22, 1997, the Boards of Directors of the MHC and the
Savings Bank unanimously adopted, and on December 22, 1997, unanimously amended,
the Plan of Conversion, pursuant to which the MHC will convert from a mutual
holding company to a stock holding company and the Savings Bank simultaneously
reorganize as a wholly-owned subsidiary of the Holding Company, a newly formed
Delaware corporation. The following discussion of all material aspects of the
Plan of Conversion is qualified in its entirety by reference to the Plan of
Conversion, which is attached as Exhibit A to both the MHC's Proxy Statement and
the Savings Bank's Proxy Statement, and is available to both members of the MHC
and stockholders of the Savings Bank 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 MHC entitled to vote on the matter at the Special
Meeting of Members called for that purpose to be held on ____________, 1998, its
approval by the stockholders of the Savings Bank entitled to vote on the matter
at the Stockholders' Meeting called for that purpose to be held on ____________,
1998, and its approval by the stockholders of the Savings Bank (excluding the
MHC) entitled to vote on the matter at the Stockholders' Meeting, and subject to
the satisfaction of certain other conditions imposed by the OTS in its approval.
Pursuant to the Plan of Conversion, (i) the MHC will convert from a
federally-chartered mutual holding company to a federally-chartered interim
stock savings bank (i.e. Interim A) and simultaneously merge with and into the
Savings Bank, pursuant to which the MHC will cease to exist and the shares of
Savings Bank Common Stock held by the MHC will be canceled, and (ii) an interim
federal stock savings bank ("Interim B") will be formed as a wholly-owned
subsidiary of the Holding Company and Interim B will merge with and into the
Savings Bank. As a result of the merger of Interim B with and into the Savings
Bank, the Savings Bank will become a wholly owned subsidiary of the Holding
Company and the Public Savings Bank Shares will be converted into the Exchange
Shares pursuant to the Exchange Ratio, which will result in the holders of such
shares owning in the aggregate approximately the same percentage of the Common
Stock to be outstanding upon the completion of the Conversion and Reorganization
(i.e., the Conversion Shares and the Exchange Shares) as the percentage of
Savings Bank Common Stock owned by them in the aggregate immediately prior to
consummation of the Conversion and Reorganization, but before giving effect to
(a) the payment of cash in lieu of issuing fractional Exchange Shares and (b)
any shares of Conversion Stock purchased by the Savings Bank's stockholders in
the Conversion Offerings.
As part of the Conversion and Reorganization, the Holding Company is
offering Conversion Shares in the Subscription Offering to holders of
Subscription Rights in the following order of priority: (i) Eligible Account
Holders (depositors of the Savings Bank with $50.00 or more on deposit as of the
close of business on June 30, 1996); (ii) Supplemental Eligible Account Holders
(depositors of the Savings Bank with $50.00 or more on deposit as of the close
of business on December 31, 1997); and (iii) Other Members (depositors of the
Savings Bank as of the close of business on ___________, 1998 and borrowers of
the Savings Bank with loans outstanding as of the close of business on October
26, 1993, which continue to be outstanding as of the close of business on
__________, 1997).
Concurrently with the Subscription Offering, any Conversion Shares not
subscribed for in the Subscription Offering may be offered for sale in the
Direct Community Offering to members of the general public, with priority being
given first to Public Stockholders as of the close of business on the Voting
Record Date (who are not Eligible Account Holders, Supplemental Eligible Account
Holders or Other Members) and then to natural persons and trusts of natural
persons residing in the Local Community. Conversion Shares not sold in the
Subscription and Direct
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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 Savings Bank or the Holding Company with the
approval of the regulatory authorities. If the Syndicated Community Offering is
determined not to be feasible because of market conditions or otherwise, the
Board of Directors of the Savings Bank will consult with the regulatory
authorities to determine an appropriate alternative method for selling the
unsubscribed Conversion Shares. The Plan of Conversion provides that the
Conversion and Reorganization must be completed within 24 months after the date
of the approval of the Plan of Conversion by the members of the MHC.
No sales of Common Stock may be completed, either in the Subscription
Offering, Direct Community Offering or Syndicated Community Offerings unless the
Plan of Conversion is approved by the members of the MHC and the stockholders of
the Savings Bank.
The completion of the Conversion Offerings, however, is subject to
market conditions and other factors beyond the Savings Bank's control. No
assurance can be given as to the length of time after approval of the Plan of
Conversion at the Special Members Meeting and the Stockholders Meeting that will
be required to complete the Direct Community or Syndicated Community Offerings
or other sale of the Conversion Shares. If delays are experienced, significant
changes may occur in the estimated pro forma market value of the MHC and the
Savings Bank, as converted, together with corresponding changes in the net
proceeds realized by the Holding Company from the sale of the Conversion Shares.
If such events occur, and the Savings Bank does not terminate the Conversion and
Reorganization, subscribers will be resolicited and given the right to increase,
decrease or rescind their subscriptions. Unless an affirmative response is
received from subscribers that they wish to confirm their orders, the funds will
be returned promptly, together with accrued interest at the Savings Bank's
passbook rate from the date payment is received until the funds are returned to
the subscriber. If the Conversion and Reorganization is terminated, the Savings
Bank would be required to charge all Conversion and Reorganization expenses
against current income.
Orders for Conversion Shares will not be filled until at least
1,466,250 Conversion Shares have been subscribed for or sold and the OTS
approves the final valuation and the Conversion and Reorganization closes. If
the Conversion and Reorganization 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 and Reorganization, 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 Savings Bank'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 and Reorganization is not
completed, all withdrawal authorizations will be terminated and all funds, which
will be held by the Savings Bank in a segregated deposit account insured by the
FDIC up to the applicable $100,000 legal limit, will be promptly returned
together with accrued interest at the Savings Bank's passbook rate from the date
payment is received until the Conversion and Reorganization is terminated.
Purposes of Conversion and Reorganization
The MHC, as a federally chartered mutual holding company, does not have
stockholders and has no authority to issue capital stock. As a result of the
Conversion and Reorganization, the Holding Company will be structured in the
form used by holding companies of commercial banks, most business entities and a
growing number of savings institutions. The holding company form of organization
will provide the Holding Company with the ability to diversify the Holding
Company's and the Savings Bank's business activities through acquisition of or
mergers with both stock savings institutions and commercial banks, as well as
other companies. Although there are no current arrangements, understandings or
agreements regarding any such opportunities, the Holding Company will be in a
position after the Conversion and Reorganization, subject to regulatory
limitations and the Holding Company's financial position, to take advantage of
any such opportunities that may arise.
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In their decision to pursue the Conversion and Reorganization, the
Board of Directors of the MHC and the Savings Bank considered various regulatory
uncertainties associated with the mutual holding company structure including the
ability to waive dividends in the future as well as the general uncertainty
regarding a possible elimination of the federal savings association charter.
The Conversion and Reorganization will be important to the future
growth and performance of the holding company organization by providing a larger
capital base to support the operations of the Savings Bank and Holding Company
and by enhancing their future access to capital markets, their ability to
diversify into other financial services related activities, and their ability to
provide services to the public. Since the MHC's ownership interest in the
Savings Bank is 53.03% as of the date of this Prospectus, the Savings Bank
currently does not have the ability to raise additional capital through the sale
of additional shares of Savings Bank Common Stock because OTS regulations
require that the MHC hold a majority of the outstanding shares of Savings Bank
Common Stock.
The Conversion and Reorganization also will result in an increase in
the number of shares of Common Stock to be outstanding as compared to the number
of outstanding shares of Public Savings Bank Shares which will increase the
likelihood of the development of an active and liquid trading market for the
Common Stock. See "MARKET FOR COMMON STOCK." In addition, the Conversion and
Reorganization permit the Holding Company to engage in stock repurchases without
adverse federal income tax consequences, unlike the Savings Bank. Currently, the
Holding Company has no plans or intentions to engage in any stock repurchases.
An additional benefit of the Conversion and Reorganization will be an
increase in the accumulated earnings and profits of the Savings Bank for federal
income tax purposes. When the Savings Bank (as a mutual institution) transferred
substantially all of its assets and liabilities to its stock savings bank
successor in the MHC Reorganization, its accumulated earnings and profits tax
attribute was not able to be transferred to the Savings Bank because no tax-free
reorganization was involved. Accordingly, this tax attribute was retained by the
Savings Bank when it converted its charter to that of the MHC, even though the
underlying retained earnings were transferred to the Savings Bank. The
Conversion and Reorganization has been structured to re-unite the accumulated
earnings and profits tax attribute retained by the MHC in the MHC Reorganization
with the retained earnings of the Savings Bank by merging the MHC with and into
the Savings Bank in a tax-free reorganization. This transaction will increase
the Savings Bank's ability to pay dividends to the Holding Company in the
future. See "DIVIDEND POLICY."
If the Savings Bank had undertaken a standard conversion involving the
formation of a stock holding company in 1993, applicable OTS regulations would
have required a greater amount of common stock to be sold than the amount of net
proceeds raised in the MHC Reorganization. Management believed that it was
advisable to profitably invest the $946,000 of net proceeds raised in the MHC
Reorganization and the $10.7 million of net proceeds raised in the Additional
Offering prior to raising the larger amount of capital that would have been
raised in a standard conversion. A standard conversion in 1993 also would have
immediately eliminated all aspects of the mutual form of organization.
In light of the foregoing, the Boards of Directors of the Primary
Parties believe that the Conversion and Reorganization is in the best interests
of the MHC and the Savings Bank, their respective members and stockholders, and
the communities served by the Savings Bank.
Effects of Conversion and Reorganization on Depositors and Borrowers of the
Savings Bank
General. Prior to the Conversion and Reorganization, each depositor in
the Savings Bank has both a deposit account in the institution and a pro rata
ownership interest in the net worth of the MHC based upon the balance in his or
her account, which interest may only be realized in the event of a liquidation
of the MHC. However, this ownership interest is tied to the depositor's account
and has no tangible market value separate from such deposit account. A depositor
who reduces or closes his or her account receives a portion or all of the
balance in the account but nothing for his or her ownership interest in the net
worth of the MHC, which is lost to the extent that the balance in the account is
reduced.
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Consequently, the depositors of the Savings Bank normally have no way
to realize the value of their ownership interest in the MHC, which has
realizable value only in the unlikely event that the MHC is liquidated. In such
event, the depositors of record at that time, as owners, would share pro rata in
any residual surplus and reserves of the MHC after other claims are paid.
Upon consummation of the Conversion and Reorganization, permanent
nonwithdrawable capital stock will be created to represent the ownership of the
net worth of the Holding Company. The Common Stock is separate and apart from
deposit accounts and cannot be and is not insured by the FDIC or any other
governmental agency. Certificates are issued to evidence ownership of the
permanent stock. The stock certificates are transferable, and therefore the
stock may be sold or traded if a purchaser is available with no effect on any
deposit and/or loan account(s) the seller may hold in the Savings Bank.
Continuity. The Conversion and Reorganization will not interrupt the
Savings Bank's normal business of accepting deposits and making loans. The
Savings Bank will continue to be subject to regulation by the OTS and the FDIC.
After the Conversion and Reorganization, the Savings Bank will continue to
provide services for depositors and borrowers under current policies by its
present management and staff.
The directors and officers of the Savings Bank at the time of the
Conversion and Reorganization will continue to serve as directors and officers
of the Savings Bank after the Conversion and Reorganization. The directors and
officers of the Holding Company consist of individuals currently serving as
directors and officers of the MHC and the Savings Bank, and they generally will
retain their positions in the Holding Company after the Conversion and
Reorganization.
Effect on Public Savings Bank Shares. Under the Plan of Conversion,
upon consummation of the Conversion and Reorganization, the Public Savings Bank
Shares shall be converted into Exchange Shares based upon the Exchange Ratio
without any further action on the part of the holder thereof. Upon surrender of
the Public Savings Bank Shares, Common Stock will be issued in exchange for such
shares. See "-- Delivery and Exchange of Stock Certificates."
Upon consummation of the Conversion and Reorganization, the Public
Stockholders will become stockholders of the Holding Company. For a description
of certain changes in the rights of stockholders as a result of the Conversion
and Reorganization, see "COMPARISON OF STOCKHOLDERS' RIGHTS."
Voting Rights. Presently, depositors and borrowers of the Savings Bank
are members of, and have voting rights in, the MHC as to all matters requiring
membership action. Upon completion of the Conversion and Reorganization, the MHC
will cease to exist and all voting rights in the Savings Bank will be vested in
the Holding Company as the sole stockholder of the Savings Bank. Exclusive
voting rights with respect to the Holding Company will be vested in the holders
of Common Stock. Depositors and borrowers of the Savings Bank will not have
voting rights in the Holding Company after the Conversion and Reorganization,
except to the extent that they become stockholders of the Holding Company.
Savings Accounts and Loans. The Savings Bank's savings accounts,
account balances and existing FDIC insurance coverage of savings accounts will
not be affected by the Conversion and Reorganization. Furthermore, the
Conversion and Reorganization will not affect the loan accounts, loan balances
or obligations of borrowers under their individual contractual arrangements with
the Savings Bank.
Tax Effects. The Savings Bank has received an opinion from Breyer &
Aguggia, Washington, D.C., that the Conversion and Reorganization will
constitute a nontaxable reorganization under Section 368(a)(1)(A) of the Code.
Among other things, the opinion provides that: (i) the conversion of the MHC
from a mutual holding company to a federally-chartered interim stock savings
bank (i.e., Interim A) and its simultaneous merger with and into the Savings
Bank, with the Savings Bank as the surviving entity will qualify as a
reorganization within the meaning of Section 368(a)(1)(A) of the Code, (ii) no
gain or loss will be recognized by the Savings Bank upon the
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receipt of the assets of the MHC in such merger, (iii) the merger of Interim B
with and into the Savings Bank, with the Savings Bank as the surviving entity,
will qualify as a reorganization within the meaning of Section 368(a)(1)(A) of
the Code, (iv) no gain or loss will be recognized by Interim B upon the transfer
of its assets to the Savings Bank, (v) no gain or loss will be recognized by the
Savings Bank upon the receipt of the assets of Interim B, (vi) no gain or loss
will be recognized by the Holding Company upon the receipt of Savings Bank
Common Stock solely in exchange for Common Stock, (vii) no gain or loss will be
recognized by the Public Stockholders upon the receipt of Exchange Shares in
exchange for their Public Savings Bank Shares, (viii) the basis of the Exchange
Shares to be received by the Public Stockholders will be the same as the basis
of the Public Savings Bank Shares surrendered in exchange therefor, before
giving effect to any payment of cash in lieu of fractional Exchange Shares, (ix)
the holding period of the Exchange Shares to be received by the Public
Stockholders will include the holding period of the Public Savings Bank Shares,
provided that the Public Savings Bank Shares were held as a capital asset on the
date of the exchange, (x) no gain or loss will be recognized by the Holding
Company upon the sale of shares of Conversion Shares in the Conversion
Offerings, (xi) the Eligible Account Holders, Supplemental Eligible Account
Holders and Other Members will recognize gain, if any, upon the issuance to them
of withdrawable savings accounts in the Savings Bank following the Conversion
and Reorganization, interests in the liquidation account and nontransferable
subscription rights to purchase Conversion Stock, but only to the extent of the
value, if any, of the subscription rights, and (xii) the tax basis to the
holders of Conversion Shares purchased in the Conversion Offerings will be the
amount paid therefor, and the holding period for the Conversion Shares will
begin on the date of consummation of the Conversion Offerings, if purchased
through the exercise of Subscription Rights, and on the day after the date of
purchase, if purchased in the Community Offering or the Syndicated Community
Offering. 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
Savings Bank, 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 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 Savings
Bank 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 Savings Bank has also received an opinion from Evans, Carter, Kunes
& Bennett, P.A., Charleston, South Carolina, that, assuming the Conversion and
Reorganization does not result in any federal income tax liability to the
Savings Bank, its account holders, or the Holding Company, implementation of the
Plan of Conversion will not result in any South Carolina tax liability to such
entities or persons.
The opinions of Breyer & Aguggia and Evans, Carter, Kunes & Bennett,
P.A. and the letter from RP Financial are filed as exhibits to the Registration
Statement. See "ADDITIONAL INFORMATION."
THE PRECEDING DISCUSSION SUMMARIZES THE MATERIAL TAX CONSEQUENCES OF
THE CONVERSION AND REORGANIZATION. PROSPECTIVE INVESTORS, HOWEVER, ARE URGED
TO CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF THE
CONVERSION AND REORGANIZATION PARTICULAR TO THEM.
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Liquidation Account. In the unlikely event of a complete liquidation of
the MHC, each depositor of the Savings Bank would receive his or her pro rata
share of any assets of the MHC remaining after payment of claims of all
creditors. 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 was to the total
value of all deposit accounts in the Savings Bank at the time of liquidation.
After the Conversion and Reorganization, each depositor, in the event of a
complete liquidation of the Savings Bank, would have a claim as a creditor of
the same general priority as the claims of all other general creditors of the
Savings Bank. However, except as described below, his or her claim would be
solely in the amount of the balance in his or her deposit account plus accrued
interest. Each stockholder would not have an interest in the value or assets of
the Savings Bank or the Holding Company above that amount.
The Plan of Conversion provides for the establishment, upon the
completion of the Conversion and Reorganization, of a special "liquidation
account" for the benefit of Eligible Account Holders and Supplemental Eligible
Account Holders in an amount equal to the amount of any dividends waived by the
MHC plus the greater of (i) the Savings Bank's retained earnings of $12.9
million at March 31, 1993, the date of the latest statement of financial
condition contained in the final offering circular utilized in the MHC
Reorganization, or (ii) 53.02% of the Savings Bank's total stockholders' equity
as reflected in its latest statement of financial condition contained in the
final Prospectus utilized in the Conversion Offerings. As of the date of this
Prospectus, the initial balance of the liquidation account would be $____
million. Each Eligible Account Holder and Supplemental Eligible Account Holder,
if he or she were to continue to maintain his or her deposit account at the
Savings Bank, would be entitled, upon a complete liquidation of the Savings Bank
after the Conversion and Reorganization to an interest in the liquidation
account prior to any payment to the Holding Company as the sole stockholder of
the Savings Bank. Each Eligible Account Holder and Supplemental Eligible Account
Holder would have an initial interest in such liquidation account for each
deposit account, including passbook accounts, transaction accounts such as
checking accounts, money market deposit accounts and certificates of deposit,
held in the Savings Bank at the close of business on June 30, 1996 or December
31, 1997, as the case may be. Each Eligible Account Holder and Supplemental
Eligible Account Holder will have a pro rata interest in the total liquidation
account for each of his or her deposit accounts based on the proportion that the
balance of each such deposit account on the Eligibility Record Date (June 30,
1996) or the Supplemental Eligibility Record Date (December 31, 1997), as the
case may be, bore to the balance of all deposit accounts in the Savings Bank on
such date.
If, however, on any September 30 annual closing date of the Savings
Bank, commencing September 30, 1998, the amount in any deposit account is less
than the amount in such deposit account on June 30, 1996 or December 31, 1997,
as the case may be, or any other annual closing date, then the interest in the
liquidation account relating to such deposit account would be reduced by the
proportion of any such reduction, and such interest will cease to exist if such
deposit account is closed. In addition, no interest in the liquidation account
would ever be increased despite any subsequent increase in the related deposit
account. Any assets remaining after the above liquidation rights of Eligible
Account Holders and Supplemental Eligible Account Holders are satisfied would be
distributed to the Holding Company as the sole stockholder of the Savings Bank.
The Exchange Offering
The Exchange Offering is being undertaken pursuant to the Plan of
Conversion, which must be approved by the members of the MHC at a Special
Meeting of Members and by the stockholders of the Savings Bank at the Annual
Meeting of Stockholders, both to be held on March ___, 1998. In the Exchange
Offering, each share of Savings Bank Common Stock held by the MHC (800,000
shares, or 53.02% of the outstanding shares, as of the date of this Prospectus)
will be canceled and each Public Savings Bank Share (708,873 shares, or 46.98%
of the outstanding shares, as of the date of this Prospectus) will be exchanged
for Exchange Shares pursuant the final Exchange Ratio that will result in the
Public Stockholders' aggregate ownership of approximately 46.98% of the
outstanding shares of Common Stock before giving effect to any (i) payment of
cash in lieu of issuing fractional Exchange Shares and (ii) Conversion Shares
purchased by the Public Stockholders in the Conversion Offerings. The final
Exchange Ratio will be based on the Public Stockholders' ownership interest and
not on the market value of
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the Public Savings Bank Shares. See "-- Stock Pricing and Number of Shares to be
Issued in the Conversion and Reorganization."
The Exchange Offering is an integral part of the Conversion and
Reorganization. Pursuant to OTS regulations, holders of Savings Bank Common
Stock do not have dissent and appraisal rights with respect to the Conversion
and Reorganization because the Savings Bank Common Stock is listed on The Nasdaq
Stock Market. Accordingly, the exchange of each Public Savings Bank Share for
Exchange Shares is mandatory. PUBLIC STOCKHOLDERS SHOULD NOT SEND THEIR
CERTIFICATES FOR EXCHANGE AT THIS TIME. The Holding Company will mail to each
Public Stockholder to their address of record exchange instructions and a
transmittal letter after the consummation of the Conversion and Reorganization.
See "-- Delivery and Exchange of Stock Certificates -- Exchange Shares."
The Subscription, Direct Community and Syndicated Community Offerings
Subscription Offering. In accordance with the Plan of Conversion,
nontransferable Subscription Rights to purchase the Conversion Shares have been
issued to persons and entities entitled to purchase the Conversion Shares in the
Subscription Offering. The amount of Conversion Shares which these parties may
purchase will be subject to the availability of the Conversion Shares 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 Conversion Shares are available. These priorities are as follows:
Category 1: Eligible Account Holders. Each depositor with $50.00 or
more on deposit at the Savings Bank as of the close of business on June 30, 1996
will receive nontransferable Subscription Rights to subscribe for up to the
greater of 50,000 Conversion Shares, one-tenth of one percent of the total
offering of Conversion Shares or 15 times the product (rounded down to the next
whole number) obtained by multiplying the total number of Conversion Shares 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, Conversion
Shares 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 Savings Bank in the one year
period preceding June 30, 1996 are subordinated to the Subscription Rights of
other Eligible Account Holders.
Category 2: Supplemental Eligible Account Holders. Each depositor with
$50.00 or more on deposit as of the close of business on December 31, 1997 will
receive nontransferable Subscription Rights to subscribe for up to the greater
of 50,000 Conversion Shares, 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 Conversion Shares to be issued by a
fraction of which the numerator is the amount of qualifying deposits of the
Supplemental Eligible Account Holder and the denominator is the total amount of
qualifying deposits of all Supplemental Eligible Account Holders. If the
exercise of Subscription Rights in this category results in an oversubscription,
Conversion Shares will be allocated among subscribing Supplemental Eligible
Account Holders so as to permit each Supplemental Eligible Account Holder, to
the extent possible, to purchase a number of shares sufficient to make his total
allocation equal 100 shares or the number of shares actually subscribed for,
whichever is less. Thereafter, unallocated shares will be allocated among
subscribing Supplemental Eligible Account Holders proportionately, based on the
amount of their respective qualifying deposits as compared to total qualifying
deposits of all Supplemental Eligible Account Holders.
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Category 3: Other Members. Each depositor of the Savings Bank as of the
close of business on the Voting Record Date (___________, 1998) and each
borrower with a loan outstanding as of the close of business on October 26,
1993, which continues to be outstanding as of the close of business on the
Voting Record Date, will receive nontransferable Subscription Rights to purchase
up 50,000 Conversion Shares or one-tenth of one percent of the total offering of
Conversion Shares to the extent shares are available following subscriptions by
Eligible Account Holders 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 SAVINGS BANK AND THE HOLDING COMPANY.
The Holding Company and the Savings Bank 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 Noon, Eastern Time, on the
Expiration Date, whether or not the Savings Bank 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 Savings Bank after the Expiration
Date will not be accepted. The Subscription Offering may be extended by the
Holding Company and the Savings Bank up to ______, 1998 without the OTS's
approval. OTS regulations require that the Holding Company complete the sale of
Conversion Shares within 45 days after the close of the Subscription Offering.
If the Direct Community Offering and the Syndicated Community Offerings are not
completed by __________, 1998 (or ___________, 1998, if the Subscription
Offering is fully extended), all funds received will be promptly returned with
interest at the Savings Bank's passbook rate and all withdrawal authorizations
will be canceled or, if regulatory approval of an extension of the time period
has been granted, all subscribers and purchasers will be given the right to
increase, decrease or rescind their orders. If an extension of time is obtained,
all subscribers will be notified of such extension and of the duration of any
extension that has been granted, and will be given the right to increase,
decrease or rescind their orders. If an affirmative response to any
resolicitation is not received by the Holding Company from a subscriber, the
subscriber's order will be rescinded and all funds received will be promptly
returned with interest (or withdrawal authorizations will be canceled). No
single extension can exceed 90 days.
Direct Community Offering. Concurrently with the Subscription Offering,
Conversion Shares will be offered by the Holding Company to certain members of
the general public in a Direct Community Offering, with preference given first
to Public Stockholders as of the close of business on the Voting Record Date
(who are not eligible to subscribe for Conversion Shares in the Subscription
Offering) and then to natural persons and trusts of natural persons residing in
the Local Community. Purchasers in the Direct Community Offering are eligible to
purchase up to 50,000 Conversion Shares. 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 will terminate on the
Expiration Date, unless extended by the Holding Company and the Savings Bank,
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 who have subscribed for close to the maximum
number of shares of Common Stock, in the discretion of the Holding Company and
the Savings Bank may be, given the opportunity to reconfirm 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 Savings Bank'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
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is subject to the absolute right of the Holding Company and the Savings Bank 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 and Reorganization.
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 and all funds submitted pursuant to the Direct Community
Offering will be promptly refunded with interest.
Syndicated Community Offering. The Plan of Conversion provides that all
shares of Common Stock not purchased in the Subscription Offering and Direct
Community Offering may be offered for sale to certain members of the general
public in a Syndicated Community Offering through a syndicate of registered
broker-dealers to be managed by Sandler O'Neill acting as agent of the Holding
Company. The Holding Company and the Savings Bank have the right to reject
orders, in whole or part, in their sole discretion in the Syndicated Community
Offering. Neither Sandler O'Neill 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, Sandler O'Neill has agreed to use its
best efforts in the sale of shares in the Syndicated Community Offering.
Conversion Shares sold in the Syndicated Community Offering also will
be sold at the $20.00 Purchase Price. See "-- Stock Pricing, Exchange Ratio and
Number of Shares to be Issued." No person will be permitted to subscribe for
more than 50,000 Conversion Shares in the Syndicated Community Offering. See "--
Plan of Distribution and Selling Commissions" for a description of the
commission to be paid to the selected dealers and to Sandler O'Neill.
Sandler O'Neill 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 Sandler O'Neill 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 and Reorganization, Sandler O'Neill 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 Savings Bank's passbook rate until the
completion of the Conversion Offerings. At the completion of the Conversion and
Reorganization, the funds received in the Conversion Offerings will be used to
purchase the shares of Common Stock ordered. The shares issued in the Conversion
and Reorganization cannot and will not be insured by the FDIC or any other
government agency. In the event the Conversion and Reorganization is not
consummated as described above, funds with interest will be returned promptly to
the selected dealers, who, in turn, will promptly credit their customers'
brokerage accounts.
The Syndicated Community Offering may terminate on or at any time
subsequent to the Expiration Date, but no later than 45 days after the close of
the Subscription Offering, unless extended by the Holding Company and the
Savings Bank, with approval of the OTS.
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In the event the Savings Bank 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 Savings Bank, 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 and Reorganization 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 Savings
Bank will make reasonable efforts to comply with the securities laws of all
states in the United States in which persons entitled to subscribe for stock
pursuant to the Plan of Conversion reside. However, the Holding Company and the
Savings Bank 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 Savings Bank 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
Savings Bank 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 Savings Bank 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 and Selling Commissions
The Primary Parties have engaged Sandler O'Neill as a financial and
marketing advisor in connection with the Offering, and Sandler O'Neill has
agreed to use its best efforts to assist the Holding Company with the
solicitation of subscriptions and purchase orders for Conversion Shares in the
Conversion Offerings. The services to be rendered by Sandler O'Neill include the
following: (i) consulting as to the securities marketing implications of any
aspect of the Plan of Conversion or related corporate documents; (ii) reviewing
with the Board of Directors RP Financial's appraisal of the aggregate pro forma
market value of the MHC and the Savings Bank, as converted; (iii) reviewing all
offering documents, including this Prospectus, stock order forms and related
offering materials; (iv) assisting in the design and implementation of a
marketing strategy for the Conversion Offerings; (v) assisting in obtaining all
requisite regulatory approvals, (vi) assisting management in scheduling and
preparing for meetings with potential investors and broker-dealers; and (vii)
providing such other general advice and assistance as may be requested to
promote the successful completion of the Conversion Offerings. In addition,
Sandler O'Neill will manage the Syndicated Community Offering, if necessary. The
engagement of Sandler O'Neill and the services performed thereunder, including
any "due diligence" investigation of the operations of the Primary Parties,
should not be construed as an endorsement or recommendation of the suitability
of an investment in the Common Stock or a verification of the accuracy or
completeness of the information contained herein. Sandler O'Neill has not
prepared any report or opinion constituting a recommendation or advice to the
Primary Parties or to persons who may purchase Conversion Shares regarding the
suitability of an investment in the Common Stock or as to the prices at which
the Common Stock may trade after the consummation of the Conversion and
Reorganization.
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Based upon negotiations between the Primary Parties and Sandler
O'Neill, Sandler O'Neill will receive a fee equal to 1.50% of the aggregate
purchase price of Conversion Shares sold in the Subscription and Community
Offerings. No fees will be paid to Sandler O'Neill on subscriptions by any
director, officer or employee of the Primary Parties or members of their
immediate families. In the event that a selected dealers agreement is entered
into in connection with a Syndicated Community Offering, the Primary Parties
will pay a fee to such selected dealers, any sponsoring dealer's fees, and a
management fee to Sandler O'Neill of 1.75% for shares sold by a National
Association of Securities Dealers, Inc. ("NASD") member firm, other than Sandler
O'Neill, pursuant to a selected dealers agreement; provided, however, that any
fees payable to Sandler O'Neill for any Conversion Shares sold by them pursuant
to such a selected dealers agreement shall not exceed 1.75% of the aggregate
purchase price of such shares and that the aggregate fees payable to Sandler
O'Neill and selected dealers shall not exceed 7.0% of the aggregate purchase
price of such shares. Sandler O'Neill will also be reimbursed for its reasonable
out-of-pocket expenses, including legal fees, for these services, in an amount
not to exceed $75,000. Notwithstanding the foregoing, in the event the
Conversion Offerings are not consummated or Sandler O'Neill ceases, under
certain circumstances after the subscription solicitation activities are
commenced, to provide assistance to the Primary Parties, Sandler O'Neill will be
entitled to be reimbursed for its reasonable out-of-pocket expenses as described
above. The Primary Parties have agreed to indemnify Sandler O'Neill in
connection with certain claims or liabilities, including certain liabilities
under the Securities Act. Sandler O'Neill has received advances towards its fees
totalling $25,000. Total marketing fees to Sandler O'Neill are expected to be
$428,625, $506,250, $583,875 and $673,145 at the minimum, midpoint, maximum, and
15% above the maximum of the Estimated Valuation Range, respectively. See "PRO
FORMA DATA" for the assumptions used to arrive at these estimates.
The management and employees of the Primary Parties may participate in
the Conversion Offerings in clerical capacities, providing administrative
support in effecting sales transactions or answering questions of a mechanical
nature relating to the proper execution of the order form. Management of the
Primary Parties may answer questions regarding the respective businesses of the
Primary Parties. 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 Primary Parties
have been instructed not to solicit offers to purchase Conversion Shares or to
provide advice regarding the purchase of Conversion Shares. None of the Primary
parties' employees or directors who participate in the Conversion Offerings will
receive any special compensation or other remuneration for such activities.
None of the Primary Parties' personnel participating in the
Subscription and Community Offering are registered or licensed as a broker or
dealer or an agent of a broker or dealer. The Primary Parties' personnel will
assist in the above-described sales activities pursuant to an exemption from
registration as a broker or dealer provided by Rule 3a4-1 ("Rule 3a4-1")
promulgated under the Exchange Act. Rule 3a4-1 generally provides that an
"associated person of an issuer" of securities shall not be deemed a broker
solely by reason of participation in the sale of securities of such issuer if
the associated person meets certain conditions. Such conditions include, but are
not limited to, that the associated person participating in the sale of an
issuer's securities not be compensated in connection therewith at the time of
participation, that such person not be associated with a broker or dealer and
that such person observe certain limitations on his participation in the sale of
securities. For purposes of this exemption, "associated person of an issuer" is
defined to include any person who is a director, officer or employee of the
issuer or a company that controls, is controlled by or is under common control
with the issuer.
Procedure for Purchasing Shares in the Subscription and Direct Community
Offerings
To ensure that each purchaser receives a prospectus at least 48 hours
prior to the Expiration Date in accordance with Rule 15c2-8 under the Exchange
Act, no Prospectus will be mailed any later than five days prior to such date or
hand delivered any later than two days prior to such date. Execution of the
Order Form will confirm receipt or delivery in accordance with Rule 15c2-8.
Order Forms will only be distributed with a Prospectus. The Savings Bank will
accept for processing only orders submitted on original Order Forms. The Savings
Bank 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.
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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 Savings Bank (which may be given by completing the
appropriate blanks in the Order Form), must be received by the Savings Bank by
Noon, Eastern Time, on the Expiration Date. Order Forms which are not received
by such time or are executed defectively or are received without full payment
(or without appropriate withdrawal instructions) are not required to be
accepted. The Holding Company and the Savings Bank 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 Savings Bank 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 Savings Bank 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 Savings Bank unless the Conversion and Reorganization
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 close of business on the Eligibility
Record Date (June 30, 1996) and/or the Supplemental Eligibility Record Date
(December 31, 1997) and/or the Voting Record Date (___________, 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.
Full payment for subscriptions may be made (i) in cash if delivered in
person at the Stock Information Center, (ii) by check, bank draft, or money
order, or (iii) by authorization of withdrawal from deposit accounts maintained
with the Savings Bank. 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 Savings Bank's passbook rate from the date payment is received until the
completion or termination of the Conversion and Reorganization. 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 and
Reorganization (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 and
Reorganization), but a hold will be placed on such funds, thereby making them
unavailable to the depositor until completion or termination of the Conversion
and Reorganization. At the completion of the Conversion and Reorganization, the
funds received in the Conversion Offerings will be used to purchase the shares
of Common Stock ordered. The shares of Common Stock issued in the Conversion and
Reorganization cannot and will not be insured by the FDIC or any other
government agency. If the Conversion and Reorganization is not consummated for
any reason, all funds submitted will be promptly refunded with interest as
described above.
If a subscriber authorizes the Savings Bank to withdraw the amount of
the aggregate Purchase Price from his or her deposit account, the Savings Bank
will do so as of the effective date of Conversion and Reorganization, though the
account must contain the full amount necessary for payment at the time the
subscription order is received. The Savings Bank will waive any applicable
penalties for early withdrawal from certificate accounts. If the remaining
balance in a certificate account is reduced below the applicable minimum balance
requirement at the time that the funds actually are transferred under the
authorization the certificate will be canceled at the time of the withdrawal,
without penalty, and the remaining balance will earn interest at the Savings
Bank's passbook rate.
IRAs maintained in the Savings Bank 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 Savings Bank 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 Conversion Shares. There will be no early withdrawal or IRS interest
penalties for such transfers. The
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new trustee would hold the Conversion Shares in a self-directed account in the
same manner as the Savings Bank now holds the depositor's IRA funds. An annual
administrative fee may be payable to the new trustee. Depositors interested in
using funds in a Savings Bank IRA to purchase Common Stock should contact the
Stock Information Center so that the necessary forms may be forwarded for
execution and returned prior to the Expiration Date. In addition, the provisions
of ERISA and IRS regulations require that officers, directors and 10%
shareholders who use self-directed IRA funds to purchase shares of Common Stock
in the Subscription Offering, make such purchases for the exclusive benefit of
IRAs.
Stock Pricing, Exchange Ratio and Number of Shares to be Issued
The Plan of Conversion requires that the purchase price of the
Conversion Shares must be based on the appraised pro forma market value of the
Conversion Shares, as determined on the basis of an independent valuation. The
Primary Parties have retained RP Financial to make such valuation. For its
services in making such appraisal and any expenses incurred in connection
therewith, RP Financial will receive a maximum fee of $30,000 plus out-of-pocket
expenses, together with a fee of no greater than $7,500 plus out-of-pocket
expenses for the preparation of a business plan and other services performed in
connection with the Holding Company's holding company application to the OTS.
The Primary Parties have agreed to indemnify RP Financial and its employees and
affiliates against certain losses (including any losses in connection with
claims under the federal securities laws) arising out of its services as
appraiser, except where RP Financial's liability results from its negligence or
bad faith.
The appraisal has been prepared by RP Financial in reliance upon the
information contained in this Prospectus, including the Consolidated Financial
Statements. RP Financial also considered the following factors, among others:
the present and projected operating results and financial condition of the
Primary Parties and the economic and demographic conditions in the Savings
Bank's existing market area; certain historical, financial and other information
relating to the Savings Bank; a comparative evaluation of the operating and
financial statistics of the Savings Bank with those of other similarly situated
publicly-traded companies located in South Carolina and other regions of the
United States; the aggregate size of the offering of the Conversion Shares; the
impact of the Conversion and Reorganization on the Savings Bank's capital and
earnings potential; the proposed dividend policy of the Holding Company and the
Savings Bank; and the trading market for the Savings Bank Common Stock and
securities of comparable companies and general conditions in the market for such
securities.
On the basis of the foregoing, RP Financial has advised the Primary
Parties in its opinion that the estimated pro forma market value of the MHC and
the Savings Bank, as converted, was $65.1 million as of December 5, 1997.
Because the holders of the Public Savings Bank Shares will continue to hold the
same aggregate percentage ownership interest in the Holding Company as they
currently hold in the Savings Bank (before giving effect to the payment of cash
in lieu of issuing fractional Exchange Shares and any Conversion Shares
purchased by the Savings Bank's stockholder in the Conversion Offerings), the
appraisal was multiplied by 53.02%, which represents the MHC's percentage
interest in the Savings Bank. The resulting amount represents the midpoint of
the valuation ($65.1 million), and the minimum and maximum of the valuation were
set at 15% below and above the midpoint, respectively, resulting in a range of
$55.3 million to $74.8 million. Based on such valuation, the Boards of Directors
of the Primary Parties determined that the Conversion Shares would be sold at
$20.00 per share, resulting in a range of 1,466,250 to 1,983,750 Conversion
Shares being offered, and that Exchange Shares would be issued at $20,000 per
share resulting in a range of 1,299,231 to 1,757,783 Exchange Shares being
offered. Upon consummation of the Conversion and Reorganization, the Conversion
Shares and the Exchange Shares will represent approximately 53.02% and 46.98%,
respectively, of the Holding Company's total outstanding shares. The Boards of
Directors of the Primary Parties reviewed RP Financial's appraisal report,
including the methodology and the assumptions used by RP Financial, and
determined that the Estimated Valuation Range was reasonable and adequate. The
Boards of Directors of the Primary Parties also established the formula for
determining the Exchange Ratio. Based upon such formula and the Estimated
Valuation Range, the Exchange Ratio ranged from a minimum of 1.83281 to a
maximum of 2.47969 Exchange Shares for each Public Savings Bank Shares, with a
midpoint of 2.15625. Based upon these Exchange Ratios, the Holding Company
expects to issue between 1,299,231 and 1,757,783 shares of Exchange Shares to
the holders of Public Savings Bank Shares outstanding immediately
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prior to the consummation of the Conversion and Reorganization. The Estimated
Valuation Range and the Exchange Ratio may be amended with the approval of the
OTS, if required, or if necessitated by subsequent developments in the financial
condition of any of the Primary Parties or market conditions generally. If the
appraisal is updated to below $55.3 million or above $86.1 million (the maximum
of the Estimated Valuation Range, as adjusted by 15%), such appraisal will be
filed with the SEC by post-effective amendment.
Based upon current market and financial conditions and recent practices
and policies of the OTS, in the event the Holding Company receives orders for
Conversion Shares in excess of $39.7 million (1,983,750 Conversion Shares) and
up to $45.6 million (2,281,312 Conversion Shares), the Holding Company may be
required by the OTS to accept all such orders. No assurances, however, can be
made that the Holding Company will receive orders for Conversion Shares in
excess of the maximum of the Estimated Valuation Range or that, if such orders
are received, that all such orders will be accepted because the Holding
Company's final valuation and number of shares to be issued are subject to the
receipt of an updated appraisal from RP Financial which reflects such an
increase in the valuation and the approval of such increase by the OTS. There is
no obligation or understanding on the part of management to take and/or pay for
any shares of Conversion Shares to complete the Conversion Offerings.
RP Financial's valuation is not intended, and must not be construed, as
a recommendation of any kind as to the advisability of purchasing such shares.
RP Financial did not independently verify the Savings Bank's Consolidated
Financial Statements and other information provided by the Savings Bank and the
MHC, nor did RP Financial value independently the assets or liabilities of the
Savings Bank. The valuation considers the Savings Bank and the MHC as going
concerns and should not be considered as an indication of the liquidation value
of the Savings Bank and the MHC. Moreover, because such valuation is necessarily
based upon estimates and projections of a number of matters, all of which are
subject to change from time to time, no assurance can be given that persons
purchasing Conversion Shares or receiving Exchange Shares in the Conversion and
Reorganization will thereafter be able to sell such shares at prices at or above
the Purchase Price or in the range of the foregoing valuation of the pro forma
market value thereof.
No sale of Conversion Shares or issuance of Exchange Shares may be
consummated unless prior to such consummation RP Financial confirms that nothing
of a material nature has occurred which, taking into account all relevant
factors, would cause it to conclude that the Purchase Price is materially
incompatible with the estimate of the pro forma market value of a share of
Common Stock upon consummation of the Conversion and Reorganization. If such is
not the case, a new Estimated Valuation Range may be set, a new Exchange Ratio
may be determined based upon the new Estimated Valuation Range, a new
Subscription and Community Offering and/or Syndicated Community Offering or
Public Offering may be held or such other action may be taken as the Primary
Parties shall determine and the OTS may permit or require.
Depending upon market or financial conditions following the
commencement of the Subscription Offering, the total number of Conversion Shares
to be issued in the Conversion Offerings may be increased or decreased without a
resolicitation of subscribers, provided that the product of the total number of
shares times the Purchase Price is not below the minimum or more than 15% above
the maximum of the Estimated Valuation Range. In the event market or financial
conditions change so as to cause the aggregate Purchase Price of the shares to
be below the minimum of the Estimated Valuation Range or more than 15% above the
maximum of such range, purchasers will be resolicited (i.e., permitted to
continue their orders, in which case they will need to affirmatively reconfirm
their subscriptions prior to the expiration of the resolicitation offering or
their subscription funds will be promptly refunded with interest at the Savings
Bank's passbook rate of interest, or be permitted to modify or rescind their
subscriptions). Any increase or decrease in the number of Conversion Shares will
result in a corresponding change in the number of Exchange Shares, so that upon
consummation of the Conversion and Reorganization, the Conversion Shares and the
Exchange Shares will represent approximately 53.03% and 46.97%, respectively, of
the Holding Company's total outstanding shares of Common Stock (exclusive of the
effects of the exercise of outstanding stock options).
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An increase in the number of Conversion Shares as a result of an
increase in the appraisal of the estimated pro forma market value would decrease
both a subscriber's ownership interest and the Holding Company's pro forma net
earnings and stockholders' equity on a per share basis while increasing pro
forma net earnings and stockholders' equity on an aggregate basis. A decrease in
the number of Conversion Shares would increase both a subscriber's ownership
interest and the Holding Company's pro forma net earnings and stockholders'
equity on a per share basis while decreasing pro forma net earnings and
stockholders' equity on an aggregate basis. See "RISK FACTORS -- Possible
Dilutive Effect of Benefit Programs" and "PRO FORMA DATA."
The appraisal report of RP Financial has been filed as an exhibit to
this Registration Statement and Application for Conversion of which this
Prospectus is a part and is available for inspection in the manner set forth
under "ADDITIONAL INFORMATION."
Limitations on Purchases of Conversion Shares
The Plan of Conversion provides for certain limitations to be placed
upon the purchase of Common Shares by eligible subscribers and others in the
Conversion and Reorganization. Each subscriber must subscribe for a minimum of
25 Conversion Shares. The Plan of Conversion provides for the following purchase
limitations: (i) no person may purchase in either the Subscription Offering,
Direct Community Offering or Syndicated Community Offering more 50,000
Conversion Shares, (ii) no person, together with associates of or persons acting
in concert with such person, may purchase in either the Subscription Offering,
Direct Community Offering or Syndicated Community Offering more than 50,000
Conversion Shares, (iii) the maximum number of shares of Conversion Shares which
may be subscribed for or purchased in all categories in the Conversion and
Reorganization by any person, when combined with any Exchange Shares received,
shall not exceed 50,000 shares of Common Stock to be issued in the Conversion
and Reorganization, and (iv) the maximum number of shares of Conversion Shares
which may be subscribed for or purchased in all categories in the Conversion and
Reorganization by any person, together with any associate or any group of
persons acting in concert, when combined with any Exchange Shares received,
shall not exceed 50,000 shares of Common Stock to be issued in the Conversion
and Reorganization. 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.
Because OTS policy requires that the maximum purchase limitation
includes Exchange Shares to be issued to Public Stockholders in exchange for
their Public Savings Bank Shares, certain Public Stockholders may be limited in
their ability to purchase Conversion Shares, or even prevented from purchasing
Conversion Shares.
The Boards of Directors of the Primary Parties may, in their sole
discretion, increase the maximum purchase limitation set forth above up to 9.99%
of the Conversion Shares sold in the Conversion and Reorganization, provided
that orders for shares which exceed 5% of the Conversion Shares sold in the
Conversion and Reorganization may not exceed, in the aggregate, 10% of the
shares sold in the Conversion and Reorganization. The Savings Bank 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
Conversion Shares will be, and other large subscribers in the discretion of the
Holding Company and the Savings Bank 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
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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 Savings Bank or a
majority-owned subsidiary of the Savings Bank) 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 Savings Bank 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 Savings Bank, 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 Shares purchased pursuant to the Conversion and Reorganization
will be freely transferable, except for shares purchased by directors and
officers of the Savings Bank and the Holding Company and by NASD members. See
"-- Restrictions on Transferability by Directors and Officers and NASD Members."
Delivery and Exchange of Stock Certificates
Conversion Stock. Certificates representing Conversion Shares will be
mailed by the Holding Company's transfer agent to the persons entitled thereto
at the addresses of such persons appearing on the Order Form as soon as
practicable following the consummation of the Conversion and Reorganization. Any
undeliverable certificates will be held by the Holding Company until claimed by
persons legally entitled thereto or otherwise disposed according to applicable
law. Purchasers of Conversion Shares may be unable to sell such shares until
certificates are available and delivered to them.
Exchange Shares. After the consummation of the Conversion and
Reorganization, each holder of a certificate(s) theretofore evidencing issued
and outstanding shares of Savings Bank Common Stock (other than the MHC), upon
surrender of the same to an agent, duly appointed by the Holding Company, which
is anticipated to be the transfer agent for the Common Stock ("Exchange Agent"),
shall be entitled to receive in exchange therefor a certificate(s) representing
the number of full Exchange Shares based on the Exchange Ratio. The Exchange
Agent shall mail a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to such certificate shall
pass, only upon delivery of such certificate to the Exchange Agent) advising
such holder of the terms of the Exchange Offering and the procedure for
surrendering to the Exchange Agent such certificates in exchange for a
certificate(s) evidencing Common Stock. The Savings Bank stockholders should not
forward Savings Bank Common Stock certificates to the Savings Bank or the
Exchange Agent until they have received the transmittal letter.
No holder of a certificate theretofore representing shares of Savings
Bank Common Stock shall be entitled to receive any dividends on the Common Stock
until the certificate representing such shares is surrendered in exchange for
certificates representing shares of Common Stock. In the event that dividends
are declared and paid by the Holding Company in respect of Common Stock after
the consummation of the Conversion and Reorganization, but before surrender of
certificates representing shares of Savings Bank Common Stock, dividends payable
in respect of shares of Common Stock not then issued shall accrue (without
interest). Any such dividends shall be paid (without interest) upon surrender of
the certificates representing such shares of Savings Bank Common Stock. After
the consummation of the Conversion and Reorganization, the Holding Company shall
be entitled to treat certificates representing shares of Savings Bank Common
Stock as evidencing ownership of the number of full shares of
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Common Stock into which the shares of Savings Bank Common Stock represented by
such certificates shall have been converted, notwithstanding the failure on the
part of the holder thereof to surrender such certificates.
The Holding Company shall not be obligated to deliver a certificate(s)
representing shares of Common Stock to which a holder of Savings Bank Common
Stock would otherwise be entitled as a result of the Conversion and
Reorganization until such holder surrenders the certificate(s) representing the
shares of Savings Bank Common Stock for exchange as provided above, or, in
default thereof, an appropriate affidavit of loss and indemnity agreement and/or
a bond as may be required in each case by the Holding Company. If any
certificate evidencing shares of Common Stock is to be issued in a name other
than that in which the certificate evidencing Savings Bank Common Stock
surrendered in exchange therefor is registered, it shall be a condition of the
issuance thereof that the certificate so surrendered shall be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange pay to the Exchange Agent any transfer or other tax required by reason
of the issuance of a certificate for shares of Common Stock in any name other
than that of the registered holder of the certificate surrendered or otherwise
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable.
Restrictions on Repurchase of Stock
Pursuant to OTS regulations, OTS-regulated savings associations (and
their holding companies) may not for a period of three years from the date of an
institution's mutual-to-stock conversion repurchase any of its common stock from
any person, except in the event of (i) an offer made to all of its stockholders
to repurchase the common stock on a pro rata basis, approved by the OTS; or (ii)
the repurchase of qualifying shares of a director; or (iii) a purchase in the
open market by a tax-qualified or non-tax-qualified employee stock benefit plan
in an amount reasonable and appropriate to fund the plan. Furthermore,
repurchases 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 association. Any repurchases of
common stock by the Holding Company would be subject to these regulatory
restrictions unless the OTS would provide otherwise.
Restrictions on Transferability by Directors and Officers and NASD Members
Shares of Common Stock purchased in the Conversion Offerings by
directors and officers of the Holding Company may not be sold for a period of
one year following consummation of the Conversion and Reorganization, 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 and Reorganization 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 Savings Bank after adoption of the Plan of Conversion and
Reorganization) and their associates during the three-year period following
Conversion and Reorganization 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.
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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 and Reorganization. The registration under the
Securities Act of shares of the Common Stock to be issued in the Conversion and
Reorganization 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.
COMPARISON OF STOCKHOLDERS' RIGHTS
General. As a result of the Conversion and Reorganization, holders of
the Savings Bank Common Stock will become stockholders of the Holding Company, a
Delaware corporation. There are certain differences in stockholder rights
arising from distinctions between the Savings Bank's Federal Stock Charter and
Bylaws and the Holding Company's Certificate of Incorporation and Bylaws and
from distinctions between laws with respect to federally chartered savings
institutions and Delaware law.
The discussion herein is not intended to be a complete statement of the
differences affecting the rights of stockholders, but rather summarizes the
material differences and similarities affecting the rights of stockholders. The
discussion herein is qualified in its entirety by reference to the Certificate
of Incorporation and Bylaws of the Holding Company and the DGCL. See "ADDITIONAL
INFORMATION" for procedures for obtaining a copy of the Holding Company's
Certificate of Incorporation and Bylaws.
Authorized Capital Stock. The Holding Company's authorized capital
stock consists of 7,500,000 shares of Common Stock, par value $.01 per share and
250,000 shares of preferred stock, par value $.01 per share ("Preferred Stock").
The Savings Bank's authorized capital stock consists of 4,000,000 shares of
Savings Bank Common Stock and 1,000,000 shares of serial preferred stock, par
value $1.00 per share. The shares of Common Stock and Preferred Stock were
authorized in an amount greater than that to be issued in the Conversion and
Reorganization to provide the Holding Company's Board of Directors with
flexibility to effect, among other transactions, financings, acquisitions, stock
dividends, stock splits and employee stock options. However, these additional
authorized shares may also be used by the Board of Directors consistent with its
fiduciary duty 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 post tender offer merger
or other transaction by which a third party seeks control, and thereby assist
management to retain its position. The Holding Company's Board currently has no
plan for the issuance of additional shares, other than the issuance of
additional shares pursuant to stock benefit plans.
Issuance of Capital Stock. Pursuant to applicable laws and regulations,
the MHC is required to own not less than a majority of the outstanding Savings
Bank Common Stock. There will be no such restriction applicable to the Holding
Company following consummation of the Conversion and Reorganization.
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The Holding Company's Certificate of Incorporation do not contain
restrictions on the issuance of shares of capital stock to directors, officers
or controlling persons of the Holding Company, whereas the Savings Bank's
Federal Stock Charter restricts such issuance to general public offerings, or if
qualifying shares, to directors, unless the share issuance or the plan under
which they would be issued has been approved by a majority of the total votes
eligible to be cast at a legal stockholders meeting. Thus, stock-related
compensation plans such as stock option plans could be adopted by the Holding
Company without stockholder approval and shares of Holding Company capital stock
could be issued directly to directors or officers without stockholder approval.
The Bylaws of the NASD, however, generally require corporations with securities
which are quoted on the Nasdaq National Market System to obtain stockholder
approval of most stock compensation plans for directors, officers and key
employees of the corporation. Moreover, although generally not required,
stockholder approval of stock related compensation plans may be sought in
certain instances in order to qualify such plans for favorable federal income
tax and securities law treatment under current laws and regulations. The Holding
Company plans to submit the stock compensation plans discussed herein to its
stockholders for approval.
Voting Rights. Neither the Savings Bank's Federal Stock Charter or
Bylaws nor the Holding Company's Certificate of Incorporation or Bylaws
currently provide for cumulative voting in elections of directors. For
additional information regarding voting rights, see "-- Limitations on
Acquisitions of Voting Stock and Voting Rights" below.
Payment of Dividends. The ability of the Savings Bank to pay dividends
on its capital stock is restricted by OTS regulations and by federal income tax
considerations related to savings institutions such as the Savings Bank. See
"REGULATION -- Federal Regulation of the Savings Bank -- Capital Requirements"
and "TAXATION." Although the Holding Company is not subject to these
restrictions as a Delaware corporation, such restrictions will indirectly affect
the Holding Company because dividends from the Savings Bank will be a primary
source of funds of the Holding Company for the payment of dividends to
stockholders of the Holding Company.
Certain restrictions generally imposed on Delaware corporations may
also have an impact on the Holding Company's ability to pay dividends. The DGCL
generally provides that the Holding Company is limited to paying dividends in an
amount equal to the excess of its net assets (total assets minus total
liabilities) over its statutory capital or, if no such excess exists, equal to
its net profits for the current year and/or the immediately preceding fiscal
year.
Board of Directors. The Savings Bank's Federal Stock Charter and Bylaws
and the Holding Company's Certificate of Incorporation and Bylaws each require
the Board of Directors of the Savings Bank and the Holding Company to be divided
into three classes as nearly equal in number as possible and that the members of
each class shall be elected for a term of three years and until their successors
are elected and qualified, with one class being elected annually.
Under the Savings Bank's Bylaws, any vacancies in the Board of
Directors of the Savings Bank may be filled by the affirmative vote of a
majority of the remaining directors although less than a quorum of the Board of
Directors. Persons elected by the directors of the Savings Bank to fill
vacancies may only serve until the next annual meeting of stockholders. Under
the Holding Company's Certificate of Incorporation, any vacancy occurring in the
Board of Directors of the Holding Company, including any vacancy created by
reason of an increase in the number of directors, may be filled by the remaining
directors, and any director so chosen shall hold office for the remainder of the
term to which the director has been elected and until his or her successor is
elected and qualified.
Under the Savings Bank's Bylaws, any director may be removed for cause
by the holders of a majority of the outstanding voting shares. The Holding
Company's Certificate of Incorporation provide that any director may be removed
for cause by a majority of the directors of the Holding Company or by the
holders of at least 80% of the outstanding voting shares of the Holding Company.
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Limitations on Liability. The Holding Company's Certificate of
Incorporation provides that the directors of the Holding Company shall not be
personally liable for monetary damages to the Holding Company for certain
breaches of their fiduciary duty as directors, except for liabilities that
involve intentional misconduct or a knowing violation of law by the director,
the authorization or illegal distributions or receipt of an improper personal
benefit from their actions as directors. This provision might, in certain
instances, discourage or deter shareholders or management from bringing a
lawsuit against directors for a breach of their duties even though such an
action, if successful, might have benefitted the Holding Company.
Currently, federal law does not permit federally chartered savings
institutions such as the Savings Bank to limit the personal liability of
directors in the manner provided by the DGCL and the laws of many other states.
Indemnification of Directors, Officers, Employees and Agents. The
Savings Bank's Federal Stock Charter and Bylaws do not contain any provision
relating to indemnification of directors and officers of the Savings Bank. Under
current OTS regulations, however, the Savings Bank shall indemnify its
directors, officers and employees for any costs incurred in connection with any
litigation involving any such person's activities as a director, officer or
employee if such person obtains a final judgment on the merits in his or her
favor. In addition, indemnification is permitted in the case of a settlement, a
final judgment against such person or final judgment other than on the merits,
if a majority of disinterested directors determine that such person was acting
in good faith within the scope of his or her employment as he or she could
reasonably have perceived it under the circumstances and for a purpose he or she
could reasonably have believed under the circumstances was in the best interest
of the Savings Bank or its stockholders. The Savings Bank also is permitted to
pay ongoing expenses incurred by a director, officer or employee if a majority
of disinterested directors concludes that such person may ultimately be entitled
to indemnification. Before making any indemnification payment, the Savings Bank
is required to notify the OTS of its intention and such payment cannot be made
if the OTS objects thereto.
The officers, directors, agents and employees of the Holding Company
are indemnified with respect to certain actions pursuant to the Holding
Company's Certificate of Incorporation, which complies with the DGCL regarding
indemnification. The DGCL allows the Holding Company to indemnify the
aforementioned persons for expenses, settlements, judgments and fines in suits
in which such person has made a party by reason of the fact that he or she is or
was an agent of the Holding Company. No such indemnification may be given if the
acts or omissions of the person are adjudged to be in violation of law, if such
person is liable to the corporation for an unlawful distribution, or if such
person personally received a benefit to which he or she was not entitled.
Special Meetings of Stockholders. The Holding Company's Certificate of
Incorporation provides that special meetings of the stockholders of the Holding
Company may be called only by the board of directors or an authorized committee
thereof. The Savings Bank's Federal Stock Charter provides that, until October
26, 1998 (i.e., five years after the consummation of the MHC Reorganization),
special meetings of the Savings Bank's stockholders may only be called by the
Board of Directors. Thereafter, special meetings may be called by the Chairman,
President, a majority of the Board of Directors or the holders of not less than
a majority of the outstanding capital stock of the Savings Bank entitled to vote
at the meeting.
Stockholder Nominations and Proposals. The Savings Bank's Bylaws
generally provide that stockholders may submit nominations for election as
director at an annual meeting of stockholders and any new business to be taken
up at such a meeting by filing such in writing with the Savings Bank at least
thirty days before the date of any such meeting.
The Holding Company's Bylaws generally provide that any stockholder
desiring to make a nomination for the election of directors or a proposal for
new business at a meeting of stockholders must submit written notice to the
Holding Company at least 30 days and not more than 60 days in advance of the
meeting, together with certain information relating to the nomination or new
business. However, if less than 31 days notice of the meeting is given,
stockholders must submit such written notice no later than the tenth day
following the date on which notice of the meeting is mailed to stockholders.
Failure to comply with these advance notice requirements will preclude such
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nominations or new business from being considered at the meeting. Management
believes that it is in the best interests of the Holding Company and its
stockholders to provide sufficient time to enable management to disclose to
stockholders information about a dissident slate of nominations for directors.
This advance notice requirement may also give management time to solicit its own
proxies in an attempt to defeat any dissident slate of nominations, should
management determine that doing so is in the best interest of stockholders
generally. Similarly, adequate advance notice of stockholder proposals will give
management time to study such proposals and to determine whether to recommend to
the stockholders that such proposals be adopted. In certain instances, such
provisions could make it more difficult to oppose management's nominees or
proposals, even if stockholders believe such nominees or proposals are in their
best interests.
Stockholder Action Without a Meeting. The Bylaws of the Savings Bank
provide that any action to be taken or which may be taken at any annual or
special meeting of stockholders may be taken if a consent in writing, setting
forth the actions so taken, is given by the holders of all outstanding shares
entitled to vote. The Holding Company's Certificate of Incorporation
specifically denies the authority of stockholders to act without a meeting.
Stockholder's Right to Examine Books and Records. A federal regulation
which is applicable to the Savings Bank provides that stockholders may inspect
and copy specified books and records of a federally chartered savings
institution after proper written notice for a proper purpose. The DGCL similarly
provides that a stockholder may inspect books and records upon written demand
stating the purpose of the inspection, if such purpose is reasonably related to
such person's interest as a stockholder.
Limitations on Acquisitions of Voting Stock and Voting Rights. The
Holding Company's Certificate of Incorporation provide that no person shall
directly or indirectly offer to acquire or acquire the beneficial ownership of
(i) more than 10% of the issued and outstanding shares of any class of an equity
security of the Holding Company, or (ii) any securities convertible into, or
exercisable for, any equity securities of the Holding Company if, assuming
conversion or exercise by such person of all securities of which such person is
the beneficial owner which are convertible into, or exercisable for, such equity
securities (but of no securities convertible into, or exercisable for, such
equity securities of which such person is not the beneficial owner), such person
would be the beneficial owner of more than 10% of any class of an equity
security of the Holding Company. The term "person" is broadly defined in the
Certificate of Incorporation to prevent circumvention of this restriction.
The foregoing restrictions do not apply to (i) any offer with a view
toward public resale made exclusively to the Holding Company by underwriters or
a selling group acting on its behalf, (ii) any employee benefit plan established
by the Holding Company or the Savings Bank, and (iii) any other offer or
acquisition approved in advance by the affirmative vote of two-thirds of the
Holding Company's Board of Directors. In the event that shares are acquired in
violation of this restriction, all shares beneficially owned by any person in
excess of 10% shall not be counted as shares entitled to vote and shall not be
voted by any person or counted as voting shares in connection with any matters
submitted to stockholders for a vote.
Neither the Charter nor the Bylaws of the Savings Bank contains a
provision which restricts voting rights of certain stockholders of the Savings
Bank in the manner set forth above.
Mergers, Consolidations and Sales of Assets. A federal regulation
requires the approval of two-thirds of the Board of Directors of the Savings
Bank and the holders of two-thirds of the outstanding stock of the Savings Bank
entitled to vote thereon for mergers, consolidations and sales of all or
substantially all of the Savings Bank's assets. Such regulation permits the
Savings Bank to merge with another corporation without obtaining the approval of
its stockholders if: (i) it does not involve an interim savings institution;
(ii) the Savings Bank's Federal Stock Charter is not changed; (iii) each share
of the Savings Bank's stock outstanding immediately prior to the effective date
of the transaction is to be an identical outstanding share or a treasury share
of the Savings Bank after such effective date; and (iv) either: (A) no shares of
voting stock of the Savings Bank and no securities convertible into such stock
are to be issued or delivered under the plan of combination or (B) the
authorized unissued shares or the treasury shares of voting stock of the Savings
Bank to be issued or delivered under the plan of combination, plus
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those initially issuable upon conversion of any securities to be issued or
delivered under such plan, do not exceed 15% of the total shares of voting stock
of the Savings Bank outstanding immediately prior to the effective date of the
transaction.
The Holding Company's 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.
The Holding Company's Certificate of Incorporation requires the Holding
Company's Board of Directors to consider certain factors in addition to the
amount of consideration to be paid when evaluating certain business combinations
or a tender or exchange offer. These additional factors include: (i) the social
and economic effects of the transaction; (ii) the business and financial
condition and earnings prospects of the acquiring person or entity; and (iii)
the competence, experience, and integrity of the acquiring person or entity and
its management.
As holder of all of the outstanding Savings Bank Common Stock after
consummation of the Conversion and Reorganization, the Holding Company generally
will be able to authorize a merger, consolidation or other business combination
involving the Savings Bank without the approval of the stockholders of the
Holding Company.
Dissenters' Rights of Appraisal. OTS regulations generally provide that
a stockholder of a federally chartered savings institution that engages in a
merger, consolidation or sale of all or substantially all of its assets shall
have the right to demand from such institution payment of the fair or appraised
value of his or her stock in the institution, subject to specified procedural
requirements. This regulation also provides, however, that the stockholders of a
federally chartered savings institution with stock which is listed on a national
securities exchange or quoted on the Nasdaq Stock System are not entitled to
dissenters' rights in connection with a merger involving such savings
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institution if the stockholder is required to accept only "qualified
consideration" for his or her stock, which is defined to include cash, shares of
stock of any institution or corporation which at the effective date of the
merger will be listed on a national securities exchange or quoted on the Nasdaq
National Market System or any combination of such shares of stock and cash.
Under the DGCL, shareholders of the Holding Company will generally have
dissenter's appraisal rights in connection with (i) a plan of merger to which
the Holding Company is a party; (ii) a plan of share exchange to which the
Holding Company is a party as the corporation whose shares will be acquired;
(iii) certain sales or exchanges of all, or substantially all, of the Holding
Company's property other than in the regular course of business; and (iv)
amendments to the Holding Company's Certificate of Incorporation effecting a
material reverse stock split.
Amendment of Governing Instruments. No amendment of the Savings Bank's
Federal Stock Charter may be made unless it is first proposed by the Board of
Directors of the Savings Bank, then preliminarily approved by the OTS, and
thereafter approved by the holders of a majority of the total votes eligible to
be cast at a legal meeting. The Holding Company's Certificate of Incorporation
may be amended by the vote of the holders of a majority of the outstanding
shares of Holding Company Common Stock, except that the provisions of the
Certificate of Incorporation governing (i) the calling of meeting of
stockholders, (ii) stockholders' nominations and proposals, (iii) authorized
capital stock, (iv) denial of preemptive rights, (v) the number and staggered
terms of directors, (vi) removal of directors, (vii) approval of certain
business combinations, (viii) the evaluation of certain business combinations,
(ix) elimination of directors' liability, (x) indemnification of officers and
directors, and (xi) the manner of amending the Certificate of Incorporation and
Bylaws, each may not be repealed, altered, amended or rescinded except by the
vote of the holders of at least 80% of the outstanding shares of the Holding
Company. This provision is intended to prevent the holders of a lesser
percentage of the outstanding stock of the Holding Company from circumventing
any of the foregoing provisions by amending the Certificate of Incorporation to
delete or modify one of such provisions.
The Bylaws of the Savings Bank may be amended by a majority vote of the
full Board of Directors of the Savings Bank or by a majority vote of the votes
cast by the stockholders of the Savings Bank at any legal meeting. The Holding
Company's Bylaws may only be amended by a majority vote of the Board of
Directors of the Holding Company or by the holders of at least 80% of the
outstanding stock by the Holding Company.
Purpose and Takeover Defensive Effects of the Holding Company's
Certificate of Incorporation and Bylaws. The Board of Directors of the Savings
Bank 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 Savings Bank in the orderly
deployment of the Conversion and Reorganization proceeds into productive assets
during the initial period after the Conversion and Reorganization. The Board of
Directors believes these provisions are in the best interest of the Savings Bank
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,
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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 Savings Bank and the Holding Company as to
the benefits to stockholders of these provisions of the Holding Company's
Certificate of Incorporation and Bylaws, these provisions may also have the
effect of discouraging a future takeover attempt that would not be approved by
the Holding Company's Board, but pursuant to which stockholders may receive a
substantial premium for their shares over then current market prices. As a
result, stockholders who might desire to participate in such a transaction may
not have any opportunity to do so. Such provisions will also render the removal
of the Holding Company's Board of Directors and of management more difficult.
The Board of Directors of the Savings Bank and the Holding Company, however,
have concluded that the potential benefits outweigh the possible disadvantages.
Following the Conversion and Reorganization, 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.
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 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.
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
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selling group acting on the converting institution's (or its holding company's)
behalf for resale to the general public are excepted. The regulation also
provides civil penalties for willful violation or assistance in any such
violation of the regulation by any person connected with the management of the
converting institution (or its holding company) or who controls more than 10% of
the outstanding shares or voting rights of a converting or converted institution
(or its holding company).
As permitted by OTS regulations, the Savings Bank's Federal Stock
Charter contains a provision whereby the acquisition or offer to acquire
ownership of more than 10% of the issued and outstanding shares of any class of
equity securities of the Savings Bank by any person, either directly or through
an affiliate of such person, will be prohibited for a period of five years
following the date of consummation of the Conversion and Reorganization. Any
stock in excess of 10% acquired in violation of the Federal Stock Charter
provision will not be counted as outstanding for voting purposes. Furthermore,
for five years from the consummation date of the MHC Reorganization,
stockholders of the Savings Bank will not be permitted to call a special meeting
of stockholders relating to a change of control of the Savings Bank or a charter
amendment and will not be permitted to cumulate their votes in the election of
directors.
Change of Control Regulations
Under the Change in Bank Control Act, no person may acquire control of
an insured federal savings and loan association or its parent holding company
unless the OTS has been given 60 days' prior written notice and has not issued a
notice disapproving the proposed acquisition. In addition, OTS regulations
provide that no company may acquire control of a savings association without the
prior approval of the OTS. Any company that acquires such control becomes a
"savings and loan holding company" subject to registration, examination and
regulation by the OTS.
Control, as defined under federal law, means ownership, control of or
holding irrevocable proxies representing more than 25% of any class of voting
stock, control in any manner of the election of a majority of the savings
association's directors, or a determination by the OTS that the acquiror has the
power to direct, or directly or indirectly to exercise a controlling influence
over, the management or policies of the institution. Acquisition of more than
10% of any class of a savings association's voting stock, if the acquiror also
is subject to any one of eight "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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DESCRIPTION OF CAPITAL STOCK OF THE HOLDING COMPANY
General
The Holding Company is authorized to issue 7,500,000 shares of Common
Stock having a par value of $.01 per share and 250,000 shares of preferred stock
having a par value of $.01 per share. The Holding Company currently expects to
issue up to 3,741,533 shares of Common Stock (subject to adjustment up to
4,302,763 shares) and no shares of preferred stock in the Conversion and
Reorganization. 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.
Stock Repurchases. The Plan of Conversion and OTS regulations place
certain limitations on the repurchase of the Holding Company's capital stock.
See "THE CONVERSION AND REORGANIZATION --Restrictions on Repurchase of Stock"
and "USE OF PROCEEDS."
Voting Rights. Upon Conversion and Reorganization, 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 Federal
law or as are otherwise presented to them by the Board of Directors. Except as
discussed in "RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY," each holder
of Common Stock will be entitled to one vote per share and will not have any
right to cumulate votes in the election of directors. If the Holding Company
issues preferred stock, holders of the Holding Company preferred stock may also
possess voting rights. Certain matters require a vote of 80% of the outstanding
shares entitled to vote thereon. See "RESTRICTIONS ON ACQUISITION OF THE HOLDING
COMPANY."
As a federal stock savings bank, corporate powers and control of the
Savings Bank are vested in the Board of Directors, who elect the officers of the
Savings Bank and who fill any vacancies on the Board of Directors as it exists
upon Conversion and Reorganization. Subsequent to Conversion and Reorganization,
voting rights will be vested exclusively in the owners of the shares of capital
stock of the Savings Bank, 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 Savings Bank.
Liquidation. In the event of any liquidation, dissolution or winding up
of the Savings Bank, the Holding Company, as holder of the Savings Bank's
capital stock would be entitled to receive, after payment or provision for
payment of all debts and liabilities of the Savings Bank (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 AND REORGANIZATION"), all assets
of the Savings Bank available for distribution. In the event of liquidation,
dissolution or winding up of the Holding Company, the holders
108
<PAGE>
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 Reorganization 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."
Effect of Receivership on the Common Stock
In the event of the receivership of the Savings Bank, the FDIC, as
receiver, shall, by operation of law, succeed to, among other things, all the
rights, titles, powers and privileges of the Savings Bank and its stockholder,
the Holding Company. As provided by the procedures and priorities applicable to
receiverships of savings institutions, the holders of the Common Stock would be
entitled to receive any funds remaining after all depositors, creditors, other
claimants (other than holders of stock ranking junior to or on a parity with the
Common Stock) and administrative expenses are paid.
Transfer Agent and Registrar
ChaseMellon Shareholder Services, L.L.C. is the transfer agent and
registrar for shares of the Common Stock.
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 Reorganization and will not deregister its Common Stock for a
period of at least three years following the completion of the Conversion and
Reorganization. Upon such registration, the proxy solicitation and tender offer
rules, insider trading reporting and restrictions, annual and periodic reporting
and other requirements of the Exchange Act will apply.
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 Conversion and Reorganization have been opined upon by Breyer & Aguggia and
the South Carolina tax consequences of the Conversion and Reorganization have
been opined upon by Evans, Carter, Kunes & Bennett, P.A., Charleston, South
Carolina. Breyer & Aguggia and Evans, Carter,
109
<PAGE>
Kunes & Bennett, P.A. have consented to the references herein to their opinions.
Certain legal matters will be passed upon for Sandler O'Neill by Muldoon, Murphy
& Faucette, Washington, D.C.
EXPERTS
The consolidated financial statements of the Savings Bank as of
September 30, 1997 and 1996 and for each of the years in the three-year period
ended September 30, 1997, have been included herein and in the Registration
Statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
RP Financial has consented to the publication herein of the summary of
its report to the Savings Bank setting forth its opinion as to the estimated pro
forma market value of the MHC and the Savings Bank, 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. 333-42517) under the Securities Act with respect to the
Common Stock offered in the Conversion and Reorganization. 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 MHC has filed with the OTS an Application for Approval of
Conversion, which includes proxy materials for the Special Members' Meeting and
the Stockholders' 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 OTS Southeast Regional Office, 1475 Peachtree Street, N.E.,
Atlanta, Georgia 30309.
110
<PAGE>
Index To Consolidated Financial Statements
Perpetual Bank, A Federal Savings Bank and Subsidiary
Page
Independent Auditors' Report...................................... F-1
Consolidated Balance Sheets as of
September 30, 1997 and 1996...................................... F-2
Consolidated Statements of Operation for the
Years Ended September 30, 1997, 1996 and 1995.................... 19
Consolidated Statements of Stockholders' Equity
for the Years Ended September 30, 1997, 1996 and 1995............ F-3
Consolidated Statements of Cash Flows for the
Years Ended September 30, 1997, 1996 and 1995.................... F-4
Notes to Consolidated Financial Statements........................ F-6
* * *
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 MHC have not been included herein
because the MHC has no material assets other than shares of Savings Bank Common
Stock (which will be canceled as part of the Conversion and Reorganization) and
no significant liabilities (contingent or otherwise), revenues or expenses, and
has not engaged in any significant activities to date.
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.
111
<PAGE>
KPMG Peat Marwick LLP
One Insignia Financial Plaza
P.O. Box 10529
Greenville, SC 29603
Independent Auditors' Report
----------------------------
The Board of Directors
Perpetual Bank, A Federal Savings Bank
and Subsidiaries
We have audited the consolidated balance sheets of Perpetual Bank, A Federal
Savings Bank and subsidiaries as of September 30, 1997 and 1996, and the related
consolidated statements of operations, stockholdersO equity and cash flows for
each of the years in the three-year period ended September 30, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Perpetual Bank, A
Federal Savings Bank and subsidiaries as of September 30, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended September 30, 1997 in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Greenville, South Carolina
November 7, 1997
F-1
<PAGE>
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 1997 and 1996
<TABLE>
<CAPTION>
Assets 1997 1996
-------------- ---- -----
<S> <C> <C>
Cash and cash equivalents $13,499,332 13,584,568
Investment securities available for sale (amortized cost
of $11,188,937 in 1997 and $2,494,535 in 1996) 11,325,700 2,493,888
Federal Home Loan Bank stock, at cost 1,650,000 993,700
Mortgage-backed securities available for sale (amortized cost
of $35,713,975 in 1997 and $44,362,007 in 1996) 35,862,700 43,124,998
Loans receivable, (net of allowance for loan losses of
$1,886,243 in 1997 and $1,534,773 in 1996) 178,772,266 140,757,990
Investment in limited partnership 5,003,835
Real estate acquired in settlement of loans 162,776 2,750
Real estate held for development 2,284,038 1,406,144
Premises and equipment, net 6,294,465 4,852,366
Accrued interest receivable:
Loans receivable 1,330,255 1,113,386
Mortgage-backed and other securities 238,186 356,827
Other 569,787 1,140,556
------------ -----------
Total assets $256,993,340 E 209,827,173
============ ===========
Liabilities and Stockholders' Equity
------------------------------------
Deposits 201,001,858 160,243,623
Advances from the Federal Home Loan Bank ("FHLB") 15,000,000 16,000,000
Advance payments by borrowers for property taxes and insurance 396,886 404,322
Accrued interest payable 1,362,483 747,059
Accrued expenses and other liabilities 8,630,370 3,341,375
------------ -----------
Total liabilities 226,391,597 180,736,379
------------ -----------
Stockholders' equity:
Common stock ($1.00 par value; authorized 20,000,000 shares;
issued and outstanding 1,508,873 shares in 1997 and
1,504,601 shares in 1996 1,508,873 1,504,601
Additional paid-in capital 11,651,917 11,696,679
Retained earnings, restricted 18,381,766 17,607,269
Unrealized gain (loss) on securities available for sale, net
of income taxes 188,423 (816,855)
Indirect guarantee of ESOP debt (804,024) (900,900)
Deferred compensation for Management Recognition
Plan (OMRPO) (325,212) --
------------ -----------
Total stockholders' equity 30,601,743 29,090,794
------------ -----------
Commitments and contingencies
Total liabilities and stockholdersO equity $256,993,340 209,827,173
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended September 30, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Unrealized
Gain (Loss)
on Indirect
Securities Guarantee Deferred
Additional Available of Compensation
Common Paid-in Retained Sale, Net ESOP for
Stock Capital Earnings of Taxes Debt MRP Total
------ ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30,
1994 $1,503,943 847,044 14,709,955 (2,320,660) (80,500) (23,010) 14,636,772
Change in unrealized loss
on securities available
for sale, net -- -- -- 1,711,405 -- -- 1,711,405
Exercise of stock options
(658 shares) 658 5,922 -- -- -- -- 6,580
Reduction of ESOP debt -- -- -- -- 73,790 -- 73,790
Earned portion of MRP -- -- -- -- -- 11,490 11,490
Dividends on common stock -- -- (125,089) -- -- -- (125,089)
Net income for 1995 -- -- 1,917,038 -- -- -- 1,917,038
------------ ---------- ----------- ---------- ---------- -------- ----------
Balance at September 30,
1995 1,504,601 852,966 16,501,904 (609,255) (6,710) (11,520) 18,231,986
Change in unrealized loss
on securities available
for sale, net -- -- -- (207,600) -- -- (207,600)
Reduction on ESOP debt -- -- -- -- 6,710 6,710
Earned portion of MRP -- -- -- -- -- 11,520 11,520
Dividends on common stock -- -- (319,022) -- -- -- (319,022)
Sale of common stock (less
offering cost of $417,536) -- 10,843,713 -- -- -- -- 10,843,713
Indirect guaranteed of
ESOP debt -- -- -- -- (900,900) -- (900,900)
Net income for 1996 -- -- 1,424,387 -- -- -- 1,424,387
----------- ---------- ----------- ---------- ---------- -------- -----------
Balance at September 30,
1996 1,504,601 11,696,679 17,607,269 (816,855) (900,900) -- 29,090,794
Change in unrealized loss
on securities, net -- -- -- 1,005,278 -- 1,005,278
Exercise of stock options 4,272 38,448 -- -- -- -- 42,720
Reduction of ESOP debt -- -- -- -- -- 96,876 96,876
ESOP expense -- 32,152 -- -- -- -- 32,152
Purchase of common stock
for MRP -- -- -- -- -- (404,093) (404,093)
Earned portion of MRP -- -- -- -- -- 78,881 78,881
Dividends on common stock -- -- (953,866) -- -- -- (953,866)
Offering costs for the
sale of common stock -- (115,362) -- -- -- -- (115,362)
Net income for 1997 -- -- 1,728,363 -- -- -- 1,728,363
----------- ---------- ---------- ---------- ---------- ---------- ----------
Balance at September 30,
1997 $1,508,873 11,651,917 18,381,766 188,423 (804,024) (325,212) 30,601,743
========= ========== ========== ========== ========== ========= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended September 30, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------ -------------
Cash flows from operating
activities:
<S> <C> <C> <C>
Net income $ 1,728,363 1,424,387 1,917,038
Adjustments to reconcile
net income to net cash
provided by operating activities:
Depreciation and
amortization 703,213 597,306 583,281
Provision for loan losses 655,000 349,250 362,000
Earnings of investment in
limited partnership (184,960) -- --
(Increase) decrease
in deferred tax assets -- -- 27,000
Gain on sale of
mutual funds, net -- -- (1,763,967)
Gain on sale of
investments, net 307,534 (53,963) (13,504)
Gain on sale of
real estate (19,894) (79,034) (47,544)
Deferred compensation 111,033 11,520 11,490
Loss (gain) on sale
of loans, net (12,509) 23,328 (66,785)
Loss (gain) on sale
of fixed assets, net 191,894 (26,096) --
Decrease (increase)
in accrued interest
receivable and other assets (46,895) (789,076) (205,004)
Increase (decrease)
in other liabilities 5,656,419 1,190,696 (131,300)
------------ ----------- ------------
Net cash provided by
operating activities 9,089,198 2,648,318 672,705
------------ ----------- ------------
Cash flows from investing
activities:
Proceeds from sales of
investment securities -- -- 7,625,359
Proceeds from maturities
of investment securities 2,550,000 800,000 393,242
Purchase of investment
securities (11,181,806) (2,488,144) (797,625)
Purchase of investments in
limited partnership (4,818,875) -- --
Purchase of mutual funds -- -- (144,640,000)
Proceeds from sales of
mutual funds -- -- 146,403,967
Proceeds from the sales
of fixed assets -- 91,096 --
Principal repayments on
mortgage-backed securities 4,412,449 2,967,619 3,501,516
Proceeds from sales of
mortgage-backed securities 22,570,776 2,922,009 --
Purchase of mortgage-backed
securities (18,760,688) -- (5,055,120)
Proceeds from redemption
of FHLB stock 650,000 1,804,600 1,110,000
Purchases of FHLB stock (1,306,300) (398,300) (2,424,700)
Increase in loans
receivable, net (12,676,474) (18,966,369) (21,874,020)
Purchases of loans receivable (31,960,810) (18,242,510) --
Sales of loans receivable 5,746,769 9,555,720 9,614,274
Proceeds from sale of
real estate owned 95,186 120,959 869,086
Proceeds from sale of
real estate held for development 1,149,353 -- --
Purchase of premises and
equipment (2,281,841) (1,558,569) (731,153)
Purchase of real estate
held for development (2,027,247) (1,406,144) --
------------ ----------- ------------
Net cash used in
investing activities (47,821,198) (24,798,033) (6,005,174)
------------ ------------ ------------
</TABLE>
F-4
<PAGE>
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------- ------------
<S> <C> <C><C>
Cash flows from financing activities:
Increase in deposit accounts 40,758,235 10,926,744 5,774,086
Proceeds from FHLB advances 68,000,000 61,000,000 216,150,000
Repayment of FHLB advances (69,000,000) (53,000,000) (218,650,000)
Proceeds from sale of common stock, less
expenses (72,642) 10,843,714 6,580
Purchase of stock for MRP (404,093) -- --
Repayments of ESOP Loan 96,876 -- --
Dividends paid on common stock (705,866) (319,022) (125,089)
(Decrease) increase in advance payments by
borrowers for property taxes and insurance (7,436) (346,858) 106,605
------------ ----------- ------------
Net cash provided by
financing activities 38,665,074 29,104,578 3,262,182
------------ ----------- ------------
Net increase (decrease) in cash and cash equivalents (85,236) 6,954,863 (2,070,287)
Cash and cash equivalents, beginning of year 13,584,568 6,629,705 8,699,992
------------ ----------- ------------
Cash and cash equivalents, end of year $ 13,499,332 13,584,568 6,629,705
============ ============ ==========
Supplemental disclosures:
Cash paid during the year for
Interest $ 9,537,349 7,434,366 8,535,117
============ ============ ==========
Taxes $ 641,000 745,840 415,500
============ ============ ==========
Noncash investing activity:
Additions to real estate acquired in
settlement of loans $ 233,748 50,859 277,511
============ ============ ==========
Loans receivable exchanged for
mortgage-backed securities $ -- 3,061,294 --
=========== ============ ==========
Change in unrealized net loss on securities
available for sale, net of tax $ 1,005,278 (207,600) (1,711,405)
============ ============ ==========
Change in Employee Stock Ownership Plan
debt guaranteed by the Bank $ (96,876) 894,190 (73,790)
============ ============ ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated financial Statements
(1) Organization and Summary of Significant Accounting Policies
-----------------------------------------------------------
On May 15, 1992, the Bank's Board of Directors adopted a plan of
reorganization pursuant to which Perpetual Bank, a Federal Savings Bank
("Perpetual" or "Bank") proposed to reorganize from a federally chartered
mutual savings and loan association into a mutual holding company ("MHC").
To implement the reorganization, Perpetual incorporated a federally
chartered capital stock savings bank (New Federal Savings Bank). In
exchange for the common shares of the New Federal Savings Bank to be issued
to the MHC, Perpetual transferred substantially all of its assets and all
of its liabilities to the New Federal Savings Bank. The New Federal Savings
Bank was renamed Perpetual Bank, a Federal Savings Bank and became a
majority-owned subsidiary of the MHC.
Perpetual has the power to issue shares of capital stock (including common
and preferred stock) to persons other than the MHC. So long as the MHC is
in existence, the aggregate amount of voting stock that may be issued to
persons other than the MHC must be less than 50% of the issued and
outstanding voting stock of Perpetual. The New Federal Savings Bank may
issue any amount of non-voting stock to persons other than the MHC.
On October 26, 1993, Perpetual completed the reorganization and sold
116,969 shares of common stock at $10 per share. The remaining 1,385,000
shares of common stock were transferred to the MHC.
The costs related to the reorganization and offering were charged against
the proceeds of the sale of stock. Capitalized costs related to this
transaction were approximately $223,443. These costs were treated as a
reduction of paid-in capital.
In September 1996, Perpetual sold 585,000 shares of common stock from its
authorized but unissued shares. SouthBanc Shares, MHC presently owns 53.02%
of Perpetual, and the minority ownership is 46.98%. The 585,000 shares were
sold at a price of $19.25 per share generating proceeds of $11,261,249,
less offering cost of $532,898, for a net proceed of $10,728,351.
In September 1997, the Board of Directors of Perpetual Bank and the MHC
adopted a proposed Plan of Conversion to convert the MHC to stock form and
to reorganize the MHC and Perpetual by forming a new Stock Holding Company
("SHC") to become the parent company of Perpetual. The SHC will exchange
certain shares of its common stock for the outstanding common stock of
Perpetual and will issue and offer for sale certain additional shares of
its common stock. The additional shares of common stock of the SHC will be
offered to eligible account holders of Perpetual as of June 30, 1996, who
will receive nontransferable subscription rights to purchase these shares,
as well as certain other persons as provided for in the Plan. The
F-6
<PAGE>
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated financial Statements
(1) Organization and Summary of Significant Accounting Policies, Continued
----------------------------------------------------------------------
amount and pricing of the proposed stock offering will be based on an
independent appraisal of Perpetual.
In connection with the proposed transaction, the MHC will file an
application with the Office of Thrift Supervision and a registration
statement with the U. S. Securities and Exchange Commission with respect to
the reorganization and common stock offering. After receipt of the required
regulatory approvals, the Plan of Conversion will be submitted to the
members of the MHC for approval by at least a majority of the votes eligible
to be cast at a special meeting and will also be submitted by Perpetual's
stockholders for approval at a special meeting. The transaction is expected
to be completed during the second calendar quarter of 1998.
At the time of the conversion, Perpetual will establish a liquidation
account in an amount equal to its equity as reflected in the consolidated
balance sheet used in the final conversion 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 Perpetual 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 account holder's or supplemental eligible account holder's interest
in the liquidation account. In the event of a complete liquidation of
Perpetual, 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, Perpetual may not declare or pay cash
dividends on or repurchase any of its shares of common stock if the effect
thereof would cause equity to be reduced below applicable regulatory capital
maintenance requirements or if such declaration and payment would otherwise
violate regulatory requirement.
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. Conversion costs incurred through September 30,
1997 were $16,350.
Consolidation
-------------
The accompanying consolidated financial statements include the accounts of
Perpetual and its wholly owned subsidiaries, United Service Corporation
("USC"), which has a wholly owned subsidiary, United Investment Service
Corporation and primarily engages in real estate development and Mortgage
First Service Corporation, which holds an equity investment in a mortgage
banking company (collectively the "Bank"). All significant intercompany
items and transactions have been eliminated in consolidation.
F-7
<PAGE>
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated financial Statements
(1) Organization and Summary of Significant Accounting Policies, Continued
----------------------------------------------------------------------
Loans Receivable, Net
---------------------
Loans receivable are stated at their unpaid principle balances less the
allowance for loan losses, and net of deferred loan origination fees and
discounts.
The Bank provides for loan losses on the allowance method. Accordingly, all
loan losses are charged to the related allowance and all recoveries are
credited to the allowance. Additions to the allowance for loan losses are
provided by charges to operations based on various factors which, in
management's judgment, deserve current recognition in estimating losses.
Such factors considered by management include the market value of the
underlying collateral, growth and composition of the loan portfolios, the
relationship of the allowance for loan losses to outstanding loans, loss
experience, delinquency trends and economic conditions. Management evaluates
the carrying value of loans periodically and the allowance is adjusted
accordingly. While management uses the best information available to make
evaluations, future adjustments to the allowance may be necessary if
economic conditions differ substantially from the assumptions used in making
evaluations. Allowances for loan losses are subject to periodic evaluation
by various regulatory authorities and may be subject to adjustment upon
their examination.
Statement of Financial Accounting Standards ("SFAS") No. 114, "Accounting by
Creditors for Impairment of a Loan", ("SFAS No. 114") requires that
creditors value all specifically reviewed loans for which it is probable
that the creditors will be unable to collect all amounts due according to
the terms of the loan agreement at either the present value of expected cash
flows discounted at the loan's effective interest rate, or if more
practical, the market price or value of the collateral. If the resulting
value of the impaired loan is less than the recorded balance, the impairment
must be recognized by creating a valuation allowance for the difference and
recognizing a corresponding bad debt expense. SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosures",
amends SFAS No. 114 to allow a creditor to use existing methods for
recognizing interest income on an impaired loan and requires additional
disclosures about how a creditor recognizes interest income related to
impaired loans. The Savings Bank adopted the provisions of SFAS No. 114 and
No. 118 effective OctoberE1, 1995. The adoption of these standards required
no increase to the reserve for loan losses and had no impact on net income.
Interest income on loans and lease financing is recorded on the accrual
basis. Accrual of interest on loans (including loans impaired under SFAS No.
114) generally is discontinued when the loan is 90 days past due and
management deems that collection of additional interest is doubtful.
Interest received on nonaccrual loans and impaired loans is generally
applied against principal or may be reported as interest income depending on
management's judgment as to the collectibility of principal. When borrowers
with loans on a nonaccrual status demonstrate their ability to repay their
loans in accordance with the contractual terms of the notes, the loans are
returned to accrual status.
F-8
<PAGE>
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated financial Statements
(1) Organization and Summary of Significant Accounting Policies, Continued
----------------------------------------------------------------------
The Bank provides an allowance for uncollectible interest based on an
experience method of anticipated collections. This allowance is netted
against accrued interest receivable for financial statement reporting
purposes.
Loan fees and direct incremental costs of originating loans are deferred and
amortized over the contractual life of the related loan. The amortization of
the net fees or costs are recognized as a yield adjustment using the
interest method.
Loans Held For Sale
-------------------
Loans held for sale are accounted for at the lower of aggregate cost
or market value.
Investment and Mortgage-Backed Securities
------------------------------------------
The Bank adopted SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities", on October 1, 1993. SFAS No. 115 addresses the
accounting and reporting for investments in equity securities that have
readily determinable fair values and for all investments in debt securities.
These investments are classified in three categories and are accounting for
as follows: (a) debt securities that the Bank has the positive intent and
ability to hold to maturity are classified as held for investment and
reported at amortized cost; (b) debt and equity securities that are bought
and held principally for the purpose of selling them in the near term are
classified as trading securities and reported at fair value, with unrealized
gains and losses included in earnings; and (c) debt and equity securities
not classified as either held for investment securities or trading
securities are classified as available for sale securities and reported at
fair value, with unrealized gains and losses excluded from earnings and
reported as a separate component of stockholders' equity. The Bank has no
securities classified as held for investment or trading. Upon adoption of
SFAS No. 115, the net unrealized loss on securities available for sale, net
of taxes, was reported as a separate component of stockholders' equity. SFAS
No. 115 will cause fluctuations in stockholders' equity based on changes in
values of debt and equity securities classified as available for sale.
Securities classified as available for sale will be considered in the
Bank's asset/liability management strategies and may be sold in response to
changes in interest rates, liquidity needs and/or significant prepayment
risk. The cost of investment securities sold is determined by the
"identified certificate" method.
Declines in the fair value of individual securities below their cost
that are deemed by management to be other than temporary result in write-
downs of the individual securities to their fair value. The write-downs are
included in earnings as realized losses.
F-9
<PAGE>
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated financial Statements
(1) Organization and Summary of Significant Accounting Policies, Continued
----------------------------------------------------------------------
At September 30, 1997, the Bank had increased stockholdersO equity by
approximately $188,000 for the unrealized gain, net of income taxes of
$97,000, on securities available for sale, and, at September 30, 1996, the
Bank had reduced stockholders' equity by approximately $817,000 for the
unrealized loss, net of income taxes of $421,000, on securities available
for sale.
Investment In Limited Partnership
---------------------------------
Investment in limited partnership represents an equity investment in a
limited partnership in which Perpetual owned more than 20 per cent but not
in excess of 50 per cent of the limited partnership and is accounted for
under the equity method. Accordingly, Perpetual records 20.625% of
Dovenmuehle's profits and losses in the consolidated statement of
operations.
Real Estate Acquired in Settlement of Loans
-------------------------------------------
Real estate acquired in settlement of loans represents real estate
acquired through foreclosure and is initially recorded at estimated fair
value. Subsequent to acquisition, real estate acquired in settlement of
loans is stated at the lower of cost or fair value, less estimated selling
costs. Costs related to holding these properties are charged to operations.
Market values of real estate acquired in settlement of loans are reviewed
regularly and allowances for losses are established when the carrying values
of real estate acquired in settlement of loans exceeds fair value less costs
to sell.
Premises and Equipment
----------------------
Premises and equipment are carried at cost less accumulated
depreciation. Depreciation is calculated primarily on the straight-line
method over the estimated useful lives of the respective assets, five to
forty years.
Securities Sold Under Agreements to Repurchase
----------------------------------------------
The Bank enters into sales of securities under agreements to repurchase.
Fixed-coupon reverse repurchase agreements are treated as financings, with
the obligation to repurchase securities sold being reflected as a liability
and the securities underlying the agreements remaining as an asset. The
securities are delivered by appropriate entry by the Bank's safekeeping
agent to the counterparties' accounts. The dealers may have sold, loaned or
otherwise disposed of such securities to other parties in the normal course
of their operations, and have agreed to resell to the Bank substantially
identical securities at the maturities of the agreements.
F-10
<PAGE>
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated financial Statements
(1) Organization and Summary of Significant Accounting Policies, Continued
----------------------------------------------------------------------
Income Taxes
------------
The provision for income taxes is based upon income and expense
reported for financial statement purposes after adjustment for permanent
differences such as tax-exempt interest income.
When income and expenses are recognized in different periods for financial
reporting purposes than for income tax purposes, deferred taxes are
provided in recognition of these temporary differences. The Bank computes
its income taxes in accordance with SFAS No. 109
"Accounting for Income Taxes" which requires the use of the liability
method to record income taxes. The liability method calculates the effect
of tax rates expected to be in place when the related temporary differences
reverse. Subsequent changes in tax rates will require adjustment to these
deferred tax assets and liabilities.
Stock Based Compensation
------------------------
In 1996, the Bank adopted the disclosure provisions of SFAS No. 123
"Accounting for Stock Based Compensation". The statement permits the Bank
to continue accounting for stock based compensation as set forth in
Accounting Principles Board ("APB") Opinion 25, "Accounting for Stock
Issued to Employees", provided the Bank discloses the pro forma effect on
net income and earnings per share of adopting the full provisions of SFAS
No. 123. Accordingly, the Bank continues to account for stock based
compensation under APB Opinion 25 and has provided the required pro forma
disclosures.
Earnings Per Share
------------------
Earnings per share for the year ended September 30, 1997, 1996, and
1995 were computed based upon the weighted average shares outstanding.
Risks and Uncertainties
-----------------------
In the normal course of its business, the Bank encounters two significant
types of risk: economic and regulatory. There are three main components of
economic risk: interest rate risk, credit risk and market risk. The Bank is
subject to interest rate risk to the degree that its interest-bearing
liabilities mature or reprice at different speeds, or on different bases,
than its interest earning assets. Credit risk is the risk of default on the
Bank's loan portfolio that results from the borrowers' inability or
unwillingness to make contractually required payments. Market risk reflects
changes in the value of collateral underlying loans receivable, the
valuation of real estate held by the Bank, and the valuation of loans held
for sale.
F-11
<PAGE>
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated financial Statements
(1) Organization and Summary of Significant Accounting Policies, Continued
----------------------------------------------------------------------
The Bank is subject to the regulations of various government agencies. These
regulations can and do change significantly from period to period. The Bank
also undergoes periodic examinations by the regulatory agencies, which may
subject it to further changes with respect to asset valuations, amounts of
required loss allowances and operating restrictions resulting from the
regulators' judgments based on information available to them at the time of
their examination.
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities as of the
dates of the balance sheets and revenues and expenses for the periods
covered. Actual results could differ significantly from those estimates and
assumptions.
Reclassification
----------------
Certain reclassifications of accounts reported for previous periods
have been made in these consolidated financial statements. Such
reclassifications had no effect on stockholders' equity or the net income as
previously reported.
(2) Cash and Cash Equivalents
-------------------------
Cash and cash equivalents consisted of the following at September 30, 1997
and 1996:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Working funds $ 2,229,557 1,789,074
Noninterest-earning demand deposits 1,805,522 2,352,194
Interest-earning overnight deposits 9,464,253 9,443,300
----------- ---------
$13,499,332 13,584,568
=========== ==========
</TABLE>
(3) Investment In Limited Partnership
---------------------------------
At September 30, 1997, the Bank's investment in Limited Partnership
consisted of a 20.625 percent interest in Dovenmuehle Mortgage Company
Limited Partnership which invests in mortgage servicing rights. The Bank
invested in Dovenmuehle in December 1996.
F-12
<PAGE>
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated financial Statements
(3) Investment In Limited Partnership, Continued
--------------------------------------------
The table below contains the summarized financial information of
Dovenmuehle (unaudited).
<TABLE>
<CAPTION>
Year Ended
Condensed Income Statement September 30, 1997
---------------------
<S> <C>
Service Fees $ 6,626,798
Other Income 416,475
-----------
Total Income 7,043,273
-----------
Servicing Expense 1,558,802
PMSR Amortization 3,429,082
Other Expense 1,153,408
-----------
Total Expense 6,141,292
-----------
Net Income $ 901,981
===========
Condensed Balance Sheet At September 30, 1997
-----------------------
Cash $ 2,049,912
Accounts Receivable 1,496,187
Purchased Mortgage Servicing Rights 48,412,490
Organizational Costs 472,827
-----------
Total Assets $52,431,416
===========
Accounts Payable 4,405,194
Long Term Debt 23,760,000
Shareholders' Equity 24,266,222
-----------
Total Liabilities and Shareholders'
Equity $52,431,416
===========
</TABLE>
There are no commitments oral or written to Dovenmuehle other than the
limited partnership investment made in the company.
F-13
<PAGE>
(4) Investment and Mortgage-Backed Securities Available for Sale
------------------------------------------------------------
The Bank had securities available for sale as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
September 30, 1997
------------------
Investment securities:
Federal Home Loan Bank
Indexed Principal
Reduction Bond $ 4,002,933 -- 7,773 3,995,160
FHLB Optional Principal
Redemption Bond 6,187,732 144,368 -- 6,332,100
U. S. Treasury Notes 998,272 168 -- 998,440
----------- ----------- ----------- -----------
$11,188,937 144,536 7,773 11,325,700
=========== =========== =========== ===========
Mortgage-backed securities:
FHLMC and FNMA
fixed rate 13,117,125 114,313 23,290 13,208,148
FHLMC five year balloons 131,893 -- 315 131,578
Agency adjustable rate,
30 year original
maturity 438,330 -- 14,271 424,059
Private label collateralized
mortgage obligations
(CMOs) 11,736,540 54,103 891 11,789,752
Agency CMOs 10,290,087 19,076 -- 10,309,163
----------- ----------- ----------- -----------
$35,713,975 187,492 38,767 35,862,700
=========== =========== =========== ===========
</TABLE>
F-14
<PAGE>
(4) Investment and Mortgage-Backed Securities Available for Sale (Continued)
------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, 1996
-------------------
Investment securities:
<S> <C> <C> <C> <C>
Federal Farm Credit Bond $ 1,999,533 - 1,033 1,998,500
Certificate of deposit 100,000 - - 100,000
FNMA discount note 395,002 386 - 395,388
------------ ----------- ---------- ------------
$ 2,494,535 386 1,033 2,493,888
============ =========== ========== ============
Mortgage-backed securities:
FHLMC and FNMA
fixed rate $ 6,411,100 31,646 197,050 6,245,696
FHLMC five year balloons 1,134,918 - 2,386 1,132,532
Agency adjustable rate,
generally 30 year
original maturities 532,971 - 3,928 529,043
Private label CMOs 27,885,137 - 864,237 27,020,900
Agency CMOs 8,397,881 12,764 213,818 8,196,827
------------ ----------- ---------- ------------
$ 44,362,007 44,410 1,281,419 43,124,998
============ =========== ========== ============
</TABLE>
Included in accrued expenses and other liabilities in the accompanying
consolidated balance sheet at September 30, 1997, was an amount payable
for the purchase of an investment security totaling $5,177,284 included in
FHLMC and FNMA Fixed Rate above, which had not settled as of September 30,
1997.
The amounts of scheduled maturities of investment and mortgage-backed
securities at September 30, 1997 were as follows:
Amortized Fair
Cost Value
---- -----
Less than one year $ 1,393,377 1,393,231
One year to five years 5,457,451 5,457,979
Five years to ten years 11,666,060 11,740,436
Ten and Over 28,386,024 28,596,754
---------- ----------
$ 46,902,912 47,188,400
============ ============
F-15
<PAGE>
(4) Investment and Mortgage-Backed Securities Available for Sale (Continued)
------------------------------------------------------------------------
Proceeds from sales of mutual funds and securities available for sale and
the related gross realized gains and losses were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Proceeds from sales of mutual funds $ - - -
146,403,967
Proceeds from sales of securities $ 22,872,420 2,922,009 7,625,359
Gross realized gains $ 7,866 56,228 1,843,902
Gross realized losses $ 315,400 2,265 66,431
</TABLE>
(5) Loans Receivable, Net
---------------------
Loans receivable at September 30, 1997 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
First mortgage loans, substantially all
one to four family $ 118,663,177 91,329,530
Construction 17,145,456 19,508,595
Commercial real estate 26,975,976 17,150,980
Loan participations purchased 859,952 979,951
Home improvement loans 3,405,621 5,035,871
Commercial loans 7,181,746 5,528,527
Consumer loans 14,422,484 10,931,490
Loans secured by deposits 1,345,137 948,337
-------------- --------------
189,999,549 151,413,281
Less:
Deferred loan fees, net 356,780 254,434
Allowance for loan losses 1,886,243 1,534,773
Undisbursed loans in process 8,984,260 8,866,084
-------------- --------------
Loans receivable, net $ 178,772,266 140,757,990
============== ==============
</TABLE>
Changes in the allowance for loan losses for the years ended September 30,
1997, 1996, and 1995 are summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balance, beginning of year $ 1,534,773 1,278,423 961,672
Provision for loan losses 655,000 349,250 362,000
Charge-offs (332,194) (115,558) (51,082)
Recoveries 28,664 22,658 5,833
----------- ---------- ----------
Balance, end of year $ 1,886,243 1,534,773 1,278,423
=========== ========== ==========
</TABLE>
F-16
<PAGE>
(5) Loans Receivable, Net, Continued
--------------------------------
Loans serviced for others amounted to approximately $62,148,000,
$73,303,000, and $73,195,000 at September 30, 1997, 1996 and 1995,
respectively.
At September 30, 1997 and 1996, the Bank had approximately $479,000 and
$368,000, respectively, in loans receivable, which were ninety days or
more delinquent and accruing interest.
As of September 30, 1997, the Bank had purchased loans in the state of
South Carolina as follows:
1 - 4 family residential $19,600,000
Real estate development 1,500,000
Construction 4,100,000
Loans Held for Sale at September 30, 1997 and September 30, 1996
were $7,102,00 and $1,101,000, respectively.
At September 30, 1997 and 1996, the Bank had approximately $403,000 and
$316,000, respectively, in non-accrual loans. The amount of interest
income that would have been recognized had these loans performed according
to their contractual terms amounted to approximately $19,000 and $22,000
during the years ended September 30, 1997 and 1996, respectively. The
actual interest income recognized on these loans amounted to approximately
$11,000 and $12,000 during the years ended September 30, 1997 and 1996,
respectively.
At September 30, 1997 and 1996, the carrying value of loans that are
considered to be impaired under SFAS No. 114 totaled approximately
$517,000 and $795,000, respectively. No impairment allowance has been
recorded on these impaired loans. The average balance of impaired loans
and interest income recognized on impaired loans for fiscal 1997 and 1996
were $512,000 and $68,414, and $687,400 and $28,176, respectively.
Activity in loans to officers, directors and other related parties for the
years ended September 30, 1997 and 1996 is summarized as follows:
1997 1996
---- ----
Balance at beginning of year $ 975,762 554,464
New loans 143,923 593,508
Repayments (194,182) (172,210)
--------- ---------
Balance at end of year $ 925,503 975,762
========= =========
F-17
<PAGE>
(5) Loans Receivable, Net, Continued
--------------------------------
The Bank primarily grants residential loans to customers in Anderson
County, South Carolina, and the surrounding communities. The Bank's
ability to collect these balances depends substantially upon the economic
conditions and real estate market in the region. The Bank does not have
any concentrations of loans to any one borrower. The Bank has increased
its commercial and consumer loan portfolios which may entail greater risk
than residential mortgage loans.
(6) Real Estate
-----------
Real estate is summarized at September 30, 1997 and 1996 as follows:
1997 1996
---- ----
Real estate held for development $ 2,284,038 1,406,144
Real estate acquired in settlement of loans 162,776 2,750
------------ ----------
$ 2,446,814 1,408,894
============= ==========
(7) Premises and Equipment
----------------------
Premises and equipment are summarized at September 30, 1997 and 1996 as
follows:
1997 1996
---- ----
Land $ 871,242 707,876
Office and other buildings 3,643,431 3,289,002
Furniture, fixtures and equipment 4,543,952 4,003,594
------------ ------------
9,058,625 8,000,472
Less accumulated depreciation (2,764,160) (3,148,106)
------------ ------------
$ 6,294,465 4,852,366
============= ============
Depreciation expense was $647,848, $472,343, and $430,029 for the years
ended September 30, 1997, 1996 and 1995, respectively.
F-18
<PAGE>
(8) Deposits
--------
Deposits outstanding by type of account and range of interest rates at
September 30, 1997 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------ -------------------------
Range of Range of
Interest Interest
Balance Rates Balance Rates
------- ----- ------- -----
<S> <C> <C> <C> <C>
Non-interest bearing checking accounts $ 11,811,694 -- $ 8,956,602 --
Interest-bearing checking accounts 25,995,824 1.75% - 4.76% 24,292,692 1.75% - 3.63%
Passbook accounts 24,359,999 1.75% - 3.00% 23,111,051 1.75% - 3.00%
------------ ------------
62,167,517 56,360,345
------------ ------------
Certificate accounts 138,834,341 2.50% - 8.00% 103,883,278 3.35% - 5.55%
------------ ------------
$201,001,858 $160,243,623
============ ============
Weighted average interest rate 4.64% 4.25%
===== ====
</TABLE>
The amounts of scheduled maturities of certificate accounts at September
30, 1997 and 1996 were as follows:
1997 1996
---- ----
Maturing within one year $ 115,651,298 83,770,480
Maturing one through three years 22,328,414 19,334,013
Maturing after three years 854,629 778,785
------------ ------------
$ 138,834,341 103,883,278
=========== ============
At September 30, 1997 and 1996, the aggregate amounts of time deposits of
$100,000 or more amounted to approximately $18,540,473 and $13,650,728,
respectively. Deposits in excess of $100,000 are not federally insured.
Accrued interest payable on deposits was $1,362,480 and $747,059 at
September 30, 1997 and 1996, respectively, and included in accrued
expenses and other liabilities in the consolidated balance sheets.
F-19
<PAGE>
(9) Advances from the FHLB
----------------------
Advances from the FHLB at September 30, 1997 and 1996 are summarized as
follows:
<TABLE>
<CAPTION>
September 30, 1997 September 30, 1996
Maturity ------------------ ------------------
Date Interest Rate Balance Interest Rate Balance
---- ------------- ------- ------------- -------
<S> <C> <C> <C> <C>
1997 - % $ - 5.55% $ 2,000,000
1998 6.47 10,000,000 6.38 5,000,000
1999 5.78 5,000,000 4.64 9,000,000
----------- -----------
$15,000,000 $16,000,000
=========== ===========
</TABLE>
During fiscal 1996, the line of credit expired and was replaced by a
blanket floating lien on qualifying mortgage loan collateral for advances.
At September 30, 1997, the Bank had $15,000,000 in outstanding FHLB
advances and, based upon eligible collateral, available credit of
$40,000,000.
At September 30, 1997 and 1996, as collateral for its advances, the Bank
has pledged securities with a carrying value of approximately $3,761,000
and $18,804,000, respectively. All of the pledged securities are held in
safekeeping at the FHLB of Atlanta.
(10) Securities Sold Under Agreements to Repurchase
----------------------------------------------
The Bank had no outstanding securities sold under agreements to repurchase
at September 30, 1997, 1996 and 1995, and the Bank did not enter into
agreements during fiscal 1997 and 1996. The maximum amount outstanding at
any month end during fiscal 1995 was $5,907,000. The average amount of
outstanding agreements for fiscal 1995 was approximately $1,338,000. The
securities underlying the agreements were under the institution's control.
(11) Income Taxes
------------
Income taxes for the years ended September 30, 1997, 1996, and 1995 are
summarized as follows:
1997 1996 1995
---- ---- ----
Current federal $544,803 1,008,811 292,313
Deferred federal 381,000 (253,000) (98,571)
----------- ---------- -----------
Total $925,803 755,811 193,742
=========== ========== ===========
F-20
<PAGE>
(11) Income Taxes, Continued
-----------------------
Income tax expense differs from the amount computed at the federal
statutory rates of 34% for the years ended September 30, 1997, 1996 and
1995, as a result of the following:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Income taxes at federal rate $ 902,416 741,267 717,665
Differences resulting from:
State taxes, net of
federal benefit 81,000 71,000 67,200
Change in amount of unrecognized
tax benefits relating to
future deductions -- -- 167,630
Decrease in beginning of year
valuation allowance (81,000) (71,000) (807,000)
Other 23,387 14,544 48,247
--------- --------- ---------
$ 925,803 755,811 193,742
========= ========= =========
Effective income tax rate 34.9% 34.7% 9.2%
===== ===== ====
</TABLE>
At September 30, 1997, the Bank has state net operating loss carryforwards
of approximately $62 million. These carryforwards expire in various
amounts beginning in fiscal year 1998 through 2006.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
September 30, 1997 and 1996 are presented below:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Loan loss allowances deferred for tax purposes $716,000 583,000
Deferred fees recognized for tax purposes as received - 70,000
Expenses deducted under the economic
performance rules - 359,000
Unrealized losses on securities available for sale - 421,000
State loss carryforwards 2,465,000 2,502,000
Other 89,000 100,000
----------- ------------
Total gross deferred tax assets 3,270,000 4,035,000
Less valuation allowances, primarily for tax
loss carryforwards (2,480,000) (2,561,000)
------------ ------------
Net deferred tax assets 790,000 1,474,000
----------- ------------
</TABLE>
F-21
<PAGE>
(11) Income Taxes, Continued
-----------------------
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Deferred tax liabilities:
-------------------------
Depreciation for tax purposes in excess of such
amount for financial reporting purposes $ 172,000 99,000
Tax bad debt reserve in excess of base year 307,000 310,000
Unrealized gain on securities available for sale 97,000 -
Loan fee income adjustments for tax purposes 36,000 -
Other 148,000 136,000
------- -------
Total gross deferred tax liabilities 760,000 545,000
------- -------
Net deferred tax asset (included in other assets) $ 30,000 929,000
========= =======
</TABLE>
A portion of the change in the deferred tax asset relates to unrealized
losses on securities available for sale. In fiscal 1997, the related
deferred tax expense of $518,000 has been recorded directly to
stockholders' equity. The balance of the change in the net deferred tax
asset results from the current period deferred tax expense of $381,000. In
fiscal 1996, the deferred taxes related to the unrealized losses on
securities available for sale of $107,000 has been recorded directly to
stockholders' equity with the balance of the change in the net deferred
tax asset resulting from the current period deferred tax benefit of
$253,000.
The realization of net deferred tax assets may be based on utilization of
carrybacks to prior taxable periods, anticipation of future taxable income
in certain periods, and the utilization of tax planning strategies.
Management has determined that it is more likely than not that the net
deferred tax assets can be supported based upon these criteria except for
the state loss carryforwards. A valuation allowance for the deferred tax
asset has been reflected to reduce the potential deferred tax assets,
primarily for state loss carryforwards, to an amount that more likely than
not can be realized at September 30, 1997 and 1996.
Prior to enactment of recent tax legislation (the Small Business Job
Protection Act of 1996 "SBJPA `96") effective with the year ending
September 30, 1997, savings and loan associations which met certain
definitional tests and operating requirements prescribed by the Internal
Revenue Code were allowed a special bad debt deduction and other special
tax provisions. If a savings and loan association did not continue to meet
the federal income tax requirements necessary to meet these definitions,
the savings and loan may have lost the benefits of these special
provisions. Taxable income of subsidiaries was generally computed without
the benefit of these special provisions.
The special bad debt deduction was based on either specified experience
formulas (the "Experience Method") or a specified percentage of taxable
income before such deduction (the "Percentage of Taxable Income Method").
For the two years ended September 30, 1996 and 1995, the percentage of
taxable income bad debt deduction was eight percent of adjusted taxable
income. The deduction was subject to certain limitations based on the
aggregate loans, saving account balances and retained earnings at year
end. Gains and losses on sales of repossessed property and provisions for
losses on loans and foreclosed real estate were generally
F-22
<PAGE>
(11) Income Taxes, Continued
-----------------------
adjustments to the tax bad debt reserve and not includable in the
computation of taxable income before this deduction.
As a result of SBJPA `96, the Bank will be required to change its overall
method of accounting for tax bad debts to the Experience Method beginning
with the fiscal year ending September 30, 1997. The Bank will be required
to recapture approximately $808,000 over an eight-year period in
connection with the change.
Retained earnings at September 30, 1997 and 1996 includes tax bad debt
reserves of approximately $5.2 million for which no provision for federal
income tax has been made. If, in the future, these amounts are used for
any purpose other than to absorb bad debt losses, they may be subject to
federal income tax at the then prevailing corporate tax rate.
(12) Capital
-------
The Bank's actual capital and ratios, those required by the Bank's primary
regulator, the Office of Thrift Supervision (OTS), as well as those
required in order to be considered well capitalized according to the
Prompt Corrective Action Provisions are presented in the following table.
As of September 30, 1997, the most recent notification from the OTS
categorized the Bank as well capitalized under the regulatory framework
for prompt corrective action. To be categorized as well capitalized, the
Bank must maintain minimum total risk-based, Tier I risked-based, and Tier
I core ("leverage") ratios as set forth in the table. There are no
conditions or events since that notification that management believes have
changed the institution's category.
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Adequacy Prompt Corrective
Actual Purposes Action Provisions
------ -------- -----------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(Dollars in Thousands)
As of September 30, 1997:
- ------------------------
<S> <C> <C> <C> <C>
Tangible Capital To Total Assets) $27,320 10.6% 3,825 1.5% -- --
Core Capital (To Total Assets) 27,320 10.6 7,651 3.0 $12,811 5.00%
Tier I Capital (To Risk-Based
Assets 27,320 17.3 -- -- 9,503 6.00
Risk-Based apital (To
Risk-Based Assets) 29,066 18.4 12,670 8.00 15,838 10.00
As of September 30, 1996:
- -------------------------
Tangible Capital (To Total
Assets) 27,786 13.2 3,166 1.5 - -
Core Capital (To Total Assets) 27,786 13.2 6,332 3.0 10,495 5.00
Tier I Capital (To Risk-Based
Assets) 27,786 23.3 - - 7,155 6.00
Risk-Based Capital (To
Risk-Based Assets) 29,196 24.5 9,548 8.0 11,925 10.00
</TABLE>
F-23
<PAGE>
If the Bank were to fail to meet the minimum capital requirements, it will
be required to file a written capital restoration plan with regulatory
agencies and would be subject to various mandatory and discretionary
restrictions on its operations.
The following table reconciles the Bank's consolidated stockholders'
equity to its regulatory capital positions at September 30, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Stockholders' equity $ 30,601,743 29,090,794
Adjustments for unrealized (gains) losses on
available for sale securities (188,423) 816,855
Investments in and advances to nonincludable
subsidiaries (2,092,695) (2,121,457)
Disallowed servicing assets (1,000,767) -
------------ ------------
Regulatory tangible and core capital 27,319,858 27,786,192
Supplemental capital 1,746,230 1,409,415
----------- ------------
Risk-based capital $ 29,066,088 29,195,607
========== ==========
</TABLE>
(13) Employee Benefit Plans
----------------------
The Bank has a profit sharing and deferred compensation plan for
substantially all full-time employees. The plan permits eligible
participants to contribute a percentage of their salary up to amounts
permitted by the Internal Revenue Code each year. At the discretion of the
Board of Directors, the Bank may match a percentage of each participant's
contribution during the plan year. In addition the Board of Directors may
from year to year make a discretionary contribution to the plan. The
Bank's contribution recorded as expense for the years ended September 30,
1997, 1996 and 1995, was $219,123, $160,525 and $141,879, respectively.
(14) Stock Option Plan
-----------------
In October 1993, the Bank's Board of Directors adopted a stock option and
incentive plan. Pursuant to the plan, an aggregate of 11,504 shares of
common stock were reserved for issuance by the Bank upon exercise of stock
options and awards to be granted to directors, officers, and other key
employees from time to time under the plan. The Bank's management was
granted incentive stock options, and the Bank's non-officer directors were
granted non-incentive stock options. These options expire on October 2003.
F-24
<PAGE>
(14) Stock Option Plan, Continued
----------------------------
In April 1997, the stockholders approved a second stock option plan and
incentive plan. Pursuant to the plan, 58,500 shares of common stock have
been reserved for issuance by the Bank upon exercise of stock options and
awards to be granted to directors, officers, and other key employees from
time to time under the plan. The Bank's management was granted incentive
stock options, and the Bank's non-officer directors were granted
non-qualified stock options. These options are priced at $25.25 and expire
in April 2007.
The following table summarizes option activity during the years ended
September 30, 1997, 1996 and 1995:
Number of Price Per
Shares Share
------ -----
Outstanding at September 30, 1994 9,530 $ 10.00
Granted - -
Exercised 658 10.00
------- -------
Outstanding at September 30, 1995 8,872 10.00
Granted - -
Exercised - -
------- -------
Outstanding at September 30, 1996 8,872 10.00
Granted 58,500 25.25
Exercised 4,272 10.00
------- -------
Outstanding at September 30, 1997 63,100 $ 24.14
======= =======
The Bank applies APB Opinion 25 in accounting for the stock-based option
plans which are described in the preceding paragraph. Accordingly, no
compensation expense has been recognized for the stock-based option plans.
Had compensation cost been recognized for the stock-based option plans
applying the fair-value-based method as prescribed by SFAS 123, the Bank's
net income and earnings per share would have been reduced to the proforma
amounts indicated below:
1997 1996
---- ----
Net Income
----------
As Reported $1,728,303 1,424,387
Proforma 1,702,803 1,424,387
Earnings Per Share
As Reported $ 1.15 .95
Proforma 1.13 .95
F-25
<PAGE>
(14) Stock Option Plan, Continued
----------------------------
The effects of applying SFAS 123 may not be representative of the effects
on reported net income in future years.
The fair value of each option granted is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in 1997:
Dividend yield 3.25 %
Expected volatility 38 %
Risk-free interest rate 6.59 %
Expected lives 7.5 years
There were no options granted in 1996.
(15) Management Recognition Plan
---------------------------
The Board of Directors initially adopted a Management Recognition Plan
("MRP") during fiscal 1994. Those eligible to receive benefits under the
MRP included certain officers of the Bank as determined by a committee
appointed by the Board of Directors of the Bank. During the year ended
September 30, 1994, 3,450 shares of common stock were granted to
management under the MRP, vesting over a three year period. Vested shares
at September 30, 1997 and 1996 was 3,450 for both years. All shares are
vested at September 30, 1997 and 1996. Compensation related to vesting of
the shares was $0, $11,520, and $11,490 for fiscal 1997, 1996 and 1995,
respectively.
In April 1997, the stockholders approved a second Management Recognition
Plan ("1996 MRP") with 23,400 shares of common stock being granted to
management under the 1996 MRP, vesting over a five-year period. During the
fiscal year 1997, 11,985 shares were purchased by the Company with 11,415
shares remaining to be purchased. Compensation expense related to vesting
of shares was $78,881 for fiscal 1997.
F-26
<PAGE>
(16) Employee Stock Ownership Plan
-----------------------------
The Bank has an Employee Stock Ownership Plan (ESOP) established by the
Board of Directors during fiscal 1994. The ESOP borrowed $80,500 from a
federal savings bank and acquired 8,050 shares of the Bank's common stock
in October 1993. All shares acquired in 1993 have been allocated to
participants. With the stock offering in September 1996, the ESOP borrowed
$900,900 from a federal savings bank and acquired 46,800 shares of the
Bank's common stock. The Bank has presented the outstanding loan amounts
as an other liability and as a reduction of stockholders' equity in the
accompanying consolidated balance sheets at September 30, 1997 and 1996.
Interest on the unpaid principal balance is due quarterly and is based on
the prime rate. During fiscal 1997 and 1996, the Bank paid interest of
$72,552 and $3,535, respectively. Compensation recorded under the ESOP was
$129,028, $10,245 and $74,490 for the fiscal years 1997, 1996 and 1995,
respectively.
(17) Commitments
-----------
In conjunction with its lending activities, the Bank enters into various
commitments to extend credit and issue letters of credit. Loan commitments
(unfunded loans and unused lines of credit) and letters of credit are
issued to accommodate the financing needs of the Bank's customers. Loan
commitments are agreements by the Bank to lend monies at a future date, so
long as there are no violations of any conditions established in the
agreement. Letters of credit commit the Bank to make payments on behalf of
customers when certain specified events occur.
Financial instruments where the contract amount represents the Bank's
credit risk at September 30, 1997 and 1996, include loan and letter of
credit commitments of $27,941,000 and $10,014,175, respectively.
These loan and letter of credit commitments are subject to the same credit
policies and reviews as loans on the balance sheet. Collateral, both the
amount and nature, is obtained based upon management's assessment of the
credit risk. Since many of the extensions of credit are expected to expire
without being drawn, the total commitment amounts do not necessarily
represent future cash requirements.
Outstanding commitments on mortgage loans not yet closed amounted to
approximately $174,000 and $119,000 at September 30, 1997 and 1996,
respectively. Substantially, all of these commitments were at variable
interest rates. Such commitments, which are funded subject to certain
limitations, extend over varying periods of time with the majority being
funded within thirty days.
These commitments will be funded with the cash flow generated from normal
operations, as well as possible utilization of existing credit facilities
available to the Bank.
F-27
<PAGE>
(18) Carrying Amounts and Fair Value of Financial Instruments
--------------------------------------------------------
The Bank's fair value methods, assumptions, carrying amounts and fair
value of financial instruments at September 30, 1997 and 1996 are
summarized below:
For cash and cash equivalents and FHLB stock, the carrying value is a
reasonable estimate of fair value.
For investment securities available for sale, mortgage-backed securities
and collateralized mortgage obligations, fair value is based on available
quoted market prices or quoted market prices for similar securities if a
quoted market price is not available.
The fair value of fixed and adjustable rate loans is estimated based upon
discounted future cash flows using discount rates comparable to rates
currently offered for such loans. The discounted future cash flows reflect
estimated maturity dates adjusted for expected prepayments.
The fair value of time deposits is estimated by discounting the amounts
payable at the certificate rates currently offered for deposits of similar
remaining maturities. The fair value of all other deposit account types is
the amount payable on demand at year-end.
For FHLB advances, fair value is estimated based on discounting amounts
payable at the current rates offered to the Bank for debt of the same
remaining maturities.
F-28
<PAGE>
(18) Carrying Amounts and Fair Value of Financial Instruments, Continued
-------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
------------------------- ---------------------------
Carrying Calculated Carrying Calculated
Amount Fair Value Amount Fair Value
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 13,499,332 13,499,332 13,584,568 13,584,568
Investment in Limited
Partnership 5,003,835 5,003,835 -- --
Investment securities
available for sale 11,325,700 11,325,700 2,493,888 2,493,888
Federal Home Loan Bank
stock 1,650,000 1,650,000 993,700 993,700
Mortgage-backed securities
and collateralized
mortgage obligations, net 35,862,700 35,862,700 43,124,998 43,124,998
Loans receivable, net 178,772,266 179,094,089 140,757,990 143,404,634
------------ ------------ ------------ ------------
$246,113,833 246,435,656 200,955,144 203,601,788
============ ============ ============ ============
Financial liabilities:
Deposits
Demand deposits $ 62,167,517 62,301,280 55,752,124 55,752,124
Certificate accounts 138,834,341 139,272,816 103,883,278 103,732,129
Advances from the FHLB 15,000,000 15,069,702 16,000,000 15,954,810
------------ ------------ ------------ ------------
$216,001,858 216,643,798 175,635,402 175,439,063
============ ============ ============ ============
</TABLE>
The Bank had $27.9 million of off-balance sheet financial commitments,
which are commitments to originate loans and unused consumer lines of
credit. Since these obligations are based on current market rates, the
carrying amount is considered to be a reasonable estimate of fair value.
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates do not reflect any premium or discount that
could result from offering for sale the Bank's entire holdings of a
particular financial instrument. Because no active market exists for a
significant portion of the Bank's financial instruments, fair value
estimates are based on judgments regarding future expected loss
experience, current economic conditions, current interest rates and
prepayment trends, risk characteristics of various financial instruments,
and other factors. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and therefore cannot be
determined with precision. Changes in any of these assumptions used in
calculating fair value would also significantly affect the estimates.
Further, the fair value estimates were calculated as of September 30, 1997
and 1996. Changes in market interest rates and prepayment assumptions
could significantly change the fair value. Therefore, management believes
that the foregoing information is of limited value and has no basis for
determining whether the fair value presented would be indicative of the
value which could be negotiated during an actual sale.
F-29
<PAGE>
(18) Carrying Amounts and Fair Value of Financial Instruments, Continued
-------------------------------------------------------------------
Fair value estimates are based on existing on and off-balance sheet
financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities that
are not considered financial instruments. For example, the Bank has
significant assets and liabilities that are not considered financial
assets or liabilities including deposit franchise value, loan servicing
portfolio, real estate, deferred tax liabilities, premises and equipment,
and goodwill. In addition, the tax ramifications related to the
realization of the unrealized gains and losses can have a significant
effect on fair value estimates and have not been considered in any of
these estimates.
(19) Dividends
---------
During fiscal 1997, the Board of Directors declared cash dividends of $.30
per share for the first quarter and $.35 per share for the second, third,
and fourth quarters. For all 1997 dividends, the Bank obtained permission
from the OTS to waive dividends payable to the MHC. The cumulative waived
dividends to the MHC are considered as a restriction on the retained
earnings of the Bank which totaled $4.6 million at September 30, 1997. To
the extent the conversion discussed in note 1 is successful, these waived
dividends would no longer be restricted.
During fiscal 1996, the Board of Directors declared cash dividends of $.30
per share for all four quarters. For fiscal 1996 dividends, the Bank
obtained permission from the OTS to waive dividends payable to the MHC.
During fiscal 1995, the Board of Directors declared cash dividends of $.25
per share for the first three quarters and $.30 per share for the fourth
quarter. The dividends payable to the MHC were waived by the OTS.
F-30
<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 the Primary Parties or Sandler O'Neill. 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 the
Primary Parties since any of the dates as of which information is furnished
herein or since the date hereof.
Table of Contents Page
Prospectus Summary...................................
Selected Consolidated Financial Information..........
Recent Developments..................................
Risk Factors.........................................
Use of Proceeds......................................
Dividend Policy......................................
Market for Common Stock..............................
Capitalization.......................................
Historical and Pro Forma Regulatory Capital Compliance
Pro Forma Data.......................................
Conversion Shares to be Purchased by Management
Pursuant to Subscription Rights.....................
Perpetual Bank, A Federal Savings Bank and Subsidiary
Consolidated Statements of Operations...............
Management's Discussion and Analysis of Financial
Condition and Results of Operations.................
Business of the Holding Company......................
Business of the Savings Bank.........................
Management of the Holding Company....................
Management of the Savings Bank.......................
Regulation...........................................
Taxation.............................................
The Conversion and Reorganization....................
Comparison of Stockholders' Rights...................
Restrictions on Acquisition of the Holding Company...
Description of Capital Stock of the Holding Company
Registration Requirements............................
Legal and Tax Opinions...............................
Experts..............................................
Additional Information...............................
Index to Consolidated Financial Statements...........
Until the later of ____________, 1998, or 25 days after commencement of the
Syndicated Community Offering of Common Stock, if any, all dealers effecting
transactions in the registered securities, whether or not participating in this
distribution, may be required to deliver a prospectus. This is in addition to
the obligation of dealers to deliver a prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.
SOUTHBANC SHARES, INC.
[Logo]
(Proposed Holding Company for
Perpetual Bank, A Federal Savings Bank)
Up to 4,301,736 Shares of
Common Stock
Prospectus
SANDLER O'NEILL & PARTNERS, L.P.
_______________, 1998
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Officers and Directors
Article XVI of the Certificate of Incorporation of SouthBanc Shares,
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 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.
II-1
<PAGE>
(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 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.
II-2
<PAGE>
Item 25. Other Expenses of Issuance and Distribution(1)
Legal fees and expenses................................ $ 180,000
Securities Marketing Firm legal fees................... 75,000
EDGAR, printing, copying, postage, mailing............. 150,000
Appraisal/business plan fees and expenses.............. 40,000
Accounting fees........................................ 40,000
Securities marketing fees (1).......................... 506,250
Data processing fees and expenses...................... 18,000
SEC filing fee......................................... 21,500
OTS filing fee......................................... 8,400
Blue sky legal fees and expenses....................... 7,500
Other.................................................. 23,350
-----------
Total............................................ $1,070,000
===========
- ---------------
(1) Assumes a total offering of Conversion Shares of $34.5 million
(midpoint of the Estimated Valuation Range), a fee of 1.50% of the aggregate
Purchase Price of the shares of Common Stock sold in the Subscription and Direct
Community Offering and the Syndicated Community Offering, excluding shares
purchased by officers and directors of the Savings Bank and their associates.
See "THE CONVERSION AND REORGANIZATION -- Plan of Distribution and Selling
Commissions."
Item 26. Recent Sales of Unregistered Securities.
Not Applicable
Item 27. Exhibits
The exhibits filed as part of this Registration Statement are as
follows:
(a) List of Exhibits
1.1 -- Form of proposed Agency Agreement among SouthBanc Shares, Inc.,
Perpetual Bank, a Federal Savings Bank, SouthBanc Shares, M.H.C. and
Sandler O'Neill & Partners, L.P.
1.2 -- Engagement Letter with Perpetual Bank, A Federal Savings Bank and
Sandler O'Neill & Partners, L.P. (a)
2 -- Plan of Conversion and Agreement and Plan of Reorganization of
SouthBanc Shares, M.H.C. and Perpetual Bank, A Federal Savings Bank
(attached as an exhibit to the Special Meeting Proxy Statement and the
Annual Meeting Proxy Statement included herein as Exhibits 99.5 and
99.6, respectively)
3.1 -- Certificate of Incorporation of SouthBanc Shares, Inc. (a)
3.2 -- Bylaws of SouthBanc Shares, 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
II-3
<PAGE>
8.2 -- State Tax Opinion of Evans, Carter, Kunes & Bennett, P.A.
8.3 -- Opinion of RP Financial, LC. as to the value of subscription rights
(a)
10.1 -- Proposed Form of Employment Agreement for Executive Officers (a)
10.2 -- Perpetual Bank, A Federal Savings Bank 401(k) Plan
21 -- Subsidiaries of SouthBanc Shares, Inc. (a)
23.1 -- Consent of KPMG Peat Marwick LLP (a)
23.2 -- Consent of Breyer & Aguggia as to its Federal Tax Opinion
(contained in opinion included as Exhibit 8.1)
23.3 -- Consent of Evans, Carter, Kunes & Bennett, P.A. as to its State Tax
Opinion (contained in opinion included as Exhibit 8.2)
23.3 -- Consent of RP Financial, LC. (a)
24 -- Power of Attorney (included in signature page) (a)
99.1 -- Order and Acknowledgement Form (contained in the marketing
materials included herein as Exhibit 99.2) (a)
99.2 -- Solicitation and Marketing Materials (a)
99.3 -- Appraisal Agreement with RP Financial, LC. (a)
99.4 -- Appraisal Report of RP Financial, LC.
99.5 -- Proxy Statement for Special Meeting of Members of SouthBanc Shares,
M.H.C.
99.6 -- Proxy Statement for Annual Meeting of Stockholders of Perpetual
Bank, A Federal Savings Bank
- ---------------
(a) Previously filed.
Item 28. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act of 1933, as amended ("Securities Act");
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information 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 end of the estimated maximum offering range may be
reflected
II-4
<PAGE>
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 a 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement.
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time shall be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(4) The undersigned registrant hereby undertakes to provide the
underwriter at the closing specified in the underwriting agreement, certificates
in such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.
(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act, and is therefore, unenforceable. In the event
that a claim for indemnification against liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question 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 the
City of Anderson, State of South Carolina, on this 3rd day of February 1998.
SOUTHBANC SHARES, INC.
By: /s/ Robert W. Orr
--------------------------------------
Robert W. Orr
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>
<S> <C> <C>
Signatures Title Date
- ---------- ----- ----
/s/ Robert W. Orr President, Chief Executive February 3, 1998
- -------------------------------- Officer and Director
Robert W. Orr (Principal Executive Officer)
/s/ Thomas C. Hall* Treasurer and Chief Financial February 3, 1998
- -------------------------------- Officer (Principal Financial
Thomas C. Hall and Accounting Officer)
/s/ Cordes G. Seabrook, Jr.* Chairman of the Board February 3, 1998
- --------------------------------
Cordes G. Seabrook, Jr.
/s/ Harold A. Pickens, Jr.* Director February 3, 1998
- --------------------------------
Harold A. Pickens, Jr.
/s/ Martha S. Clamp* Director February 3, 1998
- --------------------------------
Martha S. Clamp
/s/ Jack F. McIntosh* Director February 3, 1998
- --------------------------------
Jack F. McIntosh
/s/ Charles W. Fant, Jr.* Director February 3, 1998
- --------------------------------
Charles W. Fant, Jr.
/s/ Jim Gray Watson* Director February 3, 1998
- --------------------------------
Jim Gray Watson
/s/ Richard C. Ballenger* Director February 3, 1998
- --------------------------------
Richard C. Ballenger
/s/ F. Stevon Kay* Director February 3, 1998
- --------------------------------
F. Stevon Kay
</TABLE>
* By power of attorney dated December 17, 1997.
<PAGE>
As filed with the Securities and Exchange Commission on February 3, 1998
Registration No. 333-42517
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
EXHIBITS
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
SOUTHBANC SHARES, INC.
----------------------------------------------------------
(Exact name of registrant as specified in charter)
Delaware 6035 58-2361245
- ------------------------------- ------------------- ------------------
(State or other jurisdiction of (Primary SICC No.) (I.R.S. Employer
incorporation or organization) Identification No.)
907 N. Main Street
Anderson, South Carolina 29621
(864) 225-0241
-------------------------------------------------------------------
(Address and telephone number of principal executive offices)
Paul M. Aguggia, Esquire
Victor L. Cangelosi, Esquire
BREYER & AGUGGIA
Suite 470 East
1300 I Street, N.W.
Washington, D.C. 20005
------------------------------
(Name and address of agent for service)
<PAGE>
INDEX TO EXHIBITS
1.1 -- Form of proposed Agency Agreement among SouthBanc Shares, Inc.,
Perpetual Bank, a Federal Savings Bank, SouthBanc Shares, M.H.C.
and Sandler O'Neill & Partners, L.P.
1.2 -- Engagement Letter with Perpetual Bank, A Federal Savings Bank and
Sandler O'Neill & Partners, L.P. (a)
2 -- Plan of Conversion and Agreement and Plan of Reorganization of
SouthBanc Shares, M.H.C. and Perpetual Bank, A Federal Savings
Bank (attached as an exhibit to the Special Meeting Proxy
Statement and the Annual Meeting Proxy Statement included herein
as Exhibits 99.5 and 99.6, respectively)
3.1 -- Certificate of Incorporation of SouthBanc Shares, Inc. (a)
3.2 -- Bylaws of SouthBanc Shares, 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 Evans, Carter, Kunes & Bennett, P.A.
8.3 -- Opinion of RP Financial, LC. as to the value of subscription
rights (a)
10.1 -- Proposed Form of Employment Agreement for Executive Officers (a)
10.2 -- Perpetual Bank, A Federal Savings Bank 401(k) Plan
21 -- Subsidiaries of SouthBanc Shares, Inc. (a)
23.1 -- Consent of KPMG Peat Marwick LLP (a)
23.2 -- Consent of Breyer & Aguggia as to its Federal Tax Opinion
(contained in opinion included as Exhibit 8.1)
23.3 -- Consent of Evans, Carter, Kunes & Bennett, P.A. as to their State
Tax Opinion (contained in opinion included as Exhibit 8.2)
23.4 -- Consent of RP Financial, LC. (a)
24 -- Power of Attorney (included in signature page) (a)
99.1 -- Order and Acknowledgement Form (contained in the marketing
materials included herein as Exhibit 99.2) (a)
99.2 -- Solicitation and Marketing Materials (a)
99.3 -- Appraisal Agreement with RP Financial, LC. (a)
99.4 -- Appraisal Report of RP Financial, LC.
99.5 -- Proxy Statement for Special Meeting of Members of SouthBanc
Shares, M.H.C.
99.6 -- Proxy Statement for Annual Meeting of Stockholders of Perpetual
Bank, A Federal Savings Bank
- ---------------
(a) Previously filed.
<PAGE>
EXHIBIT 1.1
1,983,750 Shares
(subject to increase up to 2,281,312 shares
in the event of an oversubscription)
SOUTHBANC SHARES, INC.
(a Delaware corporation)
Common Stock
(par value $.01 per share)
AGENCY AGREEMENT
____________, 1998
SANDLER O'NEILL & PARTNERS, L.P.
Two World Trade Center, 104th Floor
New York, New York 10048
Ladies and Gentlemen:
SouthBanc Shares, Inc., a Delaware corporation (the "Company"), SouthBanc
Shares, M.H.C., a federally chartered mutual holding company (the "MHC") and
Perpetual Bank, A Federal Savings Bank, a federally-chartered stock savings bank
(the "Bank"), hereby confirm their agreement with Sandler O'Neill & Partners,
L.P. ("Sandler O'Neill" or the "Agent") with respect to the offer and sale by
the Company of 1,983,750 shares (subject to increase up to 2,281,312 shares in
the event of an oversubscription) of the Company's Common Stock, par value $.01
per share (the "Common Stock"). The shares of Common Stock to be sold by the
Company are hereinafter called the "Securities."
The Securities are being offered for sale in accordance with the plan of
conversion (the "Plan") adopted by the Board of Directors of the Bank and the
MHC on September 22, 1997 and subsequently amended on December 22, 1997 pursuant
to which: (i) the MHC will convert to an interim federal stock savings bank
("Interim A") and simultaneously merge with and into the Bank, pursuant to which
the MHC will cease to exist and the outstanding shares of the Bank Common Stock
held by the MHC (800,000 shares, or 53.02% of the outstanding Bank Common Stock
as of the date of the Registration Statement) will be canceled, and (ii) an
interim federal stock savings bank ("Interim B") will be formed as a wholly-
owned subsidiary of the Company and will merge with and into the Bank, resulting
in the Bank becoming a wholly-owned subsidiary of the Company
<PAGE>
and the outstanding Bank common stock (708,873 shares, or 46.98% of the
outstanding Bank Common Stock as of the date of the Registration Statement) will
be converted into the Exchange Shares pursuant to an Exchange Ratio. The
Exchange Ratio will result in the holders of the outstanding Public Bank common
stock owning in the aggregate approximately the same percentage of the Common
Stock to be outstanding upon the completion of the Conversion and Reorganization
(i.e., the Conversion Shares and the Exchange Shares) as the percentage of Bank
----
Common Stock owned by them in the aggregate immediately before the consummation
of the Conversion and Reorganization, before giving effect to any (i) payment of
cash in lieu of issuing fractional Exchange Shares and (ii) Conversion Shares
purchased by the Stockholders in the Conversion Offerings.
Pursuant to the Plan, the Company is offering to certain of the Bank' s
depositors rights to subscribe for the Securities in a subscription offering
(the "Subscription Offering"). To the extent Securities are not subscribed for
in the Subscription Offering, such Securities will be offered in a Direct
Community Offering to certain members of the general public, with first
preference given to Public Stockholders as of the close of business on the
Voting Record Date (who are not Eligible Account Holders, Supplemental Eligible
Account Holders or Other Members) and then to natural persons residing in the
counties in Anderson and Oconee Counties, South Carolina (the "Community
Offering" and together with the Subscription Offering, as each may be extended
or reopened from time to time, the "Subscription and Community Offering"). It is
currently anticipated by the Bank, the MHC and the Company that any Securities
not subscribed for in the Subscription and Community Offering will be offered,
subject to Section 2 hereof, on a best efforts basis by a selling group of
broker-dealers managed by Sandler O'Neill in a syndicated community offering
(the "Syndicated Community Offering"). The Subscription and Community Offering
and the Syndicated Community Offering are hereinafter referred to collectively
as the "Offerings." The conversion of the MHC, the consolidation of the MHC with
and into the Bank, the acquisition of all of the Bank's capital stock by the
Company and the Offerings are hereinafter referred to collectively as the
"Conversion". It is acknowledged that the number of Securities to be sold in the
Offerings may be increased or decreased as described in the Prospectus (as
hereinafter defined). If the number of Securities is increased or decreased in
accordance with the Plan, the term "Securities" shall mean such greater or
lesser number, where applicable.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-42517) including a
prospectus for the registration of the Securities under the Securities Act of
1933, as amended (the "Securities Act"), has filed such amendments thereto, if
any, and such amended prospectuses as may have been required to the date hereof
by the Commission in order to declare such registration statement effective, and
will file such additional amendments thereto and such amended prospectuses and
prospectus supplements as may hereafter be required. Such registration statement
(as amended to date, if applicable, and as from time to time amended or
supplemented hereafter) and the prospectuses constituting a part thereof
(including in each case all documents incorporated or deemed to be incorporated
by reference therein and the information, if any, deemed to be part thereof
pursuant to the rules and regulations of the Commission under the Securities
Act, as from time to time amended or supplemental pursuant to the Securities Act
or otherwise (the "Securities Act Regulations")) are hereinafter referred to as
the
2
<PAGE>
"Registration Statement" and the "Prospectus", respectively, except that if
any revised prospectus shall be used by the Company in connection with the
Subscription and Community Offering or the Syndicated Community Offering which
differs from the Prospectus on file with the Commission at the time the
Registration Statement becomes effective (whether or not such revised prospectus
is required to be filed by the Company pursuant to Rule 424(b) of the Securities
Act Regulations), the term "Prospectus" shall refer to such revised prospectus
from and after the time it is provided to the Agent for such use.
Concurrently with the execution of this Agreement, the Company is
delivering to the Agent copies of the Prospectus of the Company to be used in
the Subscription and Community Offering. Such prospectus contains information
with respect to the Bank, the MHC, the Company and the Common Stock.
SECTION 1. REPRESENTATIONS AND WARRANTIES.
(a) The Company, the MHC and the Bank jointly and severally represent and
warrant to the Agent as of the date hereof as follows:
(i) The Registration Statement has been declared effective by the
Commission, no stop order has been issued with respect thereto and no
proceedings therefor have been initiated or, to the knowledge of the Company,
the MHC and the Bank, threatened by the Commission. At the time the Registration
Statement became effective and at the Closing Time referred to in Section 2
hereof, the Registration Statement complied and will comply in all material
respects with the requirements of the Securities Act and the Securities Act
Regulations and did not and 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 not misleading. The Prospectus, at the date
hereof does not and at the Closing Time referred to in Section 2 hereof will
not, include an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the representations and warranties in this subsection shall not apply to
statements in or omissions from the Prospectus made in reliance upon and in
conformity with information with respect to the Agent furnished to the Company
in writing by the Agent expressly for use in the Prospectus (the "Agent
Information," which the Company, the MHC and the Bank acknowledge appears only
in the sections captioned "Market for Common Stock" and the first two paragraphs
of the section captioned "The Conversion - Marketing Arrangements" of the
Prospectus).
(ii) The Company has filed with the Department of the Treasury, Office
of Thrift Supervision (the "OTS") the Company's application for approval of its
acquisition of the Bank (the "Holding Company Application") on Form H-(e)l-S
promulgated under the savings and loan holding company provisions of the Home
Owners' Loan Act, as amended, ("HOLA") and the regulations promulgated
thereunder. The Company has received written notice from the OTS of its approval
of the acquisition of the Bank, such approval remains in full force and effect
and no order has been issued by the OTS suspending or revoking such approval and
no proceedings therefor have been
3
<PAGE>
initiated or, to the knowledge of the Company, the MHC or the Bank, threatened
by the OTS. At the date of such approval and the Closing Time as referred to in
Section 2, the Holding Company Application complied and will comply in all
material respects with the applicable provisions of HOLA and the regulations
promulgated thereunder.
(iii) Pursuant to the Rules and Regulations of the Office of
Thrift Supervision ("OTS") governing the conversion of federally-chartered
mutual savings banks and mutual holding companies to stock form (the "Conversion
Regulations"), the Bank has filed with the OTS an application for conversion,
and has filed such amendments thereto and supplementary materials as may be
required to the date hereof (such application, as amended to date, if
applicable, and as from time to time amended or supplemented hereafter, is
hereinafter referred to as the "Conversion Application"), including copies of
the Bank's Proxy Statement, to be dated __________, 1998, relating to the
Conversion (the "Proxy Statement"), and the Prospectus. The OTS has, by letter
dated __________, 1998, approved the Conversion Application, such approval
remains in full force and effect and no order has been issued by the OTS
suspending or revoking such approval and no proceedings therefor have been
initiated or, to the knowledge of the Company, the MHC or the Bank, threatened
by the OTS. At the date of such approval by the OTS and at the Closing Time
referred to in Section 2, the Conversion Application complied and will comply in
all material respects with the applicable provisions of the Conversion
Regulations.
(iv) At the time of their use, the Proxy Statement and any other proxy
solicitation materials will comply in all material respects with the applicable
provisions of the Conversion Regulations and will 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 the light of the circumstances under which
they were made, not misleading. The Company and the Bank will promptly file the
Prospectus and any supplemental sales literature with the Commission and the
OTS. The Prospectus and all supplemental sales literature, as of the date the
Registration Statement became effective and at the Closing Time referred to in
Section 2, complied and will comply in all material respects with the applicable
requirements of the Conversion Regulations and, at or prior to the time of their
first use, will have received all required authorizations of the OTS for use in
final form.
(v) None of the Commission nor OTS has, by order or otherwise,
prevented or suspended the use of the Prospectus or any supplemental sales
literature authorized by the Company or the Bank for use in connection with the
Offerings.
(vi) At the Closing Time referred to in Section 2, the Company and the
Bank will have completed the conditions precedent to the Conversion and the
establishment of the Foundation in accordance with the Plan, the applicable
Conversion Regulations and all other applicable laws, regulations, decisions and
orders, including all material terms, conditions, requirements and provisions
precedent to the Conversion imposed upon the Company or the Bank by the OTS, the
OTS, or any other regulatory authority, other than those which the regulatory
authority permits to be completed after the Conversion.
4
<PAGE>
(vii) RP Financial, Inc., which prepared the valuation of the
Company and the Bank as part of the Conversion, has advised the Company, the MHC
and the Bank in writing that it satisfies all requirements for an appraiser set
forth in the Conversion Regulations and any interpretations or guidelines issued
by the OTS with respect thereto.
(viii) The accountants who certified the consolidated financial
statements and supporting schedules of the Bank included in the Registration
Statement have advised the Company, the MHC and the Bank in writing that they
are independent public accountants within the meaning of the Code of Ethics of
the American Institute of Certified Public Accountants, and that such
accountants are, with respect to the Company, the MHC and the Bank, independent
certified public accountants as required by the Securities Act and the
Securities Act Regulations.
(ix) The only direct subsidiary of the MHC is the Bank. The only
subsidiaries (the "Subsidiaries") of the Bank are _____________________ and
________________.
(x) The consolidated financial statements and the related notes
thereto included in the Registration Statement and the Prospectus present fairly
the consolidated financial position of the MHC, the Bank and the Subsidiaries at
the dates indicated and the results of operations, retained earnings and cash
flows for the periods specified, and comply as to form in all material respects
with the applicable accounting requirements of the Securities Act Regulations
and the Conversion Regulations; except as otherwise stated in the Registration
Statement, said financial statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis; and the
supporting schedules and tables included in the Registration Statement present
fairly the information required to he stated therein.
(xi) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, except as otherwise stated
therein (A) there has been no material adverse change in the financial
condition, results of operations or business affairs of the Company, the MHC,
the Bank and the Subsidiaries taken as a whole, whether or not arising in the
ordinary course of business, and (B) except for transactions specifically
referred to or contemplated in the Prospectus, there have been no transactions
entered into by the Company, the MHC, the Bank or the Subsidiaries other than
those in the ordinary course of business, which are material with respect to the
Company, the MHC, the Bank and the Subsidiaries taken as a whole.
(xii) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware with corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus and to
enter into and perform its obligations under this Agreement; and the Company is
duly qualified as a foreign corporation to transact business and is in good
standing in the State of South Carolina and in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure to so qualify
would not have a material adverse effect on the financial condition, results of
operations or business affairs of the Company, the Bank, and the Subsidiaries,
taken as a whole.
5
<PAGE>
The MHC has been duly chartered and is validly existing as a mutual
holding company under the laws of the United States with corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Prospectus and to enter into and perform its obligations
under this Agreement; the MHC is qualified to do business in any jurisdiction in
which the failure to so qualify would have a material adverse effect on the
financial condition, results of operations or business of the Company, the MHC,
the Bank and the Subsidiaries, taken as a whole; upon consummation of the
Conversion, the MHC will merge with and into the Bank, with the Bank being the
surviving institution.
(xiii) Upon consummation of the Conversion as described in the
Prospectus, the authorized, issued and outstanding capital stock of the Company
will be as set forth in the Prospectus under "Capitalization" (except for
subsequent issuances, if any, pursuant to reservations, agreements or employee
benefit plans referred to in the Prospectus); no shares of Common Stock have
been or will be issued and outstanding prior to the Closing Time referred to in
Section 2; at the time of Conversion, the Securities will have been duly
authorized for issuance and, when issued and delivered by the Company pursuant
to the Plan against payment of the consideration calculated as set forth in the
Plan and stated on the cover page of the Prospectus, will be duly and validly
issued and fully paid and non-assessable; the terms and provisions of the Common
Stock and the capital stock of the Company conform to all statements relating
thereto contained in the Prospectus; the certificates representing the shares of
Common Stock conform to the requirements of applicable law and regulations; and
the issuance of the Securities is not subject to preemptive or other similar
rights.
(xiv) The Bank, as of the date hereof, is a federally-chartered
savings bank in mutual form and upon consummation of the Conversion will be a
federally-chartered savings bank in stock form, in both instances with full
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Prospectus; the Company, the MHC, the
Bank and the Subsidiaries have obtained all licenses, permits and other
governmental authorizations currently required for the conduct of their
respective businesses or required for the conduct of their respective businesses
as contemplated by the Holding Company Application and the Conversion
Application, except where the failure to obtain such licenses, permits or other
governmental authorizations would not have a material adverse effect on the
financial condition, results of operations or business affairs of the Company,
the MHC, the Bank and the Subsidiaries taken as a whole; all such licenses,
permits and other governmental authorizations are in full force and effect and
the Company, the MHC, the Bank and the Subsidiaries are in all material respects
in compliance therewith; neither the Company, the MHC, the Bank nor any of the
Subsidiaries has received notice of any proceeding or action relating to the
revocation or modification of any such license, permit or other governmental
authorization which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, might have a material adverse effect on
the financial condition, results of operations or business affairs of the
Company, the MHC, the Bank and the Subsidiaries, taken as a whole, and the Bank
is in good standing under the laws of the United States and is qualified as a
foreign corporation in any jurisdiction in which the failure to so qualify would
not have a material adverse effect on the financial condition, results of
operations or business affairs of the Company, the MHC, the Bank and the
Subsidiaries, taken as a whole.
6
<PAGE>
(xv) The deposit accounts of the Bank are insured by the FDIC up to
the applicable limits and upon consummation of the Conversion, the liquidation
account for the benefit of eligible account holders will be duly established in
accordance with the requirements of the Conversion Regulations. The Bank is a
"qualified thrift lender" within the meaning of 12 U.S.C. Section 1467a(m).
(xvi) Upon consummation of the Conversion, the authorized capital
stock of the Bank will be _______ shares of commons stock, par value $_____ per
share (the "Bank Common Stock") and __________ shares of serial preferred stock,
par value $_____ per share (the "Bank Preferred stock"), and the issued and
outstanding capital stock of the Bank will be ______ shares of Bank Common
stock; shares of Bank Common Stock and no shares of Bank Preferred Stock are
issued and outstanding as of the date hereof. No additional shares of Bank
Common Stock and no shares of Bank Preferred Stock will be issued prior to the
Closing Time referred to in Section 2; the issued and outstanding shares of Bank
Common stock have been duly authorized and validly issued, are fully paid and
nonassessable, and have been issued in compliance with all federal and state
securities laws and are owned by the MHC beneficially and of record free and
clear of any security interest, mortgage, pledge, lien, encumbrance, claim or
equity. The shares of Bank Common Stock to be issued to the Company will have
been duly authorized for issuance and, when issued and delivered by the Bank
pursuant to the Plan against payment of the consideration calculated as set
forth in the Plan and as described in the Prospectus, will be duly and validly
issued and fully paid and nonassessable, and all such Bank Common Stock will be
owned beneficially and of record by the Company free and clear of any security
interest, mortgage, pledge, lien, encumbrance or legal or equitable claim; the
terms and provisions of the Bank Common Stock and the Bank Preferred Stock
conform to all statements relating thereto contained in the Prospectus, and the
certificates representing the shares of the Bank Common Stock will conform with
the requirements of applicable laws and regulations; and the issuance of the
Bank Common stock is not subject to preemptive or similar rights.
(xvii) Each Subsidiary has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation, has full corporate power and authority to own, lease and
operate its properties and to conduct its business as descried in the
Registration Statement and Prospectus, is duly qualified to transact business
and is in good standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure to so qualify would not have a
material adverse effect on the financial condition, results of operations or
business of the Company, the MHC, the Bank and the Subsidiaries, taken as a
whole; the activities of the Subsidiaries are permitted to subsidiaries of a
federally-chartered savings bank by the rules, regulations, resolutions and
practices of the OTS and the FDIC; all of the issued and outstanding capital
stock of the Subsidiaries has ben duly authorized and validly issued, is fully
paid and nonassessable and is owned by the Bank directly, free and clear of any
security interest, mortgage, pledge, lien, encumbrance or legal or equitable
claim.
7
<PAGE>
(xviii) This Agreement has been duly executed and delivered by, and
is the valid and binding agreement of, the Company, the MHC and the Bank,
enforceable in accordance with its terms, except as may be limited by
bankruptcy, insolvency or other laws affecting the enforceability of the rights
of creditors generally and judicial limitations on the right of specific
performance and except as the enforceability of indemnification and contribution
provisions may be limited by applicable securities laws.
(xix) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus and prior to the
Closing Time, except as otherwise may be indicated or contemplated therein, none
of the Company, the MHC, the Bank nor the Subsidiaries will have (A) issued any
securities or incurred any liability or obligation, direct or contingent, or
borrowed money, except borrowings in the ordinary course of business from the
same or similar sources and in similar amounts as indicated in the Prospectus,
or (B) entered into any transaction or series of transactions which is material
in light of the business of the Company and the Bank, taken as a whole,
excluding the origination, purchase and sale of loans or the purchase or sale of
investment securities or mortgage-backed securities in the ordinary course of
business.
(xx) No approval of any regulatory or supervisory authority or any
other public authority is required in connection with the execution and delivery
of this Agreement or the issuance of the Securities and the Foundation Shares
that has not been obtained and a copy of which has been delivered to the Agent,
except as may be required under the securities laws of various jurisdictions.
(xxi) None of the Company, the MHC, the Bank nor any of the
Subsidiaries is in violation of its certificate of incorporation, organization
certificate, articles of incorporation or charter as the case may be, or bylaws;
and neither the Company, the MHC, the Bank nor any of the Subsidiaries is in
default (nor has any event occurred which, with notice or lapse of time or both,
would constitute a default) in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture, mortgage,
loan agreement, note, lease or other instrument to which the Company, the MHC,
the Bank, or any of the Subsidiaries is a party or by which it or any of them
may be bound, or to which any of the property or assets of the Company, the MHC,
the Bank or any of the Subsidiaries is subject, except for such defaults that
would not individually or in the aggregate, have a material adverse effect on
the financial condition, results of operations or business of the Company, the
MHC, the Bank and the Subsidiaries, taken as a whole; and there are no contracts
or documents of the Company, the MHC, the Bank or any of the Subsidiaries which
are required to be filed as exhibits to the Registration Statement or the
Conversion Application which have not been so filed.
(xxii) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated herein have been duly
authorized by all necessary corporate action and do not and will not conflict
with or constitute a breach of, or default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company, the MHC, the Bank or any of the Subsidiaries pursuant to, any contract,
indenture, mortgage, loan agreement, note, lease or other instrument to which
the Company, the MHC, the
8
<PAGE>
Bank or any of the Subsidiaries is a party or by which it or any of them may be
bound, or to which any of the property or assets of the Company, the MHC, the
Bank or any of the Subsidiaries is subject, except for such defaults that would
not, individually or in the aggregate, have a material adverse effect on the
financial condition, results of operations or business of the Company, the MHC,
the Bank and the Subsidiaries taken as a whole; nor will such action result in
any violation of the provisions of the certificate of incorporation,
organization certificate, articles of incorporation or charter, as the case may
be, or the by-laws of the Company, the MHC, the Bank or any of the subsidiaries,
or any applicable law, administrative regulation or administrative or court
decree to which the Company, the MHC, the Bank or any of the Subsidiaries is
subject or by which any of their property or assets may be bound.
(xxiii) No labor dispute with the employees of the Company, the MHC,
the Bank or any of the Subsidiaries exists or, to the knowledge of the Company,
the MHC or the Bank, is threatened; and the Company, the MHC and the Bank are
not aware of any existing or threatened labor disturbance by the employees of
any of its principal suppliers or contractors which might be expected to result
in any material adverse change in the financial condition, results of operations
or business of the Company, the MHC and the Bank, taken as a whole.
(xxiv) Each of the Company, the MHC, the Bank and the Subsidiaries
has good and marketable title to all properties and assets for which ownership
is material to the business of the Company, the MHC, the Bank or the
Subsidiaries and to those properties and assets described in the Prospectus as
owned by them, free and clear of all liens, charges, encumbrances or
restrictions, except such as are described in the Prospectus or are not material
in relation to the business of the Company, the MHC, the Bank and the
Subsidiaries taken as a whole; and all of the leases and subleases material to
the business of the Company, the MHC the Bank and the Subsidiaries, under which
the Company, the MHC, the Bank and any of the Subsidiaries hold properties,
including those described in the Prospectus, are valid and binding agreements of
the Company, the MHC, the Bank and any of the Subsidiaries enforceable in
accordance with their terms.
(xxv) None of the Company, the MHC, the Bank nor any of the
Subsidiaries is in violation of any directive from the OTS to make any material
change in the method of conducting their respective businesses; the Bank and the
Subsidiaries have conducted and are conducting their businesses so as to comply
with all applicable statutes, regulations and administrative and court decrees
(including, without limitation, all regulations, decisions, directives and
orders of the OTS).
(xxvi) There is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, the MHC or the Bank, threatened, against or
affecting the Company, the MHC, the Bank or any of the Subsidiaries which is
required to be disclosed in the Registration Statement (other than as disclosed
therein), or which might result in any material adverse change in the financial
condition, results of operations or business affairs of the Company, the MHC,
the Bank and the Subsidiaries, taken as a whole, or which might materially and
adversely affect the properties or assets thereof or which might materially and
adversely affect the consummation of the Conversion; all pending legal or
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governmental proceedings to which the Company, the MHC, the Bank or any of its
Subsidiaries is a party or of which any of their respective property or assets
is the subject which are not described in the Registration Statement, including
ordinary routine litigation incidental to their business, are considered in the
aggregate not material; and there are no contracts or documents of the Company,
the MHC, the Bank or any of the Subsidiaries which are required to be filed as
exhibits to the Registration Statement or the Conversion Application which have
not been so filed.
(xxvii) The Bank has obtained an opinion of its counsel, Breyer &
Aggugia with respect to the legality of the Securities to be issued and the
federal income tax consequences of the Conversion, copies of which are filed as
exhibits to the Registration Statement; the Bank has obtained the opinion of
Evans, Carter, Kunes & Bennett, P.A., Charleston, South Carolina with respect to
the state and local income tax consequences of the Conversion (including
franchise tax, sales or use tax, license fee on foreign corporations, stock
transfer tax, real property transfer gain tax and real estate transfer tax),
copies of which are filed as exhibits to the Registration Statement; all
material aspects of the aforesaid opinions are accurately summarized in the
Prospectus; the facts and representations upon which such opinions are based are
truthful, accurate and complete in all material respects; and neither the Bank,
the MHC nor the Company has taken or will take any action inconsistent
therewith.
(xxviii) The Company is not required to be registered under the
Investment Company Act of 1940, as amended.
(xxix) All of the loans represented as assets on the most recent
consolidated financial statements or consolidated selected financial information
of the Bank 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 result in a
material adverse effect on the financial condition, results of operations or
business of the Company, the MHC, the Bank and the Subsidiaries taken as a
whole.
(xxx) The Company, the MHC, the Bank and the Subsidiaries are in
compliance in all material respects with the applicable financial recordkeeping
and reporting requirements of the Currency and Foreign Transaction Reporting Act
of 1970. as amended. and the rules and regulations thereunder.
(xxxi) None of the Company, the MHC, the Bank nor any of the
Subsidiaries nor any properties owned or operated by the Company, the MHC, the
Bank or any of the Subsidiaries is in violation of or liable under any
Environmental Law (as defined below), except for such violations or liabilities
that, individually or in the aggregate, would not have a material adverse effect
on the financial condition, results of operations or business of the Company,
the MHC, the Bank and the Subsidiaries, taken as a whole. There are no actions,
suits or proceedings, or demands, claims, notices or investigations (including,
without limitation, notices, demand letters or requests for
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information from any environmental agency) instituted or pending, or to the
knowledge of the Company, the MHC or the Bank threatened, relating to the
liability of any property owned or operated by the Company, the MHC, the Bank or
any Subsidiary thereof, under any Environmental Law. For purposes of this
subsection, the term "Environmental Law" means any federal, state, local or
foreign law, statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, order, judgment, decree, injunction or
agreement with any regulatory authority relating to (i) the protection,
preservation or restoration of the environment (including, without limitation,
air, water, vapor, surface water, groundwater, drinking water supply, surface
soil, subsurface soil, plant and animal life or any other natural resource),
and/or (ii) the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production. release or disposal of any substance
presently listed, defined, designated or classified as hazardous, toxic,
radioactive or dangerous, or otherwise regulated, whether by type or by
quantity, including any material containing any such substance as a component.
(xxxii) The Company, the MHC, the Bank and the Subsidiaries have
filed all federal income and state and local franchise tax returns required to
be filed and have made timely payments of all taxes shown as due and payable in
respect of such returns, and no deficiency has been asserted with respect
thereto by any taxing authority.
(xxxiii) The Company has received approval, subject to regulatory
approval to consummate the Offerings and issuance, to have the Securities quoted
on the Nasdaq Stock Market (the "Nasdaq National Market") effective at the
Closing Time referred to in Section 2 hereof.
(xxxiv) The Company has filed a registration statement for the
Common Stock under Section 12(g) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act Registration Statement") and has requested that such
registration statement be effective concurrent with the effectiveness of the
Registration Statement.
(b) Any certificate signed by any officer of the Company, the MHC or
the Bank and delivered to either of the Agent or counsel for the Agent shall be
deemed a representation and warranty by the Company, the MHC or the Bank to each
of the matters covered thereby.
SECTION 2. APPOINTMENT OF SANDLER O'NEILL; SALE AND DELIVERY OF THE
SECURITIES; CLOSING.
On the basis of the representations and warranties herein contained and
subject to the terms and conditions herein set forth, the Company hereby
appoints Sandler O"Neill as its Agent to consult with and advise the Company,
and to assist the Company with the solicitation of subscriptions and purchase
orders for Securities, in connection with the Company's sale of Common Stock in
The Subscription and Community Offering and the Syndicated Community Offering.
On the basis of the representations and warranties herein contained, and subject
to the terms and conditions herein set forth, Sandler O'Neill accepts such
appointment and agrees to use its best efforts to assist the Company with its
solicitation of subscriptions and purchase orders for Securities in accordance
with this Agreement; provided, however, that the Agent shall not be obligated to
take any action that is
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inconsistent with any applicable laws, regulations, decisions or orders. The
services to be rendered by Sandler O'Neill pursuant to this appointment include
the following: (i) consulting as to the securities marketing implications of any
aspect of the Plan or related corporate documents; (ii) reviewing with the
Bank's Board of Directors the independent appraiser's appraisal of the aggregate
pro forma market value of the MHC and Bank, as converted; (iii) reviewing all
offering documents, including the Prospectus, stock order forms and related
offering materials (it being understood that the preparation and filing of such
documents is the sole responsibility of the MHC, the Company and the Bank and
their counsel); (iv) assisting in the design and implementation of a marketing
strategy for the Offerings; (v) assisting in obtaining all requisite regulatory
approvals; (vi) assisting Bank management in preparing for meetings with
potential investors and broker-dealers; and (vii) providing such other general
advice and assistance as may be requested to promote the successful completion
of the Conversion offerings.
The appointment of the Agent hereunder shall terminate upon the earlier to
occur of (a) forty five (45) days after the last day of the Subscription and
Community Offering, unless the Company and the Agent agree in writing to extend
such period and the OTS agrees to extend the period of time in which the Shares
may be sold, (b) the receipt and acceptance of subscriptions and purchase orders
for all of the Securities, or (c) the completion of the Syndicated Community
Offering.
If any of the Securities remain available after the expiration of the
Subscription Offering and Community Offering, at the request of the Company and
the Bank, Sandler O'Neill will seek to form a syndicate of registered brokers or
dealers ("Selected Dealers") to assist in the solicitation of purchase orders of
such Securities on a best efforts basis, subject to the terms and conditions set
forth in a selected dealers' agreement (the "Selected Dealers' Agreement"),
substantially in the form set forth in Exhibit A to this Agreement. Sandler
O'Neill will endeavor to limit the aggregate fees to be paid by the Company and
the Bank under any such Selected Dealers' Agreement to an amount competitive
with gross underwriting discounts charged at such time for underwritings of
comparable amounts of stock sold at a comparable price per share in a similar
market environment; provided, however, that the aggregate fees payable to Sander
O'Neill and Selected Dealers shall not exceed 1.75% of the aggregate Purchase
Price of the Securities sold by such Selected Dealers. Sander O'Neill will
endeavor to distribute the Securities among the Selected Dealers in a fashion
which best meets the distribution objective of the Company and the requirements
of the Plan, which may result in limiting the allocation of stock to certain
Selected Dealers. It is understood that in no event shall Sandler O'Neill be
obligated to act as a Selected Dealer or to take or purchase any Securities.
In the event the Company is unable to sell at least the total minimum of
the Securities, as set forth on the cover page of the Prospectus, within the
period herein provided, this Agreement shall terminate and the Company shall
refund to any persons who have subscribed for any of the Securities 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 others hereunder, except for the obligations of the Company and the Bank as
set forth in Sections 4, 6(a) and 7 hereof and the obligations of the Agent as
provided in Sections 6(b) and 7 hereof. Appropriate arrangements for placing the
funds received from subscriptions for Securities or other offers to purchase
Securities
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in special interest-bearing accounts with the Bank until all Securities are sold
and paid for were made prior to the commencement of the Subscription Offering,
with provision for refund to the purchasers as set forth above, or for delivery
to the Company if all Securities are sold.
If at least the total minimum of Securities, as set forth on the cover page
of the Prospectus, are sold, the Company agrees to issue or have issued the
Securities sold and to release for delivery certificates for such Securities at
the Closing Time against payment therefor by release of funds from the special
interest-bearing accounts referred to above. The closing shall be held at the
office of Breyer & Aguggia at ____ ____, local time, or at such other place and
time as shall be agreed upon by the parties hereto, on a business day to be
agreed upon by the parties hereto. The Company shall notify the Agent by
telephone, confirmed in writing, when funds shall have been received for all the
Securities. Certificates for Securities shall be delivered directly to the
purchasers thereof in accordance with their directions. Notwithstanding the
foregoing, certificates for Securities purchased through Selected Dealers shall
be made available to the Agent for inspection at least 48 hours prior to the
Closing Time at such office as the Agent shall designate. The hour and date upon
which the Company shall release for delivery all of the Securities, in
accordance with the terms hereof, is herein called the "Closing Time."
The Company will pay any stock issue and transfer taxes which may be
payable with respect to the sale of the Securities.
In addition to reimbursement of the expenses specified in Section 4 hereof,
the Agent will receive the following compensation for its services hereunder:
(a) One and one-half percent (1.50%) of the aggregate Purchase Price (as
defined in the Prospectus) of the Securities sold in the Subscription and
Community Offering, excluding in each case shares purchased by any director,
officer or employee of the Company or the Bank or members of their immediate
families (which term shall mean parents, grandparents, spouse, siblings,
children and grandchildren); and
(b) with respect to any Securities sold by an NASD member firm (other than
Sandler O'Neill) under any Selected Dealers' Agreement in the Syndicated
Community Offering, (i) the sales commission payable to Selected Dealers under
any Selected Dealers Agreement, (ii) any sponsoring dealer's fees and (iii) a
management fee to Sandler O'Neill of one and three-quarters percent (1.75%) of
the aggregate Purchase Price of such Securities sold under any such agreement.
Any fees payable to Sandler O'Neill for Securities under such agreement shall be
limited to an aggregate of seven percent (7.0%) of the aggregate Purchase Price
of such Securities. Sandler O'Neill will also be reimbursed for out-of-pocket
expenses, including legal fees, in an amount not to exceed $75,000.
If this Agreement is terminated by the Agent in accordance with the
provisions of Section 9(a) hereof or the Conversion is terminated by the Company
or the Bank, no fee shall be payable by the Company or the Bank to Sandler
O'Neill; however, the Company shall reimburse the Agent for all of its
reasonable out-of-pocket expenses incurred prior to termination, including the
reasonable fees
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and disbursements of counsel for the Agent in accordance with
the provisions of Section 4 hereof.
All fees payable to the Agent hereunder shall be payable in immediately
available funds at Closing Time, or upon the termination of this Agreement, as
the case may be. In recognition of the long lead times involved in the
conversion process, the Bank agrees to make advance payments to the Agent in the
aggregate amount of $25,000 which shall be credited against any fees or
reimbursement of expenses payable hereunder.
SECTION 3. COVENANTS OF THE COMPANY, THE MHC AND THE BANK.
The Company, the MHC and the Bank covenant with the Agent as follows:
(a) The Company, the MHC and the Bank will prepare and file such amendments
or supplements to the Registration Statement, the Prospectus, the Conversion
Application and the Proxy Statement as may hereafter be required by the
Securities Act Regulations or the Conversion Regulations or as may hereafter be
requested by the Agent. Following completion of the Subscription and Community
Offering, in the event of a Syndicated Community Offering, the Company and the
Bank will (i) promptly prepare and file with the Commission a post-effective
amendment to the Registration Statement relating to the results of the
Subscription and Community Offering, 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, file with, or mail for filing to
the Commission a prospectus or prospectus supplement containing information
relating to the results of the Subscription and Community Offering and pricing
information pursuant to Rule 424l(c) of the Securities Act Regulations, in
either case in a form acceptable to the Agent. The Company, the MHC and the Bank
will notify the Agent immediately, and confirm the notice in writing, (i) of the
effectiveness of any post-effective amendment of the Registration Statement, the
filing of any supplement to the Prospectus and the filing of any amendment to
the Conversion Application, (ii) of the receipt of any comments from the OTS or
the Commission with respect to the transactions contemplated by this Agreement
or the Plan, (iii) of any request by the Commission or the OTS for any amendment
to the Registration Statement or the Conversion Application or any amendment or
supplement to the Prospectus or for additional information, (iv) of the issuance
by the OTS of any order suspending the Offerings or the use of the Prospectus or
the initiation of any proceedings for that purpose, (v) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose, and (vi) of the
receipt of any notice with respect to the suspension of any qualification of the
Securities for offering or sale in any jurisdiction. The Company, the MHC and
the Bank will make every reasonable effort to prevent the issuance of any stop
order and, if any stop order is issued, to obtain the lifting thereof at the
earliest possible moment.
(b) The Company, the MHC and the Bank will give the Agent notice of its
intention to file or prepare any amendment to the Conversion Application or
Registration Statement (including any post-effective amendment) or any amendment
or supplement to the Prospectus (including any
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<PAGE>
revised prospectus which the Company proposes for use in connection with the
Syndicated Community Offering of the Securities which differs from the
prospectus on file at the Commission at the time the Registration Statement
becomes effective, whether or not such revised prospectus is required to be
filed pursuant to Rule 424(b) of the Securities Act Regulations), will furnish
the Agent with copies of any such amendment or supplement a reasonable amount of
time prior to such proposed filing or use, as the case may be, and will not file
any such amendment or supplement or use any such prospectus to which the Agent
or counsel for the Agent may object.
(c) The Company, the MHC and the Bank will deliver to the Agent as many
signed copies and as many conformed copies of the Conversion Application and the
Registration Statement as originally filed and of each amendment thereto
(including exhibits filed therewith or incorporated by reference therein) as the
Agent may reasonably request, and from time to time such number of copies of the
Prospectus as the Agent may reasonably request.
(d) During the period when the Prospectus is required to be delivered, the
Company. the MHC and the Bank will comply, at their own expense, with all
requirements imposed upon them by the OTS, by the applicable Conversion
Regulations, as from time to time in farce, and by the Securities Act, the
Securities Act Regulations, the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission promulgated
thereunder, including, without limitation, Regulation 1 Ob-6 under the Exchange
Act, so far as necessary to permit the continuance of sales or dealing in shares
of Common Stock during such period in accordance with the provisions hereof and
the Prospectus.
(e) If any event or circumstance shall occur as a result of which it is
necessary, in the opinion of counsel for the Agent, to amend or supplement the
Prospectus in order to make the Prospectus not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, the Company,
the MHC and the Bank will forthwith amend or supplement the Prospectus (in form
and substance satisfactory to counsel for the Agent) so that, as so amended or
supplemented, the Prospectus will not include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances existing at the time it is delivered
to a purchaser, not misleading, and the Company, the MHC and the Bank will
furnish to the Agent a reasonable number of copies of such amendment or
supplement. For the purpose of this subsection, the Company, the MHC and the
Bank will each furnish such information with respect to itself as the Agent may
from time to time reasonably request.
(f) The Company, the MHC and the Bank will take all necessary action, in
cooperation with the Agent, to qualify the Securities for offering and sale
under the applicable securities laws of such states of the United States and
other jurisdictions as the Conversion Regulations may require and as the Agent
and the Company have agreed; provided, however, that the Company, the MHC and
the Bank shall not be obligated to file any general consent to service of
process or to qualify as a foreign corporation in any jurisdiction in which it
is not so qualified. In each jurisdiction in which the Securities have been so
qualified, the Company, and the Bank will file such statements and
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reports as may be required by the laws of such jurisdiction to continue such
qualification in effect for a period of not less than one year from the
effective date of the Registration Statement.
(g) The Company will file with the Commission such reports on Form SR as
may be required pursuant to Rule 463 of the Securities Act Regulations, if such
report or substantially similar report is required by the SEC.
(h) The Company will maintain the effectiveness of the Exchange Act
Registration Statement for not less than three years. The Company will file with
the Nasdaq Stock Market all documents and notices required by the Nasdaq Stock
Market of companies that have issued securities that are listed on the Nasdaq
Stock Market.
(i) During the period beginning on the date hereof and ending on the later
of the third anniversary of the Closing Time or the date on which the Agent
receives full payment in satisfaction of any claim for indemnification or
contribution to which it may be entitled pursuant to Sections 6 or 7
respectively, neither the Company nor the Bank shall, without the prior written
consent of the Agent, which consent shall not be unreasonably withheld, take or
permit to be taken any action that could result in the Bank Common Stock or Bank
Preferred Stock becoming subject to any security interest, mortgage, pledge,
lien or encumbrance; provided, however, that this covenant shall be null and
void if the Board of Governors of the Federal Reserve System, by regulation,
policy statement or interpretive release, or letter, permits indemnification of
the Agent by the Bank as contemplated by Section 6(a) hereof.
(j) The Company and the Bank will take such actions and furnish such
information as are reasonably requested by the Agent in order for the Agent to
ensure compliance with the National Association of Securities Dealers, Inc.'s
"Interpretation Relating to Free-Riding and Withholding."
(k) Other than in connection with any employee benefit plan or arrangement
described in the Prospectus, the Company will not, without the prior written
consent of the Agent, sell or issue, contract to sell or otherwise dispose of,
any shares of Common Stock other than the Securities for a period of 180 days
following the Closing Time.
(l) The Company and the Bank will comply with the conditions imposed by or
agreed to with the OTS in connection with its approval of the Holding Company
Application and with the OTS or the FDIC in connection with their approval of,
or non-objection to, the Conversion Application including those conditions
relating to the establishment and the operation of the Foundation; the Company
and the Bank shall use their best efforts to ensure that the Foundation submits
within the time frames required by applicable law a request to the Internal
Revenue Service to be recognized as a tax-exempt organization under Section
501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"); the
Company and the Bank will take no action which will result in the possible loss
of the Foundation's tax-exempt status; and neither the Company nor the Bank will
contribute any additional assets to the Foundation until such time that such
additional contributions will be deductible for federal and state income tax
purposes.
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(m) During the period ending on the first anniversary of the Closing Time.
the Bank will comply with all applicable law and regulation necessary for the
Bank to continue to be a "qualified thrift lender" within the meaning of 12
U.S.C. 1467a(m).
(n) The Company shall not deliver the Securities until the Company and the
Bank have certified each condition set forth in Section 5 hereof, unless such
condition is waived by the Agent,.
(o) The Company or the Bank will furnish to Sandler O'Neill as early as
practicable prior to the Closing Date, but no later than two (2) full business
days prior thereto, a copy of the latest available unaudited interim
consolidated financial statements of the Bank and the Subsidiaries which have
been read by ___________________, as stated in their letters to be furnished
pursuant to subsections (e) and (f) of Section 5 hereof.
SECTION 4. PAYMENT OF EXPENSES.
The Company and the Bank jointly and severally agree to pay all expenses
incident to the performance of their obligations under this Agreement, including
but not limited to (i) the cost of obtaining all securities and bank regulatory
approvals, (ii) the printing and filing of the Registration Statement as
originally filed and of each amendment thereto, (iii) the preparation, issuance
and delivery of the certificates for the Securities to the purchasers in the
Offerings, (iv) the fees and disbursements of the Company's, the MHC's and the
Bank's counsel, accountants, conversion agent, appraiser and other advisors, (v)
the qualification of the Securities under securities laws in accordance with the
provisions of Section 3(f) hereof, including filing fees and the fees and
disbursements of counsel in connection therewith and in connection with the
preparation of the Blue Sky Survey, (vi) the printing and delivery to the Agent
of copies of the Registration Statement as originally filed and of each
amendment thereto and the printing and delivery of the Prospectus and any
amendments or supplements thereto to the purchasers in the Offerings and the
Agent, (vii) the printing and delivery to the Agent of copies of a Blue Sky
Survey, (viii) the fees and expenses incurred in connection with the listing of
the Securities on the Nasdaq Stock Market, and (viii) the cost of printing and
distributing the offering materials. In the event the Agent incurs any such fees
and expenses on behalf of the Bank, the MHC or the Company, the Bank will
reimburse the Agent for such fees and expenses whether or not the Conversion is
consummated; provided, however, that the Agent shall not incur any substantial
expenses on behalf of the Bank, the MHC or the Company pursuant to this Section
without the prior approval of the Bank or the Company.
The Company and the Bank jointly and severally agree to pay certain
expenses incident to the performance of the Agent's obligations under this
Agreement, regardless of whether the Conversion is consummated, including (i)
the filing fees paid or incurred by the Agent in connection with all filings
with the National Association of Securities Dealers, Inc., and (ii) all
reasonable out of pocket expenses incurred by the Agent relating to the
Offerings, including, without limitation, advertising, promotional, syndication
and travel expenses and fees and expenses of the Agent's counsel. All fees and
expenses to which the Agent is entitled to reimbursement under this paragraph
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of this Section 4 shall be due and payable upon receipt by the Company or the
Bank of a written accounting therefor setting forth in reasonable detail the
expenses incurred by the Agent.
SECTION 5. CONDITIONS OF AGENT'S OBLIGATIONS.
The Company, the MHC, the Bank and the Agent agree that the issuance and
the sale of Securities and all obligations of the Agent hereunder are subject to
the accuracy of the representations and warranties of the Company, the MHC and
the Bank herein contained as of the date hereof and the Closing Time, to the
accuracy of the statements of officers and directors of the Company, the MHC and
the Bank made pursuant to the provisions hereof, to the performance by the
Company the MHC and the Bank of their obligations hereunder, and to the
following further conditions:
(a) No stop order suspending the effectiveness of the Registration
Statement shall have been issued under the Securities Act or proceedings
therefor initiated or threatened by the Commission. no order suspending the
Offerings or authorization for final use of the Prospectus shall have been
issued or proceedings therefor initiated or threatened by the OTS and no order
suspending the sale of the Securities in any jurisdiction shall have been
issued.
(b) At Closing Time, the Agent shall have received:
(1) The favorable opinion, dated as of Closing Time, of Breyer &
Aguggia, counsel for the MHC, the Company and the Bank, in form and substance
satisfactory to counsel for the Agent, to the effect 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.
(ii) The Company has full corporate power and authority to own, lease
and operate its properties and to conduct its business as described in the
Registration Statement and Prospectus and to enter into and perform its
obligations under this Agreement.
(iii) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in the State of South Carolina, and in
each other jurisdiction in which such qualification is required whether by
reason of the ownership or leasing of property or the conduct of business,
except where the failure to be so qualified would not have a material adverse
effect upon the financial condition, results of operation or business of the
Company, the Bank and the Subsidiaries, taken as a whole.
(iv) Upon consummation of the Conversion, the authorized, issued and
outstanding capital stock of the Company will be within the range set forth in
the Prospectus under "Capitalization" and no shares of Common Stock have been or
will be issued and remain outstanding prior to the Closing Time.
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(v) The Securities have been duly and validly authorized for issuance
and sale and, when issued and delivered by the Company pursuant to the Plan
against payment of the consideration calculated as set forth in the Plan will be
duly and validly issued, fully paid and non-assessable.
(vi) The issuance of the Securities is not subject to preemptive or
other similar rights arising by operation of law or, to the best of such
counsel's knowledge. otherwise.
(vii) The MHC is validly existing and is in good standing under
the laws of the United States as a mutual holding company, with full corporate
power and authority to own, lease and operate its properties and to conduct its
business as described in the Registration Statement and Prospectus and is duly
qualified as a foreign corporation in each jurisdiction in which such
qualification is required, except where the failure to so qualify would not have
a material adverse effect upon the financial condition, results of operations or
business of the MHC.
(viii) The Bank has been at all times since the date hereof and
prior to the Closing Time duly organized, and is validly existing in good
standing under the laws of the United States as a federally-chartered savings
bank of stock form, with full corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Registration Statement and the Prospectus; and the Bank is duly qualified as a
foreign corporation in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or the
conduct of business except where the failure to so qualify would not have a
material adverse effect upon the financial condition or results of operations or
business of the Bank.
(ix) The deposit accounts of the Bank are insured by the FDIC up to
the applicable limits.
(x) Each Subsidiary has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the jurisdiction of its
incorporation, has full corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Registration
Statement and the Prospectus and is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure to so qualify
would not have a material adverse effect upon the financial condition, results
of operation or business of the Company, the Bank and the Subsidiaries, taken as
a whole, the activities of the Subsidiaries as described in the Prospectus are
permitted to subsidiaries of a savings association holding company and of a
federally-chartered savings bank by the rules, regulations, resolutions and
practices of the OTS; all of the issued and outstanding capital stock of each of
the Subsidiaries has been duly authorized and validly issued, is fully paid and
non-assessable and is owned by the Bank free and clear of any security interest,
mortgage, pledge, lien, encumbrance or claim.
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(xi) Upon consummation of the Conversion, all of the issued and
outstanding capital stock of the Bank when issued and delivered pursuant to the
Plan against payment of consideration calculated as set forth in the Plan will
be duly authorized and validly issued and fully paid and nonassessable, and all
such capital stock will be owned beneficially and of record by the Company free
and clear of any security interest, mortgage, pledge, lien, encumbrance. claim
or equity.
(xii) The OTS has approved the Holding Company Application and
the Conversion Application and no action is pending, or to the best of such
counsel's knowledge, threatened respecting the Holding Company Application or
the Conversion Application or the acquisition by the Company of all of the
Bank's issued and outstanding capital stock; the Holding Company Application
complies as to form in all material respects with the applicable requirements of
the OTS, and the Conversion Application complies as to form in all material
respects with the applicable requirements of the OTS and include all documents
required to be filed as exhibits thereto, excluding the Prospectus and any
related marketing materials filed as a part of the Holding Company Application
or the Conversion Application as to which no opinion need be given; the Company
is duly authorized to become a savings and loan holding company and is duly
authorized to own all of the issued and outstanding capital stock of the Bank to
be issued pursuant to the Plan.
(xiii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby (A) have been duly and
validly authorized by all necessary action on the part of each of the Company,
the MHC and the Bank, and this Agreement constitutes the legal, valid and
binding agreement of each of the Company, the MHC and the Bank, enforceable in
accordance with its terms, except as rights to indemnity and contribution
hereunder may be limited under applicable law (it being understood that such
counsel may avail itself of customary exceptions concerning the effect of
bankruptcy, insolvency, and the availability of equitable remedies), (B) will
not result in any violation of the provisions of the certificate of
incorporation, organization certificate, articles of incorporation or charter,
as the case may be, or by-laws of the Company, the MHC, the Bank or any of its
Subsidiaries; and, (C) will not conflict with or constitute a breach of, or
default under, and no event has occurred which, with notice or lapse of time or
both, would constitute a default under, or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the Company,
the MHC, the Bank or the Subsidiaries pursuant to any contract, indenture,
mortgage, loan agreement, note, lease or other instrument to which the Company,
the MHC, the Bank or any of the Subsidiaries is a party or by which any of them
may be bound, or to which any of the property or assets of the Company, the MHC,
the Bank or the Subsidiaries is subject, that, individually or in the aggregate,
would have a material adverse effect on the financial condition, results of
operations or business of the Company, the MHC, the Bank and the Subsidiaries,
taken as a whole.
(xiv) The Prospectus has been duly authorized by the OTS for
final use pursuant to the Conversion Regulations and no action is pending, or to
the best of such counsel's knowledge, is threatened, by the OTS to revoke such
authorization.
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(xv) The Registration Statement is effective under the Securities Act
and no stop order suspending the effectiveness of the Registration Statement has
been issued under the Securities Act or, to the best of such counsel's
knowledge, have proceedings therefor been initiated or threatened by the
Commission.
(xvi) No further approval, authorization, consent or other order
of any public board or body is required in connection with the execution and
delivery of this Agreement, the issuance of the Securities and the consummation
of the Conversion, except as may be required under the securities or Blue Sky
laws of various jurisdictions as to which no opinion need be rendered.
(xvii) At the time the Registration Statement became effective,
the Registration Statement (other than the financial statements the notes
thereto, related schedules and other financial, appraisal and statistical data
included therein, as to which no opinion need be rendered) complied as to form
in all material respects with the requirements of the Securities Act and the
Securities Act Regulations and the Conversion Regulations.
(xviii) The Common Stock conforms to the description thereof
contained in the Prospectus, and the form of certificate used to evidence the
Common Stock is in due and proper form and complies with all applicable
statutory requirements.
(xix) There are no legal or governmental proceedings pending or
threatened against or affecting the Company, the MHC, the Bank any of the
Subsidiaries, which are required, individually or in the aggregate, to be
disclosed in the Registration Statement and Prospectus, other than those
disclosed therein.
(xx) All pending legal or governmental proceedings to which the
Company, the MHC, the Bank or any of the Subsidiaries is a party or to which any
of their property is subject which are not described in the Registration
Statement, including ordinary routine litigation incidental to the business,
are, considered in the aggregate, not material.
(xxi) The information in the Prospectus under "-Certain Anti-
Takeover Provisions," and "- Possible Adverse Income Tax Consequences of the
Distribution of Subscription Rights," "Dividend Policy," "Business of the Bank -
Legal Proceedings," "Federal and State Taxation," "Regulation," "- Effects of
Conversion," "-Liquidation Rights" and "-Tax Aspects," "Restrictions on
Acquisition of the Company and the Bank," "Description of Capital Stock of the
Company" and "Description of Capital Stock of the Bank" to the extent that it
constitutes matters of law, summaries of legal matters, documents or
proceedings, or legal conclusions, has been reviewed by them and is complete and
accurate in all material respects.
(xxii) To the best of such counsel's knowledge, there are no
contracts, indentures, mortgages, loan agreements, notes, leases or other
instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described or
referred to therein or filed as exhibits thereto, and the descriptions thereof
or references thereto are correct.
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(xxiii) The Plan has been duly authorized by the Board of Directors
of the MHC and the Board of Directors of the Company and the Board of Directors
of the Bank and the OTS' approvals of the Plan remain in full force and effect;
the Bank's organization certificate has been amended and restated, effective
upon consummation of the Conversion and the filing of such amended and restated
organization certificate with the OTS, to authorize the issuance of permanent
capital stock; to the best of such counsel's knowledge, the Company, the MHC and
the Bank have conducted the Conversion in all material respects in accordance
with applicable requirements of the Conversion Regulations, the Plan and all
other applicable regulations. decisions and orders thereunder, including all
material applicable terms, conditions, requirements and conditions precedent to
the Conversion imposed upon the Company or the Bank by the OTS and, no order has
been issued by the OTS to suspend the Conversion or the Offerings and no action
for such purpose has been instituted or threatened by the OTS; and, to the best
of such counsel's knowledge, no person has sought to obtain review of the final
action of the OTS in approving the Conversion Application or of the OTS in
approving the Holding Company Application.
(xxiv) To the best of such counsel's knowledge, the Company, the
MHC, the Bank and the Subsidiaries have obtained all material licenses, permits
and other governmental authorizations currently required for the conduct of
their respective businesses as described in the Registration Statement and
Prospectus, and all such licenses, permits and other governmental authorizations
are in full force and effect, and the Company, the MHC, the Bank and the
Subsidiaries are in all material respects complying therewith.
(xxv) None of the MHC, the Company, the Bank nor any of the
Subsidiaries is in violation of its certificate of incorporation, organization
certificate, articles of incorporation or charter, as the case may be, or bylaws
(and the Bank will not be in violation of its organization certificate and
bylaws in stock form upon consummation of the Conversion) or, to the best of
such counsel's knowledge, in default (nor has any event occurred which, with
notice or lapse of time or both, would constitute a default) in the performance
or observance of any obligation, agreement, covenant or condition contained in
any material contract indenture, mortgage, loan agreement. note, lease or other
instrument to which the Company, the MHC, the Bank or any of the Subsidiaries is
a party or by which the Company, the MHC, the Bank or any of the Subsidiaries or
any of their property may be bound.
(xxvi) The Company is not required to be registered as an
investment company under the Investment Company Act of 1940.
(2) The favorable opinion, dated as of Closing Time, of Muldoon,
Murphy & Faucette, counsel for the Agent, with respect to the matters set forth
in Section 5(b)(1)(i). (iv), (v), (vi) (solely as to preemptive rights arising
by operation of law), (xviii) and (xixi) and such other matters as the Agent may
reasonably require.
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(3) In giving their opinions required by subsections (b)(l) and
(b)(2), respectively. of this Section, Breyer & Aguggia and Muldoon, Murphy &
Faucette shall each additionally state that nothing has come to their attention
that would lead them to believe that the Registration Statement (except for the
appraisal, financial statements, notes thereto, related schedules and other
financial, statistical or appraisal data included therein, as to which counsel
need make no statement), at the time it became effective, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
that the Prospectus (except for the appraisal, financial statements and
schedules and other financial, statistical or appraisal data included therein,
as to which counsel need make no statement), at the time the Registration
Statement became effective or at Closing Time, included an untrue statement of a
material fact or omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. In giving their opinions Breyer & Aguggia and Muldoon,
Murphy & Faucette may state that they have not independently verified the
information with respect to the Company and the Bank contained in the
Registration Statement, Conversion Application and the Prospectus. In giving
their opinions, Breyer & Aguggia and Muldoon, Murphy & Faucette may rely as to
matters of fact on certificates of officers and directors of the Company, the
MHC and the Bank and certificates of public officials and as to certain matters
of South Carolina law upon the opinion of ______________ and as to certain
matters of Delaware law upon the opinion of __________, which opinions shall be
in form and substance satisfactory to the Agent, and Muldoon, Murphy & Faucette
may also rely on the opinion of Breyer & Aguggia.
(c) At the Closing time referred to in Section 2, the Company, the MHC and
the Bank will have completed in all material respects the conditions precedent
to the Conversion in accordance with the Plan, the applicable Conversion
Regulations and all other applicable laws, regulations, decisions and orders,
including all terms, conditions, requirements and provisions precedent to the
Conversion imposed upon the Company or the Bank by the OTS or any other
regulatory authority other than those which the OTS permit to be completed after
the Conversion.
(d) At Closing Time, there shall not have been, since the date hereof or
since the respective dates as of which information is given in the Registration
Statement and the Prospectus, any material adverse change in the financial
condition, results of operations or business of the Company, the MHC, the Bank
and the Subsidiaries, taken as a whole, whether or not arising in the ordinary
course of business, and the Agent shall have received a certificate of the Chief
Executive Officer of the Company, of the MHC and of the Bank, and the chief
financial or chief accounting officer of the Company, of the MHC and of the
Bank, dated as of Closing Time, to the effect that (i) there has been no such
material adverse change, (ii) there shall have been no material transaction
entered into by the Company, the MHC or the Bank from the latest date as of
which the financial condition of the Company, the MHC or the Bank is set forth
in the Registration Statement and the Prospectus other than transactions
referred to or contemplated therein and transactions in the ordinary cause of
business, (iii) neither the Company, the MHC nor the Bank has received from the
OTS, the FDIC or the OTS any direction (oral or written) to make any material
change in the method of conducting its business with which it has not complied
(which direction, if any, shall have been
23
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disclosed to the Agent) or which materially and adversely would affect the
business, financial condition or results of operations of the Company, the MHC,
the Bank and the Subsidiaries, taker. as a whole, (iv) the representations and
warranties in Section 1 hereof are true and correct with the same force and
effect as though expressly made at and as of the Closing Time, (v) the Company,
the MHC and the Bank have complied with all agreements and satisfied all
conditions on their part to be performed or satisfied at or prior to Closing
Time, (vi) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
initiated or threatened by the Commission and (vii) no order suspending the
Offerings or the authorization for final use of the Prospectus has been issued
and no proceedings for that purpose have been initiated or threatened by the OTS
or the FDIC and no person has sought to obtain regulatory or judicial review of
the action of the OTS or the FDIC in approving the Plan in accordance with the
Conversion Regulations nor has any person sought to obtain regulatory or
judicial review of the action of the OTS in approving the Holding Company
Application.
(e) At the time of the execution of this Agreement, the Agent shall have
received from KPMG Peat Marwick LLP a letter dated such date, in form and
substance satisfactory to the Agent, to the effect that (i) they are independent
public accountants with respect to the Company, the MHC, the Bank and the
Subsidiaries within the meaning of the Code of Ethics of the American Institute
of Certified Public Accountants, the Securities Act and the Securities Act
Regulations and the Conversion Regulations; (ii) it is their opinion that the
consolidated financial statements and supporting schedules included in the
Registration Statement and covered by their opinions therein comply as to form
in all material respects with the applicable accounting requirements of the
Securities Act and the Securities Act Regulations and the Conversion
Regulations; (iii) based upon limited procedures as agreed upon by the Agent and
KPMG Peat Marwick LLP set forth in detail in such letter, nothing has come to
their attention which causes them to believe that (A) the unaudited financial
statements and supporting schedules of the Bank and the Subsidiaries included in
the Registration Statement do not comply as to form in all material respects
with the applicable accounting requirements of the Securities Act, the
Securities Act Regulations. and the Conversion Regulations or are not presented
in conformity with generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial statements included
in the Registration Statement and the Prospectus, (B) the unaudited amounts set
forth under "Selected Consolidated Financial Information and Other Data" and
"Recent Developments" in the Registration Statement and Prospectus do not agree
with the amounts set forth in unaudited consolidated financial statements as of
and for the dates and periods presented under such captions or such amounts were
not determined on a basis substantially consistent with that used in determining
the corresponding amounts in the audited financial statements included in the
Registration Statement, (C) at a specified date not more than five days prior to
the date of this Agreement, there has been any increase in the consolidated long
term or short term debt of the Bank and the Subsidiaries or any decrease in
consolidated total assets, the allowance for loan losses, total deposits or
retained earnings of the Bank. and the Subsidiaries, in each case as compared
with the amounts shown in the September 30 1997 balance sheet included in the
Registration Statement or, (D) during the period from September 30, 1997 to a
specified date not more than five days prior to the date of this Agreement,
there were any decreases, as compared with the corresponding period in the
preceding year, in total interest
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income, net interest income, net interest income after provision for loan
losses. income before income tax expense or net income of the Bank and the
Subsidiaries, except in all instances for increases or decreases which the
Registration Statement and the Prospectus disclose have occurred or may occur;
and (iv) in addition to the examination referred to in their opinions and the
limited procedures referred to in clause (iii) above, they have carried out
certain specified procedures, not constituting an audit, with respect to certain
amounts, percentages and financial information which are included in the
Registration Statement and Prospectus and which are specified by the Agent, and
have found such amounts, percentages and financial information to be in
agreement with the relevant accounting, financial and other records of the
Company, the MHC, the Bank and the Subsidiaries identified in such letter.
(f) At Closing Time, the Agent shall have received from ___________________
a letter, dated as of Closing Time, to the effect that they reaffirm the
statements made in the letter furnished pursuant to subsection (e) of this
Section, except that the specified date referred to shall be a date not more
than five days prior to Closing Time.
(g) At Closing Time, the Securities shall have been approved for listing on
the Nasdaq Stock Market upon notice of issuance.
(h) At Closing Time, the Agent shall have received a letter from RP
Financial, Inc., dated as of the Closing Time, confirming its appraisal.
(i) At Closing Time, counsel for the Agent shall have been furnished with
such documents and opinions as they may require for the purpose of enabling them
to pass upon the issuance and sale of the Securities and the Foundation Shares
as herein contemplated and related proceedings. or in order to evidence the
accuracy of any of the representations or warranties, or the fulfillment of any
of the conditions, herein contained; and all proceedings taken by the Company in
connection with the issuance and sale of the Securities and Foundation Shares as
herein contemplated shall be satisfactory in form and substance to the Agent and
counsel for the Agent.
(j) At any time prior to Closing Time, (i) there shall not have occurred
any material adverse change in the financial markets in the United States or
elsewhere or any outbreak of hostilities or escalation thereof or other calamity
or crisis the effect of which, in the judgment of the Agent, are so material and
adverse as to make it impracticable to market the Securities or to enforce
contracts, including subscriptions or orders, for the sale of the Securities,
and (ii) trading generally on the American Stock Exchange, the New York Stock
Exchange or Nasdaq shall not have been suspended, and minimum or maximum prices
for trading shall not have been fixed, or maximum ranges for prices for
securities have been required, by either of said Exchanges or by order of the
Commission or any other governmental authority, and a banking moratorium shall
not have been red by either Federal or South Carolina authorities.
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SECTION 6. INDEMNIFICATION.
(a) The Company and the Bank, jointly and severally, agree to indemnify and
hold harmless the Agent, each person, if any, who controls the Agent, within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
and its respective partners, directors, officers, employees and agents as
follows:
(i) from and against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, related to or arising out of the Conversion
(including establishment of the Foundation and the contribution of the
Foundation Shares thereto by the Company) or any action taken by the Agent where
acting as agent of the Company or the Bank or otherwise as described in Section
2 hereof;
(ii) from and against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, based upon or arising out of any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), or the omission or alleged
omission therefrom of a material fact required to be stated therein or necessary
to make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact contained in the Proxy
Statement or Prospectus (or any amendment or supplement thereto) or the omission
or alleged omission therefrom of a material fact necessary in order to make the
statements therein. in the light of the circumstances under which they were
made, not misleading;
(iii) from and against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate amount paid
in settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim whatsoever
described in clauses (i) or (ii) above. if such settlement is effected with the
written consent of the Company or the Bank. which consent shall not be
unreasonably withheld; and
(iv) from and against any and all expense whatsoever. as incurred
(including, subject to Section 6(c) hereof, the fees and disbursements of
counsel chosen by the Agent), reasonably incurred in investigating, preparing
for or defending against any litigation, or any investigation, proceeding or
inquiry by any governmental agency or body, commenced or threatened, or any
claim pending or threatened whatsoever described in clauses (i) or (ii) above,
to the extent that any such expense is not paid under (i), (ii) or (iii) above;
provided, however, that the indemnification provided for in this paragraph (a)
shall not apply to any loss, liability, claim, damage or expense to the extent
arising out of any untrue statement or alleged untrue statement of a material
fact contained in the Prospectus (or any amendment or supplement thereto) or the
omission or alleged omission therefrom of a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading which was made in reliance upon and in conformity with
the Agent Information.
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(b) The Agent agrees to indemnify and hold harmless the Company, the Bank,
their directors and trustees, each of their officers who signed the Registration
Statement, and each person, if any. who controls the Company within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act against
any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsection (a) of this Section, as incurred, but only
with respect to untrue statements or omissions, or alleged untrue statements or
omissions, of a material fact made in the Registration Statement (or any
amendment thereto) or the Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with the Agent Information.
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
which it may have otherwise than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the defense of any such
action. In no event shall the indemnifying parties be liable for fees and
expenses of more than one counsel (in addition to no more than one local counsel
in each separate jurisdiction in which any action or proceeding is commenced)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances.
(d) The Company and the Bank also agree that the Agent shall not have any
liability (whether direct or indirect, in contract or tort or otherwise) to the
Bank, the Company, its security holders or the Bank's or the Company's creditors
relating to or arising out of the engagement of the Agent pursuant to, or the
performance by the Agent of the services contemplated by. this Agreement, except
to the extent that any loss, claim, damage or liability is found in a final
judgment by a court of competent jurisdiction to have resulted primarily from
the Agent's bad faith, willful misconduct or gross negligence.
(e) In addition to, and without limiting, the provisions of Section
(6)(a)(iv) hereof, in the event that any Agent, any person, if any, who controls
the Agent within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act or any of its partners, directors, officers, employees or
agents is requested or required to appear as a witness or otherwise gives
testimony in any action, proceeding, investigation or inquiry brought by or on
behalf of or against the Company, the MHC, the Bank, the Agent or any of its
respective affiliates or any participant in the transactions contemplated hereby
in which the Agent or such person or agent is not named as a defendant or
subject of an investigation or inquiry, the Company and the Bank jointly and
severally agree to reimburse the Agent for all reasonable and necessary out-of-
pocket expenses incurred by it in connection with preparing or appearing as a
witness or otherwise giving testimony and to compensate the Agent in an amount
to be mutually agreed upon.
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SECTION 7. CONTRIBUTION.
In order to provide for just and equitable contribution in circumstances in
which the indemnity agreement provided for in Section 6 hereof is for any reason
held to be unenforceable by the indemnified parties although applicable in
accordance with its terms, the Company, the Bank and the Agent shall contribute
to the aggregate losses, liabilities, claims, damages and expenses of the nature
contemplated by said indemnity agreement incurred by the Company or the Bank and
the Agent, as incurred, in such proportions (i) that the Agent is responsible
for that portion represented by the percentage that the maximum aggregate
marketing fees appearing on the cover page of the Prospectus bears to the
maximum aggregate gross proceeds appearing thereon and the Company, the MHC and
the Bank are jointly and severally responsible for the balance or (ii) if, but
only if, the allocation provided for in clause (i) is for any reason held
unenforceable, in such proportion as is appropriate to reflect not only the
relative benefits to the Company and the Bank on the one hand and the Agent on
the other, as reflected in clause (i), but also the relative fault of the
Company and the Bank on the one hand and the Agent on the other, as well as any
other relevant equitable considerations; provided, however, that 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 was
not guilty of such fraudulent misrepresentation. For purposes of this Section,
each person, if any. who controls the Agent within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act shall have the same rights
to contribution as the Agent, and each director of the Company, each trustee of
the Bank, each officer of the Company who signed the Registration Statement, and
each person, if any, who controls the Company or the Bank within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act shall have
the same rights to contribution as the Company and the Bank. Notwithstanding
anything to the contrary set forth herein, to the extent permitted by applicable
law, in no event shall the Agent be required to contribute an aggregate amount
in excess of the aggregate marketing fees to which the Agent is entitled and
actually paid pursuant to this Agreement.
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY.
All representations, warranties and agreements contained in this Agreement.
or contained in certificates of officers of the Company, the MHC or the Bank
submitted pursuant hereto, shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of any Agent or controlling
person, or by or on behalf of the Company, and shall survive delivery of the
Securities.
SECTION 9. TERMINATION OF AGREEMENT.
(a) The Agent may terminate this Agreement, by notice to the Company, at
any time at or prior to Closing Time (i) if there has been, since the date of
this Agreement or since the respective date s as of which information is given
in the Registration Statement, any material adverse change in the financial
condition, results of operations or business of the Company, the MHC or the
Bank, or the Company the MHC, the Bank and the Subsidiaries taken as a whole,
whether or not arising
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in the ordinary course of business, or (ii) if there has occurred any material
adverse change in the financial markets in the United States or elsewhere or any
outbreak of hostilities or escalation thereof or other calamity or crisis the
effect of which, in the judgment of the Agent, are so material and adverse as to
make it impracticable to market the Securities or to enforce contracts,
including subscriptions or orders, for the sale of the Securities, (iii) if
trading generally on the Nasdaq Stock Market, the American Stock Exchange or the
New York Stock Exchange has been suspended, or minimum or maximum prices for
trading have been fixed, or maximum ranges for prices for securities have been
required, by such market or either of said Exchanges or by order of the
Commission or any other governmental authority, or if a banking moratorium has
been declared by either Federal or State authorities, (iv) if any condition
specified in Section 5 shall not have been fulfilled when and as required to be
fulfilled; (v) if there shall have been such material adverse change in the
condition or prospects of the Company or the Bank or the prospective market for
the Company's securities as in the Agent's good faith opinion would make it
inadvisable to proceed with the offering, sale or delivery of the Securities;
(vi) if, in the Agent's good faith opinion, the price for the Securities
established by RP Financial, Inc. is not reasonable or equitable under then
prevailing market conditions, or (vii) if the Conversion is not consummated on
or prior to ____________, 1998.
(b) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party except as
provided in Section 4 hereof relating to the reimbursement of expenses and
except that the provisions of Sections 6 and 7 hereof shall survive any
termination of this Agreement.
SECTION 10. NOTICES.
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if mailed or transmitted by any standard
form of telecommunication. Notices to the Agent shall be directed to the Agent
at Two World Trade Center, 104th Floor. New York, New York 10048, attention of
Catherine A. Lawton, Principal, with a copy to Lori M. Beresford, Esq., Muldoon,
Murphy & Faucette, 5101 Wisconsin Avenue, N.W., Washington, D.C. 20016; notices
to the Company and the Bank shall be directed to either of them at Perpetual
Bank, A Federal Savings Bank, 907 N. Main Street, Anderson, South Carolina,
29621 attention of Robert W. Orr, President, with a copy to Breyer & Aguggia,
1300 I Street, N.W., Suite 470 East, Washington, D.C. 20005.
SECTION 11. PARTIES.
This Agreement shall inure to the benefit of and be binding upon the Agent,
the Company, the MHC and the Bank and their respective successors. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person, firm or corporation, other than the Agent, the Company, the
MHC. and the Bank and their respective successors and the controlling persons
and officers and directors referred to in Sections 6 and 7 and their heirs and
legal representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein or therein contained. This
Agreement and all conditions and provisions
29
<PAGE>
hereof and thereof are intended to be for the sole and exclusive benefit of the
Agent, the Company, the MHC and the Bank and their respective successors, and
said controlling persons and officers and directors and their heirs and legal
representatives, and for the benefit of no other person, firm or corporation.
SECTION 12. ENTIRE AGREEMENT; AMENDMENT.
This Agreement represents the entire understanding of the parties hereto
with reference to the transactions contemplated hereby and supersedes any and
all other oral or written agreements heretofore made, except for engagement
letter dated ____________, 1997, by and between the Agent and the Company and
the Bank, relating to the Agent's providing conversion agent services to the
Company and the Bank in connection with the Conversion. No waiver, amendment or
other modification of this Agreement shall be effective unless in writing and
signed by the parties hereto.
SECTION 13. GOVERNING LAW AND TIME.
This Agreement shall be governed by and construed in accordance with the
laws of the State of South Carolina applicable to agreements made and to be
performed in said State without regard to the conflicts of laws provisions
thereof. Specified times of day refer to Eastern time.
SECTION 14. SEVERABILITY.
Any term or provision of this Agreement which is invalid or unenforceable
in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement or affecting
the validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.
SECTION 15. HEADINGS.
Sections headings are not to be considered part of this Agreement, are for
convenience and reference only and are not to be deemed to be full or accurate
descriptions of the contents of any paragraph or subparagraph.
30
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the Agent, the Company, the MHC and the Bank in accordance with its terms.
Very truly yours,
SOUTHBANC SHARES, INC.
___________________________________
By: ________________________________
Title: ______________________________
SOUTHBANC SHARES, M.H.C.
(Mutual Holding Company)
___________________________________
By: ________________________________
Title: ______________________________
CONFIRMED AND ACCEPTED, PERPETUAL BANK, A FEDERAL
as of the date first above written: SAVINGS BANK
Sandler O'Neill & Partners, L.P.
By: Sandler O'Neill & Partners Corp. _________________________________
The sole general partner By: ______________________________
Title: ____________________________
___________________________
By: Catherine A. Lawton
Vice President
31
<PAGE>
EXHIBIT 8.1
1300 I Street, N.W.
Suite 470 East
Washington, D.C. 20005
Telephone (202) 737-7900
Breyer & Aguggia Facsimile (202) 737-7979
================================================================================
ATTORNEYS AT LAW
January 16, 1998
Boards of Directors
Perpetual Bank, A Federal Savings Bank
SouthBanc Shares, M.H.C.
SouthBanc Shares, Inc.
907 N. Main Street
Anderson, South Carolina 29621-5526
Gentlemen:
In accordance with your request, set forth herein is our opinion
relating to the federal income tax consequences of the two integrated
transactions described herein. Capitalized terms used herein which are not
expressly defined herein shall have the meaning ascribed to them in the Plan of
Conversion from Mutual Holding Company to Stock Holding Company and Plan of
Reorganization dated September 22, 1997, as amended on December 22, 1997,
between Perpetual Bank, A Federal Savings Bank (the "Savings Bank") and
SouthBanc Shares, M.H.C. (the "MHC") (the "Plan").
The Proposed Transactions
- -------------------------
Based upon our review of the Plan, we understand that the relevant
facts are as follows:
In October 1993, Perpetual Bank, A Federal Savings Bank, a
federally-chartered mutual savings bank (the "Savings Bank"), reorganized into
the mutual holding company form of organization. In connection with the
foregoing transaction, which resulted in the conversion of the Savings Bank to a
stock institution (the "Stock Savings Bank"), the Stock Savings Bank
simultaneously sold 115,000 shares of the common stock of the Stock Savings Bank
(the "Stock Savings Bank Common Stock") to depositors of the Stock Savings Bank,
employee stock benefit plans of the Stock Savings Bank, directors, officers and
employees of the Stock Savings Bank and members of the general public. In
September 1996, an additional 585,000 shares of Stock Savings Bank Common Stock
were sold to the same groups in an additional public offering. As of the date
hereof, the MHC and the other stockholders ("Public Stockholders") own an
aggregate of 53% and 47%, respectively, of the outstanding Stock Savings Bank
Common Stock.
<PAGE>
Boards of Directors
Perpetual Bank, A Federal Savings Bank
SouthBanc Shares, M.H.C.
SouthBanc Shares, Inc.
January 16, 1998
Page 2
The reorganization of Savings Bank into the mutual holding company
form of organization, and the sale of Stock Savings Bank Common Stock are
sometimes hereinafter collectively referred to as the "MHC Transaction."
At the present time, two transactions are being undertaken. The first
transaction, which is sometimes referred to herein as "Merger 1," is the
conversion of the MHC from the mutual form of organization to a federal interim
stock savings bank ("Interim") and the simultaneous merger of Interim with and
into the Stock Savings Bank. The second transaction, which is sometimes referred
to herein as "Merger 2," is the acquisition of the Stock Savings Bank by
SouthBanc Shares, Inc. (the "Holding Company"), a newly organized Delaware
corporation, by means of the merger of the Stock Savings Bank with a federal
interim stock savings institution (the "Interim Stock Savings Bank"), which will
be organized as a wholly-owned subsidiary of the Holding Company. Merger 1 and
Merger 2 are sometimes collectively referred to herein as the "Conversion and
Reorganization."
Merger 1 and Merger 2 are being accomplished pursuant to the Plan. The
Plan complies in all material respects with the provisions of Subpart A of 12
C.F.R. Part 563b, the Office of Thrift Supervision ("OTS") regulations governing
the conversion of mutual institutions to stock form. The Plan also complies in
all material respects with the provisions of 12 C.F.R. Section 575.12(a),
governing the conversion of mutual holding companies to stock form. Because the
proposed transaction involves two mergers, the Plan also includes two related
plans of merger with language that complies in all material respects with 12
C.F.R. Section 552.13, governing mergers involving federal stock associations.
In Merger 1, a liquidation account is being established by the Stock
Savings Bank for the benefit of Eligible Account Holders and Supplemental
Eligible Account Holders. Pursuant to Section XIV of the Plan, the initial
balance of the liquidation account will equal the amount of any dividends waived
by the MHC plus the greater of (1) $12.9 million, which is equal to 100% of the
retained earnings of Savings Bank as of March 31, 1993, the date of the latest
statement of financial condition contained in the final offering circular
utilized in the formation of the MHC, or (2) 53% of the Stock Savings Bank's
total stockholders' equity as reflected in its latest statement of financial
condition contained in the final Prospectus to be utilized in the Conversion and
Reorganization. The $12.9 million is the amount that the liquidation account
would have been if the MHC Transaction had been a standard conversion not
involving a mutual holding company.
Upon consummation of Merger 1, the shares of Stock Savings Bank Common
Stock held by the MHC will be canceled.
<PAGE>
Boards of Directors
Perpetual Bank, A Federal Savings Bank
SouthBanc Shares, M.H.C.
SouthBanc Shares, Inc.
January 16, 1998
Page 3
Upon consummation of Merger 2 (the "Effective Date"), all of the then
outstanding shares of Stock Savings Bank Common Stock held by the Public
Stockholders will be converted into and become shares of common stock of the
Holding Company ("Holding Company Common Stock") at the Exchange Ratio (the
"Exchange Shares"). The common stock of the Interim Stock Savings Bank owned by
the Holding Company prior to Merger 2 will be converted into and become shares
of common stock of the Stock Savings Bank on the Effective Date. The Holding
Company Common Stock held by the Stock Savings Bank immediately prior to Merger
2 will be canceled on the Effective Date.
Immediately following Merger 2, Holding Company Common Stock will be
sold pursuant to the Conversion Offerings. The stockholders of the Holding
Company will be the Public Stockholders, plus those persons who purchase Holding
Company Common Stock in the Conversion Offerings. Nontransferable rights to
subscribe for Holding Company Common Stock will be granted to eligible
depositors and other persons in the priorities set forth in the Plan (the
"Subscription Rights").
Upon the Effective Date, Interim Stock Savings Bank will be merged
with and into the Stock Savings Bank and Interim Stock Savings Bank will cease
to exist as a legal entity. As a result, the Holding Company will be a publicly
held corporation, will register the Holding Company Common Stock under Section
12(g) of the Securities Exchange Act of 1934, as amended, and will become
subject to the rules and regulations thereunder and file periodic reports and
proxy statements with the SEC. The Stock Savings Bank will become a wholly owned
subsidiary of the Holding Company and will continue to carry on its business and
activities as conducted immediately prior to Merger 2.
Analysis
- --------
Section 368(a)(1)(A) of the Code defines the term "reorganization" to
include a "statutory merger or consolidation" of corporations such as Merger 1
and Merger 2. Section 368(a)(2)(E) of the Code provides that a transaction
otherwise qualifying as a merger under Section 368(a)(1)(A), such as Merger 2,
will not be disqualified by reason of the fact that common stock of a
corporation (referred to in the Code as the "controlling corporation") (i.e.,
the Holding Company) which before the merger was in control of the merged
corporation is used in the transaction if:
(i) after the transaction, the corporation surviving the merger
(i.e., Stock Savings Bank) holds substantially all of its
properties and the properties of the merged corporation
(i.e., Interim Stock Savings Bank) (other than common stock
of the
<PAGE>
Boards of Directors
Perpetual Bank, A Federal Savings Bank
SouthBanc Shares, M.H.C.
SouthBanc Shares, Inc.
January 16, 1998
Page 4
controlling corporation (i.e., the Holding Company)
distributed in the transaction; and
(ii) in the transaction, former stockholders of the surviving
corporation (i.e., the Public Stockholders) exchanged, for an
amount of voting common stock of the controlling corporation,
an amount of common stock in the surviving corporation which
constitutes control of such corporation.
Section 1.368-2(b)(1) of the Treasury Regulations provides that, in
order to qualify as a reorganization under Section 368(a)(1)(A), a transaction
must be a merger or consolidation effected pursuant to the corporate laws of the
United States or a state. The Plan provides that Mergers 1 and 2 will be
accomplished in accordance with applicable federal law.
Treasury Regulations and case law require that, in addition to the
existence of statutory authority for a merger, certain other conditions must be
satisfied in order to qualify a proposed transaction as a reorganization within
the meaning of Section 368(a)(1)(A) of the Code. The "business purpose test,"
which requires a proposed merger to have a bona fide business purpose, must be
satisfied. See 26 C.F.R. Section 1.368-1(c). We believe that Merger 1 and Merger
2 satisfy the business purpose test for the reasons set forth in the Prospectus
under the caption "THE CONVERSION AND REORGANIZATION -- Purposes of the
Conversion and Reorganization." The "continuity of business enterprise test"
requires an acquiring corporation either to continue an acquired corporation's
historic business or use a significant portion of its historic assets in a
business. See 26 C.F.R. Section 1.368-1(d). We believe that the continuity of
business enterprise test is satisfied since the Plan provides that the business
conducted by Stock Savings Bank prior to Merger 1 and Merger 2 will be
unaffected by the transactions.
The "continuity of interest doctrine" requires that the continuing
common stock interest of the former owners of an acquired corporation,
considered in the aggregate, represent a "substantial part" of the value of
their former interest, and provide them with a "definite and substantial
interest" in the affairs of the acquiring corporation or a corporation in
control of the acquiring corporation. Paulsen v. Comm'r., 469 U.S. 131 (1985);
Helvering v. Minnesota Tea Co., 296 U.S. 378 (1935); John A Nelson Co. v.
Helvering, 296 U.S. 374 (1935); Southwest Natural Gas Co. v. Comm'r., 189 F.2d
332 (5th Cir. 1951), cert. denied, 342 U.S. 860 (1951). We believe that Merger 1
satisfies the continuity of interest doctrine based upon a series of private
letter rulings issued by the IRS in substantially identical transactions as the
Conversion and Reorganization and based upon the information set forth in the
Registration Statement. See e.g., PLRs 9510044 and 9437020. Specifically, the
IRS has ruled in substantially identical transactions that:
<PAGE>
Boards of Directors
Perpetual Bank, A Federal Savings Bank
SouthBanc Shares, M.H.C.
SouthBanc Shares, Inc.
January 16, 1998
Page 5
(1) The exchange of the members' equity interests in the MHC for
interests in a liquidation account established at the Stock
Savings Bank in Merger 1 will not violate the continuity of
interest requirement of Section 1.368-1(b) of the Treasury
Regulations.
(2) Interests in the liquidation account established at the Stock
Savings Bank, and the shares of Stock Savings Bank Common
Stock held by the MHC prior to consummation of Merger 1, will
be disregarded for the purpose of determining whether an
amount of stock in the Stock Savings Bank which constitutes
"control" of such corporation was acquired by the Holding
Company in exchange for shares of Holding Company Common
Stock pursuant to Merger 2.
(3) The exchange of shares of Holding Company Common Stock for
the shares of the Stock Savings Bank Common Stock in Merger
2, following consummation of Merger 1, will satisfy the
continuity of interest requirement of Section 1.368- 1(b) of
the Treasury Regulations in Merger 2.
Accordingly, we also believe that Merger 2 satisfies the continuity of
interest doctrine because those persons who are the Stock Savings Bank's
stockholders following Merger 1 will receive only Exchange Shares for their
shares of Stock Savings Bank Common Stock. In addition, we believe other
applicable requirements of the Treasury Regulations and case law which are
preconditions to qualification of Merger 1 and Merger 2 as a reorganization,
within the meaning of Section 368(a)(1)(A) and 368(a)(2)(E) of the Code, are
satisfied on the basis of the information contained in the Plan and the
Prospectus.
Section 354 of the Code provides that no gain or loss shall be
recognized by stockholders who exchange common stock in a corporation, such as
the Stock Savings Bank, which is a party to a reorganization, solely for common
stock in another corporation which is a party to the reorganization, such as the
Holding Company. Section 356 of the Code provides that stockholders shall
recognize gain to the extent they receive money as part of a reorganization,
such as cash received in lieu of fractional shares. Section 358 of the Code
provides that, with certain adjustments for money received in reorganization,
such as cash received in lieu of fractional shares, a stockholders' basis in the
common stock he or she receives in a reorganization shall equal the basis of the
common stock which he or she surrendered, he or she shall be deemed to have held
the property received for the same period as the property exchange, provided
that the property exchanged had been held as a capital asset.
<PAGE>
Boards of Directors
Perpetual Bank, A Federal Savings Bank
SouthBanc Shares, M.H.C.
SouthBanc Shares, Inc.
January 16, 1998
Page 6
Section 361 of the Code provides that no gain or loss shall be
recognized to a corporation such as the Interim Stock Savings Bank which is a
party to a reorganization on any transfer of property pursuant to a plan of
reorganization such as the Plan. Section 362 of the Code provides that if
property is acquired by a corporation such as the Stock Savings Bank in
connection with a reorganization, then the basis of such property shall be the
same as it would be in the hands of the transferor immediately prior to the
transfer. Section 1223(s) of the Code states that where a corporation such as
the Stock Savings Bank will have a carryover basis in property received from
another corporation which is a party to a reorganization, the holding period of
such assets in the hands of the acquiring corporation shall include the period
for which such assets were held by the transferor, provided that the property
transferred had been held as a capital asset. Section 1032 of the Code states
that no gain or loss shall be recognized to a corporation, such as the Holding
Company of the receipt of property in exchange for common stock.
Opinions
In connection with the opinions expressed herein below, we have relied
upon the assumption that the representations required for advance rulings
outlined in Rev. Proc. 86-42, 1986-2 C.B. 722, are true and correct as it
applies to the Conversion and Reorganization.
Based on the foregoing assumptions and the description of Merger 1 and
Merger 2, the representations which have been made to us by management of the
Stock Savings Bank, the MHC and the Holding Company in an affidavit dated
January 15, 1998 and subject to the qualifications and limitations set forth in
this letter, we are of the opinion that, if Merger 1 were to be consummated as
described above as of the date hereof, then:
1. Merger 1 qualifies as a reorganization within the meaning of
Section 368(a)(1)(A) of the Code.
2. No gain or loss will be recognized by the Stock Savings Bank
upon the receipt of the assets of the MHC in Merger 1.
In addition, we are of the opinion that, if Merger 2 were to be
consummated as described above as of the date hereof, then:
1. Merger 2 qualifies as a reorganization within the meaning of
Section 368(a)(1)(A) of the Code. Pursuant to Section
368(a)(2)(E) of the Code, Merger 2 is not disqualified from
qualifying as a reorganization within the meaning of Section
368(a)(1)(A) because Holding Company Common Stock will be
conveyed to the
<PAGE>
Boards of Directors
Perpetual Bank, A Federal Savings Bank
SouthBanc Shares, M.H.C.
SouthBanc Shares, Inc.
January 16, 1998
Page 7
Stock Savings Bank's stockholders in exchange for their Stock
Savings Bank Common Stock.
2. No gain or loss will be recognized by the Interim Stock
Savings Bank upon the transfer of its assets to the Stock
Savings Bank.
3. No gain or loss will be recognized by the Stock Savings Bank
upon the receipt of the assets of Interim Stock Savings Bank.
4. No gain or loss will be recognized by the Holding Company on
Stock Savings Bank upon the exchange of Exchange Shares for
Stock Savings Bank Common Stock.
5. No gain or loss will be recognized by the Public Stockholders
upon the receipt of the Exchange Shares solely in exchange
for their shares of Stock Savings Bank Common Stock.
6. The basis of the Exchange Shares to be received by the Public
Stockholders will be the same as the basis of the Stock
Savings Bank Common Stock surrendered in exchange therefor,
before giving effect to any payment of cash in lieu of
fractional shares.
7. The holding period of the Exchange Shares to be received by
the Public Stockholders will include the holding period of
the Stock Savings Bank Common Stock, provided that the Stock
Savings Bank Common Stock was held as a capital asset on the
date of the exchange.
8. No gain or loss will be recognized by the Holding Company
upon the sale of Holding Company Common Stock in the
Conversion Offerings.
9. Eligible Account Holders and Supplemental Eligible Accounts
Holders will realize gain, if any, upon the constructive
issuance to them of Subscription Rights and/or interest in
the liquidation account of Stock Savings Bank. Any gain
resulting therefrom will be recognized, but only in an amount
not in excess of the fair market value of the liquidation
accounts and/or Subscription Rights received. The liquidation
account will have normal, if any, fair market value. Based
solely on the accuracy of the conclusion reached by RP
Financial, LC. in its written opinion to Stock Savings Bank
(the "Appraiser's Opinion") that the Subscription Rights
<PAGE>
Boards of Directors
Perpetual Bank, A Federal Savings Bank
SouthBanc Shares, M.H.C.
SouthBanc Shares, Inc.
January 16, 1998
Page 8
have no value at the time of distribution or exercise and our
reliance thereon, no gain or loss will be required to be
recognized by depositors upon receipt or distribution of
Subscription Rights. (Section 1001 of the Code.) See Paulsen
v. Commissioner, 469 U.S. 131,139 (1985).
Based solely on the accuracy of the conclusions reached in
the Appraiser's Opinion, and our reliance thereon, we are of
the opinion that: (a) no taxable income will be recognized by
the borrowers, directors, officers and employees of Stock
Savings Bank upon the distribution to them of Subscription
Rights or upon the exercise or lapse of the Subscription
Rights to acquire Holding Company Common Stock at fair market
value; (b) no taxable income will be realized by the
depositors of Stock Savings Bank as result of the exercise of
lapse of the Subscription Rights to purchase Holding Company
Common Stock at fair market value. Rev. Rul. 56-572, 1956-2
C.B. 182; and (c) no taxable income will be realized by Stock
Savings Bank, or Holding Company upon the issuance or
distribution of Subscription Rights to depositors of Stock
Savings Bank to purchase shares of Holding Company Common
Stock at fair market value. (Section 311 of the Code.)
Notwithstanding the Appraiser's Opinion, if the Subscription
Rights are subsequently found to have a fair market value,
income may be recognized by various recipients of the
Subscription Rights (in certain cases, whether or not the
rights are exercised) and Holding Company and/or Stock
Savings Bank may be taxable on the distribution of the
Subscription Rights. (Section 311 of the Code.) In this
regard, the Subscription Rights may be taxed partially or
entirely at ordinary income tax rates.
10. The tax basis to the holders of the Holding Company Common
Stock purchased in the Conversion Offerings will be the
amount paid therefor, and the holding period for such shares
will begin on the date of consummation of the Conversion
Offerings if purchased through the exercise of Subscription
Rights. If purchased in the Community Offering or Syndicated
Community Offering, the holding period for such stock will
begin on the day after the date of purchase.
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.
<PAGE>
Boards of Directors
Perpetual Bank, A Federal Savings Bank
SouthBanc Shares, M.H.C.
SouthBanc Shares, Inc.
January 16, 1998
Page 9
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.
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 Savings Bank'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 --
AND REORGANIZATION -- Effects of Conversion and Reorganization on Depositors and
Borrowers of the Savings Bank -- Tax Effects" and "LEGAL AND TAX OPINIONS."
Very truly yours,
/s/ Breyer & Aguggia
BREYER & AGUGGIA
<PAGE>
Exhibit 8.2
[LETTERHEAD OF]
EVANS, CARTER, KUNES & BENNETT, P.A.
ATTORNEYS AT LAW
115 CHURCH STREET
MAILING ADDRESS P.O. BOX 369
CHARLESTON, SOUTH CAROLINA 29402-0369
TELEPHONE (803) 577-2300
TELECOPIER (803) 577-2055
January 26, 1998
Boards of Directors
Perpetual Bank, a Federal Savings Bank
SouthBanc Shares, MHC
SouthBanc Shares, Inc.
907 North Main Street
Anderson, South Carolina 29621-5526
Gentlemen:
You have requested an opinion from this firm relative to the South
Carolina income tax consequences of the transactions contemplated by the Plan of
Conversion and Agreement and Plan of Reorganization (the "Plan") whereby (i) the
SouthBanc Shares, M.H.C. ("MHC") will convert from a mutual holding company to a
federal interim stock savings bank and merge with and into Perpetual Bank, a
Federal Savings Bank ("Perpetual Bank") and (ii) Perpetual Bank will be acquired
by a newly formed stock holding company, known as SouthBanc Shares, Inc.
("SouthBanc"), by means of the merger of Perpetual Bank with a federal interim
stock savings bank subsidiary of SouthBanc. The foregoing transactions will be
accompanied by a public offering of the shares of SouthBanc to certain
depositors and borrowers of Perpetual Bank and members of the general public.
In addition, shares of the common stock of Perpetual Bank currently held by
members of the general public will be exchanged at a predetermined ratio for
shares of SouthBanc common stock. The foregoing transactions are referred to
collectively herein as the "Conversion and Reorganization."
We have been provided with an opinion of special counsel to MHC,
Perpetual Bank and SouthBanc, Breyer & Aguggia, Washington, D.C., dated January
16, 1998 ("Federal Tax Opinion"), pertaining to the treatment of the foregoing
transactions for federal income tax purposes under the Internal Revenue Code of
1986, as amended ("Code").
<PAGE>
Boards of Directors
Perpetual Bank, a Federal Savings Bank
SouthBanc Shares, MHC
SouthBanc Shares, Inc.
January 26, 1998
Page 2
Based upon the facts and circumstances attendant to the proposed
reorganization, as they have been related to us via the Breyer & Aguggia opinion
letter referred to above, it is our opinion that, under the laws of the State of
South Carolina, no adverse income tax consequences will be incurred by any of
the parties to the Conversion and Reorganization or the depositors and
shareholders of Perpetual Bank as a result of the consummation of the Conversion
and Reorganization.
No opinion is expressed on any matter other than state income tax
consequences which might result from the implementation of the Conversion and
Reorganization including, but not limited to, any franchise or capital stock
taxes which might result from the implementation of the Conversion and
Reorganization. Furthermore, no opinion is expressed as to the treatment of any
net operating or capital loss carryforwards or carrybacks for South Carolina
income tax purposes. If the information upon which we have relied is incorrect
or if authority changes with retroactive effect, our opinion may be affected
thereby. We take no responsibility to update or supplement our opinion.
We hereby consent to the filing of this opinion with the OTS as an
exhibit to the Application H-(e)1-S filed by SouthBanc with the OTS in
connection with the Conversion and Reorganization and the reference to our
firm in the Application H-(e)1-S.
We also consent to the filing of this opinion with the SEC and the OTS
as exhibits to SouthBanc's Registration Statement on Form S-1 and Perpetual
Bank's Application for Conversion on Form AC ("Form AC") respectively, and the
reference to our firm in the Prospectus, which is a part of both the
Registration Statement on Form S-1 and the Form AC, under the headings, "THE
CONVERSION AND REORGANIZATION--Effects of Conversion and Reorganization on
Depositors and Borrowers of the Savings Bank--Tax Effects" and "LEGAL AND TAX
OPINIONS."
Very truly yours,
EVANS, CARTER, KUNES & BENNETT, P.A.
By: /s/ Robert M. Kunes
----------------------
Robert M. Kunes
<PAGE>
EXHIBIT 10.2
- --------------------------------------------------------------------------------
ADOPTION AGREEMENT
FOR THE BENEFIT CONSULTANTS &
ADMINISTRATORS,INC REGIONAL PROTOTYPE
NON-STANDARDIZED CASH OR DEFERRED PROFIT SHARING PLAN AND TRUST
- --------------------------------------------------------------------------------
<PAGE>
ADOPTION AGREEMENT
FOR THE BENEFIT CONSULTANTS &
ADMINISTRATORS,INC REGIONAL PROTOTYPE
NON-STANDARDIZED CASH OR DEFERRED PROFIT SHARING PLAN AND TRUST
The BENEFIT CONSULTANTS & ADMINISTRATORS,INC Regional Prototype Non-Standardized
Cash or Deferred Profit Sharing Plan and Trust ("the Plan and Trust") is hereby
adopted by PERPETUAL BANK (FSB) (hereinafter "the Employer") effective as of
April 1, 1989 ("the Effective Date"). The Plan and Trust as applicable to the
Employer shall be known as: THE PERPETUAL BANK, FSB, 401(k) PLAN.
( ) a. The Plan and Trust is an amendment of a preexisting Plan
which was originally effective as of ___/___/___.
(X) b. The Plan and Trust is an amendment and restatement of a
preexisting Plan which was originally effective as of April 1,
1985.
*** CAUTION ***
FAILURE TO FILL OUT THE ADOPTION AGREEMENT PROPERLY MAY
RESULT IN DISQUALIFICATION OF THE PLAN
PART I. The following identifying information pertains to the Employer and the
Plan and Trust:
<TABLE>
<C> <S> <C>
1. Employer Address : PO BOX 1247
ANDERSON, SC 29622
2. Employer Telephone : 803-225-0241
3. Employer Tax ID : 57-0225540
4. Employer Fiscal Year : October 1 to September 30
5. Three Digit Plan Number : 002
6. Trust ID Number : 57-0225540
7. Plan Fiscal Year (must : October 1 to September 30
be 12 consecutive mos.) (effective 10/1/90)
April 1 to March
31 (effective
4/1/85 to 3/31/90)
Short Plan Year
4/1/90 to 9/30/90
8. Short Initial Plan Year : N/A
9. Plan Agent : ROBERT W. ORR
PO BOX 1247
ANDERSON, SC 29622
</TABLE>
- 1 -
<PAGE>
<TABLE>
<C> <S> <C>
10. Plan Administrator : PERPETUAL BANK (FSB);
PO BOX 1247
ANDERSON, SC 29622
11. Plan Administrator : 57-0225540
ID Number
12. Plan Trustees : JIM GRAY WATSON
ROBERT W. ORR
PO BOX 1247
ANDERSON, SC 29622
13. IRS Determination : February 1, 1986
Letter Date
(Leave blank for a New Plan)
14. IRS File Folder Number : N/A
(Leave blank for a New Plan)
15. Legal Organization of Employer:
( ) a. Sole Proprietorship
( ) b. Partnership
(X) c. C Corporation
( ) d. S Corporation
( ) e. Not for Profit Corporation
( ) f. Personal Service Corporation
( ) g. Other - Explain:
16. Business Code : 6030
17. State of Legal Construction: SOUTH CAROLINA
18. Other Members of a Controlled Group or Affiliated Service Group:
(If any, each member should sign Adoption Agreement or otherwise
satisfy applicable participation requirements.
Leave blank if not applicable)
Controlled Group
(X) a. Not Applicable
( ) b. Other Members
Affiliated Service Group
(X) a. Not Applicable
( ) b. Other Members
</TABLE>
- 2 -
<PAGE>
PART II. The Plan contains certain predetermined design features intended to
provide the statutory requirement or most commonly adopted feature but permits
the selection of alternative features. If an Employer desires to retain the
predetermined design feature, select the provision designated Plan Provision. If
an alternative design feature is desired, select the appropriate provision.
Unless specifically provided to the contrary, only one selection may be made for
each design category. Section references are to relevant Plan Sections. Defined
terms have the meanings provided in the Plan.
A. Eligibility and Service Provisions
1. Eligible Employees - Section 1.2.23 provides that all
employees, including employees of certain related businesses
and leased employees are eligible except for certain union
members and non-resident aliens. (Specify all applicable)
(X) a. Plan Provision
( ) b. Include members of collective bargaining unit
( ) c. Exclude self-employed persons
( ) d. Exclude Employees not employed by the Employer
( ) e. Exclude commissioned Employees
( ) f. Exclude hourly Employees
( ) g. Exclude salaried Employees
( ) h. Other - Specify. (Cannot discriminate in favor of
Highly Compensated Employees).
2. Eligibility Requirements (See Section 2.1.1) - An Employee is
eligible to participate in Non-Elective Contribution portions
of the Plan if he satisfies the following requirements during
the Eligibility Computation Period. (Specify one option or
any combination other than c and d. Selecting more than one
option means that an Employee must meet all indicated
requirements for eligibility, except for option e. Option e
overrides all other requirements):
(X) a. Date of hire, i.e. no age or service required (no
other choices may be selected)
( ) b. Minimum Age of years (Not to exceed 21, partial
years may be used)
( ) c. Minimum of months of service (Cannot require more
than 24 months, or more than 12 months if full
vesting after not more than 2 Years of Service is
not selected; if periods other than whole years are
selected an Employee cannot be required to complete
any specified number of Hours of Service to receive
credit for the fractional year)
( ) d. Hours of Service required during each 12 month
Eligibility Computation Period (cannot exceed 1000)
(X) e. Employed on April 1st, 1985. (For new plans only,
select an additional option if this provision is
selected)
( ) f. Not applicable. Non-Elective Contributions are not
- 3 -
<PAGE>
permitted.
3. For the purposes of having Elective Contributions made on the
Employee's behalf, Section 2.1.1 provides that, unless the
Employer specifies otherwise in the Adoption Agreement, an
Employee must complete 1000 Hours of Service during the
Eligibility Computation Period. For these purposes, an
Employee is eligible if he satisfies the following
requirements: (Select all applicable. Selecting more than
one option means that an Employee must meet all indicated
requirements for eligibility, except for option e. Option e
overrides all other requirements):
(X) a. Date of hire, i.e. no age or service requirement
(No other choices may be selected)
( ) b. Minimum Age of ____ years (Not to exceed 21,
partial years may be specified)
( ) c. Minimum of ____ months of service (Not
to-exceed-12, if other than full years are selected
hours may not be specified)
( ) d. ____ Hours of Service required during each 12 month
Eligibility Computation Period (cannot exceed 1000)
( ) e. Employed on ___/___/___. (For new plans only,
select an additional option if this provision is
selected)
4. Matching Eligibility Requirements (See Section 2.1.1) - An
Employee is eligible to participate in the Matching
Contributions portion of the Plan if he satisfies the
following requirements during the Eligibility Computation
Period. (Specify one option or any combination other than c
and d. Selecting more than one option means that an Employee
must meet all indicated requirements for eligibility, except
for option e. Option e overrides all other requirements):
(X) a. Date of hire, i.e. no age or service required (No
other choices may be selected)
( ) b. Minimum Age of ___ years (Not to exceed 21, partial
years may be used)
( ) c. Minimum of ___ months of service (Cannot require
more than 24 months, or more than 12 months if full
vesting after not more than 2 Years of Service is
not selected; if periods other than whole years are
selected an Employee cannot be required to complete
any specified number of Hours of Service to receive
credit for the fractional year)
( ) d. ____ Hours of Service required during each 12 month
Eligibility Computation Period (cannot exceed 1000)
( ) e. Employed on ___/___/___. (For new plans only,
select an additional option if this provision is
selected)
( ) f. Not applicable. Matching Contributions are not
permitted.
- 4 -
<PAGE>
5. Eligibility Computation Period - Section 1.2.22 provides that the
initial eligibility computation period begins on the date of hire and
the subsequent periods commence on each annual anniversary of such
date. (Select one)
(X) a. Plan Provision
( ) b. The eligibility computation periods subsequent to the initial
eligibility computation period are the Plan Year beginning with
the first Plan Year commencing prior to the first anniversary
of the employment commencement date.
6. Hour of Service - Section 1.2.35 provides that service will be
credited on the basis of actual hours for which the employee
is paid or entitled to payment. If records of actual hours
are not maintained, credit is given on the basis of: (Select
one)
(X) a. Plan Provision - Records are maintained
( ) b. Days Worked - An Employee will be credited with 10 Hours of
Service if he is credited with at least 1 Hour of Service
during the day
( ) c. Weeks Worked - An Employee will be credited with 45 Hours of
Service if he is credited with at least 1 Hour of Service
during the week
( ) d. Semi-Monthly Payroll Period - An Employee will be credited with
95 Hours of Service if he is credited with at least 1 Hour of
Service during the payroll period
( ) e. Months worked - An Employee will be credited with 190 Hours of
Service if he is credited with at least 1 Hour of Service
during the month
7. Service with Predecessor Employers - Section 1.2.35 provides that
service with predecessor employers is treated as service for the
Employer. Where applicable, identify the predecessor employer(s) and
any document(s) which provides for the crediting of service with such
predecessor(s):
(X) a. Not applicable.
( ) b. Service with the following entities shall be credited as
service under this plan:
----------------------------------------------------
Service with the above entities has been determined under the
terms of the following documents:
----------------------------------------------------
- 5 -
<PAGE>
8. Entry Date - Section 2.1.2 provides that an Employee who satisfies any
eligibility requirements enters the Plan on the Entry Date. For this
purpose the Entry Date is the: (Select one)
( ) a. First day of next Plan Year or ____ months (Not to exceed 6)
after satisfying the eligibility requirements, if earlier
( ) b. First day of ____ month (Not more than 6) after satisfying
eligibility requirements or the first day of the next Plan Year,
if earlier
( ) c. Date of satisfying the eligibility requirements
( ) d. First day of Plan Year in which the eligibility requirements are
satisfied
( ) e. First day of Plan Year nearest to the date the eligibility
requirements are satisfied
( ) f. Semiannual - ( ) first or ( ) last day of 6 month periods,
beginning with first of Plan Year, coincident with or after
satisfying eligibility requirements
( ) g. Quarterly - ( ) first or ( ) last day of 3 month periods,
beginning with first of Plan Year, coincident with or after
satisfying eligibility requirements
( ) h. Monthly - ( ) first or ( ) last day of each month of the Plan
Year, coincident with or after satisfying eligibility
requirements
(X) i. First day of the Plan Year coincident with or immediately
following the date the eligibility requirements are satisfied.
(May be selected only if eligibility requirements of Plan do not
require more than 6 months of service (18 months if 100%
immediate vesting) and attainment of age 20 1/2.)
( ) j. Last day of the Plan Year coincident with or after satisfying the
eligibility requirements. (May be selected only if eligibility
requirements of Plan do not require more than 6 months of service
(18 months if 100% immediate vesting) and attainment of age 20
1/2).
NOTE: The Entry Date should be coordinated with the Compensation
Computation Period.
9. Break in Service - Section 1.2.8 provides that a Break in Service occurs if
an Employee fails to complete more than 500 hours of service during the
applicable computation period unless a lesser number is specified. (Select
one)
(X) a. Plan Provision
( ) b. A Break will occur if the Employee fails to complete more than
____ (Not to exceed 500) Hours of Service
- 6 -
<PAGE>
B. Date Provisions
1. Anniversary Date - Section 1.2.5 provides that the Anniversary Date is the
last day of the Plan Year unless another date is specified. (Select one)
(X) a. Plan Provision - No other date is specified.
( ) b. The first day of the Plan Year.
( ) c. Other - Specify. (Must be at least annually)
2. Valuation Date - Section 1.2.63 provides that the Valuation Date is the
date or dates specified in the Adoption Agreement. (Select one)
( ) a. Anniversary Date
( ) b. Semiannually on the last day of each 6 month period
beginning with the first of the Plan Year
(X) c. Quarterly on the last day of each 3 month period
beginning with the first of the Plan Year
( ) d. Monthly on the last day of each month of the Plan
Year
( ) e. Last day of Plan Year (use option (a) if
Anniversary Date is last day of the Plan Year
( ) f. Other - Specify. (Must be at least annually)
3. Normal Retirement Date - Section 1.2.46 permits the adoption of a
Normal Retirement Date. (Select one)
( ) a. Date Normal Retirement Age is attained
( ) b. First day of month in which Normal Retirement Age
is attained
( ) c. First day of month nearest date Normal Retirement
Age is attained
( ) d. First day of month coincident with or next
following the date Normal Retirement Age is
attained
( ) e. Anniversary Date nearest date Normal Retirement Age
is attained
(X) f. Anniversary Date coincident with or next following
date Normal Retirement Age is attained
4. Normal Retirement Age - For each Participant the Normal Retirement Age is:
(X) a. Age 65 (not to exceed 65)
( ) b. The later of age ____ (not to exceed 65) or the ____ (not
to exceed the fifth (5th)) anniversary of the
participation commencement date, if later. The
participation commencement date is the first day of the
Plan Year in which a Participant commenced participation
in the Plan. Solely for Plan Years beginning before 1988,
if the normal retirement age was determined by reference
to the anniversary of the participation commencement
date, the anniversary for participants who first
commenced participation before
- 7 -
<PAGE>
the first Plan Year beginning on or after January 1, 1988 is the
earlier of the tenth anniversary of the date the participant
commenced participation in the Plan (or such anniversary as had
been elected by the Employer if less than ten) or the fifth
anniversary of the first day of the first Plan Year beginning on
or after January 1, 1988.
( ) c. Age ____ and the ____ anniversary of the participation
commencement date, if both requirements are met earlier than the
later age of 65 or the fifth (5th) anniversary of participation
5. Early Retirement Date - Section 1.2.17 permits the adoption of an Early
Retirement Date: (Select one)
( ) a. The Plan does not provide an early retirement date
( ) b. The actual date the Participant attains the Early Retirement Age
(X) c. The Anniversary Date coincident with or next following the date
the Participant attains the Early Retirement Age
( ) d. The Valuation Date coincident with or next following the date
the Participant attains the Early Retirement Age
( ) e. The ( ) first ( ) last day of the month coincident with or next
following the date the Participant attains the Early Retirement
Age
( ) f. Other - Specify. (Cannot discriminate in favor of Highly
Compensated Employees)
6. Early Retirement Age: (Select all applicable. If more than one option
is selected, Early Retirement Age is attained on the first date the
requirements of any option are met.)
( ) a. Age ____ (not to exceed 65)
(X) b. Age 55 and 10 Years of Service
( ) c. Age ____ and ____ Years of Service while a Participant
( ) d. ____ years prior to the Normal Retirement Age
( ) e. Sum of age and Years of Service equals ____
( ) f. Not Applicable
NOTE: Cannot discriminate in favor of Highly Compensated Employees.
- 8 -
<PAGE>
C. Compensation
1. Compensation - See Section 1.2.10. For purposes of the Plan a Participant's
compensation is based on the Compensation Computation Period and shall:
(Select a, b, or c and all of d and e which are applicable)
( ) a. Equal compensation as defined in Section 3401(a) except as
indicated below
( ) b. Equal compensation as defined in Section 415(c)(3) except as
indicated below
(X) c. Equal compensation as defined for the Wages, Tips, and Other
Compensation Box on Form W-2 except as indicated below
(X) d. Include compensation which is not includible in gross income by
reason of Section
(X) Sections 402(h)(1)(B)(SEP deferrals)
(X) 125 (Cafeteria Plan)
(X) 402(a)(8) (401(k) deferrals)
(X) 403(b)
(X) 457(b)
( ) e. Exclude compensation which is for
( ) overtime
( ) discretionary bonuses
( ) Bonuses
( ) taxable employee benefits
( ) in excess of $_____
( ) Other exclusion - Specify. (Cannot discriminate in
favor of Highly Compensated Employees)
NOTE: Exclusions are permissible if the Plan is not integrated with
Social Security. Exclusions may cause the Plan to be
impermissible discriminatory.
2. The Compensation Computation Period is:
(X) a. The Plan Year
( ) b. The calendar year ending with or within the Plan Year
3. Fly the initial Plan Year of participation, include
Compensation from: (Select one)
(X) a. Entry Date as a Participant
(X) b. First day of the Compensation Computation Period which ends
during the initial Plan Year of participation
- 9 -
<PAGE>
D. Contribution and Allocation
1. Non-Elective Contribution Formula - The Employer's
Non-Elective contribution to the Plan shall be: (Select one)
( ) a. Discretionary, out of profits
(X) b. Discretionary, but not limited to profits
( ) c. ____% of each Participant's Compensation. (not to exceed 15%)
( ) d. Not applicable. Non-Elective Contributions are not permitted.
2. Allocation Method - The Employer Non-Elective contribution is allocated
to Participants: (Select one)
(X) a. Proportionate to Salary. Based upon each Participant's Compensation in
proportion to the Compensation of all Participants.
( ) b. Integrated with Social Security. Based on each Participant's
Compensation to the extent of a base contribution percentage
multiplied by the Participant's Compensation plus the lesser of 5.7%.
or the base contribution percentage (the contribution rate on each
Participant's Compensation up to the Social Security Integration
Level) multiplied by the Participant's Compensation in excess of the
Social Security Integration Level and any remainder is allocated based
upon each Participant's Compensation in proportion to the Compensation
of all Participants. (Select d, e, f, g or h, below)
( ) c. Not applicable - No Non-Elective Contributions.
The Social Security Integration Level is equal to:
( ) d. The taxable wage base under Section 230 of the Social Security Act in
effect as of the first day of the Plan Year.
( ) e. $____ (Not to exceed the taxable wage base under Section 230 of the
Social Security Act in effect as of the first day of the Plan Year).
( ) f. ____% (Not to exceed 100) of the taxable wage base under Section 230
of the Social Security act in effect as of the first day of the Plan
Year.
( ) g. The greater of $10,000 or 20% of the taxable wage base under Section
230 of the Social Security Act in effect as of the first day of the
Plan Year.
( ) h. 80% of the taxable wage base under Section 230 of the Social Security
Act in effect as of the first day of the Plan Year plus $1.00.
- 10 -
<PAGE>
NOTE: The Employer Contribution allocable to Compensation in excess of the
Social Security Integration Level (SSIL) may not exceed 5.4% if the
SSIL is more than 80% but less than 100% of the taxable wage base
under Section 230 of the Social Security Act at the beginning of the
plan year (TWB), and may not exceed 4.3% if the SSIL is greater than
20% of the TWB, but not more than 80% of the TWB, and greater than
$10,000.
3. Requirement to Share in Non-Elective Contribution Allocation. In order
to share in the allocation of the Employer's Non-Elective Contribution
a Participant: (Select all applicable)
( ) a. must complete ____ Hours (cannot exceed 1000), but
( ) is eligible regardless of Hours if the Employee dies during the Plan
Year
( ) is eligible regardless of Hours of Service if the Employee retires
during the Plan Year
( ) is eligible regardless of Hours of Service if the Employee becomes
totally disabled during the Plan Year
(X) b. must complete 1,000 (cannot exceed 1000) Hours and be employed at
Plan Year end but
(X) is eligible if Employee dies during the plan year,
(X) regardless of Hours of Service.
( ) only if employee meets Hours requirement
(X) is eligible if Employee retires during the Plan Year,
(X) regardless of Hours of Service.
( ) only if Employee meets Hours requirement.
(X) is eligible if Employee becomes totally disabled during the Plan
Year
(X) regardless of the Hours of Service.
( ) only if Employee meets Hours requirement.
( ) c. Not applicable - No Non-Elective Contributions.
4. to Share in Matching Contribution Allocation - In order to share in the
allocation of the Employer's Matching Contribution for each respective
quarterly Valuation Date a Participant: (Select all applicable)
( ) a. must complete ____ Hours (cannot exceed 1000), but
( ) is eligible regardless of Hours if the Employee dies during the Plan
Year
( ) is eligible regardless of Hours of Service if the Employee retires
during the Plan Year
( ) is eligible regardless of Hours of Service if the Employee becomes
totally disabled during the Plan Year
(X) b. must complete N/A (cannot exceed 1000) Hours and be employed as of
the quarterly Valuation Date but
(X) is eligible if Employee dies during the plan year,
- 11 -
<PAGE>
(X) regardless of Hours of Service.
( ) only if employee meets Hours requirement
(X) is eligible if Employee retires during the Plan Year,
(X) regardless of Hours of Service.
( ) only if Employee meets Hours requirement.
(X) is eligible if Employee becomes totally disabled during the Plan Year
(X) regardless of the Hours of Service.
( ) only if Employee meets Hours requirement.
( ) c. Not Applicable
5. Matching Contributions - The Matching Contribution by the Employer for
the Plan Year in accordance with Section 2.2.1(a)(3)(ii) is
( ) a. Matching Contributions are not permitted
( ) b. Discretionary each Plan Year
(X) c. Based upon the Allocation Method set forth below
( ) d. Based upon the Allocation Method set forth below
plus a supplemental discretionary Matching contribution
6. Allocation Method for Matching Contributions - Matching
Contributions shall be allocated to eligible Participants in
an amount:
( ) a. Proportionate to the Elective Contributions made on behalf of a
Participant
(X) b. Equal to a percentage of Elective Contributions made of behalf of a
Participant which is determined by a formula adopted by the Board of
Directors of the sponsoring employer relating corporate earnings for
the quarterly Valuation Period to such percentage
( ) c. Graded based on the dollar amount of the Elective
Contribution of each Participant as follows:
_____% of the first $_____ plus
_____% of the next $_____ plus
_____% of the next $_____ plus
_____% of the next $_____.
( ) d. Graded based on the percentage of compensation of the Elective
Contribution of each Participant as follows:
_____% of the first _____% plus
_____% of the next _____% plus
_____% of the next _____% plus
_____% of the next% _____%.
( ) e. Graded based on the dollar amount of the Elective
Contribution of each Participant as follows:
_____% if contribution is $_____ or more;
_____% if contribution is $_____ or more;
_____% if contribution is $_____ or more;
_____% if contribution is $_____ or more.
- 12 -
<PAGE>
( ) f. Graded based on the percentage of compensation of the Elective
Contribution of each Participant as follows:
_____% if contribution is _____% or more
_____% if contribution is _____% or more
_____% if contribution is _____% or more
_____% if contribution is _____% or more
( ) g. Not applicable
NOTE: Graded percentages entered in c. through f. must decrease as
percentage or amount of compensation increases.
7. If a supplemental discretionary Matching Contribution is made,
Matching Contributions shall be allocated to eligible
Participants in an amount:
( ) a. Proportionate to the Elective Contributions made on
behalf of a Participant
( ) b. According to the method selected in 6b.- f. above
(X) c. Not applicable
8. Matching Contribution Allocation Date - Matching Contributions
are allocated as of the Anniversary Date unless an alternate
date is selected. For the purposes of this Plan the Matching
Contribution is allocated as of:
(Select one)
( ) a. Plan Provision - the Anniversary Date.
(X) b. The next Valuation Date.
( ) c. Other - Specify. (Must be allocated at least
annually)
( ) d. Not applicable
9. Limitations on Matching Contributions - The Employer shall not make
Matching Contributions: (Select all applicable)
(X) a. With respect to Elective Contributions in excess of
4.5 percent of a Participant's Compensation
( ) b. In excess of $_____ for any Participant
( ) c. To Key Employees
( ) d. Not applicable.
10. Allocation of Qualified Non-Elective Contributions - (Select
a or b. If a is selected, do not complete the remainder of
this section)
( ) a. Qualified Non-Elective Contributions are not
permitted.
(X) b. Qualified Non-Elective Contributions shall be made
at the Employer's discretion.
- 13 -
<PAGE>
Qualified Non-Elective Contributions shall be allocated
(complete c and d):
(X) c. On behalf of
( ) All Participants
( ) Solely on behalf of Participants who are not Highly
Compensated Employees
(X) Solely on behalf of Participants who are not Highly
Compensated Employees to the extent necessary to
satisfy the ACP or the ADP test
( ) d. Who are eligible to receive an allocation of
( ) Non-Elective Contributions
( ) Matching Contributions
Qualified Non-Elective Contributions shall be allocated:
(Select e or f; also select g, if applicable)
(X) e. In proportion to a Participant's Compensation.
( ) f. As a uniform dollar amount.
(X) g. To the extent necessary to satisfy the ACP test or the ADP test.
11. Limitation Year - Section 1.2.40 provides that unless otherwise
specified the Limitation Year for purposes of the limitation imposed by
IRC Section 415 is the Plan Year.
(Select one)
(X) a. Plan Provision
( ) b. Calendar year coinciding with or ending within the Plan Year
( ) c. Twelve consecutive month period ending ___/___.
E. Vesting Provisions
1. Years of Service - Section 1.2.65 provides that a Year of Service is the 12
consecutive month period specified in the Adoption Agreement in which at
least 1000 Hours of Service are performed unless a lesser number is
specified. (Select all applicable)
(X) a. Use the Plan Year as the computation period
( ) b. Use Eligibility Computation Period as the computation period
( ) c. Use ____ in lieu of 1000 Hours of Service (Not to exceed 1000 hours)
2. Excluded Years - Section 1.2.65 provides unless otherwise specified all
Years of Service are taken into account.
( ) a. Plan Provision - Include all Years of Service
(X) b. Exclude Plan Years prior to age 18
( ) c. Exclude Plan years prior to adoption of plan or predecessor plan.
Effective date of (prior) plan:
___/___/___
- 14 -
<PAGE>
3. Vesting Schedule - Section 2.4.2(f) provides that benefits will vest in
accordance with the method specified in the Adoption Agreement. (Select
one of a, b, c, d, f, or g. Also select e if applicable.)
Employer Accounts:
( ) a. At the rate of 20% each year after 3 Years of Service. (20% vested in
third year)
( ) b. At the rate of 20% each year after 2 Years of Service. (20% vested in
second year)
( ) c. 100% vesting upon participation.
(X) d. 100% vesting after 5 Year(s) of Service (Not to exceed 5)
(X) e. 100% vesting at Early Retirement Date (Must also select another
alternative)
( ) f. Other: (Optional vesting schedule must be at least as favorable as a.
or d.)
<TABLE>
<CAPTION>
Year(s) of Service Percent Vesting
<S> <C>
Less than 1
----------
1 but less than 2
----------
2 but less than 3
----------
3 but less than 4
----------
4 but less than 5
----------
5 but less than 6
----------
6 but less than 7
----------
7 or More
----------
</TABLE>
( ) g. Not applicable - No Non-Elective Employer
Contributions
Matching Accounts:
( ) a. At the rate of 20% each year after 3 Years of
Service. (20% vested in third year)
( ) b. At the rate of 20% each year after 2 Years of
Service. (20% vested in second year)
(X) c. 100% vesting upon participation.
( ) d. 100% vesting after ____ Year(s) of Service (Not to
exceed 5)
( ) e. 100% vesting at Early Retirement Date (Must also
select another alternative)
Continued...
- 15 -
<PAGE>
( ) f. Other: (Optional vesting schedule must be at least
as favorable as a. or d.)
<TABLE>
<CAPTION>
Year(s) of Service Percent Vesting
<S> <C>
Less than 1
----------
1 but less than 2
----------
2 but less than 3
----------
3 but less than 4
----------
4 but less than 5
----------
5 but less than 6
----------
6 but less than 7
----------
7 or More
----------
</TABLE>
( ) g. Not applicable - No Matching Contributions
4. Prior Vesting Schedule - Section 3.10.3 provides that if the Vesting
schedule has been amended to a less favorable schedule, participants are
entitled to have their vested interest calculated under the prior schedule
under certain instances.
(X) a. Not applicable. Either not amended or new schedule is more favorable.
( ) b. The prior schedule was
<TABLE>
<CAPTION>
Employer
Year(s) of Service Percent Vesting
<S> <C>
Less than 1
----------
1 but less than 2
----------
2 but less than 3
----------
3 but less than 4
----------
4 but less than 5
----------
5 but less than 6
----------
6 but less than 7
----------
7 or More
----------
<CAPTION>
Matching
Year(s) of Service Percent Vesting
<S> <C>
Less than 1
----------
1 but less than 2
----------
2 but less than 3
----------
3 but less than 4
----------
4 but less than 5
----------
5 but less than 6
----------
6 but less than 7
----------
7 or More
----------
</TABLE>
- 16 -
<PAGE>
5. Top Heavy Vesting Schedule - Section 2.6.1(c) provides that if the Plan
becomes Top Heavy, unless the Employer specifies otherwise, vesting will be
at a rate of 20% per year beginning with the second Year of Service.
Employer Accounts:
( ) a. Plan Provision
(X) b. 100% vested after 3 Year(s) of Service (Not to exceed 3)
( ) c. Same as non-Top Heavy vesting schedule (Must be at least as favorable
as a or b)
( ) d. Other: (Optional vesting schedule must be at least as favorable as a.
or b.)
<TABLE>
<CAPTION>
Year(s) of Service Percent Vesting
<S> <C>
Less than 1
----------
1 but less than 2
----------
2 but less than 3
----------
3 but less than 4
----------
4 but less than 5
----------
5 but less than 6
----------
6 or More
----------
</TABLE>
( ) e. Not Applicable - No Employer Non-Elective Contributions
Matching Accounts:
( ) a. Plan Provision
( ) b. 100% vested after ____ Year(s) of Service (Not to exceed 3)
(X) c. Same as non-Top Heavy vesting schedule (Must be at least as favorable
as a or b)
( ) d. Other: (Optional vesting schedule must be at least as favorable as a.
or b.)
<TABLE>
<CAPTION>
Year(s) of Service Percent Vesting
<S> <C>
Less than 1
----------
1 but less than 2
----------
2 but less than 3
----------
3 but less than 4
----------
4 but less than 5
----------
5 but less than 6
----------
6 or More
----------
</TABLE>
( ) e. Not Applicable - No Matching Contributions.
- 17 -
<PAGE>
6. Re-employment - Section 2.4.4 provides that Years of Service completed
after a Break in Service are not counted for purposes of increasing the
vested percentage attributable to service before the Break unless
reemployed within 5 years.
(X) a. Plan Provision
( ) b. Count all service after the Break
( ) c. Not applicable - 100% immediate vesting
7. Forfeitures - Section 2.4.6 provides that forfeitures are determined as
of the last day of the Plan Year in which the Participant's entire
interest is distributed from the Plan.
( ) a. Plan Provision.
(X) b. Determine in Plan Year of 5th consecutive Break in Service.
( ) c. Determination as of the Valuation Date coincident with or next
following the Distribution Date
( ) d. Not applicable - All benefits are fully vested. Leave the
remaining items in this Section E blank.
8. Forfeitures of Non-Elective Contributions shall be applied to
(select all applicable):
( ) a. Supplement Non-Elective Contributions
(X) b. Reduce Non-Elective Contributions
(X) c. Reduce Qualified Non-Elective Contributions
( ) d. Supplement Matching Contributions
(X) e. Reduce Matching Contributions
9. Forfeitures of Non-Elective Contributions shall be reallocated to
participants:
( ) a. In the same manner as Non-Elective Contributions
( ) b. In proportion to each participant's Compensation
(X) c. Not applicable. Forfeitures are applied to reduce contributions.
NOTE: If the Plan provides for permitted disparity, forfeitures must
be allocated under the Plan's allocation formula.
10. Forfeitures of Matching Contributions shall be applied to:
(Select all applicable)
( ) a. Supplement matching Contributions
(X) b. Reduce Matching contributions
(X) c. Reduce Qualified Non-Elective contributions
( ) d. Supplement Non-Elective Contributions
(X) e. Reduce Non-Elective Contributions
- 18 -
<PAGE>
11. Forfeitures of Matching Contributions shall be reallocated to participants:
( ) a. In the same manner as Non-Elective Contributions
( ) b. In proportion to each participant's Compensation
( ) c. In proportion to Matching Contributions
( ) d. In proportion to Elective Contributions
(X) e. Not applicable. Forfeitures are applied to reduce contributions.
12. Requirement to Share in Allocation of Forfeitures - In order to share
in the allocation of Forfeitures which supplement rather than reduce
other contributions, a Participant:
(Select all applicable).
( ) a. Must be eligible to receive an allocation of the respective type of
contribution, i.e. Matching or Non-elective
( ) b. Must be employed on the date the forfeiture is determined.
(X) c. Not applicable. Forfeitures reduce contributions.
13. Restoration of Forfeitures - If a Participant is entitled to a restoration
of a forfeiture, the amount to be restored shall be restored by:
( ) a. An additional contribution by the Employer specifically allocated to
the Participant's Account.
(X) b. Allocating other forfeitures arising in the year of restoration to
the Participant's Account to the extent thereof and an additional
contribution by the Employer specifically allocated to the
Participant's Account to the extent that allocable forfeitures are
insufficient.
F. CODA Limitation Provisions
1. Actual Deferral Percentages - Qualified Non-Elective Contributions may be
taken into account for purposes of calculating the ADP-Actual Deferral
Percentages. For purposes of the ADP test in Section 2.7.1, the amount taken
into account shall be:
( ) a. All Qualified Non-Elective Contributions.
(X) b. The Qualified Non-Elective Contributions that are needed to meet the
ADP test.
- 19 -
<PAGE>
2. Average Contribution Percentage - The amount of Elective Deferrals and
Qualified Non-Elective Contributions taken into account as contribution
percentage amounts for the purpose of calculating the ACP-Average
Contribution Percentage, subject to such other requirements as may be
prescribed by the Secretary of the Treasury, shall be:
For elective deferrals:
( ) a. All such Elective Deferrals.
( ) b. Only those Elective Deferrals that are needed to meet the Average
Contribution Percentage test.
(X) c. Elective Deferrals are not to be included in the ACP test.
( ) d. Not applicable.
For Qualified Non-Elective Contributions:
( ) e. All such Qualified Non-Elective contributions.
(X) f. Only those Qualified Non-Elective Contributions that are needed to
meet the Average Contribution Percentage test.
( ) g. Qualified Non-Elective Contributions are not to be, included in
the ACP test.
( ) h. Not applicable.
3. Excess Aggregate Contributions - Forfeitures of Excess Aggregate
Contributions pursuant to Section 2.7.7 shall be:
(X) a. Applied to reduce Employer contributions.
( ) b. Allocated, after all other forfeitures under the Plan, to each
Participant's Matching Contribution Account in the ratio which
each Participant's Compensation for the Plan Year bears to the
total Compensation of all Participants for the Plan Year. Such
forfeitures will not be allocated to the Account of any Highly
Compensated Employee.
G. Distribution Provisions
** 1. Form of Distributions - Section 2.5.2 provides that the Employer may
elect to permit Plan distributions to be made in the form of: (Select all
applicable)
(X) a. Lump sum without regard to amount.
( ) b. Lump sum but not to exceed $____.
(X) c. Installments over 15 years payable: (Select one or more)
( ) c.1. annually
( ) c.2. quarterly
(X) c.3. monthly
- 20 -
<PAGE>
( ) d. Installments over a period of years certain selected by the
Participant that is less than the life of the Participant
payable (Select one or more.)
( ) d.1. annually
( ) d.2. quarterly
( ) d.3. monthly
( ) e. An annuity for not more than ____ years
(X) f. An annuity for the life of: (Select one or more)
( ) f.1. the Participant
(X) f.2. the Participant and spouse
( ) f.3. the Participant and a designated beneficiary
( ) g. An annuity for ____ years certain and thereafter for the life
of: (Select one or more)
( ) g.1. the Participant
( ) g.2. the Participant and spouse
( ) the Participant and a designated beneficiary
( ) h. An annuity for a period certain selected by the Participant that
is less than the life of: (Select one or more)
( ) h.1. the Participant
( ) h.2. the Participant and spouse
( ) h.3. the Participant and a designated beneficiary
NOTE: Any number of options may be selected. Once selected, however,
any option may not thereafter be eliminated.
If an annuity option of life or longer is selected Qualified
Joint and Survivor Annuity provisions are required.
NOTE: The available forms of distribution shall also include any such
form which has been available under any previous document with
respect to this plan.
2. Survivor Annuity Percentage - If a Joint and Survivor Annuity is
payable, Section 1.2.37 provides that the normal survivor annuity is
50% of the amount payable during the joint lives of the participant and
spouse, unless the Employer elects a different percentage (Select one):
(X) a. Plan Provision - 50%
( ) b. Other Percentage - ____% (Not less than 50% nor more than 100%)
( ) c. Other Percentage selected by the Participant - (Not less than
50% nor more than 100%)
3. Time of Distribution - Section 2.5.1(b) provides that
distributions are deferred to Participants who resign or are
discharged prior to retirement until the retirement date
unless the employer elects to permit distributions in advance
of such date.
( ) a. Plan Provision without advance distribution election.
(X) b. Distributions may be made at the Participant's election within a
reasonable period following the Distribution Date.
- 21 -
<PAGE>
4. Distribution Date - Section 2.4.5 provides that, subject to the
necessity of obtaining the consent of a Participant and spouse, for the
purposes of determining the amount to be distributed, the Distribution
Date:
For a Participant who is not fully vested, is
( ) a. The anniversary Date coinciding with or following
the date of termination.
(X) b. The Valuation Date coinciding with or following the
date of termination
( ) c. As soon as practical but prior to the Anniversary
Date coinciding with or following the date of
termination, based on the preceding Valuation Date.
( ) d. the ( ) Valuation Date ( ) Anniversary Date
following ____ consecutive Breaks in Service
( ) e. The Participant's Normal or Early Retirement Date
For a Participant who is fully vested but who terminates
employment prior to death, total and permanent disability or
retirement at his retirement date is:
( ) a. The Anniversary Date coinciding with or following
the date of termination
(X) b. The Valuation Date coinciding with or following the
date of termination
( ) c. As soon as practical but prior to the Anniversary
Date following the date of termination, based upon
the preceding Valuation Date
( ) d. The Participant's Normal or Early Retirement Date
For a Participant who terminates employment as a result of
death, total and permanent disability or retirement at his
retirement date, is:
( ) a. The anniversary Date coinciding with or following
the date of termination.
(X) b. The Valuation Date coinciding with or following the
date of termination
( ) c. As soon as practical but prior to the Anniversary
Date following the date of termination, based upon
the preceding Valuation Date
In the case of a Participant's interest in an Elective
Account, Voluntary Account or Segregated Account attributable
to a rollover contribution from another plan, notwithstanding
the foregoing, the Distribution Date, is:
( ) a. Not applicable - The Distribution Date is
determined in the manner indicated above for the
fully vested Participants
( ) b. The anniversary Date coinciding with or following
the date of termination
(X) c. The Valuation Date coinciding with or following the
date of termination
- 22 -
<PAGE>
( ) d. As soon as practical but prior to the Anniversary
Date following the date of termination, based upon
the preceding Valuation Date.
5. Hardship Distributions - Section 2.5.5 provides that an
Employer may permit distributions to Participants while
employed in the event of financial hardship as specified in
the Plan:
(X) a. Hardship distributions are permitted.
( ) b. Hardship distributions are not permitted.
Hardship Distributions may be made from a Participants Account
as elected below in c and d, provided that Hardship
Distributions of earnings on elective Deferrals may only be
made on such earnings credited to the Participant's account as
of the end of the last Plan Year ending before July 1, 1989.
Therefore, subject to such limitation, Hardship Distributions
may be taken from:
( ) c. all of Participant's Accounts.
(X) d. only the Participant's Account balances
attributable to the following accounts:
( ) d.1. Employer Account
( ) d.2. Qualified Non-Elective Contribution
Account
(X) d.3. Elective Contribution Account
( ) d.4. Matching Account
( ) d.5. Segregated Account (attributable to a
rollover)
( ) d.6. Voluntary Account
6. In Service Distributions - Section 2.5.6 provides that an
Employer may permit distributions to fully vested Participants
over the age of 59-1/2 prior to termination of employment if
the amounts withdrawn have been allocated to the Participant
for two (2) or more years or the Participant has been a
Participant for at least five (5) years. (Select all
applicable)
( ) a. Plan Provision.
( ) b. Require that amounts have been allocated for ____
years. (Must be at least 2)
( ) c. Require participation for at least ____ years.
(Must be at least 5)
( ) d. In Service Distributions are permitted upon
reaching Normal Retirement Date
( ) e. In Service Distribution are permitted for amounts
attributable to a rollover from another plan
regardless of age or periods of participation
(X) f. In Service Distributions are not permitted.
- 23 -
<PAGE>
7. Qualified Domestic Relations Orders - Section 3.12.9 provides that the
Employer may elect to permit distributions to an alternate payee
pursuant to the terms of a qualified domestic relations order even if
the Participant continues to be employed. (Select one)
( ) a. Distributions to an alternate payee are not
permitted while the Participant continues to be
employed.
(X) b. Distributions to an alternate payee are permitted
while the Participant continues to be employed.
H. Other Administrative Provisions
1. Earnings - Section 3.1.2 permits the Employer to specify the manner in
which earnings are allocated to Participants who receive distributions
on any date other than a Valuation Date.
Select any of the following:
( ) a. Earnings will be credited solely as of the
immediately preceding Valuation Date.
(X) b. Actual earnings will be credited to the date of
distribution.
( ) c. Earnings will be credited solely as of the
immediately preceding Valuation Date if distribution
is within ____ days of such Valuation Date and will
be credited to date of distribution otherwise.
( ) d. Earnings will be credited to the date of
distribution based upon an estimate of earnings
equal to ____% annually.
( ) e. Earnings will be credited to the date of
distribution based upon an estimate of earnings
equal to the average rate of earnings during the
preceding
( ) e.1. Valuation Period.
( ) e.2. Plan Year.
( ) e.3. ____ Valuation Periods.
2. Loans - Section 3.7.1 provides that the Employer may elect to permit
loans to Participants and Beneficiaries in accordance with a
participant loan program adopted by the Trustee.
( ) a. Loans are permitted.
(X) b. Loans are not permitted.
- 24 -
<PAGE>
3. Rollovers - Section 3.11.3 authorizes the Employer to permit
the transfer of interests in other qualified plans to the
Plan.
( ) a. Rollover contributions are not permitted.
( ) b. Rollover contributions are permitted only from
other plans of the Employer
( ) c. Rollover contributions are permitted only by
Employees who have satisfied the conditions for
participation.
(X) d. Rollover contributions are permitted from any
employee even if-not otherwise eligible to be a
Participant.
4. Investment Control - Section 3.6.5 provides that the Employer
may elect to permit Participants to control the investment of
their Accounts.
( ) a. Participants may not control their investments.
( ) b. Participants may control the investment of their
Accounts if fully vested in the Account.
( ) c. Participants may control the investment of their
Accounts to the extent vested.
(X) d. Participants may control their investments without
regard to their vested interest.
( ) e. Participants may control their investments solely
with respect to amounts attributable to: (Select
all applicable)
( ) e.1. Non-Elective Contributions
( ) e.2. Qualified Non-Elective Contributions
( ) e.3. Elective Contributions
( ) e.4. Matching Contributions
( ) e.5. Voluntary Contributions
( ) e.6. Amounts rolled over and held in a
Segregated Account
5. (This question only applies if the Employer has a Defined Benefit plan)
The interest rate used to establish the Present Value of Accrued
Benefits in order to calculate the top heavy ratio under IRC Section
416 shall be ____% and the mortality tables used shall
be _______________________________.
6. Valuation Date - For purposes of computing the top heavy
ratio, the Valuation Date is (Select one):
(X) a. the first day of Plan Year.
( ) b. the last day of the Plan Year.
( ) c. Other - Specify. ___/___ (Must be at least
annually)
- 25 -
<PAGE>
7. Single Plan Minimum Top-Heavy Allocation - For purposes of minimum
top-heavy allocations, contributions and forfeitures equal to the
following percentage of each non-Key Employee's compensation will be
allocated to the Employee's account when the Plan is top-heavy (Select
one):
(X) a. 3% or the highest percentage allocated to any Key
Employee if less.
( ) b. ____% (Must be at least 3).
8. Multiple Plans Provision - The Employer which maintains or ever
maintained another qualified defined benefit plan or welfare benefit
fund or individual medical account in which any participant in the Plan
is, was or could become a participant adds the following optional
provision which it deems necessary to satisfy Section 415 or 416 of the
Code because of the required aggregation of multiple plans:
(Select one)
( ) a. Not applicable (No other plan or other plan
terminated prior to the Effective Date of this
Adoption Agreement).
( ) b. A minimum contribution allocation of 5% of each
Non-Key Participant's total compensation shall be
provided in a defined contribution plan of the
Employer.
( ) c. A minimum contribution allocation of 7.5% of each
Non-Key Participant's total compensation shall be
provided in a defined contribution plan of the
Employer.
(X) d. A minimum benefit of 2% (must be at least the
lesser of 2% times years of service or 20%) of each
Non-Key Participant's total compensation shall be
provided in a defined benefit plan of the Employer.
( ) e. A minimum benefit of ____ (must be the lesser of 2%
times years of service or 20%) of each Non-Key
Participant's total compensation shall be provided
in a defined benefit plan of the Employer but
offset by the amount contributed on such
participant's behalf under any defined contribution
plan of the Employer.
( ) f. Other - Specify.
NOTE: The method selected must preclude Employer
discretion and the Employer must obtain a
determination letter in order to continue reliance
on the Plan's qualified status.
- 26 -
<PAGE>
9. Multiple-Defined Contribution Plans - If the Participant is
covered under another qualified defined contribution plan
maintained by the Employer, other than a master or prototype
plan: (Select one)
( ) a. Not applicable.
(X) b. The provisions of this Plan limiting annual
additions will apply as if the other plan is a
master or prototype plan.
( ) c. Other - Specify.
NOTE: Specify the method under which the plans will limit
total annual additions to the maximum permissible
amount, and will properly reduce any excess amounts
in a manner that precludes Employer discretion.
10. Top Heavy Duplications - The Employer who maintains two or more Defined
Contribution plans makes the following election:
( ) a. Not applicable.
(X) b. A minimum non-integrated contribution of 3% of each
Non-Key Participant's Compensation shall be
provided by:
(X) b.1. this Plan.
( ) b.2. the following defined contribution
plan:
---------------------------------------
( ) c. Other - Specify.
NOTE: The method selected must preclude Employer discretion
and avoid inadvertent omissions, including any
adjustments required under Code Section 415(e). The
Employer must obtain a determination letter in order
to continue reliance on the Plan's qualified status.
11. Annual Addition Limitation - If a Participant is or has ever
been a participant in a defined benefit pension plan
maintained by the Employer, Section 3.2.1(c) provides that
Annual Additions shall be limited.
( ) a. Not applicable
(X) b. The contribution to the Plan allocable to the
Participant shall be reduced so that the limitations
are not exceeded.
( ) c. Other - Specify
----------------------------------------------------
NOTE: specify the method under which the plans will limit
total additions to the maximum permissible amount,
and will properly reduce any excess amounts in a
manner that precludes employer discretion.
- 27 -
<PAGE>
12. Section 415 Compensation Definition. For purposes of calculating an
Employee's compensation pursuant to Section 3.2.1(h), relating to
limitations on contributions and benefits, Compensation means all of
each Participant's
(X) a. Wages as computed for Wages, Tips, and Other
Compensation Box on Form W-2.
( ) b. Section 3401(a) wages.
( ) c. Section 415 safe harbor compensation.
- 28 -
<PAGE>
The name, address and telephone number of the Plan Sponsor is:
BENEFIT CONSULTANTS AND ADMINISTRATORS, INC.
1724 ST. JULIAN PLACE
POST OFFICE BOX 12649
COLUMBIA, SC 29211
803-252-0888
Applicable requirements mandate that the use of this Prototype Document be
registered by the Plan Sponsor with the Internal Revenue Service. Unregistered
use may cause the Plan to become disqualified because it may not be maintained
as required by law.
The Plan Sponsor will inform the Employer of any amendments made to the Plan or
of the discontinuance or abandonment of the Plan.
NOTE: An employer may not rely on a notification letter issued by the National
Office of the Internal Revenue Service as evidence that the plan as adopted is
qualified under Section 401 of the Internal Revenue Code. In order to obtain
reliance with respect to plan qualification, the employer must apply to the
appropriate key district for a determination letter. This Adoption Agreement
may be used only in conjunction with the BENEFIT CONSULTANTS & ADMINISTRATORS,
INC Regional Defined Contribution Plan and Trust, Revised 05/06/92.
* * *
The Employer and Trustee hereby adopt the Plan and Trust as evidenced by the
foregoing Adoption Agreement on this 28th day of June, 1994.
Employer: Trustee:
PERPETUAL BANK (FSB)
/s/ Robert W. Orr /s/ Jim Gray Watson
- --------------------------- ---------------------------
ROBERT W. ORR JIM GRAY WATSON
PRESIDENT Trustee
/s/ Robert W. Orr
--------------------------
ROBERT W. ORR
Trustee
- 29 -
<PAGE>
AMENDMENT NUMBER ONE TO
PERPETUAL BANK, FSB 401(K) PLAN
BY THIS AGREEMENT, the Perpetual Bank, FSB 401(k) Plan (the "401(k) Plan),
consisting of the DATAIR Standardized Cash or Deferred Profit Sharing Plan and
Trust (the "Plane) and the related Adoption Agreement dated June 28, 1994 (the
"Adoption Agreement"), is hereby amended as follows, effective as of October 1,
1995:
Part II(A) of the Adoption Agreement (and the related provisions of the
Plan) indicated therein are hereby amended as follows:
(a) As to Sections A(1) and (2) of the Adoption Agreement, any Employee of
the Employer hired on or after October 1, 1995 shall be eligible to participate
in the Plan only upon (x) the completion of 1,000 Hours of Service during a 12
month Eligibility Computation Period and (y) the attainment of age 21.
(b) As to Sections A(3) and (4) of the Adoption Agreement, any Employee of
the Employer hired on or after October 1, 1995 shall be eligible to participate
in the Elective Contribution and Matching Contribution portions of the Plan only
upon (x) the completion of 1,000 Hours of Service during a 12 month Eligibility
Computation Period and (y) the attainment of age 21.
(c) As to Section A(8) of the Adoption Agreement, the Entry Date of an
Employee who becomes eligible to participate in the Plan on or after October 1,
1995 shall be the January 1, April 1, July 1, or October 1 coincident with or
next following the date the Employee become eligible to participate in the Plan.
(d) In all other respects, the provisions of the 401(k) Plan, as contained
in the Plan and the Adoption Agreement, are hereby ratified and confirmed.
IN WITNESS WHEREOF, this Amendment has been executed this 20th day of
October 1995.
ATTEST: PERPETUAL BANK, FSB
/s/ Sylvia B. Reed /s/ Robert W. Orr
- ---------------------------- -------------------------------
Robert W. Orr
President
/s/ Charles W. Fant, Jr.
-------------------------------
TRUSTEE
/s/ Jim Gray Watson
-------------------------------
TRUSTEE
<PAGE>
- --------------------------------------------------------------------------------
BENEFIT CONSULTANTS & ADMINISTRATORS, INC. REGIONAL PROTOTYPE
DEFINED CONTRIBUTION PLAN AND TRUST
- --------------------------------------------------------------------------------
<PAGE>
BENEFIT CONSULTANTS & ADMINISTRATORS, INC. REGIONAL PROTOTYPE
DEFINED CONTRIBUTION PLAN AND TRUST
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PART I
ARTICLE DESCRIPTION PAGE
<S> <C> <C>
I INTRODUCTION 1
1.1.1 Creation and Title 1
1.1.2 Effective Date 1
1.1.3 Purpose 1
II DEFINITIONS 2
PART II
II PARTICIPATION 16
2.1.1 Eligibility Requirement 16
2.1.2 Commencement of Participation 16
2.1.3 Participation Upon Re-Employment 16
2.1.4 Termination of Participation 16
2.1.5 Employer's Determination 16
2.1.6 Omission of Eligible Employee 17
2.1.7 Inclusion of Ineligible Participant 17
2.1.8 Election Not to Participate 17
2.1.9 Change in Status 17
2.1.10 Existing Participants 18
II CONTRIBUTIONS 19
2.2.1 Employer Contributions 19
2.2.2 Elective Contribution by the Employer
on Behalf of Electing Employees 20
2.2.3 Employee Contributions 22
2.2.4 Return on Contributions 22
III ALLOCATIONS 24
2.3.1 Profit Sharing and Money Purchase
Pension Plans 24
2.3.2 Cash on Deferred Plans 24
2.3.3 Limitation 24
2.3.4 Minimum Allocation 25
2.3.5 Fail-Safe Allocation 25
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE DESCRIPTION PAGE
<S> <C> <C>
IV BENEFITS 27
2.4.1 Distributable Benefit 27
2.4.2 Vesting 27
2.4.3 Leave of Absence 28
2.4.4 Re-Employment 28
2.4.5 Distribution Date 29
2.4.6 Forfeitures 29
V DISTRIBUTIONS 31
2.5.1 Commencement of Distribution 31
2.5.2 Method of Distribution 38
2.5.3 Nature of Distributions 47
2.5.4 Advance Distributions 49
2.5.5 Hardship Distributions 49
2.5.6 In Service Distributions 51
VI CONTINGENT TOP HEAVY PROVISIONS 53
2.6.1 Top Heavy Requirements 53
2.6.2 Top Heavy Provisions 54
2.6.3 Pairing Requirements 59
VII SPECIAL CODA LIMITATIONS 60
2.7.1 Limitation on Deferral Percentage for
Highly Compensated Employees 60
2.7.2 Multiple Plan Limitations 61
2.7.3 Limitation on Matching Contributions 62
2.7.4 Special Rules 63
2.7.5 Distribution of Excess Elective
Deferrals 64
2.7.6 Distribution of Excess Contributions 65
2.7.7 Distribution of Excess Aggregate
Contributions 66
2.7.8 Limitation on Distributions 67
2.7.9 Limitation of Elective Deferrals 67
PART III
I ACCOUNTING 68
3.1.1 Accounts 68
3.1.2 Adjustments 68
II LIMITATIONS 71
3.2.1 Limitations on Annual Additions 71
3.2.2 Controlled Businesses 80
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE DESCRIPTION PAGE
<S> <C> <C>
III FIDUCIARIES 81
3.3.1 Standard of Conduct 81
3.3.2 Individual Fiduciaries 81
3.3.3 Disqualification from Service 81
3.3.4 Bonding 81
3.3.5 Prior Acts 81
3.3.6 Insurance and Indemnity 82
3.3.7 Expenses 82
3.3.8 Agents, Accountants, and Legal Counsel 83
3.3.9 Investment Manager 83
3.3.10 Finality of Decisions or Acts 83
3.3.11 Certain Custodial Accounts or Contracts 83
IV PLAN ADMINISTRATOR 84
3.4.1 Administration of Plan 84
3.4.2 Disclosure Requirements 85
3.4.3 Information Generally Available 86
3.4.4 Statement of Accrued Benefit 86
3.4.5 Explanation of Rollover Treatment 86
V TRUSTEE 87
3.5.1 Acceptance of Trust 87
3.5.2 Trustee Capacity - Co-Trustee 87
3.5.3 Resignation, Removal and Successors 87
3.5.4 Consultations 87
3.5.5 Rights, Powers and Duties 88
3.5.6 Trustee Indemnification 90
3.5.7 Changes in Trustee Authority 90
VI TRUST ASSETS 91
3.6.1 Trustee Exclusive Owner 91
3.6.2 Investments 91
3.6.3 Administration of Trust Assets 93
3.6.4 Segregated Funds 95
3.6.5 Investment Control Option 95
VII LOANS 98
3.7.1 Authorization 98
3.7.2 Spousal Consent 98
3.7.3 Limitations 99
3.7.4 Availability 99
3.7.5 Prohibitions 100
VIII BENEFICIARIES 101
3.8.1 Designation of Beneficiaries 101
3.8.2 Absence of Death of Beneficiaries 101
3.8.3 Surviving Spouse Election 102
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE DESCRIPTION PAGE
<S> <C> <C>
IX CLAIMS 103
3.9.1 Claim Procedure 103
3.9.2 Appeal 104
X AMENDMENT AND TERMINATION 105
3.10.1 Right to Amend 105
3.10.2 Manner of Amending 105
3.10.3 Limitations of Amendments 106
3.10.4 Voluntary Termination 107
3.10.5 Involuntary Termination 107
3.10.6 Withdrawal By Employer 107
3.10.7 Powers Pending Final Distribution 107
3.10.8 Delegation to Sponsor 108
XI PORTABILITY 109
3.11.1 Continuance by Successor 109
3.11.2 Merger With Other Plan 109
3.11.3 Transfer From Other Plans 109
3.11.4 Transfer to Other Plans 110
XII MISCELLANEOUS 111
3.12.1 No Reversion to Employer 111
3.12.2 Employer Actions 111
3.12.3 Execution of Receipts and Releases 111
3.12.4 Rights of Participant Limited 111
3.12.5 Persons Dealing With Trustee Protected 112
3.12.6 Protection of Insurer 112
3.12.7 No Responsibility for Act of Insurer 112
3.12.8 Inalienability 113
3.12.9 Domestic Relations Order 113
3.12.10 Authorization to Withhold Taxes 115
3.12.11 Missing Persons 115
3.12.12 Notices 116
3.12.13 Governing Law 116
3.12.14 Severability of Provisions 116
3.12.15 Gender and Number 116
3.12.16 Binding Effect 117
3.12.17 Qualification Under Internal Revenue
Laws 117
</TABLE>
<PAGE>
PART I
ARTICLE I
INTRODUCTION
1.1.1 Creation and Title. The parties hereby create a Plan and Trust
to be known by the name set forth in the Adoption Agreement.
1.1.2 Effective Date. The provisions of this Plan and Trust shall be
effective as of the Effective Date set forth in the Adoption Agreement.
1.1.3 Purpose. This Plan and Trust is established for the purpose of
providing retirement benefits to eligible employees in accordance with the Plan
and the Adoption Agreement. If the Employer designates the Plan as a Cash or
Deferred Profit Sharing Plan in the Adoption-Agreement, the Plan is also
intended to enable eligible Employees to supplement their retirement by electing
to have the Employer contribute amounts to the Plan and Trust in lieu of
payments to such Employees in cash and the Plan and Trust are intended to
satisfy the provisions of Section 401(k) of the Internal Revenue Code of 1986,
as amended.
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ARTICLE II
DEFINITIONS
As used in this Plan and the Adoption Agreement, the following terms
shall have the following meanings:
1.2.1 "Account": The Employer Account, Controlled Account, Elective
Contribution Account, Matching Account, Qualified Non-Elective Contribution
Account, Voluntary Account or Segregated Account of a Participant, as the
context requires, established and maintained for accounting purposes.
1.2.2 "ACP": The average contribution percentage determined in
accordance with the provisions of Part II, Article VII.
1.2.3 "Act": The Employee Retirement Income Security Act of 1974, as
amended from time to time.
1.2.4 "ADP": The actual deferral percentage determined in accordance
with the provisions of Part II, Article VII.
1.2.5 "Anniversary Date": Unless otherwise specified in the Adoption
Agreement, the last day of each Plan Year.
1.2.6 "Beneficiary": The person or persons entitled hereunder to
receive the benefits which may be payable upon or after a Participant's death.
1.2.7 "Board of Directors": The board of directors of an incorporated
Employer.
1.2.8 "Break in Service": The failure of a Participant to complete
more than five hundred (500)-Hours of Service or such lesser number specified in
the Adoption Agreement during any 12 consecutive month computation period,
beginning with a Participant's first computation period after becoming a
Participant.
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A Year of Service and a Break in Service for vesting purposes shall be measured
on the same computation period. The Eligibility Computation Period and a Break
in Service for eligibility purposes shall be measured on the same computation
period.
1.2.9 "Code": The Internal Revenue Code of 1986, as amended from time
to time.
1.2.10 "Compensation": The compensation as defined in the Plan and as
specified in the Adoption Agreement (or Earned Income in the case of a self-
employed individual) which is actually paid to the Participant by the Employer
during the Compensation Computation Period; provided that if specified by
include any amount which is contributed by the Employer pursuant to a salary
reduction agreement and which is not includible in the gross income of the
Employee under Sections 125, 402(a)(8), 402(h), 403(b) or 457(b) of the Code;
provided further that for years beginning after December 31, 1988, the annual
gross compensation taken into account for purposes of the Plan shall not exceed
$200,000, as such amount may be adjusted by the Secretary of the Treasury at the
same time and in the same manner as under Section 415(d) of the Code, except
that the dollar increase in effect on January 1 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 1, 1990. If the plan determines
compensation on a period of time that contains less 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. For purposes of this dollar limitation, the rules of Section
414(q)(6) of the Code requiring the aggregation of the compensation of family
members shall apply, except that 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 Social Security Integration Level if this Plan provides
for permitted disparity), the limitation shall be prorated among the affected
individuals in proportion to each such individual's compensation as determined
under this Section prior to the application of this limitation. If compensation
for any prior plan year is taken into account in determining an employee's
contributions or benefits for the current year,
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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.
1.2.11 "Compensation Computation Period": The period specified as the
Compensation Computation Period in the Adoption Agreement.
1.2.12 "Controlled Account": An account established and maintained
for a Participant to account for his interest in a Segregated Fund over which he
exercises investment control.
1.2.13 "Date of Hire": The date an Employee first completes an Hour
of Service for the Employer.
1.2.14 "Distributable Benefit": The benefit to which a Participant is
entitled following termination of his employment.
1.2.15 "Distribution Date": The date as of which the Distributable
Benefit of a Participant is determined.
1.2.16 "Early Retirement Age": The age specified as the Early
Retirement Age, if any, in the Adoption Agreement.
1.2.17 "Early Retirement Date": The date specified as the Early
Retirement Date, if any, in the Adoption Agreement.
1.2.18 "Earned Income": The net earnings from self- employment in the
trade or business with respect to which the Plan is established for which
personal services of the Participant are a material income-producing factor. Net
earnings shall be determined without regard to items not included in gross
income and the deductions allocable to such items but, in the case of taxable
years beginning after 1989, with regard to the deduction allowed to the taxpayer
by Section 164(f) of the Code. Net earnings shall be reduced by contributions to
a qualified plan to the extent deductible under Section 404 of the Code.
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1.2.19 "Elective Contribution Account": An Account established and
maintained for a Participant to account for the Elective Contributions made on
his behalf.
1.2.20 "Elective Contribution": A contribution to a cash or deferred
profit sharing plan by the Employer on behalf of an electing Employee.
1.2.21 "Elective Deferrals": Any Employer contributions made to the
Plan at the election of the Participant, in lieu of cash compensation, including
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 the Participant
pursuant to an election to defer under any qualified CODA as described in
Section 401(k) of the Code, any simplified employee pension cash or deferred
arrangement as described in Section 402(h)(1)(B), any eligible deferred
compensation plan under Section 457, any plan as described under Section
501(c)(18), and any employer contributions made on the behalf of a participant
for the purchase of an annuity contract under Section 403(b) pursuant to a
salary reduction agreement. Elective Deferrals shall not include any deferrals
properly distributed as excess annual additions.
1.2.22 "Eligibility Computation Period": For purposes of determining
Years of Service and Breaks in Service for purposes of eligibility, the initial
eligibility computation period is the twelve (12) consecutive month period
beginning with the employment commencement date on which the Employee first
renders an Hour of Service for the Employer, and unless otherwise specified in
the Adoption Agreement, the subsequent eligibility computation periods are each
subsequent twelve (12) consecutive month period commencing on the annual
anniversary of such employment commencement date. If in accordance with the
election in the Adoption Agreement, the subsequent periods commence with the
first Plan Year which commences prior to the first anniversary of the Employee's
employment commencement date, an Employee who is credited with 1,000 Hours of
Service in both the initial eligibility computation period and the first Plan
Year which commences prior to the first anniversary of the Employee's initial
eligibility computation period shall be credited with two (2) years of service
for purposes of eligibility to participate.
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1.2.23 "Employee": A person who is currently or hereafter employed by
the Employer, or by any other employer aggregated under section 414(b), (c), (m)
or (o) of the Code and the regulations thereunder, including a Leased Employee
subject to section 414(n) of the Code and a self-employed owner of an
unincorporated Employer, but, unless otherwise provided in the Adoption
Agreement, excluding (a) an independent contractor; (b) an employee who is a
non-resident alien (within the meaning of section 7701(b)(1)(B) of the Code)
deriving no earned income (within the meaning of section 911(d)(2) of the Code)
from the Employer which constitutes income from sources within the United States
(within the meaning of section 861(a)(3) of the Code); and (c) employees who are
included in the unit of employees covered by a collective bargaining agreement
between the Employer and employee representatives, provided benefits were the
subject of good faith bargaining and two percent or less of the employees of the
Employer who are covered pursuant to that agreement are professionals as defined
in Treasury Regulation Section 1.410(b)- 9(g). For this purpose, the term
"employee representatives" does not include any organization more than half of
whose members are employees who are owners, officers, or executives of the
employer.
1.2.24 "Employer": The Employer that is a party to this Plan, or any
of its affiliates, successors or assigns which adopt the Plan; provided,
however, that no mere change in the identity, form or organization of the
Employer shall affect its status under the Plan in any manner, and, if the name
of the Employer is hereafter changed, a corresponding change shall be deemed to
have been made in the name of the Plan and references herein to the Employer
shall be deemed to refer to the Employer as it is then known.
1.2.25 "Employer Account": An Account established and maintained for
a Participant for accounting purposes to which his share of Employer
contributions and forfeitures are added.
1.2.26 "Employer Contribution": A contribution to a money purchase
pension plan or profit sharing plan other than a cash or deferred profit sharing
plan by the Employer.
1.2.27 "Entry Date": The date or dates specified as the Entry Date in
the Adoption Agreement.
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<PAGE>
1.2.28 "Excess Aggregate Contributions": With respect to any Plan
Year, the excess of:
(a) 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
(b) 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.
1.2.29 "Excess Contributions": With respect to any Plan Year, the
excess of:
(a) The aggregate amount of Employer Contributions actually taken into
account in computing the ADP of Highly Compensated Employees for such Plan
Year, over
(b) 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.
1.2.30 "Excess Elective Deferrals": Those Elective Deferrals that are
includible in a Participant's gross income under section 402(g) of the Code 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.
1.2.31 "Excessive Annual Addition": The portion of the allocation of
contributions and forfeitures that cannot be added to a Participant's Accounts
due to the limitations on annual additions contained in the Plan.
1.2.32 "Family": The spouse and lineal ascendants or descendants of
an Employee and the spouses of such lineal ascendants and descendants.
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1.2.33 "Fiduciary": The Plan Administrator, the Trustee and any other
person who has discretionary authority or control in the management of the Plan
or the disposition of Trust assets.
1.2.34 "Highly Compensated Employee": A highly compensated active
employee and a highly compensated former employee. 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: (i) received compensation
from the Employer in excess of $75,000 (as adjusted pursuant to Section 415(d)
of the Code); (ii) received compensation from the Employer in excess of $50,000
(as adjusted pursuant to Section 415(d) of the Code) and was a member of the
top-paid group for such year; or (iii) was an officer of the Employer and
received compensation during such year that is greater than 50 percent of the
dollar limitation as in effect under Section 415(b)(1)(A) of the Code. 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 5 percent owners at any time during the look-back
year or determination year. If no officer has satisfied the compensation
requirement of (iii) 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-month period immediately preceding the determination
year and compensation is as defined in Section 415(c)(3) of the Code including
amounts contributed by the Employer pursuant to a salary reduction agreement and
which is not includible in gross income under Sections 125, 402(a)(8), 402(h) or
403(b) of the Code.
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 55th birthday.
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If an Employee is, during a Plan Year or the preceding Plan Year, a family
member of either a s percent owner who is an active or former employee or a
Highly Compensated Employee who is one of the 10 most highly compensated
employees ranked on the basis of compensation paid by the Employer during such
year, then the family member and the 5 percent owner or top-ten highly
compensated employee shall be aggregated. In such case, the family member and 5
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 5 percent owner or top-ten highly compensated 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.
An Employee is in the top-paid group of employees for any year if the Employee
is in the group consisting of the top twenty (20%) percent of the employees when
ranked on the basis of compensation paid during such year.
For purposes of determining whether an Employee is a highly compensated
employee, Sections 414(b), (c), (m), (n) and (o) of the Code shall be applied.
The determination of who is a highly compensated employee, including the
determination 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 Section 414(q)
of the Code and the regulations thereunder.
1.2.35 "Hour of Service": An hour for which (a) the Employee is paid,
or entitled to payment by the Employer for the performance of duties, (b) the
Employee is paid or entitled to payment by the Employer during which no duties
are performed (irrespective of whether the employment relationship has
terminated) due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty or leave of absence, or (c) back
pay, irrespective of mitigation of damages, has been either awarded or agreed to
by the Employer. Hours of Service shall be credited to the Employee under (a),
above, for the period in which the duties are performed, under (b), above, in
the period in which the period during which no duties are performed occurs,
beginning with the first Hour of Service to which the payment relates, and under
(c), above, for the period to which the award or agreement pertains rather than
the period in which the award, agreement or payment is made; Provided, however,
that Hours of Service shall not be credited
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under both (a) and (b), above, as the case may be, and under (c) above.
Notwithstanding the preceding sentences, (i) no more than five hundred one (501)
Hours of Service shall be credited under (b), above, on account of any single
continuous period during which the Employee performs no duties whether or not
such period occurs in a single computation period, (ii) no Hours of Service
shall be credited to the Employee by reason of a payment made or due under a
plan maintained solely for the purpose of complying with applicable worker's
compensation, or unemployment compensation or disability insurance laws, and
(iii) no Hours of Service shall be credited by reason of a payment which solely
reimburses an employee for medical or medically related expenses incurred by the
Employee. The determination of Hours of Service for reasons other than the
performance of duties and the crediting of Hours of Service to computation
periods shall be made in accord with the provisions of Labor Regulation Sections
2530.200b-2(b) and (c) which are incorporated herein by reference.
Solely for the purposes of determining whether an Employee has incurred a Break
in Service, an Employee shall be credited with the number of Hours of Service
which would otherwise have been credited to such individual but for the absence
or in any case in which such Hours cannot be determined with eight (8) Hours of
Service for any day that the Employee is absent from work by reason of the
Employee's pregnancy, the birth of a child of the Employee, the placement of a
child with the Employee in connection with the adoption of such child by the
Employee or for purposes of caring for such child for a period beginning
immediately following such birth or placement. Such Hours of Service shall be
credited only in the computation period in which the absence from work begins if
the Employee would be prevented from incurring a Break in Service in such
computation period solely because credit is given for such period of absence
and, in any other case, in the immediately following computation period.
Notwithstanding the foregoing, no credit shall be given for such service unless
the Employee furnishes to the Plan Administrator information to establish that
the absence from work is for the reasons indicated and the number of days for
which there was such an absence.
In the event the Employer does not maintain records of the actual hours for
which an Employee is paid or entitled to payment, credit for service shall be
given in accordance with the method selected in the Adoption Agreement.
Service with another business entity that is, along with the Employer, a member
of a controlled group of corporations under Section 414(b) of the Code, an
affiliated service group under Section 414(m) of the Code or trades or
businesses under common control under Section 414(c) of the Code,
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or which is otherwise required to be aggregated with the Employer pursuant to
Section 414(o) of the Code and the regulations issued thereunder shall be
treated as service for the Employer. Hours of Service shall be credited for any
individual considered an employee for purposes of this Plan under Section 414(n)
or Section 414(o) of the Code and the regulations issued thereunder.
If the Employer maintains the plan of a predecessor employer, service with such
predecessor shall be treated as service for the Employer.
1.2.36 "Insurer": Any insurance company which has issued a Life
Insurance Policy.
1.2.37 "Joint and Survivor Annuity": An immediate annuity for the
life of the Participant with a survivor annuity for the life of the spouse which
is not less than fifty (50%) percent and not more than one hundred (100%)
percent of the amount of the annuity which is payable during the joint lives of
the Participant and the spouse and which is the amount of benefit which can be
purchased with the Participant's vested Account balances. The percentage of the
survivor annuity shall be fifty (50%) percent unless a different percentage is
elected by the Employer in the Adoption Agreement.
1.2.38 "Leased Employee": Any person (other than an employee of the
recipient) who pursuant to an agreement between the recipient and any other
person has performed services for the recipient (or for the recipient and
related persons determined in accordance with Section 414(n)(6) of the Code) on
a substantially full time basis for a period of at least one (1) year and such
services are of a type historically performed by employees in the business field
of the recipient employer; provided that any such person shall not be taken into
account if (a) such person is covered by a money purchase pension plan providing
(i) a nonintegrated employer contribution rate of at least ten (10%) percent of
compensation, as defined in Section 415(c)(3) of the Code and Section
3.2.1(h)(iii) of the Plan, but including amounts contributed by the employer
pursuant to a salary reduction agreement which are excludable from the person's
gross income under Sections 125, 402(a)(8), 402(h) or 403(b) of the Code; (ii)
immediate participation; and (iii) full and immediate vesting; and (b) leased
employees do not constitute more than twenty (20%) percent of the workforce of
the recipient who are not Highly Compensated Employees. 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
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provided by the recipient employer.
1.2.39 "Life Insurance Policy": A life insurance, annuity or
endowment policy or contract which is owned by the Trust and is on the life of a
Participant.
1.2.40 "Limitation Year": Unless otherwise specified in the Adoption
Agreement, the Plan Year; provided that all qualified plans maintained by the
Employer use the same Limitation Year.
1.2.41 "Mass Submitter": DATAIR Employee Benefits Systems Inc.
1.2.42 "Matching Account": An Account established and maintained for
a Participant for accounting purposes to which his share of Matching
Contributions are added.
1.2.43 "Matching Contribution": A contribution to the Plan by the
Employer which matches in whole or in part an Elective Contribution on behalf of
an electing Employee.
1.2.44 "Non-Elective Contribution": A contribution to a cash or
deferred profit sharing plan by the Employer which is neither a Qualified Non-
Elective Contribution, a Matching Contribution nor an Elective Contribution.
1.2.45 "Normal Retirement Age": The earlier of the date specified as
the Normal Retirement Age in the Adoption Agreement or the mandatory retirement
age enforced by the Employer.
1.2.46 "Normal Retirement Date": The date specified in the Adoption
Agreement as the Normal Retirement Date.
1.2.47 "Owner-Employee": An individual who is a sole proprietor or
who is a partner owning more than ten percent (10%) of either the capital or
profits interest of the partnership.
1.2.48 "Participant": Any eligible Employee who becomes entitled to
participate in the Plan.
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1.2.49 "Plan": The defined contribution plan for Employees as set
forth in this Agreement and the Adoption Agreement, together with any amendments
or supplements thereto.
1.2.50 "Plan Administrator": The person, persons or entity appointed
by the Employer to administer the Plan, or, if the Employer fails to make such
appointment, the Employer.
1.2.51 "Plan Sponsor": The Plan Sponsor specified in the Adoption
Agreement.
1.2.52 "Plan Year" or "Year": The 12 consecutive month period
designated by the Employer in the Adoption Agreement.
1.2.53 "Preretirement Survivor Annuity": A survivor annuity for the
life of the surviving spouse of the Participant, the actuarial equivalent of
which is equal to the portion of the Account balance of the Participant as of
the date of death to which the Participant had a vested and nonforfeitable
right, provided that any security interest held by the Plan by reason of a loan
outstanding to the Participant for which a valid spousal consent has been
obtained, if necessary, shall be taken into account.
1.2.54 "Qualified Non-Elective Contribution": A contribution to a
cash or deferred profit sharing plan by the Employer which is neither a Matching
Contribution nor an Elective Contribution, is one hundred percent (100%) vested
and nonforfeitable when made, which a Participant may not elect to have paid in
cash instead of being contributed to the Plan and which may not be distributed
from the Plan (except in the case of a hardship distribution) prior to the
termination of employment or death of the Participant, attainment of age 59-1/2
by the Participant or termination of the Plan without establishment of a
successor plan.
1.2.55 "Qualified Non-Elective Contribution Account": An Account
established and maintained for a Participant to account for the Qualified Non-
Elective Contributions made on his behalf.
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1.2.56 "Qualifying Employer Securities or Real Property": Securities
or real property of the Employer which the Trustee may acquire and hold pursuant
to the applicable provisions of the Code and the Act.
1.2.57 "Segregated Account": An Account established and maintained
for a Participant to account for his interest in a Segregated Fund.
1.2.58 "Segregated Fund": Assets held in the name of the Trustee
which have been segregated from the Trust Fund in accordance with any of the
provisions of the Plan.
1.2.59 "Self-Employed Individual": An individual who has Earned
Income for the taxable year from the trade or business for which the Plan is
established or who would have bad Earned Income but for the fact that the trade
or business had no net profits for the taxable year.
1.2.60 "Social Security Integration Level": The Social Security
Integration Level shall be equal to the taxable wage base or such lesser amount
specified in the Adoption Agreement. The "taxable wage base" is the contribution
and benefit base in effect under Section 230 of the Social Security Act on the
first day of the Plan Year for which allocations of Employer contributions and
forfeitures are made (referred to as the Social Security Wage Base). The Social
Security Integration Level shall be deemed to be the full amount of such Social
Security Integration Level, even though a Participant's Compensation may include
less than a full year's compensation because of either his participation
commencing after the first day of the Compensation Computation Period or his
service terminating prior to the end of the Compensation Computation Period.
1.2.61 "Trust Fund": All money and property of every kind and
character held by the Trustee pursuant to the Plan, excluding assets held in
Segregated Funds.
1.2.62 "Trustee": The persons, corporations, associations or
combination of them who shall at the time be acting as such from time to time
hereunder.
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1.2.63 "Valuation Date": The date or dates specified as the Valuation
Date in the Adoption Agreement.
1.2.64 "Voluntary Account": An Account established and maintained for
a Participant for accounting purposes to which his voluntary Employee
contributions made prior to Plan Years beginning after 1986 have been added.
1.2.65 "Year of Service": The 12-consecutive month period
(computation period) specified in the Adoption Agreement during which an
employee completes at least one thousand (1,000) Hours of Service or such lesser
number specified in the Adoption Agreement. Unless otherwise specified in the
Adoption Agreement, all Years of Service shall be taken into account.
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PART II
ARTICLE I
PARTICIPATION
2.1.1 Eligibility Requirements. Each Employee shall be eligible to
participate in this Plan and receive an appropriate allocation of contributions
upon satisfying the eligibility requirements set forth in the Adoption
Agreement.
2.1.2 Commencement of Participation. An eligible Employee shall
become a Participant in the Plan on the applicable Entry Date selected in the
Adoption Agreement.
2.1.3 Participation Upon Re-Employment. A Participant whose
employment terminates and who is subsequently re-employed shall re-enter the
Plan as a Participant immediately on the date of his reemployment. In the event
that an Employee completes the eligibility requirements set forth in the
Adoption Agreement, his employment terminates prior to becoming a Participant
and he is subsequently re-employed, such Employee shall be deemed to have met
the eligibility requirements as of the date of his re-employment and shall
become a Participant on the date of his re-employment; provided, however, that
if he is re-employed prior to the date he would have become a Participant if his
employment had not terminated, he shall become a Participant as of the date he
would have become a Participant if his employment had not terminated. Any other
Employee whose employment terminates and who is subsequently reemployed shall
become a Participant in accordance with the provisions of Sections 2.1.1 and
2.1.2.
2.1.4 Termination of Participation. An Employee who has become a
Participant shall remain a Participant until the entire amount of his
Distributable Benefit is distributed to him or his Beneficiary in the event of
death.
2.1.5 Employer's Determination. In the event any question shall arise
as to the eligibility of any person to become a Participant or the commencement
of participation, the Employer shall determine such question and the Employer's
decision shall be conclusive and binding, except to the extent of a claimant's
right to appeal the denial of a claim.
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<PAGE>
2.1.6 Omission of Eligible Employee. If an Employee who should be
included as a Participant in the Plan is erroneously omitted and discovery of
the omission is made after the contribution by the Employer is made and
allocated, the Employer shall make an additional contribution on behalf of the
omitted Employee in the amount which the Employer would have contributed on his
behalf had he not been omitted.
2.1.7 Inclusion of Ineligible Participant. If any person is
erroneously included as a Participant in the Plan and discovery of the erroneous
inclusion is made after the contribution by the Employer is made and allocated,
the Employer may elect to treat the amount contributed on behalf of the
ineligible person plus any earnings thereon as a forfeiture for the Plan Year in
which the discovery is made and apply such amount in the manner specified in the
Adoption Agreement.
2.1.8 Election Not to Participate. With respect only to
nonstandardized plans and notwithstanding anything contained in the Plan to the
contrary, an Employee may elect with the approval of the Employer not to
participate in the Plan if the election does not jeopardize the qualified or
tax-exempt status of the Plan under sections 401(a) and 501(a) of the Code,
respectively. The Employee shall sign such documents as may be reasonably
required by the Employer to evidence the election. If it is subsequently
determined that either the qualified or the tax-exempt status of the Plan has
been jeopardized, the Employer may elect to treat such Employee as having been
erroneously omitted. An Employee may revoke the election only with respect to
any subsequent Plan Year by written notice of revocation to the Employer prior
to the end of the Plan Year for which the revocation is effective.
2.1.9 Change in Status. If any Participant continues in the employ of
the Employer or an affiliate for which service is required to be taken into
account but ceases to be an Employee for any reason (such as becoming covered by
a collective bargaining agreement unless the collective bargaining agreement
otherwise provides) the Participant shall continue to be a Participant until the
entire amount of his benefit is distributed but the individual shall be deemed
not to have completed any "Years of Service" for purposes of Article V
("Benefits") during the period that the Participant is not an Employee for such
reason.
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Such Participant shall continue to receive credit for Years of Service completed
during the period for purposes of determining his vested and nonforfeitable
interest in his Accounts. In the event that the individual subsequently again
becomes a member of an eligible class of employees, the individual shall
participate immediately upon the date of such change in status. If such
Participant incurs a Break in Service and is subsequently reemployed,
eligibility to participate shall be determined in accordance with Section 2.1.3.
In the event that an individual who is not a member of an eligible class of
employees becomes a member of an eligible class, the individual shall
participate immediately if such individual has satisfied the eligibility
requirements and would have otherwise previously become a participant.
2.1.10 Existing Participants. An Employee who, on the Effective Date,
was a Participant under the provisions of the Plan as in effect immediately
prior to the Effective Date shall be a Participant on the Effective Date and the
provisions of, Sections 2.1.1 and 2.1.2, pertaining to participation, shall not
be applicable to such Employee. The rights of a Participant whose employment
terminated prior to the Effective Date shall be determined under the provisions
of the Plan as in effect at the time of such termination.
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ARTICLE II
CONTRIBUTIONS
2.2.1 Employer Contributions.
(a) Amount of Contribution.
(1) Money Purchase Pension Plan. The Employer shall contribute
to the Trust Fund each Plan Year such amount, including any
forfeitures to be applied, set forth in the Adoption Agreement.
(2) Profit Sharing Plan. The Employer shall contribute to the
Trust Fund each Plan Year such amount as it may determine.
(3) Cash or Deferred Profit Sharing Plan.
(i) Amount of Non-Elective Contribution. The Employer shall
contribute to the Trust Fund each Plan Year such amount as a Non-
Elective Contribution as the Employer may determine.
(ii) Amount of Matching Contribution. Subject to applicable
limitations provided by the Plan, the Employer shall contribute
to the Trust Fund each Plan Year with respect to the amount of
Elective Contributions on behalf of each electing Employee a
Matching Contribution determined in the manner set forth in the
Adoption Agreement.
(iii) Amount of Qualified Non-Elective Contribution. The
Employer shall contribute to the Trust Fund each Plan Year such
amount as a Qualified Non-Elective Contribution as the Employer
may determine. In addition, in lieu of distributing Excess
Contributions or Excess Aggregate Contributions as provided in
Article VII, below, and to the extent elected by the Employer in
the Adoption Agreement, the Employer may make Qualified Non-
Elective Contributions on behalf of Employees who are not Highly
Compensated Employees that are sufficient to satisfy either the
ADP test or the ACP test, or both, pursuant to regulations under
the Code.
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<PAGE>
(b) Limitation. The contribution for any Plan Year by the Employer
shall not exceed the maximum amount deductible from the Employer's income
for such Year for federal income tax purposes under the applicable sections
of the Code.
(c) Time of Contribution. All contributions by the Employer shall be
delivered to the Trustee not later than the date fixed by law for the
filing of the Employer's federal income tax return for the Year for which
such contribution is made (including any extensions of time granted by the
Internal Revenue Service for filing such return).
(d) Determination of Amount to be Final. The determination by the
Employer as to the amount to be contributed by the Employer hereunder shall
be in all respects final, binding, and conclusive on all persons or parties
having or claiming any rights under this agreement or under the Plan and
Trust created hereby. Under no circumstances and in no event shall any
Participant, Beneficiary, or other person or party have any right to
examine the books or records of the Employer.
(e) Rights of Trustee as to Contributions. The Trustee shall have no
duty to report any contribution to be made or to determine whether
contributions delivered to the Trustee by the Employer comply with the
provisions of this Agreement. The Trustee shall be accountable only for
funds actually received by the Trustee.
2.2.2 Elective Contributions by the Employer on Behalf of Electing
Employees.
(a) Amount of Contribution. If the Plan is designated in the
Adoption Agreement as a Cash or Deferred Profit Sharing Plan, each Employee
may elect to have the Employer contribute to the Trust on his behalf for
any Plan Year during which he is a Participant such amounts expressed
either in dollars or in whole percentages of his Compensation as he may
elect which would otherwise be payable by the Employer as Compensation (but
not to exceed the dollar limitation provided by Section 402(g) of the Code
as in effect at the beginning of the taxable year); provided that the
Employer may impose reasonable limitations in a uniform, nondiscriminatory
manner on the amounts which may be so contributed in order to satisfy
applicable legal requirements and to assure the deductibility of amounts
contributed by the Employer to the Plan and any other qualified plan of
deferred compensation.
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<PAGE>
(b) Election. The Plan Administrator shall determine the manner in
which a Participant may elect to have Elective Contributions made to the
Plan on his behalf. The Plan Administrator shall establish reasonable
periods during which the election may be made, modified or revoked. Unless
the Plan Administrator establishes another period during which the election
may be made, modified or revoked, any such election may be made, modified
or revoked during the first and last months of the Plan Year. An election
by an Employee may not be made retroactively and once made shall remain in
effect until modified or terminated.
(c) Payment of Contribution. Elective Contributions shall be
remitted by the Employer within a reasonable period after such amount would
have otherwise been payable to the Participant. The Employer shall
designate, in accordance with the Participant's election, the Plan Year to
which any such contributions which are made after the end of the Plan Year
pertain.
(d) Segregated Fund. Unless an Elective Contribution on behalf of a
Participant is received by the Trustee within the time prescribed by the
Plan Administrator prior to a Valuation Date, the Plan Administrator shall
direct the Trustee to establish a Segregated Fund with respect to such
contribution. The funds contained in such Segregated Fund shall be
transferred to the Trust Fund in accordance with the instructions of the
Plan Administrator and such transfer shall be deemed to have been made as
of such next succeeding Valuation Date. If an Elective Contribution on
behalf of a Participant is received by the Trustee within the period
prescribed by the Plan Administrator, such contribution shall be added to
the Trust Fund. Notwithstanding the foregoing, if the Trust Fund is
invested in such a manner that the Plan Administrator can determine, with a
reasonable degree of certainty, that portion of the adjustment to fair
market value which is attributable to Elective Contributions received by
the Trustee other than within such period, then the Plan Administrator
shall direct the Trustee shall add any such Elective Contributions to the
Trust Fund at the time the Trustee receives such Elective Contributions.
(e) Hardship Distributions. An Employee may not have Elective
Contributions made on his or her behalf for the taxable year following the
taxable year of a hardship distribution in excess of the applicable limit
under Section 402(g) of the Code for such taxable year less the amount of
the Employee's Elective Deferrals for the taxable year of the hardship
distribution.
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<PAGE>
2.2.3 Employee Contributions.
(a) Amount of Contribution. An Employee is neither required nor
permitted to contribute to the Plan for any Plan Year beginning after the
Plan Year in which the prototype Plan is adopted by the Employer. Employee
contributions for Plan Years beginning after 1986 shall be limited so as to
meet the nondiscriminatory test of Section 401(m) of the Code. The Plan
Administrator shall not accept deductible employee contributions which are
made for a taxable year beginning after December 31, 1986. Contributions
made prior to that date will be maintained in a separate account which will
be nonforfeitable at all times. The account will share in the gains and
losses of the trust in the same manner as provided in Section 3.1.2 of the
Plan. No part of the deductible voluntary contribution account will be used
to purchase life insurance.
(b) Withdrawal of Contributions. In accordance with the provisions
of the Plan as in effect prior to Plan Years beginning after 1986, all or
any portion of an Employee's contributions may be withdrawn by giving to
the Plan Administrator written notice of any proposed withdrawal. The Plan
Administrator may adopt such procedures with respect to such withdrawals as
may be necessary or appropriate. At the Plan Administrator's direction, the
Trustee shall distribute any such withdrawal to the Participant in
accordance with the procedures adopted by the Plan Administrator. Except in
the case of the voluntary deductible contribution account, such withdrawals
shall not include any interest or other increment earned on such
contributions. No forfeitures shall occur as a result of withdrawal of an
Employee's contributions. Notwithstanding the foregoing, a withdrawal of an
Employee's contributions must be consented to in writing by the
Participant's spouse.
2.2.4 Return of Contributions. Contributions by the Employer,
including Employer, Qualified Non-Elective, Non-Elective and Matching
Contributions shall be returned to the Employer in the following instances:
(a) If a contribution by the Employer, including an Employer,
Qualified Non-Elective, Non-Elective or Matching Contribution is made by
the Employer by mistake of fact, then the contribution shall be returned
within one year after its payment upon the Employer's written request.
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<PAGE>
(b) If a contribution by the Employer, including an Employer,
Qualified Non-Elective, Non-Elective or Matching Contribution is
conditioned on initial qualification of the Plan under the applicable
sections of the Code, and the Commissioner of Internal Revenue determines
that the Plan does not qualify, then the contribution made incident to the
initial qualification by the Employer shall be returned within one year
after the date of denial of initial qualification of the Plan; provided
that the application for initial qualification is made by the time
prescribed by law for filing the Employer's tax return for the taxable year
in which the Plan is adopted, or such later date as the Secretary of the
Treasury may prescribe.
(c) Each contribution by the Employer, including an Employer,
Qualified Non-Elective, Non-Elective and Matching Contribution is
conditioned upon the deductibility of the contribution under the applicable
sections of the Code and to the extent of a disallowance of the deduction
for part or all of the contribution, the contribution shall be returned
within one year after such disallowance upon the Employer's written
request.
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<PAGE>
ARTICLE III
ALLOCATIONS
2.3.1 Profit Sharing and Money Purchase Pension Plans. As of each
Anniversary Date, the Employer Contributions made by the Employer with respect
to the preceding Plan Year, and forfeitures shall be allocated among the
Employer Accounts of Participants during the Plan Year in the manner set forth
in the Adoption Agreement.
2.3.2 Cash or Deferred Plans.
(a) Non-Elective Contributions. As of each Anniversary Date, the Non-
Elective Contributions made by the Employer with respect to the preceding
Plan Year, and forfeitures, shall be allocated among the Employer Accounts
of Participants during the Plan Year in the manner specified in the
Adoption Agreement.
(b) Matching Contributions. Unless otherwise specified in the
Adoption Agreement, as of each Anniversary Date, the Matching Contribution
made by the Employer with respect to the preceding Plan Year, and
forfeitures, shall be allocated to the Matching Accounts of Participants
for whom Elective Contributions were made in the manner specified in the
Adoption Agreement.
(c) Elective Contributions. The Elective Contributions by the
Employer on behalf of an electing Employee shall be allocated to the
Elective Contribution Account of such electing Employee as of each
Valuation Date of the Plan Year to which the Elective Contribution
pertains.
(d) Qualified Non-Elective Contributions. As of each Anniversary
Date, the Qualified Non-Elective Contributions made by the Employer with
respect to the preceding Plan Year shall be allocated to the Qualified Non-
Elective Contribution Account of Participants during the Plan Year in the
manner specified in the Adoption Agreement.
2.3.3 Limitation. The allocation of Employer contributions must
satisfy the requirements of Section 416 of the Code regardless of how the
Adoption Agreement is completed. Elective Contributions and Matching
Contributions allocated to key employees (as defined in Section 416(i) of the
Code) are
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<PAGE>
taken into account for the purpose of determining the minimum contribution under
Code Section 416. However, Elective Contributions and Matching Contributions
made on behalf of non-key employees (as defined in Code Section 416(i)) may not
be taken into account for the purpose of satisfying the minimum contribution
requirement under Code Section 416.
2.3.4 Minimum Allocation. In the event the Plan becomes a Top-Heavy
Plan during any Plan Year, the provisions of Section 2.6.1(a) shall apply.
2.3.5 Fail-Safe Allocation. With respect only to nonstandardized
plans and notwithstanding any provision of the Plan or Adoption Agreement to the
contrary, for Plan Years beginning after December 31, 1989, if the Plan would
otherwise fail to satisfy the requirements of Section 401(a)(26), 410(b)(1) or
410(b)(2)(A)(i) of the Code and the regulations thereunder because Employer
contributions have not been allocated to a sufficient number or percentage of
Participants for the Plan Year, an additional contribution shall be made by the
Employer and shall be allocated to the Employer Accounts of affected
Participants subject to the following provisions:
(a) The Participants eligible to share in the allocation of the
Employer's contribution shall be expanded to include the minimum number of
Participants who are not otherwise eligible to the extent necessary to
satisfy the applicable test under the relevant Section of the Code. The
specific Participant who shall become eligible are those Participants who
are actively employed on the last day of the Plan Year who have completed
the greatest number of Hours of Service during the Plan Year.
(b) If the applicable test is still not satisfied, the Participants
eligible to share in the allocation shall be further expanded to include
the minimum number of Participants who are not employed on the last day of
the Plan Year as are necessary to satisfy the applicable test. The specific
Participants who shall become eligible are those Participants who have
completed the greatest number of Hours of Service during the Plan Year.
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<PAGE>
(c) A Participant's accrued benefit shall not be reduced by any
reallocation of amounts that have previously been allocated. To the extent
necessary, the Employer shall make an additional contribution equal to the
amount such affected Participants would have received if they had
originally shared in the allocations without regard to the deductibility of
the contribution. Any adjustment to the allocations pursuant to this
paragraph shall be considered a retroactive amendment adopted by the last
day of the Plan Year.
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ARTICLE IV
BENEFITS
2.4.1 Distributable Benefit. At such time that the employment of a
Participant terminates for any reason, he or his Beneficiary shall be entitled
to a benefit equal to the vested and nonforfeitable interest in his Accounts as
of the Distribution Date. Such Accounts shall include the allocable share of
contributions and forfeitures, if any, which may be allocated to said Accounts
as of such Distribution Date and shall be determined after making the
adjustments for which provision is made in the Plan.
2.4.2 Vesting. A Participant shall at all times be one hundred percent
(100%) vested and have a nonforfeitable interest in his Elective Contribution
Account, Qualified Non-Elective Contribution Account, Voluntary Account and
Segregated Account. The vested and nonforfeitable interest of the Participant in
his Controlled Account shall be determined by reference to the Account from
which the funds were originally transferred. The vested and nonforfeitable
interest in a Participant's Employer Account and Matching Account shall be
determined as hereinafter provided.
(a) Normal Retirement. If a Participant terminates employment at his
Normal Retirement Age, he shall be one hundred percent (100%) vested and
have a nonforfeitable interest in his Employer Account and Matching
Account.
(b) Deferred Retirement. If a Participant continues in active
employment following his Normal Retirement Age, he shall continue to
participate under the Plan. From and after his Normal Retirement Age, he
shall be one hundred percent (100%) vested and have a nonforfeitable
interest in his Employer Account and Matching Account.
(c) Disability. If the employment of a Participant is terminated
prior to his Normal Retirement Age as a result of a medically determinable
physical or mental impairment which may be expected to result in death or
to last for a continuous period of not less than twelve (12) months and
which renders him incapable of performing his duties, he shall be one
hundred percent (100%) vested and have a nonforfeitable interest in his
Employer Account and Matching Account. All determinations in connection
with the permanence and degree of such disability shall be made by the Plan
Administrator in a uniform, nondiscriminatory manner on the basis of
medical evidence.
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(d) Death. In the event of the death of a Participant, he shall be
one hundred percent (100%) vested and have a nonforfeitable interest in his
Employer Account and Matching Account.
(e) Termination of Plan. In the event of termination of the Plan
(including termination resulting from a complete discontinuance of
contributions by the Employer), each Participant shall be one hundred
percent (100%) vested and have a nonforfeitable interest in his Employer
Account and Matching Account. In the event of a partial termination of the
Plan, each Participant with respect to whom such partial termination has
occurred shall be one hundred percent (100%) vested and have a
nonforfeitable interest in his Employer Account and Matching Account.
(f) Early Retirement, Resignation or Discharge. If the employment of
a Participant terminates by reason of early retirement, resignation or
discharge prior to his Normal Retirement Age, he shall be vested and have a
nonforfeitable interest in a percentage of his Employer Account and
Matching Account determined by, except as provided below, taking into
account all of his Years of Service as of such termination date in
accordance with the schedule set forth in the Adoption Agreement.
2.4.3 Leave of Absence. A temporary cessation from active employment
with the Employer pursuant to an authorized leave of absence in accordance with
the nondiscriminatory policy of the Employer, whether occasioned by illness,
military service or any other reason shall not be treated as either a
termination of employment or a Break in Service provided that the Employee
returns to employment prior to the end of the authorized leave of absence.
2.4.4 Re-Employment. Unless otherwise elected by the Employer in the
Adoption Agreement, in the case of a Participant who has five (5) or more
consecutive Breaks in Service, all Years of Service after such Breaks in Service
shall be disregarded for the purposes of vesting the employer-derived account
balance that accrued before such breaks, but both pre-break and post-break in
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service shall count for the purposes of vesting the employer-derived account
balance that accrues after such breaks. Both accounts shall share in the
earnings and losses of the Trust Fund. In the case of a Participant who does
not have five (5) consecutive Breaks in Service, both the pre-break and post-
break service shall count in vesting both the pre-break and post-break employer-
derived account balance.
2.4.5 Distribution Date. The Distribution Date shall be determined as
hereinafter provided.
(a) General. For purposes of determining the amount to be
distributed, the Distribution Date shall be determined in the manner
specified in the Adoption Agreement.
(b) Termination of Plan. In the event of termination of the Plan
(including termination resulting from a complete discontinuance of
contributions by the Employer), the Distribution Date shall be the date of
such termination. In the event of a partial termination of the Plan, as to
each Participant with respect to whom such partial termination has
occurred, the Distribution Date shall be the Anniversary Date coinciding
with or immediately following the date of such partial termination.
(c) Distributions following Distribution Date. Subject to the
necessity, if any, of obtaining the consent of a Participant and spouse,
distribution of a Participant's Distributable Benefit shall commence within
a reasonable period after the Distribution Date, unless otherwise elected
by the Participant in accordance with the provisions of the Plan or as
required by the provisions of the Plan.
2.4.6 Forfeitures. If an Employee terminates service, and the value
of the Employee's vested account balance derived from employer and employee
contributions is not greater than $3,500 and the Employee receives a
distribution of the value of the entire vested portion of such account balance,
the nonvested portion shall be treated as a forfeiture as of the last day of the
Plan Year in which the Participant's entire vested interest is distributed from
the Plan. If the value of an Employee's vested account balance is zero, the
Employee shall be deemed to have received a distribution of such vested account
balance. A participant's vested account balance shall not include accumulated
deductible employee contributions within the meaning of Section 72(o)(5)(B) of
the Code for plan years beginning prior to January 1, 1989.
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<PAGE>
Unless otherwise elected in the Adoption Agreement, if an Employee terminates
service, and elects, in accordance with the provisions of the Plan, to receive
the value of the employee's vested account balance, the nonvested portion shall
be treated as a forfeiture. If the Employee elects to have distributed less
than the entire vested portion of the account balance derived from employer
contributions, the part of the nonvested portion that will be treated as a
forfeiture is the total nonvested portion multiplied by a fraction, the
numerator of which is the amount of the distribution attributable to employer
contributions and the denominator of which is the total value of the vested
employer derived account balance.
If an Employee receives a distribution and the Employee resumes employment
covered under the Plan, the Employee's employer-derived account balance shall be
restored to the amount on the date of distribution if the Employee repays to the
Plan the full amount of the distribution attributable to Employer contributions
before the earlier of five (5) years after the first date on which the
Participant is subsequently re-employed by the Employer, or the date the
Participant incurs five (5) consecutive Breaks in Service following the date of
the distribution. If an Employee is deemed to receive a distribution pursuant to
this section, and the Employee resumes employment covered under the Plan before
the date the Participant incurs five (5) consecutive Breaks in Service, upon the
reemployment of such Employee, the employer-derived account balance of the
Employee will be restored to the amount on the date of such deemed distribution.
Unless otherwise elected in the Adoption Agreement, such forfeiture shall be
allocated in the same manner as a contribution by the Employer for the Year in
which said forfeiture occurred. Notwithstanding any provision herein to the
contrary, forfeitures resulting from contributions by an Employer shall not be
reallocated for the benefit of another adopting Employer.
If a Participant is re-employed following a Break in Service and is entitled to
restoration of any amount of his Accounts which was forfeited as a result of
such Break in Service, such amount shall be restored in the manner specified in
the Adoption Agreement.
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ARTICLE V
DISTRIBUTIONS
2.5.1 Commencement of Distribution.
(a) Immediate Distribution. A Participant whose employment is
terminated for any reason, other than resignation or discharge prior to his
Early Retirement Date or his Normal Retirement Date, may elect upon his
termination of employment to begin distribution of his Distributable Benefit
within a reasonable period after the Distribution Date as of which his
Distributable Benefit is determined, or as of the date determined under
subsection (b), below, if that date is earlier. If a Participant does not
so elect, distribution of the Participant's Distributable Benefit shall in
no event begin later than the date determined under subsection (b), below.
(b) Deferred Distribution. Except in the case of amounts subject to
Section 2.5.2(h) for which a Participant's consent is not required, unless
the Employer elects in the Adoption Agreement to permit the Employee to
elect earlier commencement and the Employee so elects or the Employee elects
to further defer distribution, if the employment of a Participant is
terminated by reason of resignation or discharge prior to either his Early
Retirement Date or his Normal Retirement Date, distribution of his
Distributable Benefit shall be deferred and commenced on the sixtieth (60th)
day after the close of the later of the following Plan Years:
(i) The Plan Year during which the Participant attains the
earlier of age sixty-five (65) or the Normal Retirement Age;
(ii) The Plan Year during which the tenth (lOth) anniversary of
the commencement of the Participant's participation in the Plan
occurs; or
(iii) The Plan Year during which the Participant terminates
service with the Employer.
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If, however, the Employer selects an Early Retirement Date in the Adoption
Agreement, a Participant who terminates employment before satisfying the age
requirement for early retirement but has satisfied any service requirement
shall be entitled to a distribution of his Distributable Benefit in
accordance with subsection (a) above upon attaining such age. If
distribution is so deferred, unless otherwise determined by the Plan
Administrator, the Trustee at the Plan Administrator's direction shall
transfer the Distributable Benefit to a Segregated Fund from which
distribution shall thereafter be made. Such transfer shall be made as of
the Distribution Date. Notwithstanding the foregoing, the failure of a
Participant and spouse to consent to a distribution while a benefit is
immediately distributable, within the meaning of Section 2.5.2(j), shall be
deemed to be an election to defer commencement of payment of any benefit
sufficient to satisfy this section.
(c) Required Distribution. Notwithstanding anything herein to the
contrary, unless the Participant has made an appropriate election by
December 31, 1983 to defer distribution which has not been revoked or
modified, the Participant's benefit shall be distributed to the Participant
not later than April 1 of the calendar year following the calendar year in
which he attains age 70-1/2 (the required beginning date) or shall be
distributed, commencing not later than April 1 of such calendar year in
accordance with regulations prescribed by the Secretary of the Treasury over
a period not extending beyond the life expectancy of the Participant or the
life expectancy of the Participant and a beneficiary designated by the
Participant. 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. Unless otherwise elected by the
Participant (or spouse, if distributions begin after death and the spouse is
the designated beneficiary) by the time distributions are required to begin,
the life expectancy of the Participant and the Participant's spouse shall be
recalculated annually. Other than for a life annuity, 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. Life expectancy and joint and last survivor expectancy
shall be computed by use of the expected return multiples in Tables V and VI
of Section 1.72-9 of the Treasury Regulations. For calendar years beginning
after
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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 (1) the applicable life expectancy or (2) if the Participant's
spouse is not the designated beneficiary, the applicable divisor then
determined from the table set forth in Q&A-4 of Section 1.401(a)(9)-2 of the
proposed regulations. Distributions after the death of the Participant shall
be distributed using the applicable life expectancy as the relevant divisor
without regard to Proposed Regulations Section 1.401(a)(9)-2. The minimum
distribution for subsequent calendar years, including the minimum
distribution for the distribution calendar year in which the Participant's
required beginning date occurs, must be made on or before December 31 of
that distribution calendar year.
(d) Distribution After Death. Unless the Participant has made an
appropriate election by December 31, 1983 to extend the period of
distribution after his death and the, election has not been revoked or
modified, the following provisions shall apply. If distribution of the
Participant's benefit has begun and the Participant dies before his entire
benefit has been distributed to him, the remaining portion of such benefit
shall be distributed at least as rapidly as under the method of distribution
being used as of the date of the Participant's death.
If the Participant dies before the distribution of his benefit has begun,
the entire interest of the Participant shall be distributed by December 31
of the calendar year containing the fifth (5th) anniversary of the death of
such Participant, provided that if any portion of the Participant's benefit
is payable to or for the benefit of a designated beneficiary and such
portion is to be distributed in accordance with regulations issued by the
Secretary of the Treasury over the life of, or over a period not extending
beyond the life expectancy of such designated beneficiary, such
distributions shall begin not later than December 31 of the calendar year
immediately following the calendar year of the Participant's death or such
later date as may be provided by regulations issued by the Secretary of the
Treasury. If the designated beneficiary is the surviving spouse of the
Participant the date on which the distributions are required to begin shall
not be earlier than the later of December 31 of the calendar year
immediately following the calendar year in which the Participant had died
and December 31 of the calendar year in which the Participant would have
attained age 70-1/2.
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If the surviving spouse thereafter dies before the distributions to such
spouse begin and any benefit is payable to a contingent beneficiary, the
date on which distributions are required to begin shall be determined as if
the surviving spouse were the Participant.
If the Participant has not specified the manner in which benefits are
payable by the time of his or her death, the Participant's designated
beneficiary must elect the method of distribution no later than the earlier
of (1) December 31 of the calendar year in which distributions would be
required to begin under this section, or (2) December 31 of the calendar
year which contains the 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.
(e) Payments to Children. In accordance with regulations issued by
the Secretary of the Treasury, any amount paid to a child shall be treated
as if it had been paid to the surviving spouse if such amount shall become
payable to the surviving spouse upon such child reaching majority (or other
designated event permitted under such regulations).
(f) Incidental Death Benefit Distributions. Any distribution required
by the rules applicable to incidental death benefits shall be treated as a
distribution required by this Section. All distributions required under
this Section shall be determined and made in accordance with the proposed
regulations under Section 401(a)(9) of the Code, including the minimum
distribution incidental benefit requirement of Section 1.401(a)(9)-2 of the
proposed regulations.
(g) Distributions. For the purposes of this section, distribution of
a Participant's interest is considered to begin on the Participant's
required beginning date or the date distribution is required to begin to the
surviving spouse. 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.
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(h) Definitions.
(1) Applicable life expectancy. 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.
(2) Designated beneficiary. The individual who is designated as
the beneficiary under the Plan in accordance with Section 401(a)(9)
and the proposed regulations thereunder.
(3) Distribution calendar year. 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.
(4) Participant's benefit.
(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.
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(ii) Exception for second distribution calendar year. For
purposes of paragraph (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.
(5) Required beginning date.
(i) General rule. 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.
(ii) Transitional rules. The required beginning date of a
Participant who attains age 70-1/2 before January 1, 1988, shall
be determined in accordance with (I) or (II) below:
(I) Non-5-percent owners. The required beginning date
of a Participant who is not a 5-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.
(II) 5-percent owners. The required beginning date of
a Participant who is a 5-percent owner during any year
beginning after December 31, 1979, is the first day of April
following the later of:
(A) the calendar year in which the Participant
attains age 70-1/2, or
(B) the earlier of the calendar year with or
within which ends the Plan Year in which the
Participant becomes a 5-percent owner, or the calendar
year in which the Participant retires.
The required beginning date of a Participant who is not a 5-
percent owner who attains age 70-1/2 during 1988 and who has
not retired as of January 1, 1989, is April 1, 1990.
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<PAGE>
(iii) 5-percent owner. A Participant is treated as
a 5-percent owner for purposes of this section if such
Participant is a 5-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 top-heavy) 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 5-percent
owner under this section, they must continue to be
distributed, even if the Participant ceases to be a 5-percent
owner in a subsequent year.
(i) Transitional rule.
(1) Notwithstanding the other requirements of this Section
and subject to the requirements of Section 2.5.2, distribution on
behalf of any employee, including a 5-percent owner, may be made
in accordance with all of the following requirements (regardless
of when such distribution commences):
(a) The distribution by the trust is one which would
not have disqualified such trust under Section 401(a)(9) of
the Internal Revenue Code as in effect prior to amendment by
the Deficit Reduction Act of 1984.
(b) The distribution is in accordance with a method of
distribution designated by the employee whose interest in
the trust is being distributed or, if the employee is
deceased, by a beneficiary of such employee.
(c) Such designation was in writing, was signed by the
employee or the beneficiary, and was made before January 1,
1984.
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2.5.2 Method of Distribution. Subject to the provisions of Section
2.5.1 above and any security interest in a loan from the Plan for which any
necessary spousal consent has been obtained (to the extent such security
interest is used as repayment of the loan), distribution shall be made by one of
the following methods, as determined in accordance with the election of the
Participant (or in the case of death, his Beneficiary) with such spousal
consents as may be required by law:
(a) In a single distribution, as designated by the Employer in the
Adoption Agreement;
(b) In substantially equal annual, quarterly or monthly installments
over a period of more than one year but which does not exceed the period
designated in the Adoption Agreement, as selected by the Participant
(provided that such period is not greater than the Participant's life
expectancy as of the annuity starting date), plus accrued net income. If
distribution is to be so made in installments, the Plan Administrator shall
cause the undistributed portion of the Distributable Benefit to be
transferred to a Segregated Fund, from which installment payments shall
thereafter be withdrawn from time to time.
(c) By the purchase and delivery of a single premium, nontransferable,
fully refundable, annuity policy issued by a legal reserve life insurance
company providing for payments over such period as may be designated in the
Adoption Agreement as selected by the Participant; provided, however, unless
the Employer has designated a life annuity distribution option in the
Adoption Agreement, in the event of distribution of such an annuity policy
to a Participant, such duration shall be for a fixed duration which is less
than the Participant's life expectancy as of the annuity starting date. The
refund feature under such annuity policy following the death of the
Participant shall insure to the benefit of the person or persons designated
by the Participant as his Beneficiary.
(d) Any alternative method of equivalent value contained in the Plan
at any time on or after the first day of the first Plan Year beginning after
1988 to which the Participant consents.
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<PAGE>
(e) Annuity Payments
(1) Requirement of Annuity Payment. The provisions of this
Section 2.5.2(e) shall apply to any Participant who is credited with
at least one Hour of Service with the Employer on or after August 23,
1984, and such other Participants as provided in Section 2.5.2(k).
Unless an optional form of benefit is selected pursuant to a qualified
election within the 90-day period ending on the annuity starting date,
a married Participant's vested Account balance will be paid in the
form of a Joint and Survivor Annuity and an unmarried Participant's
vested Account balance will be paid in the form of a life annuity.
Unless an optional form of benefit has been selected within the
election period pursuant to a qualified election, if a Participant
dies before the annuity starting date then the Participant's vested
Account balance shall be applied toward the purchase of a
Preretirement Survivor Annuity.
Notwithstanding the other provisions of this Section 2.5.2(e), if the
Plan is designated in the Adoption Agreement as a Cash or Deferred
Profit Sharing Plan or a Profit Sharing Plan and the Employer does not
designate a life annuity distribution option in the Adoption
Agreement, the Qualified Joint and Survivor Annuity and Preretirement
Survivor Annuity forms of distribution shall not be available.
However, a Participant's surviving spouse shall be entitled to elect
distribution of the Participant's vested Account balance in the manner
provided by Section 3.8.3.
A Participant's vested Account balance is the aggregate value of the
Participant's vested account balances derived from employer and
employee contributions (including rollovers), whether vested before or
upon death, including the proceeds of insurance contracts, if any, on
the Participant's life. The provisions hereof shall apply to a
Participant who is vested in amounts attributable to employer
contributions, employee contributions (or both) at the time of death
or distribution.
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<PAGE>
The Participant may elect to have such annuity distributed upon
attainment of the earliest retirement age under the Plan. A surviving
spouse may elect to have such annuity distributed within the ninety
(90) day period commencing on the date of the Participant's death.
(2) Election to Waive Annuity Payment. A Participant may elect
at any time during the applicable election period to waive the Joint
and Survivor Annuity form of benefit or the Preretirement Survivor
Annuity form of benefit (or both) and may revoke any such election at
any time during the applicable election period.
(3) Spousal Consent Required. An election to waive any annuity
form of benefit shall not take effect unless the spouse of the
Participant consents in writing to the election, such election
designates a specific beneficiary, including any class of
beneficiaries or contingent beneficiaries, or, solely in the case of a
waiver of a Joint and Survivor Annuity, a form of benefits which may
not be changed without spousal consent (or the consent of the spouse
expressly permits designations by the Participant without any
requirement of further consent by the spouse), and the spouse's
consent acknowledges the effect of such election and is witnessed by a
Plan representative or a notary public, or it is established to the
satisfaction of the Plan Administrator that such consent cannot be
obtained because there is no spouse or because the spouse cannot be
located. A spouse may not revoke the consent without the approval of
the Participant.
Any consent by a spouse obtained under this provision (or
establishment that the consent of a spouse may not be obtained) shall
be effective only with respect to such spouse. A consent that permits
designations by the Participant without any requirement of further
consent by such spouse must acknowledge that the spouse has the right
to limit consent to a specific beneficiary, and a specific form of
benefit where applicable, and that the spouse voluntarily elects to
relinquish either or both of such rights. A revocation of a prior
waiver may be made by a Participant without the consent of the spouse
at any time before the commencement of benefits. The number of
revocations shall not be limited. No consent obtained under this
provision shall be valid unless the Participant has received notice as
provided in subsection (4) below.
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<PAGE>
(4) Written Explanations. The Plan Administrator shall provide
each Participant no less than 30 days and no more than 90 days before
the annuity starting date a written explanation of -
(a) the terms and conditions of a Joint and Survivor
Annuity;
(b) the Participant's right to make and the effect of an
election to waive the Joint and Survivor Annuity form of benefit;
(c) the rights of the Participant's spouse to consent to a
Participant's election;
(d) the right to make and the effect of a revocation of an
election.
The Plan Administrator shall provide to each Participant within
the applicable period a written explanation of a Preretirement
Survivor Annuity comparable to that provided with respect to a
Joint and Survivor Annuity.
(5) Applicable Period. The applicable period means with respect
to a Participant, whichever of the following periods ends last:
(a) The period beginning with the first day of the Plan Year
in which the Participant attains age 32 and ending with the close
of the Plan Year preceding the Plan Year in which the Participant
attains age 35.
(b) A reasonable period ending after the individual becomes
a Participant.
(c) A reasonable period ending after the Plan ceases to
fully subsidize costs.
(d) A reasonable period ending after Section 401(a)(11) of
the Code first applies to the Participant.
(e) A reasonable period ending after separation from service
in case of a Participant who separates before attaining age 35.
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<PAGE>
For purposes of applying the foregoing, a reasonable period
ending after the enumerated events described in (b), (c) and (d)
is the end of the two-year period beginning one year prior to the
date the applicable event occurs and ending one year after that
date. In the case of a Participant who separates from service
before the Plan Year in which age 35 is attained, notice shall be
provided within the two-year period beginning prior to separation
and ending one year after separation. If such a Participant
there after returns to employment with the Employer, the
applicable period for such Participant shall be redetermined.
(6) Applicable Election Period. The applicable election period
means -
(a) in the case of an election to waive a Joint and Survivor
Annuity, the ninety (90) day period ending on the annuity
starting date; and
(b) in the case of an election to waive a Preretirement
Survivor Annuity, the period which begins on the first day of the
Plan Year in which the Participant attains age thirty-five (35)
and ends on the date of the Participant's death; provided that in
the case of a Participant who is separated from service, such
period shall not begin later than the date of such separation
from service.
A Participant who will not yet attain age 35 as of the end of any
current Plan Year may make a special qualified election to waive
the Preretirement Survivor Annuity for the period beginning on
the date of such election and ending on the first day of the Plan
Year in which the Participant will attain age 35. Such election
shall not be valid unless the Participant receives a written
explanation of the Preretirement Survivor Annuity in such terms
as are comparable to the explanation required under subsection
(4). Preretirement Survivor Annuity coverage will be
automatically reinstated as of the first day of the Plan Year in
which the Participant attains age 35. Any new waiver on or after
such date shall be subject to the full requirements of this
section.
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<PAGE>
(7) Annuity Starting Date. The annuity starting date means the
first day of the first period for which an amount is payable as an
annuity or any other form.
(8) Marriage Requirement. Notwithstanding the foregoing, the
benefits under the Plan shall not be provided in the form of a Joint
and Survivor Annuity or a Preretirement Survivor Annuity unless the
Participant and his spouse have been married throughout the one (1)
year period ending on the earlier of the Participant's annuity
starting date or the date of the Participant's death. If a
Participant marries within one (1) year before the annuity starting
date and the Participant and his spouse in such marriage have been
married for at least a one (1) year period ending on or before the
date of the Participant's death, the Participant and such spouse shall
be treated as having been married throughout the required period. A
former spouse shall be treated as the spouse or surviving spouse and a
current spouse will not be treated as the spouse or surviving spouse
to the extent provided under a qualified domestic relations order as
described in Section 414(p) of the Code.
(f) Terms of Annuity Contracts. Any annuity contract distributed from
the Plan must be nontransferable. The terms of any annuity contract
purchased and distributed by the Plan to a Participant or spouse shall
comply with the requirements of the Plan. 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 Section 401(a)(9) of the Code and the proposed regulations thereunder.
(g) Incidental Death Benefits. 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.
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<PAGE>
(h) Consents. If the value of a Participant's vested account balance
derived from Employer and Employee contributions does not exceed (and at the
time of any prior distribution did not exceed) $3,500, the consent of the
Participant and his or her spouse shall not be required; provided that if
such value exceeds $3,500, the Participant and spouse (or where either has
died, the survivor) must consent to any distribution of such account
balance. The consent shall be obtained in writing within the 90 day period
ending on the annuity starting date. Neither the consent of the Participant
nor the Participant's spouse shall be required to the extent that a
distribution is required to satisfy Section 401(a)(9) or Section 415 of the
Code. In addition, upon termination of the Plan if the Plan does not offer
an annuity option (purchased from a commercial provider) and if the Employer
or any entity within the same controlled group does not maintain another
defined contribution plan (other than an employee stock ownership plan as
defined in Section 4975(e)(7) of the Code), the Participant's account
balance in the Plan will, without the Participant's consent, be distributed
to the Participant. However, if any entity within the same controlled group
as the Employer maintains another defined contribution plan (other than an
employee stock ownership plan as defined in Section 4975(e)(7) of the Code),
then the Participant's account balance will be transferred, without the
Participant's consent, to the other Plan if the Participant does not consent
to an immediate distribution.
(i) Zero Benefits. If the value of the Participant's vested and
nonforfeitable interest in the Plan at the time of his termination of
employment is zero, the Participant shall be deemed to have received a
distribution of such interest.
(j) Restrictions on Immediate Distributions. The Plan Administrator
shall notify the Participant and the Participant's spouse of the right to
defer any distribution until the Participant's account balance in the Plan
is no longer immediately distributable. Such notification shall include a
general description of the material features and an explanation of the
relative values of the optional forms of benefit available under the Plan in
a manner that would satisfy the notice requirements of Section 417(a)(3) of
the Code and shall be provided no less than 30 days and no more
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<PAGE>
than 90 days prior to the annuity starting date. Notwithstanding the
foregoing, only the Participant need consent to the commencement of a
distribution in the form of a qualified joint and survivor annuity while the
Participant's account balance in the Plan is immediately distributable.
Furthermore, if payment in the form of a qualified joint and survivor
annuity is not required with respect to the Participant pursuant to the
Plan, only the Participant need consent to the distribution of an account
balance that is immediately distributable. The Participant's account
balance is immediately distributable if any part of the Participant's
account balance could be distributed to the Participant (or surviving
spouse) before the Participant attains (or would have attained if not
deceased) the later of age 62 or the Normal Retirement Age.
(k) Transitional Rules.
(1) Any living Participant not receiving benefits on August 23,
1984, who would otherwise not receive. the benefits prescribed by the
previous sections of the article must be given the opportunity to
elect to have the prior sections of this article apply if such
Participant is credited with at least one hour of service under this
Plan or a predecessor plan in a Plan Year beginning on or after
January 1, 1976, and such Participant has at least 10 years of vesting
service when he or she separated from service.
(2) Any living Participant not receiving benefits on August 23,
1984, who was credited with at least one hour of service under this
Plan or a predecessor plan on or after September 2, 1974, and who is
not otherwise credited with any service in a plan Year beginning on or
after January 1, 1976, must be given the opportunity to have his or
her benefits paid in accordance with Section (4) below.
(3) The respective opportunities to elect (as described above)
must be afforded to the appropriate Participants during the period
commencing on August 23, 1984, and ending on the date benefits would
otherwise commence to said Participants.
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<PAGE>
(4) Any Participant who has elected pursuant to Section (2)
above and any Participant who does not elect under Section (1) or who
meets the requirements of Section (1) except that such Participant
does not have at least 10 years of vesting service when he or she
separates from service, shall have his or her benefits distributed in
accordance with all of the following requirements if benefits would
have been payable in the form of a life annuity:
(i) Automatic joint and survivor annuity. If benefits in
the form a life annuity become payable to a married Participant
who:
(1) begins to receive payments under the Plan on or
after normal retirement age; or
(2) dies on or after normal retirement age while still
working for the Employer; or
(3) begins to receive payments on or after the
qualified early retirement age; or
(4) separates from service on or after attaining normal
retirement age (or the qualified early retirement age) and
after satisfying the eligibility requirements for the
payment of benefits under the plan and thereafter dies
before beginning to receive such benefits; then such
benefits will be received under this Plan in the form of a
qualified joint and survivor annuity, unless the Participant
has elected otherwise during the election period. The
election period must begin at least 6 months before the
Participant attains qualified early retirement age and end
not more than 90 days before the commencement of benefits.
Any election hereunder will be in writing and may be changed
by the Participant at any time.
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<PAGE>
(ii) Election of early survivor annuity. A Participant who
is employed after attaining the qualified early retirement age
will be given the opportunity to elect, during the election
period, to have a survivor annuity payable on death. If the
Participant elects the survivor annuity, payments under such
annuity must not be less than the payments which would have been
made to the spouse under the qualified joint and survivor annuity
if the Participant had retired on the day before his or her
death. Any election under this provision will be in writing and
may be changed by the Participant at any time. The election
period begins on the later of (1) the 90th day before the
Participant attains the qualified early retirement age, or (2)
the date on which participation begins, and ends on the date the
Participant terminates employment.
(iii) For purposes of this Section (4):
(1) Qualified early retirement age is the later of:
(i) the earliest date, under the Plan, on which
the Participant may elect to receive retirement
benefits,
(ii) the first day of the 120th month beginning
before the Participant reaches normal retirement age,
or
(iii) the date the Participant begins
participation.
(2) Qualified joint and survivor annuity is an annuity
for the life of the Participant with a survivor annuity for
the life of the spouse as otherwise described in the Plan.
2.5.3 Nature of Distributions. The nature of the distribution of a
Participant's Distributable Benefit shall be as hereinafter provided.
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<PAGE>
(a) Trust Fund and Segregated Funds. Subject to the Joint
and Survivor Annuity requirements, except as provided in subsection (b)
with regard to Life Insurance Policies, distribution of a Participant's
Distributable Benefit shall consist of cash or property, or an annuity
contract as provided in Section 2.5.2 above.
(b) Insurance Policies. In the event that the Trustee has
purchased Life Insurance Policies on the life of the Participant, the
values and benefits available with respect to each such Policy shall be
distributed as follows:
(i) If the Participant's employment terminates for any
reason other than death, then the Trustee shall either
surrender the Life Insurance Policy for its available cash
value and distribute the proceeds as provided in subsection
(a) above or, at the election of the Participant, distribute
the Life Insurance Policy to the Participant, provided the
Participant, has a vested and nonforfeitable interest in his
Accounts in an amount at least equal to the cash value
thereof.
(ii) If the Participant's employment terminates by
reason of death, the beneficiary designated by the
Participant in accordance with the terms of the Plan shall
be entitled to receive from the Trustee the full amount of
the proceeds thereof.
The Trustee shall apply for and be the owner of any Policies
purchased under the terms of the Plan. The Policies must
provide that the proceeds are payable to the Trustee subject
to the Trustee's obligation to pay over the proceeds to the
designated Beneficiary. A Participant's spouse will be the
designated beneficiary of the proceeds of such Policies
unless a qualified election has been made in accordance with
Section 2.5.2(e) of the Plan, if applicable. Under no
circumstances shall the trust retain any part of the
proceeds. In the event of any conflict between the terms of
the Plan and the terms of any Policies purchased hereunder,
the Plan provisions shall control.
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<PAGE>
2.5.4 Advance Distributions. If the Employer elects in the Adoption
Agreement to permit advance distribution to a Participant or his Beneficiary
after his employment has terminated and before he is otherwise entitled to
distribution of his Distributable Benefit but in no event earlier than a
reasonable period following the Distribution Date, the Trustee upon the request
of the Participant or Beneficiary shall make advance distributions to him or to
his Beneficiary. The aggregate of such an advance distribution shall not exceed
the sum of the vested and nonforfeitable interest in the Participant's Accounts.
If the Employer elects in the Adoption Agreement to forfeit nonvested
amounts immediately upon distribution of the Employee's entire vested account
balance on termination of service, an Employee who terminates service and elects
to receive the value of the Employee's vested account balance shall forfeit the
nonvested portion. If the Employee elects to have distributed less than the
entire vested portion of the account balance derived from Employer
contributions, the part of the nonvested portion that is treated as a forfeiture
is the total nonvested portion multiplied by a fraction, the numerator of which
is the amount of the distribution attributable to Employer contributions and the
denominator of which is the total value of the vested Employer derived account
balance.
Except as provided in the preceding paragraph, if a Participant receives a
distribution which reduces the balance in his Employer Account when he has less
than a one hundred percent (100%) vested and nonforfeitable interest in the
Account, the amount, if any, of the Participant's vested and nonforfeitable
interest in the undistributed balance of said Account on his Accrual Date shall
be transferred to a Segregated Account and shall not be less than an amount
("X") determined by the formula: X = P (AB + (R x D)) - (R x D). For purposes
of applying the formula: P is the vested percentage at the relevant time; AB is
the account balance at the relevant time; and D is the amount of the
distribution; and R is the ratio of the account balance at the relevant time to
the account balance after distribution.
2.5.5 Hardship Distributions. If the Plan is designated in the Adoption
Agreement as a Cash or Deferred Profit Sharing Plan or a Profit Sharing Plan and
the Employer elects in the Adoption Agreement to permit hardship distributions,
a Participant may request a distribution from the Plan as a result
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<PAGE>
of immediate and heavy financial needs of the Participant to the extent that the
distribution is necessary to satisfy such financial needs. Hardship
distributions are subject to the spousal consent requirements contained in
Sections 401(a)(11) and 417 of the Code. The determination of whether a
Participant has an immediate and heavy financial need shall be made by the Plan
Administrator on the basis of all relevant facts and circumstances. A
distribution shall be deemed to be made on account of an immediate and heavy
financial need if the distribution is on account of:
(a) Deductible medical expenses described in Section 213(d) of the
Code incurred or necessary for medical care of the Participant, his spouse
or dependents;
(b) Purchase (excluding mortgage payments) of a principal residence
for the Participant;
(c) Cost of tuition and related educational fees for the next 12
months of post-secondary education for the Participant, his spouse, children
or dependents; or
(d) The need to prevent the eviction of the Participant from his
principal residence or foreclosure on the mortgage of the Participant's
principal residence.
A distribution shall be considered as necessary to satisfy an immediate and
heavy financial need of the Participant only if:
(a) The Participant has obtained all distributions, other than
hardship distributions, and all nontaxable loans under all plans maintained
by the Employer;
(b) All plans maintained by the Employer provide that the
Participant's elective Deferrals and employee contributions shall be
suspended for twelve (12) months after the receipt of the hardship
distribution;
(c) The distribution is not in excess of the amount of an immediate
and heavy financial need (including amounts necessary to pay any federal,
state or local income taxes or penalties reasonably anticipated to result
from the distribution); and
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<PAGE>
(d) All plans maintained by the Employer provide that the Participant
may not make Elective Deferrals for the Participant's taxable year
immediately following the taxable year of the hardship distribution in
excess of the applicable limit under Section 402(g) of the Code for such
taxable year less the amount of such Participant's Elective Deferrals for
the taxable year of the hardship distribution.
In the event of such distribution, when a Participant is less than one
hundred percent (100%) vested in his Employer Account or Matching Account,
the vested interest in the Employer Account or Matching Account shall
thereafter be determined in accordance with Section 2.5.4 of the Plan.
2.5.6 In Service Distributions.
(a) Cash or Deferred Profit Sharing Plans. If the Plan is designated
in the Adoption Agreement as a Cash or, Deferred Profit Sharing plan and if
the Employer elects in the Adoption Agreement to permit distributions to a
Participant after attaining age 59-1/2 but prior to his termination of
employment, a Participant shall be entitled to receive a distribution of all
or a part of his interest in the Plan upon filing a written request with the
Plan Administrator; provided that no distribution shall be made unless the
interest of the Participant in the Account from which the distribution is to
be made is fully vested and nonforfeitable and the balance in the Account to
be distributed has accumulated for at least two (2) years or the individual
has been a Participant for five (5) or more Plan Years; and the distribution
of Elective Deferrals and Qualified Non-Elective Contributions satisfy the
limitations imposed by Part II, Article VII. Any distribution shall be
subject to the written consent of the Participant's spouse.
(b) Profit Sharing Plans. If the Plan is designated in the Adoption
Agreement as a Profit Sharing Plan and if the Employer elects in the
Adoption Agreement to permit distributions to a Participant prior to his
termination of employment, a Participant shall be entitled to receive a
distribution of all or part of his interest in the Plan upon filing a
written request with the Plan Administrator; provided that no distribution
shall be made unless the interest of the Participant in the Account from
which the distribution
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<PAGE>
is to be made is fully vested and nonforfeitable and the balance in the
Account to be distributed has accumulated for at least two (2) years or the
individual has been a Participant for five (5) or more Plan Years; provided
further that in-service distributions shall be permitted subject to the
terms of Section 2.5.5 if the Employer elects in the Adoption Agreement to
have such provision apply. Any distribution shall be subject to the written
consent of the Participant's spouse.
(c) All Plans. Upon attainment of his Normal Retirement Date, a
Participant shall be entitled to receive a distribution of all or a part of
his interest in the Plan upon filing a written request with the Plan
Administrator. In service distributions are permitted at the election of the
Participant for amounts held in a Segregated Account attributable to a
rollover from another plan regardless of age or periods of participation.
Any distribution shall be subject to the written consent of the
Participant's spouse.
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<PAGE>
ARTICLE VI
CONTINGENT TOP HEAVY PROVISIONS
2.6.1 Top Heavy Requirements. If the Plan becomes a Top Heavy Plan during
any Plan Year, the following provisions shall supersede any conflicting
provisions in the Plan or Adoption Agreement and apply for such Plan Year:
(a) Except as otherwise provided below, the Employer contributions and
forfeitures allocated on behalf of any Participant who is not a Key Employee
shall not be less than the lesser of three percent of such Participant's
Compensation or in the case where the Employer has no defined benefit plan
which designates this plan to satisfy Section 401 of the Code, the largest
percentage of Employer contributions and forfeitures, as a percentage of the
first $200,000 of the Key Employee's compensation, allocated on behalf of
any Key Employee for that year. The minimum allocation is determined
without regard to any Social Security contribution. This minimum allocation
shall be made even though, under other plan provisions, the Participant
would not otherwise be entitled to receive an allocation, or would have
received a lesser allocation for the year because of (i) the Participant's
failure to complete 1,000 Hours of Service (or any equivalent provided in
the plan), or (ii) the Participant's failure to make mandatory employee
contributions to the plan, or (iii) compensation less than a stated amount.
Neither Elective Deferrals nor Matching Contributions may be taken into
account for the purpose of satisfying the minimum allocation.
For purposes of computing the minimum allocation, Compensation shall mean a
Participant's compensation as defined in Section 3.2.1(h) of the Plan.
The minimum allocation provided above shall not apply to any Participant who
was not employed by the Employer on the last day of the Plan Year.
The minimum allocation provided above shall not apply to any Participant to
the extent the Participant is covered under any other plan or plans of the
Employer and Employer has provided in the Adoption Agreement that the
minimum allocation or benefit requirement applicable to top-heavy plans will
be met in the other plan or plans.
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<PAGE>
(b) References in Section 3.2.1(d), pertaining to combined plan
limitations, to "1.25" shall be applied by substituting "1.0" for "1.25"
therein. Reference in Section 3.2.1(e), pertaining to a special transition
rule, to "$51,875" shall be applied by substituting "$41,500" for "$51,875"
therein.
(c) The vested and nonforfeitable interest of each Participant shall
be equal to the percentage determined under the vesting schedule specified
in the Adoption Agreement if the Plan becomes a Top Heavy Plan, or if no
vesting schedule is specified, the percentage determined under the following
schedule:
<TABLE>
<CAPTION>
Years of Service Percentage
<S> <C>
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
</TABLE>
The top-heavy minimum vesting schedule applies to all benefits within the
meaning of Section 411(a)(7) of the Code, except those attributable to
employee contributions, including benefits accrued before the effective date
of Section 416 of the Code and benefits accrued before the Plan becomes top-
heavy.
No decrease in a Participant's nonforfeitable percentage may occur in the
event the Plan's status as top-heavy changes for any Plan Year. Any minimum
allocation required (to the extent required to be nonforfeitable under
Section 416(b)) may not be forfeited under Section 411(a)(3)(B) or (D) of
the Code.
2.6.2 Top Heavy Definitions. The following terms, as used in this Plan,
shall have the following meaning:
(a) "Key Employee": An Employee or former employee who, at any time
during the Determination Period is either:
(i) an officer of the Employer having an Annual Compensation
greater than fifty (50%) percent of the amount in effect under Section
415(b)(1)(A) of the Code;
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<PAGE>
(ii) an owner (or a person considered an owner under Section 318
of the Code) of one of the ten largest interests in the Employer if
such individual's Annual Compensation from the Employer is more than
the limitation in effect under Section 415(c)(1)(A) of the Code;
(iii) any person who owns directly or indirectly 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 or, in the case of an
unincorporated Employer, the capital or profits interest in the
Employer;
(iv) any person who owns directly or indirectly more than one
(1%) 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 or, in the case of an
unincorporated Employer, the capital or profits interest in the
Employer and having an Annual Compensation from the Employer of more
than $150,000; or
(v) any beneficiary of a Key Employee. The determination of who
is a Key Employee shall be made in accordance with Section 416(i)(1)
of the Code and the regulations thereunder.
(b) "Aggregation Group": Each qualified retirement plan of the
Employer in which a Key Employee is a participant and each other qualified
retirement plan of the Employer which enables any plan in which a Key
Employee is a participant to meet the requirements of Section 401(a)(4) or
Section 410 of the Code.
(c) "Annual Compensation": Compensation as defined in Section
415(c)(3) of the Code, but including amounts contributed by the Employer
pursuant to a salary reduction agreement which are excludable from the
Employee's gross income under Section 125, Section 402(a)(8), Section 402(h)
or Section 403(b) of the Code.
(d) "Top-Heavy Plan": For any Plan Year beginning after December 31,
1983, the plan is top-heavy if any of the following conditions exists:
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(i) If the top-heavy ratio for the plan exceeds 60 percent and
the plan is not part of any required aggregation group or permissive
aggregation group of plans.
(ii) If the plan is a part of a required aggregation group of
plans but not part of a permissive aggregation group and the top-heavy
ratio for the group of plans exceeds 60 percent.
(iii) If the plan is a part of a required aggregation group and
part of a permissive aggregation group of plans and the top-heavy
ratio for the permissive aggregation group exceeds 60 percent.
(e) "Top-Heavy Ratio":
(i) If the Employer maintains one or more defined contribution
plans (including any simplified employee pension plan) and the
Employer has not maintained any defined benefit plan which during the
5-year period ending on the Determination Date(s) has or has had
accrued benefits, the top-heavy ratio for this plan alone or for the
required or permissive aggregation group as appropriate is a fraction,
the numerator of which is the sum of the account balances of all Key
Employees as of the Determination Date(s) (including any part of any
account balance distributed in the 5-year period ending on the
Determination Date(s)), and the denominator of which is the sum of all
account balances (including any part of any account balance
distributed in the 5-year period ending on the Determination Date(s)),
both computed in accordance with Section 416 of the Code and the
regulations thereunder. Both the numerator and denominator of the
top-heavy ratio are increased to reflect any contribution not actually
made as of the Determination Date, but which is required to be taken
into account on that date under Section 416 of the Code and the
regulations thereunder.
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<PAGE>
(ii) If the Employer maintains one or more defined contribution
plans (including any simplified employee pension plan) and the
Employer maintains or has maintained one or more defined benefit plans
which during the 5-year period ending on the Determination Date(s) has
or has had any accrued benefits, the top-heavy ratio for any required
or permissive aggregation group as appropriate is a fraction, the
numerator of which is the sum of account balances under the aggregated
defined contribution plan or plans for all Key Employees, determined
in accordance with (i) above, and the present value of accrued
benefits under the aggregated defined benefit plan or plans for all
Key Employees as of the Determination Date(s), and the denominator of
which is the sum of the account balances under the aggregated defined
contribution plan or plans for all Participants, determined in
accordance with (i) above, and the present value of accrued benefits
under the defined benefit plan or plans for all Participants as of the
Determination Date(s), all determined in accordance with Section 416
of the Code and the regulations thereunder. The accrued benefits
under a defined benefit plan in both the numerator and denominator of
the top-heavy ratio are increased for any distribution of an accrued
benefit made in the five-year period ending on the Determination Date.
(iii) For purposes of (i) and (ii) above, the value of account
balances and the present value of accrued benefits will be determined
as of the most recent valuation date that falls within or ends with
the 12-month period ending on the Determination Date, except as
provided in Section 416 of the Code and the regulations thereunder for
the first and second plan years of a defined benefit plan. The
account balances and accrued benefits of a Participant (1) who is not
a Key Employee but was a Key Employee in a prior year, or (2) who has
not been credited with at least one hour of service with any Employer
maintaining the plan at any time during the 5-year period ending on
the Determination Date will be disregarded. The calculation of the
top-heavy ratio, and the extent to which distributions, rollovers, and
transfers are taken into account will be made in accordance with
Section 416 of the Code and the regulations thereunder. Deductible
employee contributions will
- 57 -
<PAGE>
not be taken into account for purposes of computing the top-heavy
ratio. When aggregating plans, the value of account balances and
accrued benefits will be calculated with reference to the
Determination Dates that fall within the same calendar year.
The accrued benefit of a Participant other than a Key Employee shall
be determined under (a) the method, if any, that uniformly applies for
accrual purposes under all defined benefit plans maintained by the
Employer, or (b) if there is no such method, as if such benefit
accrued not more rapidly than the slowest accrual rate permitted under
the fractional rule of Section 411(b) (1)(C) of the Code.
(f) "Permissive Aggregation Group": The required aggregation group of
plans plus any other plan or plans of the Employer which, when considered as
a group with the required aggregation group, would continue to satisfy the
requirements of Sections 401(a)(4) and 410 of the Code.
(g) "Required Aggregation Group":
(i) Each qualified 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).
(ii) Any other qualified plan of the Employer which enables a
plan described in (i) to meet the requirements of Sections 401(a)(4)
or 410 of the Code.
(h) "Determination Date": For any plan year subsequent to the first
plan year, the last day of the preceding plan year. For the first plan year
of the plan, the last day of that year.
(i) "Valuation Date": The date elected by the Employer in the
Adoption Agreement as of which account balances or accrued benefits are
valued for purposes of calculating the top-heavy ratio.
(j) "Present Value": Present value shall be based only on the
interest and mortality rates specified in the Adoption Agreement.
(k) "Determination Period": The Plan Year containing the
Determination Date and the four (4) preceding Plan Year.
(l) "Non-Key Employee": An Employee who is not a Key Employee.
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<PAGE>
2.6.3 Pairing Requirements. If an Employer adopts two or more defined
contribution plans by executing Adoption Agreements pursuant to this Plan or
another prototype plan for which the Mass Submitter is the same, the following
provisions shall apply:
(a) Only one of the Adoption Agreements may provide for permitted
disparity by integration with Social Security.
(b) For each Plan Year in which the paired plans are top-heavy the
Employer shall provide a minimum contribution equal to three (3%) percent of
Compensation for each Non-Key Employee (i) under the paired plan designated
by the Employer in the Adoption Agreement if the plans benefit the same
Participants, or in the case of a plan subject to Code Section 401(k) or
401(m), the same Participants are eligible to make elective deferrals or
employee contributions, or (ii) under both paired plans if the plans benefit
the same participants. Note: The same eligibility requirements in Section
A of the Adoption Agreement must be selected.
(c) In any Plan Year in which the paired plans are top-heavy, i.e.
the top-heavy ratio exceeds sixty (60%) percent, the denominators of the
defined benefit fraction and defined contribution fraction in Section
3.2.1(d) shall be computed by multiplying the dollar limitation by 1.0
instead of by 1.25.
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<PAGE>
ARTICLE VII
SPECIAL CODA LIMITATIONS
2.7.1 Limitation on Deferral Percentage for Highly Compensated
Employees. Notwithstanding any provision herein to the contrary, the actual
deferral percentage for all Highly Compensated Employees for each Plan Year must
not exceed the actual deferral percentage for all other Employees eligible to
participate by more than the greater of:
(a) the actual deferral percentage of such other Employees multiplied
by 1.25; or
(b) the actual deferral percentage of such other Employees multiplied
by 2.0, but in no event more than two (2) percentage points greater than the
actual deferral percentage of such other Employees.
For purposes hereof, the actual deferral percentages for a Plan Year for all
Highly Compensated Employees and for all other Employees respectively are the
averages of the ratios, calculated separately for each Employee in the
respective group, of the amount of Elective Contributions and Qualified Non-
Elective Contributions paid under the Plan on behalf of each such Employee for
such Plan Year including Excess Elective Deferrals to the Employee's
Compensation for such Plan Year (whether or not the Employee was a Participant
for the entire Plan Year) but excluding Elective Deferrals that are taken into
account in the Contribution Percentage test (provided the ADP test is satisfied
both with and without exclusion of those Elective Deferrals). An Employee who
would be a Participant but for the failure to have Elective Contributions made
on his behalf shall be treated as a Participant on whose behalf no Elective
Contributions are made. For purposes of calculating the actual deferral
percentages of Highly Compensated Employees who are 5 percent owners or among
the ten most highly paid Employees, Elective Contributions and Qualified Non-
Elective Contributions on behalf of a member of the Family of such Highly
Compensated Employees shall be taken into account and Compensation of such
Employees shall include the Elective Deferrals and Qualified Non-Elective
Contributions and Compensation for the Plan Year of members of his Family (as
determined in Section 414(q)(6) of the Code). A member of the Family of such
Highly Compensated Employees shall be disregarded as a separate Employee in
determining the actual deferral percentage both for Participants who are Highly
Compensated Employees and for all other Employees.
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<PAGE>
For purposes of determining the actual deferral percentage test, Elective
Contributions and Qualified Non-Elective Contributions must be made before the
last day of the twelve month period immediately following the Plan Year to which
the contributions relate.
The Employer shall maintain records sufficient to demonstrate satisfaction of
the actual deferral percentage test and the amount of Qualified Non-Elective
Contributions used in such test.
The determination and treatment of the actual deferral percentage amounts of any
Participant shall satisfy such other requirements as may be prescribed by the
Secretary of the Treasury.
2.7.2 Multiple Plan Limitations.
(a) The actual deferral percentage for any Participant who is a Highly
Compensated Employee for the Plan Year and who is eligible to have Elective
Contributions (and Qualified Non-Elective Contributions if treated as
Elective Deferrals for purposes of the actual deferral percentage test)
allocated to his or her Accounts under two or more arrangements described in
Section 401(k) of the Code, that are maintained by the Employer, shall be
determined as if such Elective Deferrals (and, if applicable, such Qualified
Non-Elective Contributions) 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
arrangements ending with or within the same calendar year shall be treated
as a single arrangement. Notwithstanding the foregoing, certain plans shall
be treated as separate if mandatorily disaggregated under regulations under
Section 401(k) of the Code.
(b) In the event that this Plan satisfies the requirements of Section
401(k), 401(a)(4) or 410(b) of the Code 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 actual deferral 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 Section
401(k) of the Code only if they have the same Plan Year.
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<PAGE>
2.7.3 Limitation on Matching Contributions. Notwithstanding any
provision herein to the contrary, the average contribution percentage for all
Highly Compensated Employees for each Plan Year must not exceed the average
contribution percentage for all other Employees eligible to participate by more
than the greater of:
(a) the average contribution percentage of such other Employees
multiplied by 1.25; or
(b) the average contribution percentage of such other Employees
multiplied by 2.0, but in no event more than two (2) percentage points
greater than the average contribution percentage of such other Employees.
For purposes hereof, the average contribution percentages for a Plan Year for
all Highly Compensated Employees and for all other Employees respectively are
the averages of the ratios, calculated separately for each Employee in the
respective group, of the amount of Matching Contributions paid under the Plan on
behalf of each such Employee for such Plan Year, to the Employee's Compensation
for such Plan Year whether or not the Employee was a Participant for the entire
Plan Year. Such contribution percentage amounts shall include forfeitures of
Excess Aggregate Contributions or Matching Contributions allocated to the
Participant's Accounts which shall be taken into account in the Plan Year in
which such forfeiture is allocated. Forfeitures of Matching Contributions shall
be included as contribution percentage amounts only to the extent arch
forfeitures are used to reduce or supplement the Matching Contributions, as
specified in the Adoption Agreement. If so elected in the Adoption Agreement,
the Employer may include Qualified Non-Elective Contributions in the
contribution percentage amounts. The Employer may also 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. If an Elective Contribution or other contribution by an Employee is
required as a condition of participation in the Plan, any Employee who would be
a Participant if such Employee made such a contribution shall be treated as an
eligible Participant on behalf of whom no such contributions are made.
The Employer shall maintain records sufficient to demonstrate satisfaction of
the average contribution percentage test and the amount of Qualified Non-
Elective Contributions used in such test.
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<PAGE>
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.
2.7.4 Special Rules.
(a) Multiple Use: If one or more Highly Compensated Employees
participate in both a CODA and a plan subject to the ACP test maintained by
the Employer 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 ACP of those Highly Compensated Employees who also participate in a CODA
shall be reduced (beginning with such Highly Compensated Employee whose ACP
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 Aggregate 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
either the ADP or ACP of the Highly Compensated Employees does not exceed
1.25 multiplied by the ADP and ACP of the Employees who are not Highly
Compensated Employees.
(b) The contribution percentage for any Participant who is a Highly
Compensated Employee and who is eligible to have contribution percentage
amounts allocated to his or her Accounts under two or more plans described
in Section 401(a) of the Code, or arrangements described in Section 401(k)
of the Code that are maintained by the Employer, shall be determined as if
the total of such contribution percentage amounts was made under each plan.
If a Highly Compensated Employee 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. Notwithstanding the foregoing, certain plans shall
be treated as separate if mandatorily disaggregated under regulations under
section 401(m) of the Code.
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<PAGE>
(c) In the event that this Plan satisfies the requirements of Sections
401(m), 401(a)(4) or 410(b) of the Code 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 percentages 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 Section
401(m) of the Code 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 members of the Family of such
Highly Compensated Employees. Family members, with respect to Highly
Compensated Employees, shall be disregarded as separate employees in
determining the contribution percentage both for Participants who are Highly
Compensated Employees and for all other 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 shall be considered made for a Plan Year if made no
later than the end of the twelve month period beginning of the day after the
close of the Plan Year.
2.7.5 Distribution of Excess Elective Deferrals. A Participant may
assign to the Plan any Excess Elective Deferrals made during a taxable year of
the Participant by notifying the Plan Administrator on or before March 15 of
each calendar year of the amount of the Excess Elective Deferrals to be assigned
to the Plan. A Participant is deemed to notify the Plan Administrator of any
Excess Elective Deferrals that arise by taking into account only those Elective
Deferrals made to this Plan and any other plans of the Employer.
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.
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<PAGE>
Excess Elective Deferrals distributed under this section shall be adjusted for
any income or loss based on a reasonable method of computing the allocable
income or loss. The method selected must be applied consistently to all
Participants and used for all corrective distributions under the Plan for the
Plan Year, and must be the same method that is used by the Plan for allocating
income or loss to Participants' Accounts. Income or loss allocable to the
period between the end of the taxable year and the date of distribution may be
disregarded in determining income or loss.
2.7.6 Distribution of Excess Contributions. 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 of Participants who are subject to the family member aggregation
rules shall be allocated among the family members in proportion to the Elective
Deferrals (and any amounts treated as Elective Deferrals) of each family member
that is combined to determine the combined ADP.
Excess Contributions distributed under this section shall be adjusted for any
income or loss based on a reasonable method of computing the allocable income or
loss. The method selected must be applied consistently to all Participants and
used for all corrective distributions under the Plan for the Plan Year, and must
be the same method that is used by the Plan for allocating income or loss to
Participants' Accounts. Income or loss allocable to the period between the end
of the taxable year and the date of distribution may be disregarded in
determining income or loss.
Excess Contributions shall be distributed from the Participant's Elective
Contribution Account in proportion to the Participant's Elective Deferrals for
the Plan Year. Excess Contributions attributable to Qualified Non-Elective
Contributions shall be distributed from the Participant's Qualified Non-Elective
Contribution Account only to the extent that such Excess Contributions exceed
the balance in the Participant's Elective Contribution Account.
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<PAGE>
2.7.7 Distribution of Excess Aggregate Contributions. 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 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 of
Participants who are subject to the family member aggregation rules shall be
allocated among the family members in proportion to the Employee and Matching
Contributions (or amounts treated as Matching Contributions) of each family
member that is combined to determine the combined ACP. Such distributions shall
be made to Highly Compensated Employees on the basis of the respective portions
of the Excess Aggregate Contributions attributable to each of such Employees. 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 distributed under this section shall be adjusted
for any income or loss based on a reasonable method of computing the allocable
income or loss. The method selected must be applied consistently to all
Participants and used for all corrective distributions under the Plan for the
Plan Year, and must be the same method that is used by the Plan for allocating
income or loss to Participants' Accounts. Income or loss allocable to the
period between the end of the taxable year and the date of distribution may be
disregarded in determining income or loss.
Forfeitures of Excess Aggregate Contributions may either be reallocated to the
accounts of Employees who are not Highly Compensated Employees or applied to
reduce Employer Contributions, as elected by the Employer in the Adoption
Agreement.
Excess Aggregate Contributions shall be forfeited, if forfeitable or distributed
on a pro-rata basis from the Participant's Matching Account and Voluntary
Account (and, if applicable, the Participant's Qualified Non-Elective
Contribution Account or Elective Contribution Account).
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2.7.8 Limitation on Distributions. Except as otherwise provided in
this Article, Elective Deferrals and Qualified Non-Elective Contributions and
income allocable thereto are not distributable to a Participant or his or her
Beneficiary in accordance with such Participant's or Beneficiary's election
prior to separation from service, death or disability. Such amounts may,
however, be distributed upon:
(a) Termination of the Plan without the establishment of another
defined contribution plan, other than an employee stock ownership plan (as
defined in Section 4975(e) or Section 409 of the Code) or a simplified
employee pension plan as defined in Section 408(k) of the Code.
(b) The disposition by a corporation to an unrelated corporation of
substantially all of the assets (within the meaning of Section 409(d)(2) of
the Code) 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 Section
409(d)(3) of the Code) 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.
(e) The Hardship of a Participant in accordance with Section 2.5.5.
All such distributions are subject to the spousal and Participant consent
requirements, if applicable, contained in Sections 401(a)(11) and 417 of the
Code. In addition, distributions after March 31, 1988 that are triggered by any
of the first three events enumerated above must be made in a lump sum.
2.7.9 Limitation on Elective Deferrals. 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 Section 402(g) of the Code in effect at the
beginning of such taxable year.
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PART III
ARTICLE I
ACCOUNTING
3.1.1 Accounts. All income, profits, recoveries, contributions and any
and all monies, securities and properties of any kind at any time received or
held by the Trustee shall be held as a commingled Trust Fund, except to the
extent such assets are transferred to a Segregated Fund. For accounting
purposes, the Plan Administrator shall establish and maintain certain Accounts
for each Participant. An Employer Account shall be established and maintained
for each Participant to which shall be added the Participant's share of Employer
or Non-Elective Contributions and forfeitures. A Matching Account shall be
established and maintained for each Participant to which shall be added the
Participant's share of Matching Contributions and forfeitures. A Qualified Non-
Elective Contribution Account shall be established and maintained for each
Participant to which shall be added the Participant's share of Qualified Non-
Elective Contributions. If a Participant has previously made voluntary
nondeductible employee contributions, the Plan Administrator shall establish and
maintain a Voluntary Account for the Participant. If, in accordance with any of
the provisions of the Plan, assets are either deposited initially or transferred
to a Segregated Fund for the benefit of a Participant, the Plan Administrator
shall establish and maintain a Segregated Account for the Participant. If a
Participant elects to exercise investment control over all or a portion of his
Accounts, the Plan Administrator shall establish and maintain a Controlled
Account for the Participant.
3.1.2 Adjustments. As of each Valuation Date, each Participant's
Accounts shall be adjusted in the following order and manner.
(a) Distributions. Any distribution made to or on behalf of a
Participant since the last preceding Valuation Date shall be deducted from
the Participant's Account from which the distribution was made.
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(b) Insurance Premiums. Payments made since the last preceding
Valuation Date for Life Insurance Policies on the life of a Participant
(including without limitation payments of premiums and interest on policy
loans) shall be deducted from the Account of the Participant from which the
payment was made.
(c) Adjustment to Fair Market Value. The value of all monies,
securities and other property in the Trust Fund, excluding Life Insurance
Policies, shall be appraised by the Trustee at the then fair market value.
In determining such value, all income and contributions, if any, received by
the Trustee from the Employer or Participants on account of such Year
calculated under the method of accounting of the Trust shall be included and
there shall be deducted all expenses determined in accordance with the
method of accounting adopted by the Plan Administrator.
If the total net value of the Trust Fund so determined exceeds (or is less
than) the total amount in the affected Accounts of all Participants, the
excess (or deficiency) shall be added to (or deducted from) the respective
Accounts of all Participants in the ratio that each such Participant's
Account bears to the total amount in all such Accounts.
(d) Adjustment of Segregated and Controlled Accounts. The value of all
monies, securities and other property in each Participant's Segregated
Account or Controlled Account, if any, but exclusive of Life Insurance
Policies, shall be appraised by the Trustee at the then fair market value.
In determining such value, all income calculated under the method of
accounting of the Trust shall be included and all expenses shall be
deducted.
If the total net value of a Participant's Segregated Account or Controlled
Account, as the case may be, so determined exceeds (or is less than) the
previous balance in such Account, the excess (or deficiency) shall be added
to (or deducted from) the Participant's respective Account.
(e) Insurance Dividends. Dividends or credits received since the last
preceding Valuation Date on any Life Insurance Policy on the life of a
Participant shall be added to the Account of the Participant from which the
premiums for such Life Insurance Policy have been paid.
(f) Contributions and Forfeitures. Each Participant's Account shall be
increased by that portion of the contribution and forfeitures which is
allocated to him.
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(g) Transfers to Segregated Funds. To the extent that funds in the
Trust Fund attributable to a Participant's Accounts were transferred since
the last preceding Valuation Date or are to be transferred to a Segregated
Fund pursuant to any of the provisions of the Plan, the Account from which
the funds were transferred shall be decreased and the Account to which the
funds were transferred shall be increased.
(h) Transfers From Segregated Funds. To the extent that funds are
transferred from a Segregated Fund of a Participant to the Trust Fund
pursuant to any of the provisions of the Plan, the Account from which the
funds were transferred shall be decreased and the Account to which the funds
were transferred shall be increased.
(i) Time of Adjustments. Every adjustment to be made pursuant to this
Section shall be considered as having been made as of the applicable
Valuation Date regardless of the actual dates of entries, receipt by the
Trustee of contributions by the Participant or the Employer for such Year,
or the transfers of funds to or from Segregated Funds. The Trustee's
determination as to valuation of trust assets and charges or credits to the
individual Accounts of the respective Participants shall be conclusive and
binding on all persons. If funds are transferred from the Trust Fund to a
Segregated Fund as of any date other than a Valuation Date pursuant to the
terms of the Plan, the adjustment to be made pursuant to this Section shall
be made as of the date as of which such transfer is made, as if such date is
a Valuation Date.
If any Participant receives a distribution pursuant to the terms of the Plan
as of any date other than a Valuation Date, then the adjustments to be made
pursuant to this Section shall be made in the manner specified in the
Adoption Agreement.
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ARTICLE II
LIMITATIONS
3.2.1 Limitations on Annual Additions. If the Participant does not
participate in, and has never participated in, another qualified plan maintained
by the Employer, or a welfare benefit fund, as defined in Section 419(e) of the
Code, maintained by the Employer, or an individual medical account, as defined
in Section 415(1)(2) of the Code, maintained by the Employer, which provides an
annual addition, then subject to the adjustments hereinafter set forth, the
amount of annual additions which may be credited to a Participant's Accounts
during any Limitation Year shall not exceed the maximum permissible amount,
which shall equal the lesser of: (a) thirty thousand dollars ($30,000.00) or,
if greater, one-fourth of the dollar limitation under Section 415(b) (1)(A) of
the Code as in effect for the Limitation Year, or (b) twenty-five percent (25%)
of the Participant's Compensation for the Plan Year. The compensation
limitation referred to in (b) shall not apply to any contribution for medical
benefits (within the meaning of Section 401(h) or Section 419A(f)(2) of the
Code) which is otherwise treated as an annual addition under Sections 415(1)(1)
or 419A(d)(2) of the Code.
If the Employer contribution that would otherwise be contributed or allocated to
the Participant's Account would cause the annual additions for the Limitation
Year to exceed the maximum permissible amount, the amount contributed or
allocated shall be reduced so that the annual additions for the Limitation Year
shall equal the maximum permissible amount.
(a) Annual Additions. The term "annual additions" shall mean the sum
of the following amounts credited to a Participant's Accounts for the
Limitation Year:
(i) Employer contributions;
(ii) Employee contributions;
(iii) Forfeitures;
(iv) Excess Elective Deferrals, Excess Contributions and Excess
Aggregate Contributions; and
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(v) Payments allocated after March 31, 1984, to an individual
medical account, as defined in section 415(1)(2) of the Code, which is
part of a pension or annuity plan maintained by the Employer and
amounts derived from contributions paid or accrued after December 31,
1985, in taxable years ending after such date, which are attributable
to post-retirement medical benefits, allocated to the separate account
of a key employee, as defined in section 419A(d)(3) of the Code, under
a welfare benefit fund as defined in section 419(e) of the Code,
maintained by the Employer.
Any excess amounts applied under subsections (b) and (c) below to
reduce Employer contributions are considered annual additions for such
Limitation Year.
(b) Excessive Annual Additions. Prior to determining a Participant's
actual Compensation for a Limitation Year, the Employer may determine the
maximum permissible Annual Addition for the Participant on the basis of a
reasonable estimation of the Participant's Compensation for the Limitation
Year, uniformly determined for all Participants similarly situated. As soon
as is administratively feasible after the end of the Limitation Year, the
maximum permissible amount for the Limitation Year shall be determined on
the basis of the Participant's actual Compensation for the Limitation Year.
Any Excessive Annual Addition attributable to nondeductible voluntary
employee contributions made by a Participant to the extent they reduce the
excess amount shall be returned to the Participant before any other
adjustments are made. Any Excessive Annual Addition attributable to a
reasonable error in determining the amount of Elective Deferrals that may be
made on behalf of a Participant under the limits of Section 415 of the Code
shall next be returned to the Participant.
If an excess amount still exists, and the Participant is covered by the Plan
at the end of the Limitation Year, the excess amount in the Participant's
Account shall be used to reduce Employer contributions (including any
allocation of forfeitures) for such Participant in the next Limitation Year,
and each succeeding Limitation Year, if necessary. If an excess amount
still exists, and the Participant is not covered by the Plan at the end of a
Limitation Year, the excess amount shall be held unallocated in a suspense
account. The suspense account shall be applied to reduce future Employer
contributions for all remaining Participants in the next Limitation Year,
and each succeeding Limitation Year, if necessary.
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If a suspense account is in existence at any time during a particular
Limitation Year, all amounts in the suspense account must be allocated and
reallocated to Participants' Accounts before any Employer or any Employee
contributions may be made to the Plan for that Limitation Year. Excess
amounts may not be distributed to Participants or former Participants. If a
suspense account is in existence at any time during a Limitation Year, it
shall not participate in the allocation of the Trust's investment gains and
losses.
(c) Participation in Certain Other Plans. If in addition to this
Plan, the Participant is covered under another qualified regional prototype
defined contribution plan maintained by the Employer, a welfare benefit
fund, as defined in Section 419(e) of the code maintained by the Employer,
or an individual medical account, as defined in Section 415(1)(2) of the
Code, maintained by the Employer, which provides an Annual Addition during
any Limitation Year, the annual additions which may be credited to a
Participant's account under this Plan for any such Limitation Year shall not
exceed the maximum permissible amount reduced by the Annual Additions
credited to a Participant's Account under the other plans and welfare
benefit funds for the same Limitation Year. If the Annual Additions with
respect to the Participant under other defined contribution plans and
welfare benefit funds maintained by the Employer are less than the maximum
permissible amount and the Employer contribution that would otherwise be
contributed or allocated to the Participant's Account under this Plan would
cause the Annual Additions for the Limitation Year to exceed this
limitation, the amount contributed or allocated shall be reduced so that the
Annual Additions under all such plans and funds for the Limitation Year
shall equal the maximum permissible amount. If the Annual Additions with
respect to the Participant under such other defined contribution plans and
welfare benefit funds in the aggregate are equal to or greater than the
maximum permissible amount, no amount will be contributed or allocated to
the Participant's Account under this Plan for the Limitation Year.
Prior to determining the Participant's actual Compensation for the
Limitation Year, the Employer may determine the maximum permissible amount
for a Participant in the manner described in subsection (b) above. As soon
as is administratively feasible after the end of the Limitation Year, the
maximum permissible amount for the Limitation Year shall be determined on
the basis of the Participant's actual Compensation for the Limitation Year.
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If a Participant's Annual Additions under this Plan and such other plans
would result in an excess amount for a Limitation Year, the excess amount
shall be deemed to consist of the Annual Additions last allocated, except
that Annual Additions attributable to a welfare benefit fund or individual
medical account will be deemed to have been allocated first regardless of
the actual allocation date.
If the excess amount was allocated to a Participant on an allocation date of
this Plan which coincides with an allocation date of another plan, the
excess amount attributed to this Plan will be the product of:
(i) the total excess amount allocated as of such date, times
(ii) the ratio of (I) the Annual Additions allocated to the
Participant for the Limitation Year as of such date under this Plan to
(II) the total Annual Additions allocated to the Participant for the
Limitation Year as of such date under this and all the other qualified
regional prototype defined contribution plans. Any excess amount
attributed to this Plan will be disposed in the manner described in
subsection (b), above
If the Participant is covered under another qualified defined
contribution plan maintained by the Employer which is not a regional
prototype plan, Annual Additions which may be credited to the
Participant's Account under this Plan for any Limitation Year shall be
limited as provided above as though the other plan were a regional
prototype plan unless the Employer specifies other limitations in the
Adoption Agreement.
For purposes hereof, the excess amount is the excess of the
Participant's annual additions for the Limitation Year over the
maximum permissible amount and a regional prototype plan is a plan the
form of which is the subject of a favorable opinion letter from the
Internal Revenue Service.
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If the Employer maintains, or at any time maintained, a qualified
defined benefit plan covering any Participant in this Plan, the sum of
the Participant's defined benefit plan fraction and defined
contribution plan fraction will not exceed 1.0 in any Limitation Year.
The Annual Additions which may be credited to the Participant's
account under this Plan for any Limitation Year shall be limited in
the manner specified in the Adoption Agreement.
(d) Combined Plan Limitation. In the event that a Participant in this
Plan participates in a defined benefit plan (as defined in the applicable
sections of the Code) maintained by the Employer, the sum of the "defined
benefit plan fraction" plus the "defined contribution plan fraction" shall
at no time exceed 1.0. The "defined benefit plan fraction" for any year is
a fraction (i) the numerator of which is the projected annual benefit of the
Participant under all the defined benefit plans (whether or not terminated)
maintained by the Employer (determined as of the close of the year), and
(ii) the denominator of which is the lesser of (A) the product of 1.25
multiplied by the dollar limitation determined for the Limitation Year under
Sections 415(b) and (d) of the Code, or (B) the product of 1.4 multiplied by
one hundred (100%) percent of the Participant's average compensation for the
three (3) consecutive Years of Service with the Employer that produces the
highest average, including any adjustments under Section 415(b) of the Code.
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 shall 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 Section 415 for all Limitation Years beginning
before January 1, 1987. The "defined contribution fraction" for any year is
a fraction (i) the numerator of which is the sum of the annual additions to
the Participant's accounts under all defined contribution plans (whether or
not terminated) maintained by the Employer for the current and all prior
Limitation Years, including the annual additions attributable to the
Participant's nondeductible employee contributions to all defined benefit
plans, whether or not terminated, maintained
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by the Employer, and the annual additions attributable to all welfare
benefit funds and individual medical accounts (as defined in Sections 419(e)
and 415(1)(2) of the Code) maintained by the Employer, and (ii) the
denominator of which is the sum of the lesser of the following amounts
determined for the current year and for all prior limitation years of
service with the Employer, regardless of whether a defined contribution plan
was maintained by the Employer: (A) the product of 1.25 multiplied by the
dollar limitation determined under Sections 415(b) and (d) of the Code in
effect under Section 415(c)(1)(A) of the Code, or (B) thirty-five (35%)
percent of the Participant's compensation from the Employer for such plan
year. If the Employee was a Participant as of the end of the first day of
the first Limitation Year beginning after December 31, 1986, in one or more
defined contribution plans maintained by the Employer which were in
existence on May 6, 1986, the numerator of this fraction will be adjusted if
the sum of this fraction and the defined benefit fraction would otherwise
exceed 1.0 under the terms of this Plan. Under the adjustment, an amount
equal to the product of (1) the excess of the sum of the fractions over 1.0
times (2) the denominator of this fraction, shall 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
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.
The projected annual benefits under a defined benefit plan is the annual
retirement benefit (adjusted to an actuarially equivalent straight life
annuity if such benefit is expressed in a form other than a straight life
annuity) or qualified joint and survivor annuity) to which the Participant
would be entitled under the terms of the Plan assuming the Participant
continues employment until normal retirement age under the plan (or current
age, if later), and the Participant Is compensation for the current
Limitation Year and all other relevant factors used to determine benefits
under the Plan remain constant for all future Limitation Years.
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(e) Special Transition Rule for Defined Contribution Fraction. At the
election of the Plan Administrator, in applying the provisions of subsection
(d) above with respect to the defined contribution plan fraction for any
year ending after December 31, 1982, the amount taken into account for the
denominator for each Participant for all years ending before January 1, 1983
shall be an amount equal to the product of the amount of the denominator
determined under subsection (d) above for the year ending in 1982,
multiplied by the "transition fraction". The "transition fraction" is a
fraction (i) the numerator of which is the lesser of (A) $51,875 or (B) 1.4
multiplied by twenty-five (25%) percent of the Participant's compensation
for the year ending in 1981, and (ii) the denominator of which is the lesser
of (A) $41,500 or (B) twenty-five (25%) percent of the Participant's
compensation for the year ending in 1981.
(f) Special Transition Rule for Excess Benefits. Provided that the
Plan satisfied the requirements of Section 415 of the Code for the last Plan
Year beginning before January 1, 1983, an amount shall be subtracted from
the numerator of the defined contribution plan fraction (not exceeding such
numerator) so that the sum of the defined benefit plan fraction and the
defined contribution fraction computed in accordance with Section 415(e)(1)
of the Code (as amended by the Tax Equity and Fiscal Responsibility Act of
1982) does not exceed 1.0 for such year, in accordance with regulations
issued by the Secretary of the Treasury pursuant to the applicable
provisions of the Code.
(g) Employer. For purposes of this Section, employer shall mean the
Employer that adopts this Plan and all members of a group of employers which
constitutes a controlled group of corporations or trades or businesses under
common control (as defined in Sections 414(b) and (c) of the Code, as
modified by Section 415(h) of the Code), or an affiliated service group (as
defined in Section 414(m) of the Code) of which the adopting employer is
part and any other entity required to be aggregated with the Employer under
Section 414(o) of the Code and the regulations issued thereunder.
(h) Compensation. For purposes of this Section as elected in the
Adoption Agreement by the Employer, Compensation shall mean all of a
Participant's:
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(i) Wages, Tips and Other Compensation Box on Form W-2. Wages as
defined in Section 3401(a) and all other payments of compensation to
an employee by the employer (in the course of the employer's trade or
business) for which the employer is required to furnish the employee a
written statement under Sections 6041(d) and 6051(a)(3) of the Code.
Compensation must be determined without regard to any rules under
Section 3401(a) that limit the remuneration included in wages based on
the nature or location of the employment or the services rendered
(such as the exception for agricultural labor in Section 3401(a)(2) of
the Code).
(ii) Section 3401(a) Wages. Wages as defined in section 3401(a)
of the Code for the purposes of income tax withholding at the source
but determined without regard to any rules that limit the remuneration
included in wages based on the nature or location of the employment or
the services performed (such as the exception for agricultural labor
in section 3401(a)(2) of the Code).
(iii) Section 415 Safe-Harbor Compensation. 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 for the
employer maintaining the Plan to the extent that the amounts are
includible 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, and reimbursements or other expense allowances under a
nonaccountable plan (as described in section 1.62-2(c) of the
Regulations), but excluding:
(I) Employer contributions to a plan of deferred
compensation which are not includible 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;
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(II) Amounts realized from the exercise of a non-qualified
stock option or when restricted stock or property held by the
Employee is no longer subject to a substantial risk of forfeiture
or becomes freely transferable.
(III) Amounts realized from the sale, exchange or other
disposition of stock acquired under an incentive stock option;
and
(IV) 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 contract
described in Section 403(b) of the Code (whether or not the
contributions are actually excludable from the gross income of
the Employee).
For any self-employed individual, Compensation shall mean earned
income. For limitation years beginning after December 31, 1991,
for purposes of applying the limitations of this Article,
Compensation for a Limitation Year is the Compensation actually
paid or made available during such Limitation Year.
Notwithstanding the preceding sentence, Compensation for a
Participant who is permanently and totally disabled (as defined
in section 22(e)(3) of the Code) is the compensation such
Participant would have received for the Limitation Year if the
Participant had been paid at the rate of compensation paid
immediately before becoming permanently and totally disabled;
such imputed compensation for the disabled Participant may be
taken into account only if the Participant is not a Highly
Compensated Employee and contributions made on behalf of such
Participant are nonforfeitable when made.
(i) Short Limitation Year. If the Limitation Year is amended to
a different twelve (12) consecutive month period, the new Limitation
Year must begin within the Limitation Year in which the amendment is
made. If a short Limitation Year is created because of an amendment
changing the Limitation Year to a different twelve (12) consecutive
month period, the maximum annual addition shall not exceed the defined
contribution dollar limitation determined in accordance with Section
415(c)(1)(A) of the Code then in effect multiplied by a fraction, the
numerator of which is the number of months in the short Limitation
Year and the
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denominator of which is twelve (12).
3.2.2 Controlled Businesses. If this plan provides contributions or
benefits for one or more owner-employees who control both the business for which
this plan is established and one or more other trades or businesses, this plan
and the plan established for other trades or businesses must, when looked at as
a single plan, satisfy sections 401(a) and (d) for the employees of this and all
other trades or businesses.
If the plan provides contributions or benefits for one or more owner-employees
who control one or more other trades or businesses, the employees of the other
trades or businesses must be included in a plan which satisfies sections 401(a)
and (d) and which provides contributions and benefits not less favorable than
provided for owner-employees under this plan.
If an individual is covered as an owner-employee under the plans of two or more
trades or businesses which are not controlled And the individual controls a
trade or business, then the contributions or benefits of the employees under the
plan of the trades or businesses which are controlled must be as favorable as
those provided for him under the most favorable plan of the trade or business
which is not controlled.
For purposes of the preceding paragraphs, an owner-employee, or two or more
owner-employees, will be considered to control a trade or business if the owner-
employee, or two or more owner-employees together:
(a) own the entire interest in an unincorporated trade or business, or
(b) in the case of a partnership, own more than 50 percent of either
the capital interest or the profits interest in the partnership.
For purposes of the preceding sentence, an owner-employee, or two or more
owner-employees shall be treated as owning any interest in a partnership
which is owned, directly or indirectly, by a partnership which such owner-
employee, or such two or more owner-employees, are considered to control
within the meaning of the preceding sentence.
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ARTICLE III
FIDUCIARIES
3.3.1 Standard of Conduct. The duties and responsibilities of the Plan
Administrator and the Trustee with respect to the Plan shall be discharged (a)
in a non-discriminatory manner; (b) for the exclusive benefit of Participants
and their Beneficiaries; (c) by defraying the reasonable expenses of
administering the Plan; (d) with the care, skill, prudence, and diligence under
the circumstances then prevailing that a prudent man acting in a like capacity
and familiar with such matters would use in the conduct of an enterprise of a
like character and with like aims; (e) by diversifying the investments of the
Plan so as to minimize the risk of large losses, unless under the circumstances
it is clearly prudent not to do so; and (f) in accordance with the documents and
instruments governing the Plan insofar as such documents and instruments are
consistent with the provisions,of the Act.
3.3.2 Individual Fiduciaries. At any time that a group of individuals is
acting as Plan Administrator or Trustee, the number of such persons who shall
act in such capacity from time to time shall be determined by the Employer.
Such persons -- shall be appointed by the Employer and may or may not be
Participants or Employees of the Employer. Any action taken by a group of
individuals acting as either Plan Administrator or Trustee shall be taken at the
direction of a majority of such persons, or, if the number of such persons is
two (2), by unanimous consent.
3.3.3 Disqualification from Service. No person shall be permitted to serve
as a Fiduciary, custodian, counsel, agent or employee of the Plan or as a
consultant to the Plan who has been convicted of any of the criminal offenses
specified in the Act.
3.3.4 Bonding. Except as otherwise permitted by law, each Fiduciary or
person who handles funds or other property or assets of the Plan shall be bonded
in accordance with the requirements of the Act.
3.3.5 Prior Acts. No Fiduciary shall be liable for any acts occurring prior
to the period of time during which the Fiduciary was actually serving in such
capacity with respect to the Plan.
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3.3.6 Insurance and Indemnity. The Employer may purchase or cause the
Trustee to purchase and keep current as an authorized expense liability
insurance for the Plan, its Fiduciaries, and any other person to whom any
financial responsibility with respect to the Plan and Trust is allocated or
delegated, from and against any and all liabilities, costs and expenses incurred
by such persons as a result of any act or omission to act in connection with the
performance of the duties, responsibilities and obligations under the Plan and
under the Act; provided that any such insurance policy purchased with Plan
assets permits subrogation by the Insurer against the Fiduciary in the case of
breach by such Fiduciary. Unless otherwise determined and communicated to
affected parties by the Employer, the Employer shall indemnify and hold harmless
each such person, other than a corporate trustee, for and from any such
liabilities, costs and expenses which are not covered by any such insurance,
except to the extent that any such liabilities, costs or expenses are judicially
determined to be due to the gross negligence or willful misconduct of such
person. No Plan assets may be used for any such indemnification.
3.3.7 Expenses. Expenses incurred by the Plan Administrator or the Trustee
in the administration of the Plan and the Trust, including fees for legal
services rendered, such compensation to the Trustee as may be agreed upon in
writing from time to time between the Employer and the Trustee, and all other
proper charges and expenses of the Plan Administrator or the Trustee and of
their agents and counsel shall be paid by the Employer, or at its election at
any time or from time to time, lay be charged against the assets of the Trust,
but until so paid shall constitute a charge upon the assets of the Trust. The
Trustee shall have the authority to charge the Trust Fund for its compensation
and reasonable expenses unless paid or contested by written notice by the
Employer within sixty (60) days after mailing of the written billing by the
Trustee. All taxes of any and all kinds whatsoever which may be levied or
assessed under existing or future laws upon the assets of the Trust or the
income thereof shall be paid from such assets. Notwithstanding the foregoing,
no compensation shall be paid to any Employee for services rendered under the
Plan and Trust as a Trustee.
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3.3.8 Agents, Accountants and Legal Counsel. The Plan Administrator shall
have authority to employ suitable agents, custodians, investment counsel,
accountants and legal counsel who may, but need not be, legal counsel for the
Employer. The Plan Administrator and the Trustee shall be fully protected in
acting upon the advice of such persons. The Trustee shall at no time be obliged
to institute any legal action or to become a party to any legal action unless
the Trustee has been indemnified to the Trustee's satisfaction for any fees,
costs and expenses to be incurred in connection therewith.
3.3.9 Investment Manager. The Employer may employ as an investment manager
or managers to manage all or any part of the Trust Fund any (i) investment
advisor registered under the Investment Advisors Act of 1940; (ii) bank as
defined in said Act; or (iii) insurance company qualified to perform investment
management services in more than one state. Any investment manager shall have
all powers of the Trustee in the management of such part of the Trust Fund,
including the power to acquire or dispose of assets. In the event an investment
manager is so appointed, the Trustee shall not be liable for the acts or
omissions of such investment manager or be under any obligation to invest or
otherwise manage that part of the Trust Fund which is subject to the management
of the investment manager. The Employer shall notify the Trustee in writing of
any appointment of an investment manager, and shall provide the Trustee with the
investment manager's written acknowledgment that it is a fiduciary with respect
to the Plan.
3.3.10 Finality of Decisions or Acts. Except for the right of a Participant
or Beneficiary to appeal the denial of a claim, any decision or action of the
Plan Administrator or the Trustee made or done in good faith upon any matter
within the scope of authority and discretion of the Plan Administrator or the
Trustee shall be final and binding upon all persons. In the event of judicial
review of actions taken by any Fiduciary within the scope of his duties in
accordance with the terms of the Plan and Trust, such actions shall be upheld
unless determined to have been arbitrary and capricious.
3.3.11 Certain Custodial Accounts and Contracts. The term "Trustee"
as used herein will also include a person holding the assets of a custodial
account, an annuity contract or other contract which is treated as a qualified
trust pursuant to Section 401(f) of the Code and references to the Trust Fund
shall be construed to apply to such custodial account, annuity contract or other
contract.
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ARTICLE IV
PLAN ADMINISTRATOR
3.4.1 Administration of Plan. The Plan Administrator shall be designated by
the Employer from time to time. The primary responsibility of the Plan
Administrator is to administer the Plan for the exclusive benefit of the
Participants and their Beneficiaries, subject to the specific terms of the Plan.
The Plan Administrator shall administer the Plan and shall construe and
determine all questions of interpretation or policy in a manner consistent with
the Plan and the Adoption Agreement. The Plan Administrator may correct any
defect, supply any omission, or reconcile any inconsistency in such manner and
to such extent as he shall deem necessary or advisable to carry out the purpose
of the Plan; provided, however, that any interpretation or construction shall be
done in a nondiscriminatory manner and shall be consistent with the intent that
the Plan shall continue to be a qualified Plan pursuant to the Code, and shall
comply with the terms of the Act. The Plan Administrator shall have all powers
necessary or appropriate to accomplish his duties under the Plan.
(a) The Plan Administrator shall be charged with the duties of the
general administration of the Plan, including but not limited to the
following:
(1) To determine all questions relating to the eligibility of an
Employee to participate in the Plan or to remain a Participant
hereunder.
(2) To compute, certify and direct the Trustee with respect to
the amount and kind of benefits to which any Participant shall be
entitled hereunder.
(3) To authorize and direct the Trustee with respect to all
disbursements from the Trust Fund.
(4) To maintain all the necessary records for the administration
of the Plan.
(5) To interpret the provisions of the Plan and to make and
publish rules and regulations for the Plan as the Plan Administrator
may deem reasonably necessary for the proper and efficient
administration of the Plan and consistent with its terms.
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(6) To select the Insurer to provide any Life Insurance Policy to
be purchased for any Participant hereunder.
(7) To advise the Fiduciary with investment authority regarding
the short and long-term liquidity needs of the Plan in order that the
Fiduciary might direct its investment accordingly.
(8) To advise, counsel and assist any Participant regarding any
rights, benefits or elections available under the Plan.
(9) To instruct the Trustee as to the management, investment and
reinvestment of the Trust Fund unless the investment authority has
been delegated to the Trustee or an Investment Manager.
(b) The Plan Administrator shall also be responsible for preparing
and filing such annual disclosure reports and tax forms as may be required
from time to time by the Secretary of Labor, the Secretary of the Treasury
or other governmental authorities.
(c) Whenever it is determined by the Plan Administrator to be in the
best interest of the Plan and its Participants or Beneficiaries, the Plan
Administrator may request such variances, deferrals, extensions, or
exemptions or make such elections for the Plan as may be available under the
law.
(d) The Plan Administrator shall be responsible for procuring bonding
for all persons dealing with the Plan or its assets as may be required by
law.
(e) In the event this Plan is required to file reports or pay
premiums to the Pension Benefit Guaranty Corporation, the Plan Administrator
shall have the duty to prepare and make such filings, to pay any premiums
required, whether for basic or contingent liability coverage, and shall be
charged with the responsibility of notifying all necessary parties of such
events and under such circumstances as may be required by law.
3.4.2 Disclosure Requirements. Every Participant covered under the Plan
and every Beneficiary receiving benefits under the Plan shall receive from the
Plan Administrator a summary plan description, and such other information as may
be required by law or by the terms of the Plan.
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3.4.3 Information Generally Available. The Plan Administrator shall make
copies of this Plan and Trust, the Adoption Agreement, the summary plan
description, latest annual report, Life Insurance Policies, or other instruments
under which the Plan was established or is operated available for examination by
any Participant or Beneficiary in the principal office of the Plan Administrator
and such other locations as may be necessary to make such information reasonably
accessible to all interested parties. Subject to a reasonable charge to defray
the cost of furnishing such copies, the Plan Administrator shall, upon written
request of any Participant or Beneficiary, furnish a copy of any of the above
documents to the respective party.
3.4.4 Statement of Accrued Benefit. Upon written request to the Plan
Administrator once during any twelve (12) month period, a Participant or
Beneficiary shall be furnished with a written statement, based on the latest
available information, of his then vested accrued benefit and the earliest date
upon which the same will become fully vested and nonforfeitable. The statement
shall also include a notice to the Participant of any benefits which are
forfeitable if the Participant dies before a certain date.
3.4.5 Explanation of Rollover Treatment. The Plan Administrator shall, when
making a distribution eligible for rollover treatment, provide a written
explanation to the recipient of the provisions under which such distribution
will not be subject to tax if transferred to an eligible retirement plan within
sixty (60) days after the date on which the recipient received the distribution
and, if applicable, the provisions of law pertaining to the tax treatment of
lump sum distributions.
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ARTICLE V
TRUSTEE
3.5.1 Acceptance of Trust. The Trustee, by joining in the execution of the
Adoption Agreement to the Plan, agrees to act in accordance with the express
terms and conditions hereof.
3.5.2 Trustee Capacity - Co-Trustees. The Trustee may be a bank, trust
company or other corporation possessing trust powers under applicable state or
federal law or one or more individuals or any combination thereof. When there
are two or more Trustees, they may allocate specific responsibilities,
obligations or duties among themselves by their written agreement. An executed
copy of such written agreement shall be delivered to and retained by the Plan
Administrator.
3.5.3 Resignation, Removal, and Successors. Any Trustee may resign at any
time by delivering to the Employer a written notice of resignation to take
effect at a date specified therein, which shall not be less than thirty (30)
days after the delivery thereof; the Employer may waive such notice. The
Trustee may be removed by the Employer with or without cause, by tendering to
the Trustee a written notice of removal to take effect at a date specified
therein. Upon such removal or resignation of a Trustee, the Employer shall
either appoint a successor Trustee who shall have the same powers and duties as
those conferred upon the resigning or discharged Trustee, or, if a group of
individuals is acting as Trustee, determine that a successor shall not be
appointed and the number of Trustees shall be reduced by one (1).
3.5.4 Consultations. The Trustee shall be entitled to advice of counsel,
which may be counsel for the Plan or the Employer, in any case in which the
Trustee shall deem such advice necessary. The Trustee shall not be liable for
any action taken or omitted in good faith reliance upon the advice of such
counsel. With the exception of those powers and duties specifically allocated
to the Trustee by the express terms of the Plan, it shall not be the
responsibility of the Trustee to interpret the terms of the Plan and the Trustee
may request, and is entitled to receive, guidance and written direction from the
Plan Administrator on any point requiring construction or interpretation of the
Plan documents.
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3.5.5 Rights, Powers and Duties. The rights, powers and duties of the
Trustee shall be as follows:
(a) The Trustee shall be responsible for the safekeeping of the assets
of the Trust Fund in accordance with the provisions of the Plan and any
amendments hereto. The duties of the Trustee under the Plan shall be
determined solely by the express provisions hereof and no other further
duties or responsibilities shall be implied. Subject to the terms of this
Plan, the Trustee shall be fully protected and shall incur no liability in
acting in reliance upon the written instructions or directions of the
Employer, the Plan Administrator, a duly designated investment manager, or
any other named Fiduciary.
(b) The Trustee shall have all powers necessary or convenient for the
orderly and efficient performance of its duties hereunder, including but not
limited to those specified in this Section. The Trustee shall have the
power generally to do all acts, whether or not expressly authorized, which
the Trustee in the exercise of its fiduciary responsibility may deem
necessary or desirable for the protection of the Trust Fund and the assets
thereof.
(c) The Trustee shall have the power to collect and receive any and all
monies and other property due hereunder and to give full discharge and
release therefore; to settle, compromise or submit to arbitration any
claims, debts or damages due to or owing to or from the Trust Fund; to
commence or defend suits or legal proceedings wherever, in the Trustee's
judgment, any interest of the Trust Fund requires it; and to represent the
Trust Fund in all suits or legal proceedings in any court of law or equity
or before any other body or tribunal.
(d) The Trustee shall cause any Life Insurance Policies or assets of the
Trust Fund to be registered in its name as Trustee and shall be authorized
to exercise any and all ownership rights regarding these assets, subject to
the terms of the Plan.
(e) The Trustee may temporarily hold cash balances and shall be
entitled to deposit any funds received in a bank account in the name of the
Trust Fund in any bank selected by the Trustee, including the banking
department of a corporate Trustee, if any, pending disposition of such funds
in accordance with the Plan. Any such deposit may be made with or without
interest.
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(f) The Trustee shall pay the premiums and other charges due and
payable at any time on any Life Insurance Policies as it may be directed by
the Plan Administrator, provided funds for such payments are then available
in the Trust. The Trustee shall be responsible only for such funds and Life
Insurance Policies as shall actually be received by it as Trustee hereunder,
and shall have no obligation to make payments other than from such funds and
cash values of Life Insurance Policies.
(g) If the whole or any part of the Trust Fund shall become liable for
the payment of any estate, inheritance, income or other tax which the
Trustee shall be required to pay, the Trustee shall have full power and
authority to pay such tax out of any monies or other property in its hands
for the account of the person whose interest hereunder is so liable. Prior
to making any payment, the Trustee may require such releases or other
documents from any lawful taxing authority as it shall deem necessary. The
Trustee shall not be liable for any nonpayment of tax when it distributes an
interest hereunder on instructions from the Plan Administrator.
(h) The Trustee shall keep a full, accurate and detailed record of all
transactions of the Trust which the Employer and the Plan Administrator
shall have the right to examine at any time during the Trustee's regular
business hours. As of the close of each Plan Year, the Trustee shall furnish
the Plan Administrator with a statement of account setting forth all
receipts, disbursements and other transactions effected by the Trustee
during the year. The Plan Administrator shall promptly notify the Trustee
in writing of his approval or disapproval of the account. The Plan
Administrator's failure to disapprove the account within sixty (60) days
after receipt shall be considered an approval. Except as otherwise required
by law, the approval by the Plan Administrator shall be binding as to all
matters embraced in any statement to the same extent as if the account of
the Trustee had been settled by judgment or decree of a court of competent
jurisdiction under which the Trustee, Employer and all persons having or
claiming any interest in the Trust Fund were parties; provided, however,
that the Trustee may have its account judicially settled if it so desires.
(i) The Trustee is hereby authorized to execute all necessary receipts
and releases to any parties concerned.
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(j) If, at any time, as the result of the death of the Participant
there shall be a dispute as to the person to whom payment or delivery of
monies or property should be made by the Trustee, or regarding any action to
be taken by the Trustee, the Trustee may postpone such payment, delivery or
action, retaining the funds or property involved, until such dispute shall
have been resolved in a court of competent jurisdiction or the Trustee shall
have been indemnified to its satisfaction or until it has received written
direction from the Plan Administrator.
(k) Anything in this instrument to the contrary notwithstanding, the
Trustee shall have no duty or responsibility with respect to the
determination of matters pertaining to the eligibility of any Employee to
become or remain a Participant hereunder, the amount of benefit to which any
Participant or Beneficiary shall be entitled hereunder, or the size and type
of any Life Insurance Policy to be purchased from any Insurer for any
Participant hereunder; all such responsibilities being vested in the Plan
Administrator.
3.5.6 Trustee Indemnification. The Employer shall indemnify and hold
harmless the Trustee for and from the assertion or occurrence of any liability
to a Participant or Beneficiary for any action taken or omitted by the Trustee
pursuant to any written direction to the Trustee from the Employer or the Plan
Administrator. Such indemnification obligation of the Employer shall not be
applicable to the extent that any such liability is covered by insurance.
3.5.7 Changes in Trustee Authority. If a successor Trustee is
appointed, neither an Insurer nor any other person who has previously had
dealings with the Trustee shall be chargeable with knowledge of such appointment
or such change until furnished with notice thereof. Until such notice, the
Insurer and any other such party shall be fully protected in relying on any
action taken or signature presented which would have been proper in accordance
with that information previously received.
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ARTICLE VI
TRUST ASSETS
3.6.1 Trustee Exclusive Owner. All assets held by the Trustee, whether
in the Trust Fund or Segregated Funds, shall be owned exclusively by the Trustee
and no Participant or Beneficiary shall have any individual ownership thereof.
Participants and their Beneficiaries shall share in the assets of the Trust, its
net earnings, profits and losses, only as provided in this Plan.
3.6.2 Investments. The Trustee shall invest and reinvest the Trust
Fund without distinction between income or principal in one or more of the
following ways as the Trustee shall from time to time determine:
(a) The Trustee may invest the Trust Fund or any portion thereof in
obligations issued or guaranteed by the United States of America or of any
instrumentalities thereof, or in other bonds, notes, debentures, mortgages,
preferred or common stocks, options to buy or sell stocks or other
securities, mutual fund shares, limited partnership interests, commodities,
real estate or any interest therein, or in such other property, real or
personal, as the Trustee shall determine.
(b) The Trustee may cause the Trust Fund or any portion thereof to be
invested in a common trust fund established and maintained by a national or
other bank for the collective investment of fiduciary funds even though the
bank is acting as the Trustee or Investment Manager, providing such common
trust fund is a qualified trust under the applicable section of the Code, or
corresponding provisions of future federal internal revenue laws and is
exempt from income tax under the applicable section of the Code. In the
event any assets of the Trust Fund are invested in such a common trust fund,
the Declaration of Trust creating such common trust fund, as it may be
amended from time to time, shall be incorporated into this Plan by reference
and made a part hereof.
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(c) The Trustee may deposit any portion of the Trust Fund in savings
accounts in federally insured banks or savings and loan associations or
invest in certificates of deposit issued by any such bank or savings and
loan association. The Trustee may, without liability for interest, retain
any portion of the Trust Fund in cash balances pending investment thereof or
payment of expenses.
(d) The Trustee may buy and sell put and call options, covered or
uncovered, engage in spreads, straddles, ratio writing and other forms of
options trading, including sales of options against convertible bonds, and
sales of Standard & Poor futures contracts, and trade in and maintain a
brokerage account on a cash or margin basis.
(e) The Trustee may invest any portion or all of the assets of the
Trust Fund which are attributable to the vested and nonforfeitable interest
in the Accounts of a Participant in the purchase of group or individual
Life, Insurance Policies issued on the life of and for the benefit of the
Participant with the consent of the Participant, subject to the following
conditions:
(i) The aggregate premiums paid for ordinary whole Life
Insurance Policies with both nondecreasing death benefits and
nonincreasing premiums on the life of any Participant shall not at any
time exceed forty- nine percent (49%) of the aggregate amount of
Employer contributions which have been allocated to the Accounts of
such Participant.
(ii) The aggregate Premiums paid for Life Insurance Policies on
the life of any Participant which are either term, universal or any
other contracts which are not ordinary whole life Policies shall not
at any time exceed twenty-five percent (25%) of the aggregate amount
of Employer contributions which have been allocated to the Accounts of
such Participant.
(iii) The sum of one-half of the aggregate premiums for ordinary
whole Life Insurance Policies and all premiums for other Life
Insurance Policies shall not at any time exceed twenty-five percent
(25%) of the aggregate amount of Employer contributions which have
been allocated to the Accounts of such Participant.
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(iv) If the Plan permits in-service distributions to a
Participant prior to his Normal Retirement Date in accordance with
Section 2.5.6(a) or (b) and the Plan does not take into account
contributions to provide benefits under Social Security in the
allocation of contributions by the Employer, the amount which may be
distributed to the Participant may be applied to the purchase of Life
Insurance Policies.
(f) The Trustee may invest the Trust Fund or any portion thereof to
acquire or hold Qualifying Employer Securities or Real Property, provided
that the portion so invested shall not exceed the amount allowed as an
investment under the Act.
3.6.3 Administration of Trust Assets. Subject to the limitations
herein expressly set forth, the Trustee shall have the following powers and
authority in connection with the administration of the assets of the Trust:
(a) To hold and administer all contributions made by the Employer to
the Trust Fund and all income or other property derived therefrom as a
single Trust Fund, except as otherwise provided in the Plan.
(b) To manage, control, sell, convey, exchange, petition, divide,
subdivide, improve, repair, grant options, sell upon deferred payments,
lease without limit as determined for any purpose, compromise, arbitrate or
otherwise settle claims in favor of or against the Trust Fund, institute,
compromise and defend actions and proceedings, and to take any other action
necessary or desirable in connection with the administration of the Trust
Fund.
(c) To vote any stock, bonds, or other securities of any corporation
or other issuer; otherwise consent to or request any action on the part of
any such corporation or other issuer; to give general or special proxies or
powers of attorney, with or without power of substitution; to participate in
any reorganization, recapitalization, consolidation, merger or similar
transaction with respect to such securities; to deposit such stocks or other
securities in any voting trusts, or with any protective or like committee,
or
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with the trustee, or with the depositories designated thereby; to exercise
any subscription rights and conversion privileges or other options and to
make any payments incidental thereto; and generally to do all such acts,
execute all such instruments, take all such proceedings and exercise all
such rights, powers and privileges with respect to the stock or other
securities or property constituting the Trust Fund as if the Trustee were
the absolute owner thereof.
(d) To apply for and procure, at the election of any Participant, Life
Insurance Policies on the life of the Participant; to exercise whatever
rights and privileges may be granted to the Trustee under such Policies, and
to cash in, receive and collect such Policies or the proceeds therefrom as
and when entitled to do so under the provisions thereof;
(e) 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;
(f) To register any investment held in the Trust in the Trustee's 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;
(g) To borrow money for the purposes of the Plan in such amounts and
upon such terms and conditions as the Trustee deems appropriate;
(h) To commingle the assets of the Trust Fund with the assets of other
similar trusts which are exempt from income tax, whether sponsored by the
Employer, an affiliate of the Employer or an unrelated employer, provided
that the books and records of the Trustee shall at all times show the
portion of the commingled assets which are part of the Trust; and
(i) To do all acts whether or not expressly authorized which the
Trustee may deem necessary or proper for the protection of the property held
hereunder.
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3.6.4 Segregated Funds. Unless otherwise determined by the Trustee to
be prudent, the Trustee shall invest and reinvest each Segregated Fund without
distinction between income or principal in one or more appropriately identified
interest-bearing accounts or certificates of deposit in the name of the Trustee
and subject solely to the dominion of the Trustee in a banking institution
(which may or may not be the Trustee, if the Trustee is a banking institution)
or savings and loan association.
Any such account or certificate shall bear interest at a rate not less
than the rate of interest currently being paid upon regular savings accounts by
that banking corporation principally situated in the community in which the
Employer has its principal business location, which has capital, surplus and
undivided profits exceeding those of any other bank so situated. Such accounts
shall be held for the benefit of the Participant for whom such Segregated Fund
is established in accordance with the terms of the Plan and the Segregated
Account of the Participant shall be credited with any interest earned in
connection with such accounts. If the Trustee determines that an alternative
investment is appropriate, the Trustee may invest the Segregated Fund in any
manner permitted with respect to the Trust Fund and such Segregated Fund shall
be credited with the net income or loss or net appreciation or depreciation in
value of such investments. No Segregated Fund shall share in any Employer
contributions or forfeitures, any net income or loss from, or net appreciation
or depreciation in value of, any investments of the Trust Fund, or any
allocation for which provision is made in this Plan which is not specifically
attributable to the Segregated Fund.
3.6.5 Investment Control Option. If the Employer elects in the
Adoption Agreement to permit Participants to direct the investment of their
Accounts, each Participant may elect to have transferred to a Segregated Fund
and exercise investment control by appropriate direction to the Trustee with
respect to funds in the Trust Fund which do not exceed the balances in his
Accounts. To the extent that the balance in the Participant's Account with
respect to which a transfer is to be made includes his share of an Employer
contribution which has not been received
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by the Trustee, such transfer shall not be made until such contribution is
received by the Trustee. Funds so transferred to a Segregated Fund on behalf of
the Participant shall be thereafter invested by the Trustee in such bonds,
notes, debentures, commodities, mortgages, equipment trust certificates,
investment trust certificates, preferred or common stocks, partnership
interests, life insurance policies, including universal life insurance policies,
or in such other property, real or personal (other than collectibles), wherever
situated, as the Participant shall direct from time to time in writing;
provided, however, that the Participant may not direct the Trustee to make loans
to himself, nor to make loans to the Employer; and provided further that the
Trustee may limit the investment alternatives available to the Participant in a
uniform and nondiscriminatory manner but taking into account whether the
interest of the Participant is fully vested and nonforfeitable. Any such
election shall be made by the Participant giving notice thereof to the Trustee
as the Trustee deems necessary and such notice shall specify the amount of such
funds to be transferred and the Account from which the transfer is to be made.
Any such election shall be at the absolute discretion of the individual
Participant and shall be binding upon the Trustee. Upon any such election being
made, the amount of such funds to be transferred shall be deducted from his
Account as appropriate and added to a Controlled Account of the Participant. All
dividends and interest thereafter received with respect to such transferred
funds, as well as any appreciation or depreciation in his investments, shall be
added to or deducted from his Controlled Account.
If a Participant wishes to make such an election to transfer funds from the
Trust Fund to a Segregated Fund as of a date other than a Valuation Date, the
Trustee may defer such transfer until the next succeeding Valuation Date or, in
the Trustee's discretion, make such transfer, provided that the Trustee
determines that the nature of the assets in the Trust Fund is such that it is
feasible and practical to make, as of the date of such transfer, the adjustments
to Participants' Accounts for which provision is made in the Plan, as if such
date is a Valuation Date.
The Trustee shall not have any investment responsibility with respect to a
Participant's Segregated Fund. In the event that a Participant elects to have
any such funds transferred to a Segregated Fund and invested in particular
securities or assets pursuant to this Section, the Trustee shall not be liable
for any loss or damage resulting from the investment decision of the
Participant. As of any Valuation Date, the Participant may elect to have all or
any portion of any cash contained in his Segregated Fund transferred back to the
Trust Fund, in which case
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such cash shall be invested by the Trustee together with other assets held in
the Trust Fund. Any such election shall be made by giving notice thereof to the
Trustee as the Trustee deems necessary, and the notice shall specify the amount
of cash to be transferred.
As of the said Valuation Date, the amount of such funds to be so transferred
which is attributable to the balance in the Participant's Controlled Account
shall be deducted from such Account and added to the appropriate Account of the
Participant.
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ARTICLE VII
LOANS
3.7.1 Authorization. If the Employer elects in the Adoption Agreement
to permit loans to Participants or Beneficiaries, the Trustee shall establish a
participant loan program in compliance with Labor Regulation section 2550.408b.
The terms of such participant loan program shall be in writing and shall
constitute part of the Plan. Such terms shall include:
(a) The identity of the person or positions authorized to administer
the participant loan program;
(b) A procedure for applying for loans;
(c) The basis on which loans will be approved or denied;
(d) Limitations (if any) on the types and amount of loans offered;
(e) The procedure under the program for determining a reasonable rate
of interest;
(f) The types of collateral which may secure a participant loan; and
(g) The events constituting default and the steps that will be taken
to preserve plan assets in the event of default.
3.7.2 Spousal Consent. A Participant must obtain the written consent
of his spouse, if any, to the use of the Participant's interest in the Plan as
security for the loan within ninety (90) days before the date on which the loan
is to be so secured. A new consent must be obtained whenever the amount of the
loan is increased or if the loan is renegotiated, extended, renewed or otherwise
revised. The form of the consent must acknowledge the effect of such consent and
be witnessed by a Plan representative or a notary public but shall be deemed to
meet any such requirements relating to the consent of any subsequent spouse.
Such consent shall thereafter be binding with respect to the consenting spouse
or any subsequent spouse with respect to that loan.
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If a valid spousal consent has been obtained, then notwithstanding any other
provision of the Plan, the portion of the Participant's vested Account balance
used as a security interest held by the Plan by reason of a loan outstanding to
the Participant shall be taken into account for purposes of determining the
amount of the Account balance payable at the time of death or distribution but
only if the reduction is used as repayment of the loan. If less than the entire
amount of the Participant's vested Account balance (determined without regard to
the preceding sentence) is payable to the surviving spouse, the Account balance
shall be adjusted by first reducing the vested Account balance by the amount of
the security used as repayment of the loan and then determining the benefit
payable to the surviving spouse.
3.7.3 Limitations. Except to the extent provided in the participant
loan program, in no event shall the amount loaned to any Participant or
Beneficiary exceed the lesser of (a) fifty thousand dollars ($50,000.00)
(reduced by the excess, if any, of the highest outstanding balance of loans from
the Plan) during the one year period ending on the day before the date on which
the loan was made over the outstanding balance of loans from the Plan on the
date on which such loan was made) or (b) one-half of the sum of the vested and
nonforfeitable interest in his Accounts, determined as of the Valuation Date
coinciding with or immediately preceding such loan. For the purposes hereof, all
loans from all plans of the Employer and other members of a group of employers
described in Sections 414(b), (c), (m) and (o) of the Code shall be aggregated.
All loans must be adequately secured and bear a reasonable interest rate. No
Participant loan shall exceed the present value of the Participant's vested
Account balance. In the event of a default, foreclosure on the note evidencing
the loan and attachment of the security shall not occur until a distributable
event occurs.
3.7.4 Availability. Loans, if any, must be available to all
Participants and Beneficiaries without regard to any individual's race, color,
religion, sex, age or national origin. Loans shall be made available to all
Participants and Beneficiaries and loans shall not be made available to Highly
Compensated Employees in an amount greater than the amount made available to
other employees.
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3.7.5 Prohibitions. A loan shall not be made to a five (5%) percent
or greater shareholder-employee of an S corporation, an owner of more than ten
(10%) percent of either the capital interest or the profits interest of an
unincorporated Employer, a family member (as defined in section 267(c)(4) of the
Code) of such persons, or a corporation controlled by such persons through the
ownership, directly or indirectly, of fifty (50%) percent or more of the total
voting power or value of all shares of all classes of stock of the corporation,
unless an exemption for the loan is obtained pursuant to section 408 of the Act.
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ARTICLE VIII
BENEFICIARIES
3.8.1 Designation of Beneficiaries. Each Participant shall have the
right to designate a Beneficiary or Beneficiaries and contingent or successive
Beneficiaries to receive any benefits provided by this Plan which become payable
upon the Participant's death. The Beneficiaries may be changed at any time or
times by the filing of a new designation with the Plan Administrator, and the
most recent designation shall govern. Notwithstanding the foregoing and subject
to the provisions of Section 2.5.2(e)(3), the designated Beneficiary shall be
the surviving spouse of the Participant, unless such surviving spouse consents
in writing to an alternate designation and the terms of such consent acknowledge
the effect of such alternate designation and the consent is witnessed by a
representative of the Plan or by a notary public. A spouse may not revoke the
consent without the approval of the Participant. The designation of a
Beneficiary other than the spouse of the Participant or a form of benefits with
the consent of such spouse may not be changed without the consent of such spouse
and any consent must acknowledge the specific non-spouse Beneficiary, including
any class of Beneficiaries or any contingent Beneficiaries.
3.8.2 Absence or Death of Beneficiaries. If a Participant dies
without having a beneficiary designation then in force, or if all of the
Beneficiaries designated by a Participant predecease him, his Beneficiary shall
be his surviving spouse, or if none, his surviving children, equally, or if
none, such other heirs or the executor or administrator of his estate as the
Plan Administrator shall select.
If a Participant dies survived by Beneficiaries designated by him and if all
such surviving Beneficiaries thereafter die before complete distribution of such
deceased Participant's interest, the estate of the last of such designated
Beneficiaries to survive shall be deemed to be the Beneficiary of the
undistributed portion of such interest.
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3.8.3 Surviving Spouse Election. If the Plan is designated in the
Adoption Agreement as a Cash or Deferred Profit Sharing Plan or a Profit Sharing
Plan and the Employer does not elect a life annuity form of distribution in the
Adoption Agreement, a surviving spouse, who has not consented to an alternate
designation under Section 3.8.1, above, may elect to have distribution of the
Participant's vested Account balance commence within the 90-day period following
the date of the Participant's death. The Account balance shall be adjusted for
gains or losses occurring after the Participant's death in accordance with the
provisions of the Plan governing the adjustment of account balances for other
types of distributions.
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ARTICLE IX
CLAIMS
3.9.1 Claim Procedure. Any Participant or Beneficiary who is entitled
to a payment of a benefit for which provision is made in this Plan shall file a
written claim with the Plan Administrator on such forms as shall be furnished to
him by the Plan Administrator and shall furnish such evidence of entitlement to
benefits as the Plan Administrator may reasonably require. The Plan
Administrator shall notify the Participant or Beneficiary in writing as to the
amount of benefit to which he is entitled, the duration of such benefit, the
time the benefit is to commence and other pertinent information concerning his
benefit. If a claim for benefit is denied by the Plan Administrator, in whole or
in part, the Plan Administrator shall provide adequate notice in writing to the
Participant or Beneficiary whose claim for benefit has been denied within ninety
(90) days after receipt of the claim unless special circumstances require an
extension of time for processing the claim. If such an extension of time for
processing is required, written notice indicating the special circumstances and
the date by which a final decision is expected to be rendered shall be furnished
to the Participant or Beneficiary. In no event shall the period of extension
exceed one hundred eighty (180) days after receipt of the claim. The notice of
denial of the claim shall set forth (a) the specific reason or reasons for the
denial; (b) specific reference to pertinent Plan provisions on which the denial
is based; (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) a statement that any appeal of the denial must
be made by giving to the Plan Administrator, within sixty (60) days after
receipt of the notice of the denial, written notice of such appeal, such notice
to include a full description of the pertinent issues and basis of the claim.
The Participant or Beneficiary (or his duly authorized representative) may
review pertinent documents and submit issues and comments in writing to the Plan
Administrator. If the Participant or Beneficiary fails to appeal such action to
the Plan Administrator in writing within the prescribed period of time, the Plan
Administrator's adverse determination shall be final, binding and conclusive.
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3.9.2 Appeal. If the Plan Administrator receives from a Participant
or a Beneficiary, within the prescribed period of time, a notice of an appeal of
the denial of a claim for benefit, such notice and all relevant materials shall
immediately be submitted to the Employer. The Employer may hold a hearing or
otherwise ascertain such facts as it deems necessary and shall render a decision
which shall be binding upon both parties. The decision of the Employer shall be
made within sixty (60) days after the receipt by the Plan Administrator of the
notice of appeal, unless special circumstances require an extension of time for
processing, in which case a decision of the Employer shall be rendered as soon
as possible but not later than one hundred twenty (120) days after receipt of
the request for review. If such an extension of time is required, written notice
of the extension shall be furnished to the claimant prior to the commencement of
the extension. The decision of the Employer shall be in writing, 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 and shall be promptly furnished to the
claimant.
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ARTICLE X
AMENDMENT AND TERMINATION
3.10.1 Right to Amend.
(a) The Employer may at any time or times amend the Plan and the
provisions of the Adoption Agreement, in whole or in part. Subject to
subsection (b), an Employer that amends the Plan shall no longer
participate in this prototype plan and shall be considered to have an
individually designed plan.
(b) The Employer may change the choice of options in the Adoption
Agreement, add overriding language in the Adoption Agreement when such
language is necessary to satisfy Section 415 or 416 of the Code because of
the required aggregation of multiple plans and add certain model amendments
published by the Internal Revenue Service which specifically provide that
their adoption shall not cause the Plan to be treated as individually
designed. An Employer that amends the Plan for any other reason, including
a waiver of the minimum funding requirements under Section 412(d) of the
Code, shall no longer participate in this prototype plan and shall be
considered to have an individually designed plan.
An Employer that has adopted a standardized regional prototype plan may
amend the trust or custodial account document provided such amendment
merely involves the specifications of the names of the Plan, Employer,
trustee or custodian, Plan Administrator or other fiduciaries, the trust
year, or the name of any pooled trust in which the Plan's trust will
participate.
An Employer that has adopted a non-standardized regional prototype plan
will not be considered to have an individually designed plan merely because
the Employer amends administrative provisions of the trust or custodial
account document (such as provisions relating to investments and duties of
trustees) so long as the amended provisions are not in conflict with any
other provision of the Plan and do not cause the Plan to fail to qualify
under Section 401(a) of the Code.
3.10.2 Manner of Amending. Each amendment of this Plan shall be made
by delivery to the Trustee of a copy of the resolution of the Employer which
sets forth such amendment.
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3.10.3 Limitations on Amendments. No amendment shall be made to this
Plan which shall:
(a) Directly or indirectly operate to give the Employer any interest
whatsoever in the assets of the Trust or to deprive any Participant or
Beneficiary of his vested and nonforfeitable interest in the assets of the
Trust as then constituted, or cause any part of the income or corpus of the
Trust to be used for, or diverted to purposes other than the exclusive
benefit of Employees or their Beneficiaries;
(b) Increase the duties or liabilities of the Trustee without the
Trustee's prior written consent;
(c) Change the vesting schedule under the Plan if the nonforfeitable
percentage of the accrued benefit derived from Employer contributions
(determined as of the later of the date such amendment is adopted or the
date such amendment becomes effective) of any Participant is less than such
forfeitable percentage computed without regard to such amendment; or
(d) Reduce the accrued benefit of the Participant within the meaning
of Section 411(d)(6) of the Code, except to the extent permitted under
Section 412(c)(8) of the Code. An 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.
If a Plan amendment changes the vesting schedule or the Plan is amended in
any way that directly or indirectly affects the computation of the
Participant's nonforfeitable percentage or if the Plan is deemed amended by
an automatic change to or from a top-heavy vesting schedule, each
Participant who has completed three (3) or, in the case of Participants who
do not have at least one (1) Hour of Service in any Plan Year beginning
after 1988, five (5) or more Years of Service may elect within a reasonable
period after the adoption of such amendment to have his nonforfeitable
percentage computed without regard to such amendment or change. The period
during which the election may be made shall commence with the date the
amendment is adopted or deemed to be made and shall end on the latest of
sixty (60) days after:
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(i) the amendment is adopted;
(ii) the amendment becomes effective; or
(iii) the Participant is issued written notice of the amendment
by the Employer or Plan Administrator.
3.10.4 Voluntary Termination. The Employer may terminate the Plan at
any time by delivering to the Trustee an instrument in writing which designates
such termination. Following termination of the Plan, the Trust will continue
until the Distributable Benefit of each Participant has been distributed.
3.10.5 Involuntary Termination. The Plan shall terminate if (a) the
Employer is dissolved or adjudicated bankrupt or insolvent in appropriate
proceedings, or if a general assignment is made by the Employer for the benefit
of creditors, or (b) the Employer loses its identity by consolidation or merger
into one or more corporations or organizations, unless within ninety (90) days
after such consolidation or merger, such corporations or organizations elect to
continue the Plan.
3.10.6 Withdrawal By Employer. The Employer may withdraw from
participation under the Plan without terminating the Trust upon making a
transfer of the Trust assets to another Plan which shall be deemed to constitute
an amendment in its entirety of the Trust.
3.10.7 Powers Pending Final Distribution. Until final distribution of
the assets of the Trust, the Plan Administrator and Trustee shall continue to
have all the powers provided under this Plan as are necessary for the orderly
administration, liquidation and distribution of the assets of the Trust.
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3.10.8 Delegation to Sponsor. The Employer expressly delegates
authority to the Plan Sponsor the right to amend any part of the Plan on its
behalf to the extent necessary to preserve the qualified status of the Plan. For
purposes of amendments by the Plan Sponsor, the Mass Submitter shall be
recognized as the agent of the Plan Sponsor. If the Plan Sponsor does not adopt
the amendments made by the Mass Submitter, the Plan shall no longer be identical
to or a minor modifier of the mass submitter plan. The Plan Sponsor shall submit
a copy of the amendment to each Employer who has adopted the Plan after first
having received a ruling or favorable determination from the Internal Revenue
Service that the Plan as amended satisfies the applicable requirements of the
Code. The Employer may revoke the authority of the Plan Sponsor to amend the
Plan on its behalf by written notice to the Plan Sponsor of such revocation.
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ARTICLE XI
PORTABILITY
3.11.1 Continuance by Successor. In the event of the dissolution,
consolidation or merger of the Employer, or the sale by the Employer of its
assets, the resulting successor person or persons, firm or corporations may
continue this Plan by (a) adopting the Plan by appropriate resolution; (b)
appointing a new Trustee as though the Trustee (including all members of a group
of individuals acting as Trustee) had resigned; and (c) executing a proper
agreement with the new Trustee. In such event, each Participant in this Plan
shall have an interest in the Plan after the dissolution, consolidation, merger,
or sale of assets, at least equal to the interest which he had in the Plan
immediately before the dissolution, consolidation, merger or sale of assets. Any
Participants who do not accept a position with such successor within a
reasonable time shall be deemed to be terminated. If, within ninety (90) days
from the effective date of such dissolution, consolidation, merger, or sale of
assets, such successor does not adopt this Plan, as provided herein, the Plan
shall automatically be terminated and deemed to be an involuntary termination.
3.11.2 Merger With Other Plan. In the event of the merger or
consolidation with, or transfer of assets or liabilities to, any other deferred
compensation plan and trust, each Participant shall have an interest in such
other plan which is equal to or greater than the interest which he had in this
Plan immediately before such merger, consolidation or transfer, and if such
other plan thereafter terminates, each Participant shall be entitled to a
Distributable Benefit which is equal to or greater than the Distributable
Benefit to which he would have been entitled immediately before such merger,
consolidation or transfer if this Plan had then been terminated.
3.11.3 Transfer From Other Plans. The Employer may cause all or any
of the assets held in connection with any other plan or trust which is
maintained by the Employer for the benefit of its employees and satisfies the
applicable requirements of the Code relating to qualified plans and trusts to be
transferred to the Trustee, whether such transfer is made pursuant to a merger
or consolidation of this Plan with such other plan or trust or for any other
allowable purpose. In addition, the Employer, by appropriate election in the
Adoption Agreement, may permit
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rollover to the Trustee of assets held for the benefit of an Employee in a
conduit Individual Retirement Account, a terminated plan of the Employer, or any
other plan or trust which is maintained by some other employer for the benefit
of its employees and satisfies the applicable requirements of the Code relating
to qualified plans and trusts. Any such assets so transferred to the Trustee
shall be accompanied by written instructions from the employer, or the trustee,
custodian or individual holding such assets, setting forth the name of each
Employee for whose benefit such assets have been transferred and showing
separately the respective contributions by the employer and by the Employee and
the current value of the assets attributable thereto. Upon receipt by the
Trustee of such assets, the Trustee shall place such assets in a Segregated Fund
for the Participant and the Employee shall be deemed to be one hundred percent
(100%) vested and have a nonforfeitable interest in any such assets.
Notwithstanding any provisions herein to the contrary, unless the Plan provides
a life annuity distribution option, the Plan shall not be a direct or indirect
transferee of a defined benefit pension plan, money purchase pension plan,
target benefit pension plan, stock bonus or profit sharing plan which is subject
to the survivor annuity requirements of Section 401(a)(11) and Section 417 of
the Code.
3.11.4 Transfer to Other Plans. The Trustee, upon written direction
by the Employer, shall transfer some or all of the assets held under the Trust
to another plan or trust of the Employer meeting the requirements of the Code
relating to qualified plans and trusts, whether such transfer is made pursuant
to a merger or consolidation of this Plan with such other plan or trust or for
any other allowable purpose. In addition, upon the termination of employment of
any Participant and receipt by the Plan Administrator of a request in writing,
the Participant may request that any distribution from the Trust to which he is
entitled shall be transferred to an Individual Retirement Account, an Individual
Retirement Annuity, or any other plan or trust which is maintained by some other
employer for the benefit of its employees and satisfies the applicable
requirements of the Code relating to qualified plans and trusts. Upon receipt of
any such written request, the Plan Administrator shall cause the Trustee to
transfer the assets so directed and, as appropriate, shall direct the Insurer to
transfer to the new trustee any applicable insurance policies issued by it.
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ARTICLE XII
MISCELLANEOUS
3.12.1 No Reversion to Employer. Except as specifically provided in
the Plan, no part of the corpus or income of the Trust shall revert to the
Employer or be used for, or diverted to purposes other than for the exclusive
benefit of Participants and their Beneficiaries.
3.12.2 Employer Actions. Any action by the Employer pursuant to the
provisions of the Plan shall be evidenced by appropriate resolution or by
written instrument executed by any person authorized by the Employer to take
such action.
3.12.3 Execution of Receipts and Releases. Any payment to any person
eligible to receive benefits under this Plan, in accordance with the provisions
of the Plan, shall, to the extent thereof, be in full satisfaction of all claims
hereunder. The Plan Administrator may require such person, as a condition
precedent to such payment, to execute a receipt and release therefore in such
form as he shall determine.
3.12.4 Rights of Participants Limited. Neither the creation of this
Plan and Trust nor anything contained in this Plan or the Adoption Agreement
shall be construed as giving any Participant, Beneficiary or Employee any equity
or other interest in the assets, business or affairs of the Employer, or the
right to complain about any action taken by or about any policy adopted or
pursued by, the Employer, or as giving any Employee the right to be retained in
the service of the Employer; and all Employees shall remain subject to discharge
to the same extent as if the Plan had never been executed. Prior to the time
that distributions are made in conformity with the provisions of the Plan,
neither the Participants, nor their spouses, Beneficiaries, heirs-at-law, or
legal representatives shall receive or be entitled to receive cash or any other
thing of current exchangeable value, from either the Employer or the Trustee as
a result of the Plan or the Trust.
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3.12.5 Persons Dealing With Trustee Protected. No person dealing with
the Trustee shall be required or entitled to see to the application of any money
paid or property delivered to the Trustee, or determine whether or not the
Trustee is acting pursuant to the authorities granted to the Trustee hereunder
or to authorizations or directions herein required. The certificate of the
Trustee that the Trustee is acting in accordance with the Plan shall protect any
person relying thereon.
3.12.6 Protection of the Insurer. An Insurer shall not be responsible
for the validity of the Plan or Trust and shall have no responsibility for
action taken or not taken by the Trustee, for determining the propriety of
accepting premium payments or other contributions, for making payments in
accordance with the direction of the Trustee, or for the application of such
payments. The Insurer shall be fully protected in dealing with any
representative of the Employer or any one of a group of individuals acting as
Trustee. Until written notice of a change of Trustee has been received by an
Insurer at its home office, the Insurer shall be fully protected in dealing with
any party acting as Trustee according to the latest information received by the
Insurer at its home office.
3.12.7 No Responsibility for Act of Insurer. Neither the Employer,
the Plan Administrator nor the Trustee shall be responsible for any of the
following, nor shall they be liable for instituting action in connection with:
(a) The validity of policies or policy provisions;
(b) Failure or refusal by the Insurer to provide benefits under a
policy;
(c) An act by a person which may render a policy invalid or
unenforceable; or
(d) Inability to perform or delay in performing an act, which
inability or delay is occasioned by a provision of a policy or a
restriction imposed by the Insurer.
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3.12.8 Inalienability. The right of any Participant or his
Beneficiary in any distribution hereunder or to any separate Account shall not
be subject to alienation, assignment or transfer, voluntarily or involuntarily,
by operation of law or otherwise, except as may be expressly permitted herein.
No Participant shall assign, transfer, or dispose of such right nor shall any
such right be subjected to attachment, execution, garnishment, sequestration, or
other legal, equitable, or other process. The preceding 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, as defined in
Section 414(p) of the Code, or any domestic relations order entered before
January 1, 1985.
In the event a Participant's benefits are attached by order of any court, the
Plan Administrator may bring an action for a declaratory judgment in a court of
competent jurisdiction to determine the proper recipient of the benefits to be
paid by the Plan. During the pendency of the action, the Plan Administrator
shall cause any benefits payable to be paid to the court for distribution by the
court as it considers appropriate.
3.12.9 Domestic Relations Orders. The Plan Administrator shall adhere
to the terms of any judgment, decree or order (including approval of a property
settlement agreement) which relates to the provision of child support, alimony
payments, or marital property rights to a spouse, former spouse, child or other
dependent of a Participant and is made pursuant to a state domestic relations
law (including a community property law) and which creates or recognizes the
existence of an alternate payee's right to, or assigns to an alternate payee the
right to, receive all or a portion of the benefits payable with respect to a
Participant.
Any such domestic relations order must clearly specify the name and last known
mailing address of the Participant and the name and mailing address of each
alternate payee covered by the order, the amount or percentage of the
Participant's benefit to be paid by the Plan to each such alternate payee, or
the manner in which such amount or percentage is to be determined, the number of
payments or period to which such order applies, and each plan to which such
order applies.
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Any such domestic relations order shall not require the Plan to provide any type
or form of benefit, or any option not otherwise provided under the Plan, to
provide increased benefits determined on the basis of actuarial value) or the
payment of benefits to an alternate payee which are required to be paid to
another alternate payee under another order previously determined to be a
qualified domestic relations order. Notwithstanding the foregoing sentence, a
domestic relations order may require the payment of benefits to an alternate
payee before the Participant has separated from service on or after the date on
which the Participant attains or would have attained the earliest retirement age
under the Plan as if the Participant had retired on the date on which such
payment is to begin under such order (but taking into account only the present
value of the benefits actually accrued and not taking into account the present
value of any Employer subsidy for early retirement) and in any form in which
such benefits may be paid under the Plan to the Participant (other than the form
of a joint and survivor annuity with respect to the alternate payee and his or
her subsequent spouse). The interest rate assumption used in determining the
present value shall be five (5%) percent. For these purposes, the earliest
retirement age under the Plan means the earlier of: (a) the date on which the
Participant is entitled to a distribution under the Plan, or (b) the later of
the date the Participant attains age 50, or the earliest date on which the
Participant could begin receiving benefits under the Plan if the Participant
separated from service.
If the Employer so elects in the Adoption Agreement, distributions may be made
to an alternate payee even though the Participant may not receive a distribution
because he continues to be employed by the Employer.
To the extent provided in the qualified domestic relations order, the former
spouse of a Participant shall be treated as a surviving spouse of such
Participant for purposes of Sections 401(a)(11) and 417 of the Code (and any
spouse of the Participant shall not be treated as a spouse of the Participant
for such purposes) and if married for at least one (1) year, the surviving
former spouse shall be treated as meeting the requirements of Section 417(d) of
the Code.
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The Plan Administrator, shall promptly notify the Participant and each alternate
payee of the receipt of a domestic relations order by the Plan and the Plan's
procedures for determining the qualified status of domestic relations orders.
Within a reasonable period after receipt of a domestic relations order, the Plan
Administrator shall determine whether such order is a qualified domestic
relations order and shall notify the Participant and each alternate payee of
such determination. If the Participant or any affected alternate payee
disagrees with the determinations of the Plan Administrator, the disagreeing
party shall be treated as a claimant and the claims procedure of the Plan shall
be followed. The Plan Administrator may bring an action for a declaratory
judgment in a court of competent jurisdiction to determine the proper recipient
of the benefits to be paid by the Plan.
During any period in which the issue of whether a domestic relations order is a
qualified domestic relations order is being determined (by the Plan
Administrator, by a court of competent jurisdiction or otherwise), the Plan
Administrator shall separately account for the amounts which would have been
payable to the alternate payee during such period if the order had been
determined to be a qualified domestic relations order. If, within the eighteen
(18) month period beginning on the date on which the first payment would be
required to be made under the domestic relations order, the order (or
modification thereof) is determined to be a qualified domestic relations order,
the Plan Administrator shall pay the segregated amounts, including any interest
thereon, to the person or persons entitled thereto. If within such eighteen
(18) month period it is determined that the order is not a qualified domestic
relations order or the issue as to whether such order is a qualified domestic
relations order is not resolved, then the Plan Administrator shall pay the
segregated amounts, including any interest thereon, to the person or persons who
would have been entitled to such amounts if there had been no order. Any
determination that an order is a qualified domestic relations order which is
made after the close of the eighteen (18) month period shall be applied
prospectively only.
3.12.10 Authorization to Withhold Taxes. The Trustee is authorized in
accordance with applicable law to withhold from distribution to any payee such
sums as may be necessary to cover federal and state taxes which may be due with
respect to such distributions.
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3.12.11 Missing Persons. If the-Trustee mails by registered or
certified mail, postage prepaid, to the last knowing address of a Participant or
Beneficiary, a notification that them, Participant or Beneficiary is entitled to
a distribution and if (a) the notification is returned by the post office
because the addressee cannot be located at such address and if neither the
Employer, the Plan Administrator nor the Trustee shall have any knowledge of the
whereabouts of such Participant or Beneficiary within three (3) years from the
date such notification was mailed, or (b) within three (3) years after such
notification was mailed to such Participant or Beneficiary, he does not respond
thereto by informing the Trustee of his whereabouts, the ultimate disposition of
the then undistributed balance of the Distributable Benefit of such Participant
or Beneficiary shall be determined in accordance with the then applicable
Federal laws, rules and regulations. If any portion of the Distributable Benefit
is forfeited because the Participant or Beneficiary cannot be found, such
portion shall be reinstated if a claim is made by the Participant or
Beneficiary.
3.12.12 Notices. Any notice or direction to be given in accordance with the
Plan shall be deemed to have been effectively given if hand delivered to the
recipient or sent by certified mail, return receipt requested, to the recipient
at the recipient's last known address. At any time that a group of individuals
is acting as Trustee, notice to the Trustee may be given by giving notice to any
one or more of such individuals.
3.12.13 Governing Law. The provisions of this Plan shall be construed,
administered and enforced in accordance with the provisions of the Act and, to
the extent applicable, the laws of the state in which the Employer has its
principal place of business. All contributions to the Trust shall be deemed to
take place in such state.
3.12.14 Severability of Provisions. In the event that any provision of this
Plan shall be held to be illegal, invalid or unenforceable for any reason, said
illegality, invalidity or unenforceability shall not affect the remaining
provisions, but shall be fully severable and the Plan shall be construed and
enforced as if said illegal, invalid or unenforceable provisions had never been
inserted herein.
3.12.15 Gender and Number. Whenever appropriate, words used in the singular
shall include the plural, and the masculine gender shall include the feminine
gender.
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3.12.16 Binding Effect. The Plan and Adoption Agreement, and all actions and
decisions hereunder, shall be binding upon the heirs, executors, administrators,
successors and assigns of any and all parties hereto and Participants, present
and future.
3.12.17 Qualification Under Internal Revenue Laws. The Employer intends that
the Trust qualify under the applicable provisions of the Code. Until advised to
the contrary, the Trustee may assume that the Trust is so qualified and is
entitled to tax exemption under the Code. If the Plan of the Employer fails to
attain or retain qualification, the Plan of the Employer shall no longer
participate in this prototype and shall be considered an individually designed
plan.
- 117 -
<PAGE>
MODEL SECTION 401(A)(31) AMENDMENT TO THE
401(K) PROFIT SHARING PLAN AND TRUST
Section 1. This Article applies to distributions made on or after
January 1, 1993. Notwithstanding any provision of the plan to the contrary
that would otherwise limit distributee's election under this Article, a
distributee may elect, at the time and in the portion of an eligible
rollover distribution paid directly to an eligible retirement plan
specified by the distributee in a direct rollover.
Section 2. Definitions.
Section 2.1 Eligible rollover distribution: An eligible rollover
distribution is any distribution of all or any portion of the balance to
the credit of the distributee, except that an eligible rollover
distribution does not include: 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 join live
(or joint life expectancies) of the distributee and the distributee's
designated beneficiary, or for a specified period of ten years or more; any
distribution to the extent such distribution is required under section
401(a)(9) of the Code; 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).
Section 2.2 Eligible retirement plan: An eligible retirement plan is
an individual retirement plan account described in section 408(a) of the
Code, an individual retirement annuity described in Section 408(b) of the
Code, an annuity plan described in section 403(a) of the Code, or a
qualified trust described in section 401(a) of the Code, that accepts the
distributee's eligible rollover distribution. However, in the case of an
eligible retirement plan to the surviving spouse, an eligible retirement
plan is an individual retirement account or individual retirement annuity.
- 118 -
<PAGE>
Section 2.3 Distributee: A distributee includes an employee or
former employee. In addition, the employee's or former employee's surviving
spouse and the employee's or the former employee's spouse or former spouse
who is the alternative payee under a qualified domestic relations order, as
defined in section 414(p) of the Code, are distributees with regard to the
interest of the spouse or former spouse.
Section 2.4 Direct rollover: A direct rollover is a payment by the
plan to the eligible retirement plan specified by the distributee.
- 119 -
<PAGE>
MODEL SECTION 401(A)(17) AMENDMENT TO THE
401(K) PROFIT SHARING PLAN AND TRUST
SECTION 401(a)(17) LIMITATION
In addition to other applicable limitations set forth in the plan, and
notwithstanding any other provision of the plan to the contrary, for plan
year beginning on or after January 1, 1994, the annual compensation of each
employee taken into account under the plan shall not exceed the OBRS '93
annual compensation limit. The OBRA '93 annual compensation limit is
$150,000, as adjusted by the Commissioner for increased in the cost of
living in accordance with section 401(1)(17)(B) of the Internal Revenue
Code. The cost of living adjustment in effect for a calendar year applies
to any period, not exceeding 12 months, over which compensation is
determined (determination period) beginning in such calendar year. If a
determination period consist of fewer than 12 months, the OBRA '93 annual
compensation limit will be multiplied by a fraction, the numerator of which
is the number of months in the determination period and the denominator of
which is 12.
For plan years beginning on or after January 1, 1994, any reference in
this plan to the limitation under section 401(a)(17) of the Code shall mean
the OBRA '93 annual compensation limit set forth in the provision.
If compensation for any prior determination period is taken into
account in determining an employee's benefits accruing in the current plan
year, the compensation for the 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.
- 120 -
<PAGE>
REVENUE PROCEDURE 93-47 AMENDMENT TO THE
401(K) PROFIT SHARING PLAN AND TRUST
The following language, applicable to distributions made on or after January 1,
1993, is hereby inserted following the final section of section 2.5.2(j) of the
BENEFITS CONSULTANTS AND ADMINISTRATORS, INC. Defined Contribution Plan and
Trust.
"If a distribution is one to which sections 401(a)(11) and 417 of the
Internal Revenue Code do not apply, such distribution may commence less
than 30 days after the notice required under section 1.411(a)-11c of the
Income Tax Regulations is given, provided that:
(1) the plan administrator clearly informs the participant that the
participant has a right to a period of at least 30 days after receiving the
notice to consider the decision of whether or not to elect a distribution
(and if applicable, a particular distribution option), and
(2) the participant, after receiving the notice, affirmatively elects
a distribution."
- 121 -
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
SouthBanc Shares, Inc.
We consent to the use of our report dated November 7, 1997, related to the audit
of Perpetual Bank, A Federal Savings Bank as of September 30, 1997 and 1996 and
for each of the years in the three-year period ended September 30, 1997,
included herein and to the reference to our firm under the heading "Experts" in
the amended registration statement and related prospectus.
/s/KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Greenville, South Carolina
February 3, 1998
<PAGE>
Exhibit 99.2
<TABLE>
<CAPTION>
LOGO: SOUTHBANC SHARES INC.
Subscription & Community Offering Order Form
------------------------------------------------
Perpetual Bank, A Federal
Savings Bank Expiration Date
Conversion Center for Stock Order Forms
XX Street Day, Month XX, 199X
Anderson, SC XXXXX 12:00 Noon, Eastern Time
(864) XXX-XXXX
- --------------------------------------------------------------------------------
<S> <C>
IMPORTANT PLEASE NOTE: A properly completed original stock order form must be
used to subscribe for common stock. Copies of of this
form are not required to be accepted. Please read the
Stock Ownership Guide and Stock Order Form Instructions
as you complete this Form.
- --------------------------------------------------------------------------------
(1) Number of Shares (2) Total Payment Due The minimum purchase is 28 shares. The maximum purchase
- --------------------- Subscription Price --------------------- limitations are (i) in the Subscription Offering-for any eligible
X $20.00 = subscriber, $1,000,000 (50,000 shares); and (ii) in the Community
- --------------------- --------------------- Offering-for any person, together with Associates or persons
acting in concert, $1,000,000 (50,000 shares). In addition, no
person, together with associates of and persons acting in
concert with such person, may purchase in the aggregate more than
the number of shares of Conversion Stock than when combined with
Exchange Shares received by such person would exceed the overall
maximum purchase limitation of 50,000 shares.
- ------------------------------------------------------------------------------------------------------------------------------------
(3) Employee/Officer/Director Information
[_] Check here if you are a employee, officer or director of Perpetual Bank, A Federal
Savings Bank or a member of such person's immediate family.
- ------------------------------------------------------------------------------------------------------------------------------------
(4) Method of Payment/Check Check Amount
Enclosed is a check, bank draft or money order made ----------------------------------------
payable to Perpetual Bank, A Federal Savings Bank in
the amount of: ----------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
(5) Method of Payment/Withdrawal
The undersigned authorizes withdrawal from the following account(s) at Perpetual
Bank, A Federal Savings Bank. Individual Retirement Accounts maintained at
Perpetual Bank, A Federal Savings Bank cannot be used. There is no penalty for
early withdrawal used for this payment.
- ---------------------------------------------------------------
Account Number(s) Withdrawal Amount(s)
- ---------------------------------------------------------------
- ---------------------------------------------------------------
- ---------------------------------------------------------------
- ---------------------------------------------------------------
Total Withdrawal Amount
- ------------------------------------------------------------------------------------------------------------------------------------
(6) Purchaser Information
a. [_] Check here if you are an Eligible Account Holder with a deposit account(s) totaling $50.00 or
more on June 30, 1996. LIST ACCOUNT(S) BELOW.
b. [_] Check here if you are a Supplemental Eligible Account Holder with a deposit account(s)
totaling $50.00 or more on December 31, 1997. LIST ACCOUNT(S) BELOW.
c. [_] Check here if you were a depositor as of ________________ or a borrower with a loan outstanding
as of ______________ which continued to be outstanding as of ____________________.
LIST ACCOUNT(S) OR LOAN(S) BELOW.
d. [_] Check here and indicate the number of Perpetual Bank, -------------------------------------------
A Federal Savings Bank shares CURRENTLY owned
by you, or by persons associated or acting in concert with you: -------------------------------------------
Complete 6(d) on reverse side for any persons associated or acting in concert with you.
- ----------------------------------------------------------------------------------------------
Account Type (Names on Accounts) Account Number(s)
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Please Note: Failure to list all your accounts at the Bank may result in the loss
of part or all of your subscription rights. If additional space is needed, please
utilize the back of this stock order form.
- ------------------------------------------------------------------------------------------------------------------------------------
(7) Stock Registration/Form of Stock Ownership
[_] Individual [_] Joint Tenants [_] Tenants in Common
[_] Fiduciary (i.e. trust, estate, etc.) [_] Company/Corp/Partnership [_] Uniform Gifts to Minors Act
[_][_][_]-[_][_]-[_][_][_][_]
[_] IRA or other Qualified Plan - Beneficial Owners SS#
(8) Name(s) in which stock is to be registered (Please print clearly)
- ------------------------------------------------------------------------------------------------------------------------------------
Name(s) Social Security # or Tax ID#
- ------------------------------------------------------------------------------------------------------------------------------------
Name(s) continued Social Security # or Tax ID#
- ------------------------------------------------------------------------------------------------------------------------------------
Street Address County of Residence
- ------------------------------------------------------------------------------------------------------------------------------------
City State Zip Code
- --------------------------------------------------------------------------------------------------
(9) Telephone - Daytime ( ) Evening ( )
- --------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[_] (10) NASD AFFLIATION - Check here if you are a member of the National
Association of Securities Dealers, Inc. ("NASD"), a person associated with an
NASD member, a member of the immediate family of any such person to whose
support such person contributes, directly or indirectly, or the holder of an
account in which an NASD member or person associated with an NASD member has a
beneficial interest. To comply with conditions under which an exemption from the
NASD's Interpretation With Respect to Free-Riding and withholding is available,
you agree, if you have checked the NASD Affiliation box (i) not to sell,
transfer or hypothecate the stock for a period of 90 days following issuance,
and (ii) to report this subscription in writing to the applicable NASD member
within one day of payment thereafter.
[_] (11) ASSOCIATES - Acting in Concert Check here, and complete the reverse
side of this Form, if you or any associates (as defined on the reverse side of
this Form) or persons acting in concert with you have submitted other orders for
shares in the Subscription and/or Community Offerings.
- -------------------------------------------------------------------------------
(12) ACKNOWLEDGEMENT - To be effective, this Stock Order Form and accompanying
Certification Form must be properly completed and actually received by Perpetual
Bank, A Federal Savings Bank no later than 12:00 noon, Eastern Time, on DAY,
MONTH DATE, 199X, unless extended; otherwise this Stock Order Form and all
subscription rights will be void. The undersigned agrees that after receipt by
Perpetual Bank, A Federal Savings Bank, this Stock Order Form may not be
modified, withdrawn or cancelled without the Bank's consent and if authorization
to withdraw from deposit accounts at the Bank has been given as payment for
shares, the amount authorized for withdrawal shall not otherwise be available
for withdrawal by the undersigned. Under penalty of perjury, I hereby certify
that the Social Security or Tax ID Number and the information provided on this
Stock Order Form is true, correct and complete, that I am not subject to back-up
withholding, and that I am purchasing solely for my own account and that there
is no agreement or understanding regarding the sale or transfer of such shares,
or my right to subscribe for shares herewith. It is understood that this Stock
Order Form will be accepted in accordance with, and subject to, the terms and
conditions of the Amended Plan of Conversion and Agreement and Plan of
Reorganization of the Bank described in the accompanying Prospectus. The
undersigned hereby acknowledges receipt of the Prospectus at least 48 hours
prior to delivery of this Stock Order Form to the Bank.
Federal regulations prohibit any person from transferring, or entering into any
agreement, directly or indirectly, to transfer the legal or beneficial ownership
of subscription rights or the underlying securities to the account of another.
Perpetual Bank, A Federal Savings Bank, SouthBanc Shares M.H.C. and SouthBanc
Shares, Inc. will pursue any and all legal and equitable remedies in the event
they become aware of the transfer of subscription rights and will not honor
orders known by them to involve such transfer.
- ------------------------------------ ----------------------------------------
Signature Date Signature Date
- ------------------------------------ ----------------------------------------
A SIGNED CERTIFICATION FORM MUST ACCOMPANY ALL STOCK ORDER FORMS
- -----------------------------
BANK USE ONLY
- -----------------------------
- -----------------------------
- -----------------------------
BANK USE ONLY
- -----------------------------
- -----------------------------
<PAGE>
ITEM (6)a, (6)b, (6)c,-CONTINUED
- --------------------------------------------------------------------------------
Account Title (Names on Accounts) Account Number(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ITEM (6)d - CONTINUED
List below the number of Perpetual Bank, A Federal Savings
Bank shares currently owned by Associates (as defined) or by
persons acting in concert with you.
- --------------------------------------------------------------------------------
Registration (Name(s) on Stock Certificate) Number of Share(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ITEM (11) - (CONTINUED)
List below all other orders submitted by you or Associates (as defined) or by
persons acting in concert with you.
- --------------------------------------------------------------------------------
Name(s) listed on other Stock Order Forms Number of Shares Ordered
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
"Associate" is defined as: (i) any corporation or organization (other than
Perpetual Bank, A Federal Savings Bank, SouthBanc Shares, M.H.C., SouthBanc
Shares, Inc. or a majority-owned subsidiary of the Bank) of which such person is
a director, 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 a trustee or in a similar fiduciary capacity; provided,
however, such term shall not include Perpetual Bank, A Federal Savings Bank,
SouthBanc Shares, M.H.C., SouthBanc Shares, Inc.'s employee stock benefit plans
in which such person has a substantial beneficial interest or serves as a
trustee or in a similar fiduciary capacity; and (iii) any relative or spouse of
such person, or any relative of such spouse, who either has the same home as
such person or who is a director or officer of the Bank, Company, Mutual Holding
Company or any subsidiaries thereof. Directors of the Bank, Company or the
Mutual Holding Company are not treated as Associates solely because of their
Board memberships.
<PAGE>
YOU MUST SIGN THE FOLLOWING CERTIFICATION IN ORDER TO PURCHASE STOCK
CERTIFICATION FORM
I ACKNOWLEDGE THAT THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, AND IS NOT
GUARANTEED BY PERPETUAL BANK, A FEDERAL SAVINGS BANK, THE FEDERAL GOVERNMENT OR
BY ANY GOVERNMENT AGENCY. THE ENTIRE AMOUNT OF AN INVESTORS PRINCIPAL IS
SUBJECT TO LOSS.
If anyone assets that this security is federally insured or guaranteed, or is as
safe as an insured deposit, I should call ________________________, ____________
located at __________________ at (XXX) XXX-XXXX.
I further certify that, before purchasing the common stock, par value $.01 per
share, of SouthBanc Shares Inc. (the "Company"), the proposed holding company
for Perpetual Bank, A Federal Savings Bank, I received a Prospectus of the
Company dated __________, 199X relating to such offer of Common Stock.
The Prospectus that I received contains disclosure concerning the nature of the
Common Stock being offered by the Company and describes the risks involved in
the investment in this Common Stock, including but not limited to the:
1. Certain Lending Risks (page )
2. Interest Rate Risk (page )
3. Competition (page )
4. Return on Equity After Conversion and Reorganization (page )
5. Expenses Associated With MRP (page )
6. Anti-takeover Considerations (page )
7. Possible Dilutive Effect of Benefit Programs (page )
8. Absence of Prior Market for the Common Stock (page )
9. Possible Increase in Estimated Valuation Range and Number of
Shares Issued (page )
10. Possible Adverse Income Tax Consequences of the Distribution of
Subscription Rights (page )
Signature Date Signature Date
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
Name (Please Print) Name (Please Print)
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
STOCK OWNERSHIP GUIDE
INDIVIDUAL
Include the first name, middle initial and last name of the shareholder. Avoid
the use of two initials. Please omit words that do not affect ownership rights,
such as "Mrs.", "Mr.", "Dr.", "special account", "single person", etc.
- --------------------------------------------------------------------------------
JOINT TENANTS
Joint tenants with right of survivorship may be specified to identify two or
more owners. When stock is held by joint tenants with right of survivorship,
ownership is intended to pass automatically to the surviving joint tenant(s)
upon the death of any joint tenant. All parties must agree to the transfer or
sale of shares held by joint tenants.
- --------------------------------------------------------------------------------
TENANTS IN COMMON
Tenants in common may also be specified to identify two or more owners. When
stock is held by tenants in common, upon the death of one co-tenant, ownership
of the stock will be held by the surviving co-tenant(s) and by the heirs of the
deceased co-tenant. All parties must agree to the transfer or sale of shares
held by tenants in common.
- --------------------------------------------------------------------------------
UNIFORM GIFTS TO MINORS ACT ("UGMA")
Stock may be held in the name of a custodian for a minor under the Uniform Gifts
to Minors Act of each state. There may be only one custodian and one minor
designated on a stock certificate. The standard abbreviation for Custodian is
"CUST", while the Uniform Gifts to Minors Act is "UGMA". Standard U.S. Postal
Service state abbreviations should be used to describe the appropriate state.
For example, stock held by John Doe as custodian for Susan Doe under the South
Carolina Uniform Gifts to Minors Act will be abbreviated John Doe, CUST Susan
Doe UGMA, SC (use minor's social security number).
- --------------------------------------------------------------------------------
FIDUCIARIES
Information provided with respect to stock to be held in a fiduciary capacity
must contain the following:
. The name(s) of the fiduciary. If an individual, list the first name, middle
initial and last name. If a corporation, list the full corporate title
(name). If an individual and a corporation, list the corporation's title
before the individual.
. The fiduciary capacity, such as administrator, executor, personal
representative, conservator, trustee, committee, etc.
. A description of the document governing the fiduciary relationship, such as
a trust agreement or court order. Documentation establishing a fiduciary
relationship may be required to register your stock in a fiduciary
capacity.
. The date of the document governing the relationship, except that the date
of a trust created by a will need not be included in the description.
. The name of the maker, donor or testator and the name of the beneficiary.
An example of fiduciary ownership of stock in the case of a trust is: John Doe,
Trustee Under Agreement Dated 10-1-87 for Susan Doe.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STOCK ORDER FORM INSTRUCTIONS
ITEMS 1 AND 2.
Fill in the number of shares that you wish to purchase and the total payment
due. The amount due is determined by multiplying the number of shares by the
subscription price to $20.00 per share. The minimum purchase in the
Subscription and Community Offerings is 25 shares. In the Subscription
Offering, the maximum purchase by each Eligible Account Holder, Supplemental
Eligible Account Holder and Other Member is $1,000,000 (50,000 shares), and the
maximum purchase in the Community Offering by any person, together with
associates or persons acting in concert is $1,000,000 (50,000) shares. The
Primary Parties have reserved the right to reject the subscription of any order
received in the Community Offering, in whole or in part. In addition, no
person, together with associates of or persons acting in concert with such
person, may purchase in the aggregate more than the number of shares of
Conversion Stock that when combined with Exchange Shares received by such
person would exceed the overall maximum purchase limitation of 50,000 shares.
- --------------------------------------------------------------------------------
ITEM 3.
Please check this box to indicate whether you are an employee, officer or
director of Perpetual Bank, A Federal Savings Bank or a member of such person's
immediate family.
- --------------------------------------------------------------------------------
ITEM 4.
Payment for shares may be made in cash (only if delivered by you in person to a
branch office of Perpetual Bank, A Federal Savings Bank) or by check, bank draft
or money order payable to Perpetual Bank, A Federal Savings Bank). Your funds
will earn interest at the Bank's passbook rate of interest until the Conversion
is completed. DO NOT MAIL CASH TO PURCHASE STOCK! Please insert the total
check(s) amount in this box if your method of payment is by check, bank draft or
money order.
- --------------------------------------------------------------------------------
ITEM 5.
If you pay for your stock by a withdrawal from a deposit account at Perpetual
Bank, A Federal Savings Bank, insert the account number(s) and the amount of
your withdrawal authorization for each account. The total amount withdrawn
should equal the amount of your stock purchase. There will be no penalty
assessed for early withdrawals from certificate accounts used for stock
purchases. This form of payment may not be used if your account is an
Individual Retirement Account or Qualified Plan.
- --------------------------------------------------------------------------------
ITEM 6.
a. Please check this box if you are an Eligible Account Holder with a deposit
account(s) totalling $50.00 or more on June 30, 1996.
b. Please check this box if you are a Supplemental Eligible Account Holder with
a deposit account(s) totalling $50.00 or more on December 31, 1997.
c. Check here if you were a depositor as of MONTH, DATE 199X or a borrower with
a loan outstanding as of MONTH, DATE 199x which continued to be outstanding
as of MONTH, DATE 1998.
d. Please indicate the number of Perpetual Bank, A Federal Savings Bank, shares
CURRENTLY owned by you, or by persons associated (as defined on the reverse
side of the Stock Order Form) or acting in concert with you. Please list any
associates or persons acting in concert with you and share amounts on the
reverse side of this Stock Order Form.
Please list all names on the account(s) and all account number(s) of accounts
you had a these dates at the Bank in order to insure proper identification of
your purchase rights. Please note: Failure to list all your accounts at the
Bank may result in the loss of part or all of your subscription rights.
- --------------------------------------------------------------------------------
ITEMS 7, 8 AND 9.
The stock transfer industry has developed a uniform system of shareholder
registrations that will be used in the issuance of your SouthBanc Shares, Inc.
Common Stock. Please complete items 7,8 and 9 as fully and accurately as
possible, and be certain to supply your social security or Tax I.D. number(s)
and your daytime and evening telephone number(s). We will need to call you if
we cannot execute your order as given. If you have any questions regarding the
registration of your stock, please consult your legal advisor. Stock ownership
must be registered in one of the ways described above under "Stock Ownership
Guide".
- --------------------------------------------------------------------------------
ITEM 10.
Please check this box if you are a member of the NASD or if this item otherwise
applies to you.
- --------------------------------------------------------------------------------
ITEM 11.
Please check this box if you or any associate (as defined on the reverse side
of the Stock Order Form) or person acting in concert with you has submitted
another order for shares and complete the reverse side of the Stock Order Form.
- --------------------------------------------------------------------------------
ITEM 12.
Please sign and date this Stock Order Form and Certification Form where
indicated. Before you sign, review the Stock Order Form, including the
acknowledgement, and the Certification Form. Normally, one signature is
required. An additional signature is required only when payment is to be made by
withdrawal from a deposit account that requires multiple signatures to withdraw
funds.
- --------------------------------------------------------------------------------
You may mail your completed Stock Order Form and Certification Form in the
envelope that has been provided, or you may deliver your Stock Order Form and
Certification Form to any branch of Perpetual Bank, A Federal Savings Bank. Your
Stock Order Form and Certification Form, properly completed, and payment in full
(or withdrawal authorization) at the subscription price must be received by
Perpetual Bank, A federal Savings Bank no later than 12:00 noon, Eastern time,
on __________, _______ 1998 or it will become void. If you have any remaining
questions, or if you would like assistance in completing your Stock Order Form
and Certification Form, you may call our Stock Information Center Monday through
Friday from 10:00 a.m. to 4:00 p.m.
- --------------------------------------------------------------------------------
<PAGE>
[DRAFT 12/9/97]
SOUTHBANC SHARES, M.H.C.
PROPOSED LETTERS/QUESTION & ANSWER BROCHURES
INDEX
-----
1. Dear Member Letter including IRA or Qualified Plan
2. Dear Member Letter for Non Eligible States
3. Dear Friend Letter - Eligible Account Holders who are no longer Members
4. Dear Potential Investor Letter *
5. Dear Customer Letter - Used as a Cover Letter for States Requiring "Agent"
Mailing *
6. Proxy Request
7. Proxy Question and Answer Brochure
8. Stock Question and Answer Brochure*
9. Request Card
10. Mailing Insert/Lobby Poster
11. Invitation Letter - Informational Meetings
12. Dear Subscriber/Acknowledgment Letter - Initial Response to Stock Order
Received
13. Dear Shareholder - Confirmation Letter
14. Dear Interested Investor - No Shares Available Letter
15. Welcome Shareholder Letter - For Initial Certificate Mailing
16. Dear Interested Subscriber Letter - Subscription Rejection
17. Letter for Sandler O'Neill Mailing to Clients *
* Accompanied by a Prospectus
Note: Items 1 through 10 are produced by the Financial Printer and Items
11 through 17 are produced by the Stock Information Center.
<PAGE>
[SouthBanc Shares, M.H.C.]
Dear Member:
The Boards of Directors of Perpetual Bank, A Federal Savings Bank (the "Savings
Bank") and SouthBanc Shares, M.H.C. (the "MHC") have voted unanimously in favor
of an Amended Plan of Conversion and Agreement and Plan of Reorganization (the
"Plan of Conversion"). As part of this plan, we have formed SouthBanc Shares,
Inc. (the "Company") which will own all of the Savings Bank's Common Stock.
Pursuant to the Plan of Conversion, the existing stockholders of the Savings
Bank (other than the MHC) will be issued shares of the Company Common Stock in
exchange for their shares of Savings Bank Common Stock ( the "Exchange Shares").
The Exchange Shares will result in those stockholders owning in the aggregate
approximately the same percentage of the Company as they had owned in the
Savings Bank. In addition to the shares of Company Common Stock to be issued in
the Exchange, the Company is offering up to X,XXX,XXX shares of Common Stock to
the MHC's members, the Savings Bank stockholders and members of the public. We
are converting so that the Savings Bank and the MHC will be structured in a form
used by most other holding companies of savings institutions, commercial banks
and most other business entities, and to allow our bank to become stronger.
TO ACCOMPLISH THE CONVERSION AND REORGANIZATION, YOUR PARTICIPATION IS EXTREMELY
IMPORTANT. On behalf of the Board, I ask that you help us meet our goal by
reading the enclosed Proxy Statement and Question and Answer Brochure and then
casting your vote in favor of the Plan of Conversion, and mailing your signed
proxy card immediately in the _______ postage-paid envelope provided. Should
you choose to attend the Special Meeting of Members and wish to vote in person,
you may do so by revoking any previously executed proxy. If you have an IRA or
other Qualified Plan account for which the Savings Bank acts as trustee and we
do not receive a proxy from you, the Savings Bank intends, as trustee for such
account, to vote for the Plan of Conversion on your behalf.
If the Plan of Conversion is approved let me assure you that:
.Deposit accounts will continue to be federally insured to the fullest extent
permitted by law.
.Existing deposit accounts and loans will not undergo any change as a result of
the Conversion and Reorganization.
.Voting for approval will not obligate you to buy any shares of Common Stock.
As a qualifying account holder, you may also take advantage of your
nontransferable rights to subscribe for shares of SouthBanc Shares, Inc. Common
Stock without commission or fee on a priority basis, before the stock is offered
to the general public. If you are interested in subscribing for shares of
Common Stock, please complete the enclosed request card and return it to us in
the ______ postage-paid envelope provided by DAY, MONTH DATE 199X, and we will
mail you a Prospectus, a stock order form and a certification form.
If you wish to use funds in your IRA or Qualified Plan maintained at the Savings
Bank to subscribe for Common Stock, please be aware that federal law requires
that such funds first be transferred to a self-directed retirement account with
a trustee other than the Savings Bank. The transfer of such funds to a new
trustee takes time, so please make arrangements as soon as possible.
If you have any questions after reading the enclosed material, please call our
Stock Information Center at (xxx) xxx-xxxx. The Stock Information Center is open
Monday through Friday between the hours of 10:00 a.m. and 4:00 p.m. Please note
that the Stock Information Center will be closed from 12:00 noon DAY, MONTH
DATE, 199X, through 12 noon DAY, MONTH DATE, 199X, in observance of the
_________________ holiday.
Sincerely,
Signature
Title
The shares of Common Stock offered in the Conversion and Reorganization are not
savings accounts or deposits and are not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
This is not an offer to sell or a solicitation of an offer to buy Common Stock.
The offer is made only by the Prospectus.
#1
<PAGE>
[SouthBanc Shares, M.H.C.]
Dear Member:
The Boards of Directors of Perpetual Bank, A Federal Savings Bank (the "Savings
Bank") and SouthBanc Shares, M.H.C. (the "MHC") have voted unanimously in favor
of an Amended Plan of Conversion and Agreement and Plan of Reorganization (the
"Plan of Conversion"). As part of this plan, we have formed SouthBanc Shares,
Inc. (the "Company") which will own all of the Savings Bank's Common Stock.
Pursuant to the Plan of Conversion, the existing stockholders of the Savings
Bank (other than the MHC) will be issued shares of the Company Common Stock in
exchange for their shares of Savings Bank Common Stock ( the "Exchange Shares").
The Exchange Shares will result in those stockholders owning in the aggregate
approximately the same percentage of the Company as they had owned in the
Savings Bank. In addition to the shares of Company Common Stock to be issued in
the Exchange, the Company is offering up to X,XXX,XXX shares of Common Stock to
the MHC's members, the Savings Bank stockholders and members of the public. We
are converting so that the Savings Bank and the MHC will be structured in a form
used by most other holding companies of savings institutions, commercial banks
and most other business entities, and to allow our bank to become stronger.
TO ACCOMPLISH THE CONVERSION AND REORGANIZATION, YOUR PARTICIPATION IS EXTREMELY
IMPORTANT. On behalf of the Board, I ask that you help us meet our goal by
reading the enclosed Proxy Statement and Question and Answer Brochure and then
casting your vote in favor of the Plan of Conversion, and mailing your signed
proxy card immediately in the ____ postage-paid envelope provided. Should you
choose to attend the Special Meeting of Members and wish to vote in person, you
may do so by revoking any previously executed proxy. If you have an IRA or
other Qualified Plan account for which the Savings Bank acts as trustee and we
do not receive a proxy from you, the Savings Bank intends, as trustee for such
account, to vote for the Plan of Conversion on your behalf.
If the Plan of Conversion is approved let me assure you that:
.Deposit accounts will continue to be federally insured to the fullest extent
permitted by law.
.Existing deposit accounts and loans will not undergo any change as a result of
the Conversion.
We regret that we are unable to offer you Common Stock in the Subscription and
Direct Community Offerings, because the laws of your state or jurisdiction
require us to register either (1) the to-be-issued Common Stock of SouthBanc
Shares, Inc., or (2) an agent of the Savings Bank to solicit the sale of such
stock, and the number of eligible subscribers in your state or jurisdiction does
not justify the expense of such registration.
If you have any questions after reading the enclosed material, please call our
Stock Information Center at (xxx) xxx-xxxx. The Stock Information Center is open
Monday through Friday between the hours of 10:00 a.m. and 4:00 p.m. Please note
that the Stock Information Center will be closed from 12:00 noon DAY, MONTH
DATE, 199X, through 12 noon DAY, MONTH DATE, 199X, in observance of the
_________________ holiday.
Sincerely,
Signature
Title
The shares of Common Stock offered in the Conversion and Reorganization are not
savings accounts or deposits and are not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
#2
<PAGE>
[SouthBanc Shares, M.H.C.]
Dear Friend:
The Boards of Directors of Perpetual Bank, A Federal Savings Bank (the "Savings
Bank") and SouthBanc Shares, M.H.C. (the "MHC") have voted unanimously in favor
of an Amended Plan of Conversion and Agreement and Plan of Reorganization (the
"Plan of Conversion"). As part of this plan, we have formed SouthBanc Shares,
Inc. (the "Company") which will own all of the Savings Bank's Common Stock.
Pursuant to the Plan of Conversion, the existing stockholders of the Savings
Bank (other than the MHC) will be issued shares of the Company Common Stock in
exchange for their shares of Savings Bank Common Stock ( the "Exchange Shares").
The Exchange Shares will result in those stockholders owning in the aggregate
approximately the same percentage of the Company as they had owned in the
Savings Bank. In addition to the shares of Company Common Stock to be issued in
the Exchange, the Company is offering up to X,XXX,XXX shares of Common Stock to
the MHC's members, the Savings Bank stockholders and members of the public. We
are converting so that the Savings Bank and the MHC will be structured in a form
used by most other holding companies of savings institutions, commercial banks
and most other business entities, and to allow our bank to become stronger. The
Conversion and Reorganization will in no way affect the insurance of deposit
accounts or the services offered by the Savings Bank.
As a former account holder, you may take advantage of your nontransferable
rights to subscribe for shares of SouthBanc Shares, Inc. Common Stock without
commission or fee on a priority basis, before the stock is offered to the
general public. If you are interested in subscribing for shares of Common
Stock, please complete the enclosed request card and return it to us in the
postage-paid envelope provided by Month Date, 199X, and we will mail you a
Prospectus, a stock order form and a certification form.
To ensure that each purchaser receives a Prospectus at least 48 hours prior to
the Expiration Date of Day, Month Date, 199X in accordance with Rule 15c2-8 of
the Securities Exchange Act of 1934, as amended, 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.
If you have any questions after reading the enclosed material, please call our
Stock Information Center at (xxx) xxx-xxxx. The Stock Information Center is open
Monday through Friday from 10:00 a.m. to 4:00 p.m. Please note that the Stock
Information Center will be closed from 12:00 noon DAY, MONTH DATE, 199X, through
12 noon DAY, MONTH DATE, 199X, in observance of the _________________ holiday.
Sincerely,
Signature
Title
The shares of Common Stock offered in the Conversion and Reorganization are not
savings accounts or deposits and are not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
This is not an offer to sell or a solicitation of an offer to buy Common Stock.
The offer is made only by the Prospectus.
#3
<PAGE>
[SouthBanc Shares, M.H.C.]
Dear Potential Investor:
We are pleased to provide you with the enclosed material in connection with the
Conversion and Reorganization of Perpetual Bank, A Federal Savings Bank (the
"Savings Bank") and SouthBanc Shares, M.H.C., the mutual holding company of
Perpetual, into the stock holding company structure.
This information packet includes the following:
PROSPECTUS: This document provides detailed information about the Savings
Bank's operations, the proposed stock offering by SouthBanc Shares, Inc., the
holding company formed by the Savings Bank to become the Savings Bank's parent
company upon completion of the Conversion and Reorganization. Please read it
carefully prior to making an investment decision.
STOCK QUESTION AND ANSWER BROCHURE: This answers commonly asked questions about
the stock offering.
STOCK ORDER AND CERTIFICATION FORMS: Use these forms to subscribe for stock and
return them together with your payment in the postage-paid envelope provided.
The deadline to subscribe for stock is 12:00 noon, Eastern Time on Day, Month
Date, 199X.
We are pleased to offer you this opportunity to become one of our stockholders.
If you have any questions regarding the Conversion and Reorganization or the
Prospectus, please call our Stock Information Center at (xxx) xxx-xxxx. The
Stock Information Center is open Monday through Friday between the hours of
10:00 a.m. and 4:00 p.m. Please note that the Stock Information Center will
be closed from 12:00 noon DAY, MONTH DATE, 199X, through 12 noon DAY, MONTH
DATE, 199X, in observance of the _________________ holiday.
Sincerely,
Signature
Title
The shares of Common Stock offered in the Conversion and Reorganization are not
savings accounts or deposits and are not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
This is not an offer to sell or a solicitation of an offer to buy Common Stock.
The offer is made only by the Prospectus.
#4
<PAGE>
[SANDLER O'NEILL & PARTNERS, L.P. LETTERHEAD]
Dear Customer:
At the request of Perpetual Bank, A Federal Savings Bank, (the "Savings Bank")
and SouthBanc Shares, M.H.C.("MHC"), we have enclosed material regarding the
offering of Common Stock by SouthBanc Shares, Inc. the holding company formed by
the Savings Bank and the MHC to become the Savings Bank's parent company. This
material is offered in connection with the Conversion and Reorganization of the
Savings Bank and the MHC. These materials include a Prospectus and stock order
and certification forms which offer you the opportunity to subscribe for shares
of Common Stock of SouthBanc Shares, Inc.
We recommend that you read this material carefully. If you decide to subscribe
for shares, you must return the properly completed stock order form and signed
certification form along with full payment for the shares (or appropriate
instructions authorizing withdrawal from a deposit account at Perpetual Bank, A
Federal Savings Bank) no later than 12:00 noon, Eastern time on Month Date, 199X
in the accompanying postage-paid envelope. If you have any questions after
reading the enclosed material, please call the Stock Information Center at (xxx)
xxx-xxxx and ask for a Sandler O'Neill representative. The Stock Information
Center is open Monday through Friday between the hours of 10:00 a.m. and 4:00
p.m. Please note that the Stock Information Center will be closed from 12:00
noon DAY, MONTH DATE, 199X, through 12 noon DAY, MONTH DATE, 199X, in observance
of the _________________ holiday.
We have been asked to forward these documents to you in view of certain
requirements of the securities laws of your jurisdiction. We should not be
understood as recommending or soliciting in any way any action by you with
regard to the enclosed materials.
Sincerely,
Sandler O'Neill & Partners, L.P.
The shares of Common Stock offered in the Conversion and Reorganization are not
savings accounts or deposits and are not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
This is not an offer to sell or a solicitation of an offer to buy Common Stock.
The offer is made only by the Prospectus.
Enclosure
#5
<PAGE>
LOGO: [PERPETUAL BANK, A FEDERAL SAVINGS BANK]
A SUBSIDIARY OF
SOUTHBANC SHARES, M.H.C.
P R O X Y R E Q U E S T
WE NEED YOUR VOTE!
DEAR CUSTOMER:
YOUR VOTE ON OUR AMENDED PLAN OF CONVERSION AND AGREEMENT AND PLAN OF
REORGANIZATION HAS NOT YET BEEN RECEIVED. YOUR VOTE IS VERY IMPORTANT TO US.
PLEASE VOTE AND MAIL THE ENCLOSED PROXY TODAY.
REMEMBER: VOTING FOR THE PLAN OF CONVERSION DOES NOT OBLIGATE YOU TO BUY STOCK.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AMENDED PLAN OF
CONVERSION, AND URGES YOU TO VOTE IN FAVOR OF IT. YOUR DEPOSIT
ACCOUNTS OR LOANS WITH THE SAVINGS BANK WILL NOT BE AFFECTED IN ANY
WAY. DEPOSIT ACCOUNTS WILL CONTINUE TO BE FEDERALLY INSURED.
A POSTAGE-PAID ENVELOPE IS ENCLOSED WITH THE PROXY FORM. IF YOU HAVE ANY
QUESTIONS, PLEASE CALL OUR STOCK INFORMATION CENTER AT (XXX) XXX-XXXX, MONDAY
THROUGH FRIDAY, BETWEEN THE HOURS OF 10:00 A.M. AND 4:00 P.M.
IF YOU HAVE MORE THAN ONE ACCOUNT YOU MAY RECEIVE MORE THAN ONE PROXY.
PLEASE VOTE TODAY BY RETURNING ALL PROXY CARDS RECEIVED.
---
SINCERELY,
SOUTHBANC SHARES, M.H.C.
#6
<PAGE>
7-1
PROXY QUESTIONS AND ANSWERS
BACKGROUND
On October 23, 1993, Perpetual Bank, A Federal Savings Bank ("Perpetual" or the
"Savings Bank") reorganized into a new form of organization, the mutual holding
company structure. As part of this Reorganization, the Savings Bank formed
SouthBanc Shares, M.H.C. (the "MHC") a mutual holding company and Perpetual
became a stockholder-owned company through the initial sale of Common Stock. In
September 1996, the Savings Bank completed an additional offering of Common
Stock.
The primary business of the MHC has been to hold shares of Perpetual's Common
Stock. As majority stockholder, it holds XX.X% of the shares of Common Stock
outstanding. The remaining shares are traded publicly and are owned by
Perpetual's management, benefit plans, customers and members of the public
(together, "Public Stockholders").
THE CONVERSION AND REORGANIZATION
The Boards of Directors of the Savings Bank and the MHC have unanimously adopted
a Plan, whereby the MHC will convert to a federal interim stock savings
institution and will merge with and into the Savings Bank. The Savings Bank has
formed SouthBanc Shares, Inc., a Delaware chartered corporation (the "Company"),
and, pursuant to a reorganization and merger, the Savings Bank will become the
wholly owned subsidiary of the Company. The Company will offer Common Stock to
the Savings Bank's Eligible Account Holders, Supplemental Eligible Account
Holders and Other Members in a Subscription Offering, and then to certain
members of the general public in a Direct Community Offering. As a result of
the Conversion and Reorganization, each share of Savings Bank Common Stock held
by the MHC will be canceled and each share of Savings Bank Common Stock held by
the Savings Bank's Public Stockholders will be converted into shares of
SouthBanc Shares, Inc. Common Stock. The Public Stockholders will be mailed
instructions with regard to effecting the Exchange at a later date after the
consummation of the Conversion and Reorganization.
It is necessary for the MHC to receive a majority of the outstanding votes in
favor of the Conversion and Reorganization, so YOUR VOTE IS VERY IMPORTANT.
Please return your proxy in the enclosed _______ postage-paid envelope.
YOUR BOARDS OF DIRECTORS URGE YOU TO VOTE "FOR" THE CONVERSION AND
REORGANIZATION AND RETURN YOUR PROXY CARD TODAY.
<PAGE>
7-2
Q. WHAT IS THE REASON FOR THE CONVERSION AND REORGANIZATION?
A. The MHC does not have stockholders and has no authority to issue capital
stock. As a result of the Conversion and Reorganization, the MHC will be
restructured into the form used by holding companies of commercial banks,
other business entities and a growing number of savings institutions. The
Conversion and Reorganization will enhance the ability of the Company and
the Savings Bank to access capital markets, expand current operations,
acquire other financial institutions or branch offices and diversify into
other financial services to the extent allowable by applicable law and
regulation.
Q. WHAT WILL BE THE EFFECT OF THE CONVERSION AND REORGANIZATION?
A. . The Conversion and Reorganization will have no effect on the balance or
terms of any deposit account or loan. Your deposits will continue to
be federally insured to the fullest extent permissible.
. The officers and employees of Perpetual will continue in their current
capacities.
. The Company will replace the MHC, and Perpetual will become the wholly-
owned subsidiary of the Company.
. The Company will be a stock corporation and will sell its Common Stock.
. The Company's Common Stock will be publicly held and will be traded on
the Nasdaq National Market under the symbol "PERT".
. The Public Stockholders will exchange their Savings Bank stock for stock
of the Company pursuant to an exchange ratio.
Q. WHO IS ELIGIBLE TO VOTE ON THE CONVERSION?
A. Depositors and certain borrowers as of MONTH, DATE, 1998 (the "Voting
Record Date") who continue to be members of the MHC as of the Special
Meeting of Members to be held on MONTH DATE, 1998. The Stockholders of
Perpetual Bank as of a Voting Record Date also have the right to vote and
will be mailed a separate proxy card.
<PAGE>
7-3
Q. AM I REQUIRED TO VOTE?
A. No. Members are not required to vote. However, because the Conversion and
Reorganization will produce a fundamental change in the Savings Bank's
corporate structure, the Boards of Directors encourages all members to
vote.
Q. WHY DID I RECEIVE SEVERAL PROXIES?
A. If you have more than one account you may have received more than one proxy
depending upon the ownership structure of your accounts. Please vote and
sign all proxy cards that you received.
Q. HOW DO I VOTE?
A. You may vote by mailing your signed proxy card in the _______ postage-paid
envelope provided. Should you choose to attend the Special Meeting of
Members and decide to change your vote, you may do so by revoking any
previously executed proxy.
Q. DOES MY VOTE FOR THE CONVERSION AND REORGANIZATION MEAN THAT I MUST BUY
COMMON STOCK IN SOUTHBANC SHARES, INC.?
A. No. Voting for the Conversion and Reorganization does not obligate you to
buy shares of Common Stock of SouthBanc Shares, Inc.
Q. WILL ANY ACCOUNT I HOLD WITH THE SAVINGS BANK BE CONVERTED INTO STOCK?
A. No. All accounts remain as they were prior to the Conversion and
Reorganization. As an Eligible Account Holder, Supplemental Eligible
Account Holder or Other Member, you receive priority over the general
public in exercising your right to subscribe for shares of Common Stock.
Q. I HAVE A JOINT SAVINGS ACCOUNT. MUST BOTH PARTIES SIGN THE PROXY CARD?
A. Only one signature is required, but both parties should sign if possible.
Q. WHO MUST SIGN TRUST OR CUSTODIAN ACCOUNTS?
A. The trustee or custodian must sign such accounts, not the beneficiary.
<PAGE>
7-4
Q. I AM THE EXECUTOR (ADMINISTRATOR) FOR A DECEASED DEPOSITOR. CAN I SIGN THE
PROXY CARD?
A. Yes. Please indicate on the card the capacity in which you are signing the
card.
Q. HOW CAN I RECEIVE ADDITIONAL INFORMATION ABOUT THE CONVERSION AND
REORGANIZATION?
A. The MHC's Proxy Statement describes the Conversion and Reorganization in
detail. Please read the Proxy Statement carefully before voting.
Additional information is available in the Prospectus, which you may obtain
by returning a completed request card, or by calling our Stock Information
Center at (XXX) XXX-XXXX, Monday through Friday, between the hours of 10:00
A.M. and 4:00 P.M. Please note that the Stock Information Center will be
closed from 12:00 noon DAY, MONTH DATE, 199X, through 12 noon DAY, MONTH
DATE, 199X, in observance of the _________________ holiday.
TO ENSURE THAT EACH PURCHASER RECEIVES A PROSPECTUS AT LEAST 48 HOURS PRIOR TO
THE EXPIRATION DATE OF [DAY, MONTH DATE] 199X IN ACCORDANCE WITH RULE 15C2-8 OF
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, 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.
The shares of Common Stock offered in the Conversion and Reorganization are not
savings accounts or deposits and are not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency or the Savings
Bank.
This is not an offer to sell or a solicitation of an offer to buy Common Stock.
The offer is made only by the Prospectus.
<PAGE>
8-1
STOCK OFFERING QUESTIONS & ANSWERS
BACKGROUND
On October 23, 1993, Perpetual Bank, A Federal Savings Bank ("Perpetual" or the
"Savings Bank") reorganized into a new form of organization, the mutual holding
company structure. As part of this Reorganization, the Savings Bank formed
SouthBanc Shares, M.H.C. (the "MHC") a mutual holding company and Perpetual
became a stockholder-owned company through the initial sale of Common Stock. In
September 1996, the Savings Bank completed an additional offering of Common
Stock.
The primary business of the MHC has been to hold shares of Perpetual's Common
Stock. As majority stockholder, it holds XX.X% of the shares of Common Stock
outstanding. The remaining shares are traded publicly and are owned by
Perpetual's management, benefit plans, customers and members of the public
(together, "Public Stockholders").
THE CONVERSION AND REORGANIZATION
The Boards of Directors of the Savings Bank and the MHC have unanimously adopted
a Plan, whereby the MHC will convert to a federal interim stock savings
institution and will merge with and into the Savings Bank. The Savings Bank has
formed SouthBanc Shares, Inc. a Delaware chartered corporation (the "Company")
and, pursuant to a reorganization and merger, the Savings Bank will become the
wholly owned subsidiary of the Company. The Company will offer Common Stock to
the Savings Bank's Eligible Account Holders, Supplemental Eligible Account
Holders and Other Members in a Subscription Offering, and then to certain
members of the general public in a Direct Community Offering. As a result of
the Conversion and Reorganization, each share of Savings Bank Common Stock held
by the MHC will be canceled and each share of Savings Bank Common Stock held by
the Savings Bank's Public Stockholders will be converted into shares of
SouthBanc Shares, Inc. Common Stock. The Public Stockholders will be mailed
instructions with regard to effecting the Exchange at a later date after the
consummation of the Conversion and Reorganization.
Investment in Common Stock involves certain risks. For a discussion of these
risks and other factors, investors are urged to read the accompanying
Prospectus.
<PAGE>
8-2
Q. WHAT IS THE REASON FOR THE CONVERSION AND REORGANIZATION?
A. The MHC does not have stockholders and has no authority to issue capital
stock. As a result of the Conversion and Reorganization, the MHC will be
restructured into the form used by holding companies of commercial banks,
other business entities and a growing number of savings institutions. The
Conversion and Reorganization will enhance the ability of the Company and the
Savings Bank to access capital markets, expand current operations, acquire
other financial institutions or branch offices and diversify into other
financial services to the extent allowable by applicable law and regulation.
Q. WILL THE CONVERSION AND REORGANIZATION AFFECT ANY OF MY DEPOSIT ACCOUNTS OR
LOANS?
A. No. The Conversion and Reorganization will not have any effect on the balance
or terms of any deposit account or loan. Your deposits will continue to be
federally insured to the fullest extent permissible.
Q. WHO IS ELIGIBLE TO PURCHASE STOCK IN THE SUBSCRIPTION OFFERING?
A. Nontransferable rights to purchase stock in the Subscription Offering have
been granted, in the order of priority, to: (i) depositors of the Savings
Bank with account balances of $50 or more on June 30, 1996 ("Eligible Account
Holders"), (ii) depositors of the Savings Bank with account balances of $50
or more on December 31, 1997 ("Supplemental Eligible Account Holders"), and
(iii) depositors of the Savings Bank as of MONTH, DATE, 199X and borrowers of
the Savings Bank with loans outstanding on MONTH, DATE, 199X which continue
to be outstanding as of MONTH, DATE, 199X ("Other Members").
Q. WILL I RECEIVE A DISCOUNT ON THE PRICE OF THE STOCK?
A. No. Conversion regulations require that the offering price of the stock be
the same for everyone: customers, directors, officers and employees of the
Savings Bank, and the general public.
<PAGE>
8-3
Q. HOW MANY SHARES OF STOCK ARE BEING OFFERED, AND AT WHAT PRICE?
A. Excluding Exchange Shares, the Company is offering between 1,466,250 and
1,983,750 shares of Common Stock at a purchase price of $20 per share through
the Prospectus. Under certain circumstances, SouthBanc Shares, Inc. may
issue up to 2,281,312 shares.
Q. HOW MUCH STOCK CAN I PURCHASE?
A. The minimum purchase is 25 shares; the maximum purchase by any person in the
Subscription Offering is $1,000,000 (50,000 shares); the maximum purchase by
any person or entity, including purchases by associates of such person or
entity, in the Direct Community Offering and Syndicated Community Offering is
$1,000,000 (50,000 shares); and the maximum purchase by any person including
purchases by associates of such person, in the Subscription and Direct
Community Offerings is $1,000,000 (50,000 shares). In addition, no person,
together with associates of and persons acting in concert with such person,
may purchase in the aggregate more than the number of shares of Conversion
shares that when combined with Exchange Shares received by such person would
exceed the overall maximum purchase limitation of 50,000 shares.
Q. HOW DO I ORDER STOCK?
A. You may subscribe for shares of Common Stock by completing and returning the
stock order form and certification form, together with your payment, in the
postage-paid envelope that has been provided.
Q. HOW CAN I PAY FOR MY SHARES OF STOCK?
A. You can pay for Company Common Stock by check, cash, money order or
withdrawal from your deposit account at the Savings Bank; provided, that
payment or withdrawal instructions, together with a completed stock order
form and certification form, are received by the Savings Bank no later than
12:00 noon, Eastern time on DAY, MONTH DATE, 1998. If you choose to pay by
cash, you must deliver the stock order form and payment in person to a branch
office of the Savings Bank and it will be converted to a bank check or a
money order. PLEASE DO NOT SEND CASH IN THE MAIL.
<PAGE>
8-4
Q. CAN I SUBSCRIBE FOR SHARES USING FUNDS IN MY IRA/QUALIFIED PLAN MAINTAINED AT
THE SAVINGS BANK?
A. Federal regulations do not permit the purchase of Common Stock with your
existing IRA or Qualified Plan funds maintained at the Savings Bank. To use
such funds to subscribe for stock, you need to establish a "self-directed"
trust account with an outside trustee. Please call our Stock Information
Center if you require additional information. TRANSFER OF SUCH FUNDS TAKES
TIME, SO, PLEASE MAKE ARRANGEMENTS AS SOON AS POSSIBLE.
Q. CAN I SUBSCRIBE FOR SHARES AND ADD SOMEONE ELSE WHO IS NOT ON MY ACCOUNT TO
MY STOCK REGISTRATION?
A. No. Federal regulations prohibit the transfer of subscription rights.
Adding the names of other qualifying account holders who are not owners of
your qualifying account(s) will result in your order becoming null and void.
Q. WILL PAYMENTS FOR STOCK EARN INTEREST UNTIL THE CONVERSION AND REORGANIZATION
CLOSES?
A. Yes. Any payments made by cash, check or money order will earn interest at
the Savings Bank's passbook rate from the date of receipt to the completion
or termination of the Conversion and Reorganization. Withdrawals from a
deposit account or a certificate of deposit at the Savings Bank may be made
without penalty. Depositors who elect to pay for their Common Stock by
withdrawal will receive interest at the contract rate on the account until
the completion or termination of the Conversion and Reorganization.
Q. ARE DIVIDENDS CURRENTLY PAID ON THE STOCK?
A. The Savings Bank's Board of Directors has paid quarterly cash dividends to
its Public Stockholders commencing with the quarter ended December 31, 1995.
The Board of Directors intends to declare and pay a regular cash dividend for
the first calendar quarter of 1998 to holders of Savings Bank Common Stock.
The record date for determining the holders of Savings Bank Common Stock
entitled to receipt of the dividend is expected to pre-date the consummation
of the Conversion and Reorganization. Consequently, dividends, if any, would
not be paid on the Common Stock offered hereby until after the consummation
of the Conversion and Reorganization. Upon completion of the Conversion and
Reorganization, the Holding Company's Board of Directors will have the
authority to declare dividends on the Common Stock, subject to statutory and
regulatory requirements. The first dividend payment on the Common Stock is
expected during the month following the end of the quarter in which the
Conversion and Reorganization is consummated. No assurances, however, can be
given as to whether the dividend payments will continue or, if continued, the
amount of such dividends.
<PAGE>
8-5
Q. WILL MY STOCK BE COVERED BY DEPOSIT INSURANCE?
A. No. The Common Stock cannot be insured or guaranteed by the FDIC, the Bank
Insurance Fund, the Savings Association Insurance Fund or any other
government agency.
Q. WHERE WILL THE STOCK BE TRADED?
A. Upon completion of the Conversion and Reorganization, SouthBanc Shares, Inc.
expects the stock to be traded over-the-counter and to be quoted on the
Nasdaq National Market under the symbol "PERT". Prior to the Conversion and
Reorganization, the Savings Bank Common Stock has been listed on the Nasdaq
Smallcap Market under the same symbol.
Q. CAN I CHANGE MY MIND AFTER I PLACE AN ORDER TO SUBSCRIBE FOR STOCK?
A. No. After receipt, your order may not be modified or withdrawn.
Q. WHAT IF I HAVE ADDITIONAL QUESTIONS OR REQUIRE MORE INFORMATION?
A. If you have any questions regarding the Conversion or need additional
information, please call our Stock Information Center at (XXX) XXX-XXXX,
Monday through Friday, between the hours of 10:00 A.M. and 4:00 P.M.
Please note that the Stock Information Center will be closed from 12:00 noon
DAY, MONTH DATE, 1998, through 12 noon DAY, MONTH DATE, 1998, in observance
of the _________________ holiday.
The shares of Common Stock offered in the Conversion and Reorganization are not
savings accounts or deposits and are not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency nor is the Common
Stock insured or guaranteed by Perpetual Bank, A Federal Savings Bank or
SouthBanc Shares, M.H.C. or SouthBanc Shares, Inc.
This is not an offer to sell or a solicitation of an offer to buy Common Stock.
The offer is made only by the Prospectus.
<PAGE>
<TABLE>
<CAPTION>
SOUTHBANC SHARES, M.H.C. REQUEST FOR INFORMATION
ABOUT THE CONVERSION AND REORGANIZATION
<S>
Please send : <C>
Mark Appropriate Box(es)[_]
[_] The Prospectus and Stock Order and Certification Forms Daytime
[_] The Amended Plan of Conversion and Agreement and Plan of Reorganization Phone: ( )
-----------------------
Evening
Phone: ( )
-----------------------
</TABLE>
I understand this request for information does not obligate us to purchase any
shares of SouthBanc Shares, Inc. Common Stock.
PLEASE RETURN THIS CARD IN THE ENCLOSED_____ POSTAGE-PAID ENVELOPE.
#9
<PAGE>
----------------------------
L O G O
----------------------------
PERPETUAL BANK, A FEDERAL SAVINGS BANK
Please Support Us
Vote Your
Proxy Card Today
- --------------------------------------------------------------------------------
IF YOU HAVE MORE THAN ONE ACCOUNT, YOU MAY HAVE RECEIVED MORE THAN ONE PROXY
CARD DEPENDING UPON THE OWNERSHIP STRUCTURE OF YOUR ACCOUNTS. PLEASE VOTE, SIGN
AND RETURN ALL PROXY CARDS THAT YOU RECEIVED.
- --------------------------------------------------------------------------------
#10
<PAGE>
[Perpetual Bank, A Federal Savings Bank]
____________________, 1998
Mr. John Smith
00-00 00 Drive
City, State 00000
Dear Mr. Smith:
We are pleased to announce that the Boards of Directors of Perpetual Bank, A
Federal Savings Bank (the "Savings Bank") and SouthBanc Shares, M.H.C. (the
"MHC") have adopted an Amended Plan of Conversion and Agreement and Plan of
Reorganization (the "Plan of Conversion"). As part of this plan, we have formed
SouthBanc Shares, Inc. (the "Company") which will own all of the Savings Bank's
stock. We are converting so that the Savings Bank and the MHC will be
structured in a form used by most other holding companies of savings
institutions and commercial banks and most other business entities, and to allow
our bank to become stronger.
You are cordially invited to join members of our senior management team at an
informational meeting to be held on ___________ at 7:30 p.m. to learn more about
the conversion and the stock offering.
A member of our staff will be calling to confirm your interest in attending the
meeting.
If you would like additional information regarding the meeting or our
conversion, please call our Stock Information Center at (XXX) XXX-XXXX. The
Stock Information Center is open Monday through Friday between the hours of
10:00 a.m. and 4:00 p.m.
Sincerely,
SIGNATURE
TITLE
The shares of Common Stock offered in the Conversion and Reorganization are not
savings accounts or deposits and are not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
This is not an offer to sell or a solicitation of an offer to buy Common Stock.
The offer is made only by the Prospectus.
(Printed by Stock Information Center)
#11
<PAGE>
[SouthBanc Shares, Inc.]
____________________, 1998
Dear Subscriber:
We hereby acknowledge receipt of your order for shares of Common Stock of
SouthBanc Shares, Inc.
At this time, we cannot confirm the number of shares of SouthBanc Shares, Inc.
Common Stock that will be issued to you. Such allocation will be made in
accordance with the Plan of Conversion and Agreement and Plan of Reorganization
following completion of the stock offering.
If you have any questions, please call our Stock Information Center at (XXX)
XXX-XXXX.
Sincerely,
SouthBanc Shares, Inc.
Stock Information Center
The shares of Common Stock offered in the Conversion and Reorganization are not
savings accounts or deposits and are not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
(Printed by Stock Information Center)
#12
<PAGE>
[SouthBanc Shares, Inc.]
____________________, 1998
[NAME]
[ADDRESS]
Dear Shareholder:
Our Subscription and Direct Community Offerings have been completed and we are
pleased to confirm your subscription for _________ shares of SouthBanc Shares,
Inc. common stock at a price of $20 per share.
Trading in our stock has commenced on the Nasdaq National Market under the
symbol "PERT". Your stock certificate will be mailed to you as soon as
possible. In addition, if your subscription was paid for by check, interest
will be mailed to you shortly.
On behalf of the directors and employees, we thank you for your interest in
SouthBanc Shares, Inc., and welcome you as a shareholder.
Sincerely,
SouthBanc Shares, Inc.
The shares of Common Stock offered in the Conversion and Reorganization are not
savings accounts or deposits and are not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
(Printed by Stock Information Center)
#13
<PAGE>
[SouthBanc Shares, Inc.]
____________________, 1998
Dear Interested Subscriber:
We recently completed our Subscription and Direct Community Offerings.
Unfortunately, due to the excellent response from our Eligible Account Holders,
stock was not available for our Supplemental Eligible Account Holders, Other
Members or community friends. If your subscription was paid for by check, a
refund of any balance due you with interest will be mailed to you promptly.
We appreciate your interest in SouthBanc Shares, Inc. and hope you become an
owner of our stock in the future. The stock trades on the Nasdaq National
Market under the symbol "PERT".
Sincerely,
SouthBanc Shares, Inc.
Stock Information Center
The shares of Common Stock offered in the Conversion and Reorganization are not
savings accounts or deposits and are not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
(Printed by Stock Information Center)
#14
<PAGE>
[SouthBanc Shares, Inc.]
____________________, 1998
Welcome Shareholder:
We are pleased to enclose the stock certificate that represents your share of
ownership in SouthBanc Shares, Inc., the holding company of Perpetual Bank, A
Federal Savings Bank.
Please examine your stock certificate to be certain that it is properly
registered. If you have any questions about your certificate, you should
contact the Transfer Agent immediately at the following address:
TRANSFER AGENT
Please also remember that your certificate is a negotiable instrument which
should be stored in a secure place, such as a safe deposit box or on deposit
with your stockbroker.
On behalf of the Board of Directors of SouthBanc Shares, Inc. and the employees
of Perpetual Bank, A Federal Savings Bank, I would like to thank you for
supporting our offering.
Sincerely,
SIGNATURE
TITLE
The shares of Common Stock offered in the Conversion and Reorganization are not
savings accounts or deposits and are not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
(Printed by Stock Information Center)
#15
<PAGE>
[SouthBanc Shares, Inc.]
____________________, 1998
Dear Interested Subscriber:
We regret to inform you that Perpetual Bank, A Federal Savings Bank, SouthBanc
Shares, M.H.C., and SouthBanc Shares, Inc. the holding company for Perpetual
Bank, A Federal Savings Bank, have decided not to accept your order for shares
of SouthBanc Shares, Inc. Common Stock in our Direct Community Offering. This
action is in accordance with our Amended Plan of Conversion and Agreement and
Plan of Reorganization which gives the Savings Bank, the Mutual Holding Company
and the Company, the absolute right to reject the subscription of any Community
Member, in whole or in part, in the Direct Community Offering.
Enclosed, therefore, is a check representing your subscription and interest
earned thereon.
Sincerely,
SouthBanc Shares, Inc.
Stock Information Center
(Printed by Stock Information Center)
#16
<PAGE>
[SANDLER O'NEILL & PARTNERS, L.P. LETTERHEAD]
____________________, 1998
To Our Friends:
We are enclosing the offering material for SouthBanc Shares, Inc. in connection
with the reorganization of Perpetual Bank, A Federal Savings Bank and SouthBanc
Shares, M.H.C., the mutual holding company of the Savings Bank, into the stock
holding company structure.
Sandler O'Neill & Partners, L.P. is managing SouthBanc Shares, Inc.'s
Subscription and Direct Community Offerings, which will conclude at 12:00 noon,
Eastern time on _____________ ____, 1998. Sandler O'Neill is also providing
conversion agent and proxy solicitation services. In the event that all the
stock is not subscribed for in the Subscription and Direct Community Offerings,
Sandler O'Neill will form and manage a syndicate of broker/dealers to sell the
remaining stock.
Members of the general public, other than residents of ______, are eligible to
participate. If you have any questions about this transaction, please do not
hesitate to call or write.
Sincerely,
SANDLER O'NEILL & PARTNERS, L.P.
The shares of Common Stock offered in the Conversion and Reorganization are not
savings accounts or deposits and are not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
This is not an offer to sell or a solicitation of an offer to buy Common Stock.
The offer is made only by the Prospectus.
(Printed by Sandler O'Neill)
#17
<PAGE>
----------------------------------------
CONVERSION APPRAISAL REPORT
SOUTHBANC SHARES, INC.
PROPOSED HOLDING COMPANY FOR
PERPETUAL BANK, A FEDERAL SAVINGS BANK
Anderson, South Carolina
Dated As Of:
December 5, 1997
----------------------------------------
Prepared By:
RP Financial, LC.
1700 North Moore Street
Suite 2210
Arlington, Virginia 22209
<PAGE>
[LETTERHEAD OF RP FINANCIAL, LC. APPEARS HERE]
December 5, 1997
Board of Directors
SouthBanc Shares, M.H.C.
Perpetual Bank, A Federal Savings Bank
907 North Main Street
Anderson, South Carolina 29621
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 by SouthBanc Shares, Inc. ("SouthBanc" or the
"Holding Company"), in connection with the mutual-to-stock conversion of
SouthBanc Shares, M.H.C., Anderson, South Carolina (the "Mutual Holding Company"
or the "MHC"). The Mutual Holding Company currently has a majority ownership
interest in, and its principal asset consists of, approximately 53.02 percent of
the common stock of Perpetual Bank, A Federal Savings Bank, Anderson, South
Carolina ("Perpetual" or the "Bank"). The remaining 46.98 percent of Perpetual's
common stock is owned by public stockholders (the "Public Shares"). It is our
understanding that the Holding Company will offer its stock to depositors,
members of the local community and the public at large.
This Appraisal is furnished pursuant to the requirements of the Code of
Federal Regulations 563b.7 and has been prepared in accordance with the
"Guidelines for Appraisal Reports for the Valuation of Savings and Loan
Associations Converting from Mutual to Stock Form of Organization" of the Office
of Thrift Supervision ("OTS"), which have been adopted in practice by the
Federal Deposit Insurance Corporation ("FDIC"), including the most recent
revisions as of October 21, 1994, and applicable regulatory interpretations
thereof.
Description of Reorganization
- -----------------------------
The Boards of Directors of Perpetual and the Mutual Holding Company have
adopted a Plan of Conversion and Agreement and Plan of Reorganization pursuant
to which the proposed transaction will occur. In the reorganization process, to
become effective concurrent with the completion of the stock sale, which is
targeted for the first calendar quarter of 1998: (1) the MHC, which currently
owns approximately 53.02 percent of the Holding Company, will convert to an
interim federal stock savings bank and merge with and into the Bank, with the
Bank being the surviving entity; (2) the outstanding Perpetual common stock held
by the MHC will be cancelled; (3) a second interim federal stock savings bank
will be formed as a wholly-owned subsidiary of SouthBanc and merge with and into
the Bank, resulting in the Bank becoming a wholly-owned subsidiary of the
Holding Company; and (4) the outstanding Public Shares of Perpetual will be
converted into Exchange Shares pursuant to an Exchange Ratio, which will result
in the holders of such shares owning in the aggregate approximately the same
percentage of the Holding Company as they currently own.
Pursuant to the reorganization, SouthBanc will issue shares in the
Subscription and Community Offerings that will represent an ownership interest
in the Holding Company equal to the percentage ownership that the MHC currently
maintains in SouthBanc. Also pursuant to the reorganization, the Holding Company
will issue the Exchange Shares to the current minority stockholders of the
Holding Company in exchange for the Public Shares pursuant to an exchange ratio
determined by the Board of Directors that will maintain approximately the
current minority stockholders' existing ownership interest (the Exchange Ratio).
<PAGE>
RP Financial, LC.
Board of Directors
December 5, 1997
Page 2
RP Financial, LC.
- -----------------
RP Financial, LC. ("RP Financial") is a financial consulting firm that
specializes in financial valuations and analyses of business enterprises and
securities. The background and experience of RP Financial are detailed in
Exhibit V-1. We believe that, except for the fee we will receive for our
appraisal of the shares to be issued by the Holding Company, and the preparation
of and the fee received for the regulatory business plan filed with the
application, we are independent of the Bank, the MHC, the Holding Company and
other parties engaged by the Bank to assist in the stock issuance process.
Valuation Methodology
- ---------------------
In preparing our appraisal, we have reviewed the MHC'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 and Exchange Commission ("SEC"). We have conducted an analysis of the
Bank and the MHC (hereinafter, collectively referred to as the "Bank") that has
included due diligence related discussions with the Bank's management; KPMG Peat
Marwick LLP, the Bank's independent auditor; Breyer and Aguggia, the Bank's
conversion counsel; and Sandler O'Neill & Partners, L.P., which has been
retained by the Bank as a financial and marketing advisor in connection with the
Holding Company's stock offering. All conclusions and assumptions 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 Bank
operates, and have assessed the Bank's relative strengths and weaknesses. We
have kept abreast of the changing regulatory and legislative environment and
analyzed the potential impact on the Bank and the industry as a whole. We have
analyzed the potential effects of the stock offering on the Bank's operating
characteristics and financial performance as they relate to the pro forma market
value of the Bank. We have reviewed the economy in the Bank's primary market
area and have compared the Bank's financial performance and condition with
selected publicly-traded thrift institutions. We have reviewed conditions in the
securities markets in general and for thrift stocks in particular, including the
market for existing thrift issues (including both full stock institutions and
institutions organized as mutual holding companies), initial public offerings by
thrifts and second step conversion offerings.
Our Appraisal is based on the Bank's representation that the information
contained in the regulatory applications and additional information furnished to
us by the Bank and its independent auditors are truthful, accurate and complete.
We did not independently verify the financial statements and other information
provided by the Bank and its independent auditors, nor did we independently
value the individual assets or liabilities of the Bank. The valuation considers
the Bank only as a publicly-held going concern and should not be considered as
an indication of the liquidation or control values of the Bank.
Our appraised value is predicated on a continuation of the current
operating environment for the Bank 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) may occur
from time to time, often with great unpredictability and may materially impact
the value of thrift stocks as a whole or the Bank's value alone. 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 the Holding
Company's shares 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.
<PAGE>
RP Financial, LC.
Board of Directors
December 5, 1997
Page 3
Valuation Conclusion
- --------------------
It is our opinion that, as of December 5, 1997, the aggregate pro forma
market value of the Bank and the Mutual Holding Company, inclusive of the sale
of an approximate 53.02 percent ownership interest in the Subscription and
Community Offerings, was $65,070,148 at the midpoint. Based on the range of
value set forth in the OTS conversion guidelines, the resultant valuation range
equals $55,309,626 at the minimum and $74,830,670 at the maximum. Based on this
valuation and the approximate 53.02 percent ownership interest being sold in the
Subscription and Community Offerings, the midpoint of the Holding Company's
stock offering was $34,500,000, equal to 1,725,000 shares offered at a per share
value of $20.00. The resultant offering range includes a minimum of $29,325,000
and a maximum of $39,675,000. Based on the $20.00 per share offering price,
this range equates to an offering of 1,466,250 shares at the minimum to
1,983,750 shares at the maximum. The Holding Company's offering also includes a
provision for a super range, which if exercised, based on a market value of
$86,055,271, would result in an offering size of $45,626,250, equal to 2,281,312
shares at the $20.00 per share offering price.
Establishment of Exchange Ratio
- -------------------------------
OTS regulations provide that in a conversion of a mutual holding company,
the minority stockholders are entitled to exchange their shares of the Bank's
common stock for common stock of the Holding Company. The Board of Directors of
the Mutual Holding Company has independently established a formula to determine
the exchange ratio. The formula has been designed to preserve the current
aggregate percentage ownership in the Bank represented by the Public Shares,
which results in an approximate 46.98 percent minority ownership interest.
Pursuant to the formula, the Exchange Ratio will be determined at the end of the
Holding Company's stock offering based on the total number of shares sold in the
Subscription and Community Offerings. Based upon this formula, and the
valuation conclusion and offering range concluded above, the Exchange Ratio
would be 1.83281 shares, 2.15625 shares, 2.47969 shares and 2.85164 shares of
Holding Company stock issued for each Public Share, at the minimum, midpoint,
maximum and super range of the offering, respectively.
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 initial offering will thereafter be able to sell
such shares at prices related to the foregoing valuation of the pro forma market
value. The Appraisal does not take into account any trading activity with
respect to the purchase and sale of common stock in the secondary market, and
reflects only a valuation range as of this date for the pro forma market value
of the Bank immediately upon issuance of the stock.
RP Financial's valuation was determined based on the financial condition,
operations and shares outstanding as of September 30, 1997, the date of the
financial data included in the Holding Company's Prospectus. The proposed
Exchange Ratio and the exchange of Public Shares for newly issued Holding
Company shares was determined independently by the Boards of Directors of the
MHC and the Bank. RP Financial expresses no opinion on the proposed Exchange
Ratio and the exchange of Public Shares for newly issued Holding Company shares.
<PAGE>
RP Financial, LC.
Board of Directors
December 5, 1997
Page 4
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.
The valuation will be updated should market conditions or changes in
Perpetual's operating results warrant. The valuation will also be updated at the
completion of the Holding Company's stock offering. These updates will consider,
among other things, any developments or changes in the Bank's financial
performance and condition, management policies, and current conditions in the
equity markets for thrift shares, both existing issues and new issues. Also,
these updates will consider changes in other external factors which impact value
including, but not limited to: various changes in the legislative and regulatory
environment (including changes in the appraisal guidelines), 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.
/s/ William E. Pommerening
William E. Pommerening
Chief Executive Officer
/s/ James J. Oren
James J. Oren
Vice President
<PAGE>
RP Financial, LC.
TABLE OF CONTENTS
SOUTHBANC SHARES, INC.
PERPETUAL BANK, A FEDERAL SAVINGS BANK
Anderson, South Carolina
<TABLE>
<CAPTION>
PAGE
DESCRIPTION NUMBER
----------- ------
CHAPTER ONE OVERVIEW AND FINANCIAL ANALYSIS
- -----------
<S> <C>
Plan of Conversion and Holding Company Reorganization 1.1
Strategic Discussion 1.2
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 1.14
Funding Composition and Strategy 1.14
Subsidiary Operations 1.16
Legal Proceedings 1.16
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 3.10
Summary 3.14
</TABLE>
<PAGE>
RP Financial, LC.
TABLE OF CONTENTS
SOUTHBANC SHARES, INC.
PERPETUAL BANK, A FEDERAL SAVINGS BANK
Anderson, South Carolina
(continued)
<TABLE>
<CAPTION>
PAGE
DESCRIPTION NUMBER
----------- ------
CHAPTER FOUR VALUATION ANALYSIS
- ------------
<S> <C>
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 4.4
5. Dividends 4.6
6. Liquidity of the Shares 4.7
7. Marketing of the Issue 4.7
A. The Public Market 4.8
B. The New Issue Market 4.13
C. Secondary Step Conversion Offerings 4.16
D. The Acquisition Market 4.16
E. Trading in Perpetual's Stock 4.16
8. Management 4.20
9. Effect of Government Regulation and Regulatory Reform 4.20
Summary of Adjustments 4.20
Valuation Approaches 4.21
1. Price-to-Tangible Book ("P/TB") 4.23
2. Price-to-Earnings ("P/E") 4.23
3. Price-to-Assets ("P/A") 4.24
Valuation Conclusion 4.24
Establishment of Exchange Ratio 4.25
</TABLE>
<PAGE>
RP Financial, LC.
LIST OF TABLES
SOUTHBANC SHARES, INC.
PERPETUAL BANK, A FEDERAL SAVINGS BANK
Anderson, South Carolina
<TABLE>
<CAPTION>
TABLE
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
<S> <S> <C>
1.1 Historical Balance Sheets 1.5
1.2 Historical Income Statements 1.8
2.1 Major Employers-Anderson 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 & Related Info. 3.11
3.5 Credit Risk Measures & Related Information 3.12
3.6 Interest Rate Risk Comparative Analysis 3.13
4.1 Peer Group Market Area Comparative Analysis 4.5
4.2 Recent Conversions: Market Pricing Comparatives 4.14
4.3 Market Pricing Comparatives 4.15
4.4 Completed Second Step Conversions 4.17
4.5 MHC Institutions - Implied Pricing Ratios 4.18
4.6 Key Valuation Parameters 4.21
4.7 Derivation of Estimated Core Earnings 4.24
4.8 Public Market Pricing: Valuation Conclusion 4.26
4.9 Calculation of Exchange Ratios 4.27
</TABLE>
<PAGE>
RP Financial, LC.
Page 1.1
I. OVERVIEW AND FINANCIAL ANALYSIS
Perpetual Bank, A Federal Savings Bank ("Perpetual" or the "Bank") is a
federally chartered stock savings bank headquartered in Anderson, South
Carolina. Perpetual is the subsidiary of a mutual holding company called
SouthBanc Shares, M.H.C. (the "Mutual Holding Company" or the "MHC"). The MHC
owns a 53.02 percent ownership interest in Perpetual, with the remaining 46.98
percent owned by non-MHC private investors. Perpetual was incorporated in 1906,
and converted to a stock institution pursuant to an initial mutual holding
company reorganization transaction in October 1993, during which the Bank sold
an estimated 7.9 percent of the Bank's common stock to the public and the
remaining shares to the Mutual Holding Company. During 1996, the Bank completed
an "Additional Minority Stock Issuance" (Additional Issuance), whereby the Bank
completed an additional offering of Bank common stock to then existing public
stockholders and members of the MHC, increasing the minority ownership
percentage to approximately 46.8 percent. The Bank presently serves the western
South Carolina markets surrounding the city of Anderson. The single largest
segment of the Bank's operations is in the Anderson area (Anderson County)
located near the western border of South Carolina, as the greatest concentration
of deposits, including the main office and four branch offices, are located in
Anderson. A fifth office location was opened in Seneca, Oconee County, South
Carolina in December 1996, located to the west of Anderson County. Exhibit I-1
presents the locations of Perpetual's office buildings.
The Bank is currently a member of the Federal Home Loan Bank ("FHLB")
system and its deposits are insured up to the regulatory maximums by the Savings
Association Insurance Fund ("SAIF") of the Federal Deposit Insurance Corporation
("FDIC"). At September 30, 1997, Perpetual had $257.0 million in total assets,
$201.0 million in deposits and stockholders' equity of $30.6 million, equal to
11.9 percent of assets. All of Perpetual's capital is tangible capital. At
September 30, 1997, the Bank had issued and outstanding 1,508,873 shares of
common stock, of which 800,000 were owned by the MHC and 708,873 were owned by
private investors.
Plan of Conversion and Holding Company Reorganization
- -----------------------------------------------------
On September 22, 1997, the Board of Directors of the Bank and the Mutual
Holding Company adopted the Plan of Conversion and Agreement and Plan of
Reorganization (the "Plan") pursuant to which the Mutual Holding Company will
convert from mutual to stock form and simultaneously merge with and into the
Bank. A newly formed Delaware corporation, SouthBanc Shares, Inc. ("SouthBanc"
or the "Holding Company"), will be formed as a unitary savings and loan holding
company to facilitate the reorganization. In the reorganization process, to
become effective concurrent with the completion of the stock sale which is
targeted for the first calendar quarter of 1998: (1) the MHC, which currently
owns approximately 53.02 percent of the Bank, will
<PAGE>
RP Financial, LC.
Page 1.2
convert to an interim federal stock savings bank and merge with and into the
Bank, with the Bank being the surviving entity; (2) the outstanding Perpetual
common stock held by the MHC will be cancelled; (3) a second interim federal
stock savings bank will be formed as a wholly-owned subsidiary of SouthBanc and
merge with and into the Bank, resulting in the Bank becoming a wholly-owned
subsidiary of the Holding Company operating under the name Perpetual Bank, A
Federal Savings Bank; and, (3) the outstanding publicly-owned shares of Bank
common stock (the "Public Shares") will be converted into shares of common stock
of the Holding Company (the "Exchange Shares") pursuant to a ratio that will
result in the holders of such shares owning approximately the same percentage of
the Company as they currently own of the Bank.
Pursuant to the reorganization, the SouthBanc will issue shares in a
subscription and community offering that will represent an ownership interest in
the Holding Company of approximately 53.02 percent, the percentage ownership
that the MHC currently maintains in the Bank. SouthBanc will also issue the
Exchange Shares to the current minority stockholders of the Bank. The number of
exchange shares issued by the Holding Company will be calculated pursuant to an
exchange ratio determined by the Board of Directors that will maintain the
current minority stockholders' existing ownership interest (the "Exchange
Ratio"), adjusted for assets currently held at the MHC level.
The Holding Company anticipates granting common stock awards to directors,
officers and other key personnel (1998 Management Recognition Plan or "1998
MRP") up to 4 percent of the shares being offered publicly, supplementing stock
awards granted in during 1996 (the "1996 MRP"). The Holding Company also
intends to implement, subject to stockholder approval, a stock option plan no
less than six months after conversion, which will reserve for future issuance
10 percent of the stock issued in the Subscription and Community offerings.
At this time, no other activities are contemplated for the Holding Company
other than the ownership of the Bank, although in the future the Holding Company
may acquire or organize other operating subsidiaries. The Holding Company plans
to retain a portion of the net proceeds from the sale of common stock and infuse
the remaining proceeds into the Bank.
Strategic Discussion
- --------------------
Throughout most of its existence, Perpetual's investment powers were
limited primarily to fixed rate mortgage loans, share loans and investment
securities funded by a limited range of deposit products. Since 1989, the Bank
has pursued a gradual refocus of operations to becoming a retail, community-
oriented bank, pursuing a diversified investment strategy that included consumer
and commercial lending, offering of non-traditional
<PAGE>
RP Financial, LC.
Page 1.3
products and services such as investment products, and pursuing growth in core
deposits. The objectives of these strategies have been to reduce interest rate
risk, diversify the Bank's earnings stream, and increase overall net income.
In recent years, the Bank has sought to position itself to survive in an
increasingly competitive and diversified financial services industry. The
Bank's efforts have included reorganizing into the stock form of ownership
through the 1993 mutual holding company conversion; pursuing acquisitions of
other financial institutions and branch deposits; further diversifying the
Bank's balance sheet through diversification of lending and investments;
increasing non-interest sources of income; and strengthening the Bank's retail
franchise through attracting and retaining core deposits in the local market.
These strategies have resulted in a degree of success. For example, the Bank
was successful in its mutual holding company reorganization, raising an
additional $1.2 million of capital in 1993 and $11.3 million in the Additional
Issuance transaction in 1996, and putting in place a corporate structure with
sufficient flexibility to pursue growth and acquisitions. Moreover, the Bank
has been successful in diversifying its balance sheet through increased lending
in the areas of construction, commercial real estate, commercial business and
residential adjustable rate mortgages ("ARMs"). Finally, the Bank has been
successful in increasing non-interest income through deposit fees and non-
traditional products such as retail brokerage services through its subsidiary
operations, and has been successful in increasing core deposits through
marketing of checking accounts. The Bank also successfully opened a new branch
office location in Seneca, Oconee County, South Carolina in December 1996 which
has gained over $10 million in new deposits as of September 1997. As a result,
the total size of the Bank's balance sheet and overall operations has increased
since fiscal year end 1993 indicating the success in pursuing retail growth in
the local markets.
Over the next several years, the Bank's business plan is to remain focused
on a continuation of its retail, community banking strategy, including pursuing
growth through acquisitions whenever possible. A key component of the business
plan is the full conversion offering, which is expected to raise in excess of
$30 million in new capital at the midpoint of the valuation range. The
additional capital is expected to provide the Bank with greater flexibility to
pursue a growth strategy in the future, and will be needed to support the
resulting anticipated balance sheet growth. Key aspects of Perpetual's current
business plan include the following:
(1) Continue to diversify the Bank's balance sheet by pursuing
commercial business lending, commercial real estate lending,
consumer lending and residential ARM lending (including purchasing
residential ARMs from selected South Carolina lenders);
(2) Build and maintain the Bank's retail customer base by increasing
consumer checking accounts, expanding the Bank's retail branch
network in Anderson, and providing a full range of loan and
investment products;
<PAGE>
RP Financial, LC.
Page 1.4
(3) Retain a residential lending emphasis by originating residential
loans locally (Anderson and surrounding markets) and purchasing high
quality residential loans, primarily residential ARMs, from selected
South Carolina lenders;
(4) Attempt to reduce interest rate risk through adjustable rate and
short-term lending, emphasis on stable core deposits, and
lengthening whenever possible the maturity of liabilities;
(5) Preserve strong asset quality through a focus on residential lending
and careful underwriting;
(6) Enhance shareholder returns through efforts to increase non-interest
income, increase net interest income, pursue balance sheet growth,
and continued efforts to control operating expenses;
(7) Pursue acquisition opportunities (institutions and branch deposits)
to leverage capital, enter new markets, and increase market share
locally; and,
(8) Position the Bank for future growth by raising additional capital
through the full conversion stock offering.
Balance Sheet Trends
- --------------------
Table 1.1 shows key balance sheet items at the close of the last five
fiscal years ended September 30, 1993 through 1997. Over this time period,
Perpetual followed a growth strategy, realizing annualized asset growth of
11.2 percent, although most of the growth occurred during the most recent two
fiscal years. Over the past four years, the composition of the Bank's asset
base has changed, as the balance of mortgage-backed securities ("MBS") has been
reduced, while the balance of cash and investments and loans receivable have
shown strong increases. The composition of the Bank's liabilities and
stockholders' equity has also experienced change, as deposits, borrowings and
equity have all increased substantially. Exhibit I-2 presents the Bank's
audited financial statements, while Exhibit I-3 displays Perpetual's key
operating ratios over the past five years.
As of September 30, 1997, the largest component of the Bank's balance sheet
was loans receivable, which equaled $178.8 million, or 69.6 percent of total
assets. Consistent with the Bank's emphasis on retail lending, the balance of
loans receivable has increased at an annualized rate of 16.5 percent since
fiscal year-end 1993, faster than overall asset growth. Growth in loans
receivable has accelerated in the past two fiscal years as the Bank has
increased its activity in residential lending by augmenting local loan
production with loan purchases from selected South Carolina lenders and mortgage
brokers, and from a mortgage company in which a service corporation subsidiary
of the Bank has an equity investment. Perpetual has also increased lending
activities in the areas of commercial real estate, commercial business and
consumer loans, while construction lending declined in the most recent fiscal
year. The Bank's loan portfolio continues to reflect that of a residential
lender, with a concentration of 1-4 family residential mortgages (66 percent of
net loans receivable) and construction loans, primarily residential construction
(10 percent). The diversification in the Bank's portfolio is highlighted by
<PAGE>
RP Financial, LC.
Table 1.1
Perpetual Bank, A Federal Savings Bank
Historical Balance Sheets (1)
(Amount and Percent of Assets)
<TABLE>
<CAPTION>
For the Fiscal Year Ended September 30,
----------------------------------------------------------------
1993 1994 1995
------------------- --------------------- -------------------
Amount Pct Amount Pct Amount Pct
------ --- ------ --- ------ ---
($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C>
Total Amount of:
Assets $168,308 100.00% $171,533 100.00% $178,304 100.00%
Loans Receivable (net) 97,004 57.63% 104,852 61.13% 116,539 65.36%
Mortgage-Backed Securities 58,677 34.86% 50,064 29.19% 46,344 25.99%
Cash and Investment Securities 6,989 4.15% 10,084 5.88% 9,829 5.51%
Deposits 143,871 85.48% 143,380 83.59% 148,709 83.40%
FHLB Advances, Other Borrowed Funds 8,500 5.05% 10,500 6.12% 8,000 4.49%
Stockholders Equity 13,921 8.27% 14,637 8.53% 18,232 10.23%
AFS Adjustment --- --- (2,321) -1.35% (609) -0.34%
Shares Outstanding for BV/Share Calc. (2) N/A 1,503,943 1,504,601
Wghtd Avg Shrs for EPS Calculations (2) N/A 1,502,418 1,504,059
Book Value/Share N/A $9.73 $12.12
Offices Open 3 4 5
<CAPTION>
9/30/93-
For the Fiscal Year Ended September 30, 9/30/97
--------------------------------------------- Annualized
1996 1997 Growth Rate
------------------ -------------------- -----------
Amount Pct Amount Pct Pct
------ --- ------ --- ---
($000) (%) ($000) (%) (%)
<S> <C> <C> <C> <C> <C>
Total Amount of:
Assets $209,827 100.00% $256,993 100.00% 11.16%
Loans Receivable (net) 140,758 67.08% 178,772 69.56% 16.51%
Mortgage-Backed Securities 43,125 20.55% 35,863 13.95% -11.58%
Cash and Investment Securities 17,072 8.14% 31,479 12.25% 45.68%
Deposits 160,244 76.37% 201,002 78.21% 8.72%
FHLB Advances, Other Borrowed Funds 16,000 7.63% 15,000 5.84% 15.26%
Stockholders Equity 29,091 13.86% 30,602 11.91% 21.76%
AFS Adjustment (817) -0.39% 188 0.07%
Shares Outstanding for BV/Share Calc. (2) 1,504,601 1,508,873
Wghtd Avg Shrs for EPS Calculations (2) 1,504,601 1,505,432
Book Value/Share $19.33 $20.28
Offices Open 5 6
</TABLE>
(1) Ratios are as a percent of ending assets.
(2) The Bank's initial sale of stock was completed in October 1993 and a second
minority stock offering was completed in September 1996.
Source: Perpetual's audited financial statements.
<PAGE>
RP Financial, LC.
Page 1.6
concentrations of non-residential loans, including commercial real estate (15
percent), consumer (11 percent), commercial business (4 percent), and multi-
family loans (1 percent) which comprise the remainder of the portfolio.
The second largest balance sheet category, MBS is comprised of conventional
MBS, collateralized mortgage obligations ("CMOs"), and other guaranteed
securities. The total MBS portfolio had a balance of $35.9 million as of
September 30, 1997, equal to 14.0 percent of total assets. The Bank's portfolio
of MBS provides the Bank with relatively strong yields and limited credit risk
as all investments are issued by the U.S. Government or its Agencies (GNMA,
FNMA, FHLMC) or are investment grade instruments guaranteed by the funding arm
of the Resolution Trust Corporation. The portfolio of MBS has declined steadily
over the past four years as a result of normal scheduled principal retirement
and prepayments, as Perpetual has opted to reinvestment available funds into
whole loans receivable. In addition, during fiscal 1997, Perpetual completed a
restructuring of the MBS portfolio by selling a portion of the CMO portfolio and
utilizing the proceeds to purchase short- and intermediate-term MBS and other
investment securities. The Bank's entire portfolio of MBS is held as Available
for Sale ("AFS"), and is thus carried on the books at its estimated market value
pursuant to SFAS No. 115.
As of September 30, 1997, Perpetual's portfolio of cash and investment
securities totaled $31.5 million, equal to 12.3 percent of total assets (see
Exhibit I-4). The balance of cash and investments has increased from
$9.8 million as of September 30, 1995, as the growth in all funding sources has
exceeded the Bank's lending volume and due to the reinvestment of funds from the
sale of CMOs. As of September 30, 1997, the portfolio of cash and investments
was comprised cash and cash equivalents ($13.5 million), U.S. Treasury and
Agency securities ($11.3 million, FHLB stock ($1.7 million) and an investment in
a Limited Partnership ($5.0 million). Perpetual's investment in a Limited
Partnership consisted of a 20.625 percent interest in Dovenmuehle Mortgage
Company Limited Partnership ("Dovenmuehle"), which invests in mortgage servicing
rights. The Bank's investment in Dovenmuehle was completed in December of 1996,
and as of fiscal year end 1997, assets of Dovenmuehle totaled $52.4 million, of
which $48.4 million consisted of purchased mortgage servicing rights. All of
the U.S. Treasury and Agencies securities are classified as AFS, with an
unrealized pre-tax gain of $137,000 as of September 30, 1997.
As of September 30, 1997, the Bank's assets were funded with a combination
of deposits, borrowed funds and stockholders' equity. Retail deposits have
consistently met the majority of Perpetual's funding needs, and over the last
four years the balance of deposits has increased at an annualized rate of
8.7 percent. Deposits increased by $40.8 million, or 25.4 percent, for fiscal
1997, as the Bank benefited from the opening of the Seneca branch in Oconee
County, from deposits gained from more aggressive marketing of certain
certificate of deposit ("CD") products such as special 7-month and 13-month CDs,
and from marketing efforts to open additional checking accounts. As of
September 30, 1997, deposits totaled $201.0 million, equal to 78.2 percent of
total
<PAGE>
RP Financial, LC.
Page 1.7
liabilities and stockholders' equity. Virtually all of the Bank's deposits are
taken in by the Bank's main office and five branches from depositors who reside
in Perpetual's primary market area. The Bank does not utilize brokered CDs as a
funding source although jumbo deposits are employed on a regular but limited
basis.
Borrowings obtained by the Bank since fiscal 1993 have consisted of FHLB
advances and reverse repurchase agreement borrowings. As of September 30, 1997,
borrowings totaled $15.0 million or 5.8 percent of total liabilities and
stockholders' equity, and consisted solely of FHLB advances. During fiscal
1995, the Bank utilized a significant amount of FHLB advances (approximately
$42 million) in conjunction with a temporary financing transaction (discussed in
greater detail in the "Income and Expense Trends" section following). Such
borrowings have subsequently been paid down. It is Perpetual's current
philosophy to continue to utilize borrowings to fund operations, but to utilize
such funds on limited basis for liquidity or other special purposes.
Perpetual's stockholders' equity has realized significant growth since
1993, increasing from $13.9 million or 8.3 percent of assets at the close of
fiscal 1993 to $30.6 million or 11.9 percent of assets currently. The increases
in stockholders' equity are attributable primarily to positive earnings for the
past four years and the successful MHC reorganization and stock issuance in 1993
and Additional Minority Stock Issuance in 1996. As of September 30, 1997,
Perpetual maintained a capital surplus relative to all three fully phased-in
regulatory capital requirements: tangible, core and risk-based. Perpetual's
plan for the future is to enhance capital through retention of earnings and
through the secondary offering of common stock.
Income and Expense Trends
- -------------------------
The Bank has reported positive net income for the five fiscal years ended
September 30, 1997, with earnings ranging from a low of 0.72 percent in fiscal
1997 to a high of 1.40 percent in fiscal 1994 (see Table 1.2 for details). For
the twelve months ended September 30, 1997, net income equaled $1.7 million,
equivalent to a ROAA of 0.72 percent.
Since fiscal 1993, Perpetual's net interest income before provisions for
loan losses has ranged from a high of 3.95 percent of average assets in fiscal
1996 to a low of 2.29 percent of average assets in fiscal 1995, with net
interest income supported by a relatively low level of interest expense (over
30 percent of the Bank's deposit base consists of lower costing savings and
transaction accounts). Net interest income was 3.71 percent of average assets
in the twelve months ended September 30, 1997. The significant decline in net
interest income during fiscal 1995 is attributable to a financing transaction
completed by the Bank, in which Perpetual borrowed approximately $42 million in
FHLB advances (incurring interest expense) and purchased approximately
$50 million of a mutual fund that generated capital gains (recognized as gains
on sale). This financing transaction
<PAGE>
RP Financial, LC.
Table 1.2
Perpetual Bank, A Federal Savings Bank
Historical Income Statements
(Amount and Percent of Assets)(1)
<TABLE>
<CAPTION>
For the Fiscal Year Ended September 30,
-------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997
--------------- --------------- --------------- --------------- ---------------
Amount Pct Amount Pct Amount Pct Amount Pct Amount Pct
------ --- ------ --- ------ --- ------ --- ------ ---
($000) (%) ($000) (%) ($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income $12,034 7.13% $12,075 6.96% $13,543 6.50% $14,921 7.86% $18,396 7.66%
Interest Expense (6,184) -3.66% (5,624) -3.24% (8,761) -4.20% (7,425) -3.91% (9,496) -3.96%
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Interest Income $ 5,850 3.47% $ 6,451 3.72% $ 4,782 2.29% $ 7,496 3.95% $ 8,900 3.71%
Provision for Loan Losses (364) -0.22% (120) -0.07% (362) -0.17% (349) -0.18% (655) -0.27%
---- ------ ---- ------ ---- ------ ---- ------ ---- ------
Net Interest Income after Provisions $ 5,486 3.25% $ 6,331 3.65% $ 4,420 2.12% $ 7,147 3.76% $ 8,245 3.43%
Other Income $ 1,026 0.61% $ 1,100 0.63% $ 1,339 0.64% $ 1,818 0.96% $ 2,322 0.97%
Operating Expense (4,414) -2.62% (4,749) -2.74% (5,540) -2.66% (5,948) -3.13% (7,638) -3.18%
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Operating Income $ 2,098 1.24% $ 2,681 1.55% $ 219 0.11% $ 3,017 1.59% $ 2,929 1.22%
Gain (Loss) on Sale of Investments $ 162 0.10% $ 130 0.08% $ 1,777 0.85% $ 54 0.03% $ (308) -0.13%
Gain (Loss) on Sale of Loans 373 0.22% 287 0.17% 67 0.03% (23) -0.01% 13 0.01%
Gain (Loss) on Sale of REO 52 0.03% 49 0.03% 48 0.02% 79 0.04% 20 0.01%
SAIF Special Assessment 0 0.00% 0 0.00% 0 0.00% (946) -0.50% 0 0.00%
- ----- - ----- - ----- ---- ------ - -----
Total Non-Operating Inc.\Exp. $ 587 0.35% $ 466 0.27% $ 1,892 0.91% $ (836) -0.44% $ (275) -0.11%
Net Income Before Tax $ 2,685 1.59% $ 3,147 1.81% $ 2,111 1.01% $ 2,180 1.15% $ 2,654 1.11%
Income Taxes (947) -0.56% (1,064) -0.61% (194) -0.09% (756) -0.40% (926) -0.39%
---- ------ ------ ------ ---- ------ ---- ------ ---- ------
Net Inc(Loss) Before Extraordinary
Items $ 1,738 1.03% $ 2,083 1.20% $ 1,917 0.92% $ 1,424 0.75% $ 1,728 0.72%
Cumulative Effect of Change in
Accounting For Income Taxes $ 0 0.00% $ 350 0.20% $ 0 0.00% $ 0 0.00% $ 0 0.00%
- ----- --- ----- - ----- - ----- - -----
Net Income (Loss) $ 1,738 1.03% $ 2,433 1.40% $ 1,917 0.92% $ 1,424 0.75% $ 1,728 0.72%
<CAPTION>
Earnings Excluding Non-Operating and Extraord. Items:
- ----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pre-Tax Net Inc. Before Extraordinary
Items $ 2,685 1.59% $ 3,147 1.81% $ 2,111 1.01% $ 2,180 1.15% $ 2,654 1.11%
Addback (Deduct): Non-Recurring
(Inc)/Exp (587) -0.35% (466) -0.27% (1,892) -0.91% 836 0.44% 275 0.11%
Tax Effect (740) -0.44% (907) -0.52% (20) -0.01% (1,046) -0.55% (1,022) -0.43%
---- ------ ---- ------ --- ------ ------ ------ ------ ------
Earnings Excl. Non-Op./Extraord Items: $ 1,358 0.80% $ 1,775 1.02% $ 199 0.10% $ 1,971 1.04% $ 1,908 0.79%
Earnings Per Share:
Reported N/A $ 1.62 $ 1.27 $ 0.95 $ 1.15
Earnings Excl. Non-Op/Extraord Items: N/A 1.18 0.13 1.31 1.27
Dividends:
Amount N/A $ 0.76 $ 1.05 $ 1.20 $ 1.35
Payout Ratio N/A 1.94% 6.20% 10.08% 53.07%
Efficiency Ratio 64.20% 62.90% 90.51% 63.86% 68.06%
</TABLE>
(1) Ratios are as a percent of average assets. Average assets calculated based
on annual average.
(2) Based on the effective tax rate for each year.
Source: Perpetual's audited financial statements.
<PAGE>
RP Financial, LC.
Page 1.9
temporarily depressed net interest income and inflated gains on sale reported by
the Bank. The volatility in the Bank's net interest income tends to distorts
the stability of the Bank's yield-cost spread. As shown in Perpetual's
historical yields and costs information (Exhibit I-5), the Bank's interest rate
spread has been relatively consistent, ranging from 3.59 percent in fiscal 1997
to 3.85 percent in fiscal 1996.
Perpetual has pursued diversification and expansion of its retail banking
activities in recent years, and as a result, the Bank has successfully generated
an increase in non-interest operating income over the period shown in Table 1.2.
Such income, shown as "Other Income" in the table, ranged from 0.61 percent of
average assets in fiscal 1993 to 0.97 percent of assets in fiscal 1997. Other
income primarily consists of loan and deposit account service charges and fees,
which have increased due to the Bank's growing loan and deposit portfolios and a
higher number of deposit checking accounts (NOTE: a corresponding increase is
seen in operating expenses which is attributable to the marketing efforts
required to attract checking accounts). Additional income was recognized for
fiscal 1997 from the investment in Dovenmuehle, which provides partnership
income from purchased mortgage servicing rights. Other income was gained from
brokerage fees from subsidiary operations, income on loans serviced for others,
rental income from Bank owned properties and other retail banking fees.
For the twelve months ended September 30, 1997, operating expenses totaled
3.18 percent of average assets, which represents an increase relative to
operating expense levels from past years. The Bank's operating expenses are
higher than industry averages (see Table 3.3 in Chapter III), and they reflect
the greater level of operating diversification of the Bank which tends to incur
greater operating expenses. The increase in the Bank's operating expense in the
recent past reflects, among other things, the marketing and mailing costs
associated with the Bank's efforts to attract checking accounts, the opening of
the new Seneca branch office location, the relocation of the Perpetual Square
office, the opening of a customer "call center", staffed by a number of customer
service representatives, the purchase of additional computer equipment and
additional expenses associated with Perpetual's ESOP and MRP established in the
1996 Additional Minority Stock Issuance. Perpetual's operating expenses are
expected to increase in the near term following conversion as a result of full
implementation of the MRP benefits plan expenses, including the 1998 MRP that is
expected to purchase stock in the Holding Company in the amount of 4.0 percent
of the stock in the year following conversion. The amortization expenses
associated with this new plan and full implementation of the 1996 MRP will be
included in the Bank's future operating expenses.
Loss provisions recorded by the Bank have been moderate, but consistent,
factors in the Bank's earnings over the last several fiscal years (see
Exhibit I-6). For the twelve months ended September 30, 1997, loan loss
provisions equaled 0.27 percent of average assets. The level of loan loss
provisions established in fiscal 1997 was higher than past years, but was
established concurrent with the increase in the Bank's loan portfolio including
commercial real estate, commercial business and consumer loans. Going forward,
Perpetual intends to continue
<PAGE>
RP Financial, LC.
Page 1.10
to evaluate the adequacy of the level of general valuation allowances ("GVAs")
on a regular basis and the Bank has indicated that loan loss provisions will
continue to be established as determined necessary by the Bank's management in
accordance with asset classification and loss reserve policies.
Non-operating income and expenses have had an influence on Perpetual's net
income. During fiscal 1997, the largest non-operating item consisted of a loss
of $308,000 incurred on the sale of CMOs, with the funds subsequently reinvested
into other investment securities. During fiscal 1995, the Bank recorded a
capital gain as a result of a financing transaction designed to utilized a
capital loss carryforward of the Bank. As of September 30, 1997, the financing
transaction ($42 million in FHLB advances and $50 million in a mutual fund) has
been unwound and no further significant capital gains are anticipated from this
source. The other sources of non-operating income over the past five years are
attributable to gains or losses on the sale of investment securities, loans
originated for resale in the secondary market and sale of real estate owned.
During fiscal 1996, as was the case of all SAIF-insured thrifts, Perpetual was
required to book the SAIF recapitalization assessment fee, in the amount of
$946,000.
Interest Rate Risk Management
- -----------------------------
Perpetual manages interest rate risk from both the asset and liability
sides of the balance sheet. With regard to asset strategies, the Bank has
successfully increased the interest sensitivity of its assets by maintaining a
balance of short-term CMOs in the MBS portfolio (i.e., 61 percent of total MBS
are in the form of CMOs), increasing the balances of short-term loans such as
construction loans, commercial real estate loans, commercial business loans, and
increasing the balances of residential ARMs through originations and purchases.
The Bank's liability strategies have included lengthening the term to maturity
of CDs and, more recently, attracting retail checking accounts. The combination
of these strategies has successfully reduced exposure to rising interest rates.
Specifically, at September 30, 1997, the Bank reported that net portfolio value
("NPV") would decrease by 17 percent and increase by 13 percent, respectively,
under a 200 basis point instantaneous and sustained increase and decrease in
prevailing rates (see Exhibit I-7). Perpetual's NPV measures indicate that the
Bank has been somewhat successful in limiting interest rate risk exposure. (The
success of these policies is shown in the stability in Perpetual's yield-cost
spread in the past three years as shown in Exhibit I-5). The completion of the
full conversion offering should facilitate efforts to further control interest
rate risk, as the offering proceeds can be reinvested to enhance core earnings
and as the ratio of interest-earning assets to interest-bearing liabilities is
improved. Perpetual's fixed rate and adjustable rate loans are shown in
Exhibit I-8.
<PAGE>
RP Financial, LC.
Page 1.11
Lending Activities and Strategy
- -------------------------------
Perpetual's lending activities have traditionally concentrated on the
origination of 1-4 family permanent mortgage loans (see Exhibits I-9, I-10 and
I-11, loan composition, lending activity and contractual maturity by loan type,
respectively). As of September 30, 1997, the Bank maintained its concentration
on residential lending, as mortgage loans secured by 1-4 family properties
totaled $118.3 million, or 66 percent of net loans receivable. The remainder of
the portfolio exhibits generally broad diversification, including commercial
real estate, construction, consumer and commercial loans.
Perpetual offers a variety of residential mortgage products, including
fixed-rate residential mortgages and residential ARMs. The Bank also purchases
residential mortgage loans, (both fixed and adjustable rate) to supplement
internal loan originations. Fixed rate 1-4 family loans are offered by
Perpetual with fully amortizing or balloon terms, and are generally priced based
on secondary market pricing to facilitate their resale into the secondary
market. Fixed rate 1-4 family mortgages are originated with terms ranging from
15 to 30 years. Conforming fixed rate 1-4 family loans are generally sold into
the secondary market on a servicing retained basis, with such loans currently
sold to a local mortgage company. Perpetual retains any non-conforming 1-4
family fixed-rate loans in its portfolio, although such volume is relatively
low. At September 30, 1997, fixed-rate residential mortgages due more than one
year after September 30, 1997 totaled approximately $48 million, or 58 percent
of the residential mortgage loan portfolio.
Perpetual also originates and purchases ARMs with maturities of up to
30 years, and residential ARMs totaled $46 million, or 26 percent of net loans
receivable and 41 percent of residential mortgages at September 30, 1997. The
Bank offers several ARM programs, including a one-year ARM, a three-year ARM, a
5/1 ARM and a 10/1 ARM. The one-year ARM, 5/1 ARM and 10/1 ARM are all index to
the one year constant maturity Treasury ("CMT") index, and the three-year ARM is
indexed to the three year CMT. Periodic rate adjustments for ARMs are limited
to 2/6 percentage points for the periodic and lifetime adjustments on one-year
and three-year ARMs, and are limited to 2/5 percentage points for the 5/1 and
10/1 ARM products. Adjustment margins vary by product, currently ranging
between 2.75 percent for the three-year ARM to 3.00 percent for the 5/1 and 10/1
ARMs. The Bank qualifies the borrowers on its three-year, 5/1 and 10/1 ARMs
based on the initial rates, and qualifies borrowers for its one-year ARMs at the
fully indexed rate. The Bank also offers two "two step" mortgages, a five-year
2-step loan and a seven-year 2-step loan, both of which adjust relative to the
10 year CMT plus an adjustment margin. Due to the decline in demand for ARMs in
the low interest rate environment in recent years, in 1995 the Bank began
purchasing ARMs from third party lenders who originate ARMs in markets outside
of Anderson County, including larger, non-conforming loans secured by residences
on Hilton Head Island and other areas in the southern part of South Carolina.
In addition, Perpetual in recent periods has purchased 1-4
<PAGE>
RP Financial, LC.
Page 1.12
family mortgage loans secured by properties located primarily in Greenville,
South Carolina, with such loans purchased from a mortgage company in which a
service corporation subsidiary of the Bank has an equity investment. As of
September 30, 1997, the portfolio of loans purchased by Perpetual totaled
$23.7 million of 1-4 family residential mortgage loans. Management believes that
it is managing the credit risk associated with purchasing loans by underwriting
such loans according to the guidelines of the Bank.
All residential mortgage loans have maximum loan-to-value ("LTVs") ratios
of 95 percent. Loans with LTVs in excess of 80 percent are required to have
private mortgage insurance ("PMI"). The majority of the residential loans
originated by the Bank are secured by properties located in its primary lending
territory, with lesser concentrations of loans in Hilton Head and other South
Carolina markets. Residential mortgage originations are typically generated
through either loan purchases from established third party lenders, the
Greenville-based mortgage banking company, or by Perpetual's in-house
originators utilizing existing and past customers, realtors, referrals, walk-ins
and, to a lesser degree, local advertising.
Perpetual's loan portfolio is diversified into commercial real estate,
construction, consumer and commercial business loans. As of September 30,
1997, commercial real estate and multi-family loans (collectively, "income-
property loans") comprised $28.2 million, or 16 percent of net loans receivable
with the majority of such loans consisting of commercial real estate loans.
Since fiscal 1993, the Bank has rapidly grown the portfolio of such loans in
efforts to become more of a full service community bank and for the yield
advantages such loans offer. The portfolio of such loans has more than tripled
from the level of $8.0 million, or 7 percent of gross loans at fiscal year end
1995. Commercial real estate loans totaled $27.0 million at September 30, 1997
and are secured primarily by shopping centers, small warehouses, and small
commercial buildings. Loans secured by multi-family residences totaled
$1.2 million. The majority of income property loans are originated as
adjustable rate loans, with rates generally tied to the Prime rate of interest
plus a margin, generally with a balloon feature at five years. The Bank also
originates fixed rate loans, generally with a balloon feature at five years.
From time to time the Bank will purchase commercial real estate mortgages from
third party originators, with such loans required to meet the underwriting
standards of the Bank. Mortgages secured by income property require certified
appraisals, personal guarantees, and minimum debt service coverage ratios, and
are originated by the Bank with maximum LTV ratios of 80 percent. Perpetual
generally limits such lending to properties in the market area and generally
lends to borrowers who are well known to the Bank. Perpetual originates
commercial real estate loans with its in-house origination staff and also
purchases commercial real estate loans from established third party lenders,
provided such loans can meet the Bank's underwriting criteria.
<PAGE>
RP Financial, LC.
Page 1.13
Construction lending is also an area of lending diversification, and
construction loans totaled $17.1 million, or 10 percent of net loans receivable,
as of September 30, 1997. Construction loans, primarily for the construction of
1-4 family residences, are offered both to individuals and local builders.
Loans to individuals are usually "construction/permanent" loans that are
interest-only for the construction period, after which they convert to fully
amortizing loans of the Bank. Loans to local builders are made on either a pre-
sold or "speculative" basis. Construction loans to builders are primarily
short-term loans with fixed interest rates (interest-only). To reduce the risk
of credit losses, the Bank generally limits the number of speculative
construction loans to 2 or 3 per builder, does site inspections prior to
disbursing funds, and rotates the inspectors among the various builder
relationships. The Bank has been very active in construction lending, which has
contributed to the overall growth in the loan portfolio, and views construction
loans as a good source of end loans for its portfolio. During fiscal 1997,
Perpetual also purchased speculative construction loans secured by 1-4 family
properties located on Hilton Head Island, South Carolina.
Consumer lending includes several types of loans, the most significant of
which are home equity loans and lines of credit and traditional consumer credit.
Home equity loans and lines of credit totaled $12.6 million at September 30,
1997, equal to 7 percent of net loans receivable. Perpetual's home equity loans
are generally fixed rate loans with terms of 5 to 15 years. Home equity lines
are floating rate loans with rates tied to the Prime rate of interest plus a
0.5 to 0.75 percentage point margin, and with terms of 5 to 15 years. Home
equity loans and home equity lines are generally underwritten with maximum LTVs
of 80 percent (including any senior liens on the property), although in some
circumstances the Bank will originate such loans with LTVs of 100 percent.
Other consumer credit totaled $6.6 million at September 30, 1997, equal to
4 percent of gross loans receivable, and consisted of automobile loans, personal
loans, and other types of non-mortgage loans. Perpetual has experienced a
moderate decline in the portfolio of consumer loans since fiscal 1993, primarily
due to a decline in the balance of home equity loans.
The remainder of Perpetual's loan portfolio consisted of loans secured by
commercial business loans, which totaled $7.2 million or 4 percent of net loans
receivable at September 30, 1997. Such loans are primarily secured by business
equipment or are commercial lines of credit. Commercial lines of credit include
secured and unsecured loans, generally with interest rates tied to the Prime
lending rate plus 1.0 percent and one year renewal features. The recent growth
in the portfolio of commercial business loans is largely attributable to
increased such lending initiated by the newly installed commercial lender.
Perpetual experienced a significant increase in loans receivable between
September 30, 1993 and September 30, 1997. The increase resulted from a
combination of several factors, including increased income property lending and
commercial business lending (both related to the recently installed commercial
lender) and loan purchases from other local South Carolina lenders. The loan
growth trend is highlighted in Exhibit I-10,
<PAGE>
RP Financial, LC.
Page 1.14
which shows that Perpetual's commercial real estate and multi-family loan
originations increased from $6.3 million in fiscal 1995 to $12.2 million for the
twelve months ended September 30, 1997. During the same period, originations of
commercial business loans increased from $4.7 million to $10.7 million. Another
key reason for growth in the loan portfolio has been the purchase of loans from
outside sources. As shown in Exhibit I-10, during the twelve months ended
September 30, 1997, the Bank purchased $23.6 million in residential mortgages
and $3.1 million in commercial real estate mortgages from third party lenders,
both of which are sharp increases from 1995 levels. Loan sales consisted largely
of conforming fixed-rate 1-4 family mortgages. As of September 30, 1997, the
Bank's portfolio of loans serviced for others totaled approximately $62 million.
In addition to the Bank's portfolio of loans serviced for others, in
December 1996 the Bank purchased a 20.625 percent interest in a limited
partnership that invests in mortgage servicing rights. Through this limited
partnership, Perpetual invests in a particular tranche of servicing rights tied
to a national portfolio of residential mortgage loans. For the year ended
September 30, 1997, the Bank's return on investment was approximately
5.89 percent and Perpetual recorded other income of $185,000 on the investment
based on net income of the limited partnership. As of September 30, 1997,
Perpetual maintained an investment in the limited partnership, Dovenmuehle,
totaling $5.0 million.
Asset Quality
- -------------
As shown in Exhibit I-12, the credit quality of Perpetual's loan portfolio
has been relatively good, reflecting an increasing balance over the last three
fiscal years. As of September 30, 1997, non-performing assets consisted of
$0.4 million of non-accruing loans, $0.5 million of accruing loans that were in
excess of 90 days delinquent, and $0.2 million of real estate owned ("REO").
Overall, NPAs equaled $1.0 million, equal to 0.41 percent of assets as of
September 30, 1997. The Bank's overall loss exposure in NPAs is believed to be
moderate, as the Bank maintained valuation allowances equal to $1.9 million of
September 30, 1997. Valuation allowances were equal to 1.05 percent and
180.48 percent of net loans receivable and NPAs, respectively. The Bank's
classified assets are shown in Exhibit I-13.
Funding Strategy
- ----------------
As of September 30, 1997, the Bank's assets were funded with deposits,
borrowed funds, stockholders' equity, liquidity and loan principal repayments,
and retail deposits have consistently met the majority of Perpetual's funding
needs. Borrowings have been used to a moderate extent as the Bank has increased
its reliance on deposits and stockholders' equity to provide funds. In
addition, during fiscal 1995, the Bank utilized a
<PAGE>
RP Financial, LC.
Page 1.15
significant amount of FHLB advances of approximately $50 million on a temporary
basis in conjunction with a financing transaction. Virtually all of the Bank's
deposits are generated through the Bank's main office in downtown Anderson and
the branch offices from depositors who reside in Perpetual's primary market
area. The Bank has recently been successful in increasing its deposit base, with
primary efforts directed towards attracting and retaining retail checking
accounts. Such efforts have included a formal marketing strategy for a "totally
free" checking account product and attention to enhancing the Bank's branch
network, primarily through the opening of a customer call center.
Perpetual offers a full line of deposit products including CDs as well as
various transaction and savings accounts including non-interest checking, NOW
and passbook savings accounts (see Exhibit I-14). Like most savings
institutions, the Bank actively promotes lower cost "core" deposits such as
passbook and checking accounts, with special emphasis on attracting retail
checking accounts. Also like most savings institutions, the Bank's customers
tend to prefer CDs due to their higher interest rates. The trend towards CDs
was accelerated in fiscal 1995, as higher interest rates generally encouraged
savers to shift their funds from lower costing core deposits into CDs (see
Exhibit I-15). As of September 30, 1997, the Bank's deposit base continued to
be dominated by CDs, which comprised $138.8 million or 69.1 percent of total
deposits. Jumbo CDs, which tend to more rate sensitive than other types of CDs,
comprise a relatively small proportion of the Bank's deposit base, equal to
$18.5 million or 9.2 percent of total deposits as of September 30, 1997. The
Bank does not utilize brokered CDs.
Passbook savings and transaction accounts comprised the balance of
Perpetual's deposits, and totaled $62.2 million or 30.9 percent of total
deposits at September 30, 1997. The balance of passbook savings accounts has
remained relatively constant over the last three fiscal years, along the
proportion of such accounts has declined. At the same time, the Bank's checking
accounts and non-interest bearing accounts have increased over the past three
years due to increased marketing efforts. Perpetual actively seeks passbook
savings and transactions accounts due to their stable nature and lower interest
costs. Over the past several fiscal years, the Bank has been successful in
increasing its deposit base within the existing branch network, and through the
opening of the Seneca, Oconee County branch. In the future, the Bank has
indicated its intention to continue to utilize deposits as the primary source of
funds, utilizing FHLB advances as an alternative source of funding, at least
until such time as the Bank is able to increase its retail deposit base.
<PAGE>
RP Financial, LC.
Page 1.16
Subsidiary Operations
- ---------------------
Perpetual had three subsidiaries as of September 30, 1997: (1) United
Service Corporation of Anderson, Inc. ("USC"), which is a wholly-owned
subsidiary of the Bank; (2) United Investments Services, Inc. ("United
Investment"), which is wholly-owned by USC and is a second tier subsidiary of
Perpetual; and (3) Mortgage First Service Corporation ("Mortgage First").
In addition to ownership of United Investment, USC is involved in the
following real estate development projects: (1) Perpetual Square, a 33-acre
commercial development in Anderson County, of which as of September 30, 1997
approximately 8 acres had been sold; (2) The Meadows Development, a 99-acre
residential subdivision consisting of approximately 108 lots in Anderson County,
of which as of September 30, 1997 three lots had been sold; (3) Ashton Place
Subdivision, a 24-acre multi-family housing development consisting of 44 lots in
Anderson County, of which as of September 30, 1997 29 lots had been sold;
(4) North Park, a 57-acre industrial park located in Anderson County of which 12
acres had been sold. As of September 30, 1997, USC had assets of $2.4 million,
and on a consolidated basis, USC and United Investment reported net income of
$395,000 for the year ended September 30, 1997.
United Investment operates as a full service brokerage unit, selling
annuities, stocks, bonds and other investments to the Bank's customers and the
general public. United Investment provides the Bank with a steady source of
non-interest operating income from investment and insurance commissions.
Mortgage First is a wholly-owned subsidiary of Perpetual, which made a
$400,000 equity investment in a start-up regional mortgage-banking company known
as "First Trust Mortgage Corporation of the South" ("First Trust"), which is
headquartered in Greenville, South Carolina and maintains offices in Rock Hill,
Columbia and Clemson, South Carolina. During the year ended September 30, 1997,
First Trust closed 810 loans totalling approximately $100 million. Perpetual
has purchased loans from First Trust in recent periods, and all such loan are
subject to the Bank's underwriting standards. At September 30, 1997, the Bank's
financial commitment to First Trust and the maximum exposure to share in any
losses incurred by First Trust were limited solely to the amount of Perpetual's
equity investment through Mortgage First. The Bank recorded a loss of
approximately $100,000 related to First Trust's operations for the year ended
September 30, 1997.
Legal Proceedings
- -----------------
The Bank is involved in various legal proceedings incident to the normal
course of business. Management does not believe that the Bank is exposed to any
significant loss from these legal proceedings.
<PAGE>
RP Financial, LC.
Page 2.1
II. MARKET AREA
Introduction
- ------------
Perpetual conducts operations out of a headquarters office in Anderson,
Anderson County, South Carolina, four branch offices in the city of Anderson,
and a branch office in the town of Seneca, Oconee County. Exhibit I-1 details
the locations of the Bank's offices, while Exhibit II-1 details the general
characteristics of the Bank's offices. Anderson County is part of the
Greenville-Spartanburg-Anderson metropolitan statistical area (the "MSA") in the
western portion of the state of South Carolina. The closest major city is
Atlanta, approximately 100 miles to the southwest. Although Anderson County is
included in the MSA, much of Anderson County is rural in nature and roughly
50 percent of the land is utilized for agricultural purposes (Anderson County
contains an estimated 1997 population of 159,000, approximately 18 percent of
the MSA population). While the more rural nature of Anderson County area has
historically limited overall population levels, U.S. Interstate Route I-85,
which crosses through Anderson County, has become a major transportation route
for the east coast traffic. This highway provides access to the Northeast U.S.
and the southern region of the U.S. (Atlanta and points south and west), and has
spurred a significant amount of development along the Interstate right of way.
Perpetual has served the city of Anderson and Anderson County since it was
chartered in 1906. The Seneca branch was opened in December 1996, extending
Perpetual's market area to the west into Oconee County (a smaller but rapidly
growing county). Thus, the Bank considers Anderson County to be the Bank's
primary market area for deposits and lending activity, with a growing presence
in Oconee County. Additional lending demand is generated from customers living
in the other counties contiguous to Anderson County. Due to the population
growth and overall economic stability in the region, competition from other
financial institutions in Anderson County is substantial.
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 Anderson County, the employment base
is relatively broad-based in most economic sectors, but continues to reflect a
concentration in manufacturing, and more specifically, textiles. 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
<PAGE>
RP Financial, LC.
Page 2.2
Corporation. The Bank's market areas have in general reported relatively strong
increases in population, households and income in recent years.
Competition from other financial institutions operating in the Bank's
market area includes a number of both large and small commercial banks and
savings institutions. The Bank maintains a market share of approximately
11 percent of overall financial institution deposits in the headquarters county
of Anderson, and a market share of less than 3 percent in Oconee County. The
other financial institutions are both locally-owned community-oriented
institutions and subsidiaries of larger regional and superregional institutions.
A number of market area savings institutions have been acquired or have
announced acquisitions in recent periods, resulting in new or strengthened
competitors. The Bank has experienced growth in deposits in recent years, as the
positive demographic and economic characteristics of the market area, along with
more aggressive marketing by the Bank have assisted in deposit growth. 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
<PAGE>
RP Financial, LC.
Page 2.3
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 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 early November, the stock market reacted
noticeably to declines in a number of foreign stock markets, particularly the
Hong Kong market, experiencing declines of over
<PAGE>
RP Financial, LC.
Page 2.4
100 points in the DJIA on a number of occasions. During the last half of
November, the stock market recovered essentially all of the losses incurred
earlier, as action taken by foreign governments such as South Korea were seen as
addressing the financial problems in that country, and continued positive job
creation and unemployment figures showed strength in the U.S. economy.
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 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
<PAGE>
RP Financial, LC.
Page 2.5
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.
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 December 5, 1997.
Market Area Demographics
- ------------------------
Demographic growth trends in the two 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, Perpetual operates in a two county market area
with an estimated population of 223,000 as of 1997. As of 1997, both market area
counties are experiencing growth in population and households above the state
and national averages. These growth trends are projected to continue through the
year 2002, and indicate a favorable environment for business expansion. Oconee
County, while much smaller than Anderson County, recorded higher growth than
Anderson County over the past seven years.
Income levels in the primary market area generally approximate the
statewide averages. Estimated per capita annual income for 1997 in Anderson
County was slightly below statewide averages, while Oconee County's per capita
income was 1 percent higher than the state average. Median household incomes for
both counties were slightly below the state average. Income distribution levels
are similar to per capita income figures, with both
<PAGE>
RP Financial, LC.
Page 2.6
Anderson and Oconee Counties approximating statewide averages. Based on the
positive population 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 Bank's deposit gathering activities and a substantial portion of the
lending operations are conducted in the two county market area described above.
Employment in these counties is generally diversified, containing employment
primarily in manufacturing, wholesale and retail trade, services and state and
local government, although manufacturing employment has declined as a percent of
total employment in recent years (but remains the largest segment of the
employment base). Due to the location of I-85 and presence of other large
metropolitan areas such as Greenville and Spartanburg, South Carolina, Anderson
County has a material portion of residents that commute to their place of
employment outside of Anderson County. For example, the recently opened BMW
plant near Spartanburg and other major plants along I-85 to the north draw
employees from Anderson County. Employment within Anderson County is
concentrated in manufacturing at a higher rate than the state as a whole, 31
percent versus 19 percent. Major manufacturing industries in Anderson County
include textiles, machinery, fabricated metal products and rubber/plastic
products. Table 2.1 below presents the major employers within Anderson County.
As shown by this list of employers, the Bank's headquarters market area county
contains a relatively well diversified employment base.
Table 2.1
Perpetual Bank, A Federal Savings Bank
Major Employers-Anderson County
<TABLE>
<CAPTION>
Employer Industry Employees
-------- -------- ---------
<S> <C> <C>
Anderson Area Medical Center Health Care 2,610
Michelin Tire Corporation Rubber Products 1,500
State of South Carolina State Government 1,356
Milliken & Company Fabrics Making and Finishing 1,300
BASF Corporation Nylon Fibers 1,170
Robert Bosch Corporation Automotive Systems 1,100
Owens-Corning Fiberglass Fiberglass 900
Frigidaire Company Household Refrigerators 800
Springs Industries-Clark-Schwebel Woven Fabric 790
Bi-Lo Grocery Store 744
Torrington Machine Parts 720
Glen Raven Mills Fabrics and Textiles 641
Loom Craft Jacquard Weaving 603
</TABLE>
Source: Local Area Chamber of Commerce.
<PAGE>
RP Financial, LC.
Page 2.7
Table 2.2 displays unemployment data in the local market area as of
September 1996 and September 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 Bank's market area, both market area counties recorded noticeable
improvements in the employment rates, and both counties 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
Perpetual Bank, A Federal Savings Bank
Market Area Unemployment Trends
<TABLE>
<CAPTION>
Region Sept. 1996 Sept. 1997
------ ---------- ----------
<S> <C> <C>
United States 5.0% 4.7%
South Carolina 6.3 4.7
Anderson County 5.0 3.1
Oconee County 6.6 4.2
</TABLE>
Source: U.S. Bureau of Labor Statistics.
Deposit Trends and Competition
- ------------------------------
The market area (defined as the two 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 First Citizens Bank and Trust
Company of Columbia, Carolina First Bank of Greenville and Anderson National
Bank of Anderson, 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 both market area counties exhibited similar trends as the state, with
both Anderson and Oconee Counties recording relatively moderate deposit growth
less than the state average. Savings institutions lost deposits in Oconee
County, primarily due to acquisitions, and
<PAGE>
--------------------------------------
Table 2.3
Perpetual Bank, A Federal Savings Bank
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%
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%
Perpetual 142,516 11.0% 4 157,383 11.4% 5 5.1%
Oconee County $523,120 100.0% 19 $559,544 100.0% 16 3.4%
Commercial Banks/Savings Banks 320,893 61.3% 15 375,034 67.0% 12 8.1%
Savings Institutions 202,227 38.7% 4 184,510 33.0% 4 -4.5%
Perpetual (1) N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Perpetual opened a branch in Oconee County in December 1996.
Source: FDIC; OTS.
<PAGE>
RP Financial, LC.
Page 2.9
reported growth in Anderson County. Commercial banks hold a majority of
financial institution deposits in both counties, ranging from a 62 percent
market share in Anderson County to over 67 percent of deposits in Oconee County.
Perpetual has recorded increases in deposits over the time period shown in
Table 2.3 at a higher rate than Anderson County as a whole, resulting in an
increase in deposit market share since June 30, 1994. The Bank only recently
opened the Oconee County branch, and data available subsequent to June 30, 1996
reveals a continued increase in deposit funds for the Bank. This increase in
deposits reveals success in raising additional retail deposit funds for business
operations. The Bank's market share is over eleven percent of deposits in
Anderson County, and less than three percent in Oconee County (based on more
recent data for the Bank), 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. 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 Perpetual 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 Perpetual'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 Bank is provided by these public companies. Factors
affecting Perpetual'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 Perpetual and
the Peer Group, will then be used as a basis for the valuation of the Bank'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 Bank. 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, or asset or market value
considerations.
<PAGE>
RP Financial, LC.
Page 3.1
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 Perpetual, we believe that it provides a reasonable representation
of publicly-traded thrifts with operations comparable to those of the Bank 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 $171 million thrift operating 5 offices in Arkansas. Similar to
Community Financial, Texarkana First reported loan diversification into
commercial real estate and non-mortgage lending, which resulted in one of
the highest risk-weighted assets-to-assets ratio of the Peer Group.
Texarkana's profitability was supported by a strong net interest margin and
operating expenses lower than the Peer Group average. Texarkana also
reported a the second largest portfolio of loans serviced for others of the
Peer Group members.
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.1
Peer Group of Publicly-Traded Thrifts
December 8, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------- ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ -------
($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TSH Teche Holding Company of LA AMEX Southern LA Thrift 404 9 09-30 04/95 20.50 70
SOPN First SB, SSB, Moore Co. of NC OTC Central NC Thrift 295 5 06-30 01/94 23.25 86
CFTP Community Fed. Bancorp of MS OTC Northeast MS Thrift 216 2 09-30 03/96 20.25 94
CFFC Community Fin. Corp. of VA OTC Central VA Thrift 183 4 03-31 03/88 26.50 34
FTF Texarkana Fst. Fin. Corp of AR AMEX Southwest AR Thrift 179 5 09-30 07/95 25.50 46
BFSB Bedford Bancshares of VA OTC Southern VA Thrift 139 3 09-30 08/94 29.00 33
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 14.00 18
SSM Stone Street Bancorp of NC AMEX Central NC Thrift 105 2 12-31 04/96 22.50 43
SCCB S. Carolina Comm. Bnshrs of SC OTC Central SC Thrift 46 1 06-30 07/94 22.87 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: 12/08/97
<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 $46 million in assets and operating from a single
office in Winnsboro, South Carolina within approximately 75 miles of
Anderson in west-central South Carolina. South Carolina Community is a
seasoned thrift, having converted in 1994. South Carolina Community
reported a relatively high level of capital comparison to other Peer Group
members, a relatively strong net interest margin and a high level of
operating expenses in comparison to the Peer Group averages. Similar to
Perpetual, South Carolina Community reported a high proportion of 1-4
family loans in portfolio and a low risk-weighted assets ratio. Asset
quality and reserve coverage ratios were also similar to the Bank.
In aggregate, the Peer Group companies have an average capital ratio that
is higher than the industry average (18.62 percent of assets versus 13.01
percent for the all SAIF average), and higher core profitability (1.29 percent
versus 0.88 percent for all SAIF-insured publicly-traded institutions). The Peer
Group's much
<PAGE>
RP Financial, LC.
Page 3.5
higher capital ratio combined with higher earnings results in a lower core ROE
of 7.01 percent versus 7.82 percent for the all SAIF average. In terms of
pricing, the Peer Group on average trades at a lower price/book ("P/B") multiple
and a similar price/earnings ("P/E") multiple relative to the industry (see the
following table).
<TABLE>
<CAPTION>
As of December 5, 1997
----------------------
Peer All SAIF
Group Insured
----- -------
<S> <C> <C>
Equity-to-Assets 18.62% 13.01%
Return on Assets ("ROA")-Core 1.29% 0.88%
Return on Equity ("ROE")-Core 7.01% 7.82%
Market Capitalization ($Mil) $44.93 $183.12
Price-to-Tangible Book Ratio ("P/TB") 144.10% 163.19%
Price-to-Earnings Multiple ("P/E")-Core 21.63x 20.17x
Price-to-Assets Ratio ("P/A") 26.76% 19.36%
</TABLE>
Source: Chapter IV tables.
The following sections present a comparison of the Bank'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 Bank and the
Peer Group, reflecting the expected similarities and some differences given the
selection procedures outlined above. Information for Perpetual and the Peer
Group is as of September 30, 1997. The Bank's pre-conversion net worth of 11.9
percent was below the Peer Group's average net worth ratio of 18.6 percent,
although the Bank's capital level can be expected to exceed the Peer Group
average on a pro forma basis. The increase in the Bank's capital on a pro forma
basis can also be expected to reduce its ROE. Neither the Bank or the Peer Group
had a balance of goodwill. The Bank 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 Bank's ratio of loans to assets was
lower than the Peer Group's ratio (69.6 percent of assets versus 77.7 percent
for the Peer Group), while Perpetual recorded a higher level of MBS (14.0
percent versus 4.4 percent for the Peer Group). The Bank maintains a similar
balance of cash and investments as part of its operating strategy, and the
portfolio totaled 12.3 percent of total assets. In contrast, the Peer Group
maintained a ratio of cash and investments of 15.5 percent of assets. Following
the conversion, the
<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>
Perpetual Bank, A FSB of SC
- ---------------------------
September 30, 1997 12.3 69.6 14.0 78.2 5.8 0.0 11.9 0.0 11.9 0.0
SAIF-Insured Thrifts 17.5 68.2 11.1 70.1 15.2 0.2 12.9 0.2 12.7 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 15.5 77.7 4.4 73.0 7.0 0.0 18.6 0.0 18.6 0.0
South-East Companies 15.5 77.7 4.4 73.0 7.0 0.0 18.6 0.0 18.6 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 9.4 87.8 0.0 70.0 15.8 0.0 13.2 0.0 13.2 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 4.4 85.8 7.5 69.4 16.2 0.0 13.5 0.0 13.5 0.0
FTF Texarkana Fst. Fin. Corp of AR 11.5 82.5 3.8 80.1 2.8 0.0 15.3 0.0 15.3 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>
Perpetual Bank, A FSB of SC
- ---------------------------
September 30, 1997 22.48 84.39 16.72 25.43 -6.25 5.19 5.19 10.70 10.70 18.30
SAIF-Insured Thrifts 11.63 4.93 13.17 8.02 14.46 3.26 2.53 11.03 11.07 22.69
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 7.38 -2.96 10.02 7.60 21.35 -0.76 -0.76 15.62 17.29 32.12
South-East Companies 7.38 -2.96 10.02 7.60 21.35 -0.76 -0.76 15.62 17.29 32.12
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 13.99 36.47 12.50 16.18 11.54 8.19 8.19 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 6.46 -25.67 8.31 10.04 -2.25 3.97 3.97 11.95 11.95 22.46
FTF Texarkana Fst. Fin. Corp of AR 7.82 -17.44 12.34 7.62 74.56 3.62 3.62 15.29 15.29 25.82
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>
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
Bank's level of cash and investments is expected to initially increase, pending
deployment of the proceeds into loans. Overall, Perpetual's IEA totaled 95.9
percent of assets which was lower than the Peer Group's ratio.
Both Perpetual and the Peer Group relied on both deposits and borrowings as
funding sources, as reflected in the current deposits to assets ratios of 78.2
percent and 73.0 percent, respectively, and borrowings to assets ratios of 5.8
percent and 7.0 percent, respectively. Total interest-bearing liabilities
("IBL") maintained by the Bank and the Peer Group equaled 84.0 percent and 80.0
percent, respectively, with the Peer Group's lower ratio attributable to its
higher capital ratio. On a pro forma basis, Perpetual's IBL ratio is expected
to decline as a result of the Bank'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 Perpetual and the Peer Group are for the year
ended September 30, 1997. The Bank reported a stronger increase in assets since
September 30, 1996, above both the Peer Group and industry averages, while the
Peer Group reported asset growth equal to 7.4 percent, below both comparative
averages. Changes in the Bank's balance sheet occurred in the area of loans
receivable and MBS (an increase of 16.7 percent), along with a higher increase
in cash and investments (84.39 percent). Alternatively, the Peer Group funded
increases in loans and MBS through available cash and investments. Perpetual's
asset growth was supported by growth in deposits and equity, while the Peer
Group funded asset growth through a combination of deposits and borrowings.
Perpetual's profitable operations resulted in growth in the capital account
equal to 5.2 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 0.8 percent on average.
Income and Expense Components
- -----------------------------
For the twelve months ended September 30, 1997, Perpetual's net income
amounted to 0.72 percent of average assets, below the 1.31 percent average
return posted by the Peer Group (see Table 3.3). Net interest income was the
primary component of the Bank's and the Peer Group's earnings, with both
Perpetual and the Peer Group reporting a net interest margin that was above the
statewide and industry averages (3.70 and 3.84 percent of average assets,
respectively). Perpetual reported a comparative level of interest income and a
higher level of interest expense, with the greatest difference reported in
interest expense. The Bank's higher interest expense results from both a higher
ratio of interest-bearing liabilities to assets than the Peer Group, offset in
part by a favorable yield/cost spread. As shown in the "yields, costs, and
spreads" section of Table 3.3, the Bank has both a higher yield on earning
assets and a lower cost of funds in comparison to the Peer Group and the
industry as a whole, resulting in a stronger yield cost spread (3.59 percent
versus 2.98 percent for the Peer Group and 2.85 for all SAIF-insured thrifts).
Perpetual's lower cost of funds was supported by a relatively large portion of
savings
<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>
<CAPTION>
Net Interest Income Other Income
---------------------------- -------------------
Loss NII Total
Net Provis. After Loan R.E. Other Other
Income Income Expense NII on IEA Provis. Fees Oper. Income Income
------ ------ ------- ------ ------- -------- ---- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Perpetual Bank, A FSB of SC
- ---------------------------
September 30, 1997 0.72 7.66 3.96 3.70 0.27 3.43 0.00 0.00 0.97 0.97
SAIF-Insured Thrifts 0.90 7.42 4.13 3.29 0.13 3.17 0.11 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 1.31 7.68 3.85 3.84 0.08 3.75 0.09 0.01 0.25 0.34
South-East Companies 1.31 7.68 3.85 3.84 0.08 3.75 0.09 0.01 0.25 0.34
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 1.12 7.82 4.04 3.78 0.28 3.50 0.00 0.00 0.37 0.37
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 0.98 7.55 4.23 3.32 0.06 3.26 0.02 0.02 0.63 0.68
FTF Texarkana Fst. Fin. Corp of AR 1.70 7.92 4.12 3.80 0.00 3.80 0.17 0.01 0.26 0.43
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
</TABLE>
<TABLE>
<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>
Perpetual Bank, A FSB of SC
- ---------------------------
September 30, 1997 3.18 0.00 -0.11 0.00 8.19 4.60 3.59 2,284 34.89
SAIF-Insured Thrifts 2.20 0.02 0.03 0.00 7.68 4.84 2.85 4,272 36.86
State of SC 2.24 0.00 0.07 0.00 7.65 4.84 2.81 3,832 37.36
Comparable Group Average 2.04 0.00 0.03 0.00 7.87 4.89 2.98 4,450 37.35
South-East Companies 2.04 0.00 0.03 0.00 7.87 4.89 2.98 4,450 37.35
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 2.07 0.00 -0.01 0.00 8.06 4.75 3.32 3,525 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 2.52 0.00 0.07 0.00 7.70 4.94 2.77 2,479 34.06
FTF Texarkana Fst. Fin. Corp of AR 1.54 0.00 0.01 0.00 8.11 4.99 3.12 5,106 37.11
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>
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
and transaction accounts in the deposit portfolio, a favorable comparison due to
the lower cost nature of these funds. The reinvestment of the net conversion
proceeds may serve to initially dilute the Bank'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, the Bank operates with a
higher operating expense ratio than the Peer Group (3.18 percent versus
2.04 percent of assets for the Peer Group), which is attributable to the various
expenses incurred by Perpetual in the most recent fiscal year (branch opening,
call center, data processing equipment and employee benefit program costs),
which increased the operating expense ratio for the Bank. These features have
increased Perpetual's staffing requirements and compensation expenses, as
evidenced by the Bank's lower assets per employee ratio relative to the Peer
Group average ($2.284 million and $4.450 million, respectively). Going forward,
Perpetual'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 higher contribution to the Bank'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 Bank recorded non-interest operating income of 0.97 percent of average
assets versus a level of 0.34 percent recorded by the Peer Group. Going forward,
the Bank 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 Bank's efficiency ratio of 68.1 percent compares unfavorably to the
Peer Group's ratio of 48.8 percent. Perpetual's ratio is also unfavorable in
comparison to the industry average of 59.1 percent.
During the most recent fiscal year, Perpetual recorded a non-operating loss
of 0.11 percent of average assets, while the Peer Group as a whole recorded net
non-operating income of 0.03 percent of average assets, although most of the
Peer Group's non-operating income was due to a single thrift that reported such
income. The Bank recorded non-operating expense primarily in the form of losses
on the sale of securities, offset by income from the resolution of REO.
Perpetual reported higher levels of loan loss provisions than the Peer Group at
0.27 and 0.08 percent of average assets, respectively.
<PAGE>
RP Financial, LC.
Page 3.10
Loan Composition
- ----------------
Table 3.4 presents data related to the loan composition of Perpetual and
the Peer Group. The emphasis on residential lending for the Bank and the Peer
Group was evident, with 1-4 family permanent mortgage loans and MBS accounting
for 71.82 percent and 80.63 percent of the Bank's and the Peer Group's total
loan and MBS portfolios, respectively. In contrast to the Peer Group, Perpetual
maintains a sizeable portfolio of loans serviced for others, representing an
additional source of income.
Perpetual's loan portfolio exhibited greater diversification into higher
risk weight loans than the Peer Group's loan portfolio. Construction/land and
commercial real estate lending are the Bank's primary methods of lending
diversification, and such loans comprised 13.8 and 7.3 percent of the total loan
and MBS portfolio at September 30, 1997. The Peer Group achieved their loan
portfolio diversification primarily through commercial real estate and
commercial business lending, totaling 13.79 percent of total loans and MBS.
Perpetual reported a higher risk-weighted assets ratio than the Peer Group at
61.63 and 58.75 percent, respectively.
Credit Risk
- -----------
While Perpetual's credit risk exposure appears to be lower than the Peer
Group's exposure based on the Bank's lower level of NPAs and higher reserve
coverage ratios, the Bank's higher level of risk-weighted assets and lower
proportion of 1-4 family loans held in portfolio indicate a higher level of
credit risk. As shown in Table 3.5, as of September 30, 1997, the Bank recorded
NPAs of 0.41 percent of assets, lower than the Peer Group average of
0.43 percent, and maintained a lower ratio of non-performing loans ("NPLs") to
loans of 0.23 percent versus 0.49 percent for the Peer Group. Most of the Bank's
and Peer Group's NPAs consist of non-accruing loans with only minimal levels of
REO. The Bank maintained a higher level of loss reserves as a percent of loans
receivable (1.05 percent versus 0.57 percent for the Peer Group), and a higher
ratio of reserves as a percent of NPLs and total NPAs.
Interest Rate Risk
- ------------------
Table 3.6 reflects the relative interest rate risk exposure of Perpetual
and the Peer Group. The Bank's lower capital level was the key factor
contributing to its lower IEA/IBL ratio relative to the Peer Group
(114.2 percent versus 122.9 percent, respectively). The Bank's lower capital and
IEA/IBL ratios increases its funding costs relative to the Peer Group. However,
the Bank's capital ratio and IEA/IBL ratio will increase on a post-conversion
basis. The Bank maintained a higher ratio of non-interest earning assets to the
Peer Group.
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Table 3.4
Loan Portfolio Composition and Related Information
Comparable Institution Analysis
As of September 30, 1997
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>
Perpetual Bank, A FSB of SC 16.71 55.11 13.82 7.32 3.35 8.93 61.63 62,148 19
SAIF-Insured Thrifts 14.95 62.12 5.31 11.80 6.30 1.67 52.59 401,709 3,386
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 58.75 8,706 57
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 0.00 63.50 3.72 26.84 5.34 1.64 68.50 9,610 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 9.18 82.57 4.72 2.87 4.43 0.00 56.18 0 0
FTF Texarkana Fst. Fin. Corp of AR 1.11 70.86 7.08 13.94 7.31 2.36 60.80 23,362 27
TWIN Twin City Bancorp of TN 12.69 52.27 3.91 3.99 26.03 2.38 54.93 58,017 595
</TABLE>
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>
Perpetual Bank, A FSB of SC 0.06 0.41 0.23 1.05 467.99 180.48 332 0.19
SAIF-Insured Thrifts 0.26 0.77 0.85 0.78 160.86 123.36 310 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 0.43 0.49 0.57 120.44 128.25 42 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 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 0.01 0.28 0.32 0.96 300.63 291.99 19 0.02
FTF Texarkana Fst. Fin. Corp of AR 0.07 0.23 NA 0.76 NA 276.17 21 0.06
TWIN Twin City Bancorp of TN 0.08 0.16 NA 0.20 NA 88.17 115 0.60
</TABLE>
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 3.6
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
--------------------------
Non-Earn. Quarterly Change in Net Interest Income
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>
Perpetual Bank, A FSB of SC 11.9 114.2 4.1 36 -69 60 20 NA NA
SAIF-Insured Thrifts 12.6 114.0 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 18.6 122.9 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 13.2 113.2 2.8 -16 -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 13.5 114.3 2.2 -0 -5 -2 -8 -13 -12
FTF Texarkana Fst. Fin. Corp of AR 15.3 117.8 2.3 -20 9 13 -11 -3 3
TWIN Twin City Bancorp of TN 12.9 113.6 3.7 2 18 -15 1 -23 14
</TABLE>
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 3.14
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 Bank and the Peer Group has been examined in relation to the
change in market interest rates. As shown in Table 3.6, the Bank's net interest
margin has recently shown more sensitivity to changing market interest rates in
comparison to the Peer Group's average net interest margin. On a pro forma
basis, Perpetual'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 Perpetual, subject to the adjustments
noted in the following section.
<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 to be
issued in conjunction with the conversion of the MHC. The MHC is converting to
a Delaware stock corporation pursuant to the Plan. The pro forma valuation
methodology has been modified to reflect the unique characteristics of the
conversion of the MHC, specifically the fact that the MHC will be selling only a
partial ownership interest in the Subscription and Community offerings, instead
of a 100 percent ownership interest as would be the case in a standard
conversion.
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 Bank's operations and financial
condition; (2) monitor the Bank'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,
<PAGE>
RP Financial, LC.
Page 4.2
over the course of the conversion process. RP Financial will also prepare a
final valuation update at the closing of the conversion offering to determine if
the preliminary range of value continues to be appropriate.
The appraised value determined herein is based on the current market and
operating environment for the Bank 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 Perpetual, or Perpetual's value alone. To the
extent a change in factors impacting the Bank'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 Bank and the Peer Group and how those differences
affect the pro forma valuation. Emphasis is placed on the specific strengths and
weaknesses of the Bank 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 second step conversions, to assess the impact on value of Perpetual
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
Bank'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 Perpetual's and
the Peer Group's balance sheets, with the Peer Group maintaining a
higher balance of overall loans receivable as a percent of assets, and
a lower level of investment in MBS. Perpetual reported a higher level
of diversification into higher credit risk types of loans relative to
the Peer Group. Both the Bank and the Peer Group relied on borrowed
funds, although retail deposits comprised the major portion of the
respective funding needs.
<PAGE>
RP Financial, LC.
Page 4.3
o Credit Risk. Perpetual maintains a comparable level of NPAs/assets as
-----------
the Peer Group, despite a higher credit risk profile in the loan
portfolio and a higher risk-weighted assets ratio. Reserve coverage
ratios are more favorable than the Peer Group. The Bank has a lower
loans/assets ratio to the Peer Group.
o Liquidity. Perpetual maintained a higher level of cash and investments
---------
and MBS in comparison to the Peer Group. The Bank's proportion of cash
and investments is likely to initially increase on a pro forma basis.
Borrowings were utilized to a similar degree by the Bank and the Peer
Group, and both maintain ample borrowings capacity. The Bank's loans
meet secondary market standards for sale.
o Capital. While the Bank maintains a lower capital position in relation
-------
to the Peer Group, following the infusion of conversion proceeds, the
Bank's capital position is expected to exceed the Peer Group average.
As a result, Perpetual is expected to have more leverage capacity than
the Peer Group. The Bank's pro forma return on equity ("ROE") is not
expected to exceed the Peer Group average due to lower profitability.
On balance, RP Financial determined that no adjustment was warranted 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 Perpetual 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 Bank reported net income of 0.72 percent of
-----------------
average assets for the most recent twelve month period versus earnings
of 1.31 percent for the Peer Group. The differential in reported
earnings is due to the Bank's higher operating expenses, offset in
part by higher non-interest operating income.
o Core Earnings. The Bank also maintains a less favorable core earnings
-------------
posture relative to the Peer Group, even though reported earnings were
adversely affected by losses on the sale of securities. Perpetual and
the Peer Group operated with a similar level of net interest income,
with the Bank reporting more favorable non-interest operating income
and less favorable operating expenses than the Peer Group. The
effective tax rates for Perpetual and the Peer Group were comparable.
While redeployment of conversion proceeds into interest-earning assets
should enhance Perpetual's net interest income, operating expenses for
the Bank are expected to increase as well, and any attempt by the Bank
to add products or services would likely result in higher operating
expense. On a pro forma basis, Perpetual's core profitability is
expected to remain below that of the Peer Group.
o Interest Rate Risk. Perpetual's change in NPV under a 200 basis point
------------------
increase in interest rates (as calculated by the OTS), indicates a
moderate exposure to rising interest rates, particularly given the
origination of ARMs that carry repricing periods of greater than one
year. Although gap data was not available for the Peer Group, other
analyses indicated a comparable advantage
<PAGE>
RP Financial, LC.
Page 4.4
for the Peer Group. The pro forma increase in the IEA/IBL ratio can be
expected to reduce the Bank's interest rate risk exposure.
o Credit Risk. Loss provisions had a higher impact on the earnings of
-----------
the Bank in comparison to the Peer Group. In terms of potential credit
quality related losses, the Bank maintained higher reserve coverage
ratios as a percent of loans receivable, as a percent of non-accruing
loans and as a percent of total NPAs. The Bank's lower proportion of
residential loans held in portfolio increases 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. Perpetual's internally generated
loan demand has been less than available funds, requiring the Bank to
utilize outside sources for loan products, reducing the spread earned
on these assets. Perpetual currently operates at a high operating
expense ratio; operating expenses would likely increase if the Bank
expands its products and/or services. Although the higher expected pro
forma capital position is expected to enable the Bank 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 Bank's earnings appearing to have less
upside potential than the Peer Group.
o Return on Equity. On a pro forma basis the Bank'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 Bank's asset growth in recent periods has been higher than the Peer
Group's, which has been achieved in part by the opening of a new branch office
location and aggressive offerings of short-term CD accounts (7- and 13-month
time periods) and efforts to gain additional checking deposit accounts.
Perpetual has in place both internal and external sources of loan products that
can be used to reinvest available liquidity, and the Bank intends to continue to
grow in future periods, and is expected to have adequate capital post-conversion
to support such growth. We concluded that a slight upward adjustment was
warranted for the Bank's asset growth potential.
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 Bank and the Peer Group is included in Table 4.1.
Perpetual's market area of Anderson County, South Carolina is a urban/rural
market that has been experiencing growing levels of population and households in
recent years, while the Peer Group companies operate on average in smaller, more
rural
<PAGE>
Table 4.1
Peer Group Market Area Comparative Analysis
<TABLE>
<CAPTION>
Per Capita Income
Population Proj. ----------------- Deposit
------------ Pop. 1990-97 1997-2002 % State Market
Institution County 1990 1997 2002 % Change % Change Median Age Amount Average Share(1)
- ----------- ------ ---- ---- ---- -------- -------- ---------- ------ ------- --------
(000) (000)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bedford Bancshares of VA Bedford 46 54 59 17.2% 10.3% 38.2 $15,786 103.1% 16.0%
Community Federal Bancorp of MS Lee 66 74 81 13.5% 8.2% 34.0 16,087 119.7% 14.4%
Community Financial Corp. of VA Augusta 55 60 64 10.1% 6.3% 37.9 13,088 74.5% 3.5%
FFBS Bancorp of Columbus MS Lowndes 59 62 63 3.9% 2.6% 31.5 15,528 115.6% 17.7%
First SB, SSB of Moore Co. of NC Moore 59 70 78 18.7% 10.9% 40.9 19,350 110.5% 21.3%
KS Bancorp of Kenly NC Johnston 81 102 116 24.9% 13.8% 36.3 17,233 98.4% 9.0%
S. Carolina Comm. Bancshares of SC Fairfield 22 22 22 -0.1% -0.1% 34.5 12,525 80.9% 23.9%
Stone Street Bancorp of NC Davie 28 31 33 10.4% 6.5% 38.7 18,754 107.1% 25.7%
Teche Holding Company of LA St. Mary 58 57 57 -1.1% -0.7% 31.4 10,562 80.4% 19.3%
Texarkana First Fin. Corp. of AR Miller 38 39 39 1.2% 0.8% 33.9 12,612 93.4% 16.8%
Twin City Bancorp of TN Sullivan 144 151 156 5.0% 3.3% 38.9 16,588 99.7% 5.2%
--- --- --- ---- ---- ---- ------ ----- ----
Averages: 60 66 70 9.4% 5.6% 36.0 $15,283 98.5% 15.7%
Medians: 58 60 63 10.1% 6.3% 36.3 15,786 99.7% 16.8%
Perpetual Bank, A FSB of SC Anderson 145 159 168 9.2% 5.8% 37.4 $14,799 95.6% 11.4%
</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 4.6
markets that have also been growing at rates similar to that of the Bank. The
per capita income in the Bank's market is below the average of the primary
markets of the Peer Group members. Perpetual has a lower 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 achievable than that of
the Peer Group. The Bank'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 upward adjustment was warranted
for market area.
5. Dividends
---------
As stated in SouthBanc'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 equal to the pre-conversion
dividend rate adjusted for the exchange ratio of the conversion. 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 Bank, 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 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 1.48 percent to 3.78 percent. The average dividend yield on
the stocks of the Peer Group institutions was 2.39 percent as of December 5,
1997, representing an average earnings payout ratio of 47.73 percent. As of
December 5, 1997, approximately 85 percent of all publicly-traded savings
institutions had adopted cash dividend
<PAGE>
RP Financial, LC.
Page 4.7
policies (see Exhibit IV-1), exhibiting an average yield of 1.82 percent and an
average payout ratio of 35.06 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 Holding
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 $16.0 million to $93.7 million as of December 5, 1997, with an average
market value of $44.9 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 Bank's pro forma market value is expected to be
greater than the comparative Peer Group averages, with a higher number of shares
outstanding. The Bank's stock is expected to be listed on the NASDAQ National
Market System, and accordingly, we anticipate the liquidity of the Bank'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.
7. Marketing of the Issue
----------------------
We believe that five separate markets exists for savings institution stocks
coming to market such as Perpetual: (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; (C) the
market for second step conversions by MHCs; (D) the acquisition market for
savings institution franchises in South Carolina; and (E) the market for the
public stock of Perpetual. All of these markets were considered in the
valuation of the Bank's second step conversion.
<PAGE>
RP Financial, LC.
Page 4.8
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 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
<PAGE>
RP Financial, LC.
Page 4.9
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. 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
<PAGE>
RP Financial, LC.
Page 4.10
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 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.
<PAGE>
RP Financial, LC.
Page 4.11
Following the one day rally, volatility returned to the stock market
through mid- and late-November, however there was a general upward trend in
prices, and by the end of November the market was testing the previous highs.
With a certain level of volatility, 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 December 5, 1997, the DJIA
closed at 8149.13, an increase of 27.7 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
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.
<PAGE>
RP Financial, LC.
Page 4.12
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 November.
On December 5, 1997, the SNL Index for all publicly-traded thrifts closed at
798.3, an increase of 68.5 percent from one year earlier.
<PAGE>
RP Financial, LC.
Page 4.13
B. The New Issue Market
--------------------
In addition to thrift stock market conditions in general, the new
issue market for converting thrifts is also an important consideration in
determining the Bank's pro forma market value. 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
133.82 percent reflects a discount of 18.0 percent from the average P/B ratio of
all publicly-traded savings institutions (equal to 163.19 percent), and the
average core P/E ratio of 32.06 times reflects a premium of 59.0 percent from
the all public average core P/E ratio of 20.17 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 strong, 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.
December 5, 1997
------------------------------------------------------------
Table 4.2
Recent Conversions (Last Three Months)
Conversion Pricing Characteristics: Sorted Chronologically
------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Institutional Information Pre-Conversion Data
---------------------------------- Offering
Financial Info. Asset Quality Information
- ----------------------------------------------------------------------------------------------------------------------------
Conversion Equity/ NPAs/ Res. Gross % of Exp./
Institution State Date Ticker Assets Assets Assets Cov. Proc. Mid. Proc.
- ----------- ----- ---- ------ ------ ------ ------ ---- ----- ---- -----
($Mil) (%) (%)(2) (%) ($Mil) (%) (%)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equality Bancorp, Inc. (8) MO * 10/02/97 EBI 239 5.82% 0.29% 41% 13.2 132% 3.9%
First Security Fed Fin., Inc IL 10/31/97 FSFF 260 11.52% 0.87% 74% 64.1 132% 1.7%
Oregon Trail Financial Corp. OR 10/06/97 OTFC 220 10.08% 0.12% 280% 46.9 132% 2.3%
Riverview Bancorp, Inc. (8) WA * 10/01/97 RVSB 230 11.24% 0.14% 245% 35.7 132% 2.8%
SHS Bancorp, Inc. PA 10/01/97 SHSB 83 5.52% 1.41% 36% 8.2 132% 5.7%
Ohio State Financial Serv OH * 09/29/97 Sheet 34 14.45% 0.47% 86% 6.3 94% 5.7%
Citizens Bancorp IN 09/19/97 Sheet 46 12.28% 0.45% 84% 10.6 132% 4.6%
Averages: $159 10.13% 0.54% 121% 26.4 127% 3.8%
Medians: 220 11.24% 0.45% 84% 13.2 132% 3.9%
Averages, Excluding 2nd Steps $129 10.77% 0.66% 140% $27.2 125% 4.0%
Medians, Excluding 2nd Steps $83 11.52% 0.47% 84% $10.6 132% 4.6%
<CAPTION>
- -------------------------------------------------------------------------------------------
Institutional Information Insider Purchases
- -------------------------------------------------------------------------------------------
Benefit Plans
-------------
Conversion Recog. Mgmt.
Institution State Date Ticker ESOP Plans & Dirs.
- ----------- ----- ---- ------ ------------------------
(%) (%) (%)(3)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Equality Bancorp, Inc. (8) MO * 10/02/97 EBI 9.0% 5.0% 10.6%
First Security Fed Fin., Inc IL 10/31/97 FSFF 8.0% 4.0% 4.4%
Oregon Trail Financial Corp. OR 10/06/97 OTFC 8.0% 4.0% 3.9%
Riverview Bancorp, Inc. (8) WA * 10/01/97 RVSB 8.0% 4.0% 2.9%
SHS Bancorp, Inc. PA 10/01/97 SHSB 8.0% 4.0% 5.2%
Ohio State Financial Serv OH * 09/29/97 Sheet 8.0% 4.0% 8.3%
Citizens Bancorp IN 09/19/97 Sheet 8.0% 4.0% 16.1%
Averages: 8.1% 4.1% 7.3%
Medians: 8.0% 4.0% 5.2%
Averages, Excluding 2nd Steps 8.0% 4.0% 7.6%
Medians, Excluding 2nd Steps 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> <C>
Equality Bancorp, Inc. (8) MO * 10/02/97 EBI 100.5% 18.8 10.0% 0.5% 9.9% 5.4%
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 Sheet 62.3% 13.4 16.0% 1.2% 25.7% 4.6%
Citizens Bancorp IN 09/19/97 Sheet 72.9% 14.8 14.8% 1.1% 46.3% 2.4%
Averages: 81.5% 17.0 16.1% 1.0% 23.4% 4.5%
Medians: 75.3% 16.5 16.0% 1.1% 21.6% 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> <C>
Equality Bancorp, Inc. (8) MO * 10/02/97 EBI $10.00 $13.50 35.0% $15.38 53.8% NA NA
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 Sheet 10.00 15.50 55.0% 15.50 55.0% 14.88 48.8%
Citizens Bancorp IN 09/19/97 Sheet 10.00 14.00 40.0% 14.00 40.0% 15.38 53.8%
Averages: $8.57 $14.69 46.9% $15.23 52.3% $15.24 52.4%
Medians: $10.00 $14.75 47.5% $15.38 53.8% $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% $15.88 58.8%
</TABLE>
Note: * - Appraisal performed by RP Financial;
"NT" - Not Traded; "NA" - Not
Applicable, Not Available.
(1) Non-OTS regulated thrifts. December 5, 1997
(2) As reported in summary pages of prospectus.
(3) As reported in prospectus.
(4) Does not take into account the adoption of SOP 93-6.
(5) Excludes impact of special SAIF assessment on earnings
(6) Latest price if offering less than one week old.
(7) Latest price if offering more than one week but less than one month old.
(8) Second-step conversions.
(9) Simultaneously converted to commercial bank charter.
- --------------------------------------------------------------------------------
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Table 4.3
Market Pricing Comparatives
Prices As of December 5, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization -------------- Pricing Ratios(3)
--------------- Core Book -------------------------------------
Price/ Market 12-Mth Value/
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
- --------------------- -------- ----- ------ ----- ----- ------ ------ ------ -------
($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 23.92 183.12 1.12 15.17 19.32 158.46 19.36 163.19 20.17
Special Selection Grouping(8) 16.06 72.29 0.52 12.37 27.08 132.23 28.06 133.82 27.08
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
FSFF First SecurityFed Fin of IL 16.50 105.73 0.61 12.80 27.05 128.91 34.85 128.91 27.05
OTFC Oregon Trail Fin. Corp of OR 16.00 75.12 0.59 13.29 27.12 120.39 28.91 120.39 27.12
RVSB Riverview Bancorp of WA 15.50 94.98 0.45 9.56 NM 162.13 33.65 168.48 NM
SHSB SHS Bancorp, Inc. of PA 16.25 13.33 0.41 13.83 NM 117.50 14.85 117.50 NM
<CAPTION>
Dividends(4) Financial Characteristics(6)
----------------------- -------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ ---------------- ---------------
Financial Institution Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
- --------------------- ------- ----- -------- ------ ------ ------ ----- ----- ----- -----
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.37 1.58 30.15 1,198 13.01 0.77 0.89 8.08 0.88 7.82
Special Selection Grouping(8) 0.00 0.00 0.00 234 21.11 0.55 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 NA 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 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 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. Secondary Step Conversion Market
--------------------------------
There is a pronounced difference in the pricing of second step
conversions relative to full conversion offerings in which 100 percent of the
shares are issued. As noted in Table 4.4, during the past 12 months, the median
pro forma price/tangible book ratios of second step conversions exceeded 95
percent, as compared to the median price/tangible book of conversions over the
last three months which just exceeds 72 percent, perhaps reflecting the smaller
offering and some seasoning as a public company for second steps. Furthermore,
as shown in Table 4.5, assuming the publicly-traded MHCs completed second step
conversions (utilizing standard assumptions for each MHC) at their current
market prices, the implied median price/tangible book is computed at
approximately 108.78 percent.
D. Acquisition Market
------------------
Also considered in the valuation was the potential impact on
Perpetual's stock price of recently completed and pending acquisitions of other
thrifts operating in Perpetual'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
Bank's stock. To the extent that acquisition speculation may impact the Bank'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.
E. Trading in Perpetual's Stock
----------------------------
Since Perpetual's minority stock currently trades under the symbol
"PERT" on the NASDAQ National Market system, RP Financial also considered the
recent trading activity in its valuation analysis. Perpetual had a total of
1,508,873 shares issued and outstanding at September 30, 1997, of which 708,873
were held by Public Stockholders and were traded as public securities. As of
December 5, 1997, the Bank's stock price was $54.75 per share. Prior to the
announcement of the second step conversion, the shares were trading in the range
of $36.00 to $41.00. The day the second step was announced, the shares
increased to a range of $45.00 to $48.50 on heavy volume and closed at $48.50.
We attribute the price increase to some speculation and the current pricing has
placed it at a premium to the average P/TB of other MHCs. There are significant
differences between the Bank's minority stock (currently being traded) and the
conversion stock that will be issued by the Holding Company. Such differences
include different liquidity characteristics (the new conversion stock will be
significantly more liquid owing to greater public shares available to trade), a
lower return on equity for the Holding Company's conversion stock, and the
anticipated difference in dividend for the
<PAGE>
RP Financial, LC.
November 28, 1997
-------------------------------------------------------------
Table 4.4
Pricing Characteristics and After-Market Trends
Second Step Conversions
-------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional Information Pre-Conversion Data Insider Purchases
----------------------------- Offering
Financial Info. Asset Quality Information
- ------------------------------------------------------------------------------------------------------------------------------------
Benefit Plans
-------------
Conversion Equity/ NPAs/ Res. Gross % of Exp./ Recog. Mgmt.
Institution State Date Ticker Assets Assets Assets Cov. Proc. Mid. Proc. ESOP Plans & Dirs.
- ----------- ----- ---- ------ ------ ------ ------ ---- ----- ---- ----- ---------------------
($Mil) (%) (%)(2) (%) ($Mil) (%) (%) (%) (%) (%)(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Riverview Bancorp, Inc. WA* 10/01/97 RVSB $230 11.24% 0.14% 245% $35.7 132% 2.8% 8.0% 4.0% 2.9%
Bayonne Bancshares NJ 08/22/97 FSNJ 577 8.33% 0.81% 53% 48.7 132% 3.8% 8.0% 4.0% 10.0%
Montgomery Fin. Corp. IN 07/01/97 MONT 94 9.83% 0.91% 20% 11.9 132% 4.5% 8.0% 4.0% 4.6%
Cumberland Mtn. Bncshrs. KY* 04/01/97 P.Sheet 92 5.14% 1.31% 19% 4.4 132% 8.0% 6.2% 4.0% 4.5%
Kenwood Bancorp OH* 07/01/96 P.Sheet 48 6.88% 0.00% NM 1.6 102% 22.2% 8.0% 4.0% 6.4%
Commonwealth Bancorp PA* 06/17/96 CMSB 2,054 6.71% 0.51% 109% 98.7 110% 1.9% 8.0% 4.0% 0.1%
Westwood Financial Corp. NJ 06/07/96 WWFC 85 7.05% 0.00% NM 3.9 99% 9.9% 0.0% 0.0% 2.5%
Jacksonville Bancorp TX 04/01/96 JXVL 198 10.47% 1.41% 36% 16.2 106% 4.4% 8.0% 4.0% 2.0%
North Central Bancshares IA 03/21/96 FFFD 180 16.47% 0.17% 562% 26 106% 3.5% 3.2% 0.0% 0.5%
Fidelity Financial of Ohio OH* 03/04/96 FFOH 227 13.23% 0.50% 69% 22.8 132% 3.2% 8.0% 4.0% 5.6%
First Colorado Bancorp CO* 01/02/96 FFBA 1,400 12.71% 0.31% 20% 134.1 105% 1.9% 10.0% 2.0% 2.0%
Charter Financial IL* 12/29/95 CBSB 293 12.17% 0.27% 281% 29.2 116% 3.4% 3.3% 0.0% 0.1%
American Nat'l Bancorp MD* 11/03/95 ANBK 426 6.80% 2.23% 67% 21.8 132% 3.3% 8.0% 4.0% 0.6%
First Defiance Fin. Corp. OH* 10/02/95 FDEF 476 15.27% 0.24% 135% 64.8 132% 2.3% 8.0% 4.0% 0.9%
Community Bank Shares IN* 04/10/95 CBIN 205 7.00% 0.33% 80% 10.1 132% 4.4% 8.0% 0.0% 17.9%
Fed One Bancorp WV* 01/19/95 FOBC 305 9.2% 0.32% 142% 16.1 85% 7.7% 7.0% 4.0% 0.9%
Home Financial Corp. FL* 10/25/94 HOFL 1,005 13.4% 0.91% 44% 175.6 112% 3.1% 8.0% 4.0% 0.6%
Jefferson Bancorp LA* 08/18/94 JEBC 257 6.3% 0.9% 25% 16.1 107% 3.9% 7.0% 3.0% 1.5%
Averages: $426 9.11% 0.59% 112% $38.7 106% 4.9% 6.6% 2.8% 3.3%
Medians: 257 9.83% 0.50% 69% $22.8 116% 3.8% 8.0% 4.0% 2.0%
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Institutional Information Pro Forma Data
----------------------------------------------------
Pricing Ratios(4) Fin. Characteristics
- ---------------------------------------------------------------------------------------------------------------
Conversion IPO
Institution State Date Ticker P/TB P/E(7) P/Core P/A ROA TE/A ROE Price
- ----------- ----- ---- ------ ---- ------ ------ --- --- ---- --- -----
(%) (x) (x) (%) (%) (%) (%) ($)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Riverview Bancorp, Inc. WA* 10/01/97 RVSB 109.0% 17.7 17.7 23.6% 1.3% 21.6% 6.2% $10.00
Bayonne Bancshares NJ 08/22/97 FSNJ 100.9% NM NM 14.6% -0.5% 14.4% -6.6% $10.00
Montgomery Fin. Corp. IN 07/01/97 MONT 89.1% 24.1 24.1 16.0% 0.7% 17.9% 3.7% 10.00
Cumberland Mtn. Bncshrs. KY* 04/01/97 P.Sheet 81.2% 13.8 13.8 7.1% 0.5% 8.8% 5.9% 10.00
Kenwood Bancorp OH* 07/01/96 P.Sheet 67.6% NM NM 6.0% 0.1% 8.8% 1.7% 10.00
Commonwealth Bancorp PA* 06/17/96 CMSB 109.3% 12.1 12.5 8.4% 0.7% 6.7% 10.4% 10.00
Westwood Financial Corp. NJ 06/07/96 WWFC 80.0% 10.1 10.1 7.3% 0.7% 9.2% 7.9% 10.00
Jacksonville Bancorp TX 04/01/96 JXVL 77.7% 14.9 14.9 12.6% 0.8% 16.2% 5.2% 10.00
North Central Bancshares IA 03/21/96 FFFD 74.2% 12.1 12.5 19.7% 1.6% 26.5% 6.1% 10.00
Fidelity Financial of Ohio OH* 03/04/96 FFOH 82.6% 18.1 18.1 16.6% 0.9% 20.0% 4.6% 10.00
First Colorado Bancorp CO* 01/02/96 FFBA 87.0% 12.7 13.4 13.2% 1.0% 15.2% 6.9% 10.00
Charter Financial IL* 12/29/95 CBSB 81.4% 12.3 12.3 15.5% 1.3% 19.1% 6.6% 10.00
American Nat'l Bancorp MD* 11/03/95 ANBK 83.9% 17.7 17.7 9.0% 0.5% 10.7% 4.7% 10.00
First Defiance Fin. Corp. OH* 10/02/95 FDEF 85.6% 18.2 18.2 20.6% 1.1% 24.1% 4.7% 10.00
Community Bank Shares IN* 04/10/95 CBIN 85.5% 10.3 9.0 9.3% 0.9% 10.9% 8.3% 10.00
Fed One Bancorp WV* 01/19/95 FOBC 67.9% 9.0 9.0 8.8% 1.0% 13.0% 7.6% 10.00
Home Financial Corp. FL* 10/25/94 HOFL 86.4% 10.6 12.4 21.3% 2.0% 24.6% 8.2% 10.00
Jefferson Bancorp LA* 08/18/94 JEBC 71.7% 10.2 10.2 7.9% 0.8% 11.1% 7.0% 10.00
Averages: 76.5% 13.2 13.3 12.2% 0.9% 14.3% 5.9% $8.95
Medians: 83.9% 12.7 13.4 13.2% 0.9% 15.2% 6.2% $10.00
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Institutional Information Post-IPO Pricing Trends
Closing Price:
- -------------------------------------------------------------------------------------------------------------------
First After After
Conversion Trading % First % First %
Institution State Date Ticker Day Chg. Week(5) Chg. Month(6) Chg.
- ----------- ----- ---- ------ --- ---- ------- ---- -------- ----
($) (%) ($) (%) ($) (%)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Riverview Bancorp, Inc. WA* 10/01/97 RVSB $13.25 32.5% $13.63 36.2% $13.25 32.5%
Bayonne Bancshares NJ 08/22/97 FSNJ 11.75 17.5% 11.88 18.8% 12.38 23.8%
Montgomery Fin. Corp. IN 07/01/97 MONT 11.13 11.3% 11.25 12.5% 12.13 21.2%
Cumberland Mtn. Bncshrs. KY* 04/01/97 P.Sheet 11.88 18.8% 12.25 22.5% 12.63 26.3%
Kenwood Bancorp OH* 07/01/96 P.Sheet NT NA NT NA NT NA
Commonwealth Bancorp PA* 06/17/96 CMSB 10.50 5.0% 10.75 7.5% 10.00 0.0%
Westwood Financial Corp. NJ 06/07/96 WWFC 10.75 7.5% 10.38 3.8% 10.62 6.2%
Jacksonville Bancorp TX 04/01/96 JXVL 9.75 -2.5% 9.63 -3.8% 9.88 -1.2%
North Central Bancshares IA 03/21/96 FFFD 10.88 8.7% 10.69 6.9% 10.44 4.4%
Fidelity Financial of Ohio OH* 03/04/96 FFOH 10.50 5.0% 10.00 0.0% 10.13 1.3%
First Colorado Bancorp CO* 01/02/96 FFBA 11.44 14.4% 11.63 16.3% 12.00 20.0%
Charter Financial IL* 12/29/95 CBSB 10.81 8.1% 10.88 8.7% 11.38 13.8%
American Nat'l Bancorp MD* 11/03/95 ANBK 9.38 -6.3% 9.75 -2.5% 9.88 -1.2%
First Defiance Fin. Corp. OH* 10/02/95 FDEF 10.38 3.8% 10.31 3.1% 10.13 1.3%
Community Bank Shares IN* 04/10/95 CBIN 12.00 20.0% 12.75 27.5% 12.25 22.5%
Fed One Bancorp WV* 01/19/95 FOBC 11.00 10.0% 11.00 10.0% 11.62 16.2%
Home Financial Corp. FL* 10/25/94 HOFL 9.59 -4.1% 10.00 0.0% 10.31 3.1%
Jefferson Bancorp LA* 08/18/94 JEBC 13.00 30.0% 14.25 42.5% 14.25 42.5%
Averages: 10.44 8.8% $10.61 11.7% $10.74 12.9%
Medians: $10.94 8.4% $10.94 9.4% $11.50 15.0%
</TABLE>
November 28, 1997
Note: "NT" - Not Traded; "NA" - Not Applicable, Not Available.
(1) Non-OTS regulated thrifts.
(2) As reported in summary pages of prospectus.
(3) As reported in prospectus.
(4) Does not take into account the adoption of SOP 93-6.
(5) Latest price if offering less than one week old.
(6) Latest price if offering more than one week but less than one month old.
(7) Price to core earnings if converted after 9/30/96 due to impact of SAIF
assessment.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.5
MHC INSTITUTIONS -- IMPLIED PRICING RATIOS FULL CONVERSION BASIS
Comparable Institution Analysts
As of December 5, 1997
<TABLE>
<CAPTION>
Fully Converted
Implied Value Per Share (8)
---------------- ----------------
Implied Core Book Pricing Ratios (3)
Price/ Market 12-Mth Value/ ---------------------------------------------
Share(1) Val(8) EPS(2) Share P/E P/B P/A P/TB P/CORE
-------- ------- ------- ------- --------- -------- ------- ------- ----------
($) ($Mil) ($) ($) (X) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts (7)
- -------------------------
Averages 23.92 183.12 1.12 15.17 19.32 158.46 19.36 163.19 20.17
Medians --- --- --- --- 19.24 152.11 17.91 153.92 19.90
All Non-MHC State of SC(7)
- --------------------------
Averages 32.87 148.78 1.31 17.49 19.91 219.96 27.27 219.96 21.64
Medians --- --- --- --- 19.91 211.80 28.09 211.80 21.64
Publicly - Traded MHC Institutions,
- -----------------------------------
Full Conversion Basis
- ---------------------
Averages 26.23 278.75 1.12 24.24 22.15 107.84 25.21 108.78 23.33
Medians --- --- --- --- 22.30 105.23 25.21 105.23 23.04
Publicly - Traded MHC Institutions,
- -----------------------------------
Full Conversions Basis
- ----------------------
CMSV Commty. Svgs. MHC of FL (48.5) 34.75 177.05 1.45 31.19 22.56 111.41 22.48 111.41 23.97
FFFL Fidelity FSB, MHC of FL (47.7) 29.87 202.61 1.20 26.13 22.29 114.31 17.82 114.66 24.89
SKBO First Carnegie, MHC of PA(45.0) 18.75 43.13 0.60 19.39 NM 96.70 25.74 96.70 NM
FFSX First FS&LS. MHC of IA (46.1) 31.87 90.29 1.60 28.88 19.55 110.35 18.10 110.81 19.92
GDVS Greater DV SB,MHC of PA (19.9) 30.00 98.16 1.31 29.52 22.90 101.63 31.02 101.63 22.90
HARS Harris SB, MHC of PA (24.3) 19.50 658.69 0.82 17.83 21.43 109.37 25.94 113.11 23.78
JXSB Jcksnville SB, MHC of IL (45.6) 26.25 33.39 1.18 25.91 22.25 101.31 18.56 101.31 22.25
LFED Leeds FSB, MHC of MD (36.3) 22.75 117.89 1.02 21.62 22.30 105.23 33.68 105.23 22.30
NWSB Northwest SB, MHC of PA (30.7) 15.25 712.98 0.69 13.42 22.10 113.64 28.23 115.71 22.10
PBHC OswegCity SB, MHC OF NY (46. ) 28.75 55.11 1.35 25.37 19.69 113.32 25.21 122.60 21.30
PBCT Peoples Bank, MHC of CT (40.1) 36.37 2223.15 1.50 30.18 18.09 120.51 25.04 120.55 24.25
PHSB Ppls Home SB, MHC of PA (45.0) 19.00 52.44 0.82 19.21 22.62 98.91 22.68 98.91 23.17
PULB Pulaski SB, MHC of MO (29.8) 30.00 62.82 1.45 29.34 24.39 102.25 28.80 102.25 20.69
PLSK Pulaski SB, MHC of NJ (46.0) 19.00 39.33 0.81 19.19 23.46 99.01 19.94 99.01 23.46
SBFL SB Fngr Lakes MHC of NY (33.1) 29.50 52.66 1.03 28.90 NM 102.08 20.39 102.08 28.64
WAYN Wayne S&L Co. MHC of OH (47.8) 33.00 74.42 1.21 25.43 26.19 129.77 26.23 129.77 27.27
WCFB Wbstr Cty FSB MHC of IA (45.2) 21.25 44.63 0.95 20.53 22.37 103.51 38.64 103.51 22.37
<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>
SAIF-Insured Thrifts (7)
- -------------------------
Averages 0.37 1.58 30.15 1,198 13.01 0.77 0.89 8.08 0.88 7.82
Medians --- --- --- --- --- --- --- --- --- ---
All Non-MHC State of SC(7)
- --------------------------
Averages 0.60 1.89 40.07 684 16.51 0.79 1.05 11.07 1.00 10.31
Medians --- --- --- --- --- --- --- --- --- ---
Publicly - Traded MHC Institutions,
- -----------------------------------
Full Conversion Basis
- ---------------------
Averages 0.50 1.83 35.86 1,112 23.53 0.61 1.13 4.95 1.10 4.78
Medians --- --- --- --- --- --- --- --- --- ---
Publicly - Traded MHC Institutions,
- -----------------------------------
Full Conversions Basis
- ----------------------
CMSV Commty. Svgs. MHC of FL (48.5) 0.90 2.59 62.07 788 20.17 0.41 1.04 5.03 0.97 4.74
FFFL Fidelity FSB, MHC of FL (47.7) 0.90 3.01 NM 1,137 15,59 0.40 0.88 5.22 0.79 4.68
SKBO First Carnegie, MHC of PA(45.0) 0.30 1.60 50.00 168 26.62 NA 0.83 4.04 0.83 4.04
FFSX First FS&LS. MHC of IA (46.1) 0.48 1.51 30.00 499 16.40 0.22 0.92 5.77 0.90 5.67
GDVS Greater DV SB,MHC of PA (19.9) 0.36 1.20 27.48 316 30.52 1.82 1.39 4.49 1.39 4.49
HARS Harris SB, MHC of PA (24.3) 0.22 1.13 26.83 2,540 23.72 0.68 1.31 5.23 1.18 4.72
JXSB Jcksnville SB, MHC of IL (45.6) 0.40 1.52 33.90 180 18.32 0.79 0.88 4.61 0.88 4.61
LFED Leeds FSB, MHC of MD (36.3) 0.51 2.24 50.00 350 32.01 0.06 1.53 4.79 1.53 4.79
NWSB Northwest SB, MHC of PA (30.7) 0.16 1.05 23.19 2,526 24.84 0.77 1.33 5.21 1.33 5.21
PBHC OswegCity SB, MHC OF NY (46. ) 0.28 0.97 20.74 219 22.25 0.91 1.30 5.90 1.20 5.46
PBCT Peoples Bank, MHC of CT (40.1) 0.76 2.09 50.67 8,879 20.78 0.76 1.40 6.86 1.05 5.12
PHSB Ppls Home SB, MHC of PA (45.0) 0.00 0.00 0.00 231 22.93 0.45 0.98 4.88 0.96 4.76
PULB Pulaski SB, MHC of MO (29.8) 1.10 3.67 NM 218 28.16 0.64 1.19 4.23 1.40 4.99
PLSK Pulaski SB, MHC of NJ (46.0) 0.30 1.58 37.04 197 20.14 0.65 0.87 4.89 0.87 4.89
SBFL SB Fngr Lakes MHC of NY (33.1) 0.40 1.36 38.83 258 19.97 0.50 0.71 3.37 0.76 3.62
WAYN Wayne S&L Co. MHC of OH (47.8) 0.62 1.88 51.24 284 20.21 0.58 1.00 5.02 0.96 4.82
WCFB Wbstr Cty FSB MHC of IA (45.2) 0.80 3.76 NM 116 37.33 0.07 1.73 4.65 1.73 4.65
</TABLE>
(1) Current stock price of minority stock. Average of High/Low or Bid/Ask price
per share.
(2) EPS (estimated core earnings) is based on reported trailing twelve month
data, adjusted to omit non-operating gains and losses (including the SAIF
assessment) on a tax effected basis. Public MHC data reflects additional
earnings from reinvestment of proceeds of second step conversion.
(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. Ratios are
pro forma assuming a second step conversion to full stock form.
(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 (earnings adjusted to reflect second step
conversion).
(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 and medians those companies the subject of actual or
rumored acquisition activities or unusual operating characteristics.
(8) Figures estimated by RP Financial to reflect a second step conversion of
the MHC to full stock form.
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.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Calculation of Implied Per Share Data --
Incorporating MHC Second Step Conversion
Comparable Institution Analysis
For the Twelve Months Ended September 30, 1997
<TABLE>
<CAPTION>
Current Ownership Current Per Share Data (MHC Ratios)
----------------------------- -------------------------------------------------
Total Public MHC Core Book Tangible
Shares Shares Shares EPS EPS Value Book Assets
-------- -------- -------- ------- ------ ------- ---------- --------
(000) (000) (000) ($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Publicly-Traded MHC Institutions
- -------------------------------
CMSV Commty. Svgs, MHC of FL (48.5) 5,095 2,470 2,625 1.07 0.98 15.79 15.79 139.20
FFFL Fidelity FSB, MHC of FL (47.7) 6,783 3,224 3,559 0.93 0.79 12.65 12.57 154.16
FFSX First FS&LA, MHC of IA (46.1) 2,833 1,303 1,530 1.18 1.15 14.08 13.96 161.26
GDVS Greater DV SB, MHC of PA (19.9) 3,272 650 2,622 0.68 0.68 8.85 8.85 76.04
HARS Harris SB, MHC of PA (24.3) 33,779 8,169 25,610 0.52 0.43 5.12 4.53 62.47
JXSB Jcksnville SB, MHC of IL (45.6) 1,272 580 692 0.80 0.80 13.63 13.63 129.12
LFED Leeds FSB, MHC of MD (36.3) 5,182 1,883 3,299 0.64 0.64 9.16 9.16 55.08
NWSB Northwest SB, MHC of PA (30.7) 46,753 14,352 32,401 0.41 0.41 4.33 4.09 44.93
PBCT Peoples Bank, MHC of CT (40.1) 61,126 24,453 36,673 1.44 0.93 11.41 11.40 126.48
PBHC OswegoCity SB, MHC of NY (46.) 1,917 882 1,035 1.05 0.94 12.02 10.10 100.68
PHSB Ppls Home SB, MHC of PA (45.0) 2,760 1,242 1,518 0.56 0.54 10.22 10.22 74.79
PLSK Pulaski SB, MHC of NJ (46.0) 2,070 952 1,118 0.54 0.54 10.36 10.36 86.47
PULB Pulaski SB, MHC of MO (29.8) 2,094 624 1,470 0.68 0.90 11.23 11.23 86.07
SBFL SB Fngr Lakes MHC of NY (33.1) 1,785 590 1,195 0.44 0.51 11.92 11.92 127.71
SKBO First Carnegie, MHC of PA (45.0) 2,300 1,035 1,265 0.33 0.33 10.52 10.52 63.97
WAYN Wayne S&L Co. MHC of OH (47.8) 2,255 1,075 1,180 0.81 0.76 10.58 10.58 110.97
WCFB Wbstr Cty FSB of IA (45.2) 2,100 950 1,150 0.64 0.64 10.52 10.52 44.99
<CAPTION>
Impact of Second Step Conversion
----------------------------------------------------------------------
Share Gross Net Incr. Net Incr.
Price Procds(1) Capital(2) Income(3)
---------- -------------- -------------- --------------
($000) ($000) ($000) ($000)
<S> <C> <C> <C> <C>
Publicly-Traded MHC Institutions
- --------------------------------
CMSV Commty. Svgs, MHC of FL (48.5) 34.75 91,219 78,448 2,402
FFFL Fidelity FSB, MHC of FL (47.7) 29.87 106,307 91,424 2,799
FFSX First FS&LA, MHC of IA (46.1) 31.87 48,761 41,935 1,284
GDVS Greater DV SB, MHC of PA (19.9) 30.00 78,660 67,648 2,071
HARS Harris SB, MHC of PA (24.3) 19.50 499,395 429,480 13,151
JXSB Jcksnville SB, MHC of IL (45.6) 26.25 18,165 15,622 478
LFED Leeds FSB, MHC of MD (36.3) 22.75 75,052 64,545 1,976
NWSB Northwest SB, MHC of PA (30.7) 15.25 494,115 424,939 13,012
PBCT Peoples Bank, MHC of CT (40.1) 36.37 1,333,797 1,147,065 35,124
PBHC OswegoCity SB, MHC of NY (46.) 28.75 29,756 25,590 784
PHSB Ppls Home SB, MHC of PA (45.0) 19.00 28,842 24,804 760
PLSK Pulaski SB, MHC of NJ (46.0) 19.00 21,242 18,268 559
PULB Pulaski SB, MHC of MO (29.8) 30.00 44,100 37,926 1,161
SBFL SB Fngr Lakes MHC of NY (33.1) 29.50 35,253 30,317 928
SKBO First Carnegie, MHC of PA (45.0) 18.75 23,719 20,398 625
WAYN Wayne S&L Co. MHC of OH (47.8) 33.00 38,940 33,488 1,025
WCFB Wbstr Cty FSB of IA (45.2) 21.25 24,438 21,016 644
<CAPTION>
Pro Forma Per Share Data (Fully Converted)
----------------------------------------------------------
Core Book Tangible
EPS EPS Value Book Assets
-------- --------- ---------- ----------- ---------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Publicly-Traded MHC Institutions
- --------------------------------
CMSV Commty. Svgs, MHC of FL (48.5) 1.54 1.45 31.19 31.19 154.60
FFFL Fidelity FSB, MHC of FL (47.7) 1.34 1.20 26.13 26.05 167.64
FFSX First FS&LA, MHC of IA (46.1) 1.63 1.60 28.88 28.76 176.06
GDVS Greater DV SB, MHC of PA (19.9) 1.31 1.31 29.52 29.52 96.71
HARS Harris SB, MHC of PA (24.3) 0.91 0.82 17.83 17.24 75.18
JXSB Jcksnville SB, MHC of IL (45.6) 1.18 1.18 25.91 25.91 141.40
LFED Leeds FSB, MHC of MD (36.3) 1.02 1.02 21.62 21.62 67.54
NWSB Northwest SB, MHC of PA (30.7) 0.69 0.69 13.42 13.18 54.02
PBCT Peoples Bank, MHC of CT (40.1) 2.01 1.50 30.18 30.17 145.25
PBHC OswegoCity SB, MHC of NY (46.) 1.46 1.35 25.37 23.45 114.03
PHSB Ppls Home SB, MHC of PA (45.0) 0.84 0.82 19.21 19.21 83.78
PLSK Pulaski SB, MHC of NJ (46.0) 0.81 0.81 19.19 19.19 95.30
PULB Pulaski SB, MHC of MO (29.8) 1.23 1.45 29.34 29.34 104.18
SBFL SB Fngr Lakes MHC of NY (33.1) 0.96 1.03 28.90 28.90 144.69
SKBO First Carnegie, MHC of PA (45.0) 0.60 0.60 19.39 19.39 72.84
WAYN Wayne S&L Co. MHC of OH (47.8) 1.26 1.21 25.43 25.43 125.82
WCFB Wbstr Cty FSB of IA (45.2) 0.95 0.95 20.53 20.53 55.00
</TABLE>
(1) Gross proceeds calculated as stock price multiplied by the number of shares
owned by the mutual holding company (i.e., non-public shares).
(2) Net increased in capital reflects gross proceeds less offering expenses,
contra-equity account for leveraged ESOP and deferred compensation account
for restricted stock plan:
Offering expense percent 2.00
ESOP percent purchase 8.00
Recognition plan percent 4.00
(3) Net increase in earnings reflects after-tax reinvestment income (assumes
ESOP and recognition plan do not generate reinvestment income), less after-
tax ESOP amortization and recognition plan vesting:
After-tax reinvestment 4.29
ESOP loan term (years) 10
Recog. plan vesting (yrs) 5
Effective tax rate 34.00
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 4.20
conversion stock. Since the pro forma impact has not been publicly disseminated
to date, it is appropriate to discount the current trading level. As the pro
forma impact is made known publicly, the trading level will become more
informative.
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
----------
Perpetual's management team has experience and expertise in all of the key
areas of the Bank's operations. Exhibit IV-5 lists Perpetual's Board of
Directors and executive management with summary resumes. The Bank's operations
to date indicates that Perpetual's management team, in conjunction with the
Board, has developed and implemented an effective operating philosophy.
Perpetual 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, Perpetual 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, Perpetual will operate in
substantially the same regulatory environment as the Peer Group members -- all
of whom are adequately capitalized institutions and are operating with no
apparent restrictions. Exhibit IV-6 reflects the Bank's pro forma regulatory
capital ratios. On balance, RP Financial concluded that no adjustment to the
Bank's value was warranted for this factor.
Summary of Adjustments
- ----------------------
Overall, we believe the Bank's pro forma market value should take into
account the valuation adjustments relative to the Peer Group:
<PAGE>
RP Financial, LC.
Page 4.21
Table 4.6
Perpetual Bank, A Federal Savings Bank
Key Valuation Parameters
<TABLE>
<CAPTION>
Key Valuation Parameters: Valuation Adjustment
------------------------ --------------------
<S> <C>
Financial Condition No Adjustment
Profitability, Growth and Viability of Earnings Moderate Downward
Asset Growth Slight Upward
Primary Market Area Slight Upward
Dividends No Adjustment
Liquidity of the Shares No Adjustment
Marketing of the Issue Slight Upward
Management No Adjustment
Effect of Government Regulations and Regulatory Reform No Adjustment
</TABLE>
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 Perpetual'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 MHC's
interest to the public. In computing the pro forma impact of the conversion and
the related pricing ratios, we have incorporated the valuation parameters
disclosed in Perpetual'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 (6.33 percent). With
regard to the employee stock ownership plan and stock reward plans, we have
performed the valuation assuming 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. In addition to
the three valuation methodologies specified by the OTS, RP Financial also
considered the recent prices for trades of the Bank's stock.
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 Bank 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.
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.,
<PAGE>
RP Financial, LC.
Page 4.22
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.
o Trading of PERT Stock. Converting institutions generally do not have
---------------------
stock outstanding. Perpetual, however, has public shares outstanding
due to the mutual holding company form of ownership. Because PERT
stock is currently traded in the markets, it is an indicator of
investor interest in the Bank's conversion stock and therefore
received some weight in our valuation. Based on the December 5, 1997
stock price of $54.75 per share and the 1,508,873 shares of Bank stock
issued and outstanding, the implied value of $82.611 million was
considered in the valuation process. However, since the conversion
stock will have different characteristics than the minority shares and
since pro forma information has not been publicly disseminated to
date, the current trading price of PERT stock was somewhat discounted
herein but will become more important towards the closing of the
offering.
The current minority ownership percentage is 46.98 percent. Pursuant to
federal policy as established subsequent to February 1, 1995, the minority
ownership interest is required to be adjusted pursuant to a two-step process to
reflect both waived dividends and assets held by the MHC. However, the MHC was
formed prior to this date, and thus dividends waived by the MHC are exempt from
this minority ownership interest adjustment. In addition, assets held at the MHC
consist of a de minimus amount of assets. Thus, there has been no adjustment to
the minority ownership interest percentage. Our calculations for the exchange
ratio and the size of the offering were based upon the existing ownership
percentage of approximately 46.98 percent.
The Bank has previously adopted Statement of Position ("SOP" 93-6), which
causes 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 continued to reflect all shares issued in the offering
including shares exchanged by the existing ESOP in the full conversion offering
to capture the full dilutive impact of such stock to the Bank's shareholders.
However, we have considered the impact of adoption of SOP 93-6 on the Bank in
the determination of the Bank's pro forma value.
<PAGE>
RP Financial, LC.
Page 4.23
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 Bank's conversion
stock is $65,070,148 at the midpoint at this time.
1. Price-to-Tangible Book ("P/TB"). The application of the P/TB
-------------------------------
valuation method requires calculating the Bank's pro forma market value by
applying a valuation P/TB ratio to Perpetual's pro forma tangible book value.
Based on the $65,070,148 midpoint valuation, Perpetual's pro forma P/TB ratio
was 103.86 percent. In comparison to the average P/TB ratio for the Peer Group
of 144.10 percent, Perpetual's valuation reflected a discount of 27.9 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.
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 $65,070,148, Perpetual's pro forma P/TB ratio of 103.86 percent
represented a discount of 22.4 percent from the 133.82 percent average P/TB
ratio of the recently converted thrifts (see Table 4.3). At the super maximum
of the valuation range, Perpetual's pro forma P/B ratio of 117.62 percent is
discounted by approximately 12.1 percent from the new conversions.
2. Price-to-Earnings ("P/E"). The application of the P/E valuation
-------------------------
method requires calculating the Bank'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 Bank'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. Perpetual reported net income of $1,728,363 for fiscal 1997, which
included non-operating items such as gains on the sale of securities and losses
on the sale of loans and REO. In order to derive a core earnings base, we
excluded these items from the Bank's reported earnings. In addition, during
fiscal 1997 Perpetual enacted the "1996 MRP Plan", which was approved during
calendar year 1996. The Bank recorded compensation expense related to the 1996
MRP Plan in the amount of $79,000 during fiscal year 1997, however on a go-
forward basis expense related to this Plan is projected to total approximately
$208,000 annually. Therefore, we also adjusted Perpetual's earnings for this
"additional expense", estimated to total $129,000 on a pre-tax basis, which is
expected to be incurred in fiscal 1998 and future years. The Bank's
<PAGE>
RP Financial, LC.
Page 4.24
valuation earnings base was thus estimated to total $1,820,000 as shown in
Table 4.7 (Note: the adjustments applied to the Peer Group's earnings in the
calculation of core earnings are shown in Exhibit IV-9).
Table 4.7
Perpetual Bank, A Federal Savings Bank
Derivation of Estimated Core Earnings
<TABLE>
<CAPTION>
Amount
------
($000)
<S> <C>
Pre-Tax Net Operating Income $2,654
Addback: Loss on Sale of Securities 308
Less: Gain on Sale of Loans/REO (33)
Less: Additional 1996 MRP Expense (129)
Adjusted Pre-Tax Income $2,800
Less: Tax Adjustment(1) (980)
----
Adjusted (Core) Income After Tax $1,820
</TABLE>
(1) Tax rate equal to 35%.
Based on Perpetual's trailing twelve month core earnings, and incorporating
the impact of the pro forma assumptions previously discussed, the Bank's pro
forma core P/E multiple at the $65,070,148 midpoint value equaled 23.04 times.
Comparatively, the Peer Group posted an average core P/E multiple of 19.58
times, which indicates a premium of 17.7 percent in the Bank's pro forma
earnings multiple. In reaching the valuation conclusion, we also evaluated the
Bank'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 Bank'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, Perpetual's value equaled 22.51 percent of pro
forma assets. Comparatively, the Peer Group companies exhibited an average P/A
ratio of 26.76 percent, which implies a 15.9 percent discount being applied to
the Bank's pro forma P/A ratio.
Valuation Conclusion
- --------------------
Based on the foregoing, it is our opinion that, as of December 5, 1997, the
aggregate pro forma market value of the Bank, inclusive of the sale of the MHCs
ownership interest in the Subscription and Community Offerings was $65,070,148
at the midpoint. Based on this valuation and the approximate 53.02 percent
<PAGE>
RP Financial, LC.
Page 4.25
ownership interest being sold in the Subscription and Community Offerings, the
midpoint value of the Holding Company's stock offering was $34,500,000 (i.e.
0.4698 x $65,070,148), equal to 1,725,000 shares offered at $20.00 per share.
Pursuant to the conversion guidelines, the 15 percent offering range includes a
minimum of $29,325,000 and a maximum of $39,675,000. Based on the $20.00 per
share offering price, this valuation range equates to an offering of 1,466,250
shares at the minimum to 1,983,750 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 $45,626,250, equal to 2,281,312 shares at the $20.00 per share
offering price. The comparative pro forma valuation ratios relative to the Peer
Group are shown in Table 4.8, and the key valuation assumptions are detailed in
Exhibit IV-7. The pro forma calculations for the range are detailed in
Exhibit IV-8.
Establishment of Exchange Ratio
- -------------------------------
OTS regulations provide that in a conversion of a mutual holding company,
the minority stockholders are entitled to exchange their shares of the Bank's
common stock for common stock of the Company. The Board of Directors of the
Mutual Holding Company has independently established a formula to determine the
exchange ratio. The formula has been designed to preserve the current aggregate
percentage ownership in the Bank represented by the Public Shares, which is an
approximate 46.98 percent ownership interest. Pursuant to the formula, the
Exchange Ratio will be determined at the end of the Holding Company's stock
offering based on the total number of shares sold in the Subscription and
Community offerings. Based upon this formula, and the valuation conclusion and
offering range concluded above, the Exchange Ratio would be 1.83281 shares,
2.15625 shares, 2.47969 shares and 2.85164 shares of Holding Company stock
issued for each Public Share, at the minimum, midpoint, maximum and supermaximum
of the offering, respectively.
The Exchange Ratio formula and share exchange procedures were determined
independently by the Board of Directors. RP Financial expresses no opinion on
the proposed exchange of the Holding Company shares for the Public Shares or on
the proposed Exchange Ratio.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.8
Public Market Pricing
Perpetual Bank, A FSB of SC and the Comparables
As of December 5, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization -------------- Pricing Ratios(3) Dividends(4)
-------------- Core Book ----------------------------------- -----------------------
Price/ Market 12-Mth Value/ Amount/ Payout
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE Share Yield Ratio(5)
-------- ----- ------ ----- --- --- --- ---- ------ ----- ------ --------
($) ($Mil) ($) ($) (X) (%) (%) (%) (X) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Perpetual Bank, A FSB of SC
- ---------------------------
Range Maximum 20.00 86.06 0.71 17.00 28.10 117.62 28.73 117.62 27.28 $0.49 2.45 68.98
Range Midpoint 20.00 74.83 0.77 18.05 25.93 110.79 25.46 110.79 25.13 0.56 2.82 73.20
Range Minimum 20.00 65.07 0.84 19.26 23.82 103.86 22.51 103.86 23.04 0.65 3.25 77.31
20.00 55.31 0.93 20.89 21.45 95.75 19.46 95.75 20.71 0.76 3.82 81.92
SAIF-Insured Thrifts(7)
- -----------------------
Averages 23.92 183.12 1.12 15.17 19.32 158.46 19.36 163.19 20.17 0.37 1.58 30.15
Medians --- --- --- --- 19.24 152.11 17.91 153.92 19.90 --- --- ---
All Non-MHC State of SC(7)
- --------------------------
Averages 32.87 148.78 1.31 17.49 19.91 219.96 27.27 219.96 21.64 0.60 1.89 40.07
Medians --- --- --- --- 19.91 211.80 28.09 211.80 21.64 --- --- ---
Comparable Group Averages
- -------------------------
Averages 22.67 44.93 1.12 15.78 19.07 144.10 26.76 144.10 19.58 0.54 2.39 47.73
Medians --- --- --- --- 18.30 137.87 25.50 137.87 19.16 --- --- ---
State of SC
- -----------
CFCP Coastal Fin. Corp. of SC 22.75 105.72 1.08 6.97 18.20 326.40 21.40 326.40 21.06 0.36 1.58 33.33
FFCH First Fin. Holdings Inc. of SC 48.00 305.66 2.16 16.45 21.62 291.79 17.84 291.79 22.22 0.84 1.75 38.89
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 0.24 1.59 29.63
FSPT FirstSpartan Fin. Corp. of SC 37.87 167.76 1.25 29.17 NM 129.83 34.78 129.83 NM 0.60 1.58 48.00
PALM Palfed, Inc. of Aiken SC(7) 28.62 151.66 0.84 10.74 NM 266.48 22.69 266.48 NM 0.12 0.42 14.29
SCCB S. Carolina Comm. Bnshrs of SC 22.87 15.99 0.75 17.35 NM 131.82 35.04 131.82 NM 0.60 2.62 NM
Comparable Group
- ----------------
BFSB Bedford Bancshares of VA 29.00 33.12 1.38 17.18 20.86 168.80 23.80 168.80 21.01 0.56 1.93 40.58
CFTP Community Fed. Bancorp of MS 20.25 93.74 0.65 12.47 NM 162.39 43.41 162.39 NM 0.30 1.48 46.15
CFFC Community Fin. Corp. of VA 26.50 33.79 1.51 18.99 17.67 139.55 18.43 139.55 17.55 0.56 2.11 37.09
FFBS FFBS Bancorp of Columbus MS 22.50 35.37 1.16 14.34 19.40 156.90 26.21 156.90 19.40 0.50 2.22 43.10
SOPN First SB, SSB, Moore Co. of NC 23.25 85.72 1.32 18.43 17.61 126.15 29.03 126.15 17.61 0.88 3.78 66.67
KSAV KS Bancorp of Kenly NC 22.50 19.91 1.39 16.45 16.07 136.78 18.11 136.86 16.19 0.60 2.67 43.17
SCCB S. Carolina Comm. Bnshrs of SC 22.87 15.99 0.75 17.35 NM 131.82 35.04 131.82 NM 0.60 2.62 NM
SSM Stone Street Bancorp of NC 22.50 42.71 0.86 16.32 26.16 137.87 40.76 137.87 26.16 0.45 2.00 52.33
TSH Teche Holding Company of LA 20.50 70.48 1.07 15.81 18.30 129.66 17.44 129.66 19.16 0.50 2.44 46.73
FTF Texarkana Fst. Fin. Corp of AR 25.50 45.57 1.61 15.32 15.84 166.45 25.50 166.45 15.84 0.56 2.20 34.78
TWIN Twin City Bancorp of TN 14.00 17.81 0.60 10.88 19.72 128.68 16.65 128.68 23.33 0.40 2.86 66.67
<CAPTION>
Financial Characteristics(6)
-------------------------------------------------------
Reported Core MEMO: MEMO
Total Equity/ NPAs/ --------------- --------------- Exchange Conversion
Assets Assets Assets ROA ROE ROA ROE Ratio Proceeds
------- ------- ------- ------- ------- ------- ------- -------- -----------
($Mil) (%) (%) (%) (%) (%) (%) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Perpetual Bank, A FSB of SC
- ---------------------------
Range Maximum 300 24.42 0.35 1.02 4.19 1.05 4.31 2.8516 $45.63
Range Midpoint 294 22.98 0.36 0.98 4.27 1.01 4.41 2.4797 39.68
Range Minimum 289 21.68 0.36 0.95 4.36 0.98 4.51 2.1563 34.50
284 20.33 0.37 0.91 4.36 0.94 4.62 1.8328 29.33
SAIF-Insured Thrifts(7)
- -----------------------
Averages 1,198 13.01 0.77 0.89 8.08 0.88 7.82
Medians --- --- --- --- --- --- ---
All Non-MHC State of SC(7)
- --------------------------
Averages 684 16.51 0.79 1.05 11.07 1.00 10.31
Medians --- --- --- --- --- --- ---
Comparable Group Averages
- -------------------------
Averages 174 18.62 0.43 1.31 7.15 1.29 7.01
Medians --- --- --- --- --- --- ---
State of SC
- -----------
CFCP Coastal Fin. Corp. of SC 494 6.56 0.10 1.21 19.41 1.05 16.77
FFCH First Fin. Holdings Inc. of SC 1,713 6.12 1.49 0.87 14.24 0.85 13.86
FSFC First So.east Fin. Corp. of SC(7) 350 10.28 0.24 1.05 10.32 1.05 10.32
FSPT FirstSpartan Fin. Corp. of SC 482 26.79 0.69 0.96 6.28 0.96 6.28
PALM Palfed, Inc. of Aiken SC(7) 669 8.51 2.04 0.39 4.82 0.67 8.26
SCCB S. Carolina Comm. Bnshrs of SC 46 26.59 0.87 1.15 4.34 1.15 4.34
Comparable Group
- ----------------
BFSB Bedford Bancshares of VA 139 14.10 0.52 1.20 8.41 1.19 8.35
CFTP Community Fed. Bancorp of MS 216 26.73 0.50 1.47 4.77 1.45 4.70
CFFC Community Fin. Corp. of VA 183 13.21 0.56 1.12 8.18 1.13 8.23
FFBS FFBS Bancorp of Columbus MS 135 16.70 0.58 1.41 7.48 1.41 7.48
SOPN First SB, SSB, Moore Co. of NC 295 23.01 0.29 1.75 7.26 1.75 7.26
KSAV KS Bancorp of Kenly NC 110 13.24 0.53 1.21 8.81 1.20 8.74
SCCB S. Carolina Comm. Bnshrs of SC 46 26.59 0.87 1.15 4.34 1.15 4.34
SSM Stone Street Bancorp of NC 105 29.57 0.23 1.54 4.69 1.54 4.69
TSH Teche Holding Company of LA 404 13.45 0.28 0.98 7.29 0.93 6.97
FTF Texarkana Fst. Fin. Corp of AR 179 15.32 0.23 1.70 10.74 1.70 10.74
TWIN Twin City Bancorp of TN 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>
RP Financial, LC.
Page 4.27
Table 4.9
Perpetual Bank, A Federal Savings Bank
Calculation of Exchange Ratios
<TABLE>
<CAPTION>
Shares Price/ Exchange Implied
Offered Share Shares(1) Exch. Ratio(2)
------- ----- --------- --------------
($000)
<S> <C> <C> <C> <C>
Minimum 1,466,250 $20.00 1,299,231 1.83281
Midpoint 1,725,000 20.00 1,528,507 2.15625
Maximum 1,983,750 20.00 1,757,783 2.47969
Super Maximum 2,281,312 20.00 2,021,451 2.85164
</TABLE>
(1) Calculated to preserve the Public Shares percentage ownership in the
Holding Company at approximately 46.98 percent.
(2) Calculated as pro forma exchange shares divided by 708,873 existing
Public Shares outstanding.
<PAGE>
RP Financial, LC.
<TABLE>
<CAPTION>
LIST OF EXHIBITS
Exhibit
Number Description
- ------- -----------
<S> <C>
I-1 Map of Office Locations
I-2 Perpetual's Audited Financial Statements
I-3 Key Operating Ratios
I-4 Investment Portfolio Composition
I-5 Yields and Costs
I-6 Loan Loss Allowance Activity
I-7 NPV Analysis
I-8 Fixed Rate and Adjustable Rate Loans
I-9 Loan Portfolio Composition
I-10 Loan Originations, Purchases, and Sales
I-11 Contractual Maturity By Loan Type
I-12 Non-Performing Assets
I-13 Classified Assets
I-14 Deposit Composition
I-15 Deposit Rate/Maturity Data
II-1 List of Office Locations
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
</TABLE>
<PAGE>
RP Financial, LC.
<TABLE>
<CAPTION>
LIST OF EXHIBITS(continued)
<S> <C>
IV-1 Stock Prices: December 5, 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
</TABLE>
<PAGE>
EXHIBITS
<PAGE>
EXHIBIT I-1
Perpetual Bank, A Federal Savings Bank
Map of Office Locations
<PAGE>
[MAP OF SOUTH CAROLINA APPEARS HERE]
<PAGE>
EXHIBIT I-2
Perpetual Bank, A Federal Savings Bank
Audited Financial Statements
[Incorporated by Reference]
<PAGE>
EXHIBIT I-3
Perpetual Bank, A Federal Savings Band
Key Operating Ratios
<TABLE>
<CAPTION>
KEY OPERATING RATIOS:
At or For the
Year Ended September 30,
--------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Performance Ratios:
<S> <C> <C> <C> <C> <C>
Return on average assets (net income divided by
average assets) ................................................. 0.72% 0.75% 0.92% 1.20%(4) 1.03%
Return on average equity (net income divided by
average equity) ................................................. 5.78 7.40 11.88 13.84(4) 13.36
Average equity to average assets ................................. 12.54 10.16 7.77 8.61 7.75
Interest rate spread (difference between yield
on interest-earning assets and average cost of
interest-bearing liabilities for the period)(5) ................. 3.57 3.85 3.61 3.54 3.26
Net interest margin (net interest income as a
percentage of average interest-earning assets
for the period)(5) .............................................. 3.96 4.16 2.90 3.86 3.59
Dividend payout ratio(3) ......................................... 117.39 126.32 82.68 46.91 N/A
Non-interest expense to average assets ........................... 3.20 3.72 2.74 2.74 2.63
Average interest-earning assets to average
interest-bearing liabilities .................................... 109.36 107.69 86.56 109.36 108.66
Asset Quality Ratios:
Allowance for loan losses to total loans
at end of period ................................................ 1.04 1.08 1.08 0.92 0.91
Net charge-offs to average outstanding loans
during the period ............................................... 0.18 0.07 0.04 0.04 0.06
Ratio of non-performing assets to total assets ................... 0.20 0.38 0.33 0.73 0.82
Capital Ratios:
Average equity to average assets ................................. 12.54 10.16 7.77 8.61 7.75
</TABLE>
- ---------------------
(1) Represents a 20.625% equity investment in a limited partnership that
invests in mortgage servicing rights. See "BUSINESS OF THE SAVINGS
BANK -- Lending Activities -- Loan Purchases and, Sales and Servicing"
and Note 3 of Notes to Consolidated Financial Statements.
(2) The Savings Bank was not a public company before fiscal 1994.
(3) Takes into account dividends waived by the MHC. All dividends to the MHC
have been waived since the first quarter of fiscal 1994. See Note 18 of
Notes to Consolidated Financial Statements. The dividend payout ratio
based only on dividends actually paid to Public Stockholders was 55.19%,
22.40%, 6.53% and 3.71% for the years ended September 30, 1997, 1996,
1995 and 1994, respectively.
(4) Excludes the effect of the one-time change in method of accounting for
income taxes in fiscal 1994. Return on assets and return on average
equity were 1.40% and 16.16%, respectively.
(5) Excludes income on mutual funds totalling approximately $1.7 million in
fiscal 1995, which was reported as gains on sale and included in other
income.
<PAGE>
EXHIBIT I-4
Perpetual Bank, A Federal Savings Bank
Investment Portfolio Composition
<TABLE>
<CAPTION>
At September 30,
------------------------------------------------------------------------------
1997 1996 1995
----------------------- ---------------------- ----------------------
Amortized Percent of Amortized Percent of Amortized Percent of
Cost(1) Portfolio Cost(1) Portfolio Cost(1) Portfolio
------- --------- ------- --------- ------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. agency securities ...... $10,191 22% $ -- --% $ -- --%
Certificates of deposit...... -- -- 100 -- -- --
U.S. Treasury securities..... 998 2 2,395 5 798 2
Mortgage-backed securities
and CMOs.................... 35,714 76 44,362 95 47,269 98
Total........................ ------- --- ------- --- ------- ---
$46,903 100% $46,857 100% $48,067 100%
======= === ======= === ======= ===
</TABLE>
- ---------------
(1) The market value of the Savings Bank's investment portfolio amounted
to $47.2 million, $45.6 million and $47.1 million at September 30,
1997, 1996, and 1995, respectively.
The following table sets forth the maturities and weighted average
yields of the debt securities in the Savings Bank's investment securities
portfolio at September 30, 1997.
<TABLE>
<CAPTION>
Less Than One to Five to Over Ten
One Year Five Years Ten Years Years
------------- -------------- -------------- --------------
Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. agency securities....... $ -- --% $4,003 6.26% $ -- --% $ 6,188 8.10%
U.S Treasury securities...... 998 5.64 -- -- -- -- -- --
Mortgage-backed securities
and CMOs.................... 395 6.65 1,455 7.56 11,666 7.55 22,198 7.08
------ ------ ------- -------
Total........................ $1,393 5.93 $5,458 6.61 $11,666 7.55 $28,386 7.30
====== ====== ======= =======
</TABLE>
The following table sets forth certain information with respect to
each security (other than U.S. Government and agency securities) which had an
aggregate amortized cost in excess of 10% of the Savings Bank's stockholders'
equity at the dates indicated.
<TABLE>
<CAPTION>
At September 30,
------------------------------------------------------------------------------
1997 1996 1995
----------------------- ----------------------- -----------------------
Carrying Market Carrying Market Carrying Market
Value Value Value Value Value Value
----- ----- ----- ----- ----- -----
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
RTC mortgage-backed
securities.................. $ 889 $ 888 $ 1,447 $ 1,414 $ 1,479 $ 1,430
CMOs......................... 21,138 21,211 34,836 33,804 36,743 35,900
------- ------- ------- ------- ------- -------
Total....................... $22,027 $22,099 $36,283 $35,218 $38,222 $37,330
======= ======= ======= ======= ======= =======
</TABLE>
<PAGE>
EXHIBIT I-5
Perpetual Bank, A Federal Savings Bank
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(1):
Mortgage loans....................... $118,030 $9,790 8.29% $91,535 $7,984 8.72% $88,153 $7,292 8.28%
Commercial real estate loans......... 23,098 2,102 9.10 14,045 1,338 9.52 5,583 524 9.39
Commercial other..................... 6,114 592 9.68 4,468 395 8.84 2,061 219 10.63
Consumer loans....................... 17,755 1,922 10.82 18,563 1,793 9.66 16,697 1,794 10.74
-------- ------- -------- ------- -------- -------
Total loans......................... 164,997 14,406 8.73 128,611 11,510 8.95 112,494 9,829 8.74
-------- -------
Mortgage-backed securities and CMOs... 48,638 3,303 6.79 44,793 3,072 6.86 48,263 3,418 7.08
Investment securities................. 5,271 339 6.43 896 65 7.25 246 9 3.66
Interest-bearing deposits............. 4,485 251 5.60 4,593 193 4.20 1,682 127 7.55
Other earning assets.................. 1,311 97 7.40 1,102 81 7.35 2,205 160 7.26
-------- ------- -------- ------- -------- -------
Total interest-earning assets....... 224,702 18,396 8.19 179,995 14,921 8.29 164,890 13,543 8.21
Non-interest-earning assets:
Mutual funds(3)...................... -- -- 33,578
Office properties and equipment, net. 5,645 4,048 3,887
Real estate, net..................... 56 20 382
Other non-interest-earning assets.... 8,072 5,339 4,801
-------- -------- --------
Total assets........................ $238,475 $189,402 $207,538
======== ======== ========
Interest-bearing liabilities:
Savings.............................. 22,923 590 2.57 23,482 622 2.65 26,885 743 2.76
Negotiable order of withdrawal
("NOW") accounts..................... 35,196 548 1.56 28,412 468 1.65 20,923 362 1.73
Certificates of deposit.............. 123,407 6,980 5.56 102,721 5,679 5.53 99,653 4,904 4.92
-------- ------- -------- ------- -------- -------
Total deposits...................... 181,526 8,118 4.47 154,615 6,769 4.38 147,461 6,009 4.07
Other interest-bearing liabilities... 23,951 1,378 5.75 12,531 656 5.24 43,036 2,752 6.39
-------- ------- -------- ------- -------- -------
Total interest-bearing liabilities.. 205,477 9,496 4.62 167,146 7,425 4.44 190,497 8,761 4.60
</TABLE>
(table continued on next page)
<PAGE>
<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
---------------------------- ---------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Non-interest-bearing liabilities:
Non-interest-bearing deposits......... 397 1,186 909
Other liabilities..................... 2,693 1,827 --
--------- --------- ---------
Total liabilities................... 3,090 170,159 191,406
Stockholders' equity................... 29,908 19,243 16,132
--------- --------- ---------
Total liabilities and stockholders'
equity............................. $238,475 $189,402 $207,538
========= ========= =========
Net interest income.................... $8,900 $7,496 $4,782
====== ====== ======
Interest rate spread................... 3.57% 3.85% 3.61%
==== ==== ====
Net interest margin.................... 3.96% 4.16% 2.90%
==== ==== ====
Ratio of average interest-earning
assets to average interest-bearing
liabilities.......................... 109.36% 107.69% 86.56%
====== ====== =====
</TABLE>
---------------
(1) Excludes interest on loans 90 days or more past due.
(2) Represents mutual funds which do not pay interest or dividends.
<PAGE>
EXHIBIT I-6
Perpetual Bank, A Federal Savings Bank
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 ............ $l,535 $1,278 $ 962 $ 884 $ 624
------ ------ ------ ------ ------
Provision for loan losses ................... 655 349 362 120 364
Transfers to real estate owned
valuation allowance ........................ -- -- -- -- 50
Recoveries:
Residential mortgage ........................ 4 6 -- -- --
Consumer .................................... 24 17 6 6 7
Total recoveries ........................... 28 23 6 6 7
------ ------ ------ ------ ------
Charge-offs:
Residential mortgage ....................... 4 18 -- 13 4
Consumer ................................... 100 97 52 35 57
Commercial ................................. 228 -- -- -- --
------ ------ ------ ------ ------
Total charge-offs ......................... 332 115 52 48 61
------ ------ ------ ------ ------
Net charge-offs ........................... 304 92 46 42 54
------ ------ ------ ------ ------
Allowance at end of period .................. $1,886 $1,535 $1,278 $ 962 $ 884
====== ====== ====== ====== ======
Ratio of allowance to total loans
outstanding at the end of the period ....... 1.04% 1.08% 1.08% 0.92% 0.91%
Ratio of net charge-offs to average
loans outstanding during the period ........ 0.18% 0.07% 0.04% 0.84% 0.06%
</TABLE>
<PAGE>
EXHIBIT I-7
Perpetual Bank, A Federal Savings Bank
NPV Analysis
<TABLE>
<CAPTION>
Basis NPV as Percent of
Point ("bp") Net Portfolio Value Present Value of Assets
Change ------------------------------------------- -------------------------
In Rates Amount $ Change % Change NPV Ratio Change
- -------- ------ -------- -------- --------- ------
<S> <C> <C> <C> <C> <C>
400 bp 24,217 $(14,457) (37)% 9.84% (479)bp
300 bp 28,092 (10,581) (27) 11.19 (343)
200 bp 31,972 (6,702) (17) 12.50 (213)
100 bp 35,469 (3,204) (8) 13.63 (100)
0 bp 38,673 14.62
(100 bp) 41,265 2,591 7 15.39 77
(200 bp) 43,761 5,087 13 16.10 148
(300 bp) 46,961 8,287 21 17.01 239
(400 bp) 51,467 12,793 33 18.26 364
</TABLE>
<PAGE>
EXHIBIT I-8
Perpetual Bank, A Federal Savings Bank
Fixed Rate and Adjustable Rate Loans
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>
Residential mortgage(1)........... $48,357 $34,760
Commercial real estate............ 12,101 1,466
Commercial business............... 1,220 814
Construction...................... 447 --
Automobile........................ 3,337 --
Savings account loans............. 256 --
Other............................. 748 2,021
------- -------
Total.......................... $66,466 $39,061
======= =======
</TABLE>
<PAGE>
EXHIBIT I-9
Perpetual Bank, A Federal Savings Bank
Loan Portfolio Composition
<TABLE>
<CAPTION>
At September 30,
---------------------------------------------------------------------
1997 1996 1995
------------------- ------------------- -------------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans:
One- to four-family (1).............................. $118,279 66.16% $ 91,186 64.78% $ 81,226 69.70%
Multi-family......................................... 1,245 0.70 1,010 0.72 630 0.54
Commercial real estate............................... 26,976 15.09 17,009 12.08 7,355 6.31
Construction......................................... 17,145 9.59 19,509 13.86 11,523 9.89
-------- ------ -------- ------ -------- ------
Total mortgage loans............................. 163,645 91.54 128,714 91.44 100,734 86.44
-------- ------ -------- ------ -------- ------
Commercial business loans............................ 7,182 4.02 5,529 3.93 3,657 3.13
Consumer loans:
Home equity and second mortgage..................... 3,405 1.90 5,036 3.58 7,535 6.47
Lines of credit..................................... 9,156 5.12 6,713 4.77 6,279 5.39
Automobile loans.................................... 3,540 1.98 2,677 1.90 1,438 1.23
Other............................................... 3,072 1.72 2,490 1.77 2,293 1.97
-------- ------ -------- ------ -------- ------
Total consumer loans............................. 19,173 10.72 16,916 12.02 17,545 15.06
-------- ------ -------- ------ -------- ------
Total loans...................................... 190,000 106.28 151,159 107.39 121,936 104.63
Less:
Undisbursed proceeds for loans in process............ 8,985 (5.03) 8,866 (6.30) 4,119 (3.53)
Unearned discounts................................... 357 -- -- -- -- --
Allowance for loan losses............................ 1,886 (1.05) 1,535 (1.09) 1,278 (1.10)
-------- ------ -------- ------ -------- ------
Net loans receivable............................. $178,722 100.00% $140,758 100.00% $116,539 100.00%
======== ====== ======== ====== ======== ======
<CAPTION>
At September 30,
--------------------------------------------
1994 1993
------------------- -------------------
Amount Percent Amount Percent
------ ------- ------ -------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Mortgage loans:
One- to four-family (1).............................. $ 77,624 74.03% $ 68,461 70.58%
Multi-family......................................... -- -- -- --
Commercial real estate............................... 5,158 4.92 2,584 2.66
Construction......................................... 7,159 6.83 5,112 5.27
-------- ------ -------- ------
Total mortgage loans............................. 89,941 85.78 76,157 78.51
-------- ------ -------- ------
Commercial business loans............................ 1,222 1.17 222 0.23
Consumer loans:
Home equity and second mortgage..................... 10,071 9.60 14,956 15.42
Lines of credit..................................... 6,045 5.77 5,915 6.10
Automobile loans.................................... 735 0.70 942 0.97
Other............................................... 1,837 1.75 2,168 2.23
-------- ------ -------- ------
Total consumer loans............................. 18,688 17.82 23,981 24.72
-------- ------ -------- ------
Total loans...................................... 109,851 104.77 100,360 103.46
Less:
Undisbursed proceeds for loans in process............ 4,037 (3.85) 2,471 (2.55)
Unearned discounts................................... -- -- -- --
Allowance for loan losses............................ 962 (0.92) 884 (0.91)
-------- ------ -------- ------
Net loans receivable............................. $104,852 100.00% $ 97,005 100.00%
======== ====== ======== ======
</TABLE>
-----------
(1) Includes construction loans converted to permanent loans and
participation loans.
<PAGE>
EXHIBIT I-10
Perpetual Bank, A Federal Savings Bank
Loan Originations, Purchases, and Sales
<TABLE>
<CAPTION>
Years Ended September 30,
---------------------------------------
1997 1996 1995
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
Total loans at beginning of
period ........................... $ 151,159 $ 121,936 $ 109,851
--------- --------- ---------
Loans originated:
One- to four-family .............. 18,783 30,065 16,167
Multi-family ..................... 240 1,312 526
Commercial real estate ........... 11,912 7,113 5,804
Construction loans ............... 10,934 12,816 12,169
Commercial business .............. 10,731 6,302 4,735
Consumer ......................... 24,739 10,696 14,984
--------- --------- ---------
Total loans originated ......... $ 77,339 $ 68,304 54,385
--------- --------- ---------
Loans purchased:
One- to four-family .............. 23,581 18,242 6,543
Commercial real estate(l) ........ 3,146 -- 813
--------- --------- ---------
Total loans purchased .......... 26,727 18,242 7,356
--------- --------- ---------
Loans sold:
Total whole loans sold ........... (5,747) (9,556) (9,614)
--------- --------- ---------
Total loans sold .............. (5,747) (9,556) (9,614)
Mortgage loan principal
repayments ....................... (59,478) (47,767) (40,042)
Net loan activity ................. 38,841 29,223 12,085
--------- --------- ---------
Total loans at end of period ...... $ 190,000 $ 151,159 $ 121,936
========= ========= =========
</TABLE>
- -------------
(1) In 1997, includes a $2.3 million purchased loan secured by single-family
lots located in Greenville, South Carolina.
<PAGE>
EXHIBIT I-11
Perpetual Bank, A Federal Savings Bank
Contractual Maturity By Loan Type
<TABLE>
<CAPTION>
Within One Year After 3 Years After 5 Years
One Year Through 3 Years Through 5 Years Through 10 Years Beyond 10 Years Total
-------- --------------- --------------- ---------------- --------------- -----
<S> <C> <C> <C> <C> <C> <C>
Residential mortgage(1)..... $ 27,466 $ 35,284 $ 20,606 $ 18,913 $ 8,314 $110,583
Commercial real estate...... 13,365 7,884 5,024 568 91 26,932
Commercial business......... 5,148 1,174 732 128 - 7,182
Construction................ 16,698 447 - - - 17,145
Automobile.................. 203 1,350 1,939 48 - 3,540
Savings account loans....... 1,089 144 88 12 12 1,345
Other....................... 11,519 2,083 12 674 - 14,288
-------- -------- -------- -------- -------- --------
Total loans.............. $ 75,488 $ 48,366 $ 28,401 $ 20,343 $ 8,417 $181,015
========= ========= ========= ========= ========= =========
</TABLE>
- ----------------------
(1) Includes one- to four-family and multi-family loans.
<PAGE>
EXHIBIT I-12
Perpetual Bank, A Federal Savings Bank
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 non-accrual basis:
Mortgage .................................. $ 220 $ 190 $ 348 $ 435 $ --
Consumer .................................. -- -- 124 163 448
Commercial ................................ 183 126 -- -- --
------ ------ ------ ------ ------
403 316 472 598 448
------ ------ ------ ------ ------
Accruing loans which are contractually
past due 90 days or more:
Real estate:
Residential ............................... 6 467 82 60 826
Consumer .................................. 8 2 9 17 17
Commercial ................................ 465 10 -- -- --
------ ------ ------ ------ ------
479 479 91 77 843
------ ------ ------ ------ ------
Total of non-accrual and
past due 90 days or more ................. 882 795 563 675 1,291
------ ------ ------ ------ ------
Real estate owned, net .................... 163 3 32 575 87
------ ------ ------ ------ ------
Total non-performing assets ............... $1,045 $ 798 $ 595 $1,250 $1,378
====== ====== ====== ====== ======
Total loans delinquent 90 days
or more to net loans ..................... 0.49% 0.56% 0.48% 0.64% 1.33%
Total loans delinquent 90 days
or more to total assets .................. 0.34% 0.38% 0.32% 0.39% 0.77%
Total non-performing assets to
total assets ............................. 0.41% 0.38% 0.33% 0.73% 0.82%
</TABLE>
<PAGE>
EXHIBIT I-13
Perpetual Bank, A Federal Savings Bank
Classified Assets
<TABLE>
<CAPTION>
At or For the Years
Ended September 30,
-------------------------------
1997 1996 1995
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Loss .............................. $ 140 $ 125 $ 86
Doubtful .......................... 8 32 --
Substandard assets ................ 1,227 598 575
Special mention ................... 58 -- --
----- ----- -----
$1,433 $ 755 $ 661
====== ====== ======
General loss allowances ........... 1,746 1,410 1,192
Specific loss allowances .......... 140 125 86
Net charge-offs ................... 304 92 46
</TABLE>
<PAGE>
EXHIBIT I-14
Perpetual Bank, A Federal Savings Bank
Deposit Composition
<TABLE>
<CAPTION>
Percentage
Interest Minimum of Total
Rate Term Category Amount Balance Deposits
- ---- ---- -------- ------ ------- --------
<S> <C> <C> <C> <C> <C>
2.28% None NOW accounts $ 100 $ 25,996 12.93%
-- None Non-interest-bearing accounts 100 11,812 5.88
2.67 None Savings accounts 100 24,360 12.12
Certificates of Deposit
-----------------------
5.71 Within 6 months Fixed-term, fixed-rate 1,000 75,002 37.31
5.89 7 - 12 months Fixed-term, fixed-rate 1,000 40,649 20.22
6.00 13 - 36 months Fixed-term, fixed-rate 1,000 22,347 11.12
6.06 37 - 120 months Fixed-term, fixed-rate 1,000 836 0.42
------- -----
$201,002 100.00%
======== ======
</TABLE>
The following table indicates the amount of jumbo certificates of
deposit by time remaining until maturity at September 30, 1997. Jumbo
certificates of deposit require minimum deposits of $100,000 and have negotiable
interest rates.
<TABLE>
<CAPTION>
Certificates
Maturity Period of Deposits
- --------------- -----------
(In Thousands)
<S> <C>
Three months or less................. $ 4,677
Over three through six months........ 5,721
Over six through twelve months....... 5,061
Over twelve months................... 3,081
-------
Total............................. $18,540
=======
</TABLE>
<PAGE>
EXHIBIT I-15
Perpetual Bank, A Federal Savings Bank
Deposit Rate/Maturity Data
<TABLE>
<CAPTION>
At September 30,
---------------------------
1997 1996 1995
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Below 3.00%............ $ 194 $ -- $ 503
3.00 - 5.00%........... 2,012 4,119 18,623
5.01 - 7.00%........... 136,400 99,182 81,903
7.01 - 9.00%........... 228 582 685
------- ------- -------
Total............... $138,834 $103,883 $101,714
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Amount Due
-----------------------------------------------------------------
Percent
One to Over Two Over Three Over Five of Total
Less Than Two to Three to Five to Ten Certificate
One Year Years Years Years Years Total Accounts
-------- ----- ----- ----- ----- ----- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
2.50 - 5.00% ............ $ 2,206 $ -- $ -- $ -- $ -- $ 2,206 1.58%
5.01 - 7.00% ............ 113,445 17,017 5,330 506 102 136,400 98.26
7.01 - 9.00% ............ -- -- -- 159 69 228 0.16
-------- ------- ------ ---- ---- -------- ------
Total ................... $115,651 $17,017 $5,330 $665 $171 $138,834 100.00%
======== ======= ====== ==== ==== ======== ======
</TABLE>
<PAGE>
EXHIBIT II-1
Perpetual Bank, A Federal Savings Bank
List of Office Locations
<TABLE>
<CAPTION>
Lease
Year Owned or Square Expiration
Location Opened Leased Footage Date
- -------- ------ ------ ------- ----
<S> <C> <C> <C> <C>
Main Office:
907 N. Main Street 1979 Owned 50,000 --
Anderson, South Carolina
Branch Offices:
104 Whitehall Road 1975 Building owned 2,000 December 31, 2004, with
Anderson, South Carolina Land leased two renewal options for ten
years each
2821 South Main Street 1976 Building owned 2,500 April 30, 2000, with five
Anderson, South Carolina Land leased renewal options for five years
each
Windsor Place Winn Dixie(1) 1993 Leased 450 March 1, 1998, with two
SC Highway 81 renewal options for five
Anderson, South Carolina years each
Northtowne 1994 Owned 2,800 --
3898 Liberty Highway
Anderson, South Carolina
1007 By-Pass 123 1996 Owned 2,900 --
Seneca, South Carolina
- ------------------
</TABLE>
(1) In October 1997, this branch office was closed in conjunction with the
opening of a new 2,700 square foot branch office on SC Highway 81,
Anderson, South Carolina in the Perpetual Square complex. The Savings Bank
owns the building and real estate of this new branch office. See "--
Subsidiary Activities" for additional information regarding Perpetual
Square.
<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%
December 5, 1997 8.50% 5.31% 5.58% 6.08%
</TABLE>
(1) End of period data.
Source: SNL Securities.
<PAGE>
EXHIBIT II-3
Perpetual Bank, A Federal Savings Bank
Demographic/Economic Reports
<PAGE>
--------------------------------------
STATE DEMOGRAPHIC REPORT
--------------------------------------
State 00
State Name UNITED STATES
<TABLE>
<CAPTION>
Population
- ----------
<S> <C>
1980 226,542,204
1990 248,709,873
1997 267,805,150
2002 281,208,787
</TABLE>
Population Growth Rate 1
<TABLE>
<CAPTION>
Households
- ----------
<S> <C>
1990 91,947,410
1997 99,019,931
2002 104,000,643
</TABLE>
Household Growth Rate 1
Average Household Size 2.64
<TABLE>
<CAPTION>
Families
- --------
<S> <C>
1990 64,517,947
1997 68,999,546
</TABLE>
Family Growth Rate 0.9
<TABLE>
<CAPTION>
Race 1990 1997
- ---- ---- ----
<S> <C> <C>
% White 80.3 78.4
% Black 12.1 12.4
% Asian
/Pacific Isl. 2.9 3.7
% Hispanic* 9 10.8
</TABLE>
<TABLE>
<CAPTION>
1997 Age Distribution
- ---------------------
<S> <C>
0-4 7.2
5-9 7.4
10-14 7.1
15-19 7.1
20-24 6.5
25-44 31.4
45-64 20.5
65-84 11.3
85+ 1.4
18+ 74.3
</TABLE>
<TABLE>
<CAPTION>
Median Age
- ----------
<S> <C>
1990 32.9
1997 34.8
</TABLE>
Male/Female Ratio 95.9
Per Capita Income $18,000
<TABLE>
<CAPTION>
1997 Household Income*
- ------------------------------
<S> <C>
Base 99,019,225
% less than $15K 17.7
% $15K-25K 14.4
% $25K-50K 33.5
% $50K-100K 26.5
% $100K-150K 5.4
% greater than $150K 2.6
</TABLE>
<TABLE>
<CAPTION>
Median Household Income
- -----------------------
<S> <C>
1997 $36,961
2002 $42,042
</TABLE>
<TABLE>
<CAPTION>
1997 Average Disposable Income
- -----------------------------------
<S> <C>
Total $35,584
Householder less than 35 $30,999
Householder 35-44 $40,281
Householder 45-54 $45,940
Householder 55-64 $39,611
Householder 65+ $22,603
</TABLE>
<TABLE>
<CAPTION>
Spending Potential Index*
- -------------------------
<S> <C>
Auto Loan 100
Home Loan 100
Investments 100
Retirement Plans 100
Home Repair 100
Lawn & Garden 100
Remodeling 100
Appliances 100
Electronics 100
Furniture 100
Restaurants 100
Sporting Goods 100
Theater/Concerts 100
Toys & Hobbies 100
Travel 100
Video Rental 100
Apparel 100
Auto Aftermarket 100
Health Insurance 100
Pets & Supplies 100
</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 11/18/97
<PAGE>
--------------------------------------
STATE DEMOGRAPHIC REPORT
--------------------------------------
State 45
State Name SOUTH CAROLINA
<TABLE>
<CAPTION>
Population
- ----------
<S> <C>
1980 3,120,729
1990 3,486,703
1997 3,728,002
2002 3,903,439
</TABLE>
Population Growth Rate 0.9
<TABLE>
<CAPTION>
Households
- ----------
<S> <C>
1990 1,258,044
1997 1,382,405
2002 1,468,512
</TABLE>
Household Growth Rate 1.3
Average Household Size 2.63
<TABLE>
<CAPTION>
Families
- --------
<S> <C>
1990 928,206
1997 992,446
</TABLE>
Family Growth Rate 0.9
<TABLE>
<CAPTION>
Race 1990 1997
- ---- ---- ----
<S> <C> <C>
% White 69 68.6
% Black 29.8 30.1
% Asian
/Pacific Isl. 0.6 0.8
% Hispanic* 0.9 1.1
</TABLE>
<TABLE>
<CAPTION>
1997 Age Distribution
- ---------------------
<S> <C>
0-4 7.1
5-9 7.4
10-14 7.1
15-19 7.4
20-24 6.8
25-44 31
45-64 21.2
65-84 10.9
85+ 1.1
18+ 74.3
</TABLE>
<TABLE>
<CAPTION>
Median Age
- ----------
<S> <C>
1990 32
1997 34.4
</TABLE>
Male/Female Ratio 94
Per Capita Income $15,474
<TABLE>
<CAPTION>
1997 Household Income*
- ------------------------------
<S> <C>
Base 1,382,401
% less than $15K 20.4
% $15K-25K 16.1
% $25K-50K 35.6
% $50K-100K 23.1
% $100K-150K 3.6
% greater than $150K 1.3
</TABLE>
<TABLE>
<CAPTION>
Median Household Income
- -----------------------
<S> <C>
1997 $32,771
2002 $37,972
</TABLE>
<TABLE>
<CAPTION>
1997 Average Disposable Income
- -----------------------------------
<S> <C>
Total $31,864
Householder less than 35 $28,383
Householder 35-44 $36,515
Householder 45-54 $40,270
Householder 55-64 $34,461
Householder 65+ $20,181
</TABLE>
<TABLE>
<CAPTION>
Spending Potential Index*
- -------------------------
<S> <C>
Auto Loan 99
Home Loan 87
Investments 91
Retirement Plans 91
Home Repair 98
Lawn & Garden 96
Remodeling 104
Appliances 99
Electronics 97
Furniture 94
Restaurants 92
Sporting Goods 98
Theater/Concerts 94
Toys & Hobbies 99
Travel 90
Video Rental 99
Apparel 94
Auto Aftermarket 96
Health Insurance 100
Pets & Supplies 99
</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 11/18/97
<PAGE>
--------------------------------------
COUNTY DEMOGRAPHIC REPORT
--------------------------------------
State/County 45007
County Name ANDERSON SC
<TABLE>
<CAPTION>
Population
- ----------
<S> <C>
1980 133,235
1990 145,196
1997 158,524
2002 167,721
</TABLE>
Population Growth Rate 1.2
<TABLE>
<CAPTION>
Households
- ----------
<S> <C>
1990 55,481
1997 61,648
2002 66,066
</TABLE>
Household Growth Rate 1.5
Average Household Size 2.54
<TABLE>
<CAPTION>
Families
- --------
<S> <C>
1990 41,495
1997 44,859
</TABLE>
Family Growth Rate 1.1
<TABLE>
<CAPTION>
Race 1990 1997
- ---- ---- ----
<S> <C> <C>
% White 82.9 82.2
% Black 16.6 17.2
% Asian
/Pacific Isl. 0.2 0.3
% Hispanic* 0.4 0.5
</TABLE>
<TABLE>
<CAPTION>
1997 Age Distribution
- ---------------------
<S> <C>
0-4 6.2
5-9 6.7
10-14 6.8
15-19 7.2
20-24 5.9
25-44 29.1
45-64 23.9
65-84 12.8
85+ 1.4
18+ 76.1
</TABLE>
<TABLE>
<CAPTION>
Median Age
- ----------
<S> <C>
1990 34.8
1997 37.4
</TABLE>
Male/Female Ratio 92.4
Per Capita Income $14,799
<TABLE>
<CAPTION>
1997 Household Income*
- ----------------------
<S> <C>
Base 61,648
% less than $15K 22.5
% $15K-25K 17.5
% $25K-50K 36.7
% $50K-100K 19.8
% $100K-150K 2.6
% greater than $150K 0.9
</TABLE>
<TABLE>
<CAPTION>
Median Household Income
- -----------------------
<S> <C>
1997 $30,210
2002 $35,101
</TABLE>
<TABLE>
<CAPTION>
1997 Average Disposable Income
- ------------------------------
<S> <C>
Total $29,411
Householder less than 35 $28,096
Householder 35-44 $35,289
Householder 45-54 $38,168
Householder 55-64 $31,473
Householder 65+ $16,158
</TABLE>
<TABLE>
<CAPTION>
Spending Potential Index*
- -------------------------
<S> <C>
Auto Loan 99
Home Loan 80
Investments 87
Retirement Plans 87
Home Repair 97
Lawn & Garden 94
Remodeling 109
Appliances 99
Electronics 96
Furniture 89
Restaurants 88
Sporting Goods 97
Theater/Concerts 90
Toys & Hobbies 99
Travel 86
Video Rental 99
Apparel 90
Auto Aftermarket 93
Health Insurance 101
Pets & Supplies 98
</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 11/18/97
<PAGE>
--------------------------------------
COUNTY DEMOGRAPHIC REPORT
--------------------------------------
State/County 45073
County Name OCONEE SC
<TABLE>
<CAPTION>
Population
- ----------
<S> <C>
1980 48,611
1990 57,494
1997 63,616
2002 67,835
</TABLE>
Population Growth Rate 1.4
<TABLE>
<CAPTION>
Households
- ----------
<S> <C>
1990 22,358
1997 25,296
2002 27,396
</TABLE>
Household Growth Rate 1.7
Average Household Size 2.5
<TABLE>
<CAPTION>
Families
- --------
<S> <C>
1990 16,875
1997 18,510
</TABLE>
Family Growth Rate 1.3
<TABLE>
<CAPTION>
Race 1990 1997
- ---- ---- ----
<S> <C> <C>
% White 90.5 90
% Black 8.8 9.2
% Asian
/Pacific Isl. 0.3 0.4
% Hispanic* 0.9 1.2
</TABLE>
<TABLE>
<CAPTION>
1997 Age Distribution
- ---------------------
<S> <C>
0-4 6
5-9 6.4
10-14 6.6
15-19 6.9
20-24 5.6
25-44 29.1
45-64 24.5
65-84 13.7
85+ 1.3
18+ 76.9
</TABLE>
<TABLE>
<CAPTION>
Median Age
- ----------
<S> <C>
1990 35.5
1997 38.3
</TABLE>
Male/Female Ratio 97.3
Per Capita Income $15,644
<TABLE>
<CAPTION>
1997 Household Income*
- ------------------------------
<S> <C>
Base 25,296
% less than $15K 20.2
% $15K-25K 18.2
% $25K-50K 35.8
% $50K-100K 21.6
% $100K-150K 3.1
% greater than $150K 1.1
</TABLE>
<TABLE>
<CAPTION>
Median Household Income
- -----------------------
<S> <C>
1997 $31,493
2002 $36,550
</TABLE>
<TABLE>
<CAPTION>
1997 Average Disposable Income
- -----------------------------------
<S> <C>
Total $30,703
Householder less than 35 $27,062
Householder 35-44 $36,820
Householder 45-54 $38,543
Householder 55-64 $34,699
Householder 65+ $19,588
</TABLE>
<TABLE>
<CAPTION>
Spending Potential Index*
- -------------------------
<S> <C>
Auto Loan 100
Home Loan 77
Investments 85
Retirement Plans 86
Home Repair 96
Lawn & Garden 94
Remodeling 114
Appliances 99
Electronics 95
Furniture 86
Restaurants 87
Sporting Goods 97
Theater/Concerts 88
Toys & Hobbies 99
Travel 83
Video Rental 99
Apparel 88
Auto Aftermarket 93
Health Insurance 103
Pets & Supplies 99
</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 11/18/97
<PAGE>
EXHIBIT II-4
Perpetual Bank, A Federal Savings Bank
Sources of Personal Income/Employment Sectors
<PAGE>
REGIONAL ECONOMIC PROFILE
for States and counties
<TABLE>
<CAPTION>
Anderson, South Carolina [45.007]
- -------------------------------------------------------------------------------------------------------------------
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 17,670 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 capital 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
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA30 August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
REGIONAL ECONOMIC PROFILE
for States and counties
<TABLE>
<CAPTION>
Oconee, South Carolina [45.073]
- ------------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Place of residence profile
Personal income (thousands of dollars] 946,829 991,021 1,057,564 1,129,171 1,221,187
Nonfarm personal income 926,320 982,684 1,033,029 1,106,700 1,192,703
Farm income 20,509 8,337 24,535 22,471 28,484
Derivation of personal income
Net earnings 1/ 618,898 639,635 684,853 727,435 792,966
Transfer payments 154,218 173,714 185,790 202,513 215,951
Income maintenance 2/ 7,758 9,917 10,749 11,582 12,640
Unemployment insurance 6,036 7,541 6,027 3,679 2,773
Retirement and other 140,424 156,256 169,014 187,252 200,538
Dividends, interest, and rent 173,713 177,672 186,921 199,223 212,270
Population (number of persons) 3/ 58,242 58,845 59,779 60,619 61,620
Per capita incomes (dollars) 4/
Per capita personal income 16,257 16,841 17,691 18,627 19,818
Per capita net earnings 10,626 10,870 11,456 12,000 12,869
Per capita transfer payments 2,648 2,952 3,108 3,341 3,505
Per capita income maintenance 133 169 180 191 205
Per capita unemployment insurance 104 128 101 61 45
Per capita retirement & other 2,411 2,655 2,827 3,089 3,254
Per capita dividends, interest, & rent 2,983 3,019 3,127 3,286 3,445
Place of work profile
Total earnings (place of work, $000] 652,554 666,268 704,236 745,625 805,549
Wages and salary disbursements 528,489 546,183 560,033 594,608 637,787
Other labor income 66,784 71,950 77,174 82,346 89,870
Proprietors' income 57,281 48,135 67,029 68,671 77,892
Nonfarm proprietors' income 37,902 40,851 43,688 47,366 50,640
Farm proprietors' income 19,379 7,284 23,341 21,305 27,252
Total full- and part- time employment 30,152 30,255 29,685 29,908 30,987
Wage and salary jobs 25,625 25,529 25,019 25,235 26,282
Number of proprietors 4,527 4,726 4,666 4,673 4,705
Number of nonfarm proprietors 5/ 3,756 3,931 3,893 3,940 4,004
Number of farm proprietors 771 795 773 733 701
Average earnings per job (dollars) 21,642 22,022 23,724 24,931 25,996
Wage & salary earnings per job 20,624 21,395 22,384 23,563 24,267
Average earnings per nonfarm proprietor 10,091 10,392 11,222 12,022 12,647
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA3O August 1997 BUREAU OF ECONOMIC ANALYSIS
<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 States and Counties
(number of jobs)
<TABLE>
<CAPTION>
Anderson, South Carolina [45.007]
- ---------------------------------------------------------------------------------------------------
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 57,512 58,776 61,000 62,797 63,666
Proprietors' employment 9,799 10,045 10,228 10,389 10,485
Farm proprietors' employment 1,505 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
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA25 August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY 1/
for States and counties
(number of jobs)
<TABLE>
<CAPTION>
Oconee, South Carolina [45.073]
- ------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Employment by place of work
Total full- and part-time employment 30,152 30,255 29,685 29,908 30,987
By type
Wage and salary employment 25,625 25,529 25,019 25,235 26,282
Proprietors' employment 4,527 4,726 4,666 4,673 4,705
Farm proprietors' employment 771 795 773 733 701
Nonfarm proprietors' employment 2/ 3,756 3,931 3,893 3,940 4,004
By industry
Farm employment 880 911 883 836 801
Nonfarm employment 29,272 29,344 28,802 29,072 30,186
Private employment 25,879 25,865 25,318 25,566 26,634
Ag. serv., forestry, fishing, and other 3/ 233 231 254 260 271
Mining (L) (L) (L) (L) (L)
Construction 1,758 1,737 1,685 1,788 2,082
Manufacturing 10,515 10,516 10,252 9,990 10,336
Transportation and public utilities (D) (D) (D) (D) (D)
Wholesale trade 529 492 470 495 493
Retail trade 4,236 4,453 4,352 4,422 4,622
Finance, insurance, and real estate 1,105 1,171 1,098 1,035 987
Services (D) (D) (D) (D) (D)
Government and government enterprises 3,393 3,479 3,484 3,506 3,552
Federal, civilian 154 153 157 161 168
Military 419 415 409 399 375
State and local 2,820 2,911 2,918 2,946 3,009
State 277 278 278 261 247
Local 2,543 2,633 2,640 2,685 2,762
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA25 August 1997 BUREAU OF ECONOMIC ANALYSIS
<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.
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>
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 2,871,573
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 1,318,738 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 201,380 211,731 226,0l4 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
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA05.1 August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
PERSONAL INCOME BY MAJOR SOURCE AND EARNINGS BY INDUSTRY 1/
for States and counties
(thousands of dollars)
<TABLE>
<CAPTION>
Oconee, South Carolina (45.073)
- ------------------------------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income by place of residence
Personal income (thousands of dollars) 946,829 991,021 1,057,564 1,129,171 1,221,187
Nonfarm personal income 926,320 982,684 1,033,029 1,106,700 1,192,703
Farm income 2/ 20,509 8,337 24,535 22,471 28,484
Population (number of persons) 3/ 58,242 58,845 59,779 60,619 61,620
Per capita personal income (dollars) 16,257 16,841 17,691 18,627 19,818
Derivation of personal income
Earnings by place of work 652,554 666,268 704,236 745,625 805,549
Less: Personal cont. for social insurance 4/ 46,912 48,474 50,444 54,630 58,486
Plus: Adjustment for residence 5/ 13,256 21,841 31,061 36,440 45,903
Equals: Net earnings by place of residence 618,898 639,635 684,853 727,435 792,966
Plus: Dividends, interest, and rent 6/ 173,713 177,672 186,921 199,223 212,270
Plus: Transfer payments 154,218 173,714 185,790 202,513 215,951
Earnings by place of work
Components of earnings
Wage and salary disbursements 528,489 546,183 560,033 594,608 637,787
Other labor income 66,784 71,950 77,174 82,346 89,870
Proprietors' income 7/ 57,281 48,135 67,029 68,671 77,892
Farm proprietors' income 19,379 7,284 23,341 21,305 27,252
Nonfarm proprietors' income 37,902 40,851 43,688 47,366 50,640
Earnings by industry
Farm earnings 20,509 8,337 24,535 22,471 28,484
Nonfarm earnings 632,045 657,931 679,701 723,154 777,065
Private earnings 562,631 583,942 600,010 640,142 689,884
Ag. serv., forestry, fishing, and other 8/ 1,910 1,884 2,024 2,147 2,310
Mining (L) (L) 69 77 88
Construction 39,205 39,893 37,922 39,904 47,577
Manufacturing 241,458 262,875 269,589 284,296 310,321
Durable goods 115,275 127,026 132,591 145,953 167,455
Nondurable goods 126,183 135,849 136,998 138,343 142,866
Transportation and public utilities (D) (D) (D) (D) (D)
Wholesale trade 10,156 10,427 9,760 12,667 14,091
Retail trade 45,777 49,262 50,888 53,730 60,620
Finance, insurance, and real estate 11,802 13,065 15,128 14,951 14,804
Services (D) (D) (D) (D) (D)
Government and government enterprises 69,414 73,989 79,691 83,012 87,181
Federal, civilian 4,514 4,973 5,256 5,547 5,675
Military 2,618 2,854 2,875 3,115 3,019
State and local 62,282 66,162 71,560 74,350 78,487
State 6,509 6,657 6,948 6,921 7,142
Local 55,773 59,505 64,612 67,429 71,345
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA05.1 August 1997 BUREAU OF ECONOMIC ANALYSIS
<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 $50,000. Estimates are included in totals.
(N) Data not available for this year.
<PAGE>
EXHIBIT III-1
Perpetual Bank, A Federal Savings Bank
General Characteristics of Publicly-Traded Institutions
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 8, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
California Companies
- --------------------
AHM Ahmanson and Co. H.F. of CA NYSE Nationwide M.B. 46,800 368 12-31 10/72 62.94 5,942
GDW Golden West Fin. Corp. of CA NYSE Nationwide M.B. 39,229 246 12-31 05/59 94.75 5,379
GSB Glendale Fed. Bk, FSB of CA NYSE CA Div. 16,433 154 06-30 10/83 34.31 1,731
CSA Coast Savings Financial of CA NYSE California R.E. 9,040 92 12-31 12/85 62.75 1,170
DSL Downey Financial Corp. of CA NYSE Southern CA Thrift 5,854 85 12-31 01/71 28.75 769
FED FirstFed Fin. Corp. of CA NYSE Los Angeles CA R.E. 4,105 25 12-31 12/83 37.75 400
BPLS Bank Plus Corp. of CA OTC Los Angeles CA R.E. 3,920 37 12-31 / 13.12 254
WES Westcorp Inc. of Orange CA NYSE California Div. 3,757 26 12-31 05/86 16.87 443
BVCC Bay View Capital Corp. of CA OTC San Francisco CA M.B. 3,162 41 12-31 05/86 36.12 449
PFFB PFF Bancorp of Pomona CA OTC Southern CA Thrift 2,615 23 03-31 03/96 19.25 345
CENF CENFED Financial Corp. of CA OTC Los Angeles CA Thrift 2,305 18 12-31 10/91 39.75 237
AFFFZ America First Fin. Fund of CA OTC San Francisco CA Div. 2,251 36 12-31 / 50.50 304
HEMT HF Bancorp of Hemet CA OTC Southern CA Thrift 1,050 19 06-30 06/95 17.00 107
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 / 23.12 71
QCBC Quaker City Bancorp of CA OTC Los Angeles CA R.E. 847 8 06-30 12/93 21.25 99
PROV Provident Fin. Holdings of CA OTC Southern CA M.B. 641 9 06-30 06/96 20.87 101
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 18.75 61
SGVB SGV Bancorp of W. Covina CA OTC Los Angeles CA Thrift 409 8 06-30 06/95 18.00 42
BYFC Broadway Fin. Corp. of CA OTC Los Angeles CA Thrift 125 3 12-31 01/96 13.25 11
Florida Companies
- -----------------
OCN Ocwen Financial Corp. of FL OTC Southeast FL Div. 2,956 1 12-31 / 25.62 1,550
BANC BankAtlantic Bancorp of FL OTC Southeastern FL M.B. 2,845 60 12-31 11/83 14.25 317
BKUNA BankUnited SA of FL OTC Miami FL Thrift 2,145 14 09-30 12/85 12.81 122
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 65.50 326
</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 8, 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>
Florida Companies (continued)
- -----------------------------
FFFL Fidelity FSB, MHC of FL (47.7) OTC Southeast FL Thrift 1,046 20 12-31 01/94 29.87 203
CMSV Commty. Svgs, MHC of FL (48.5) OTC Southeast FL Thrift 709 20 12-31 10/94 34.75 177
FFLC FFLC Bancorp of Leesburg FL OTC Central FL Thrift 383 9 12-31 01/94 23.12 89
Mid-Atlantic Companies
- ----------------------
DME Dime Bancorp, Inc. of NY (3) NYSE NY,NJ,FL M.B. 19,413 91 12-31 08/86 26.00 2,639
SVRN Sovereign Bancorp of PA OTC PA,NJ,DE M.B. 14,601 120 12-31 08/86 19.31 1,724
GPT GreenPoint Fin. Corp. of NY (3) NYSE New York City NY Thrift 13,094 74 12-31 01/94 68.00 2,912
ASFC Astoria Financial Corp. of NY OTC NY Thrift 7,904 45 12-31 11/93 57.00 1,178
LISB Long Island Bancorp, Inc of NY OTC Long Island NY M.B. 5,931 36 09-30 04/94 48.50 1,165
ALBK ALBANK Fin. Corp. of Albany NY OTC Upstate NY,MA,VT Thrift 3,717 72 12-30 04/92 44.69 575
ROSE T R Financial Corp. of NY (3) OTC New York City NY Thrift 3,692 15 12-31 06/93 34.00 598
RSLN Roslyn Bancorp, Inc. of NY (3) OTC Long Island NY M.B. 3,474 6 12-31 01/97 23.25 1,015
NYB New York Bancorp, Inc. of NY NYSE Southeastern NY Thrift 3,244 29 09-30 01/88 36.94 788
MLBC ML Bancorp of Villanova PA OTC Philadelphia PA M.B. 2,316 18 03-31 08/94 29.75 353
CMSB Cmnwealth Bancorp of PA OTC Philadelphia PA M.B. 2,278 56 06-30 06/96 21.06 342
HARS Harris SB, MHC of PA (24.3) OTC Southeast PA Thrift 2,110 31 12-31 01/94 19.50 659
NWSB Northwest SB, MHC of PA (30.7) OTC Pennsylvania Thrift 2,101 53 06-30 11/94 15.25 713
RELY Reliance Bancorp, Inc. of NY OTC New York City NY Thrift 2,035 28 06-30 03/94 35.50 309
HAVN Haven Bancorp of Woodhaven NY OTC New York City NY Thrift 1,833 20 12-31 09/93 22.25 195
QCSB Queens County Bancorp of NY (3) OTC New York City NY Thrift 1,541 13 12-31 11/93 36.19 547
JSB JSB Financial, Inc. of NY NYSE New York City NY Thrift 1,531 13 12-31 06/90 48.69 482
WSFS WSFS Financial Corp. of DE (3) OTC DE Div. 1,496 16 12-31 11/86 20.00 249
OCFC Ocean Fin. Corp. of NJ OTC Eastern NJ Thrift 1,489 10 12-31 07/96 37.37 306
DIME Dime Community Bancorp of NY OTC New York City NY Thrift 1,385 15 06-30 06/96 25.50 322
PFSB PennFed Fin. Services of NJ OTC Northern NJ Thrift 1,364 17 06-30 07/94 34.00 164
MFSL Maryland Fed. Bancorp of MD OTC MD Thrift 1,157 J 25 02-28 06/87 26.50 171
YFED York Financial Corp. of PA OTC PA,MD Thrift 1,156 22 06-30 02/84 25.50 225
FSLA First SB SLA MHC of NJ (47.5) OTC Eastern NJ Thrift 1,045 16 12-31 07/92 43.00 344
PVSA Parkvale Financial Corp of PA OTC Southwestern PA Thrift 1,005 28 06-30 07/87 29.00 148
FFIC Flushing Fin. Corp. of NY (3) OTC New York City NY Thrift 960 7 12-31 11/95 23.25 186
</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 8, 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>
Mid-Atlantic Companies (continued)
- ----------------------------------
PSBK Progressive Bank, Inc. of NY (3) OTC Southeast NY Thrift 885 17 12-31 08/84 35.00 134
PKPS Poughkeepsie Fin. Corp. of NY OTC Southeast NY Thrift 884 13 12-31 11/85 10.50 132
PWBC PennFirst Bancorp of PA OTC Western PA Thrift 822 9 12-31 06/90 18.75 100
MBB MSB Bancorp of Middletown NY (3) AMEX Southeastern NY Thrift 814 J 16 12-31 09/92 30.37 86
GAF GA Financial Corp. of PA AMEX Pittsburgh PA Thrift 802 13 12-31 03/96 19.56 156
IBSF IBS Financial Corp. of NJ OTC Southwest NJ Thrift 735 10 09-30 10/94 16.87 185
SFIN Statewide Fin. Corp. of NJ OTC Northern NJ Thrift 703 16 12-31 10/95 23.12 106
FBBC First Bell Bancorp of PA OTC Pittsburgh PA Thrift 681 7 12-31 06/95 18.12 118
TSBS Peoples Bcrp, MHC of NJ (35.9) OTC Central NJ Thrift 639 14 12-31 08/95 37.50 339
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 12.37 111
FMCO FMS Financial Corp. of NJ OTC Southern NJ Thrift 582 18 12-31 12/88 32.75 78
PULS Pulse Bancorp of S. River NJ OTC Central NJ Thrift 526 4 09-30 09/86 26.12 80
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 25.00 113
AHCI Ambanc Holding Co., Inc. of NY (3) OTC East-Central NY Thrift 485 J 12 12-31 12/95 19.37 83
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 16.25 38
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 33.00 68
FSBI Fidelity Bancorp, Inc. of PA OTC Southwestern PA Thrift 381 8 09-30 06/88 27.50 43
FKFS First Keystone Fin. Corp of PA OTC Philadelphia PA Thrift 373 5 09-30 01/95 35.87 44
PBCI Pamrapo Bancorp, Inc. of NJ OTC Northern NJ Thrift 372 8 12-31 11/89 24.50 70
FOBC Fed One Bancorp of Wheeling WV OTC Northern WV,OH Thrift 358 9 12-31 01/95 25.87 61
HARL Harleysville SA of PA OTC Southeastern PA Thrift 345 4 09-30 08/87 28.50 47
LFBI Little Falls Bancorp of NJ OTC New Jersey Thrift 324 6 12-31 01/96 20.37 53
CVAL Chester Valley Bancorp of PA OTC Southeastern PA Thrift 322 7 06-30 03/87 27.25 60
YFCB Yonkers Fin. Corp. of NY OTC Yonkers NY Thrift 313 4 09-30 04/96 19.00 57
EQSB Equitable FSB of Wheaton MD OTC Central MD Thrift 308 J 4 09-30 09/93 45.78 28
FIBC Financial Bancorp, Inc. of NY OTC New York, NY Thrift 297 5 09-30 08/94 24.75 42
CATB Catskill Fin. Corp. of NY (3) OTC Albany NY Thrift 290 4 09-30 04/96 18.25 85
LFED Leeds FSB, MHC of MD (36.3) OTC Baltimore MD Thrift 285 1 06-30 05/94 22.75 118
FBER First Bergen Bancorp of NJ OTC Northern NJ Thrift 285 4 09-30 04/96 18.87 54
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 8, 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>
Mid-Atlantic Companies (continued)
- ----------------------------------
WVFC WVS Financial Corp. of PA (3) OTC Pittsburgh PA Thrift 282 5 06-30 11/93 32.00 56
PHFC Pittsburgh Home Fin. of PA OTC Pittsburgh PA Thrift 273 6 09-30 04/96 19.00 37
WSB Washington SB, FSB of MD AMEX Southeastern MD Thrift 268 J 4 07-31 / 7.00 30
WYNE Wayne Bancorp of NJ OTC Northern NJ Thrift 267 0 12-31 06/96 22.62 46
IFSB Independence FSB of DC OTC Washington DC Ret. 258 J 2 12-31 06/85 13.25 17
GDVS Greater DV SB, MHC of PA (19.9) (3) OTC Southeast PA Thrift 249 7 12-31 03/95 30.00 98
ESBK The Elmira SB FSB of Elmira NY (3) OTC NY,PA Thrift 228 6 12-31 03/85 31.25 22
SBFL SB Fngr Lakes MHC of NY (33.1) OTC Western NY Thrift 228 4 04-30 11/94 29.50 53
HRBF Harbor Federal Bancorp of MD OTC Baltimore MD Thrift 217 9 03-31 08/94 25.00 42
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 19.00 52
PBHC OswegoCity SB, MHC of NY (46.) (3) OTC NY Thrift 193 5 12-31 11/95 28.75 55
PEEK Peekskill Fin. Corp. of NY OTC Southeast NY Thrift 181 3 06-30 12/95 17.75 57
PLSK Pulaski SB, MHC of NJ (46.0) OTC New Jersey Thrift 179 6 12-31 04/97 19.00 39
SFED SFS Bancorp of Schenectady NY OTC Eastern NY Thrift 174 3 12-31 06/95 22.62 28
AFED AFSALA Bancorp, Inc. of NY OTC Central NY Thrift 159 J 5 12-31 10/96 19.12 28
SKBO First Carnegie,MHC of PA(45.0) OTC Western PA Thrift 147 J 3 03-31 04/97 18.75 43
PRBC Prestige Bancorp of PA OTC Thrift 138 0 12-31 06/96 19.25 18
TPNZ Tappan Zee Fin., Inc. of NY OTC Southeast NY Thrift 124 J 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 16.12 36
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 17.25 19
WHGB WHG Bancshares of MD OTC Baltimore MD Thrift 100 J 5 09-30 04/96 15.87 23
SHSB SHS Bancorp, Inc. of PA OTC Pittsburgh Thrift 90 P 4 12/31 10/97 16.25 13
ALBC Albion Banc Corp. of Albion NY OTC Western NY Thrift 71 2 09-30 07/93 28.00 7
PWBK Pennwood SB of PA (3) OTC Pittsburgh PA Thrift 48 3 12-31 07/96 19.12 11
Mid-West Companies
- -------------------
COFI Charter One Financial of OH OTC OH,MI Div. 15,197 221 12-31 01/88 64.00 3,172
CFB Commercial Federal Corp. of NE NYSE NE,CO,KS,OK,IA M.B. 7,207 107 06-30 12/84 50.37 1,087
SPBC St. Paul Bancorp, Inc. of IL OTC Chicago IL Div. 4,549 52 12-31 05/87 25.00 853
</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 8, 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>
Mid-West Companies (continued)
- ------------------------------
MAFB MAF Bancorp of IL OTC Chicago IL Thrift 3,371 20 12-31 01/90 34.00 518
CTZN CitFed Bancorp of Dayton OH OTC Dayton OH M.B. 3,295 35 03-31 01/92 36.00 467
GTFN Great Financial Corp. of KY OTC Kentucky M.B. 2,894 45 12-31 03/94 50.56 699
FLGS Flagstar Bancorp, Inc of MI OTC MI Thrift 2,033 15 12/31 / 19.12 261
ABCW Anchor Bancorp Wisconsin of WI OTC Wisconsin M.B. 1,955 35 03-31 07/92 33.37 302
DNFC D&N Financial Corp. of MI OTC MI Ret. 1,754 37 12-31 02/85 26.37 217
STFR St. Francis Cap. Corp. of WI OTC Milwaukee WI Thrift 1,661 23 09-30 06/93 40.63 213
FTFC First Fed. Capital Corp. of WI OTC Southern WI M.B. 1,560 44 12-31 11/89 30.75 282
FISB First Indiana Corp. of IN OTC Central IN M.B. 1,547 28 12-31 08/83 27.50 290
ABCL Allied Bancorp of IL OTC Chicago IL M.B. 1,371 14 09-30 07/92 27.37 220
JSBA Jefferson Svgs Bancorp of MO OTC St. Louis MO,TX Thrift 1,292 J 32 12-31 04/93 41.75 209
AADV Advantage Bancorp of WI OTC WI,IL Thrift 1,037 15 09-30 03/92 66.50 215
OFCP Ottawa Financial Corp. of MI OTC Western MI Thrift 867 26 12-31 08/94 29.12 156
CFSB CFSB Bancorp of Lansing MI OTC Central MI Thrift 860 17 12-31 06/90 34.87 177
NASB North American SB of MO OTC KS,MO M.B. 737 J 7 09-30 09/85 54.00 120
GSBC Great Southern Bancorp of MO OTC Southwest MO Thrift 728 25 06-30 12/89 23.75 192
HOMF Home Fed Bancorp of Seymour IN OTC Southern IN Thrift 694 16 06-30 01/88 26.50 135
SFSL Security First Corp. of OH OTC Northeastern OH R.E. 681 13 03-31 01/88 20.37 155
FNGB First Northern Cap. Corp of WI OTC Northeast WI Thrift 657 20 12-31 12/83 14.00 124
MSBK Mutual SB, FSB of Bay City MI OTC Michigan M.B. 654 22 12-31 07/92 12.75 55
FFYF FFY Financial Corp. of OH OTC Youngstown OH Thrift 611 10 06-30 06/93 30.12 124
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 26.50 74
FDEF First Defiance Fin.Corp. of OH OTC Northwest OH Thrift 574 9 06-30 10/95 16.25 146
HMNF HMN Financial, Inc. of MN OTC Southeast MN Thrift 569 7 12-31 06/94 26.50 112
FFBH First Fed. Bancshares of AR OTC Northern AR Thrift 547 12 12-31 05/96 22.00 108
FFOH Fidelity Financial of OH OTC Cincinnati OH Thrift 529 4 12-31 03/96 15.37 86
FCBF FCB Fin. Corp. of Neenah WI OTC Eastern WI Thrift 523 J 6 03-31 09/93 28.00 109
HFGI Harrington Fin. Group of IN OTC Eastern IN Thrift 521 3 06-30 / 12.12 39
CAFI Camco Fin. Corp. of OH OTC Eastern OH M.B. 502 11 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 32.50 103
</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 8, 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>
Mid-West Companies (continued)
- ------------------------------
FFSX First FS&LA. MHC of IA (46.1) OTC Western IA Thrift 457 13 06-30 07/92 31.87 90
PERM Permanent Bancorp of IN OTC Southwest IN Thrift 434 12 03-31 04/94 26.12 55
SFSB SuburbFed Fin. Corp. of IL OTC IL,IN Thrift 427 J 12 12-31 03/92 34.69 44
HALL Hallmark Capital Corp. of WI OTC Milwaukee WI Thrift 418 3 06-30 01/94 15.00 43
MCBS Mid Continent Bancshares of KS OTC Central KS M.B. 405 9 09-30 06/94 42.25 83
CASH First Midwest Fin. Corp. of IA OTC IA,SD R.E. 405 12 09-30 09/93 21.25 57
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 30.50 57
WOFC Western Ohio Fin. Corp. of OH OTC Western OH Thrift 397 6 12-31 07/94 26.87 63
CBSB Charter Financial Inc. of IL OTC Southern IL Thrift 393 J 8 09-30 12/95 23.12 96
ASBI Ameriana Bancorp of IN OTC Eastern IN,OH Thrift 393 8 12-31 03/87 20.37 66
FFHH FSF Financial Corp. of MN OTC Southern MN Thrift 388 11 09-30 10/94 19.75 59
PFSL Pocahnts Fed, MHC of AR (47.0) OTC Northeast AR Thrift 383 6 09-30 04/94 34.87 57
PVFC PVF Capital Corp. of OH OTC Cleveland OH R.E. 383 9 06-30 12/92 20.06 52
FFKY First Fed. Fin. Corp. of KY OTC Central KY Thrift 383 8 06-30 07/87 22.37 93
SWBI Southwest Bancshares of IL OTC Chicago IL Thrift 375 6 12-31 06/92 25.62 68
INBI Industrial Bancorp of OH OTC Northern OH Thrift 354 10 12-31 08/95 18.25 94
SMFC Sho-Me Fin. Corp. of MO OTC Southwest MO Thrift 345 8 12-31 07/94 47.75 72
HBEI Home Bancorp of Elgin IL OTC Northern IL Thrift 343 5 12-31 09/96 18.50 127
KNK Kankakee Bancorp of IL AMEX Illinois Thrift 340 9 12-31 01/93 34.38 49
HBFW Home Bancorp of Fort Wayne IN OTC Northeast IN Thrift 335 J 9 09-30 03/95 27.12 68
HMCI Homecorp, Inc. of Rockford IL OTC Northern IL Thrift 327 9 12-31 06/90 27.37 47
WFI Winton Financial Corp. of OH OTC Cincinnati OH R.E. 317 J 5 09-30 08/88 20.00 40
WCBI WestCo Bancorp of IL OTC Chicago IL Thrift 309 1 12-31 06/92 26.50 66
FSFF First SecurityFed Fin of IL OTC Chicago Thrift 303 P 5 12-31 10/97 16.50 106
GFCO Glenway Financial Corp. of OH OTC Cincinnati OH Thrift 293 6 06-30 11/90 18.50 42
PFDC Peoples Bancorp of Auburn IN OTC Northeastern IN Thrift 291 6 09-30 07/87 25.00 85
CBK Citizens First Fin.Corp. of IL AMEX Central IL Thrift 278 7 12-31 05/96 18.00 47
EFBI Enterprise Fed. Bancorp of OH OTC Cincinnati OH Thrift 275 5 09-30 10/94 27.50 55
FBCV 1st Bancorp of Vincennes IN OTC Southwestern IN M.B. 261 1 06-30 04/87 27.50 29
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 33.00 74
CAPS Capital Savings Bancorp of MO OTC Central MO Thrift 242 8 06-30 12/93 24.25 46
</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 8, 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>
Mid-West Companies (continued)
- ------------------------------
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 26.50 32
LARK Landmark Bancshares of KS OTC Central KS Thrift 228 J 5 09-30 03/94 23.25 39
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 18.87 47
FFFD North Central Bancshares of IA OTC Central IA Thrift 215 4 12-31 03/96 18.50 60
CMRN Cameron Fin. Corp. of MO OTC Northwest MO Thrift 212 3 09-30 04/95 20.75 53
GFED Guarnty FS&LA,MHC of MO (31.0) OTC Southwest MO Thrift 210 4 06-30 04/95 25.37 79
MFFC Milton Fed. Fin. Corp. of OH OTC Southwest OH Thrift 210 2 09-30 10/94 15.37 35
MWFD Midwest Fed. Fin. Corp of WI OTC Central WI Thrift 207 J 9 12-31 07/92 27.25 44
WEFC Wells Fin. Corp. of Wells MN OTC Southcentral MN Thrift 205 7 12-31 04/95 17.50 34
FFBZ First Federal Bancorp of OH OTC Eastern OH Thrift 204 6 09-30 06/92 19.62 31
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 27.75 25
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 40.50 29
PULB Pulaski SB, MHC of MO (29.8) OTC St. Louis MO Thrift 180 J 5 09-30 05/94 30.00 63
MARN Marion Capital Holdings of IN OTC Central IN Thrift 180 2 06-30 03/93 27.00 48
PFED Park Bancorp of Chicago IL OTC Chicago IL Thrift 175 3 12-31 08/96 18.00 44
EGLB Eagle BancGroup of IL OTC Central IL Thrift 172 3 12-31 07/96 20.00 24
FFWD Wood Bancorp of OH OTC Northern OH Thrift 167 6 06-30 08/93 19.50 41
BWFC Bank West Fin. Corp. of MI OTC Southeast MI Thrift 165 3 06-30 03/95 17.25 45
JXSB Jcksnville SB,MHC of IL (45.6) OTC Central IL Thrift 164 4 12-31 04/95 26.25 33
SMBC Southern Missouri Bncrp of MO OTC Southeast MO Thrift 163 8 06-30 04/94 19.12 31
FBSI First Bancshares of MO OTC Southcentral MO Thrift 163 6 06-30 12/93 25.37 28
HMLK Hemlock Fed. Fin. Corp. of IL OTC Chicago IL Thrift 162 3 12-31 04/97 17.12 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 17.75 18
WEHO Westwood Hmstd Fin Corp of OH OTC Cincinnati OH Thrift 143 2 12-31 09/96 17.75 49
RIVR River Valley Bancorp of IN OTC Southeast IN Thrift 140 J 3 12-31 12/96 18.62 22
GTPS Great American Bancorp of IL OTC East Central IL Thrift 140 3 12-31 06/95 19.00 32
FKKYD 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 8, 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>
Mid-West Companies (continued)
- ------------------------------
CLAS Classic Bancshares of KY OTC Eastern KY Thrift 130 J 3 03-31 12/95 16.37 21
MIFC Mid Iowa Financial Corp. of IA OTC Central IA Thrift 126 J 6 09-30 10/92 11.75 20
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 17.62 17
NBSI North Bancshares of Chicago IL OTC Chicago IL Thrift 122 2 12-31 12/93 26.25 25
HFSA Hardin Bancorp of Hardin MO OTC Western MO Thrift 117 3 03-31 09/95 17.87 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 13.37 23
BDJI First Fed. Bancorp. of MN OTC Northern MN Thrift 111 5 09-30 04/95 27.00 18
HFFB Harrodsburg 1st Fin Bcrp of KY OTC Central KY Thrift 109 J 2 09-30 10/95 17.87 36
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 21.37 22
FTNB Fulton Bancorp of MO OTC Central MO Thrift 104 2 06-30 10/96 20.62 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 12.37 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 21.00 35
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 20.37 17
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 21.25 45
CIBI Community Inv. Bancorp of OH OTC NorthCentral OH Thrift 94 3 06-30 02/95 16.25 15
FFDF FFD Financial Corp. of OH OTC Northeast OH Thrift 88 1 06-30 04/96 18.00 26
KYF Kentucky First Bancorp of KY AMEX Central KY Thrift 88 2 06-30 08/95 14.37 19
HZFS Horizon Fin'l. Services of IA OTC Central IA Thrift 88 3 06-30 06/94 11.50 10
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 14.25 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 17.87 39
SOBI Sobieski Bancorp of S. Bend IN OTC Northern IN Thrift 84 3 06-30 03/95 19.50 15
FFBI First Financial Bancorp of IL OTC Northern IL M.B. 84 2 12-31 10/93 20.25 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 8, 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>
Mid-West Companies (continued)
- ------------------------------
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 19.00 23
HCFC Home City Fin. Corp. of OH OTC Southwest OH Thrift 70 1 06-30 12/96 17.37 16
MIVI Miss. View Hold. Co. of MN OTC Central MN Thrift 70 J 1 09-30 03/95 17.50 13
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 18.50 13
LXMO Lexington B&L Fin. Corp. of MO OTC West Central MO Thrift 59 J 1 09-30 06/96 17.25 20
MRKF Market Fin. Corp. of OH OTC Cincinnati OH Thrift 56 2 09-30 03/97 15.44 21
CSBF CSB Financial Group Inc of IL (3) OTC Centralia IL Thrift 49 J 2 09-30 10/95 13.00 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 9.12 23
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 1 09-30 04/96 15.75 8
JOAC Joachim Bancorp of MO OTC Eastern MO Thrift 35 1 03-31 12/95 15.00 11
New England Companies
- ---------------------
PBCT Peoples Bank, MHC of CT (40.1) (3) OTC Southwestern CT Div. 7,731 97 12-31 07/88 36.37 2,223
WBST Webster Financial Corp. of CT OTC Central CT Thrift 6,811 77 12-31 12/86 64.00 867
PHBK Peoples Heritage Fin Grp of ME (3) OTC ME,NH,MA Div. 6,056 132 12-31 12/86 43.94 1,207
CFX CFX Corp of NH (3) AMEX NH,MA M.B. 2,821 43 12-31 02/87 28.75 689
EGFC Eagle Financial Corp. of CT OTC Western CT Thrift 2,097 19 09-30 02/87 51.81 327
SISB SIS Bancorp Inc of MA (3) OTC Central MA Div. 1,453 24 12-31 02/95 38.12 213
ANDB Andover Bancorp, Inc. of MA (3) OTC MA,NH M.B. 1,281 12 12-31 05/86 39.00 201
FESX First Essex Bancorp of MA (3) OTC MA,NH Div. 1,210 15 12-31 08/87 20.62 155
AFCB Affiliated Comm BC, Inc of MA OTC MA Thrift 1,129 12 12-31 10/95 31.50 205
MDBK Medford Bank of Medford, MA (3) OTC Eastern MA Thrift 1,106 16 12-31 03/86 36.75 167
FAB FirstFed America Bancorp of MA AMEX MA,RI M.B. 1,036 12 03-31 01/97 21.00 183
</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 8, 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>
New England Companies (continued)
- ---------------------------------
FFES First FS&LA of E. Hartford CT OTC Central CT Thrift 987 12 12-31 06/87 37.50 101
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 45.50 162
DIBK Dime Financial Corp. of CT (3) OTC Central CT Thrift 922 11 12-31 07/86 30.00 155
MECH Mechanics SB of Hartford CT (3) OTC Hartford CT Thrift 831 14 12-31 06/96 25.75 136
PBKB People's SB of Brockton MA (3) OTC Southeastern MA Thrift 717 14 12-31 10/86 20.37 67
NSSB Norwich Financial Corp. of CT (3) OTC Southeastern CT Thrift 701 19 12-31 11/86 31.25 170
NSSY Norwalk Savings Society of CT (3) OTC Southwest CT Thrift 617 M 7 12-31 06/94 39.25 95
BKC American Bank of Waterbury CT (3) AMEX Western CT Thrift 610 15 12-31 12/81 48.62 112
MWBX MetroWest Bank of MA (3) OTC Eastern MA Thrift 586 11 12-31 10/86 9.00 126
SOSA Somerset Savings Bank of MA (3) OTC Eastern MA R.E. 520 5 12-31 07/86 4.75 79
SWCB Sandwich Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 512 11 12-31 07/86 45.00 86
ABBK Abington Savings Bank of MA (3) OTC Southeastern MA M.B. 502 8 12-31 06/86 36.37 67
EIRE Emerald Island Bancorp, MA (3) OTC Eastern MA R.E. 443 9 02-31 09/86 32.00 72
BKCT Bancorp Connecticut of CT (3) OTC Central CT Thrift 424 3 12-31 07/86 24.25 123
WRNB Warren Bancorp of Peabody MA (3) OTC Eastern MA R.E. 364 6 12-31 07/86 20.50 78
LSBX Lawrence Savings Bank of MA (3) OTC Northeastern MA Thrift 353 5 12-31 05/86 14.50 62
CEBK Central Co-Op. Bank of MA (3) OTC Eastern MA Thrift 344 J 8 03-31 10/86 26.25 52
NHTB NH Thrift Bancshares of NH OTC Central NH Thrift 319 10 12-31 05/86 21.50 45
NMSB Newmil Bancorp. of CT (3) OTC Eastern CT Thrift 317 13 06-30 02/86 13.37 51
NBN Northeast Bancorp of ME (3) OTC Eastern ME Thrift 265 8 06-30 08/87 27.94 36
ANE Alliance Bancorp of New Englan (3) AMEX Northern CT Thrift 242 7 12-31 12/86 17.12 28
HIFS Hingham Inst. for Sav. of MA (3) OTC Eastern MA Thrift 216 5 12-31 12/88 27.87 36
IPSW Ipswich SB of Ipswich MA (3) OTC Northwest MA Thrift 203 5 12-31 05/93 13.25 32
HPBC Home Port Bancorp, Inc. of MA (3) OTC Southeastern MA Thrift 201 2 12-31 08/88 23.62 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 / 14.62 20
KSBK KSB Bancorp of Kingfield ME (3) OTC Western ME M.B. 146 J 8 12-31 06/93 16.50 20
MFLR Mayflower Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 129 4 04-30 12/87 24.75 22
NTMG Nutmeg FS&LA of CT OTC CT M.B. 105 3 12-31 / 13.12 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 8, 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 71.37 18,355
WFSL Washington FS&LA of Seattle WA OTC Western US Thrift 5,720 89 09-30 11/82 33.12 1,573
IWBK Interwest SB of Oak Harbor WA OTC Western WA Div. 2,047 31 12-31 / 39.87 321
STSA Sterling Financial Corp. of WA OTC WA,OR M.B. 1,870 41 06-30 / 21.62 164
FWWB First Savings Bancorp of WA (3) OTC Central WA Thrift 1,074 J 16 03-31 11/95 26.00 266
KFBI Klamath First Bancorp of OR OTC Southern OR Thrift 980 7 09-30 10/95 22.31 224
HRZB Horizon Financial Corp. of WA (3) OTC Northwest WA Thrift 531 12 03-31 08/86 17.50 130
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 11 06-30 08/92 12.75 43
RVSB Riverview Bancorp of WA OTC Southwest WA Thrift 282 9 03-31 10/97 15.50 95
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 18.12 36
EFBC Empire Federal Bancorp of MT OTC Southern MT Thrift 110 P 3 12-31 01/97 16.31 42
South-East Companies
- --------------------
FFCH First Fin. Holdings Inc. of SC OTC CHARLESTON SC Div. 1,713 32 09-30 11/83 48.00 306
LIFB Life Bancorp of Norfolk VA OTC Southeast VA Thrift 1,486 20 12-31 10/94 35.12 346
FLFC First Liberty Fin. Corp. of GA OTC Georgia M.B. 1,289 J 31 9-30 12/83 30.75 238
ISBF ISB Financial Corp. of LA OTC SouthCentral LA Thrift 956 27 12-31 04/95 27.62 191
EBSI Eagle Bancshares of Tucker GA OTC Atlanta GA Thrift 873 14 03-31 04/86 19.00 108
HFNC HFNC Financial Corp. of NC OTC Charlotte NC Thrift 867 8 06-30 12/95 14.75 254
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 28.62 152
VABF Va. Beach Fed. Fin. Corp of VA OTC Southeast VA M.B. 605 12 12-31 11/80 17.25 86
FFFC FFVA Financial Corp. of VA OTC Southern VA Thrift 567 11 12-31 10/94 33.75 153
CFCP Coastal Fin. Corp. of SC OTC SC Thrift 494 9 09-30 09/90 22.75 106
FSPT FirstSpartan Fin. Corp. of SC OTC Northwestern SC Thrift 482 5 06-30 07/97 37.87 168
TSH Teche Holding Company of LA AMEX Southern LA Thrift 404 9 09-30 04/95 20.50 70
CFBC Community First Bnkg Co. of GA OTC Westcentral GA Thrift 395 12 12-31 07/97 39.50 95
COOP Cooperative Bk.for Svgs. of NC OTC Eastern NC Thrift 360 16 03-31 08/91 18.25 54
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 29.25 80
</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 8, 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>
South-East Companies (continued)
- --------------------------------
SOPN First SB, SSB, Moore Co. of NC OTC Central NC Thrift 295 5 06-30 01/94 23.25 86
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 274 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 54.75 82
SSFC South Street Fin. Corp. of NC (3) OTC South Central NC Thrift 241 2 09-30 10/96 19.00 85
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 / 69.00 53
CFTP Community Fed. Bancorp of MS OTC Northeast MS Thrift 216 2 09-30 03/96 20.25 94
ESX Essex Bancorp of VA AMEX VA,NC M.B. 192 4 12-31 07/90 5.00 5
CFFC Community Fin. Corp. of VA OTC Central VA Thrift 183 4 03-31 03/88 26.50 34
FTF Texarkana Fst. Fin. Corp of AR AMEX Southwest AR Thrift 179 5 09-30 07/95 25.50 46
GSFC Green Street Fin. Corp. of NC OTC Southern NC Thrift 178 3 09-30 04/96 18.25 78
FGHC First Georgia Hold. Corp of GA OTC Southeastern GA Thrift 156 J 9 09-30 02/87 8.25 25
BFSB Bedford Bancshares of VA OTC Southern VA Thrift 139 3 09-30 08/94 29.00 33
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 10.75 30
CFNC Carolina Fincorp of NC (3) OTC Southcentral NC Thrift 114 4 06-30 11/96 17.62 33
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 5 12-31 07/95 20.00 16
TWIN Twin City Bancorp of TN OTC Northeast TN Thrift 107 3 12-31 01/95 14.00 18
SRN Southern Banc Company of AL AMEX Northeast AL Thrift 105 J 4 06-30 10/95 17.69 22
SSM Stone Street Bancorp of NC AMEX Central NC Thrift 105 2 12-31 04/96 22.50 43
CENB Century Bancshares of NC (3) OTC Charlotte NC Thrift 101 1 06-30 12/96 83.00 34
SZB SouthFirst Bancshares of AL AMEX Central AL Thrift 97 J 2 09-30 02/95 20.00 17
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 18.00 20
SSB Scotland Bancorp of NC AMEX S. Central NC Thrift 64 2 09-30 04/96 10.37 20
SCCB S. Carolina Comm. Bnshrs of SC OTC Central SC Thrift 46 1 06-30 07/94 22.87 16
MBSP Mitchell Bancorp of NC (3) OTC Western NC Thrift 35 1 12-31 07/96 17.87 17
South-West Companies
- --------------------
</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 8, 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>
South-West Companies (continued)
- --------------------------------
CBSA Coastal Bancorp of Houston TX OTC Houston TX M.B. 2,930 37 12-31 / 29.00 145
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 19.12 48
FFDB FirstFed Bancorp of AL OTC Central AL Thrift 176 7 03-31 11/91 21.28 24
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
Western Companies (Excl CA)
- ---------------------------
FFBA First Colorado Bancorp of Co OTC Denver CO Thrift 1,513 26 12-31 01/96 25.50 420
WSTR WesterFed Fin. Corp. of MT OTC MT Thrift 999 35 06-30 01/94 24.75 138
GBCI Glacier Bancorp of MT OTC Western MT Div. 574 16 12-31 03/84 22.06 150
UBMT United Fin. Corp. of MT OTC Central MT Thrift 103 4 12-31 09/86 26.00 32
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: 12/08/97
<PAGE>
EXHIBIT III-2
Perpetual Bank, A Federal Savings Bank
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 December 5, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization ----------------
--------------- 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 23.92 183.12 1.12 15.17 19.32 158.46 19.36 163.19 20.17
State of SC 32.87 148.78 1.31 17.49 19.91 219.96 27.27 219.96 21.64
Comparable Group
- ----------------
State of SC
- -----------
CFCP Coastal Fin. Corp. of SC 22.75 105.72 1.08 6.97 18.20 326.40 21.40 326.40 21.06
FFCH First Fin. Holdings Inc. of SC 48.00 305.66 2.16 16.45 21.62 291.79 17.84 291.79 22.22
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 37.87 167.76 1.25 29.17 NM 129.83 34.78 129.83 NM
PALM Palfed, Inc. of Aiken SC(7) 28.62 151.66 0.84 10.74 NM 266.48 22.69 266.48 NM
PERT Perpetual of SC, MHC (46.8)(7) 54.75 38.60 1.58 20.13 NM 271.98 32.16 271.98 NM
SCCB S. Carolina Comm. Bnshrs of SC 22.87 15.99 0.75 17.35 NM 131.82 35.04 131.82 NM
- --------------------------------------------------------------------------------------------------------------
<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 1.58 30.15 1,198 13.01 0.77 0.89 8.08 0.88 7.82
State of SC 0.60 1.89 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 1.58 33.33 494 6.56 0.10 1.21 19.41 1.05 16.77
FFCH First Fin. Holdings Inc. of SC 0.84 1.75 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 1.58 48.00 482 26.79 0.69 0.96 6.28 0.96 6.28
PALM Palfed, Inc. of Aiken SC(7) 0.12 0.42 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 2.56 NM 256 11.82 0.12 0.78 6.37 1.05 8.60
SCCB S. Carolina Comm. Bnshrs of SC 0.60 2.62 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
Perpetual Bank, A Federal Savings Bank
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 December 5, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization ---------------- Pricing Ratios(3)
------------------ Core Book ------------------------------------------
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 23.92 183.12 1.12 15.17 19.32 158.46 19.36 163.19 20.17
Special Selection Grouping(8) 24.18 65.52 1.01 17.86 21.00 139.17 28.94 140.43 22.10
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
ANA Acadiana Bancshares of LA 23.75 64.05 0.94 17.22 24.48 137.92 23.38 137.92 25.27
BFSB Bedford Bancshares of VA 29.00 33.12 1.38 17.18 20.86 168.80 23.80 168.80 21.01
- ----------------------------------------------------------------------------------------------------------------------------
CFNC Carolina Fincorp of NC 17.62 32.61 0.68 13.92 25.17 126.58 28.59 126.58 25.91
CENB Century Bancshares of NC 83.00 33.78 4.20 75.12 19.81 110.49 33.47 110.49 19.76
CFTP Community Fed. Bancorp of MS 20.25 93.74 0.65 12.47 NM 162.39 43.41 162.39 NM
- ----------------------------------------------------------------------------------------------------------------------------
CFFC Community Fin. Corp. of VA 26.50 33.79 1.51 18.99 17.67 139.55 18.43 139.55 17.55
- ----------------------------------------------------------------------------------------------------------------------------
CFBC Community First Bnkg Co. of GA 39.50 95.35 1.29 29.10 NM 135.74 24.17 137.58 NM
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 33.75 152.62 1.63 16.70 19.85 202.10 26.90 206.30 20.71
SOPN First SB, SSB, Moore Co. of NC 23.25 85.72 1.32 18.43 17.61 126.15 29.03 126.15 17.61
- ----------------------------------------------------------------------------------------------------------------------------
FSPT FirstSpartan Fin. Corp. of SC 37.87 167.76 1.25 29.17 NM 129.83 34.78 129.83 NM
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 18.25 78.44 0.65 14.65 28.08 124.57 44.07 124.57 28.08
HFNC HFNC Financial Corp. of NC 14.75 253.58 0.53 9.48 23.79 155.59 29.25 155.59 27.83
ISBF ISB Financial Corp. of LA 27.62 190.61 0.96 16.70 28.47 165.39 19.94 193.28 28.77
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 17.87 16.64 0.59 15.36 NM 116.34 48.10 116.34 NM
PDB Piedmont Bancorp of NC 10.75 29.57 0.25 7.56 NM 142.20 23.37 142.20 NM
SCCB S. Carolina Comm. Bnshrs of SC 22.87 15.99 0.75 17.35 NM 131.82 35.04 131.82 NM
- ----------------------------------------------------------------------------------------------------------------------------
SSB Scotland Bancorp of NC 10.37 19.85 0.65 7.61 15.71 136.27 30.82 136.27 15.95
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 19.00 85.42 0.65 13.73 NM 138.38 35.51 138.38 29.23
SZB SouthFirst Bancshares of AL 20.00 16.96 0.25 16.06 NM 124.53 17.43 124.53 NM
SRN Southern Banc Company of AL 17.69 21.76 0.43 14.58 NM 121.33 20.64 122.59 NM
SCBS Southern Commun. Bncshrs of AL 18.00 20.47 0.54 13.20 NM 136.36 29.08 136.36 NM
SSM Stone Street Bancorp of NC 22.50 42.71 0.86 16.32 26.16 137.87 40.76 137.87 26.16
- ----------------------------------------------------------------------------------------------------------------------------
TSH Teche Holding Company of LA 20.50 70.48 1.07 15.81 18.30 129.66 17.44 129.66 19.16
- ----------------------------------------------------------------------------------------------------------------------------
FTF Texarkana Fst. Fin. Corp of AR 25.50 45.57 1.61 15.32 15.84 166.45 25.50 166.45 15.84
- ----------------------------------------------------------------------------------------------------------------------------
TWIN Twin City Bancorp of TN 14.00 17.81 0.60 10.88 19.72 128.68 16.65 128.68 23.33
- ----------------------------------------------------------------------------------------------------------------------------
<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 1.58 30.15 1,198 13.01 0.77 0.89 8.08 0.88 7.82
Special Selection Grouping(8) 0.51 2.18 49.77 240 21.44 0.65 1.12 5.45 1.16 5.70
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
ANA Acadiana Bancshares of LA 0.36 1.52 38.30 274 16.95 0.50 0.98 5.64 0.95 5.46
BFSB Bedford Bancshares of VA 0.56 1.93 40.58 139 14.10 0.52 1.20 8.41 1.19 8.35
- ----------------------------------------------------------------------------------------------------------------------------------
CFNC Carolina Fincorp of NC 0.24 1.36 35.29 114 22.59 0.16 1.17 5.03 1.14 4.89
CENB Century Bancshares of NC 2.00 2.41 47.62 101 30.29 0.25 1.69 5.60 1.70 5.62
CFTP Community Fed. Bancorp of MS 0.30 1.48 46.15 216 26.73 0.50 1.47 4.77 1.45 4.70
- ----------------------------------------------------------------------------------------------------------------------------------
CFFC Community Fin. Corp. of VA 0.56 2.11 37.09 183 13.21 0.56 1.12 8.18 1.13 8.23
- ----------------------------------------------------------------------------------------------------------------------------------
CFBC Community First Bnkg Co. of GA 0.60 1.52 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 1.42 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 3.78 66.67 295 23.01 0.29 1.75 7.26 1.75 7.26
- ----------------------------------------------------------------------------------------------------------------------------------
FSPT FirstSpartan Fin. Corp. of SC 0.60 1.58 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 2.41 67.69 178 35.38 0.10 1.59 4.45 1.59 4.45
HFNC HFNC Financial Corp. of NC 0.28 1.90 52.83 867 18.80 0.92 1.23 5.43 1.05 4.64
ISBF ISB Financial Corp. of LA 0.50 1.81 52.08 956 12.05 0.27 0.75 5.87 0.74 5.81
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 2.24 67.80 35 41.35 2.25 1.61 3.77 1.61 3.77
PDB Piedmont Bancorp of NC 0.40 3.72 NM 127 16.43 0.89 -0.24 -1.28 0.55 2.91
SCCB S. Carolina Comm. Bnshrs of SC 0.60 2.62 NM 46 26.59 0.87 1.15 4.34 1.15 4.34
- ----------------------------------------------------------------------------------------------------------------------------------
SSB Scotland Bancorp of NC 0.30 2.89 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 2.11 61.54 241 25.66 0.31 1.21 5.34 1.25 5.51
SZB SouthFirst Bancshares of AL 0.50 2.50 NM 97 14.00 0.75 -0.03 -0.19 0.23 1.62
SRN Southern Banc Company of AL 0.35 1.98 NM 105 17.01 NA 0.14 0.79 0.50 2.84
SCBS Southern Commun. Bncshrs of AL 0.30 1.67 55.56 70 21.33 2.48 0.55 3.24 0.90 5.30
SSM Stone Street Bancorp of NC 0.45 2.00 52.33 105 29.57 0.23 1.54 4.69 1.54 4.69
- ----------------------------------------------------------------------------------------------------------------------------------
TSH Teche Holding Company of LA 0.50 2.44 46.73 404 13.45 0.28 0.98 7.29 0.93 6.97
- ----------------------------------------------------------------------------------------------------------------------------------
FTF Texarkana Fst. Fin. Corp of AR 0.56 2.20 34.78 179 15.32 0.23 1.70 10.74 1.70 10.74
- ----------------------------------------------------------------------------------------------------------------------------------
TWIN Twin City Bancorp of TN 0.40 2.86 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: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been
obtained from sources we believe are reliable, but we cannot guarantee
the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT IV-1
Perpetual Bank, A Federal Savings Bank
Stock Prices:
As of December 5, 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 December 5, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 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) ($) ($) ($) (%) (%) (%)
Market Averages. SAIF-Insured Thrifts(no MHC)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(300) 23.87 5,865 189.5 25.00 15.44 23.35 1.93 253.19 48.43
NYSE Traded Companies(10) 47.41 33,668 1,819.0 48.73 28.24 45.35 4.00 348.95 54.15
AMEX Traded Companies(16) 18.21 3,147 57.0 20.34 12.89 17.98 1.06 287.93 33.15
NASDAQ Listed OTC Companies(274) 23.27 4,920 132.5 24.33 15.08 22.80 1.90 240.08 49.10
California Companies(21) 31.53 18,713 891.4 32.85 18.82 30.34 3.95 171.26 56.08
Florida Companies(5) 22.91 20,239 454.8 24.64 13.65 22.56 1.31 189.23 53.92
Mid-Atlantic Companies(59) 25.46 6,729 187.8 26.33 15.71 24.97 1.74 228.03 58.65
Mid-West Companies(144) 22.02 3,622 104.3 22.95 14.52 21.64 1.51 282.88 44.58
New England Companies(9) 29.72 5,017 191.4 30.62 17.51 28.99 2.40 455.94 65.16
North-West Companies(8) 23.91 11,774 347.8 25.33 17.45 23.54 1.41 187.85 38.97
South-East Companies(41) 23.58 3,451 81.2 25.58 16.18 22.86 2.97 239.62 40.76
South-West Companies(7) 19.91 1,905 42.6 22.00 13.66 19.94 -0.12 49.93 45.60
Western Companies (Excl CA)(6) 23.53 5,273 128.5 24.46 16.16 22.82 3.29 392.36 39.44
Thrift Strategy(241) 22.66 3,718 96.1 23.77 15.00 22.32 1.47 228.48 46.41
Mortgage Banker Strategy(36) 29.33 14,731 630.5 30.20 17.41 27.99 4.02 326.82 60.50
Real Estate Strategy(9) 27.62 7,823 255.5 28.74 16.19 26.74 3.96 242.33 56.26
Diversified Strategy(10) 34.47 30,268 1,065.8 36.93 20.50 32.71 4.56 225.56 50.99
Retail Banking Strategy(4) 18.54 4,340 96.8 20.12 11.66 17.97 1.83 381.94 38.84
Companies Issuing Dividends(254) 24.19 5,566 188.1 25.34 15.68 23.67 1.89 267.30 47.09
Companies Without Dividends(46) 21.99 7,633 197.4 22.98 13.99 21.51 2.15 165.27 57.66
Equity/Assets (less than) 6%(23) 30.09 19,214 690.6 31.25 17.41 29.09 3.51 215.55 62.64
Equity/Assets 6-12%(142) 26.23 5,749 209.4 27.20 15.88 25.56 2.27 269.22 56.99
Equity/Assets (greater than) 12%(135) 20.60 3,733 86.6 21.89 14.69 20.32 1.34 215.20 36.78
Converted Last 3 Mths (no MHC)(3) 16.25 3,974 64.7 16.58 15.13 16.02 1.43 0.00 0.00
Actively Traded Companies(39) 35.33 18,235 808.5 36.23 20.92 34.03 3.50 292.75 64.05
Market Value Below $20 Million(50) 17.74 874 14.6 18.89 12.40 17.66 0.74 283.22 41.06
Holding Company Structure(266) 23.96 5,618 186.8 25.11 15.63 23.45 1.95 240.37 46.93
Assets Over $1 Billion(60) 34.58 19,090 741.1 35.69 20.78 33.27 4.00 286.80 56.23
Assets $500 Million-$1 Billion(49) 24.36 5,454 119.3 25.44 14.97 23.72 2.63 300.03 55.60
Assets $250-$500 Million(65) 23.46 2,779 61.7 24.60 15.25 23.11 1.27 227.17 53.06
Assets less than $250 Million(126) 18.94 1,480 26.9 20.10 13.25 18.76 1.03 159.33 39.19
Goodwill Companies(122) 27.82 10,091 336.2 28.86 17.06 27.00 2.88 279.73 54.72
Non-Goodwill Companies(178) 21.25 3,065 92.2 22.44 14.36 20.94 1.30 215.75 44.04
Acquirors of FSLIC Cases(10) 44.51 35,626 1,970.5 45.36 26.65 42.61 3.55 365.71 56.04
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
Market Averages. SAIF-Insured Thrifts(no MHC)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(300) 1.17 1.15 15.40 14.97 148.05
NYSE Traded Companies(10) 2.79 2.65 22.22 21.43 338.78
AMEX Traded Companies(16) 0.60 0.71 14.05 13.85 107.51
NASDAQ Listed OTC Companies(274) 1.14 1.11 15.21 14.78 142.88
California Companies(21) 1.73 1.61 17.45 16.86 265.86
Florida Companies(5) 1.17 0.85 11.42 10.73 171.97
Mid-Atlantic Companies(59) 1.31 1.31 16.00 15.39 164.56
Mid-West Companies(144) 1.06 1.04 15.11 14.81 126.64
New England Companies(9) 1.30 1.46 17.47 16.71 236.67
North-West Companies(8) 1.13 1.07 14.49 13.93 129.56
South-East Companies(41) 0.99 0.96 14.52 14.22 112.14
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) 1.08 1.08 15.54 15.18 132.71
Mortgage Banker Strategy(36) 1.60 1.47 15.12 14.20 220.19
Real Estate Strategy(9) 1.66 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(254) 1.21 1.18 15.52 15.05 144.64
Companies Without Dividends(46) 0.91 0.92 14.70 14.47 168.21
Equity/Assets (less than) 6%(23) 1.67 1.69 14.20 13.24 287.51
Equity/Assets 6-12%(142) 1.40 1.35 15.39 14.77 182.47
Equity/Assets (greater than) 12%(135) 0.87 0.87 15.60 15.44 92.32
Converted Last 3 Mths (no MHC)(3) 0.54 0.54 13.31 13.31 70.71
Actively Traded Companies(39) 1.95 1.95 17.26 16.62 228.67
Market Value Below $20 Million(50) 0.81 0.82 14.60 14.56 113.53
Holding Company Structure(266) 1.15 1.12 15.65 15.23 145.24
Assets Over $1 Billion(60) 1.83 1.78 17.18 15.98 243.29
Assets $500 Million-$1 Billion(49) 1.25 1.17 14.44 13.93 154.37
Assets $250-$500 Million(65) 1.17 1.16 15.75 15.37 151.21
Assets less than $250 Million(126) 0.82 0.83 14.77 14.71 100.03
Goodwill Companies(122) 1.45 1.41 15.78 14.70 193.04
Non-Goodwill Companies(178) 0.98 0.97 15.15 15.15 118.24
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 December 5, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 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) ($Mil) ($) ($) ($) (%) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHC)
- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(60) 27.49 8,002 246.3 28.38 16.82 26.80 2.60 262.87 59.25
NYSE Traded Companies(2) 47.00 72,159 2,775.5 47.69 30.12 45.44 4.64 158.45 59.71
AMEX Traded Companies(6) 28.02 2,187 64.0 28.82 15.90 27.52 1.15 166.38 66.54
NASDAQ Listed OTC Companies(52) 26.60 5,890 158.0 27.51 16.35 25.93 2.66 278.02 58.44
California Companies(1) 18.00 7,847 141.2 21.25 14.00 18.00 0.00 0.00 20.00
Mid-Atlantic Companies(15) 29.55 17,474 579.2 30.44 17.92 28.49 4.14 190.07 59.62
Mid-West Companies(2) 11.06 1,707 17.4 11.12 8.25 10.69 3.41 0.00 31.78
New England Companies(33) 27.78 4,521 133.3 28.68 16.18 27.29 1.67 292.67 67.11
North-West Companies(4) 20.58 7,249 156.9 21.56 13.09 20.02 2.88 153.46 54.20
South-East Companies(5) 32.25 2,076 46.5 32.92 23.29 31.22 3.17 0.00 36.06
Thrift Strategy(43) 27.45 4,912 168.8 28.33 16.86 26.85 2.33 256.68 58.59
Mortgage Banker Strategy(7) 28.57 31,238 799.1 29.75 16.85 27.60 3.69 281.08 71.75
Real Estate Strategy(5) 19.25 5,823 109.6 21.31 14.38 19.31 -0.29 508.31 28.33
Diversified Strategy(5) 30.67 13,256 456.0 30.67 17.56 28.93 5.55 202.18 69.26
Companies Issuing Dividends(52) 29.13 8,456 269.3 29.99 17.81 28.40 2.57 263.88 59.35
Companies Without Dividends(8) 16.43 4,948 91.9 17.55 10.13 16.05 2.74 248.69 58.62
Equity/Assets less than 6%(5) 19.91 29,899 746.5 20.16 10.16 19.19 3.49 192.41 96.30
Equity/Assets 6-12%(39) 30.07 6,372 240.7 31.13 17.67 29.46 1.87 279.06 63.72
Equity/Assets greater than 12%(16) 23.90 5,990 133.0 24.59 16.66 23.04 3.92 53.24 39.25
Actively Traded Companies(18) 30.00 11,760 343.8 31.01 18.22 29.24 2.68 299.47 58.58
Market Value Below $20 Million(4) 16.15 951 14.9 16.50 10.81 15.70 3.12 0.00 45.39
Holding Company Structure(40) 26.54 6,571 183.6 27.44 16.51 25.97 2.31 245.17 56.77
Assets Over $1 Billion(14) 34.32 24,469 847.4 35.05 20.69 33.02 4.24 242.13 63.31
Assets $500 Million-$1 Billion(16) 30.35 5,008 123.6 31.44 18.03 29.54 3.03 245.86 60.04
Assets $250-$500 Million(13) 22.14 3,342 69.1 23.13 13.20 22.09 0.63 296.73 63.11
Assets less than $250 Million(17) 23.43 1,549 29.8 24.17 15.39 22.85 2.43 271.01 52.39
Goodwill Companies(30) 30.93 11,423 381.8 31.80 18.52 30.21 2.39 261.61 61.36
Non-Goodwill Companies(30) 24.04 4,580 110.7 24.95 15.11 23.39 2.81 265.39 57.22
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
Market Averages. BIF-Insured Thrifts(no MHC)
- --------------------------------------------
<S> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(60) 1.59 1.52 15.85 14.99 153.09
NYSE Traded Companies(2) 2.34 2.29 20.01 12.88 248.52
AMEX Traded Companies(6) 1.34 1.15 17.59 15.21 172.94
NASDAQ Listed OTC Companies(52) 1.58 1.53 15.49 15.05 146.91
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) 1.91 1.80 14.67 14.10 168.95
North-West Companies(4) 1.05 1.02 11.21 10.83 95.73
South-East Companies(5) 1.42 1.41 27.07 27.07 100.38
Thrift Strategy(43) 1.56 1.49 16.45 15.52 148.63
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) 1.57 1.50 16.59 15.62 161.96
Companies Without Dividends(8) 1.69 1.67 10.85 10.74 93.52
Equity/Assets less than 6%(5) 1.23 1.01 7.70 7.47 153.80
Equity/Assets 6-12%(39) 1.94 1.85 15.59 14.33 182.89
Equity/Assets greater than 12%(16) 0.93 0.95 18.43 18.26 89.58
Actively Traded Companies(18) 1.97 1.86 15.73 14.92 183.84
Market Value Below $20 Million(4) 1.53 1.53 13.58 13.41 70.48
Holding Company Structure(40) 1.51 1.46 16.01 15.30 136.16
Assets Over $1 Billion(14) 1.83 1.78 15.82 14.09 187.28
Assets $500 Million-$1 Billion(16) 1.93 1.81 16.83 15.48 191.21
Assets $250-$500 Million(13) 1.17 1.11 12.82 12.51 120.44
Assets less than $250 Million(17) 1.40 1.35 17.31 17.20 113.72
Goodwill Companies(30) 1.75 1.65 16.69 14.96 194.27
Non-Goodwill Companies(30) 1.43 1.39 15.01 15.01 111.90
</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 December 5, 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) 25.05 8,362 58.1 26.98 13.01 24.50 2.62 377.81 103.57
BIF-Insured Thrifts(3) 31.71 22,105 311.4 33.12 12.38 31.06 1.87 362.13 161.58
NASDAQ Listed OTC Companies(23) 26.23 10,787 102.8 28.07 12.90 25.66 2.49 369.97 116.00
Florida Companies(3) 32.31 5,939 91.1 36.13 17.63 31.44 3.23 0.00 68.90
Mid-Atlantic Companies(11) 22.50 11,091 60.5 23.94 10.12 22.14 2.22 0.00 162.04
Mid-West Companies(7) 28.47 2,111 26.2 30.40 14.99 28.07 1.58 377.81 85.01
New England Companies(1) 36.37 61,126 889.4 37.37 18.00 33.69 7.95 362.13 88.94
Thrift Strategy(22) 25.59 7,641 53.6 27.48 12.58 25.16 2.14 377.81 118.08
Diversified Strategy(1) 36.37 61,126 889.4 37.37 18.00 33.69 7.95 362.13 88.94
Companies Issuing Dividends(22) 26.68 11,289 107.7 28.59 12.86 26.10 2.51 369.97 116.00
Companies Without Dividends(1) 19.00 2,760 23.6 19.75 13.62 18.62 2.04 0.00 0.00
Equity/Assets 6-12%(16) 27.84 14,078 135.2 30.02 13.10 27.22 2.53 369.97 122.67
Equity/Assets greater than 12%(7) 22.35 2,887 25.0 23.37 12.42 21.90 2.37 0.00 91.55
Holding Company Structure(2) 28.75 1,917 25.4 29.50 9.38 28.50 0.88 0.00 206.50
Assets Over $1 Billion(6) 25.25 37,110 341.0 26.75 11.94 23.64 6.67 362.13 126.47
Assets $500 Million-$1 Billion(2) 34.75 5,095 85.8 39.75 18.00 35.00 -0.71 0.00 69.51
Assets $250-$500 Million(5) 29.21 3,423 39.9 30.25 15.36 28.12 4.09 377.81 92.91
Assets less than $250 Million(10) 24.72 2,174 19.7 26.62 11.94 24.69 0.45 0.00 128.32
Goodwill Companies(9) 26.94 25,532 238.5 28.58 12.98 25.82 4.59 369.97 129.31
Non-Goodwill Companies(14) 25.84 2,744 28.8 27.78 12.86 25.57 1.33 0.00 106.03
MHC Institutions(23) 26.23 10,787 102.8 28.07 12.90 25.66 2.49 369.97 116.00
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- -------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(20) 0.68 0.67 10.72 10.65 95.80
BIF-Insured Thrifts(3) 1.06 0.85 10.76 10.12 101.07
NASDAQ Listed OTC Companies(23) 0.75 0.70 10.73 10.55 96.73
Florida Companies(3) 1.00 0.89 14.22 14.18 146.68
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) 0.71 0.69 10.69 10.50 94.87
Diversified Strategy(1) 1.44 0.93 11.41 11.40 126.48
Companies Issuing Dividends(22) 0.76 0.71 10.76 10.58 98.10
Companies Without Dividends(1) 0.56 0.54 10.22 10.22 74.79
Equity/Assets 6-12%(16) 0.82 0.74 10.90 10.65 109.96
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(6) 0.83 0.64 8.38 8.15 97.01
Assets $500 Million-$1 Billion(2) 1.07 0.98 15.79 15.79 139.20
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) 0.92 0.78 9.94 9.44 108.33
Non-Goodwill Companies(14) 0.65 0.67 11.16 11.16 90.40
MHC Institutions(23) 0.75 0.70 10.73 10.55 96.73
</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 December 5, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 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 62.94 94,411 5,942.2 63.31 31.50 59.50 5.78 235.68 93.66
CSA Coast Savings Financial of CA 62.75 18,644 1,169.9 63.62 34.75 60.00 4.58 442.82 71.35
CFB Commercial Federal Corp. of NE 50.37 21,582 1,087.1 51.19 29.75 48.06 4.81 ***.** 57.41
DME Dime Bancorp, Inc. of NY* 26.00 101,492 2,638.8 26.00 14.62 24.25 7.22 158.45 76.27
DSL Downey Financial Corp. of CA 28.75 26,754 769.2 28.81 17.70 27.50 4.55 164.73 53.83
FED FirstFed Fin. Corp. of CA 37.75 10,585 399.6 39.44 21.50 36.50 3.42 133.75 71.59
GSB Glendale Fed. Bk, FSB of CA 34.31 50,456 1,731.1 36.12 21.25 33.31 3.00 111.14 47.57
GDW Golden West Fin. Corp. of CA 94.75 56,770 5,379.0 94.75 59.87 89.62 5.72 261.78 50.11
GPT GreenPoint Fin. Corp. of NY* 68.00 42,826 2,912.2 69.37 45.62 66.62 2.07 N.A. 43.16
JSB JSB Financial, Inc. of NY 48.69 9,898 481.9 49.56 36.00 46.62 4.44 323.39 28.13
NYB New York Bancorp, Inc. of NY 36.94 21,319 787.5 37.00 16.81 35.37 4.44 421.02 90.71
WES Westcorp Inc. of Orange CA 16.87 26,256 442.9 23.50 13.25 17.00 -0.76 130.15 -22.90
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 23.75 2,697 64.1 24.75 14.19 23.75 0.00 N.A. 59.72
ANE Alliance Bancorp of New Englan* 17.12 1,627 27.9 18.00 8.72 17.50 -2.17 136.14 90.22
BKC American Bank of Waterbury CT* 48.62 2,313 112.5 48.75 27.37 47.12 3.18 159.31 73.64
BFD BostonFed Bancorp of MA 20.37 5,650 115.1 22.31 14.37 20.37 0.00 N.A. 38.10
CFX CFX Corp of NH(8)* 28.75 23,977 689.3 28.75 14.52 27.75 3.60 141.60 85.48
CNY Carver Bancorp, Inc. of NY 16.25 2,314 37.6 17.06 7.75 17.06 -4.75 160.00 96.97
CBK Citizens First Fin.Corp. of IL 18.00 2,584 46.5 19.50 13.50 18.25 -1.37 N.A. 25.26
ESX Essex Bancorp of VA(8) 5.00 1,058 5.3 7.94 1.00 5.00 0.00 -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 21.00 8,707 182.8 22.12 13.62 20.62 1.84 N.A. N.A.
GAF GA Financial Corp. of PA 19.56 7,973 156.0 19.69 14.50 19.25 1.61 N.A. 29.37
KNK Kankakee Bancorp of IL 34.38 1,426 49.0 34.62 23.37 33.87 1.51 243.80 38.91
KYF Kentucky First Bancorp of KY 14.37 1,303 18.7 14.62 10.56 14.50 -0.90 N.A. 32.20
MBB MSB Bancorp of Middletown NY* 30.37 2,844 86.4 30.62 16.37 29.00 4.72 203.70 54.79
PDB Piedmont Bancorp of NC 10.75 2,751 29.6 17.87 9.25 10.37 3.66 N.A. 2.38
SSB Scotland Bancorp of NC 10.37 1,914 19.8 19.25 10.12 10.25 1.17 N.A. -26.56
SZB SouthFirst Bancshares of AL 20.00 848 17.0 20.87 12.50 19.00 5.26 N.A. 50.94
SRN Southern Banc Company of AL 17.69 1,230 21.8 17.69 13.12 16.87 4.86 N.A. 34.83
SSM Stone Street Bancorp of NC 22.50 1,898 42.7 27.25 19.25 20.25 11.11 N.A. 9.76
TSH Teche Holding Company of LA 20.50 3,438 70.5 23.50 13.00 21.88 -6.31 N.A. 42.66
FTF Texarkana Fst. Fin. Corp of AR 25.50 1,787 45.6 27.00 14.25 24.75 3.03 N.A. 63.15
THR Three Rivers Fin. Corp. of MI 20.37 824 16.8 20.50 13.62 19.75 3.14 N.A. 45.50
WSB Washington SB, FSB of MD 7.00 4,348 30.4 8.25 4.81 7.37 -5.02 460.00 43.74
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 27.50 1,038 28.5 27.50 18.09 26.68 3.07 N.A. 44.74
AFED AFSALA Bancorp, Inc. of NY 19.12 1,455 27.8 19.50 11.37 19.12 0.00 N.A. 59.33
ALBK ALBANK Fin. Corp. of Albany NY 44.69 12,872 575.2 47.75 30.50 46.25 -3.37 92.22 42.46
AMFC AMB Financial Corp. of IN 16.00 964 15.4 17.75 12.50 16.00 0.00 N.A. 20.75
ASBP ASB Financial Corp. of OH 13.37 1,700 22.7 18.00 11.50 13.12 1.91 N.A. 2.85
ABBK Abington Savings Bank of MA* 36.37 1,840 66.9 37.75 19.00 36.00 1.03 449.40 86.51
AABC Access Anytime Bancorp of NM 10.12 1,217 12.3 10.75 5.15 10.12 0.00 49.93 87.76
AFBC Advance Fin. Bancorp of WV 17.25 1,084 18.7 17.87 12.75 17.75 -2.82 N.A. N.A.
AADV Advantage Bancorp of WI(8) 66.50 3,236 215.2 66.50 31.75 62.25 6.83 622.83 106.20
AFCB Affiliated Comm BC, Inc of MA 31.50 6,493 204.5 32.12 17.10 28.50 10.53 N.A. 84.21
ALBC Albion Banc Corp. of Albion NY 28.00 250 7.0 30.50 16.50 29.00 -3.45 115.38 67.16
ABCL Allied Bancorp of IL 27.37 8,020 219.5 28.37 16.08 26.25 4.27 310.34 64.19
<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* 0.97 0.94 17.22 17.22 101.60
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 1.12 1.07 15.81 15.81 117.54
FTF Texarkana Fst. Fin. Corp of AR 1.61 1.61 15.32 15.32 100.01
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 1.84 0.91 21.75 21.33 251.38
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 1.78 1.76 16.97 16.87 173.81
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 December 5, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 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 14.00 0.00 N.A. 40.00
AHCI Ambanc Holding Co., Inc. of NY* 19.37 4,306 83.4 19.50 10.50 17.00 13.94 N.A. 72.18
ASBI Ameriana Bancorp of IN 20.37 3,231 65.8 22.00 15.25 19.50 4.46 120.69 27.31
AFFFZ America First Fin. Fund of CA(8) 50.50 6,011 303.6 50.56 28.75 47.12 7.17 169.33 66.94
ABCW Anchor Bancorp Wisconsin of WI 33.37 9,054 302.1 33.37 17.37 31.50 5.94 127.16 86.74
ANDB Andover Bancorp, Inc. of MA* 39.00 5,149 200.8 40.50 25.00 37.75 3.31 262.79 52.22
ASFC Astoria Financial Corp. of NY 57.00 20,666 1,178.0 57.00 34.75 55.12 3.41 117.14 54.60
AVND Avondale Fin. Corp. of IL 16.00 3,495 55.9 18.87 12.75 16.00 0.00 N.A. -6.54
BKCT Bancorp Connecticut of CT* 24.25 5,086 123.3 24.25 10.75 26.68 -9.11 319.55 115.56
BPLS Bank Plus Corp. of CA 13.12 19,341 253.8 13.75 9.62 11.12 17.99 N.A. 14.09
BWFC Bank West Fin. Corp. of MI 17.25 2,630 45.4 17.25 7.00 22.00 -21.59 N.A. 143.64
BANC BankAtlantic Bancorp of FL 14.25 22,276 317.4 17.12 12.12 14.37 -0.84 242.55 6.58
BKUNA BankUnited SA of FL 12.81 9,533 122.1 13.75 8.50 12.94 -1.00 135.91 28.10
BVCC Bay View Capital Corp. of CA 36.12 12,421 448.6 36.12 19.50 33.75 7.02 82.89 70.46
FSNJ Bayonne Banchsares of NJ 12.37 8,993 111.2 13.06 5.80 12.00 3.08 N.A. 57.78
BFSB Bedford Bancshares of VA 29.00 1,142 33.1 29.00 17.50 28.25 2.65 176.19 64.59
BFFC Big Foot Fin. Corp. of IL 18.87 2,513 47.4 19.62 12.31 18.50 2.00 N.A. 45.15
BSBC Branford SB of CT(8)* 6.00 6,559 39.4 6.31 3.62 6.00 0.00 183.02 55.04
BYFC Broadway Fin. Corp. of CA 13.25 831 11.0 13.25 9.12 13.00 1.92 N.A. 43.24
CBES CBES Bancorp of MO 21.37 1,025 21.9 22.37 13.31 20.37 4.91 N.A. 49.96
CCFH CCF Holding Company of GA 20.00 820 16.4 21.00 14.50 20.00 0.00 N.A. 35.59
CENF CENFED Financial Corp. of CA 39.75 5,959 236.9 42.25 25.45 40.75 -2.45 153.51 49.49
CFSB CFSB Bancorp of Lansing MI 34.87 5,087 177.4 35.75 16.59 35.50 -1.77 287.44 96.67
CKFB CKF Bancorp of Danville KY 18.50 903 16.7 20.50 17.50 18.50 0.00 N.A. -8.64
CNSB CNS Bancorp of MO 21.00 1,653 34.7 21.50 14.50 20.00 5.00 N.A. 38.89
CSBF CSB Financial Group Inc of IL* 13.00 942 12.2 13.12 10.00 12.50 4.00 N.A. 28.46
CBCI Calumet Bancorp of Chicago IL 32.50 3,166 102.9 34.00 21.67 31.87 1.98 143.08 46.59
CAFI Camco Fin. Corp. of OH 24.00 3,214 77.1 24.25 14.05 24.00 0.00 N.A. 58.73
CMRN Cameron Fin. Corp. of MO 20.75 2,562 53.2 20.75 15.50 19.62 5.76 N.A. 29.69
CAPS Capital Savings Bancorp of MO(8) 24.25 1,892 45.9 24.75 12.75 22.37 8.40 83.02 86.54
CFNC Carolina Fincorp of NC* 17.62 1,851 32.6 17.87 13.00 17.37 1.44 N.A. 31.79
CASB Cascade SB of Everett WA(8) 12.75 3,387 43.2 16.80 10.40 12.75 0.00 -0.39 -1.16
CATB Catskill Fin. Corp. of NY* 18.25 4,657 85.0 19.12 13.75 17.62 3.58 N.A. 30.36
CNIT Cenit Bancorp of Norfolk VA 68.00 1,654 112.5 71.00 39.00 68.00 0.00 328.21 63.86
CEBK Central Co-Op. Bank of MA* 26.25 1,965 51.6 27.00 15.87 26.50 -0.94 400.00 50.00
CENB Century Bancshares of NC* 83.00 407 33.8 84.00 62.00 80.00 3.75 N.A. 27.69
CBSB Charter Financial Inc. of IL(8) 23.12 4,150 95.9 24.25 12.50 22.00 5.09 N.A. 84.96
COFI Charter One Financial of OH 64.00 49,563 3,172.0 64.00 36.91 59.25 8.02 265.71 60.00
CVAL Chester Valley Bancorp of PA 27.25 2,189 59.7 27.50 14.10 26.25 3.81 140.51 93.26
CTZN CitFed Bancorp of Dayton OH 36.00 12,984 467.4 37.00 18.83 33.76 6.64 500.00 63.64
CLAS Classic Bancshares of KY 16.37 1,300 21.3 17.25 11.50 17.12 -4.38 N.A. 40.88
CMSB Cmnwealth Bancorp of PA 21.06 16,243 342.1 21.12 13.50 20.37 3.39 N.A. 40.40
CBSA Coastal Bancorp of Houston TX 29.00 4,992 144.8 33.25 22.37 28.87 0.45 N.A. 26.80
CFCP Coastal Fin. Corp. of SC 22.75 4,647 105.7 27.75 14.44 23.00 -1.09 127.50 44.44
CMSV Commty. Svgs, MHC of FL (48.5) 34.75 5,095 85.8 39.75 18.00 35.00 -0.71 N.A. 69.51
CFTP Community Fed. Bancorp of MS 20.25 4,629 93.7 20.25 16.37 17.12 18.28 N.A. 19.12
CFFC Community Fin. Corp. of VA 26.50 1,275 33.8 27.50 20.75 24.75 7.07 278.57 27.71
CFBC Community First Bnkg Co. of GA 39.50 2,414 95.4 40.00 31.87 38.37 2.95 N.A. N.A.
CIBI Community Inv. Bancorp of OH 16.25 916 14.9 17.00 10.33 15.75 3.17 N.A. 43.42
COOP Cooperative Bk.for Svgs. of NC 18.25 2,983 54.4 18.75 10.00 17.37 5.07 265.00 80.34
CRZY Crazy Woman Creek Bncorp of WY 15.37 955 14.7 15.50 11.25 15.37 0.00 N.A. 28.08
DNFC D&N Financial Corp. of MI 26.37 8,244 217.4 26.37 14.87 24.12 9.33 201.37 57.43
DCBI Delphos Citizens Bancorp of OH 17.50 1,960 34.3 18.25 11.75 17.50 0.00 N.A. 45.83
DIME Dime Community Bancorp of NY 25.50 12,625 321.9 25.50 14.31 23.25 9.68 N.A. 72.88
DIBK Dime Financial Corp. of CT* 30.00 5,162 154.9 32.00 16.50 31.50 -4.76 185.71 73.91
<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 1.03 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* 1.12 1.02 8.96 8.96 83.33
BPLS Bank Plus Corp. of CA 0.65 0.54 9.16 9.15 202.69
BWFC Bank West Fin. Corp. of MI 0.59 0.32 8.87 8.87 62.68
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 0.42 0.42 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 0.38 0.48 14.77 14.77 150.11
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 0.98 0.98 17.43 17.43 82.94
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 8.36 125.91
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 1.98 1.98 15.92 14.47 253.74
CLAS Classic Bancshares of KY 0.51 0.69 14.93 12.63 100.19
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 1.50 1.51 18.99 18.99 143.75
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 December 5, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
Shares Market 52 Week (1) % Change From
--------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EGLB Eagle BancGroup of IL 20.00 1,198 24.0 20.00 13.25 19.75 1.27 N.A. 34.50
EBSI Eagle Bancshares of Tucker GA 19.00 5,666 107.7 20.94 13.62 19.25 -1.30 162.07 22.58
EGFC Eagle Financial Corp. of CT(8) 51.81 6,316 327.2 52.50 26.75 51.75 0.12 492.11 69.87
ETFS East Texas Fin. Serv. of TX 20.00 1,026 20.5 21.50 16.12 20.00 0.00 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)* 32.00 2,250 72.0 32.62 14.20 32.25 -0.78 319.95 100.00
EFBC Empire Federal Bancorp of MT 16.31 2,592 42.3 18.25 12.50 16.50 -1.15 N.A. N.A.
EFBI Enterprise Fed. Bancorp of OH 27.50 1,986 54.6 27.75 14.12 27.75 -0.90 N.A. 89.66
EQSB Equitable FSB of Wheaton MD 45.78 602 27.6 45.78 26.75 45.00 1.73 N.A. 62.05
FCBF FCB Fin. Corp. of Neenah WI 28.00 3,879 108.6 28.37 18.50 27.25 2.75 N.A. 51.35
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 18.00 1,445 26.0 19.50 13.00 18.37 -2.01 N.A. 35.85
FFLC FFLC Bancorp of Leesburg FL 23.12 3,835 88.7 23.50 12.00 22.50 2.76 N.A. 79.22
FFFC FFVA Financial Corp. of VA 33.75 4,522 152.6 35.12 20.00 33.37 1.14 N.A. 64.63
FFWC FFW Corporation of Wabash IN 40.50 715 29.0 40.50 20.75 37.75 7.28 N.A. 85.10
FFYF FFY Financial Corp. of OH 30.12 4,122 124.2 30.50 25.00 29.75 1.24 N.A. 19.00
FMCO FMS Financial Corp. of NJ 32.75 2,388 78.2 32.75 17.12 29.37 11.51 263.89 79.45
FFHH FSF Financial Corp. of MN 19.75 3,010 59.4 21.00 14.25 20.00 -1.25 N.A. 30.62
FOBC Fed One Bancorp of Wheeling WV 25.87 2,373 61.4 27.00 15.75 24.87 4.02 158.70 64.25
FBCI Fidelity Bancorp of Chicago IL 23.25 2,795 65.0 25.75 16.87 23.25 0.00 N.A. 36.76
FSBI Fidelity Bancorp, Inc. of PA 27.50 1,555 42.8 27.50 16.82 26.62 3.31 255.76 51.27
FFFL Fidelity FSB, MHC of FL (47.7) 29.87 6,783 96.3 32.50 17.25 27.87 7.18 N.A. 68.28
FFED Fidelity Fed. Bancorp of IN 10.00 2,791 27.9 10.50 7.50 10.00 0.00 41.84 2.56
FFOH Fidelity Financial of OH 15.37 5,580 85.8 16.37 11.12 15.00 2.47 N.A. 33.65
FIBC Financial Bancorp, Inc. of NY 24.75 1,710 42.3 25.75 14.25 24.81 -0.24 N.A. 65.00
FBSI First Bancshares of MO 25.37 1,093 27.7 28.00 16.50 26.25 -3.35 98.98 52.65
FBBC First Bell Bancorp of PA 18.12 6,511 118.0 18.37 13.12 17.25 5.04 N.A. 36.75
FBER First Bergen Bancorp of NJ 18.87 2,865 54.1 19.50 11.37 18.62 1.34 N.A. 64.09
SKBO First Carnegie,MHC of PA(45.0) 18.75 2,300 19.4 19.87 11.62 18.62 0.70 N.A. N.A.
FSTC First Citizens Corp of GA 29.25 2,742 80.2 29.25 14.17 24.00 21.88 254.55 73.80
FCME First Coastal Corp. of ME* 14.62 1,359 19.9 15.75 7.25 13.87 5.41 N.A. 88.65
FFBA First Colorado Bancorp of Co 25.50 16,485 420.4 25.50 16.00 22.75 12.09 672.73 50.00
FDEF First Defiance Fin.Corp. of OH 16.25 8,957 145.6 16.25 11.75 15.25 6.56 N.A. 31.37
FESX First Essex Bancorp of MA* 20.62 7,527 155.2 20.62 13.12 19.87 3.77 243.67 57.16
FFES First FS&LA of E. Hartford CT 37.50 2,682 100.6 37.50 22.75 37.00 1.35 476.92 63.04
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 27.00 673 18.2 28.00 17.50 28.00 -3.57 N.A. 45.95
FFBH First Fed. Bancshares of AR 22.00 4,896 107.7 22.00 15.75 21.37 2.95 N.A. 38.63
FTFC First Fed. Capital Corp. of WI 30.75 9,165 281.8 30.75 15.50 27.87 10.33 310.00 96.23
FFKY First Fed. Fin. Corp. of KY 22.37 4,159 93.0 23.50 17.75 22.00 1.68 42.03 10.47
FFBZ First Federal Bancorp of OH 19.62 1,575 30.9 20.50 14.50 19.25 1.92 96.20 22.63
FFCH First Fin. Holdings Inc. of SC 48.00 6,368 305.7 49.00 22.25 43.12 11.32 291.84 113.33
FFBI First Financial Bancorp of IL 20.25 415 8.4 20.25 15.50 19.00 6.58 N.A. 27.60
FFHS First Franklin Corp. of OH 26.50 1,192 31.6 26.50 16.00 26.00 1.92 101.98 60.61
FGHC First Georgia Hold. Corp of GA 8.25 3,052 25.2 9.50 5.33 8.37 -1.43 115.40 45.50
FSPG First Home Bancorp of NJ 23.75 2,708 64.3 23.75 13.69 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 27.50 10,561 290.4 27.50 17.37 26.25 4.76 103.70 28.50
FKFS First Keystone Fin. Corp of PA 35.87 1,228 44.0 35.87 19.00 32.00 12.09 N.A. 86.34
FLKY First Lancaster Bncshrs of KY 15.75 951 15.0 16.37 14.50 15.75 0.00 N.A. 7.73
FLFC First Liberty Fin. Corp. of GA 30.75 7,725 237.5 30.75 18.25 27.87 10.33 505.31 67.39
CASH First Midwest Fin. Corp. of IA 21.25 2,699 57.4 21.25 15.00 20.50 3.66 N.A. 38.62
FMBD First Mutual Bancorp of IL 20.25 3,507 71.0 21.50 13.75 20.25 0.00 N.A. 35.00
FMSB First Mutual SB of Bellevue WA* 18.25 4,067 74.2 20.17 10.61 18.25 0.00 253.68 72.01
FNGB First Northern Cap. Corp of WI 14.00 8,840 123.8 14.00 8.00 13.50 3.70 92.84 72.20
<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 1.19 0.99 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 0.61 0.47 19.74 19.74 134.88
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 1.75 1.71 16.64 16.64 244.98
FFFL Fidelity FSB, MHC of FL (47.7) 0.93 0.79 12.65 12.57 154.16
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 1.80 1.49 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 December 5, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 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) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFPB First Palm Beach Bancorp of FL 38.75 5,048 195.6 40.56 23.00 38.75 0.00 N.A. 64.06
FSLA First SB SLA MHC of NJ (47.5)(8) 43.00 8,007 146.4 47.50 16.36 40.37 6.51 330.00 155.65
SOPN First SB, SSB, Moore Co. of NC 23.25 3,687 85.7 25.00 17.87 24.37 -4.60 N.A. 24.00
FWWB First Savings Bancorp of WA* 26.00 10,247 266.4 26.50 18.00 25.25 2.97 N.A. 41.54
FSFF First SecurityFed Fin of IL 16.50 6,408 105.7 16.62 15.00 16.06 2.74 N.A. N.A.
SHEN First Shenango Bancorp of PA 33.00 2,069 68.3 35.00 21.75 33.75 -2.22 N.A. 46.67
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 18.12 1,984 36.0 19.00 15.50 17.62 2.84 N.A. N.A.
FFDB FirstFed Bancorp of AL 21.28 1,151 24.5 22.75 12.50 22.00 -3.27 N.A. 70.24
FSPT FirstSpartan Fin. Corp. of SC 37.87 4,430 167.8 39.00 35.00 37.50 0.99 N.A. N.A.
FLAG Flag Financial Corp of GA 18.50 2,037 37.7 19.87 10.25 18.50 0.00 88.78 72.09
FLGS Flagstar Bancorp, Inc of MI 19.12 13,670 261.4 21.75 13.00 18.25 4.77 N.A. N.A.
FFIC Flushing Fin. Corp. of NY* 23.25 7,983 185.6 24.00 17.37 22.25 4.49 N.A. 28.31
FBHC Fort Bend Holding Corp. of TX 19.62 1,656 32.5 24.00 11.00 19.62 0.00 N.A. 53.88
FTSB Fort Thomas Fin. Corp. of KY 14.75 1,495 22.1 15.00 9.25 14.75 0.00 N.A. 0.89
FKKYD Frankfort First Bancorp of KY 9.25 3,280 30.3 12.25 8.00 9.25 0.00 N.A. -18.65
FTNB Fulton Bancorp of MO 20.62 1,719 35.4 26.50 14.12 20.25 1.83 N.A. 34.16
GFSB GFS Bancorp of Grinnell IA 16.87 988 16.7 17.62 10.12 16.87 0.00 N.A. 58.85
GUPB GFSB Bancorp of Gallup NM 20.25 801 16.2 22.25 15.25 20.25 0.00 N.A. 27.60
GSLA GS Financial Corp. of LA 17.75 3,438 61.0 18.75 13.37 17.75 0.00 N.A. N.A.
GOSB GSB Financial Corp. of NY 16.12 2,248 36.2 16.75 14.25 15.63 3.13 N.A. N.A.
GWBC Gateway Bancorp of KY(8) 19.62 1,076 21.1 19.62 14.00 19.62 0.00 N.A. 37.68
GBCI Glacier Bancorp of MT 22.06 6,816 150.4 22.75 15.33 20.75 6.31 356.73 35.09
GFCO Glenway Financial Corp. of OH 18.50 2,280 42.2 19.00 9.50 19.00 -2.63 N.A. 80.49
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) 50.56 13,823 698.9 50.62 29.12 48.00 5.33 N.A. 73.63
GSBC Great Southern Bancorp of MO 23.75 8,080 191.9 23.75 16.00 21.88 8.55 713.36 33.35
GDVS Greater DV SB,MHC of PA (19.9)* 30.00 3,272 19.5 32.50 9.75 31.00 -3.23 N.A. 189.30
GSFC Green Street Fin. Corp. of NC 18.25 4,298 78.4 20.75 15.12 18.50 -1.35 N.A. 17.74
GFED Guarnty FS&LA,MHC of MO (31.0)(8) 25.37 3,125 24.6 27.87 10.87 23.75 6.82 N.A. 110.36
HCBB HCB Bancshares of AR 13.62 2,645 36.0 14.25 12.62 13.62 0.00 N.A. N.A.
HEMT HF Bancorp of Hemet CA 17.00 6,282 106.8 17.12 10.75 16.75 1.49 N.A. 52.88
HFFC HF Financial Corp. of SD 26.50 2,803 74.3 27.00 16.50 26.00 1.92 430.00 53.09
HFNC HFNC Financial Corp. of NC 14.75 17,192 253.6 22.06 13.94 14.87 -0.81 N.A. -17.46
HMNF HMN Financial, Inc. of MN 26.50 4,212 111.6 26.50 17.87 25.87 2.44 N.A. 46.25
HALL Hallmark Capital Corp. of WI 15.00 2,886 43.3 15.37 8.50 15.25 -1.64 N.A. 69.11
HARB Harbor FSB, MHC of FL (46.6)(8) 65.50 4,973 151.7 69.75 32.00 65.00 0.77 N.A. 83.22
HRBF Harbor Federal Bancorp of MD 25.00 1,693 42.3 25.00 15.00 21.75 14.94 150.00 58.73
HFSA Hardin Bancorp of Hardin MO 17.87 859 15.4 18.62 12.00 17.50 2.11 N.A. 42.96
HARL Harleysville SA of PA 28.50 1,662 47.4 30.25 14.60 29.37 -2.96 60.56 80.38
HFGI Harrington Fin. Group of IN 12.12 3,257 39.5 13.75 9.75 12.37 -2.02 N.A. 12.74
HARS Harris SB, MHC of PA (24.3) 19.50 33,779 159.3 20.75 6.00 19.00 2.63 N.A. 220.72
HFFB Harrodsburg 1st Fin Bcrp of KY 17.87 2,025 36.2 18.87 14.75 17.12 4.38 N.A. -5.30
HHFC Harvest Home Fin. Corp. of OH 14.75 915 13.5 14.75 9.25 14.75 0.00 N.A. 51.28
HAVN Haven Bancorp of Woodhaven NY 22.25 8,772 195.2 22.69 13.94 21.50 3.49 N.A. 55.49
HTHR Hawthorne Fin. Corp. of CA 23.12 3,088 71.4 24.00 7.37 21.00 10.10 -15.93 184.38
HMLK Hemlock Fed. Fin. Corp. of IL 17.12 2,076 35.5 17.50 12.50 17.25 -0.75 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* 27.87 1,303 36.3 29.00 17.50 27.12 2.77 511.18 48.64
HBEI Home Bancorp of Elgin IL 18.50 6,856 126.8 19.31 12.75 18.00 2.78 N.A. 37.04
HBFW Home Bancorp of Fort Wayne IN 27.12 2,525 68.5 27.50 18.50 27.37 -0.91 N.A. 42.74
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 17.37 905 15.7 18.00 12.00 18.00 -3.50 N.A. 31.09
HOMF Home Fed Bancorp of Seymour IN 26.50 5,102 135.2 28.25 15.22 27.50 -3.64 299.70 54.34
HWEN Home Financial Bancorp of IN 16.44 465 7.6 17.25 12.75 16.44 0.00 N.A. 28.94
<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
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C>
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* 0.99 0.94 14.92 13.78 104.83
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
FKKYD 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 1.31 1.32 12.53 12.49 208.99
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 December 5, 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* 23.62 1,842 43.5 25.00 16.12 24.00 -1.58 195.25 43.15
HMCI Homecorp, Inc. of Rockford IL(8) 27.37 1,708 46.7 27.37 11.83 25.00 9.48 173.70 114.67
HZFS Horizon Fin'l. Services of IA 11.50 851 9.8 13.00 7.25 11.00 4.55 N.A. 52.12
HRZB Horizon Financial Corp. of WA* 17.50 7,434 130.1 18.00 10.65 16.56 5.68 53.24 49.06
IBSF IBS Financial Corp. of NJ 16.87 10,949 184.7 18.75 12.94 17.44 -3.27 N.A. 24.14
ISBF ISB Financial Corp. of LA 27.62 6,901 190.6 28.00 17.12 26.25 5.22 N.A. 53.44
ITLA Imperial Thrift & Loan of CA* 18.00 7,847 141.2 21.25 14.00 18.00 0.00 N.A. 20.00
IFSB Independence FSB of DC 13.25 1,281 17.0 15.12 7.37 13.78 -3.85 562.50 65.63
INCB Indiana Comm. Bank, SB of IN(8) 20.50 922 18.9 20.50 15.00 20.50 0.00 N.A. 26.15
INBI Industrial Bancorp of OH 18.25 5,173 94.4 18.25 12.00 18.00 1.39 N.A. 43.14
IWBK Interwest SB of Oak Harbor WA 39.87 8,050 321.0 43.25 27.62 39.50 0.94 298.70 23.63
IPSW Ipswich SB of Ipswich MA* 13.25 2,378 31.5 14.12 5.63 12.87 2.95 N.A. 120.83
JXVL Jacksonville Bancorp of TX 19.12 2,490 47.6 19.50 13.25 18.75 1.97 N.A. 30.78
JXSB Jcksnville SB,MHC of IL (45.6) 26.25 1,272 15.2 29.50 12.00 26.75 -1.87 N.A. 98.11
JSBA Jefferson Svgs Bancorp of MO 41.75 5,006 209.0 44.00 22.75 43.25 -3.47 N.A. 60.58
JOAC Joachim Bancorp of MO 15.00 722 10.8 15.63 14.00 14.75 1.69 N.A. 3.45
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)* 16.50 1,238 20.4 16.50 7.67 15.25 8.20 N.A. 115.12
KFBI Klamath First Bancorp of OR 22.31 10,019 223.5 24.25 14.87 21.88 1.97 N.A. 41.65
LSBI LSB Fin. Corp. of Lafayette IN 27.75 916 25.4 27.75 17.86 26.00 6.73 N.A. 49.43
LVSB Lakeview SB of Paterson NJ 25.00 4,509 112.7 26.00 11.50 24.12 3.65 N.A. 100.96
LARK Landmark Bancshares of KS 23.25 1,689 39.3 27.25 16.50 24.00 -3.13 N.A. 29.17
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* 14.50 4,284 62.1 16.37 7.94 13.87 4.54 321.51 78.35
LFED Leeds FSB, MHC of MD (36.3) 22.75 5,182 42.8 22.75 10.00 21.50 5.81 N.A. 113.21
LXMO Lexington B&L Fin. Corp. of MO 17.25 1,138 19.6 17.25 12.75 16.75 2.99 N.A. 27.78
LIFB Life Bancorp of Norfolk VA(8) 35.12 9,848 345.9 36.37 16.75 31.12 12.85 N.A. 95.11
LFBI Little Falls Bancorp of NJ 20.37 2,608 53.1 20.50 12.19 20.00 1.85 N.A. 59.76
LOGN Logansport Fin. Corp. of IN 15.25 1,261 19.2 16.00 11.12 15.25 0.00 N.A. 35.56
LONF London Financial Corp. of OH 15.75 515 8.1 21.00 13.00 14.75 6.78 N.A. 11.54
LISB Long Island Bancorp, Inc of NY 48.50 24,023 1,165.1 48.75 30.62 47.12 2.93 N.A. 38.57
MAFB MAF Bancorp of IL 34.00 15,249 518.5 34.75 22.25 32.50 4.62 300.00 46.74
MBLF MBLA Financial Corp. of MO 27.00 1,268 34.2 27.00 19.00 27.00 0.00 N.A. 42.11
MFBC MFB Corp. of Mishawaka IN 23.25 1,651 38.4 23.75 16.50 23.25 0.00 N.A. 39.89
MLBC ML Bancorp of Villanova PA(8) 29.75 11,866 353.0 29.75 13.75 28.75 3.48 N.A. 110.69
MSBF MSB Financial Corp. of MI 19.00 1,234 23.4 19.50 9.50 19.50 -2.56 N.A. 100.00
MARN Marion Capital Holdings of IN 27.00 1,776 48.0 28.13 19.25 26.50 1.89 N.A. 40.26
MRKF Market Fin. Corp. of OH 15.44 1,336 20.6 15.75 12.25 15.25 1.25 N.A. N.A.
MFCX Marshalltown Fin. Corp. of IA(8) 17.25 1,411 24.3 17.25 14.25 17.25 0.00 N.A. 16.01
MFSL Maryland Fed. Bancorp of MD 26.50 6,467 171.4 26.87 16.75 26.62 -0.45 404.76 52.56
MASB MassBank Corp. of Reading MA* 45.50 3,561 162.0 47.75 27.75 45.00 1.11 361.46 59.15
MFLR Mayflower Co-Op. Bank of MA* 24.75 890 22.0 26.25 14.75 24.44 1.27 395.00 45.59
MECH Mechanics SB of Hartford CT* 25.75 5,293 136.3 27.25 15.37 25.62 0.51 N.A. 63.49
MDBK Medford Bank of Medford, MA* 36.75 4,541 166.9 38.50 24.50 37.00 -0.68 425.00 42.72
MERI Meritrust FSB of Thibodaux LA(8) 69.00 774 53.4 69.00 31.50 51.22 34.71 N.A. 118.22
MWBX MetroWest Bank of MA* 9.00 13,956 125.6 9.06 4.62 8.25 9.09 118.45 67.60
MCBS Mid Continent Bancshares of KS(8) 42.25 1,962 82.9 43.25 23.25 41.25 2.42 N.A. 80.79
MIFC Mid Iowa Financial Corp. of IA 11.75 1,678 19.7 11.75 6.25 10.62 10.64 135.00 84.46
MCBN Mid-Coast Bancorp of ME 28.75 233 6.7 29.00 18.50 28.75 0.00 403.50 51.32
MWBI Midwest Bancshares, Inc. of IA 17.75 1,018 18.1 19.50 8.83 18.50 -4.05 433.03 101.02
MWFD Midwest Fed. Fin. Corp of WI(8) 27.25 1,628 44.4 27.50 16.75 26.50 2.83 445.00 47.30
MFFC Milton Fed. Fin. Corp. of OH 15.37 2,305 35.4 15.94 13.25 15.00 2.47 N.A. 6.00
MIVI Miss. View Hold. Co. of MN 17.50 740 13.0 19.75 11.75 18.25 -4.11 N.A. 45.83
MBSP Mitchell Bancorp of NC* 17.87 931 16.6 18.00 13.50 17.50 2.11 N.A. 25.40
MBBC Monterey Bay Bancorp of CA 18.75 3,230 60.6 20.50 14.62 19.00 -1.32 N.A. 27.12
<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 0.97 0.96 16.70 14.29 138.54
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 0.90 1.85 22.03 17.09 258.09
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 0.85 0.85 14.42 13.11 97.82
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 0.75 0.70 14.77 14.77 74.19
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* 1.46 1.38 13.98 13.75 144.98
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) 2.13 2.21 20.38 20.38 206.56
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 December 5, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 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 12.37 1,653 20.4 14.00 11.00 12.31 0.49 N.A. -4.85
MSBK Mutual SB, FSB of Bay City MI 12.75 4,279 54.6 14.62 5.37 13.00 -1.92 45.71 131.82
NHTB NH Thrift Bancshares of NH 21.50 2,075 44.6 22.75 11.62 21.00 2.38 365.37 70.36
NSLB NS&L Bancorp of Neosho MO 18.50 707 13.1 19.50 13.62 18.75 -1.33 N.A. 35.83
NMSB Newmil Bancorp. of CT* 13.37 3,835 51.3 14.50 8.50 14.25 -6.18 109.89 37.13
NASB North American SB of MO 54.00 2,229 120.4 55.62 31.00 49.94 8.13 ***.** 57.66
NBSI North Bancshares of Chicago IL 26.25 962 25.3 27.12 15.75 26.50 -0.94 N.A. 59.09
FFFD North Central Bancshares of IA 18.50 3,258 60.3 19.25 13.25 18.87 -1.96 N.A. 36.43
NBN Northeast Bancorp of ME* 27.94 1,294 36.2 27.94 13.25 27.75 0.68 137.79 99.57
NEIB Northeast Indiana Bncrp of IN 20.00 1,763 35.3 21.12 13.25 20.00 0.00 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) 15.25 46,753 218.9 16.37 6.50 14.00 8.93 N.A. 127.95
NSSY Norwalk Savings Society of CT* 39.25 2,427 95.3 40.00 22.94 38.50 1.95 N.A. 67.95
NSSB Norwich Financial Corp. of CT* 31.25 5,432 169.8 31.62 18.00 29.75 5.04 346.43 59.28
NTMG Nutmeg FS&LA of CT 13.12 740 9.7 13.12 7.00 13.00 0.92 N.A. 74.93
OHSL OHSL Financial Corp. of OH 27.75 1,235 34.3 28.25 20.37 27.75 0.00 N.A. 29.85
OCFC Ocean Fin. Corp. of NJ 37.37 8,176 305.5 38.37 25.12 37.12 0.67 N.A. 46.55
OCN Ocwen Financial Corp. of FL 25.62 60,505 1,550.1 28.28 12.62 24.25 5.65 N.A. 91.62
OTFC Oregon Trail Fin. Corp of OR 16.00 4,695 75.1 16.75 15.63 16.00 0.00 N.A. N.A.
PBHC OswegoCity SB, MHC of NY (46.)* 28.75 1,917 25.4 29.50 9.38 28.50 0.88 N.A. 206.50
OFCP Ottawa Financial Corp. of MI 29.12 5,353 155.9 29.12 14.89 27.50 5.89 N.A. 90.45
PFFB PFF Bancorp of Pomona CA 19.25 17,903 344.6 21.50 13.37 18.37 4.79 N.A. 29.46
PSFI PS Financial of Chicago IL 17.87 2,167 38.7 18.00 11.62 17.25 3.59 N.A. 52.09
PVFC PVF Capital Corp. of OH 20.06 2,590 52.0 21.75 13.18 20.50 -2.15 355.91 40.08
PALM Palfed, Inc. of Aiken SC(8) 28.62 5,299 151.7 28.62 13.75 27.00 6.00 86.21 104.43
PBCI Pamrapo Bancorp, Inc. of NJ 24.50 2,843 69.7 26.75 18.50 23.87 2.64 335.17 22.50
PFED Park Bancorp of Chicago IL 18.00 2,431 43.8 18.12 11.75 17.87 0.73 N.A. 38.46
PVSA Parkvale Financial Corp of PA 29.00 5,106 148.1 29.75 19.60 29.75 -2.52 250.24 39.42
PEEK Peekskill Fin. Corp. of NY 17.75 3,193 56.7 18.25 13.37 17.50 1.43 N.A. 24.56
PFSB PennFed Fin. Services of NJ 34.00 4,823 164.0 34.00 19.87 33.19 2.44 N.A. 67.90
PWBC PennFirst Bancorp of PA 18.75 5,310 99.6 19.50 12.27 18.25 2.74 134.96 51.33
PWBK Pennwood SB of PA* 19.12 570 10.9 19.12 12.50 18.94 0.95 N.A. 39.05
PBKB People's SB of Brockton MA* 20.37 3,283 66.9 20.50 10.50 20.00 1.85 242.93 91.81
PFDC Peoples Bancorp of Auburn IN 25.00 3,392 84.8 25.00 13.00 22.00 13.64 137.87 85.19
PBCT Peoples Bank, MHC of CT (40.1)* 36.37 61,126 889.4 37.37 18.00 33.69 7.95 362.13 88.94
TSBS Peoples Bcrp, MHC of NJ (35.9)(8) 37.50 9,046 121.8 39.12 15.63 34.75 7.91 N.A. 134.38
PFFC Peoples Fin. Corp. of OH 14.25 1,491 21.2 19.00 12.75 14.00 1.79 N.A. 5.56
PHBK Peoples Heritage Fin Grp of ME* 43.94 27,475 1,207.3 43.94 24.87 42.62 3.10 187.00 56.93
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 26.12 2,103 54.9 27.37 18.25 25.62 1.95 N.A. 28.99
PMFI Perpetual Midwest Fin. of IA 30.50 1,873 57.1 30.50 18.75 27.00 12.96 N.A. 58.44
PERT Perpetual of SC, MHC (46.8)(8) 54.75 1,505 38.6 58.00 21.37 51.00 7.35 N.A. 125.77
PCBC Perry Co. Fin. Corp. of MO 23.25 828 19.3 25.00 17.00 23.25 0.00 N.A. 36.76
PHFC Pittsburgh Home Fin. of PA 19.00 1,969 37.4 20.81 12.87 20.69 -8.17 N.A. 42.11
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 34.87 1,632 26.8 37.12 16.25 34.00 2.56 N.A. 99.26
PTRS Potters Financial Corp of OH 17.62 965 17.0 17.62 9.38 17.00 3.65 N.A. 76.20
PKPS Poughkeepsie Fin. Corp. of NY(8) 10.50 12,595 132.2 10.62 5.12 9.94 5.63 35.48 100.00
PHSB Ppls Home SB, MHC of PA (45.0) 19.00 2,760 23.6 19.75 13.62 18.62 2.04 N.A. N.A.
PRBC Prestige Bancorp of PA 19.25 915 17.6 19.37 12.87 18.41 4.56 N.A. 42.59
PFNC Progress Financial Corp. of PA 15.50 4,010 62.2 16.37 7.68 15.50 0.00 40.78 94.24
PSBK Progressive Bank, Inc. of NY* 35.00 3,828 134.0 38.00 22.75 33.75 3.70 161.78 53.85
PROV Provident Fin. Holdings of CA 20.87 4,836 100.9 21.12 13.62 20.00 4.35 N.A. 49.07
PULB Pulaski SB, MHC of MO (29.8) 30.00 2,094 18.7 32.50 14.12 30.50 -1.64 N.A. 106.90
PLSK Pulaski SB, MHC of NJ (46.0) 19.00 2,070 18.1 24.50 11.50 18.75 1.33 N.A. N.A.
PULS Pulse Bancorp of S. River NJ 26.12 3,081 80.5 29.75 15.75 24.50 6.61 111.16 65.84
<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
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C>
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* 2.40 2.74 20.49 19.76 254.37
NSSB Norwich Financial Corp. of CT* 1.47 1.36 15.05 13.67 129.02
NTMG Nutmeg FS&LA of CT 0.80 0.57 7.84 7.84 142.10
OHSL OHSL Financial Corp. of OH 1.65 1.60 20.74 20.74 189.96
OCFC Ocean Fin. Corp. of NJ 1.68 1.66 27.63 27.63 182.15
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* 1.44 0.75 8.96 8.59 218.54
PFDC Peoples Bancorp of Auburn IN 1.24 1.24 13.06 13.06 85.67
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 1.20 1.18 11.20 11.20 127.17
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 December 5, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 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 16.25 28.50 0.00 N.A. 56.16
QCBC Quaker City Bancorp of CA 21.25 4,673 99.3 24.56 13.00 20.50 3.66 183.33 39.80
QCSB Queens County Bancorp of NY* 36.19 15,108 546.8 37.75 20.22 35.00 3.40 N.A. 71.92
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 20.00 0.00 N.A. 48.15
RELY Reliance Bancorp, Inc. of NY 35.50 8,712 309.3 35.50 18.50 33.12 7.19 N.A. 82.05
RELI Reliance Bancshares Inc of WI* 9.12 2,472 22.5 9.12 6.50 8.87 2.82 N.A. 35.11
RIVR River Valley Bancorp of IN 18.62 1,190 22.2 18.87 13.25 18.75 -0.69 N.A. 35.42
RVSB Riverview Bancorp of WA 15.50 6,128 95.0 15.50 6.00 15.00 3.33 N.A. 147.21
RSLN Roslyn Bancorp, Inc. of NY* 23.25 43,642 1,014.7 24.31 15.00 21.75 6.90 N.A. N.A.
SCCB S. Carolina Comm. Bnshrs of SC 22.87 699 16.0 25.25 15.00 23.00 -0.57 N.A. 52.47
SBFL SB Fngr Lakes MHC of NY (33.1) 29.50 1,785 17.4 29.50 12.75 29.25 0.85 N.A. 114.55
SFED SFS Bancorp of Schenectady NY 22.62 1,231 27.8 24.50 14.75 22.12 2.26 N.A. 53.36
SGVB SGV Bancorp of W. Covina CA 18.00 2,342 42.2 19.37 10.75 17.12 5.14 N.A. 60.00
SHSB SHS Bancorp, Inc. of PA 16.25 820 13.3 16.37 14.75 16.00 1.56 N.A. N.A.
SISB SIS Bancorp Inc of MA* 38.12 5,581 212.7 38.12 22.37 33.62 13.38 N.A. 66.68
SWCB Sandwich Co-Op. Bank of MA* 45.00 1,919 86.4 45.00 27.25 41.75 7.78 422.04 51.26
SFSL Security First Corp. of OH 20.37 7,591 154.6 21.00 10.17 19.50 4.46 95.87 68.63
SFNB Security First Netwrk Bk of GA(8) 8.00 8,620 69.0 13.87 5.50 8.00 0.00 N.A. -21.95
SMFC Sho-Me Fin. Corp. of MO(8) 47.75 1,499 71.6 49.25 21.62 47.00 1.60 N.A. 119.54
SOBI Sobieski Bancorp of S. Bend IN 19.50 779 15.2 19.75 13.75 19.62 -0.61 N.A. 34.48
SOSA Somerset Savings Bank of MA(8)* 4.75 16,652 79.1 5.94 1.94 4.87 -2.46 -7.23 141.12
SSFC South Street Fin. Corp. of NC* 19.00 4,496 85.4 20.00 13.75 17.50 8.57 N.A. 35.71
SCBS Southern Commun. Bncshrs of AL 18.00 1,137 20.5 18.50 13.00 18.19 -1.04 N.A. 35.85
SMBC Southern Missouri Bncrp of MO 19.12 1,612 30.8 19.50 14.00 19.00 0.63 N.A. 27.47
SWBI Southwest Bancshares of IL 25.62 2,657 68.1 26.00 18.00 25.50 0.47 156.20 40.38
SVRN Sovereign Bancorp of PA 19.31 89,275 1,723.9 19.50 10.62 18.94 1.95 331.99 76.51
STFR St. Francis Cap. Corp. of WI 40.63 5,238 212.8 41.25 26.00 38.25 6.22 N.A. 56.27
SPBC St. Paul Bancorp, Inc. of IL 25.00 34,133 853.3 28.50 14.73 24.50 2.04 124.62 59.54
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 23.12 4,591 106.1 23.12 13.87 21.50 7.53 N.A. 60.89
STSA Sterling Financial Corp. of WA 21.62 7,567 163.6 22.50 13.62 21.12 2.37 137.84 53.12
SFSB SuburbFed Fin. Corp. of IL 34.69 1,263 43.8 34.87 19.00 34.87 -0.52 420.09 82.58
ROSE T R Financial Corp. of NY* 34.00 17,592 598.1 35.00 15.12 32.87 3.44 N.A. 91.55
THRD TF Financial Corp. of PA 28.00 4,088 114.5 28.00 15.87 28.00 0.00 N.A. 72.31
TPNZ Tappan Zee Fin., Inc. of NY 19.75 1,488 29.4 22.62 13.62 19.75 0.00 N.A. 45.01
ESBK The Elmira SB FSB of Elmira NY* 31.25 706 22.1 31.25 16.75 30.00 4.17 117.47 71.23
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 14.00 1,272 17.8 14.50 11.50 13.62 2.79 N.A. 21.74
UFRM United FS&LA of Rocky Mount NC 11.50 3,074 35.4 12.75 7.75 11.50 0.00 253.85 35.29
UBMT United Fin. Corp. of MT 26.00 1,223 31.8 27.00 18.75 27.00 -3.70 147.62 35.06
VABF Va. Beach Fed. Fin. Corp of VA 17.25 4,979 85.9 17.62 9.25 16.62 3.79 267.80 82.73
VFFC Virginia First Savings of VA(8) 25.25 5,814 146.8 25.25 12.37 25.25 0.00 ***.** 98.04
WHGB WHG Bancshares of MD 15.87 1,462 23.2 16.50 12.62 16.25 -2.34 N.A. 20.96
WSFS WSFS Financial Corp. of DE* 20.00 12,442 248.8 20.00 9.87 19.62 1.94 175.86 96.27
WVFC WVS Financial Corp. of PA* 32.00 1,748 55.9 34.00 23.00 31.50 1.59 N.A. 29.98
WRNB Warren Bancorp of Peabody MA* 20.50 3,798 77.9 21.37 14.75 20.62 -0.58 508.31 36.67
WFSL Washington FS&LA of Seattle WA 33.12 47,509 1,573.5 33.31 22.39 32.19 2.89 127.00 37.48
WAMU Washington Mutual Inc. of WA(8)* 71.37 257,176 18,354.7 72.37 40.37 69.12 3.26 284.54 64.79
WYNE Wayne Bancorp of NJ 22.62 2,014 45.6 24.87 14.00 22.75 -0.57 N.A. 48.33
WAYN Wayne S&L Co. MHC of OH (47.8) 33.00 2,255 35.5 33.00 15.33 31.00 6.45 N.A. 102.08
WCFB Wbstr Cty FSB MHC of IA (45.2) 21.25 2,100 20.2 22.00 12.75 20.25 4.94 N.A. 54.55
WBST Webster Financial Corp. of CT 64.00 13,554 867.5 66.00 35.12 62.66 2.14 577.97 74.15
WEFC Wells Fin. Corp. of Wells MN 17.50 1,959 34.3 19.00 12.50 17.75 -1.41 N.A. 33.38
WCBI WestCo Bancorp of IL 26.50 2,474 65.6 29.25 20.00 27.50 -3.64 165.00 23.26
<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 2.24 2.21 24.54 21.71 317.04
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 0.58 0.57 14.20 14.20 83.43
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 December 5, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- % Change From
Shares Market 52 Week (1) -----------------------
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 24.75 5,577 138.0 27.00 17.62 23.56 5.05 N.A. 35.62
WOFC Western Ohio Fin. Corp. of OH 26.87 2,356 63.3 29.25 20.25 25.75 4.35 N.A. 23.54
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 17.75 2,782 49.4 18.00 11.50 17.50 1.43 N.A. 46.45
WFI Winton Financial Corp. of OH 20.00 1,986 39.7 20.50 11.50 20.00 0.00 N.A. 73.91
FFWD Wood Bancorp of OH 19.50 2,119 41.3 19.50 10.50 18.50 5.41 N.A. 72.11
YFCB Yonkers Fin. Corp. of NY 19.00 3,021 57.4 22.00 12.12 18.50 2.70 N.A. 47.63
YFED York Financial Corp. of PA 25.50 8,806 224.6 27.25 12.80 26.50 -3.77 169.84 96.15
<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 0.61 0.71 23.39 21.83 168.69
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 1.14 1.33 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-1B
Weekly Thrift Market Line - Part Two
Prices As Of December 5, 1997
<TABLE>
<CAPTION>
Key Financial Ratios
----------------------------------------------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- ---------------
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5)
--------------------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHCs)
----------------------------------------------
SAIF-Insured Thrifts(300) 13.06 12.82 0.90 8.12 4.69 0.88 7.86
NYSE Traded Companies(10) 7.75 7.54 0.96 14.43 5.97 0.86 13.52
AMEX Traded Companies(16) 14.70 14.59 0.64 3.84 3.08 0.78 4.91
NASDAQ Listed OTC Companies(274) 13.17 12.93 0.91 8.13 4.74 0.89 7.81
California Companies(21) 7.41 7.17 0.64 9.66 5.18 0.57 8.89
Florida Companies(5) 8.55 8.12 1.20 14.66 5.29 0.80 9.61
Mid-Atlantic Companies(59) 11.12 10.79 0.86 8.74 4.89 0.85 8.75
Mid-West Companies(144) 14.26 14.09 0.93 7.47 4.59 0.92 7.30
New England Companies(9) 8.05 7.77 0.62 8.22 4.62 0.66 8.90
North-West Companies(8) 16.32 15.90 0.98 8.53 4.18 0.97 8.03
South-East Companies(41) 15.99 15.80 0.97 7.28 4.02 0.96 6.98
South-West Companies(7) 10.52 10.27 0.87 10.21 6.82 0.88 10.00
Western Companies (Excl CA)(6) 16.12 15.71 1.21 8.16 4.93 1.21 8.18
Thrift Strategy(241) 14.31 14.10 0.92 7.37 4.63 0.92 7.32
Mortgage Banker Strategy(36) 7.47 7.03 0.77 11.19 5.19 0.69 10.10
Real Estate Strategy(9) 7.26 7.08 0.87 12.03 6.19 0.84 11.61
Diversified Strategy(10) 8.42 8.18 1.31 16.29 5.73 1.04 13.51
Retail Banking Strategy(4) 6.62 6.33 -0.24 -0.25 -3.26 -0.29 -1.06
Companies Issuing Dividends(254) 13.33 13.08 0.93 8.24 4.84 0.92 8.01
Companies Without Dividends(46) 11.46 11.33 0.69 7.47 3.79 0.64 6.98
Equity/Assets less than 6%(23) 5.05 4.72 0.68 13.54 5.80 0.64 12.81
Equity/Assets 6-12%(142) 8.77 8.46 0.82 9.71 5.16 0.78 9.30
Equity/Assets greater than 12%(135) 18.43 18.28 1.01 5.73 4.07 1.01 5.68
Converted Last 3 Mths (no MHC)(3) 21.23 21.23 0.91 4.06 3.30 0.91 4.06
Actively Traded Companies(39) 8.95 8.71 1.00 12.43 5.47 0.99 12.41
Market Value Below $20 Million(50) 14.68 14.66 0.84 6.04 4.67 0.85 6.08
Holding Company Structure(266) 13.51 13.29 0.90 7.78 4.58 0.88 7.56
Assets Over $1 Billion(60) 7.90 7.40 0.89 12.03 5.25 0.83 11.32
Assets $500 Million-$1 Billion(49) 10.42 10.08 0.90 9.22 4.77 0.84 8.62
Assets $250-$500 Million(65) 11.78 11.52 0.88 8.15 4.94 0.86 7.95
Assets less than $250 Million(126) 17.11 17.06 0.92 5.88 4.28 0.93 5.92
Goodwill Companies(122) 9.15 8.56 0.85 10.08 5.11 0.81 9.57
Non-Goodwill Companies(178) 15.65 15.65 0.93 6.83 4.41 0.92 6.73
Acquirors of FSLIC Cases(10) 7.27 6.84 0.84 12.30 5.63 0.83 12.07
<CAPTION>
Asset Quality Ratios Pricing Ratios
----------------------- ---------------------------------------
Price/ Price/
NPAs Resvs/ Resvs/ Price/ Price/ Price/ Tang. Core
Financial Institution Assets NPAs Loans Earning Book Assets Book Earnings
--------------------- ------- ------- ------- ------- ------- ------- ------- --------
(%) (%) (%) (X) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHCs)
----------------------------------------------
SAIF-Insured Thrifts(300) 0.79 122.41 0.79 19.29 155.55 18.88 160.46 20.14
NYSE Traded Companies(10) 1.14 75.98 1.19 17.07 204.36 15.54 198.16 17.64
AMEX Traded Companies(16) 0.66 141.41 0.71 21.06 130.64 19.33 132.01 19.97
NASDAQ Listed OTC Companies(274) 0.78 123.34 0.77 19.32 155.28 18.99 160.96 20.25
California Companies(21) 1.72 69.82 1.26 18.83 171.66 11.87 170.47 19.86
Florida Companies(5) 1.62 86.80 0.76 20.50 181.60 20.65 205.62 25.59
Mid-Atlantic Companies(59) 0.80 92.52 0.91 19.31 158.19 16.90 166.22 19.82
Mid-West Companies(144) 0.63 137.51 0.66 19.02 148.31 19.61 151.75 19.78
New England Companies(9) 0.48 156.42 1.04 17.98 167.01 13.10 176.30 20.23
North-West Companies(8) 0.51 205.79 0.59 20.99 163.08 23.20 170.94 21.72
South-East Companies(41) 0.86 138.63 0.81 20.85 166.46 23.95 171.30 22.17
South-West Companies(7) 0.77 66.48 0.72 16.89 134.41 13.45 141.86 16.97
Western Companies (Excl CA)(6) 0.34 130.33 0.71 20.47 159.26 23.56 165.97 20.51
Thrift Strategy(241) 0.72 122.95 0.72 19.71 146.71 19.81 150.79 20.22
Mortgage Banker Strategy(36) 0.99 126.54 1.01 17.94 194.66 14.00 206.74 20.80
Real Estate Strategy(9) 1.23 98.78 1.32 16.83 183.03 13.12 186.27 17.53
Diversified Strategy(10) 1.36 117.46 1.05 17.82 231.74 21.76 240.31 18.21
Retail Banking Strategy(4) 0.73 132.47 0.95 18.04 150.89 9.44 155.91 20.77
Companies Issuing Dividends(254) 0.70 122.79 0.75 19.19 157.10 19.32 162.25 20.12
Companies Without Dividends(46) 1.31 120.15 0.98 19.95 146.19 16.29 149.74 20.23
Equity/Assets less than 6%(23) 1.40 77.64 1.07 17.44 203.31 10.91 215.47 19.67
Equity/Assets 6-12%(142) 0.79 131.78 0.87 18.20 171.88 14.72 179.29 18.95
Equity/Assets greater than 12%(135) 0.67 121.01 0.66 21.06 132.38 24.13 134.19 21.68
Converted Last 3 Mths (no MHC)(3) 0.75 170.52 0.75 27.08 122.27 26.20 122.27 27.08
Actively Traded Companies(39) 0.98 123.47 0.95 18.08 205.18 17.41 211.54 18.73
Market Value Below $20 Million(50) 0.70 109.38 0.63 19.03 123.71 17.76 124.01 20.48
Holding Company Structure(266) 0.78 119.97 0.77 19.52 153.54 19.31 157.91 20.35
Assets Over $1 Billion(60) 0.94 108.45 0.98 18.62 199.20 15.90 213.63 20.12
Assets $500 Million-$1 Billion(49) 0.86 146.87 0.91 18.58 170.86 17.20 177.12 19.68
Assets $250-$500 Million(65) 0.67 136.29 0.73 19.20 154.45 17.41 159.28 19.46
Assets less than $250 Million(126) 0.73 111.53 0.67 20.10 130.67 21.67 131.34 20.74
Goodwill Companies(122) 0.87 108.14 0.86 18.68 176.73 15.71 189.36 19.69
Non-Goodwill Companies(178) 0.73 132.11 0.73 19.75 141.55 20.99 141.55 20.47
Acquirors of FSLIC Cases(10) 1.08 60.52 0.82 18.02 205.47 14.33 203.16 18.59
<CAPTION>
Dividend Data(6)
-----------------------
Ind. Divi-
Div./ dend Payout
Financial Institution Share Yield Ratio(7)
--------------------- ------- ------- -------
($) (%) (%)
<S> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHCs)
----------------------------------------------
SAIF-Insured Thrifts(300) 0.36 1.56 29.83
NYSE Traded Companies(10) 0.44 1.06 16.58
AMEX Traded Companies(16) 0.32 1.84 37.14
NASDAQ Listed OTC Companies(274) 0.36 1.56 30.05
California Companies(21) 0.16 0.47 9.68
Florida Companies(5) 0.20 0.74 14.79
Mid-Atlantic Companies(59) 0.37 1.46 29.11
Mid-West Companies(144) 0.35 1.65 31.23
New England Companies(9) 0.44 1.47 29.55
North-West Companies(8) 0.35 1.31 20.93
South-East Companies(41) 0.45 2.00 41.25
South-West Companies(7) 0.35 1.66 29.63
Western Companies (Excl CA)(6) 0.60 2.55 45.88
Thrift Strategy(241) 0.37 1.68 32.46
Mortgage Banker Strategy(36) 0.31 1.08 19.95
Real Estate Strategy(9) 0.14 0.68 11.55
Diversified Strategy(10) 0.47 1.38 23.67
Retail Banking Strategy(4) 0.14 0.81 22.88
Companies Issuing Dividends(254) 0.42 1.82 35.06
Companies Without Dividends(46) 0.00 0.00 0.00
Equity/Assets less than 6%(23) 0.21 0.66 12.13
Equity/Assets 6-12%(142) 0.37 1.45 26.96
Equity/Assets greater than 12%(135) 0.37 1.81 36.56
Converted Last 3 Mths (no MHC)(3) 0.00 0.00 0.00
Actively Traded Companies(39) 0.49 1.48 26.03
Market Value Below $20 Million(50) 0.33 1.87 34.52
Holding Company Structure(266) 0.37 1.61 30.84
Assets Over $1 Billion(60) 0.41 1.13 21.78
Assets $500 Million-$1 Billion(49) 0.36 1.46 28.27
Assets $250-$500 Million(65) 0.36 1.53 28.11
Assets less than $250 Million(126) 0.34 1.81 35.95
Goodwill Companies(122) 0.38 1.38 26.06
Non-Goodwill Companies(178) 0.34 1.68 32.59
Acquirors of FSLIC Cases(10) 0.42 1.25 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 December 5, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHCs)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(60) 12.66 12.28 1.16 11.60 5.92 1.12 11.03 0.81 141.29 1.43
NYSE Traded Companies(2) 7.56 5.18 0.89 11.54 4.99 0.87 11.31 1.95 40.15 1.04
AMEX Traded Companies(6) 12.87 12.02 0.84 8.02 4.54 0.75 7.01 1.42 104.14 1.60
NASDAQ Listed OTC Companies(52) 12.86 12.61 1.21 11.98 6.11 1.18 11.44 0.72 148.58 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 4.31 0.88 8.70 0.85 136.53 1.35
Mid-West Companies(2) 36.66 35.98 0.82 1.90 1.99 0.95 2.33 0.56 57.14 0.56
New England Companies(33) 9.23 8.94 1.29 14.94 7.39 1.21 13.95 0.85 144.76 1.70
North-West Companies(4) 12.22 11.86 1.22 10.73 5.30 1.19 10.46 0.17 241.66 1.04
South-East Companies(5) 27.37 27.37 1.33 5.08 3.94 1.33 5.05 0.69 145.62 0.74
Thrift Strategy(43) 13.71 13.30 1.17 10.99 5.82 1.13 10.40 0.83 135.14 1.37
Mortgage Banker Strategy(7) 9.02 8.82 0.91 11.72 5.35 0.94 11.57 0.48 171.40 1.35
Real Estate Strategy(5) 10.69 10.66 1.80 17.32 9.20 1.68 16.10 1.35 88.34 1.59
Diversified Strategy(5) 6.94 6.42 1.04 15.06 6.02 1.00 14.56 0.76 196.07 2.08
Companies Issuing Dividends(52) 12.01 11.60 1.08 10.69 5.31 1.04 10.07 0.78 144.21 1.37
Companies Without Dividends(8) 17.04 16.83 1.71 17.66 9.99 1.72 17.46 1.10 120.84 1.80
Equity/Assets less than 6%(5) 5.17 5.05 0.96 17.25 6.32 0.80 14.29 0.92 98.61 1.42
Equity/Assets 6-12%(39) 8.80 8.30 1.23 14.12 7.02 1.18 13.50 0.89 137.29 1.61
Equity/Assets (greater than)12%(16) 22.74 22.54 1.05 4.83 3.49 1.08 4.96 0.60 163.94 1.04
Actively Traded Companies(18) 9.01 8.59 1.22 13.94 6.80 1.15 13.00 0.73 138.50 1.49
Market Value Below $20 Million(4) 23.62 23.28 1.77 14.62 9.95 1.81 14.46 1.49 57.79 1.18
Holding Company Structure(40) 14.47 14.10 1.22 11.19 5.88 1.20 10.77 0.73 151.62 1.48
Assets Over $1 Billion(14) 9.11 8.40 1.05 12.26 5.31 1.04 11.92 0.82 154.48 1.49
Assets $500 Million-$1 Billion(16) 9.41 8.85 1.16 12.86 6.45 1.11 12.02 0.85 146.86 1.55
Assets $250-$500 Million(13) 11.57 11.40 1.07 10.63 5.31 1.02 10.09 0.67 162.47 1.65
Assets less than $250 Million(17) 19.63 19.51 1.31 10.58 6.37 1.29 10.06 0.90 102.63 1.07
Goodwill Companies(30) 9.51 8.73 0.97 11.29 5.60 0.93 10.62 0.86 139.39 1.45
Non-Goodwill Companies(30) 15.82 15.82 1.35 11.90 6.24 1.32 11.43 0.76 143.53 1.41
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHCs)
- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(60) 17.21 183.29 20.46 190.58 18.60 0.48 1.59 29.87
NYSE Traded Companies(2) 20.06 239.99 17.92 263.16 20.46 0.58 1.04 20.95
AMEX Traded Companies(6) 18.08 155.73 19.06 187.91 19.68 0.56 1.72 34.25
NASDAQ Listed OTC Companies(52) 17.00 183.81 20.71 189.32 18.43 0.47 1.59 29.87
California Companies(1) 11.84 146.10 15.67 146.70 11.84 0.00 0.00 0.00
Mid-Atlantic Companies(15) 19.85 192.26 19.55 203.65 20.66 0.50 1.62 33.58
Mid-West Companies(2) 0.00 99.75 36.52 102.65 0.00 0.00 0.00 0.00
New England Companies(33) 15.28 195.19 17.43 202.86 16.69 0.50 1.68 27.81
North-West Companies(4) 19.79 191.10 21.92 195.90 20.47 0.31 1.56 29.11
South-East Companies(5) 23.16 125.94 33.81 125.94 25.04 0.68 1.93 50.08
Thrift Strategy(43) 17.62 176.10 21.29 182.59 19.01 0.50 1.66 32.04
Mortgage Banker Strategy(7) 17.12 207.74 17.65 214.31 19.29 0.36 1.19 23.42
Real Estate Strategy(5) 10.95 173.44 18.53 173.74 11.58 0.26 1.27 12.75
Diversified Strategy(5) 16.72 235.03 16.01 253.20 17.44 0.47 1.43 24.22
Companies Issuing Dividends(52) 18.08 186.64 20.26 194.93 19.58 0.55 1.82 34.51
Companies Without Dividends(8) 10.06 160.81 21.82 161.98 10.13 0.00 0.00 0.00
Equity/Assets less than 6%(5) 16.12 263.83 13.78 269.90 20.45 0.18 0.92 14.12
Equity/Assets 6-12%(39) 16.11 197.29 17.33 207.87 17.01 0.54 1.68 28.55
Equity/Assets (greater than)12%(16) 21.71 133.41 28.78 135.08 22.67 0.43 1.54 36.96
Actively Traded Companies(18) 15.49 194.16 17.01 205.38 16.88 0.58 1.83 28.70
Market Value Below $20 Million(4) 13.14 119.59 27.36 121.04 12.19 0.18 0.98 26.59
Holding Company Structure(40) 17.40 176.31 22.36 186.06 18.76 0.49 1.66 31.68
Assets Over $1 Billion(14) 18.80 224.71 19.69 234.43 20.01 0.54 1.51 29.52
Assets $500 Million-$1 Billion(16) 15.78 186.95 16.99 204.06 17.09 0.54 1.63 26.49
Assets $250-$500 Million(13) 17.72 181.17 19.57 185.08 18.57 0.40 1.69 31.12
Assets less than $250 Million(17) 16.90 148.21 25.24 149.33 18.99 0.43 1.52 32.38
Goodwill Companies(30) 17.42 188.09 16.84 203.13 19.17 0.52 1.53 27.00
Non-Goodwill Companies(30) 16.97 178.50 24.08 178.50 17.97 0.44 1.64 32.74
</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
<TABLE>
<CAPTION>
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of December 5, 1997
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) 12.19 12.08 0.79 7.22 2.71 0.79 7.07 0.48 142.10 0.71
BIF-Insured Thrifts(3) 10.87 10.23 1.05 10.29 3.29 0.87 8.36 1.16 74.62 1.11
NASDAQ Listed OTC Companies(23) 11.96 11.75 0.84 7.76 2.81 0.80 7.30 0.61 129.45 0.78
Florida Companies(3) 9.77 9.75 0.74 7.34 3.10 0.65 6.47 0.41 71.26 0.45
Mid-Atlantic Companies(11) 12.16 11.79 0.81 7.62 2.57 0.79 7.33 0.73 109.28 0.89
Mid-West Companies(7) 13.05 13.04 0.87 7.00 2.90 0.91 7.26 0.46 181.63 0.52
New England Companies(1) 9.02 9.01 1.16 13.69 3.96 0.75 8.84 0.76 146.25 1.66
Thrift Strategy(22) 12.14 11.92 0.82 7.39 2.74 0.81 7.20 0.60 128.33 0.72
Diversified Strategy(1) 9.02 9.01 1.16 13.69 3.96 0.75 8.84 0.76 146.25 1.66
Companies Issuing Dividends(22) 11.85 11.63 0.85 7.82 2.80 0.81 7.35 0.62 128.20 0.74
Companies Without Dividends(1) 13.66 13.66 0.73 6.80 2.95 0.71 6.55 0.45 148.08 1.37
Equity/Assets 6-12%(16) 10.01 9.72 0.80 8.34 2.91 0.73 7.54 0.71 83.86 0.81
Equity/Assets greater than 12%(7) 16.63 16.63 0.93 6.38 2.56 0.98 6.73 0.31 266.20 0.71
Holding Company Structure(2) 11.94 10.03 1.06 9.22 3.65 0.95 8.25 0.91 43.96 0.67
Assets Over $1 Billion(6) 8.77 8.38 0.93 10.57 3.11 0.76 8.59 0.65 86.19 0.94
Assets $500 Million-$1 Billion(2) 11.34 11.34 0.80 7.04 3.08 0.73 6.45 0.41 90.57 0.62
Assets $250-$500 Million(5) 11.63 11.61 0.88 7.97 2.99 0.86 7.73 0.29 188.56 0.43
Assets less than $250 Million(10) 13.55 13.34 0.79 6.52 2.59 0.81 6.68 0.73 133.77 0.84
Goodwill Companies(9) 9.29 8.70 0.91 10.05 3.30 0.78 8.53 0.62 95.63 0.83
Non-Goodwill Companies(14) 13.41 13.41 0.80 6.51 2.54 0.81 6.63 0.60 149.74 0.75
MHC Institutions(23) 11.96 11.75 0.84 7.76 2.81 0.80 7.30 0.61 129.45 0.78
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- -------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(20) 27.01 224.96 28.75 225.25 27.71 0.51 1.92 37.93
BIF-Insured Thrifts(3) 26.32 298.97 32.25 314.22 0.00 0.47 1.42 44.13
NASDAQ Listed OTC Companies(23) 26.55 239.77 29.37 243.05 27.71 0.50 1.83 39.99
Florida Companies(3) 0.00 228.10 22.17 228.85 0.00 0.90 2.80 0.00
Mid-Atlantic Companies(11) 27.38 231.65 30.47 238.15 0.00 0.28 1.24 36.08
Mid-West Companies(7) 27.01 240.00 30.38 240.39 27.71 0.68 2.47 45.34
New England Companies(1) 25.26 318.76 28.76 319.04 0.00 0.76 2.09 52.78
Thrift Strategy(22) 27.19 234.12 29.41 237.62 27.71 0.48 1.82 38.40
Diversified Strategy(1) 25.26 318.76 28.76 319.04 0.00 0.76 2.09 52.78
Companies Issuing Dividends(22) 26.55 243.61 29.62 247.13 27.71 0.53 1.95 44.99
Companies Without Dividends(1) 0.00 185.91 25.40 185.91 0.00 0.00 0.00 0.00
Equity/Assets 6-12%(16) 26.55 251.49 26.76 256.41 27.71 0.48 1.66 44.99
Equity/Assets greater than 12%(7) 0.00 216.33 35.62 216.33 0.00 0.54 2.25 0.00
Holding Company Structure(2) 27.38 239.18 28.56 284.65 0.00 0.28 0.97 26.67
Assets Over $1 Billion(6) 25.26 277.44 28.32 278.33 0.00 0.51 1.82 44.70
Assets $500 Million-$1 Billion(2) 0.00 220.08 24.96 220.08 0.00 0.90 2.59 0.00
Assets $250-$500 Million(5) 27.01 262.21 30.27 262.86 27.71 0.54 1.88 40.68
Assets less than $250 Million(10) 27.38 226.10 30.02 231.15 0.00 0.44 1.74 37.03
Goodwill Companies(9) 26.55 255.10 26.93 267.40 27.71 0.47 1.63 40.29
Non-Goodwill Companies(14) 0.00 234.19 30.70 234.19 0.00 0.52 1.95 39.62
MHC Institutions(23) 26.55 239.77 29.37 243.05 27.71 0.50 1.83 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 December 5, 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 6.26 0.65 16.33 1.86 43.81 1.22
CSA Coast Savings Financial of CA 5.20 5.14 0.62 12.51 4.69 0.66 13.36 1.23 75.26 1.37
CFB Commercial Federal Corp. of NE 6.17 5.52 0.94 16.03 6.00 0.94 16.03 0.88 75.53 0.90
DME Dime Bancorp, Inc. of NY* 5.43 5.17 0.68 12.66 5.00 0.67 12.46 1.02 51.61 0.81
DSL Downey Financial Corp. of CA 7.13 7.04 0.73 9.96 5.18 0.70 9.56 0.95 55.50 0.58
FED FirstFed Fin. Corp. of CA 5.16 5.11 0.56 11.73 5.80 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 5.13 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 6.26 0.86 13.68 1.18 47.94 0.67
GPT GreenPoint Fin. Corp. of NY* 9.69 5.19 1.09 10.41 4.97 1.06 10.17 2.88 28.68 1.26
JSB JSB Financial, Inc. of NY 23.22 23.22 1.93 8.61 6.10 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 6.50 1.66 32.45 0.88 65.33 0.92
WES Westcorp Inc. of Orange CA 9.08 9.06 0.99 10.57 7.77 0.20 2.18 0.76 121.61 1.78
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 16.95 16.95 0.98 5.64 4.08 0.95 5.46 0.50 201.03 1.32
ANE Alliance Bancorp of New Englan* 7.36 7.18 0.79 11.65 6.72 0.73 10.74 1.99 62.80 2.00
BKC American Bank of Waterbury CT* 8.81 8.49 1.30 15.51 6.73 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 2.02 0.99 11.98 0.55 137.87 1.10
CNY Carver Bancorp, Inc. of NY 8.40 8.07 -0.15 -1.74 -1.60 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 3.50 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 NA NA NA
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 4.81 1.05 6.08 0.24 63.36 0.41
KNK Kankakee Bancorp of IL 11.43 10.78 0.89 8.28 6.25 0.87 8.12 1.05 60.22 0.90
KYF Kentucky First Bancorp of KY 16.70 16.70 1.16 6.52 5.43 1.14 6.43 0.09 457.83 0.76
MBB MSB Bancorp of Middletown NY* 7.39 3.63 0.27 3.87 2.60 0.18 2.55 NA NA NA
PDB Piedmont Bancorp of NC 16.43 16.43 -0.24 -1.28 -1.02 0.55 2.91 0.89 75.98 0.81
SSB Scotland Bancorp of NC 22.62 22.62 1.86 5.47 6.36 1.83 5.39 NA NA 0.53
SZB SouthFirst Bancshares of AL 14.00 14.00 -0.03 -0.19 -0.15 0.23 1.62 0.75 39.15 0.40
SRN Southern Banc Company of AL 17.01 16.83 0.14 0.79 0.68 0.50 2.84 NA NA 0.20
SSM Stone Street Bancorp of NC 29.57 29.57 1.54 4.69 3.82 1.54 4.69 0.23 229.34 0.62
TSH Teche Holding Company of LA 13.45 13.45 0.98 7.29 5.46 0.93 6.97 0.28 291.99 0.96
FTF Texarkana Fst. Fin. Corp of AR 15.32 15.32 1.70 10.74 6.31 1.70 10.74 0.23 276.17 0.76
THR Three Rivers Fin. Corp. of MI 13.46 13.41 0.57 4.02 3.04 0.82 5.83 0.87 59.98 0.77
WSB Washington SB, FSB of MD 8.38 8.38 0.42 5.04 3.57 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 6.69 0.36 4.33 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 6.47 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 4.79 0.91 5.35 0.96 75.72 1.07
ABBK Abington Savings Bank of MA* 7.13 6.46 0.85 12.38 6.30 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 4.81 0.87 6.25 0.74 38.01 0.33
AADV Advantage Bancorp of WI(8) 9.54 8.88 1.04 11.55 4.96 0.93 10.36 0.48 117.02 1.02
AFCB Affiliated Comm BC, Inc of MA 9.76 9.71 1.09 11.13 5.65 1.08 11.00 0.34 218.65 1.18
ALBC Albion Banc Corp. of Albion NY 8.57 8.57 0.50 5.53 4.68 0.49 5.45 0.12 321.43 0.53
ABCL Allied Bancorp of IL 9.42 9.30 0.79 8.70 3.87 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 15.97 312.05 12.70 NM 18.68 0.88 1.40 22.34
CSA Coast Savings Financial of CA 21.34 248.91 12.94 251.81 19.98 0.00 0.00 0.00
CFB Commercial Federal Corp. of NE 16.68 244.63 15.08 273.45 16.68 0.33 0.66 10.93
DME Dime Bancorp, Inc. of NY* 20.00 250.48 13.59 263.16 20.31 0.16 0.62 12.31
DSL Downey Financial Corp. of CA 19.30 184.18 13.14 186.57 20.10 0.32 1.11 21.48
FED FirstFed Fin. Corp. of CA 17.24 188.66 9.73 190.46 17.32 0.00 0.00 0.00
GSB Glendale Fed. Bk, FSB of CA 19.49 186.57 10.53 208.44 16.26 0.00 0.00 0.00
GDW Golden West Fin. Corp. of CA 15.98 208.88 13.71 208.88 16.25 0.50 0.53 8.43
GPT GreenPoint Fin. Corp. of NY* 20.12 229.50 22.24 NM 20.61 1.00 1.47 29.59
JSB JSB Financial, Inc. of NY 16.39 135.59 31.48 135.59 18.44 1.40 2.88 47.14
NYB New York Bancorp, Inc. of NY 15.39 NM 24.28 NM 15.02 0.60 1.62 25.00
WES Westcorp Inc. of Orange CA 12.88 129.77 11.79 130.07 NM 0.40 2.37 30.53
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 24.48 137.92 23.38 137.92 25.27 0.36 1.52 37.11
ANE Alliance Bancorp of New Englan* 14.89 156.35 11.51 160.30 16.15 0.20 1.17 17.39
BKC American Bank of Waterbury CT* 14.87 209.30 18.44 217.25 17.62 1.44 2.96 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 280.49 24.43 290.99 NM 0.88 3.06 NM
CNY Carver Bancorp, Inc. of NY NM 107.69 9.05 112.07 NM 0.00 0.00 NM
CBK Citizens First Fin.Corp. of IL 28.57 121.70 16.73 121.70 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 144.63 17.65 144.63 NM 0.00 0.00 0.00
GAF GA Financial Corp. of PA 20.81 132.88 19.44 134.16 21.49 0.48 2.45 51.06
KNK Kankakee Bancorp of IL 15.99 126.17 14.42 133.83 16.29 0.48 1.40 22.33
KYF Kentucky First Bancorp of KY 18.42 127.28 21.26 127.28 18.66 0.50 3.48 64.10
MBB MSB Bancorp of Middletown NY* NM 143.59 10.61 292.58 NM 0.60 1.98 NM
PDB Piedmont Bancorp of NC NM 142.20 23.37 142.20 NM 0.40 3.72 NM
SSB Scotland Bancorp of NC 15.71 136.27 30.82 136.27 15.95 0.30 2.89 45.45
SZB SouthFirst Bancshares of AL NM 124.53 17.43 124.53 NM 0.50 2.50 NM
SRN Southern Banc Company of AL NM 121.33 20.64 122.59 NM 0.35 1.98 NM
SSM Stone Street Bancorp of NC 26.16 137.87 40.76 137.87 26.16 0.45 2.00 52.33
TSH Teche Holding Company of LA 18.30 129.66 17.44 129.66 19.16 0.50 2.44 44.64
FTF Texarkana Fst. Fin. Corp of AR 15.84 166.45 25.50 166.45 15.84 0.56 2.20 34.78
THR Three Rivers Fin. Corp. of MI NM 131.08 17.64 131.59 22.63 0.40 1.96 64.52
WSB Washington SB, FSB of MD 28.00 135.66 11.36 135.66 20.00 0.10 1.43 40.00
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 14.95 126.44 10.94 128.93 NM 0.28 1.02 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 15.46 167.44 15.48 190.09 15.57 0.72 1.61 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 20.89 129.81 20.21 129.81 22.28 0.40 2.99 62.50
ABBK Abington Savings Bank of MA* 15.88 187.18 13.34 206.53 17.83 0.40 1.10 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 20.78 114.85 17.69 114.85 21.30 0.32 1.86 38.55
AADV Advantage Bancorp of WI(8) 20.15 217.39 20.74 233.66 22.47 0.40 0.60 12.12
AFCB Affiliated Comm BC, Inc of MA 17.70 185.62 18.12 186.72 17.90 0.60 1.90 33.71
ALBC Albion Banc Corp. of Albion NY 21.37 115.42 9.89 115.42 21.71 0.32 1.14 24.43
ABCL Allied Bancorp of IL 25.82 170.00 16.01 172.14 23.19 0.44 1.61 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 December 5, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ----------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AHCI Ambanc Holding Co., Inc. of NY* 12.94 12.94 -0.59 -4.24 -3.36 -0.61 -4.43 0.73 107.99 1.48
ASBI Ameriana Bancorp of IN 11.21 11.21 0.92 8.35 5.55 0.84 7.61 0.52 53.03 0.37
AFFFZ America First Fin. Fund of CA(8) 8.37 8.28 1.99 24.83 14.48 2.01 25.10 0.35 94.92 0.48
ABCW Anchor Bancorp Wisconsin of WI 6.40 6.29 0.99 16.08 6.26 0.93 15.00 0.98 115.36 1.44
ANDB Andover Bancorp, Inc. of MA* 8.12 8.12 1.05 13.16 6.44 1.03 12.85 0.91 107.23 1.33
ASFC Astoria Financial Corp. of NY 7.72 6.53 0.81 10.37 5.19 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 13.01 4.62 1.24 11.85 1.04 118.74 2.00
BPLS Bank Plus Corp. of CA 4.52 4.51 0.36 7.51 4.95 0.30 6.24 2.21 67.35 2.02
BWFC Bank West Fin. Corp. of MI 14.15 14.15 1.03 6.73 3.42 0.56 3.65 0.21 69.91 0.21
BANC BankAtlantic Bancorp of FL 5.50 4.55 1.04 18.10 8.56 0.54 9.50 0.92 108.06 1.42
BKUNA BankUnited SA of FL 3.12 2.46 0.31 7.68 3.83 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 3.93 0.62 10.22 0.63 195.87 1.62
FSNJ Bayonne Banchsares of NJ 15.62 15.62 0.37 3.86 2.02 0.52 5.41 1.12 47.67 1.38
BFSB Bedford Bancshares of VA 14.10 14.10 1.20 8.41 4.79 1.19 8.35 0.52 92.88 0.58
BFFC Big Foot Fin. Corp. of IL 17.48 17.48 0.50 3.28 2.23 0.50 3.28 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 9.84 9.84 0.26 2.49 2.87 0.33 3.14 1.62 52.84 1.02
CBES CBES Bancorp of MO 16.92 16.92 1.23 6.90 5.52 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 6.06 0.58 11.04 0.97 76.38 1.07
CFSB CFSB Bancorp of Lansing MI 7.71 7.71 1.20 15.75 5.68 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 2.24 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 1.23 0.52 1.98 0.56 57.14 0.57
CBCI Calumet Bancorp of Chicago IL 16.21 16.21 1.45 9.07 6.98 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 21.02 21.02 1.26 5.47 4.72 1.26 5.47 0.55 139.04 0.91
CAPS Capital Savings Bancorp of MO(8) 9.14 9.14 0.95 10.96 4.95 0.94 10.78 0.37 84.67 0.39
CFNC Carolina Fincorp of NC* 22.59 22.59 1.17 5.03 3.97 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 4.60 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 5.52 0.88 8.79 0.53 151.19 1.15
CENB Century Bancshares of NC* 30.29 30.29 1.69 5.60 5.05 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 4.54 1.59 10.49 0.56 104.84 0.79
COFI Charter One Financial of OH 7.05 6.48 1.26 18.64 5.69 1.23 18.23 0.27 159.82 0.68
CVAL Chester Valley Bancorp of PA 8.66 8.66 0.98 11.29 4.99 0.93 10.79 0.53 173.12 1.12
CTZN CitFed Bancorp of Dayton OH 6.27 5.70 0.86 13.53 5.50 0.86 13.53 0.40 136.26 0.86
CLAS Classic Bancshares of KY 14.90 12.61 0.56 3.44 3.12 0.75 4.66 0.67 93.71 0.94
CMSB Cmnwealth Bancorp of PA 9.28 7.24 0.75 7.49 4.84 0.63 6.32 0.47 85.46 0.71
CBSA Coastal Bancorp of Houston TX 3.47 2.92 0.41 12.41 8.28 0.43 12.77 0.62 38.71 0.54
CFCP Coastal Fin. Corp. of SC 6.56 6.56 1.21 19.41 5.49 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 3.08 0.73 6.45 0.41 90.57 0.62
CFTP Community Fed. Bancorp of MS 26.73 26.73 1.47 4.77 3.26 1.45 4.70 0.50 54.53 0.46
CFFC Community Fin. Corp. of VA 13.21 13.21 1.12 8.18 5.66 1.13 8.23 0.56 105.58 0.67
CFBC Community First Bnkg Co. of GA 17.80 17.57 0.74 4.46 3.27 0.74 4.46 2.19 25.76 0.75
CIBI Community Inv. Bancorp of OH 11.75 11.75 0.97 8.31 6.22 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 4.00 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 6.37 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 4.31 1.06 6.72 0.60 135.05 1.39
DIBK Dime Financial Corp. of CT* 8.14 7.91 1.94 23.83 10.17 1.94 23.75 0.37 353.73 3.21
EGLB Eagle BancGroup of IL 11.85 11.85 0.32 2.61 2.30 0.25 2.04 1.48 35.66 0.73
EBSI Eagle Bancshares of Tucker GA 8.17 8.17 0.65 7.67 4.63 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) ($) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AHCI Ambanc Holding Co., Inc. of NY* NM 132.94 17.20 132.94 NM 0.20 1.03 NM
ASBI Ameriana Bancorp of IN 18.03 149.45 16.75 149.45 19.78 0.64 3.14 56.64
AFFFZ America First Fin. Fund of CA(8) 6.91 161.24 13.49 162.96 6.83 1.60 3.17 21.89
ABCW Anchor Bancorp Wisconsin of WI 15.97 241.46 15.46 245.73 17.11 0.32 0.96 15.31
ANDB Andover Bancorp, Inc. of MA* 15.54 193.07 15.68 193.07 15.92 0.76 1.95 30.28
ASFC Astoria Financial Corp. of NY 19.26 193.15 14.90 228.37 20.36 0.60 1.05 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* 21.65 270.65 29.10 270.65 23.77 0.50 2.06 44.64
BPLS Bank Plus Corp. of CA 20.18 143.23 6.47 143.39 24.30 0.00 0.00 0.00
BWFC Bank West Fin. Corp. of MI 29.24 194.48 27.52 194.48 NM 0.21 1.22 35.59
BANC BankAtlantic Bancorp of FL 11.68 202.70 11.16 245.27 22.27 0.13 0.91 10.66
BKUNA BankUnited SA of FL 26.14 182.22 5.69 231.65 29.11 0.00 0.00 0.00
BVCC Bay View Capital Corp. of CA 25.44 243.89 14.19 292.00 22.72 0.32 0.89 22.54
FSNJ Bayonne Banchsares of NJ NM 116.92 18.26 116.92 NM 0.17 1.37 68.00
BFSB Bedford Bancshares of VA 20.86 168.80 23.80 168.80 21.01 0.56 1.93 40.29
BFFC Big Foot Fin. Corp. of IL NM 126.05 22.04 126.05 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 89.71 8.83 89.71 27.60 0.20 1.51 52.63
CBES CBES Bancorp of MO 18.11 121.42 20.54 121.42 19.97 0.40 1.87 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 16.49 184.80 10.28 185.06 18.32 0.36 0.91 14.94
CFSB CFSB Bancorp of Lansing MI 17.61 267.61 20.63 267.61 18.75 0.68 1.95 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 146.44 35.64 146.44 NM 0.24 1.14 51.06
CSBF CSB Financial Group Inc of IL* NM 100.15 25.07 105.95 NM 0.00 0.00 0.00
CBCI Calumet Bancorp of Chicago IL 14.32 129.95 21.07 129.95 14.57 0.00 0.00 0.00
CAFI Camco Fin. Corp. of OH 13.87 160.21 15.36 173.04 16.44 0.54 2.25 31.21
CMRN Cameron Fin. Corp. of MO 21.17 119.05 25.02 119.05 21.17 0.28 1.35 28.57
CAPS Capital Savings Bancorp of MO(8) 20.21 207.26 18.94 207.26 20.55 0.24 0.99 20.00
CFNC Carolina Fincorp of NC* 25.17 126.58 28.59 126.58 25.91 0.24 1.36 34.29
CASB Cascade SB of Everett WA(8) 19.62 152.51 10.13 152.51 19.62 0.00 0.00 0.00
CATB Catskill Fin. Corp. of NY* 21.73 118.43 29.35 118.43 21.47 0.32 1.75 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* 18.10 150.86 14.98 168.59 17.86 0.32 1.22 22.07
CENB Century Bancshares of NC* 19.81 110.49 33.47 110.49 19.76 2.00 2.41 47.73
CBSB Charter Financial Inc. of IL(8) 22.02 168.64 24.40 190.60 15.73 0.32 1.38 30.48
COFI Charter One Financial of OH 17.58 295.89 20.87 322.26 17.98 1.00 1.56 27.47
CVAL Chester Valley Bancorp of PA 20.04 213.73 18.51 213.73 20.96 0.44 1.61 32.35
CTZN CitFed Bancorp of Dayton OH 18.18 226.13 14.19 248.79 18.18 0.24 0.67 12.12
CLAS Classic Bancshares of KY NM 109.65 16.34 129.61 23.72 0.28 1.71 54.90
CMSB Cmnwealth Bancorp of PA 20.65 161.75 15.02 207.49 24.49 0.28 1.33 27.45
CBSA Coastal Bancorp of Houston TX 12.08 142.44 4.94 169.39 11.74 0.48 1.66 20.00
CFCP Coastal Fin. Corp. of SC 18.20 326.40 21.40 326.40 21.06 0.36 1.58 28.80
CMSV Commty. Svgs, MHC of FL (48.5) NM 220.08 24.96 220.08 NM 0.90 2.59 NM
CFTP Community Fed. Bancorp of MS NM 162.39 43.41 162.39 NM 0.30 1.48 45.45
CFFC Community Fin. Corp. of VA 17.67 139.55 18.43 139.55 17.55 0.56 2.11 37.33
CFBC Community First Bnkg Co. of GA NM 135.74 24.17 137.58 NM 0.60 1.52 46.51
CIBI Community Inv. Bancorp of OH 16.09 134.30 15.78 134.30 16.09 0.32 1.97 31.68
COOP Cooperative Bk.for Svgs. of NC 25.00 196.87 15.14 196.87 25.00 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 15.70 235.87 12.39 238.43 17.01 0.20 0.76 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 23.18 172.18 23.24 199.84 23.83 0.24 0.94 21.82
DIBK Dime Financial Corp. of CT* 9.84 206.33 16.80 212.46 9.87 0.44 1.47 14.43
EGLB Eagle BancGroup of IL NM 117.44 13.92 117.44 NM 0.00 0.00 0.00
EBSI Eagle Bancshares of Tucker GA 21.59 150.91 12.34 150.91 21.35 0.60 3.16 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 December 5, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 5.00 0.92 13.24 0.17 416.26 0.97
EFBC Empire Federal Bancorp of MT 34.89 34.89 0.83 2.37 2.15 1.09 3.12 0.05 357.14 0.45
EFBI Enterprise Fed. Bancorp of OH 11.43 11.42 0.92 7.43 4.33 0.77 6.18 0.07 297.93 0.30
EQSB Equitable FSB of Wheaton MD 5.04 5.04 0.46 9.09 4.81 0.74 14.50 0.49 36.72 0.26
FCBF FCB Fin. Corp. of Neenah WI 14.64 14.64 0.74 4.48 2.18 0.57 3.45 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 6.44 0.95 3.85 NA NA 0.46
FFLC FFLC Bancorp of Leesburg FL 13.73 13.73 1.00 6.81 4.07 0.94 6.44 0.18 226.46 0.52
FFFC FFVA Financial Corp. of VA 13.31 13.04 1.40 10.28 5.04 1.35 9.86 0.16 361.92 0.99
FFWC FFW Corporation of Wabash IN 9.70 8.81 1.04 10.57 6.00 1.02 10.35 0.18 217.37 0.60
FFYF FFY Financial Corp. of OH 13.70 13.70 1.29 8.85 6.21 1.27 8.70 0.66 72.24 0.63
FMCO FMS Financial Corp. of NJ 6.49 6.39 1.02 15.82 7.15 1.01 15.69 1.15 43.53 0.94
FFHH FSF Financial Corp. of MN 11.17 11.17 0.85 7.05 5.27 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 5.33 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 6.79 6.79 0.80 11.51 6.36 0.78 11.25 0.30 171.64 1.04
FFFL Fidelity FSB, MHC of FL (47.7) 8.21 8.15 0.67 7.64 3.11 0.57 6.49 0.40 51.95 0.28
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 4.94 1.02 7.37 0.29 106.32 0.37
FIBC Financial Bancorp, Inc. of NY 9.05 9.00 0.91 9.52 5.90 0.97 10.18 1.75 27.02 0.91
FBSI First Bancshares of MO 13.92 13.92 1.19 8.36 6.86 1.08 7.54 0.67 45.57 0.36
FBBC First Bell Bancorp of PA 10.53 10.53 1.15 9.44 6.51 1.12 9.20 0.09 116.26 0.13
FBER First Bergen Bancorp of NJ 13.65 13.65 0.77 4.97 3.76 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 1.76 0.52 5.53 NA NA 0.83
FSTC First Citizens Corp of GA 10.12 7.98 1.96 20.65 7.42 1.75 18.46 NA NA 1.43
FCME First Coastal Corp. of ME* 9.75 9.75 4.17 48.29 30.92 4.01 46.37 1.65 108.25 2.49
FFBA First Colorado Bancorp of Co 13.08 12.91 1.21 8.92 4.35 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 3.88 1.00 4.67 0.45 99.07 0.59
FESX First Essex Bancorp of MA* 7.40 6.48 0.90 12.27 6.45 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 5.12 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 3.89 0.63 5.70 0.32 120.28 0.79
FFBH First Fed. Bancshares of AR 14.89 14.89 1.06 6.78 5.14 1.01 6.48 0.96 23.38 0.29
FTFC First Fed. Capital Corp. of WI 6.73 6.35 1.08 16.76 5.85 0.89 13.87 0.13 395.30 0.64
FFKY First Fed. Fin. Corp. of KY 13.70 12.93 1.64 11.95 6.53 1.62 11.87 0.49 94.29 0.53
FFBZ First Federal Bancorp of OH 7.67 7.66 1.01 13.33 6.37 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 4.63 0.85 13.86 1.49 45.68 0.82
FFBI First Financial Bancorp of IL 8.92 8.92 -0.07 -0.84 -0.74 0.43 5.28 0.33 178.83 0.87
FFHS First Franklin Corp. of OH 9.02 8.97 0.56 6.21 3.96 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 3.88 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 5.89 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 5.99 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 4.29 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 6.35 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 4.71 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 2.65 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 5.68 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) ($) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EGFC Eagle Financial Corp. of CT(8) NM 226.15 15.60 284.20 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)* 20.00 232.39 16.23 232.39 18.82 0.28 0.88 17.50
EFBC Empire Federal Bancorp of MT NM 110.50 38.56 110.50 NM 0.30 1.84 NM
EFBI Enterprise Fed. Bancorp of OH 23.11 173.83 19.87 173.94 27.78 1.00 3.64 NM
EQSB Equitable FSB of Wheaton MD 20.81 177.44 8.94 177.44 13.04 0.00 0.00 0.00
FCBF FCB Fin. Corp. of Neenah WI NM 141.84 20.76 141.84 NM 0.80 2.86 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 15.52 121.13 29.48 121.13 NM 0.30 1.67 25.86
FFLC FFLC Bancorp of Leesburg FL 24.60 168.39 23.13 168.39 25.98 0.29 1.25 30.85
FFFC FFVA Financial Corp. of VA 19.85 202.10 26.90 206.30 20.71 0.48 1.42 28.24
FFWC FFW Corporation of Wabash IN 16.67 164.43 15.96 181.13 17.02 0.72 1.78 29.63
FFYF FFY Financial Corp. of OH 16.11 148.37 20.32 148.37 16.37 0.80 2.66 42.78
FMCO FMS Financial Corp. of NJ 14.00 207.28 13.45 210.34 14.12 0.28 0.85 11.97
FFHH FSF Financial Corp. of MN 18.99 137.06 15.32 137.06 19.17 0.50 2.53 48.08
FOBC Fed One Bancorp of Wheeling WV 18.75 153.53 17.16 160.68 18.75 0.62 2.40 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 15.71 165.26 11.23 165.26 16.08 0.36 1.31 20.57
FFFL Fidelity FSB, MHC of FL (47.7) NM 236.13 19.38 237.63 NM 0.90 3.01 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 20.22 124.55 16.22 140.37 18.08 0.28 1.82 36.84
FIBC Financial Bancorp, Inc. of NY 16.95 157.54 14.25 158.35 15.87 0.40 1.62 27.40
FBSI First Bancshares of MO 14.58 122.38 17.04 122.38 16.16 0.20 0.79 11.49
FBBC First Bell Bancorp of PA 15.36 164.43 17.32 164.43 15.76 0.40 2.21 33.90
FBER First Bergen Bancorp of NJ 26.58 139.06 18.99 139.06 26.58 0.20 1.06 28.17
SKBO First Carnegie,MHC of PA(45.0) NM 178.23 29.31 178.23 NM 0.30 1.60 NM
FSTC First Citizens Corp of GA 13.48 235.13 23.79 298.17 15.08 0.29 0.99 13.36
FCME First Coastal Corp. of ME* 3.23 137.15 13.37 137.15 3.37 0.00 0.00 0.00
FFBA First Colorado Bancorp of Co 22.97 212.50 27.79 215.19 23.18 0.48 1.88 43.24
FDEF First Defiance Fin.Corp. of OH 25.79 128.87 25.34 128.87 26.64 0.32 1.97 50.79
FESX First Essex Bancorp of MA* 15.50 173.28 12.83 198.08 18.09 0.48 2.33 36.09
FFES First FS&LA of E. Hartford CT 19.53 153.69 10.19 153.69 17.20 0.60 1.60 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 25.71 152.20 16.30 152.20 26.21 0.00 0.00 0.00
FFBH First Fed. Bancshares of AR 19.47 132.21 19.69 132.21 20.37 0.24 1.09 21.24
FTFC First Fed. Capital Corp. of WI 17.08 268.32 18.07 284.72 20.64 0.48 1.56 26.67
FFKY First Fed. Fin. Corp. of KY 15.32 177.54 24.32 188.14 15.43 0.56 2.50 38.36
FFBZ First Federal Bancorp of OH 15.70 197.78 15.17 197.98 15.57 0.24 1.22 19.20
FFCH First Fin. Holdings Inc. of SC 21.62 291.79 17.84 291.79 22.22 0.84 1.75 37.84
FFBI First Financial Bancorp of IL NM 111.88 9.98 111.88 21.54 0.00 0.00 NM
FFHS First Franklin Corp. of OH 25.24 151.52 13.66 152.39 21.37 0.40 1.51 38.10
FGHC First Georgia Hold. Corp of GA 25.78 195.96 16.10 213.73 NM 0.05 0.61 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 16.98 194.62 18.77 196.99 20.68 0.48 1.75 29.63
FKFS First Keystone Fin. Corp of PA 16.68 177.93 11.80 177.93 18.21 0.20 0.56 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 23.30 250.00 18.43 277.28 28.47 0.44 1.43 33.33
CASH First Midwest Fin. Corp. of IA 15.74 131.91 14.18 148.50 16.47 0.48 2.26 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 21.21 169.90 18.85 169.90 22.22 0.32 2.29 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 347.05 32.96 NM NM 0.48 1.12 42.11
SOPN First SB, SSB, Moore Co. of NC 17.61 126.15 29.03 126.15 17.61 0.88 3.78 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 December 5, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FWWB First Savings Bancorp of WA* 14.23 13.15 1.06 6.79 3.81 1.01 6.44 0.27 241.66 0.97
FSFF First SecurityFed Fin of IL 27.03 27.03 1.29 4.77 3.70 1.29 4.77 NA NA 0.98
SHEN First Shenango Bancorp of PA 11.62 11.62 1.17 10.45 6.85 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 1.82 0.18 1.47 1.70 33.83 0.76
FFDB FirstFed Bancorp of AL 9.63 8.81 1.03 10.63 7.47 1.01 10.36 1.31 33.87 0.63
FSPT FirstSpartan Fin. Corp. of SC 26.79 26.79 0.96 6.28 3.30 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 8.68 0.70 11.39 3.04 8.02 0.27
FFIC Flushing Fin. Corp. of NY* 14.20 13.64 0.95 5.92 4.26 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
FKKYD 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 3.54 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 3.23 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 5.53 1.53 15.94 0.25 243.94 0.84
GFCO Glenway Financial Corp. of OH 9.46 9.35 0.79 8.36 5.35 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 4.35 0.76 7.96 3.11 16.32 0.74
GSBC Great Southern Bancorp of MO 8.65 8.65 1.84 20.39 6.61 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 2.27 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 3.56 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 2.44 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 0.29 0.17 2.17 1.65 24.89 0.81
HFFC HF Financial Corp. of SD 9.42 9.42 1.02 11.06 7.74 0.94 10.15 0.48 173.70 1.08
HFNC HFNC Financial Corp. of NC 18.80 18.80 1.23 5.43 4.20 1.05 4.64 0.92 92.55 1.06
HMNF HMN Financial, Inc. of MN 14.88 14.88 1.00 6.87 5.06 0.85 5.79 0.10 465.21 0.71
HALL Hallmark Capital Corp. of WI 7.30 7.30 0.65 9.11 6.07 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 4.09 1.21 14.58 0.43 238.88 1.38
HRBF Harbor Federal Bancorp of MD 13.06 13.06 0.71 5.50 3.64 0.71 5.50 0.10 189.19 0.28
HFSA Hardin Bancorp of Hardin MO 11.53 11.53 0.79 5.83 5.26 0.74 5.52 0.09 195.33 0.36
HARL Harleysville SA of PA 6.62 6.62 1.03 16.07 7.19 1.03 16.14 0.02 NA 0.78
HFGI Harrington Fin. Group of IN 4.84 4.84 0.43 8.95 5.53 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 2.67 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 3.08 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 11.28 5.89 0.68 11.37 0.76 85.85 1.12
HTHR Hawthorne Fin. Corp. of CA 4.85 4.85 0.86 19.13 10.25 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 1.64 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 7.10 1.25 13.03 0.89 78.90 0.91
HBEI Home Bancorp of Elgin IL 27.56 27.56 0.83 3.02 2.32 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 2.65 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 5.30 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 6.57 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 7.41 1.66 15.62 0.13 NA 1.54
HMCI Homecorp, Inc. of Rockford IL(8) 6.83 6.83 0.51 7.94 3.62 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 6.70 0.65 6.33 0.94 44.31 0.67
HRZB Horizon Financial Corp. of WA* 15.64 15.64 1.58 10.12 6.23 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) ($) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FWWB First Savings Bancorp of WA* 26.26 174.26 24.80 188.68 27.66 0.28 1.08 28.28
FSFF First SecurityFed Fin of IL 27.05 128.91 34.85 128.91 27.05 0.00 0.00 0.00
SHEN First Shenango Bancorp of PA 14.60 146.34 17.01 146.34 14.67 0.60 1.82 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 123.01 20.21 123.01 NM 0.28 1.55 NM
FFDB FirstFed Bancorp of AL 13.38 144.08 13.88 157.51 13.73 0.50 2.35 31.45
FSPT FirstSpartan Fin. Corp. of SC NM 129.83 34.78 129.83 NM 0.60 1.58 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 11.52 215.07 12.85 223.89 23.04 0.00 0.00 0.00
FFIC Flushing Fin. Corp. of NY* 23.48 136.12 19.33 141.77 22.36 0.24 1.03 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
FKKYD Frankfort First Bancorp of KY NM 135.23 22.77 135.23 NM 0.36 3.89 NM
FTNB Fulton Bancorp of MO 28.25 138.58 34.18 138.58 NM 0.20 0.97 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 116.98 31.66 116.98 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 18.08 262.31 26.20 268.70 17.65 0.48 2.18 39.34
GFCO Glenway Financial Corp. of OH 18.69 152.01 14.38 153.78 19.27 0.40 2.16 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) 22.98 239.85 24.15 249.93 NM 0.60 1.19 27.27
GSBC Great Southern Bancorp of MO 15.13 304.88 26.38 304.88 16.05 0.44 1.85 28.03
GDVS Greater DV SB,MHC of PA (19.9)* NM 338.98 39.45 338.98 NM 0.36 1.20 52.94
GSFC Green Street Fin. Corp. of NC 28.08 124.57 44.07 124.57 28.08 0.44 2.41 67.69
GFED Guarnty FS&LA,MHC of MO (31.0)(8) NM 289.61 37.73 289.61 NM 0.44 1.73 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 128.21 10.17 153.85 NM 0.00 0.00 0.00
HFFC HF Financial Corp. of SD 12.93 137.09 12.92 137.09 14.10 0.42 1.58 20.49
HFNC HFNC Financial Corp. of NC 23.79 155.59 29.25 155.59 27.83 0.28 1.90 45.16
HMNF HMN Financial, Inc. of MN 19.78 131.91 19.62 131.91 23.45 0.00 0.00 0.00
HALL Hallmark Capital Corp. of WI 16.48 141.64 10.34 141.64 16.85 0.00 0.00 0.00
HARB Harbor FSB, MHC of FL (46.6)(8) 24.44 336.41 28.80 347.48 24.62 1.40 2.14 52.24
HRBF Harbor Federal Bancorp of MD 27.47 149.25 19.49 149.25 27.47 0.48 1.92 52.75
HFSA Hardin Bancorp of Hardin MO 19.01 113.39 13.08 113.39 20.08 0.48 2.69 51.06
HARL Harleysville SA of PA 13.90 207.12 13.72 207.12 13.83 0.44 1.54 21.46
HFGI Harrington Fin. Group of IN 18.09 156.59 7.58 156.59 21.64 0.12 0.99 17.91
HARS Harris SB, MHC of PA (24.3) NM NM 31.21 NM NM 0.22 1.13 42.31
HFFB Harrodsburg 1st Fin Bcrp of KY NM 123.33 33.22 123.33 24.48 0.40 2.24 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 16.98 177.57 10.65 178.14 16.86 0.30 1.35 22.90
HTHR Hawthorne Fin. Corp. of CA 9.76 165.02 8.01 165.02 10.14 0.00 0.00 0.00
HMLK Hemlock Fed. Fin. Corp. of IL NM 113.68 21.95 113.68 28.07 0.24 1.40 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* 14.08 173.00 16.79 173.00 14.08 0.48 1.72 24.24
HBEI Home Bancorp of Elgin IL NM 134.35 37.03 134.35 NM 0.40 2.16 NM
HBFW Home Bancorp of Fort Wayne IN NM 153.92 20.45 153.92 23.58 0.20 0.74 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 18.88 114.35 22.42 114.35 18.68 0.36 2.07 39.13
HOMF Home Fed Bancorp of Seymour IN 15.23 224.96 19.48 231.85 16.77 0.35 1.32 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* 13.50 202.75 21.64 202.75 13.57 0.80 3.39 45.71
HMCI Homecorp, Inc. of Rockford IL(8) 27.65 209.41 14.30 209.41 NM 0.00 0.00 0.00
HZFS Horizon Fin'l. Services of IA 14.94 111.98 11.15 111.98 18.55 0.18 1.57 23.38
HRZB Horizon Financial Corp. of WA* 16.06 156.67 24.50 156.67 16.36 0.44 2.51 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 December 5, 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 3.14 0.78 4.41 0.13 110.72 0.50
ISBF ISB Financial Corp. of LA 12.05 10.31 0.75 5.87 3.51 0.74 5.81 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 4.91 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 5.37 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 6.32 1.03 15.57 0.58 73.44 0.77
IPSW Ipswich SB of Ipswich MA* 5.61 5.61 1.20 20.28 6.64 0.95 16.13 0.84 97.31 1.09
JXVL Jacksonville Bancorp of TX 14.92 14.92 1.02 6.45 4.71 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 3.05 0.65 6.02 0.79 56.34 0.56
JSBA Jefferson Svgs Bancorp of MO 8.54 6.62 0.38 4.79 2.16 0.77 9.84 0.67 101.16 0.89
JOAC Joachim Bancorp of MO 28.14 28.14 0.80 2.74 2.60 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 6.55 0.99 13.99 1.59 52.04 1.07
KFBI Klamath First Bancorp of OR 14.74 13.40 1.14 5.81 3.81 1.14 5.81 0.03 510.24 0.23
LSBI LSB Fin. Corp. of Lafayette IN 8.64 8.64 0.78 8.67 5.80 0.69 7.65 1.05 69.89 0.83
LVSB Lakeview SB of Paterson NJ 12.22 10.46 1.26 12.10 5.36 0.92 8.76 1.13 59.43 1.50
LARK Landmark Bancshares of KS 13.79 13.79 0.88 5.93 4.90 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 9.79 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 2.81 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 3.19 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 3.84 0.85 8.05 0.41 141.46 1.32
LFBI Little Falls Bancorp of NJ 11.68 10.77 0.57 4.32 3.24 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 19.91 19.91 1.02 5.01 4.76 0.96 4.68 NA NA 0.63
LISB Long Island Bancorp, Inc of NY 9.21 9.13 0.86 9.35 4.25 0.73 7.90 0.91 63.07 0.92
MAFB MAF Bancorp of IL 7.79 6.84 1.16 14.90 7.29 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 4.03 0.50 7.10 0.43 178.98 1.71
MSBF MSB Financial Corp. of MI 16.54 16.54 1.49 8.38 4.53 1.44 8.09 1.02 40.20 0.45
MARN Marion Capital Holdings of IN 21.95 21.95 1.69 7.48 6.19 1.67 7.39 1.08 104.36 1.32
MRKF Market Fin. Corp. of OH 35.44 35.44 0.98 3.41 2.46 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 4.08 0.89 10.73 0.47 85.54 0.46
MASB MassBank Corp. of Reading MA* 10.78 10.62 1.10 10.61 6.11 1.03 9.96 0.21 113.84 0.84
MFLR Mayflower Co-Op. Bank of MA* 9.64 9.48 1.05 10.93 5.90 1.00 10.33 0.57 154.47 1.56
MECH Mechanics SB of Hartford CT* 10.40 10.40 1.79 17.75 10.25 1.78 17.69 0.91 188.34 2.53
MDBK Medford Bank of Medford, MA* 9.01 8.45 1.07 11.98 6.78 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 4.96 1.15 14.65 0.39 70.30 0.52
MWBX MetroWest Bank of MA* 7.46 7.46 1.38 18.49 6.00 1.38 18.49 0.90 131.24 1.55
MCBS Mid Continent Bancshares of KS(8) 9.87 9.87 1.11 10.98 5.04 1.15 11.39 0.24 47.79 0.19
MIFC Mid Iowa Financial Corp. of IA 9.36 9.34 1.00 10.77 6.04 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 6.82 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 5.10 1.13 13.01 NA NA 1.02
MFFC Milton Fed. Fin. Corp. of OH 12.57 12.57 0.73 4.95 3.90 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 3.77 1.03 5.55 NA NA NA
MBSP Mitchell Bancorp of NC* 41.35 41.35 1.61 3.77 3.30 1.61 3.77 2.25 23.36 0.63
MBBC Monterey Bay Bancorp of CA 11.50 10.67 0.47 4.06 3.09 0.43 3.71 0.76 51.39 0.60
MONT Montgomery Fin. Corp. of IN 19.14 19.14 0.68 3.57 3.40 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 1.18 0.05 0.85 0.05 650.66 0.64
NHTB NH Thrift Bancshares of NH 7.82 6.72 0.70 9.26 4.60 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 2.22 0.77 3.71 0.03 210.00 0.13
NMSB Newmil Bancorp. of CT* 10.17 10.17 0.85 8.36 5.24 0.82 8.00 1.36 128.18 3.26
<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 144.31 25.14 144.31 NM 0.40 2.37 NM
ISBF ISB Financial Corp. of LA 28.47 165.39 19.94 193.28 28.77 0.50 1.81 51.55
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 20.38 95.39 6.57 107.90 24.54 0.22 1.66 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 18.62 155.19 26.66 155.19 17.72 0.56 3.07 57.14
IWBK Interwest SB of Oak Harbor WA 15.82 247.18 15.68 251.70 17.19 0.64 1.61 25.40
IPSW Ipswich SB of Ipswich MA* 15.06 277.20 15.56 277.20 18.93 0.12 0.91 13.64
JXVL Jacksonville Bancorp of TX 21.24 141.11 21.05 141.11 16.20 0.50 2.62 55.56
JXSB Jacksnville SB,MHC of IL (45.6) NM 192.59 20.33 192.59 NM 0.40 1.52 50.00
JSBA Jefferson Svgs Bancorp of MO NM 189.51 16.18 244.29 22.57 0.56 1.34 62.22
JOAC Joachim Bancorp of MO NM 109.73 30.88 109.73 NM 0.50 3.33 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)* 15.28 195.04 14.00 206.25 15.00 0.08 0.48 7.41
KFBI Klamath First Bancorp of OR 26.25 154.72 22.81 170.18 26.25 0.32 1.43 37.65
LSBI LSB Fin. Corp. of Lafayette IN 17.24 146.98 12.69 146.98 19.54 0.34 1.23 21.12
LVSB Lakeview SB of Paterson NJ 18.66 182.35 22.28 212.95 25.77 0.13 0.52 9.70
LARK Landmark Bancshares of KS 20.39 124.87 17.22 124.87 17.22 0.40 1.72 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* 10.21 184.95 17.60 184.95 10.28 0.00 0.00 0.00
LFED Leeds FSB, MHC of MD (36.3) NM 248.36 41.30 248.36 NM 0.51 2.24 NM
LXMO Lexington B&L Fin. Corp. of MO NM 117.03 33.14 117.03 24.30 0.30 1.74 54.55
LIFB Life Bancorp of Norfolk VA(8) 26.01 217.19 23.27 223.27 28.10 0.48 1.37 35.56
LFBI Little Falls Bancorp of NJ NM 140.19 16.37 152.01 NM 0.20 0.98 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 21.00 106.64 21.23 106.64 22.50 0.24 1.52 32.00
LISB Long Island Bancorp, Inc of NY 23.54 213.28 19.65 215.27 27.87 0.60 1.24 29.13
MAFB MAF Bancorp of IL 13.71 197.44 15.38 224.72 13.82 0.28 0.82 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) 24.79 220.21 15.24 235.92 NM 0.40 1.34 33.33
MSBF MSB Financial Corp. of MI 22.09 184.11 30.44 184.11 22.89 0.28 1.47 32.56
MARN Marion Capital Holdings of IN 16.17 121.51 26.67 121.51 16.36 0.88 3.26 52.69
MRKF Market Fin. Corp. of OH NM 103.69 36.75 103.69 NM 0.28 1.81 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 24.54 176.67 14.81 178.93 16.99 0.42 1.58 38.89
MASB MassBank Corp. of Reading MA* 16.37 161.12 17.37 163.55 17.43 0.96 2.11 34.53
MFLR Mayflower Co-Op. Bank of MA* 16.95 177.04 17.07 180.00 17.93 0.68 2.75 46.58
MECH Mechanics SB of Hartford CT* 9.75 157.69 16.41 157.69 9.79 0.00 0.00 0.00
MDBK Medford Bank of Medford, MA* 14.76 167.35 15.08 178.57 15.84 0.72 1.96 28.92
MERI Meritrust FSB of Thibodaux LA(8) 20.18 277.11 22.89 277.11 20.18 0.70 1.01 20.47
MWBX MetroWest Bank of MA* 16.67 287.54 21.44 287.54 16.67 0.12 1.33 22.22
MCBS Mid Continent Bancshares of KS(8) 19.84 207.31 20.45 207.31 19.12 0.40 0.95 18.78
MIFC Mid Iowa Financial Corp. of IA 16.55 167.86 15.70 168.10 11.75 0.08 0.68 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 14.67 174.36 12.06 174.36 16.59 0.24 1.35 19.83
MWFD Midwest Fed. Fin. Corp of WI(8) 19.60 243.09 21.43 252.08 19.89 0.34 1.25 24.46
MFFC Milton Fed. Fin. Corp. of OH 25.62 134.24 16.87 134.24 29.00 0.60 3.90 NM
MIVI Miss. View Hold. Co. of MN 26.52 98.31 18.56 98.31 18.04 0.16 0.91 24.24
MBSP Mitchell Bancorp of NC* NM 116.34 48.10 116.34 NM 0.40 2.24 67.80
MBBC Monterey Bay Bancorp of CA NM 128.51 14.78 138.58 NM 0.12 0.64 20.69
MONT Montgomery Fin. Corp. of IN 29.45 104.74 20.05 104.74 29.45 0.22 1.78 52.38
MSBK Mutual SB, FSB of Bay City MI NM 131.04 8.34 131.04 NM 0.00 0.00 0.00
NHTB NH Thrift Bancshares of NH 21.72 178.57 13.97 207.93 26.88 0.50 2.33 50.51
NSLB NS&L Bancorp of Neosho MO NM 111.99 21.90 111.99 28.91 0.50 2.70 NM
NMSB Newmil Bancorp. of CT* 19.10 158.79 16.15 158.79 19.96 0.32 2.39 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 December 5, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASB North American SB of MO 7.68 7.42 1.26 17.18 7.59 1.19 16.18 3.11 27.16 0.98
NBSI North Bancshares of Chicago IL 13.43 13.43 0.64 4.40 3.01 0.56 3.85 NA NA 0.27
FFFD North Central Bancshares of IA 22.91 22.91 1.83 7.47 6.27 1.83 7.47 0.22 446.43 1.16
NBN Northeast Bancorp of ME* 6.96 6.15 0.71 10.01 4.90 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 2.69 0.96 9.86 0.77 85.90 0.87
NSSY Norwalk Savings Society of CT* 8.06 7.77 0.97 12.43 6.11 1.10 14.19 1.31 73.30 1.46
NSSB Norwich Financial Corp. of CT* 11.66 10.60 1.14 10.24 4.70 1.06 9.48 1.20 158.13 2.71
NTMG Nutmeg FS&LA of CT 5.52 5.52 0.61 10.94 6.10 0.43 7.80 NA NA 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 15.17 15.17 1.01 5.69 4.50 1.00 5.62 0.52 83.85 0.86
OCN Ocwen Financial Corp. of FL 14.14 13.77 3.10 32.06 5.23 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 3.65 0.95 8.25 0.91 43.96 0.67
OFCP Ottawa Financial Corp. of MI 8.74 7.06 0.81 9.10 4.43 0.79 8.89 0.35 106.15 0.43
PFFB PFF Bancorp of Pomona CA 10.06 9.95 0.45 4.25 3.38 0.46 4.32 1.62 64.39 1.44
PSFI PS Financial of Chicago IL 37.32 37.32 1.96 4.86 4.03 1.99 4.92 0.68 31.79 0.52
PVFC PVF Capital Corp. of OH 7.18 7.18 1.36 19.67 9.47 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 1.71 0.67 8.26 2.04 53.36 1.30
PBCI Pamrapo Bancorp, Inc. of NJ 12.91 12.82 1.34 9.82 7.06 1.32 9.70 2.39 28.48 1.21
PFED Park Bancorp of Chicago IL 23.14 23.14 1.10 4.80 4.44 1.14 4.98 0.24 118.76 0.72
PVSA Parkvale Financial Corp of PA 7.72 7.67 1.08 14.34 7.07 1.08 14.34 0.26 547.66 1.91
PEEK Peekskill Fin. Corp. of NY 26.09 26.09 1.14 4.30 3.72 1.14 4.30 1.24 28.37 1.35
PFSB PennFed Fin. Services of NJ 7.33 6.20 0.82 10.90 6.29 0.82 10.90 0.61 32.20 0.28
PWBC PennFirst Bancorp of PA 8.37 7.44 0.67 8.85 5.07 0.67 8.85 0.68 87.79 1.45
PWBK Pennwood SB of PA* 18.34 18.34 0.99 5.21 4.34 1.09 5.71 1.49 42.39 1.04
PBKB People's SB of Brockton MA* 4.10 3.93 0.83 15.38 7.07 0.43 8.01 0.53 110.55 1.08
PFDC Peoples Bancorp of Auburn IN 15.24 15.24 1.48 9.70 4.96 1.48 9.70 0.29 106.74 0.38
PBCT Peoples Bank, MHC of CT (40.1)* 9.02 9.01 1.16 13.69 3.96 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 2.32 0.91 5.27 0.91 55.06 0.80
PFFC Peoples Fin. Corp. of OH 27.20 27.20 0.90 3.32 3.72 0.90 3.32 NA NA 0.39
PHBK Peoples Heritage Fin Grp of ME* 7.45 6.36 1.28 16.08 5.71 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 4.82 0.62 6.58 1.07 47.01 1.00
PMFI Perpetual Midwest Fin. of IA 8.51 8.51 0.40 4.65 2.75 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 2.14 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 5.32 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 4.19 0.62 9.94 0.16 274.52 1.07
PTRS Potters Financial Corp of OH 8.81 8.81 0.96 10.97 6.81 0.95 10.79 0.44 389.09 2.65
PKPS Poughkeepsie Fin. Corp. of NY(8) 8.42 8.42 0.54 6.43 3.52 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 2.95 0.71 6.55 0.45 148.08 1.37
PRBC Prestige Bancorp of PA 11.21 11.21 0.63 5.12 4.42 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 6.29 0.94 11.15 0.94 115.80 1.65
PROV Provident Fin. Holdings of CA 13.33 13.33 0.75 5.30 4.50 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 2.27 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 2.84 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 7.04 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 5.65 0.68 7.77 1.35 67.38 1.15
QCSB Queens County Bancorp of NY* 11.22 11.22 1.54 11.21 3.98 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 5.52 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) ($) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASB North American SB of MO 13.17 212.85 16.34 220.23 13.99 0.80 1.48 19.51
NBSI North Bancshares of Chicago IL NM 154.05 20.69 154.05 NM 0.48 1.83 60.76
FFFD North Central Bancshares of IA 15.95 122.27 28.02 122.27 15.95 0.25 1.35 21.55
NBN Northeast Bancorp of ME* 20.39 195.80 13.62 221.57 24.73 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 NM 33.94 NM NM 0.16 1.05 39.02
NSSY Norwalk Savings Society of CT* 16.35 191.56 15.43 198.63 14.32 0.40 1.02 16.67
NSSB Norwich Financial Corp. of CT* 21.26 207.64 24.22 228.60 22.98 0.56 1.79 38.10
NTMG Nutmeg FS&LA of CT 16.40 167.35 9.23 167.35 23.02 0.20 1.52 25.00
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 22.24 135.25 20.52 135.25 22.51 0.80 2.14 47.62
OCN Ocwen Financial Corp. of FL 19.12 NM 52.44 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.)* 27.38 239.18 28.56 284.65 NM 0.28 0.97 26.67
OFCP Ottawa Financial Corp. of MI 22.57 205.80 17.98 254.77 23.11 0.40 1.37 31.01
PFFB PFF Bancorp of Pomona CA 29.62 131.04 13.18 132.48 29.17 0.00 0.00 0.00
PSFI PS Financial of Chicago IL 24.82 121.07 45.18 121.07 24.48 0.48 2.69 66.67
PVFC PVF Capital Corp. of OH 10.56 188.71 13.56 188.71 11.02 0.00 0.00 0.00
PALM Palfed, Inc. of Aiken SC(8) NM 266.48 22.69 266.48 NM 0.12 0.42 24.49
PBCI Pamrapo Bancorp, Inc. of NJ 14.16 145.06 18.73 146.09 14.33 1.00 4.08 57.80
PFED Park Bancorp of Chicago IL 22.50 108.37 25.07 108.37 21.69 0.00 0.00 0.00
PVSA Parkvale Financial Corp of PA 14.15 190.79 14.73 192.05 14.15 0.52 1.79 25.37
PEEK Peekskill Fin. Corp. of NY 26.89 119.85 31.27 119.85 26.89 0.36 2.03 54.55
PFSB PennFed Fin. Services of NJ 15.89 164.09 12.02 193.84 15.89 0.28 0.82 13.08
PWBC PennFirst Bancorp of PA 19.74 144.68 12.11 162.62 19.74 0.36 1.92 37.89
PWBK Pennwood SB of PA* 23.04 124.72 22.87 124.72 21.01 0.32 1.67 38.55
PBKB People's SB of Brockton MA* 14.15 227.34 9.32 237.14 27.16 0.44 2.16 30.56
PFDC Peoples Bancorp of Auburn IN 20.16 191.42 29.18 191.42 20.16 0.43 1.72 34.68
PBCT Peoples Bank, MHC of CT (40.1)* 25.26 318.76 28.76 319.04 NM 0.76 2.09 52.78
TSBS Peoples Bcrp, MHC of NJ (35.9)(8) NM 313.28 53.09 348.19 NM 0.35 0.93 40.23
PFFC Peoples Fin. Corp. of OH 26.89 90.30 24.56 90.30 26.89 0.50 3.51 NM
PHBK Peoples Heritage Fin Grp of ME* 17.51 267.60 19.93 313.63 17.51 0.84 1.91 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 20.73 133.88 12.67 135.69 20.90 0.40 1.53 31.75
PMFI Perpetual Midwest Fin. of IA NM 167.21 14.22 167.21 NM 0.30 0.98 35.71
PERT Perpetual of SC, MHC (46.8)(8) NM 271.98 32.16 271.98 NM 1.40 2.56 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 18.81 129.87 13.69 131.22 21.11 0.24 1.26 23.76
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 23.88 234.66 14.84 234.66 24.22 0.90 2.58 61.64
PTRS Potters Financial Corp of OH 14.68 157.32 13.86 157.32 14.93 0.20 1.14 16.67
PKPS Poughkeepsie Fin. Corp. of NY(8) 28.38 177.66 14.96 177.66 28.38 0.20 1.90 54.05
PHSB Ppls Home SB, MHC of PA (45.0) NM 185.91 25.40 185.91 NM 0.00 0.00 0.00
PRBC Prestige Bancorp of PA 22.65 114.04 12.78 114.04 22.65 0.12 0.62 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* 15.91 173.44 15.15 192.63 16.20 0.68 1.94 30.91
PROV Provident Fin. Holdings of CA 22.20 118.18 15.75 118.18 NM 0.00 0.00 0.00
PULB Pulaski SB, MHC of MO (29.8) NM 267.14 34.86 267.14 NM 1.10 3.67 NM
PLSK Pulaski SB, MHC of NJ (46.0) NM 183.40 21.97 183.40 NM 0.30 1.58 55.56
PULS Pulse Bancorp of S. River NJ 14.20 186.31 15.30 186.31 14.04 0.70 2.68 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 17.71 138.62 11.72 138.62 18.48 0.00 0.00 0.00
QCSB Queens County Bancorp of NY* 25.13 316.35 35.48 316.35 24.96 0.80 2.21 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 18.11 184.03 15.20 250.53 17.15 0.64 1.80 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 December 5, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RELI Reliance Bancshares Inc of WI* 48.29 48.29 1.32 2.58 2.74 1.38 2.68 NA NA 0.56
RIVR River Valley Bancorp of IN 12.40 12.21 0.46 4.24 2.47 0.62 5.72 0.71 122.47 1.05
RVSB Riverview Bancorp of WA 20.76 19.97 1.22 9.14 3.03 1.17 8.75 0.14 226.93 0.58
RSLN Roslyn Bancorp, Inc. of NY* 17.64 17.55 0.96 5.10 3.14 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 3.28 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 1.49 0.43 4.44 0.50 103.35 1.10
SFED SFS Bancorp of Schenectady NY 12.47 12.47 0.68 5.36 4.16 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 3.61 0.43 5.48 1.06 29.26 0.41
SHSB SHS Bancorp, Inc. of PA 12.64 12.64 0.37 2.96 2.52 0.37 2.96 1.43 33.94 0.74
SISB SIS Bancorp Inc of MA* 7.36 7.36 0.83 11.20 5.38 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 5.42 0.95 11.70 0.82 93.38 1.06
SFSL Security First Corp. of OH 9.27 9.12 1.36 14.56 5.60 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 5.68 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 3.28 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 6.74 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 3.32 1.25 5.51 0.31 57.66 0.38
SCBS Southern Commun. Bncshrs of AL 21.33 21.33 0.55 3.24 1.83 0.90 5.30 2.48 46.17 1.94
SMBC Southern Missouri Bncrp of MO 16.15 16.15 0.94 5.84 4.92 0.90 5.59 0.88 51.46 0.66
SWBI Southwest Bancshares of IL 11.34 11.34 1.06 9.81 5.85 1.02 9.48 0.20 101.05 0.28
SVRN Sovereign Bancorp of PA 4.42 3.61 0.42 10.16 2.64 0.61 14.74 0.65 99.50 0.92
STFR St. Francis Cap. Corp. of WI 7.74 6.85 0.76 9.21 5.51 0.75 9.08 0.21 181.82 0.83
SPBC St. Paul Bancorp, Inc. of IL 8.99 8.97 1.06 12.12 5.56 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 5.15 0.81 8.36 0.38 104.03 0.84
STSA Sterling Financial Corp. of WA 5.25 4.81 0.48 11.12 4.81 0.43 10.05 0.47 96.70 0.82
SFSB SuburbFed Fin. Corp. of IL 6.48 6.46 0.39 5.88 3.55 0.56 8.56 NA NA 0.30
ROSE T R Financial Corp. of NY* 6.24 6.24 0.97 15.55 5.53 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 17.02 17.02 0.72 4.05 2.94 0.70 3.98 1.68 32.52 1.17
ESBK The Elmira SB FSB of Elmira NY* 6.35 6.19 0.42 6.66 4.29 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 5.07 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 4.69 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 4.35 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 2.14 0.51 2.23 0.15 160.96 0.29
WSFS WSFS Financial Corp. of DE* 5.54 5.51 1.14 20.70 6.55 1.13 20.54 1.27 134.95 2.68
WVFC WVS Financial Corp. of PA* 12.00 12.00 1.30 10.59 6.50 1.31 10.64 0.19 361.83 1.21
WRNB Warren Bancorp of Peabody MA* 10.65 10.65 2.16 21.61 9.95 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 6.67 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 4.73 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 2.45 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 3.01 1.43 6.14 0.07 560.00 0.72
WBST Webster Financial Corp. of CT 5.34 4.60 0.46 9.03 2.80 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 6.23 1.03 7.29 0.31 114.71 0.39
WCBI WestCo Bancorp of IL 15.54 15.54 1.50 9.72 7.09 1.42 9.20 0.21 139.06 0.37
WSTR WesterFed Fin. Corp. of MT 10.62 8.57 0.81 6.87 4.69 0.77 6.58 0.41 116.74 0.72
WOFC Western Ohio Fin. Corp. of OH 13.87 12.94 0.37 2.65 2.27 0.43 3.09 0.44 115.19 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 2.65 1.16 3.78 0.22 77.88 0.22
WFI Winton Financial Corp. of OH 7.11 6.96 0.76 10.50 5.70 0.89 12.25 0.30 84.06 0.29
FFWD Wood Bancorp of OH 12.43 12.43 1.41 11.10 5.49 1.29 10.17 0.35 101.19 0.44
YFCB Yonkers Fin. Corp. of NY 14.02 14.02 1.05 6.64 5.16 1.06 6.71 0.48 72.05 0.78
<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) ($) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RELI Reliance Bancshares Inc of WI* NM 99.35 47.97 99.35 NM 0.00 0.00 0.00
RIVR River Valley Bancorp of IN NM 127.27 15.78 129.22 NM 0.16 0.86 34.78
RVSB Riverview Bancorp of WA NM 162.13 33.65 168.48 NM 0.00 0.00 0.00
RSLN Roslyn Bancorp, Inc. of NY* NM 165.60 29.20 166.43 25.00 0.28 1.20 38.36
SCCB S. Carolina Comm. Bnshrs of SC NM 131.82 35.04 131.82 NM 0.60 2.62 NM
SBFL SB Fngr Lakes MHC of NY (33.1) NM 247.48 23.10 247.48 NM 0.40 1.36 NM
SFED SFS Bancorp of Schenectady NY 24.06 128.23 15.99 128.23 24.06 0.28 1.24 29.79
SGVB SGV Bancorp of W. Covina CA 27.69 138.57 10.31 140.73 25.35 0.00 0.00 0.00
SHSB SHS Bancorp, Inc. of PA NM 117.50 14.85 117.50 NM 0.00 0.00 0.00
SISB SIS Bancorp Inc of MA* 18.60 198.96 14.64 198.96 18.78 0.56 1.47 27.32
SWCB Sandwich Co-Op. Bank of MA* 18.44 212.67 16.87 221.24 18.83 1.40 3.11 57.38
SFSL Security First Corp. of OH 17.87 245.13 22.71 249.02 17.71 0.32 1.57 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) 17.62 229.90 20.76 229.90 18.58 0.00 0.00 0.00
SOBI Sobieski Bancorp of S. Bend IN NM 121.95 18.02 121.95 NM 0.32 1.64 50.00
SOSA Somerset Savings Bank of MA(8)* 14.84 230.58 15.20 230.58 15.32 0.00 0.00 0.00
SSFC South Street Fin. Corp. of NC* NM 138.38 35.51 138.38 29.23 0.40 2.11 63.49
SCBS Southern Commun. Bncshrs of AL NM 136.36 29.08 136.36 NM 0.30 1.67 NM
SMBC Southern Missouri Bncrp of MO 20.34 116.87 18.87 116.87 21.24 0.50 2.62 53.19
SWBI Southwest Bancshares of IL 17.08 160.02 18.15 160.02 17.67 0.80 3.12 53.33
SVRN Sovereign Bancorp of PA NM 267.08 11.81 326.73 26.09 0.08 0.41 15.69
STFR St. Francis Cap. Corp. of WI 18.14 165.57 12.82 187.15 18.38 0.56 1.38 25.00
SPBC St. Paul Bancorp, Inc. of IL 17.99 208.68 18.76 209.21 17.99 0.40 1.60 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 19.43 161.23 15.10 161.57 19.43 0.44 1.90 36.97
STSA Sterling Financial Corp. of WA 20.79 166.56 8.75 181.99 23.00 0.00 0.00 0.00
SFSB SuburbFed Fin. Corp. of IL 28.20 158.40 10.27 158.98 19.38 0.32 0.92 26.02
ROSE T R Financial Corp. of NY* 18.09 259.74 16.20 259.74 20.12 0.64 1.88 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 139.08 23.67 139.08 NM 0.28 1.42 48.28
ESBK The Elmira SB FSB of Elmira NY* 23.32 152.14 9.67 156.25 28.94 0.64 2.05 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 19.72 128.68 16.65 128.68 23.33 0.40 2.86 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 21.31 128.46 30.85 128.46 21.49 1.00 3.85 NM
VABF Va. Beach Fed. Fin. Corp of VA 23.00 198.28 14.18 198.28 28.28 0.20 1.16 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 112.08 23.15 112.08 NM 0.32 2.02 NM
WSFS WSFS Financial Corp. of DE* 15.27 300.30 16.64 302.11 15.38 0.00 0.00 0.00
WVFC WVS Financial Corp. of PA* 15.38 165.12 19.82 165.12 15.31 1.20 3.75 57.69
WRNB Warren Bancorp of Peabody MA* 10.05 200.78 21.38 200.78 11.33 0.52 2.54 25.49
WFSL Washington FS&LA of Seattle WA 14.99 219.19 27.51 238.79 15.05 0.92 2.78 41.63
WAMU Washington Mutual Inc. of WA(8)* NM NM 19.20 NM NM 1.12 1.57 NM
WYNE Wayne Bancorp of NJ 21.14 137.17 17.04 137.17 21.14 0.20 0.88 18.69
WAYN Wayne S&L Co. MHC of OH (47.8) NM 311.91 29.74 311.91 NM 0.62 1.88 NM
WCFB Wbstr Cty FSB MHC of IA (45.2) NM 202.00 47.23 202.00 NM 0.80 3.76 NM
WBST Webster Financial Corp. of CT NM 238.63 12.74 277.06 21.40 0.80 1.25 44.69
WEFC Wells Fin. Corp. of Wells MN 16.06 117.77 16.74 117.77 16.51 0.48 2.74 44.04
WCBI WestCo Bancorp of IL 14.10 136.53 21.21 136.53 14.89 0.60 2.26 31.91
WSTR WesterFed Fin. Corp. of MT 21.34 130.06 13.81 161.24 22.30 0.46 1.86 39.66
WOFC Western Ohio Fin. Corp. of OH NM 114.88 15.93 123.09 NM 1.00 3.72 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 125.00 34.56 125.00 NM 0.28 1.58 59.57
WFI Winton Financial Corp. of OH 17.54 176.06 12.51 179.86 15.04 0.46 2.30 40.35
FFWD Wood Bancorp of OH 18.22 199.59 24.82 199.59 19.90 0.40 2.05 37.38
YFCB Yonkers Fin. Corp. of NY 19.39 130.85 18.34 130.85 19.19 0.24 1.26 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 December 5, 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 4.94 0.81 9.60 2.50 23.98 0.69
<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 20.24 219.45 19.43 219.45 24.06 0.48 1.88 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
December 5, 1997 8149.1 983.8 1,633.9 798.3 419.3
</TABLE>
(1) End of period data.
Sources: SNL Securities; Wall Street Journal.
<PAGE>
EXHIBIT IV-3
Perpetual Bank, A Federal Savings Bank
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 SNI indices are market-value weighted: i.e., an institutions effect on an
index is proportionate to that institutions 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 ($000) (%) (%) (%) (%) (%)
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
09/23/97 Pending Regions Financial AL Palfed, Inc. SC 664,863 8.24 0.85 10.54 2.12 90.96
07/01/97 Pending Carolina First Corp SC First SE Fin'l Corp SC 334,751 10.23 0.56 5.55 0.11 476.73
06/25/97 11/10/97 First fin'l Holdings SC Investors Savings BK SC 62,021 10.87 1.02 9.10 0.02 NA
02/18/97 08/01/97 CCB Financial Corp NC American Federal Bnk SC 1,394,874 7.22 0.96 12.01 0.51 159.95
01/29/97 07/21/97 Carolina First Corp SC Lowcountry SB SC 75,361 7.97 0.26 3.76 0.56 86.59
--------------------------------------------------------------------------
Average 506,374 8.91 0.73 8.19 0.66 203.56
Median 334,751 8.24 0.85 9.10 0.51 125.46
--------------------------------------------------------------------------
<CAPTION>
Deal Terms and Pricing at Completion (1)
-----------------------------------------------
Deal Deal Deal Deal Pr/ Deal Pr/
Ann'd Comp Value Pr/Sh Consid Pr/Bk Tg Bk 4-Qtr
Date Date Buyer ST Seller ST ($M) ($) Type (%) (%) EPS (x)
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <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
07/01/97 Pending Carolina First Corp SC First SE Fin'l Corp SC 64.7 14.75 Stock 189.10 189.10
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
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
01/29/97 07/21/97 Carolina First Corp SC Lowcountry SB SC 13.5 Mix 216.10 216.10 40.30
--------------------------------------------------------------------------
Average 132.7 33.65 246.85 251.90 31.64
Median 64.7 32.22 216.75 216.75 28.07
--------------------------------------------------------------------------
<CAPTION>
Deal Terms and
Pricing at
Completion (1)
------------------
Deal Pr/ TgBkPr/
Ann'd Comp Assets CoreDp
Date Date Buyer ST Seller ST (%) (%)
- ------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C> <C>
09/23/97 Pending Regions Financial AL Palfed, Inc. SC 22.64 18.54
07/01/97 Pending Carolina First Corp SC First SE Fin'l Corp SC 19.33 11.95
06/25/97 11/10/97 First fin'l Holdings SC Investors Savings BK SC 24.01 20.08
02/18/97 08/01/97 CCB Financial Corp NC American Federal Bnk SC 32.08 33.68
01/29/97 07/21/97 Carolina First Corp SC Lowcountry SB SC 17.38 12.60
---------------------------------------------
Average 23.09 19.37
Median 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
Perpetual Bank, A Federal Savings Bank
Directors and Management Summary Resumes
Harold A. "Drew" Pickens, Jr. is the owner of Harold A. Pickens and Sons,
Inc., with which he has been affiliated since 1956. Mr. Pickens serves as an
Elder at First Presbyterian Church.
Robert W. "Lujack" Orr has been employed by the Savings Bank since 1974 and
has held a variety of positions, such as Senior Vice President/Funds Acquisition
and Executive Vice President, prior to assuming his current position as
President and Managing Officer on January 1, 1991. Mr. Orr is a member of the
Board of the Community Financial Institutions of South Carolina and he is
Secretary of the America's Community Bankers Association. He is active in
numerous civic organizations, serving as President of the YMCA, on the Board of
Directors of the Chamber of Commerce, on the Board of Visitors of Anderson
College, and as an Elder of Central Presbyterian Church. Mr. Orr is a director
of First Trust, the mortgage banking company in which a service corporation
subsidiary of the Savings Bank has an equity investment.
Jack F. McIntosh is a partner in the law firm of McIntosh and Sherard,
Anderson, South Carolina, with which he has been affiliated for 35 years.
McIntosh and Sherard serves as General Counsel for the Savings Bank's wholly-
owned subsidiary, United Service, since 1984. Mr. McIntosh is also a member of
the Board of the Alzheimer's Association and of Medical University for South
Carolina.
Charles W. Fant, Jr. is a partner in the architectural firm of Fant & Fant
Architects, Anderson, South Carolina, with which he has been affiliated since
1956. Mr. Fant is also active in the community, serving as a Trustee of Connie
Maxwell Children's Home and on the Board of Adjustment and Appeals for both the
City of Anderson and Anderson County, South Carolina.
Cordes G. Seabrook, Jr. is a partner in Value Systems, Gastonia, North
Carolina, an association management company. In this capacity, Mr. Seabrook is
the organizer and manager of the Textile Purchasing Association. Mr. Seabrook is
active in several community organizations, serving as a member of the Board of
Anderson Memorial Hospital, Anderson Area Arts Council, SCETV Endowment and the
Tri-County Tech Endowment. Mr. Seabrook is a minority stockholder and also
serves as a member of the Board of Directors of DS1, Greer, South Carolina, a
company that designs and manufactures security information systems.
Richard C. Ballenger is the President of City Glass Company and D&B Glass
Company, Inc., with which he has been affiliated since 1972. He serves as an
Elder at First Presbyterian Church, is a member of the Board of Directors of the
Anderson Rotary Club and is on the Advisory Board of the Salvation Army.
F. Stevon Kay is the President of Hill Electric Company, Inc., with which
he has been affiliated since 1969. He is a Board member of the Salvation Army
Boys and Girls Club and the President of the Anderson Youth Association. He
attends Concord Baptist Church.
Jim Gray Watson, the Savings Bank's former President and Chief Executive
Officer, was employed by the Savings Bank for 31 years prior to his retirement
in December 1990. Mr. Watson is also involved in numerous charitable and
community organizations.
Martha C. Clamp, a certified public accountant, was employed for six years
as a staff accountant for the accounting firm of Cole, Hook & Cleary, CPAs,
Anderson, South Carolina, and has been self-employed as an accountant since
1988. Ms. Clamp also serves as the Treasurer of the Foothills Sertoma Club, a
member of the
<PAGE>
Board of the Anderson County Easter Seals and the Anderson College Alumni Board
and as a Panel Allocation member of the United Way.
J. Roy Martin, Jr. served as a member of the Savings Bank's Board of
Directors from 1970 until 1988. Since 1988, Mr. Martin has served as a Director
Emeritus of the Savings Bank.
Wade A. Watson, Jr. served as a member of the Savings Bank's Board of
Directors from 1960 until 1989. Mr. Watson has served as a Director Emeritus of
the Savings Bank since 1989. Mr. Watson is the brother of the Savings Bank's
former President and Chief Executive Officer, Jim Gray Watson.
Thomas C. Hall has been employed by the Savings Bank since 1975 and
currently serves as Senior Vice President, Treasurer and Chief Financial Officer
responsible for areas of accounting, investments, data processing and deposits.
Mr. Hall is a member of the Financial Managers Society, a Board member of the
Foothills United Way, a member of the Institute of Management Accountants, and a
Board member of the University of South Carolina Alumni Association, Anderson
Chapter.
Barry C. Visioli has been affiliated with the Savings Bank since 1973. Mr.
Visioli serves as Senior Vice President and is responsible for Lending
Operations. He is a Council Member of the Salvation Army Boys and Girls Club, a
Board Member of the Family Counseling Agency and serves on the Anderson County
Board of Assessment Appeals. Mr. Visioli is a director of First Trust, the
mortgage banking company in which a service corporation subsidiary of the
Savings Bank has an equity investment.
Sylvia B. Reed joined the Savings Bank in 1986 and currently serves as
Corporate Secretary. Ms. Reed is a member and Treasurer of the Anderson Chapter
of the American Business Women's Association, which furnishes college
scholarships for students. She is a member of the choir at Taylor Memorial
Church.
<PAGE>
EXHIBIT IV-6
Perpetual Bank, A Federal Savings Bank
Pro Forma Regulatory Capital Ratios
<TABLE>
<CAPTION>
PRO FORMA AT SEPTEMBER 30, 1997
--------------------------------------------------------------
Minimum of Estimated Midpoint of Estimated
Valuation Range Valuation Range
--------------------------- ---------------------------
1,466,250 Conversion Shares 1,725,000 Conversion Shares
September 30, 1997 at $20.00 Per Share at $20.00 Per Share
------------------------- --------------------------- ---------------------------
Percent of Percent of Percent of
Adjusted Adjusted Adjusted
Total Total Total
Amount Assets(1) Amount Assets(1) Amount Assets(1)
------ ---------- ------ ---------- ------ ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
GAAP capital(2)..................... $30,602 11.91% $41,811 15.59% $43,945 16.26%
Tangible Capital(2)................. 27,321 10.71 38,530 14.47 40,664 15.15
Tangible capital requirement........ 3,825 1.50 3,994 1.50 4,026 1.50
------- ----- ------- ----- ------- -----
Excess.............................. $23,496 9.21% $34,536 12.97% $36,638 13.65%
======= ===== ======= ===== ======= =====
Core capital(2)..................... $27,321 10.71% $38,530 14.47% $40,664 15.15%
Core capital requirement(3)......... 7,651 3.00 7,987 3.00 8,051 3.00
------- ----- ------- ----- ------- -----
Excess.............................. $19,670 7.71% $30,543 11.47% $32,613 12.15%
======= ===== ======= ===== ======= =====
Total capital(4).................... $29,067 18.35% $40,276 25.08% $42,410 26.33%
Risk-based capital requirement...... 12,670 8.00 12,849 8.00 12,883 8.00
------- ----- ------- ----- ------- -----
Excess.............................. $16,397 10.35% $27,426 17.08% $29,527 18.33%
======= ===== ======= ===== ======= =====
<CAPTION>
PRO FORMA AT SEPTEMBER 30, 1997
----------------------------------------------------------
15% above
Maximum of Estimated Maximum of Estimated
Valuation Range Valuation Range
--------------------------- ---------------------------
1,983,750 Conversion Shares 2,281,312 Conversion Shares
at $20.00 Per Share at $20.00 Per Share
--------------------------- ---------------------------
Percent of Percent of
Adjusted Adjusted
Total Total
Amount Assets(1) Amount Assets(1)
------ ---------- ------ ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
GAAP capital(2)..................... $46,078 16.91% $48,533 17.65%
Tangible Capital(2)................. 42,797 15.82 45,252 16.58
Tangible capital requirement........ 4,058 1.50 4,094 1.50
------- ----- ------- -----
Excess.............................. $38,739 14.32% $41,158 15.08%
======= ===== ======= =====
Core capital(2)..................... $42,797 15.82% $45,252 16.58%
Core capital requirement(3)......... 8,115 3.00 8,189 3.00
------- ----- ------- -----
Excess.............................. $34,682 12.82% $37,063 13.58%
======= ===== ======= =====
Total capital(4).................... $44,543 27.59% $46,998 29.02%
Risk-based capital requirement...... 12,918 8.00 12,957 8.00
------- ----- ------- -----
Excess.............................. $31,625 19.59% $34,041 21.02%
======= ===== ======= =====
</TABLE>
- ---------------
(1) Based upon total tangible assets of $255.0 million at September 30, 1997
and $266.2 million, $268.4 million, $270.5 million and $273.0 million at
the minimum, midpoint, maximum, and maximum, as adjusted, of the Estimated
Valuation Range, respectively, for purpose of the tangible capital
requirement, upon total adjusted assets of $255.0 million at September 30,
1997 and $266.2 million, $268.2 million, $270.5 million and $273.0 million
at the minimum, midpoint, maximum, and maximum, as adjusted, of the
Estimated Valuation Range, respectively, and upon risk-weighted assets of
$158.4 million at September 30, 1997 and $160.6 million, $161.0 million,
$161.5 million and $162.0 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) A $2.1 million investment in non-includable subsidiaries, a $1.0 million
deduction associated with the limited partnership interest discussed under
"BUSINESS OF THE SAVINGS BANK -- Lending Activities -- Equity Investment in
Limited Partnership" and an unrealized gain on securities available-for-
sale, net of taxes, of $188,000 account for the difference between
generally accepted accounting principals ("GAAP") capital and both 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.
<PAGE>
EXHIBIT IV-7
Perpetual Bank, A Federal Savings Bank
Pro Forma Analysis Sheet
<PAGE>
EXHIBIT IV-7
PRO FORMA ANALYSIS SHEET
Perpetual Bank, A Federal Savings Bank
Prices as of December 5, 1997
<TABLE>
<CAPTION>
Peer Group South Carolina Companies All SAIF Insured
----------------- ------------------------ ---------------------
Valuation Midpoint Pricing Multiples Symbol Subject (1) Mean Median Mean Median Mean Median
- ------------------------------------ ------ ----------- ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Price-earnings multiple = P/E 23.82x 19.07x 18.30x 19.91x 19.91x 19.32x 19.24x
Price-core earnings multiple = P/CE 23.04x 19.58x 19.16x 21.64x 21.64x 20.17x 19.90x
Price-book ratio = P/B 103.86% 144.10% 137.87% 219.96% 211.80% 158.46% 152.11%
Price-tangible book ratio = P/TB 103.86% 144.10% 137.87% 219.96% 211.80% 163.19% 153.92%
Price-assets ratio = P/A 22.51% 26.76% 25.50% 27.27% 28.09% 19.36% 17.91%
</TABLE>
<TABLE>
<CAPTION>
Valuation Parameters
- --------------------
<S> <C> <C> <C>
Pre-Conversion Earnings (Y) $1,728,363 ESOP Stock Purchases (E) 0.00% (4)
Pre-Conversion Core Earnings $1,820,000 Cost of ESOP Borrowings (S) 0.00%
Pre-Conversion Book Value (B) $30,602,000 ESOP Amortization (T) 10.00 years
Pre-Conv. Tang. Book Value (B) $30,602,000 RRP Amount (M) 4.00%
Pre-Conversion Assets (A) $256,993,340 MRP Vesting (N) 5.00 years (4)
Reinvestment Rate (2)(R) 3.69% Percentage Sold (PCT) 53.01970%
Est. Conversion Expenses (3)(X) 3.10%
Tax rate (TAX) 35.00%
</TABLE>
<TABLE>
<CAPTION>
Calculation of Pro Forma Value After Conversion
- -----------------------------------------------
<S> <C> <C>
1. V= P/E * (Y) V= $65,070,148
-------------------------------------------------------
1 - P/E * PCT * ((1-X-E-M)*R - (1-TAX)*E/T - (1-TAX)*M/N)
2. V= P/B * B V= $65,070,148
-------------------------
1 - P/B * PCT * (1-X-E-M)
3. V= P/A * A V= $65,070,148
--------------------------
1 - P/A * PCT * (1-X-E-M)
</TABLE>
<TABLE>
<CAPTION>
Full
Gross Exchange Conversion
Conclusion Proceeds Ratio Value
- ---------- -------- ----- -----
<S> <C> <C> <C>
Minimum $29,325,000 1.83281 $55,309,626
Midpoint $34,500,000 2.15625 $65,070,148
Maximum $39,675,000 2.47969 $74,830,670
Supermaximum $45,626,250 2.85164 $86,055,271
</TABLE>
- -----------------------------------------------------------------
(1) Pricing ratios shown reflect the midpoint value.
(2) Net return reflects a reinvestment rate of 5.68 percent, and a tax rate of
35.00 percent.
(3) Estimated offering expenses at midpoint of the offering.
(4) MRP amortizes over 5 years, amortization expenses tax effected at 35.0
percent.
<PAGE>
EXHIBIT IV-8
Perpetual Bank, A Federal Savings Bank
Pro Forma Effect of Conversion Proceeds
<PAGE>
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Perpetual Bank, A Federal Savings Bank
At the Minimum of the Range
<TABLE>
<S> <C>
1. Conversion Proceeds
Full Conversion Value $55,309,626
Exchange Ratio 1.8328
Offering Proceeds $29,325,000
Less: Estimated Offering Expenses 990,000
-------
Net Conversion Proceeds $28,335,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $28,335,000
Less: Non-Cash Stock Purchases (1) 1,173,000
---------
Net Proceeds Reinvested $27,162,000
Estimated net incremental rate of return 3.69%
-----
Earnings Increase $1,002,821
Less: Estimated cost of ESOP borrowings 0
Less: Amortization of ESOP borrowings 0
Less: Recognition Plan Vesting (2) 152,490
-------
Net Earnings Increase $850,331
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended September 30, 1997 (reported) $1,728,363 $850,331 $2,578,694
12 Months ended September 30, 1997 (core) $1,820,000 $850,331 $2,670,331
<CAPTION>
Before Net Cash After
4. Pro Forma Net Worth Conversion Proceeds Conversion
---------- -------- ----------
<S> <C> <C> <C>
September 30, 1997 $30,602,000 $27,162,000 $57,764,000
September 30, 1997 (Tangible) $30,602,000 $27,162,000 $57,764,000
<CAPTION>
Before Net Cash After
5. Pro Forma Assets Conversion Proceeds Conversion
---------- -------- ----------
<S> <C> <C> <C>
September 30, 1997 $256,993,340 $27,162,000 $284,155,340
</TABLE>
(1) Includes MRP stock purchases equal to 4.0 percent of the second step
offering.
(2) MRP is amortized over 5 years, and amortization expense is tax effected at
35.00 percent.
<PAGE>
Exhibit IV-8 PRO FORMA
EFFECT OF CONVERSION PROCEEDS Perpetual
Bank, A Federal Savings Bank
At the Midpoint of the Range
<TABLE>
<S> <C>
1. Conversion Proceeds
Full Conversion Value $65,070,148
Exchange Ratio 2.1563
Offering Proceeds $34,500,000
Less: Estimated Offering Expenses 1,070,000
---------
Net Conversion Proceeds $33,430,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $33,430,000
Less: Non-Cash Stock Purchases (1) 1,380,000
---------
Net Proceeds Reinvested $32,050,000
Estimated net incremental rate of return 3.69%
-----
Earnings Increase $1,183,286
Less: Estimated cost of ESOP borrowings 0
Less: Amortization of ESOP borrowings 0
Less: Recognition Plan Vesting (2) 179,400
-------
Net Earnings Increase $1,003,886
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended September 30, 1997 (reported) $1,728,363 $1,003,886 $2,732,249
12 Months ended September 30, 1997 (core) $1,820,000 $1,003,886 $2,823,886
<CAPTION>
Before Net Cash After
4. Pro Forma Net Worth Conversion Proceeds Conversion
---------- -------- ----------
<S> <C> <C> <C>
September 30, 1997 $30,602,000 $32,050,000 $62,652,000
September 30, 1997 (Tangible) $30,602,000 $32,050,000 $62,652,000
<CAPTION>
Before Net Cash After
5. Pro Forma Assets Conversion Proceeds Conversion
---------- -------- ----------
<S> <C> <C> <C>
September 30, 1997 $256,993,340 $32,050,000 $289,043,340
</TABLE>
(1) Includes MRP stock purchases equal to 4.0 percent of the second step
offering.
(2) MRP is amortized over 5 years, and amortization expense is tax effected at
35.00 percent.
<PAGE>
Exhibit IV-8 PRO FORMA
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Perpetual Bank, A Federal Savings Bank
At the Maximum of the Range
<TABLE>
<S> <C>
1. Conversion Proceeds
Full Conversion Value $74,830,670
Exchange Ratio 2.4797
Offering Proceeds $39,675,000
Less: Estimated Offering Expenses 1,150,000
-----------
Net Conversion Proceeds $38,525,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $38,525,000
Less: Non-Cash Stock Purchases (1) 1,587,000
-----------
Net Proceeds Reinvested $36,938,000
Estimated net incremental rate of return 3.69%
-----------
Earnings Increase $1,363,751
Less: Estimated cost of ESOP borrowings 0
Less: Amortization of ESOP borrowings 0
Less: Recognition Plan Vesting (2) 206,310
-----------
Net Earnings Increase $1,157,441
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended September 30, 1997 (reported) $1,728,363 $1,157,441 $2,885,804
12 Months ended September 30, 1997 (core) $1,820,000 $1,157,441 $2,977,441
<CAPTION>
Before Net Cash After
4. Pro Forma Net Worth Conversion Proceeds Conversion
---------- -------- ----------
<S> <C> <C> <C>
September 30, 1997 $30,602,000 $36,938,000 $67,540,000
September 30, 1997 (Tangible) $30,602,000 $36,938,000 $67,540,000
<CAPTION>
Before Net Cash After
5. Pro Forma Assets Conversion Proceeds Conversion
---------- -------- ----------
<S> <C> <C> <C>
September 30, 1997 $256,993,340 $36,938,000 $293,931,340
</TABLE>
(1) Includes MRP stock purchases equal to 4.0 percent of the second step
offering.
(2) MRP is amortized over 5 years, and amortization expense is tax effected at
35.00 percent.
<PAGE>
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Perpetual Bank, A Federal Savings Bank
At the Superrange Maximum
<TABLE>
<S> <C>
1. Conversion Proceeds
Full Conversion Value $86,055,271
Exchange Ratio 2.8516
Offering Proceeds $45,626,250
Less: Estimated Offering Expenses 1,240,000
-----------
Net Conversion Proceeds $44,386,250
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $44,386,250
Less: Non-Cash Stock Purchases (1) 1,825,050
-----------
Net Proceeds Reinvested $42,561,200
Estimated net incremental rate of return 3.69%
-----------
Earnings Increase $1,571,360
Less: Estimated cost of ESOP borrowings 0
Less: Amortization of ESOP borrowings 0
Less: Recognition Plan Vesting (2) 237,257
-----------
Net Earnings Increase $1,334,103
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended September 30, 1997 (reported) $1,728,363 $1,334,103 $3,062,466
12 Months ended September 30, 1997 (core) $1,820,000 $1,334,103 $3,154,103
<CAPTION>
Before Net Cash After
4. Pro Forma Net Worth Conversion Proceeds Conversion
---------- -------- ----------
<S> <C> <C> <C>
September 30, 1997 $30,602,000 $42,561,200 $73,163,200
September 30, 1997 (Tangible) $30,602,000 $42,561,200 $73,163,200
<CAPTION>
Before Net Cash After
5. Pro Forma Assets Conversion Proceeds Conversion
---------- -------- ----------
<S> <C> <C> <C>
September 30, 1997 $256,993,340 $42,561,200 $299,554,540
</TABLE>
(1) Includes MRP stock purchases equal to 4.0 percent of the second step
offering.
(2) MRP is amortized over 5 years, and amortization expense is tax effected at
35.00 percent.
<PAGE>
EXHIBIT IV-9
Perpetual Bank, A Federal Savings Bank
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 1,915 13 -4 0 1,924 1,275 1.51
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 3,867 -274 93 0 3,686 3,438 1.07
FTF Texarkana Fst. Fin. Corp of AR 2,884 -21 7 0 2,870 1,787 1.61
TWIN Twin City Bancorp of TN 903 -221 75 0 757 1,272 0.60
</TABLE>
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The
information provided in this table has been obtained from sources we
believe are reliable, but we cannot guarantee the accuracy or
completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT V-1
RP Financial, LC.
Firm Qualifications Statement
<PAGE>
RP FINANCIAL, LC.
- --------------------------------------------------------------------------------
Financial Services Industry Consultants FIRM QUALIFICATION STATEMENT
RP Financial provides financial and management consulting and valuation services
to the financial services industry nationwide, particularly federally-insured
financial institutions. RP Financial establishes long-term client relationships
through its wide array of services, emphasis on quality and timeliness, hands-on
involvement by our principals and senior consulting staff, and careful
structuring of strategic plans and transactions. RP Financial's staff draws
from backgrounds in consulting, regulatory agencies and investment banking,
thereby providing our clients with considerable resources.
STRATEGIC AND CAPITAL PLANNING
RP Financial's strategic and capital planning services are designed to provide
effective workable plans with quantifiable results. Through a program known as
SAFE (Strategic Alternatives Financial Evaluations), RP Financial analyzes
strategic options to enhance shareholder value or other established objectives.
Our planning services involve conducting situation analyses; establishing
mission statements, strategic goals and objectives; and identifying strategies
for enhancement of franchise value, capital management and planning, earnings
improvement and operational issues. Strategy development typically includes the
following areas: capital formation and management, asset/liability targets,
profitability, return on equity and market value of stock. Our proprietary
financial simulation model provides the basis for evaluating the financial
impact of alternative strategies and assessing the feasibility/compatibility of
such strategies with regulations and/or other guidelines.
MERGER AND ACQUISITION SERVICES
RP Financial's merger and acquisition (M&A) services include targeting
candidates and potential acquirors, assessing acquisition merit, conducting
detailed due diligence, negotiating and structuring transactions, preparing
merger business plans and financial simulations, rendering fairness opinions and
assisting in implementing post-acquisition strategies. Through our financial
simulations, comprehensive in-house data bases, valuation expertise and
regulatory knowledge, RP Financial's M&A consulting focuses on structuring
transactions to enhance shareholder returns.
VALUATION SERVICES
RP Financial's extensive valuation practice includes valuations for a variety of
purposes including mergers and acquisitions, mutual-to-stock conversions, ESOPs,
subsidiary companies, mark-to-market transactions, loan and servicing
portfolios, non-traded securities, core deposits, FAS 107 (fair market value
disclosure), FAS 122 (loan servicing rights) and FAS 123 (stock options). Our
principals and staff are highly experienced in performing valuation appraisals
which conform with regulatory guidelines and appraisal industry standards. RP
Financial is the nation's leading valuation firm for mutual-to-stock conversions
of thrift institutions.
OTHER CONSULTING SERVICES AND DATA BASES
RP Financial offers a variety of other services including branching strategies,
feasibility studies and special research studies, which are complemented by our
quantitative and computer skills. RP Financial's consulting services are aided
by its in-house data base resources for commercial banks and savings
institutions and proprietary valuation and financial simulation models.
YEAR 2000 SERVICES
RP Financial, through a relationship with a computer research and development
company with a proprietary methodology, offers Year 2000 advisory and conversion
services to financial institutions which are more cost effective and less
disruptive than most other providers of such service.
RP Financial's Key Personnel (Years of Relevant Experience)
Ronald S. Riggins, Managing Director (17)
William E. Pommerening, Managing Director (13)
Gregory E. Dunn, Senior Vice President (15)
James P. Hennessey, Senior Vice President (10)
James J. Oren, Vice President (10)
- --------------------------------------------------------------------------------
Washington Headquarters
Rosslyn Center
1700 North Moore Street, Suite 2210 Telephone: (703) 528-1700
Arlington, VA 22209 Fax No.: (703) 528-1788
<PAGE>
EXHIBIT 99.5
SOUTHBANC SHARES, M.H.C.
907 N. Main Street
Anderson, South Carolina 29621
(864) 225-0241
NOTICE OF SPECIAL MEETING OF MEMBERS
To be Held on March __, 1998
Notice is hereby given that a special meeting ("Special Meeting") of
members of SouthBanc Shares, M.H.C. ("MHC") will be held at the main office of
Perpetual Bank, A Federal Savings Bank, 907 N. Main Street, Anderson, South
Carolina, on _________, March __, 1998, at __:00 _.m., Eastern Time. Business to
be taken up at the Special Meeting shall be:
(1) To approve an Amended Plan of Conversion from Mutual Holding
Company to Stock Holding Company and Agreement and Plan of
Reorganization ("Plan of Conversion") between the MHC and
Perpetual Bank, A Federal Savings Bank ("Savings Bank"),
pursuant to which the Savings Bank organized SouthBanc Shares,
Inc. ("Holding Company") and, upon consummation of the
following transactions, the Savings Bank will become a wholly
owned subsidiary of the Holding Company: (i) the MHC, which
currently owns 53.03% of the outstanding shares of common
stock of the Savings Bank, will convert from mutual holding
company to a federal interim stock savings bank ("Interim A")
and simultaneously merge with and into the Savings Bank, with
the Savings Bank as the surviving entity; (ii) the Savings
Bank will merge with and into an interim stock savings bank
("Interim B") to be formed as a wholly owned subsidiary of the
Holding Company, with the Savings Bank being the surviving
entity; (iii) the outstanding shares of common stock of the
Savings Bank (other than those held by the MHC which will be
canceled) ("Public Savings Bank Shares") will be exchanged for
shares of common stock of the Holding Company ("Exchange
Shares") pursuant to a ratio that will result in the holders
of such shares owning in the aggregate the same percentage of
the outstanding shares of common stock of the Holding Company
as they currently own in the Savings Bank, before giving
effect to such stockholders purchasing additional shares of
common stock of the Holding Company ("Conversion Shares") in a
concurrent stock offering by the Holding Company ("Conversion
Offerings") or by the Savings Bank's employee stock ownership
plan thereafter or receiving cash in lieu of fractional
Exchange Shares; and (iv) the offer and sale of Conversion
Shares by the Holding Company in the Conversion Offerings
(collectively, "Conversion and Reorganization"), all
undertaken pursuant to the laws of the United States and the
rules and regulations of the Office of Thrift Supervision; and
(2) To consider and vote upon any other matters that may lawfully
come before the Special Meeting.
Note: As of the date of mailing of this Notice, the Board of Directors
is not aware of any other matters that may come before the Special Meeting.
The members entitled to vote at the Special Meeting shall be those
members of the MHC at the close of business on ____________, 1998, and who
continue as members until the Special Meeting, and should the Special Meeting
be, from time to time, adjourned to a later time, until the final adjournment
thereof.
BY ORDER OF THE BOARD OF DIRECTORS
SYLVIA B. REED
SECRETARY
Anderson, South Carolina
February __, 1998
<PAGE>
PLEASE SIGN AND RETURN PROMPTLY EACH PROXY CARD YOU RECEIVE IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. THIS WILL ASSURE NECESSARY REPRESENTATION AT THE SPECIAL
MEETING, BUT WILL NOT PREVENT YOU FROM VOTING IN PERSON IF YOU SO DESIRE. THE
PROXY IS SOLICITED ONLY FOR THIS SPECIAL MEETING (AND ANY ADJOURNMENTS THEREOF)
AND WILL NOT BE USED FOR ANY OTHER MEETING. YOU MAY REVOKE YOUR WRITTEN PROXY BY
WRITTEN INSTRUMENT DELIVERED TO SYLVIA B. REED, SECRETARY, SOUTHBANC SHARES,
M.H.C., AT THE ABOVE ADDRESS AT ANY TIME PRIOR TO OR AT THE SPECIAL MEETING.
<PAGE>
SOUTHBANC SHARES, M.H.C.
907 N. Main Street
Anderson, South Carolina 29621
(864) 225-0241
PROXY STATEMENT
MARCH ___, 1998
YOUR PROXY, IN THE FORM ENCLOSED, IS SOLICITED BY THE BOARD OF
DIRECTORS OF SOUTHBANC SHARES, M.H.C. FOR USE AT A SPECIAL MEETING OF MEMBERS TO
BE HELD ON _________, MARCH __, 1998, AND ANY ADJOURNMENT OF THAT MEETING, FOR
THE PURPOSES SET FORTH IN THE FOREGOING NOTICE OF SPECIAL MEETING. YOUR BOARD OF
DIRECTORS AND MANAGEMENT URGE YOU TO VOTE FOR THE PLAN OF CONVERSION.
PURPOSE OF MEETING -- SUMMARY
A special meeting of members ("Special Meeting") of SouthBanc Shares,
M.H.C. ("MHC") will be held at the main office of Perpetual Bank, A Federal
Savings Bank, 907 N. Main Street, Anderson, South Carolina, on _________, March
__, 1998, at __:00 __.m., Eastern Time, for the purpose of considering and
voting upon an Amended Plan of Conversion and Agreement and Plan of
Reorganization ("Plan of Conversion"), which, if approved by a majority of the
total votes of the members eligible to be cast, will permit Perpetual Bank, A
Federal Savings Bank ("Savings Bank") to become a subsidiary of the Holding
Company, a newly organized Delaware corporation formed by the Savings Bank. The
reorganization of the Savings Bank and the acquisition of control of the Savings
Bank by the Holding Company are collectively referred to herein as the
"Conversion and Reorganization."
Pursuant to the MHC's Federal Mutual Holding Company Charter,
depositors of the Savings Bank, and borrowers of the Savings Bank with a loan
outstanding as of October 26, 1993 and for as long as such loan remains
outstanding, are members of the MHC. Members entitled to vote on the Plan of
Conversion are members of the MHC as of ____________, 1998 ("Voting Record
Date") who continue as members until the Special Meeting, and should the Special
Meeting be, from time to time, adjourned to a later time, until the final
adjournment thereof. The Conversion and Reorganization requires the approval of
not less than a majority of the total votes eligible to be cast at the Special
Meeting.
Pursuant to the Plan of Conversion, (i) the MHC will convert from a
federally-chartered mutual holding company to a federally-chartered interim
stock savings bank (i.e. Interim A) and simultaneously merge with and into the
Savings Bank, pursuant to which the MHC will cease to exist and the shares of
common stock, par value $1.00 per share of the Savings Bank ("Savings Bank
Common Stock") held by the MHC will be canceled, and (ii) An interim federal
stock savings bank ("Interim B") will be formed as a wholly-owned subsidiary of
the Holding Company and will merge with and into the Savings Bank. As a result
of the merger of Interim B with and into the Savings Bank, the Savings Bank will
become a wholly owned subsidiary of the Holding Company and the shares of
Savings Bank Common Stock held by persons other than the MHC ("Public Savings
Bank Shares") will be converted into shares of common stock of the Holding
Company ("Exchange Shares") pursuant to a ratio ("Exchange Ratio"), which will
result in the holders of such shares owning in the aggregate approximately the
same percentage of the Common Stock to be outstanding upon the completion of the
Conversion and Reorganization as the percentage of Savings Bank Common Stock
owned by them in the aggregate immediately prior to consummation of the
Conversion and Reorganization, but before giving effect to (a) the payment of
cash in lieu of issuing fractional Exchange Shares and (b) any Conversion Shares
(defined below) purchased by the Savings Bank's stockholders in the Conversion
Offerings (defined below).
3
<PAGE>
As part of the Plan of Conversion, nontransferable rights to subscribe
("Subscription Rights") for up to 1,983,750 shares (which may be increased to
2,281,312 shares under circumstances described in footnote 4 of the table
appearing on the cover page of the Prospectus) of Common Stock ("Conversion
Shares") have been granted, in order of priority, to (i) depositors with $50.00
or more on deposit at the Savings Bank as of the close of business on June 30,
1996 ("Eligible Account Holders"), (ii) depositors with $50.00 or more on
deposit at the Savings Bank as of the close of business on December 31, 1997
("Supplemental Eligible Account Holders"), and (iii) depositors of the Savings
Bank (other than Eligible Account Holders and Supplemental Eligible Account
Holders) as of the Voting Record Date, and borrowers of the Savings Bank with
loans outstanding as of the close of business on October 26, 1993 which continue
to be outstanding as of the close of business on the Voting Record Date ("Other
Members"), subject to the priorities and purchase limitations set forth in the
Plan of Conversion ("Subscription Offering"). Concurrently, but subject to the
prior rights of Subscription Rights holders, the Holding Company is offering the
Conversion Shares for sale to members of the general public through a direct
community offering ("Direct Community Offering") with preference given first to
Public Stockholders as of the close of business on the Voting Record Date (who
are not Eligible Account Holders, Supplemental Eligible Account Holders or Other
Members) and then to natural persons and trusts of natural persons who are
permanent residents of Anderson or Oconee Counties of South Carolina ("Local
Community"). It is anticipated that any Conversion Shares not subscribed for in
the Subscription Offering or purchased in the Direct Community Offering will be
offered to eligible members of the general public on a best efforts basis by a
selling group of broker-dealers managed by Sandler O'Neill & Partners, L.P.
("Sandler") in a syndicated community offering ("Syndicated Community
Offering"). The Subscription Offering, Direct Community Offering and the
Syndicated Community Offering are referred to collectively as the "Conversion
Offerings."
SOUTHBANC SHARES, M.H.C.
The MHC is the federally-chartered mutual holding company of the
Savings Bank. The MHC was formed in October 1993 as a result of the
reorganization of the Savings Bank into a federally chartered mutual holding
company ("MHC Reorganization"). The members of the MHC consist of depositors of
the Savings Bank and those current borrowers of the Savings Bank who had loans
outstanding as of the consummation date of the MHC Reorganization (October 26,
1993). The MHC's sole business activity is holding the 800,000 shares of Savings
Bank Common Stock, which represents 53.02% of the outstanding shares as of the
date of this Prospectus. The MHC's main office is located at 907 N. Main Street,
Anderson, South Carolina 29621, and its telephone number is (864) 225-0241. As
part of the Conversion and Reorganization, the MHC will convert to a
federally-chartered interim stock savings bank and simultaneously merge with and
into the Savings Bank, with the Savings Bank as the surviving entity.
SOUTHBANC SHARES, INC.
The Holding Company was organized on November 6, 1997 under Delaware
law at the direction of the Savings Bank to acquire the Savings Bank as a
wholly-owned subsidiary upon consummation of the Conversion and Reorganization.
The Holding Company has only engaged in organizational activities to date. The
Holding Company has received conditional OTS approval to become a savings and
loan holding company through the acquisition of 100% of the issued and
outstanding capital stock of the Savings Bank, which, along with 50% of the net
proceeds of the Conversion Offerings (see table under "PRO FORMA DATA") as
permitted by the OTS to be retained by it, and a note receivable evidencing a
loan to the Savings Bank's Employee Stock Ownership Plan ("ESOP"), will be the
only significant assets of the Holding Company. Funds retained by the Holding
Company will be used for general business activities. See "USE OF PROCEEDS."
Upon consummation of the Conversion and Reorganization, the Holding Company will
be classified as a unitary savings and loan holding company subject to OTS
regulation. See "REGULATION -- Savings and Loan Holding Company Regulations."
The main office of the Holding Company is located at 907 N. Main Street,
Anderson, South Carolina 29621, and its telephone number is (864) 225- 0241.
4
<PAGE>
PERPETUAL BANK, A FEDERAL SAVINGS BANK
The Savings Bank is a federally chartered stock savings bank
headquartered in Anderson, South Carolina. The Savings Bank was originally
chartered in 1906 and operated as a mutual institution without stockholders
until October 1993, at which time it reorganized into the mutual holding company
structure. The Savings Bank's deposits are insured by the Federal Deposit
Insurance Corporation ("FDIC") up to applicable legal limits under the Savings
Association Insurance Fund. The Savings Bank, a member of the Federal Home Loan
Bank ("FHLB") system, is regulated by the Office of Thrift Supervision ("OTS")
and the FDIC. At September 30, 1997, the Savings Bank had total assets of $257.0
million, total deposits of $201.0 million, and total stockholders' equity of
$30.8 million, on a consolidated basis.
On October 26, 1993, the MHC Reorganization was consummated and the
Savings Bank completed its initial stock offering by issuing 1,500,000 shares of
Savings Bank Common Stock at $10.00 per share, 1,385,000 shares (92.3%) of which
were sold to the MHC. The remaining 115,000 shares (7.7%) were issued to members
of the MHC, including officers, directors and employees of the Savings Bank.
In September 1996, the Savings Bank completed an additional offering of
Savings Bank Common Stock through the issuance of 585,000 shares at a price of
$19.25 to then existing members of the MHC ("Additional Offering"). In
connection with the closing of the Additional Offering, 585,000 shares of
Savings Bank Common Stock held by the MHC were canceled. Accordingly, upon
consummation of the Additional Offering on September 30, 1996, there were
1,504,601 shares of Savings Bank Common Stock issued and outstanding, of which
800,000 (53.2%) were held by the MHC and 704,601 shares (46.8%) were held by the
Public Stockholders. Currently, there are 708,803 shares (46.98%) held by the
Public Stockholders as a result of the exercise of stock options since the
consummation of the Additional Offering.
The Savings Bank considers Anderson and Oconee Counties in the
northwestern corner of South Carolina as its primary market area because a
substantial portion of its loan portfolio is secured by properties located in
those counties. The Savings Bank faces strong competition within its primary
market area. The Savings Bank also invests in loans secured by properties
located outside of its primary market area (predominately in Hilton Head Island,
South Carolina, and in the greater Greenville, South Carolina, area) as a result
of loan purchases from other lenders, including a mortgage banking company in
which a service corporation subsidiary of the Savings Bank has a one-third
equity interest.
The Savings Bank is primarily engaged in the business of attracting
deposits from the general public and using those funds, along with FHLB
advances, to originate and purchase one- to- four family mortgage loans. The
Savings Bank originates and purchases commercial real estate and construction
loans, as well as consumer loans and, to a lesser extent, commercial business
loans and multi-family real estate loans. Such latter type loans, which totalled
$71.7 million, or 40.1%, of net loans receivable at September 30, 1997, are
inherently riskier than one- to- four-family mortgage loans. As a complement to
its lending activities, the Savings Bank services mortgage loans and invests in
mortgage servicing rights.
In addition to its lending activities, the Savings Bank, through a
service corporation subsidiary, develops residential and commercial properties
located in its primary market area. The Savings Bank also invests in short-and
intermediate-term mortgage-backed securities, including collateralized mortgage
obligations ("CMOs").
The Savings Bank's principal office is located at 907 North Main
Street, Anderson, South Carolina 29621, and the telephone number at that office
is (864) 225-0241. The Savings Bank also operates five branch offices.
VOTING RIGHTS AND VOTE REQUIRED FOR APPROVAL
The MHC's Board of Directors has fixed the close of business on
___________, 1998 as the record date for the determination of members entitled
to notice of and to vote at the Special Meeting. All holders of savings
5
<PAGE>
or other authorized accounts of the Savings Bank, and borrowers of the Savings
Bank with loans outstanding as of October 26, 1993 and for as long as such loans
remain outstanding, are members of the Savings Bank under its current charter.
All members of record as of the close of business on the Voting Record Date who
continue to be members on the date of the Special Meeting or any adjournment
thereof will be entitled to vote at the Special Meeting or such adjournment.
Each eligible depositor member will be entitled at the Special Meeting
to cast one vote for each $100, or fraction thereof, of the aggregate withdrawal
value of all of the depositor's savings accounts in the Savings Bank as of the
Voting Record Date. Borrowers with loans outstanding as of October 26, 1993,
which continue to be outstanding as of the Voting Record Date will be entitled
to cast one vote for the period of time such borrowings remain in existence. No
member is entitled to cast more than 1,000 votes. Any number of members present
and voting, represented in person or by proxy, at the Special Meeting will
constitute a quorum.
Approval of the Plan of Conversion will require the affirmative vote of
a majority of the total outstanding votes of the MHC's members eligible to be
cast at the Special Meeting. As of the Voting Record Date for the Special
Meeting, there were approximately _________ votes eligible to be cast, of which
_________ votes may be cast by depositor members and ___ votes may be cast by
borrower members.
PROXIES
Members may vote at the Special Meeting or any adjournment thereof in
person or by proxy. Enclosed is a proxy which may be used by any eligible member
to vote on the Plan of Conversion. All properly executed proxies received by
management will be voted in accordance with the instructions indicated thereon
by the members giving such proxies. If no instructions are given, such proxies
will be voted in favor of the Plan of Conversion. If any other matters are
properly presented at the Special Meeting and may properly be voted on, all
proxies will be voted on such matters in accordance with the best judgment of
the proxy holders named therein. If the enclosed proxy is returned, it may be
revoked at any time before it is voted by written notice to the Secretary of the
Savings Bank, by submitting a later dated proxy, or by attending and voting in
person at the Special Meeting. The proxies being solicited are only for use at
the Special Meeting and at any and all adjournments thereof and will not be used
for any other meeting. Management is not aware of any other business to be
presented at the Special Meeting.
The trustees for individual retirement accounts at the Savings Bank,
will vote in favor of the Plan of Conversion, unless the beneficial owner
executes and returns the enclosed proxy for the Special Meeting or attends the
Special Meeting and votes in person.
To the extent necessary to permit approval of the Plan of Conversion,
proxies may be solicited by officers, directors or regular employees of the MHC,
in person, by telephone or through other forms of communication. Such persons
will be reimbursed by the MHC for their reasonable out-of-pocket expenses
incurred in connection with such solicitation. If necessary, the Special Meeting
may be adjourned to an alternative date.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors unanimously recommends that you vote "FOR" the
Plan of Conversion. Voting in favor of the Plan of Conversion will not obligate
any voter to purchase any Conversion Shares.
THE CONVERSION AND REORGANIZATION
The OTS has approved the Plan of Conversion subject to its approval by
the members of the Savings Bank and the stockholders of the Savings Bank
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.
6
<PAGE>
General
On September 22, 1997, the Boards of Directors of the MHC and the
Savings Bank unanimously adopted, and on December 22, 1997, unanimously amended,
the Plan of Conversion, pursuant to which the MHC will convert from a mutual
holding company to a stock holding company and the Savings Bank simultaneously
reorganize as a wholly-owned subsidiary of the Holding Company, a newly formed
Delaware corporation. The following discussion of all material aspects of the
Plan of Conversion is qualified in its entirety by reference to the Plan of
Conversion, which is attached hereto as Exhibit A. The OTS has approved the Plan
of Conversion subject to its approval by the members of the MHC entitled to vote
on the matter at the Special Meeting of Members called for that purpose to be
held on ____________, 1998, its approval by the stockholders of the Savings Bank
entitled to vote on the matter at the Stockholders' Meeting called for that
purpose to be held on ____________, 1998, and its approval by the stockholders
of the Savings Bank (excluding the MHC) entitled to vote on the matter at the
Stockholders' Meeting, and subject to the satisfaction of certain other
conditions imposed by the OTS in its approval.
Pursuant to the Plan of Conversion, (i) the MHC will convert from a
federally-chartered mutual holding company to a federally-chartered interim
stock savings bank (i.e. Interim A) and simultaneously merge with and into the
Savings Bank, pursuant to which the MHC will cease to exist and the shares of
Savings Bank Common Stock held by the MHC will be canceled, and (ii) An interim
federal stock savings bank ("Interim B") will be formed as a wholly-owned
subsidiary of the Holding Company and will merge with and into the Savings Bank.
As a result of the merger of Interim B with and into the Savings Bank, the
Savings Bank will become a wholly owned subsidiary of the Holding Company and
the Public Savings Bank Shares will be converted into the Exchange Shares
pursuant to the Exchange Ratio, which will result in the holders of such shares
owning in the aggregate approximately the same percentage of the Common Stock to
be outstanding upon the completion of the Conversion and Reorganization (i.e.,
the Conversion Shares and the Exchange Shares) as the percentage of Savings Bank
Common Stock owned by them in the aggregate immediately prior to consummation of
the Conversion and Reorganization, but before giving effect to (a) the payment
of cash in lieu of issuing fractional Exchange Shares and (b) any shares of
Conversion Stock purchased by the Savings Bank's stockholders in the Conversion
Offerings.
As part of the Conversion and Reorganization, the Holding Company is
offering Conversion Shares in the Subscription Offering to holders of
Subscription Rights in the following order of priority: (i) Eligible Account
Holders (depositors of the Savings Bank with $50.00 or more on deposit as of the
close of business on June 30, 1996); (ii) Supplemental Eligible Account Holders
(depositors of the Savings Bank with $50.00 or more on deposit as of the close
of business on December 31, 1997); and (iii) Other Members (depositors of the
Savings Bank as of the close of business on ___________, 1998 and borrowers of
the Savings Bank with loans outstanding as of the close of business on October
26, 1993, which continue to be outstanding as of the close of business on
__________, 1997).
Concurrently with the Subscription Offering, any Conversion Shares not
subscribed for in the Subscription Offering may be offered for sale in the
Direct Community Offering to members of the general public, with priority being
given first to Public Stockholders as of the close of business on the Voting
Record Date (who are not Eligible Account Holders, Supplemental Eligible Account
Holders or Other Members) and then to natural persons and trusts of natural
persons residing in the Local Community. Conversion Shares 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 Savings Bank or the
Holding Company with the approval of the regulatory authorities. If the
Syndicated Community Offering is determined not to be feasible because of market
conditions or otherwise, the Board of Directors of the Savings Bank will consult
with the regulatory authorities to determine an appropriate alternative method
for selling the unsubscribed Conversion Shares. The Plan of Conversion
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provides that the Conversion and Reorganization must be completed within 24
months after the date of the approval of the Plan of Conversion by the members
of the MHC.
No sales of Common Stock may be completed, either in the Subscription
Offering, Direct Community Offering or Syndicated Community Offerings unless the
Plan of Conversion is approved by the members of the MHC and the stockholders of
the Savings Bank.
The completion of the Conversion Offerings, however, is subject to
market conditions and other factors beyond the Savings Bank's control. No
assurance can be given as to the length of time after approval of the Plan of
Conversion at the Special Members Meeting and the Stockholders Meeting that will
be required to complete the Direct Community or Syndicated Community Offerings
or other sale of the Conversion Shares. If delays are experienced, significant
changes may occur in the estimated pro forma market value of the MHC and the
Savings Bank, as converted, together with corresponding changes in the net
proceeds realized by the Holding Company from the sale of the Conversion Shares.
If such events occur, and the Savings Bank does not terminate the Conversion and
Reorganization, subscribers will be resolicited and given the right to increase,
decrease or rescind their subscriptions. Unless an affirmative response is
received from subscribers that they wish to confirm their orders, the funds will
be returned promptly, together with accrued interest at the Savings Bank's
passbook rate from the date payment is received until the funds are returned to
the subscriber. If the Conversion and Reorganization is terminated, the Savings
Bank would be required to charge all Conversion and Reorganization expenses
against current income.
Orders for Conversion Shares will not be filled until at least
1,466,250 Conversion Shares have been subscribed for or sold and the OTS
approves the final valuation and the Conversion and Reorganization closes. If
the Conversion and Reorganization 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 and Reorganization, 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 Savings Bank'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 and Reorganization is not
completed, all withdrawal authorizations will be terminated and all funds, which
will be held by the Savings Bank in a segregated deposit account insured by the
FDIC up to the applicable $100,000 legal limit, held will be promptly returned
together with accrued interest at the Savings Bank's passbook rate from the date
payment is received until the Conversion and Reorganization is terminated.
Purposes of Conversion and Reorganization
The MHC, as a federally chartered mutual holding company, does not have
stockholders and has no authority to issue capital stock. As a result of the
Conversion and Reorganization, the Holding Company will be structured in the
form used by holding companies of commercial banks, most business entities and a
growing number of savings institutions. The holding company form of organization
will provide the Holding Company with the ability to diversify the Holding
Company's and the Savings Bank's business activities through acquisition of or
mergers with both stock savings institutions and commercial banks, as well as
other companies. Although there are no current arrangements, understandings or
agreements regarding any such opportunities, the Holding Company will be in a
position after the Conversion and Reorganization, subject to regulatory
limitations and the Holding Company's financial position, to take advantage of
any such opportunities that may arise.
In their decision to pursue the Conversion and Reorganization, the
Board of Directors of the MHC and the Savings Bank considered various regulatory
uncertainties associated with the mutual holding company structure including the
ability to waive dividends in the future as well as the general uncertainty
regarding a possible elimination of the federal savings association charter.
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The Conversion and Reorganization will be important to the future
growth and performance of the holding company organization by providing a larger
capital base to support the operations of the Savings Bank and Holding Company
and by enhancing their future access to capital markets, their ability to
diversify into other financial services related activities, and their ability to
provide services to the public. Since the MHC's ownership interest in the
Savings Bank is 53.03% as of the date of the Prospectus, the Savings Bank
currently does not have the ability to raise additional capital through the sale
of additional shares of Savings Bank Common Stock because OTS regulations
require that the MHC hold a majority of the outstanding shares of Savings Bank
Common Stock.
The Conversion and Reorganization also will result in an increase in
the number of shares of Common Stock to be outstanding as compared to the number
of outstanding shares of Public Savings Bank Shares which will increase the
likelihood of the development of an active and liquid trading market for the
Common Stock. In addition, the Conversion and Reorganization permit the Holding
Company to engage in stock repurchases without adverse federal income tax
consequences, unlike the Savings Bank. Currently, the Holding Company has no
plans or intentions to engage in any stock repurchases.
An additional benefit of the Conversion and Reorganization will be an
increase in the accumulated earnings and profits of the Savings Bank for federal
income tax purposes. When the Savings Bank (as a mutual institution) transferred
substantially all of its assets and liabilities to its stock savings bank
successor in the MHC Reorganization, its accumulated earnings and profits tax
attribute was not able to be transferred to the Savings Bank because no tax-free
reorganization was involved. Accordingly, this tax attribute was retained by the
Savings Bank when it converted its charter to that of the MHC, even though the
underlying retained earnings were transferred to the Savings Bank. The
Conversion and Reorganization has been structured to re-unite the accumulated
earnings and profits tax attribute retained by the MHC in the MHC Reorganization
with the retained earnings of the Savings Bank by merging the MHC with and into
the Savings Bank in a tax-free reorganization. This transaction will increase
the Savings Bank's ability to pay dividends to the Holding Company in the
future.
If the Savings Bank had undertaken a standard conversion involving the
formation of a stock holding company in 1993, applicable OTS regulations would
have required a greater amount of common stock to be sold than the amount of net
proceeds raised in the MHC Reorganization. Management believed that it was
advisable to profitably invest the $946,000 of net proceeds raised in the MHC
Reorganization and the $10.7 million of net proceeds raised in the Additional
Offering prior to raising the larger amount of capital that would have been
raised in a standard conversion. A standard conversion in 1993 also would have
immediately eliminated all aspects of the mutual form of organization.
In light of the foregoing, the Boards of Directors of the Primary
Parties believe that the Conversion and Reorganization is in the best interests
of the MHC and the Savings Bank, their respective members and stockholders, and
the communities served by the Savings Bank.
Effects of Conversion and Reorganization on Depositors and Borrowers of the
Savings Bank
General. Prior to the Conversion and Reorganization, each depositor in
the Savings Bank has both a deposit account in the institution and a pro rata
ownership interest in the net worth of the MHC based upon the balance in his or
her account, which interest may only be realized in the event of a liquidation
of the MHC. However, this ownership interest is tied to the depositor's account
and has no tangible market value separate from such deposit account. A depositor
who reduces or closes his or her account receives a portion or all of the
balance in the account but nothing for his or her ownership interest in the net
worth of the MHC, which is lost to the extent that the balance in the account is
reduced.
Consequently, the depositors of the Savings Bank normally have no way
to realize the value of their ownership interest in the MHC, which has
realizable value only in the unlikely event that the MHC is liquidated. In such
event, the depositors of record at that time, as owners, would share pro rata in
any residual surplus and reserves of the MHC after other claims are paid.
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Upon consummation of the Conversion and Reorganization, permanent
nonwithdrawable capital stock will be created to represent the ownership of the
net worth of the Holding Company. The Common Stock is separate and apart from
deposit accounts and cannot be and is not insured by the FDIC or any other
governmental agency. Certificates are issued to evidence ownership of the
permanent stock. The stock certificates are transferable, and therefore the
stock may be sold or traded if a purchaser is available with no effect on any
deposit and/or loan account(s) the seller may hold in the Savings Bank.
Continuity. The Conversion and Reorganization will not interrupt the
Savings Bank's normal business of accepting deposits and making loans. The
Savings Bank will continue to be subject to regulation by the OTS and the FDIC.
After the Conversion and Reorganization, the Savings Bank will continue to
provide services for depositors and borrowers under current policies by its
present management and staff.
The directors and officers of the Savings Bank at the time of the
Conversion and Reorganization will continue to serve as directors and officers
of the Savings Bank after the Conversion and Reorganization. The directors and
officers of the Holding Company consist of individuals currently serving as
directors and officers of the MHC and the Savings Bank, and they generally will
retain their positions in the Holding Company after the Conversion and
Reorganization.
Effect on Public Savings Bank Shares. Under the Plan of Conversion,
upon consummation of the Conversion and Reorganization, the Public Savings Bank
Shares shall be converted into Exchange Shares based upon the Exchange Ratio
without any further action on the part of the holder thereof. Upon surrender of
the Public Savings Bank Shares, Common Stock will be issued in exchange for such
shares. See "-- Delivery and Exchange of Stock Certificates."
Upon consummation of the Conversion and Reorganization, the Public
Stockholders will become stockholders of the Holding Company. For a description
of certain changes in the rights of stockholders as a result of the Conversion
and Reorganization.
Voting Rights. Presently, depositors and borrowers of the Savings Bank
are members of, and have voting rights in, the MHC as to all matters requiring
membership action. Upon completion of the Conversion and Reorganization, the MHC
will cease to exist and all voting rights in the Savings Bank will be vested in
the Holding Company as the sole stockholder of the Savings Bank. Exclusive
voting rights with respect to the Holding Company will be vested in the holders
of Common Stock. Depositors and borrowers of the Savings Bank will not have
voting rights in the Holding Company after the Conversion and Reorganization,
except to the extent that they become stockholders of the Holding Company.
Savings Accounts and Loans. The Savings Bank's savings accounts,
account balances and existing FDIC insurance coverage of savings accounts will
not be affected by the Conversion and Reorganization. Furthermore, the
Conversion and Reorganization will not affect the loan accounts, loan balances
or obligations of borrowers under their individual contractual arrangements with
the Savings Bank.
Tax Effects. The Savings Bank has received an opinion from Breyer &
Aguggia, Washington, D.C., that the Conversion and Reorganization will
constitute a nontaxable reorganization under Section 368(a)(1)(A) of the
Internal Revenue Code of 1986, as amended ("Code"). Among other things, the
opinion provides that: (i) the conversion of the MHC from a mutual holding
company to a federally-chartered interim stock savings bank (i.e., Interim A)
and its simultaneous merger with and into the Savings Bank, with the Savings
Bank as the surviving entity will qualify as a reorganization within the meaning
of Section 368(a)(1)(A) of the Code, (ii) no gain or loss will be recognized by
the Savings Bank upon the receipt of the assets of the MHC in such merger, (iii)
the merger of Interim B with and into the Savings Bank, with the Savings Bank as
the surviving entity, will qualify as a reorganization within the meaning of
Section 368(a)(1)(A) of the Code, (iv) no gain or loss will be recognized by
Interim B upon the transfer of its assets to the Savings Bank, (v) no gain or
loss will be recognized by the Savings Bank upon the receipt of the assets of
Interim B, (vi) no gain or loss will be recognized by the Holding Company upon
the receipt of Savings Bank Common Stock solely in
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exchange for Common Stock, (vii) no gain or loss will be recognized by the
Public Stockholders upon the receipt of Exchange Shares in exchange for their
Public Savings Bank Shares, (viii) the basis of the Exchange Shares to be
received by the Public Stockholders will be the same as the basis of the Public
Savings Bank Shares surrendered in exchange therefor, before giving effect to
any payment of cash in lieu of fractional Exchange Shares, (ix) the holding
period of the Exchange Shares to be received by the Public Stockholders will
include the holding period of the Public Savings Bank Shares, provided that the
Public Savings Bank Shares were held as a capital asset on the date of the
exchange, (x) no gain or loss will be recognized by the Holding Company upon the
sale of shares of Conversion Shares in the Conversion Offerings, (xi) the
Eligible Account Holders, Supplemental Eligible Account Holders and Other
Members will recognize gain, if any, upon the issuance to them of withdrawable
savings accounts in the Savings Bank following the Conversion and
Reorganization, interests in the liquidation account and nontransferable
subscription rights to purchase Conversion Stock, but only to the extent of the
value, if any, of the subscription rights, and (xii) the tax basis to the
holders of Conversion Shares purchased in the Conversion Offerings will be the
amount paid therefor, and the holding period for the Conversion Shares will
begin on the date of consummation of the Conversion Offerings, if purchased
through the exercise of Subscription Rights, and on the day after the date of
purchase, if purchased in the Community Offering or the Syndicated Community
Offering. Unlike a private letter ruling issued by the Internal Revenue Service
("IRS"), an opinion of counsel is not binding on the IRS and the IRS could
disagree with the conclusions reached therein. In the event of such
disagreement, no assurance can be given that the conclusions reached in an
opinion of counsel would be sustained by a court if contested by the IRS.
Based upon past rulings issued by the IRS, the opinion provides that
the receipt of Subscription Rights by Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members under the Plan of Conversion will be
taxable to the extent, if any, that the Subscription Rights are deemed to have a
fair market value. RP Financial, LC. ("RP Financial") a financial consulting
firm retained by the Savings Bank, 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 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 Savings Bank 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 Savings Bank has also received an opinion from Evans, Carter, Kunes
& Bennett, P.C., Charleston, South Carolina, that, assuming the Conversion and
Reorganization does not result in any federal income tax liability to the
Savings Bank, its account holders, or the Holding Company, implementation of the
Plan of Conversion will not result in any South Carolina tax liability to such
entities or persons.
The opinions of Breyer & Aguggia and Evans, Carter, Kunes & Bennett,
P.C. and the letter from RP Financial are filed as exhibits to the Registration
Statement.
THE PRECEDING DISCUSSION SUMMARIZES THE MATERIAL TAX CONSEQUENCES OF
THE CONVERSION AND REORGANIZATION. PROSPECTIVE INVESTORS, HOWEVER, ARE URGED TO
CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF THE
CONVERSION AND REORGANIZATION PARTICULAR TO THEM.
Liquidation Account. In the unlikely event of a complete liquidation of
the MHC, each depositor of the Savings Bank would receive his or her pro rata
share of any assets of the MHC remaining after payment of claims of all
creditors. 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 was to the total
value of all deposit accounts in the Savings Bank at the time of liquidation.
After the Conversion and Reorganization, each depositor, in the event of a
complete liquidation of the
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Savings Bank, would have a claim as a creditor of the same general priority as
the claims of all other general creditors of the Savings Bank. However, except
as described below, his or her claim would be solely in the amount of the
balance in his or her deposit account plus accrued interest. Each stockholder
would not have an interest in the value or assets of the Savings Bank or the
Holding Company above that amount.
The Plan of Conversion provides for the establishment, upon the
completion of the Conversion and Reorganization, of a special "liquidation
account" for the benefit of Eligible Account Holders and Supplemental Eligible
Account Holders in an amount equal to the amount of any dividends waived by the
MHC plus the greater of (i) the Savings Bank's retained earnings of $12.9
million at March 31, 1993, the date of the latest statement of financial
condition contained in the final offering circular utilized in the MHC
Reorganization, or (ii) 53.02% of the Savings Bank's total stockholders' equity
as reflected in its latest statement of financial condition contained in the
final Prospectus utilized in the Conversion Offerings. As of the date of the
Prospectus, the initial balance of the liquidation account would be $____
million. Each Eligible Account Holder and Supplemental Eligible Account Holder,
if he or she were to continue to maintain his or her deposit account at the
Savings Bank, would be entitled, upon a complete liquidation of the Savings Bank
after the Conversion and Reorganization to an interest in the liquidation
account prior to any payment to the Holding Company as the sole stockholder of
the Savings Bank. Each Eligible Account Holder and Supplemental Eligible Account
Holder would have an initial interest in such liquidation account for each
deposit account, including passbook accounts, transaction accounts such as
checking accounts, money market deposit accounts and certificates of deposit,
held in the Savings Bank at the close of business on June 30, 1996 or December
31, 1997, as the case may be. Each Eligible Account Holder and Supplemental
Eligible Account Holder will have a pro rata interest in the total liquidation
account for each of his or her deposit accounts based on the proportion that the
balance of each such deposit account on the Eligibility Record Date (June 30,
1996) or the Supplemental Eligibility Record Date (December 31, 1997), as the
case may be, bore to the balance of all deposit accounts in the Savings Bank on
such date.
If, however, on any September 30 annual closing date of the Savings
Bank, commencing September 30, 1998, the amount in any deposit account is less
than the amount in such deposit account on June 30, 1996 or December 31, 1997,
as the case may be, or any other annual closing date, then the interest in the
liquidation account relating to such deposit account would be reduced by the
proportion of any such reduction, and such interest will cease to exist if such
deposit account is closed. In addition, no interest in the liquidation account
would ever be increased despite any subsequent increase in the related deposit
account. Any assets remaining after the above liquidation rights of Eligible
Account Holders and Supplemental Eligible Account Holders are satisfied would be
distributed to the Holding Company as the sole stockholder of the Savings Bank.
The Exchange Offering
The Exchange Offering is being undertaken pursuant to the Plan of
Conversion, which must be approved by the members of the MHC at a Special
Meeting of Members and by the stockholders of the Savings Bank at the Annual
Meeting of Stockholders, both to be held on March ___, 1998. In the Exchange
Offering, each share of Savings Bank Common Stock held by the MHC (800,000
shares, or 53.02% of the outstanding shares, as of the date of this Prospectus)
will be canceled and each Public Savings Bank Share (708,873 shares, or 46.98%
of the outstanding shares, as of the date of this Prospectus) will be exchanged
for Exchange Shares pursuant the final Exchange Ratio that will result in the
Public Stockholders' aggregate ownership of approximately 46.98% of the
outstanding shares of Common Stock before giving effect to any (i) payment of
cash in lieu of issuing fractional Exchange Shares and (ii) Conversion Shares
purchased by the Public Stockholders in the Conversion Offerings. The final
Exchange Ratio will be based on the Public Stockholders' ownership interest and
not on the market value of the Public Savings Bank Shares. See "-- Stock Pricing
and Number of Shares to be Issued in the Conversion and Reorganization."
The Exchange Offering is an integral part of the Conversion and
Reorganization. Pursuant to OTS regulations, holders of Savings Bank Common
Stock do not have dissent and appraisal rights with respect to the Conversion
and Reorganization because the Savings Bank Common Stock is listed on The Nasdaq
Stock Market.
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Accordingly, the exchange of each Public Savings Bank Share for
Exchange Shares is mandatory. PUBLIC STOCKHOLDERS SHOULD NOT SEND THEIR
CERTIFICATES FOR EXCHANGE AT THIS TIME. The Holding Company will mail to each
Public Stockholder to their address of record exchange instructions and a
transmittal letter after the consummation of the Conversion and Reorganization.
See "-- Delivery and Exchange of Stock Certificates -- Exchange Shares."
The Subscription, Direct Community and Syndicated Community Offerings
Subscription Offering. In accordance with the Plan of Conversion,
nontransferable Subscription Rights to purchase the Conversion Shares have been
issued to persons and entities entitled to purchase the Conversion Shares in the
Subscription Offering. The amount of Conversion Shares which these parties may
purchase will be subject to the availability of the Conversion Shares 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 Conversion Shares are available. These priorities are as follows:
Category 1: Eligible Account Holders. Each depositor with $50.00 or
more on deposit at the Savings Bank as of the close of business on June 30, 1996
will receive nontransferable Subscription Rights to subscribe for up to the
greater of 50,000 Conversion Shares, one-tenth of one percent of the total
offering of Conversion Shares or 15 times the product (rounded down to the next
whole number) obtained by multiplying the total number of Conversion Shares 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, Conversion
Shares 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 Savings Bank in the one year
period preceding June 30, 1996 are subordinated to the Subscription Rights of
other Eligible Account Holders.
Category 2: Supplemental Eligible Account Holders. Each depositor with
$50.00 or more on deposit as of the close of business on December 31, 1997 will
receive nontransferable Subscription Rights to subscribe for up to the greater
of 50,000 Conversion Shares, 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 Conversion Shares to be issued by a
fraction of which the numerator is the amount of qualifying deposits of the
Supplemental Eligible Account Holder and the denominator is the total amount of
qualifying deposits of all Supplemental Eligible Account Holders. If the
exercise of Subscription Rights in this category results in an oversubscription,
Conversion Shares will be allocated among subscribing Supplemental Eligible
Account Holders so as to permit each Supplemental Eligible Account Holder, to
the extent possible, to purchase a number of shares sufficient to make his total
allocation equal 100 shares or the number of shares actually subscribed for,
whichever is less. Thereafter, unallocated shares will be allocated among
subscribing Supplemental Eligible Account Holders proportionately, based on the
amount of their respective qualifying deposits as compared to total qualifying
deposits of all Supplemental Eligible Account Holders.
Category 3: Other Members. Each depositor of the Savings Bank as of the
close of business on the Voting Record Date (___________, 1998) and each
borrower with a loan outstanding as of the close of business on October 26,
1993, which continues to be outstanding as of the close of business on the
Voting Record Date, will receive nontransferable Subscription Rights to purchase
up 50,000 Conversion Shares or one-tenth of one percent of the total offering of
Conversion Shares to the extent shares are available following subscriptions by
Eligible Account Holders 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.
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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 SAVINGS BANK AND THE HOLDING COMPANY.
The Holding Company and the Savings Bank 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 Noon, Eastern Time, on the
Expiration Date, whether or not the Savings Bank 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 Savings Bank after the Expiration
Date will not be accepted. The Subscription Offering may be extended by the
Holding Company and the Savings Bank up to ______, 1998 without the OTS's
approval. OTS regulations require that the Holding Company complete the sale of
Conversion Shares within 45 days after the close of the Subscription Offering.
If the Direct Community Offering and the Syndicated Community Offerings are not
completed by __________, 1998 (or ___________, 1998, if the Subscription
Offering is fully extended), all funds received will be promptly returned with
interest at the Savings Bank's passbook rate and all withdrawal authorizations
will be canceled or, if regulatory approval of an extension of the time period
has been granted, all subscribers and purchasers will be given the right to
increase, decrease or rescind their orders. If an extension of time is obtained,
all subscribers will be notified of such extension and of the duration of any
extension that has been granted, and will be given the right to increase,
decrease or rescind their orders. If an affirmative response to any
resolicitation is not received by the Holding Company from a subscriber, the
subscriber's order will be rescinded and all funds received will be promptly
returned with interest (or withdrawal authorizations will be canceled). No
single extension can exceed 90 days.
Direct Community Offering. Concurrently with the Subscription Offering,
Conversion Shares will be offered by the Holding Company to certain members of
the general public in a Direct Community Offering, with preference given first
to Public Stockholders as of the close of business on the Voting Record Date
(who are not eligible to subscribe for Conversion Shares in the Subscription
Offering) and then to natural persons and trusts of natural persons residing in
the Local Community. Purchasers in the Direct Community Offering are eligible to
purchase up to 50,000 Conversion Shares. 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 will terminate on the
Expiration Date, unless extended by the Holding Company and the Savings Bank,
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 who have subscribed for close to the maximum
number of shares of Common Stock, in the discretion of the Holding Company and
the Savings Bank may be, given the opportunity to reconfirm 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 Savings Bank'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 Savings Bank 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
and Reorganization.
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 and all funds submitted pursuant to the Direct Community
Offering will be promptly refunded with interest.
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Syndicated Community Offering. The Plan of Conversion provides that all
shares of Common Stock not purchased in the Subscription Offering and Direct
Community Offering may be offered for sale to certain members of the general
public in a Syndicated Community Offering through a syndicate of registered
broker-dealers to be managed by Sandler O'Neill acting as agent of the Holding
Company. The Holding Company and the Savings Bank have the right to reject
orders, in whole or part, in their sole discretion in the Syndicated Community
Offering. Neither Sandler O'Neill 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, Sandler O'Neill has agreed to use its
best efforts in the sale of shares in the Syndicated Community Offering.
Conversion Shares sold in the Syndicated Community Offering also will
be sold at the $20.00 Purchase Price. See "-- Stock Pricing, Exchange Ratio and
Number of Shares to be Issued." No person will be permitted to subscribe for
more than 50,000 Conversion Shares in the Syndicated Community Offering.
See "--Plan of Distribution and Selling Commissions" for a description of the
commission to be paid to the selected dealers and to Sandler O'Neill.
Sandler O'Neill 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 Sandler O'Neill 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 and Reorganization, Sandler O'Neill 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 Savings Bank's passbook rate until the
completion of the Conversion Offerings. At the completion of the Conversion and
Reorganization, the funds received in the Conversion Offerings will be used to
purchase the shares of Common Stock ordered. The shares issued in the Conversion
and Reorganization cannot and will not be insured by the FDIC or any other
government agency. In the event the Conversion and Reorganization is not
consummated as described above, funds with interest will be returned promptly to
the selected dealers, who, in turn, will promptly credit their customers'
brokerage accounts.
The Syndicated Community Offering may terminate on or at any time
subsequent to the Expiration Date, but no later than 45 days after the close of
the Subscription Offering, unless extended by the Holding Company and the
Savings Bank, with approval of the OTS.
In the event the Savings Bank 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 Savings Bank, 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 and Reorganization 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
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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 Savings
Bank will make reasonable efforts to comply with the securities laws of all
states in the United States in which persons entitled to subscribe for stock
pursuant to the Plan of Conversion reside. However, the Holding Company and the
Savings Bank 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 Savings Bank 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
Savings Bank 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 Savings Bank 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 and Selling Commissions
The Primary Parties have engaged Sandler O'Neill as a financial and
marketing advisor in connection with the Offering, and Sandler O'Neill has
agreed to use its best efforts to assist the Holding Company with the
solicitation of subscriptions and purchase orders for Conversion Shares in the
Conversion Offerings. The services to be rendered by Sandler O'Neill include the
following: (i) consulting as to the securities marketing implications of any
aspect of the Plan of Conversion or related corporate documents; (ii) reviewing
with the Board of Directors RP Financial's appraisal of the aggregate pro forma
market value of the MHC and the Savings Bank, as converted; (iii) reviewing all
offering documents, including the Prospectus, stock order forms and related
offering materials; (iv) assisting in the design and implementation of a
marketing strategy for the Conversion Offerings; (v) assisting in obtaining all
requisite regulatory approvals, (vi) assisting management in scheduling and
preparing for meetings with potential investors and broker-dealers; and (vii)
providing such other general advice and assistance as may be requested to
promote the successful completion of the Conversion Offerings. In addition,
Sandler O'Neill will manage the Syndicated Community Offering, if necessary. The
engagement of Sandler O'Neill and the services performed thereunder, including
any "due diligence" investigation of the operations of the Primary Parties,
should not be construed as an endorsement or recommendation of the suitability
of an investment in the Common Stock or a verification of the accuracy or
completeness of the information contained herein. Sandler O'Neill has not
prepared any report or opinion constituting a recommendation or advice to the
Primary Parties or to persons who may purchase Conversion Shares regarding the
suitability of an investment in the Common Stock or as to the prices at which
the Common Stock may trade after the consummation of the Conversion and
Reorganization.
Based upon negotiations between the Primary Parties and Sandler
O'Neill, Sandler O'Neill will receive a fee equal to 1.50% of the aggregate
purchase price of Conversion Shares sold in the Subscription and Community
Offerings. No fees will be paid to Sandler O'Neill on subscriptions by any
director, officer or employee of the Primary Parties or members of their
immediate families. In the event that a selected dealers agreement is entered
into in connection with a Syndicated Community Offering, the Primary Parties
will pay a fee to such selected dealers, any sponsoring dealer's fees, and a
management fee to Sandler O'Neill of 1.75% for shares sold by a National
Association of Securities Dealers, Inc. ("NASD") member firm, other than Sandler
O'Neill, pursuant to a selected dealers agreement; provided, however, that any
fees payable to Sandler O'Neill for any Conversion Shares sold by them pursuant
to such a selected dealers agreement shall not exceed 1.75% of the aggregate
purchase price of such shares and that the aggregate fees payable to Sandler
O'Neill and selected dealers shall not exceed 7.0% of the aggregate purchase
price of such shares. Sandler O'Neill will also be reimbursed for its reasonable
out-of-pocket
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expenses, including legal fees, for these services, in an amount not to exceed
$75,000. Notwithstanding the foregoing, in the event the Conversion Offerings
are not consummated or Sandler O'Neill ceases, under certain circumstances after
the subscription solicitation activities are commenced, to provide assistance to
the Primary Parties, Sandler O'Neill will be entitled to be reimbursed for its
reasonable out-of-pocket expenses as described above. The Primary Parties have
agreed to indemnify Sandler O'Neill in connection with certain claims or
liabilities, including certain liabilities under the Securities Act. Sandler
O'Neill has received advances towards its fees totalling $25,000. Total
marketing fees to Sandler O'Neill are expected to be $428,625, $506,250,
$583,875 and $673,145 at the minimum, midpoint, maximum, and 15% above the
maximum of the Estimated Valuation Range, respectively.
The management and employees of the Primary Parties may participate in
the Conversion Offerings in clerical capacities, providing administrative
support in effecting sales transactions or answering questions of a mechanical
nature relating to the proper execution of the order form. Management of the
Primary Parties may answer questions regarding the respective businesses of the
Primary Parties. 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 Primary Parties
have been instructed not to solicit offers to purchase Conversion Shares or to
provide advice regarding the purchase of Conversion Shares. None of the Primary
parties' employees or directors who participate in the Conversion Offerings will
receive any special compensation or other remuneration for such activities.
None of the Primary Parties' personnel participating in the
Subscription and Community Offering are registered or licensed as a broker or
dealer or an agent of a broker or dealer. The Primary Parties' personnel will
assist in the above-described sales activities pursuant to an exemption from
registration as a broker or dealer provided by Rule 3a4-1 ("Rule 3a4-1")
promulgated under the Securities Exchange Act of 1934, as amended ("Exchange
Act"). Rule 3a4-1 generally provides that an "associated person of an issuer" of
securities shall not be deemed a broker solely by reason of participation in the
sale of securities of such issuer if the associated person meets certain
conditions. Such conditions include, but are not limited to, that the associated
person participating in the sale of an issuer's securities not be compensated in
connection therewith at the time of participation, that such person not be
associated with a broker or dealer and that such person observe certain
limitations on his participation in the sale of securities. For purposes of this
exemption, "associated person of an issuer" is defined to include any person who
is a director, officer or employee of the issuer or a company that controls, is
controlled by or is under common control with the issuer.
Procedure for Purchasing Shares in the Subscription and Direct Community
Offerings
To ensure that each purchaser receives a prospectus at least 48 hours
prior to the Expiration Date in accordance with Rule 15c2-8 under the Exchange
Act, no Prospectus will be mailed any later than five days prior to such date or
hand delivered any later than two days prior to such date. Execution of the
Order Form will confirm receipt or delivery in accordance with Rule 15c2-8.
Order Forms will only be distributed with a Prospectus. The Savings Bank will
accept for processing only orders submitted on original Order Forms. The Savings
Bank 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 Savings Bank (which may be given by completing the
appropriate blanks in the Order Form), must be received by the Savings Bank by
Noon, Eastern Time, on the Expiration Date. Order Forms which are not received
by such time or are executed defectively or are received without full payment
(or without appropriate withdrawal instructions) are not required to be
accepted. The Holding Company and the Savings Bank 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 Savings Bank 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
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for each share subscribed for, must be received by the Savings Bank 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 Savings Bank unless
the Conversion and Reorganization 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 close of business on the Eligibility
Record Date (June 30, 1996) and/or the Supplemental Eligibility Record Date
(December 31, 1997) and/or the Voting Record Date (___________, 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.
Full payment for subscriptions may be made (i) in cash if delivered in
person at the Stock Information Center, (ii) by check, bank draft, or money
order, or (iii) by authorization of withdrawal from deposit accounts maintained
with the Savings Bank. 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 Savings Bank's passbook rate from the date payment is received until the
completion or termination of the Conversion and Reorganization. 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 and
Reorganization (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 and
Reorganization), but a hold will be placed on such funds, thereby making them
unavailable to the depositor until completion or termination of the Conversion
and Reorganization. At the completion of the Conversion and Reorganization, the
funds received in the Conversion Offerings will be used to purchase the shares
of Common Stock ordered. The shares of Common Stock issued in the Conversion and
Reorganization cannot and will not be insured by the FDIC or any other
government agency. If the Conversion and Reorganization is not consummated for
any reason, all funds submitted will be promptly refunded with interest as
described above.
If a subscriber authorizes the Savings Bank to withdraw the amount of
the aggregate Purchase Price from his or her deposit account, the Savings Bank
will do so as of the effective date of Conversion and Reorganization, though the
account must contain the full amount necessary for payment at the time the
subscription order is received. The Savings Bank will waive any applicable
penalties for early withdrawal from certificate accounts. If the remaining
balance in a certificate account is reduced below the applicable minimum balance
requirement at the time that the funds actually are transferred under the
authorization the certificate will be canceled at the time of the withdrawal,
without penalty, and the remaining balance will earn interest at the Savings
Bank's passbook rate.
"IRAs" maintained in the Savings Bank 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 Savings Bank 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 Conversion
Shares. There will be no early withdrawal or IRS interest penalties for such
transfers. The new trustee would hold the Conversion Shares in a self-directed
account in the same manner as the Savings Bank now holds the depositor's IRA
funds. An annual administrative fee may be payable to the new trustee.
Depositors interested in using funds in a Savings Bank IRA to purchase Common
Stock should contact the Stock Information Center so that the necessary forms
may be forwarded for execution and returned prior to the Expiration Date. In
addition, the provisions of ERISA and IRS regulations require that officers,
directors and 10% shareholders who use self-directed IRA funds to purchase
shares of Common Stock in the Subscription Offering, make such purchases for the
exclusive benefit of IRAs.
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Stock Pricing, Exchange Ratio and Number of Shares to be Issued
The Plan of Conversion requires that the purchase price of the
Conversion Shares must be based on the appraised pro forma market value of the
Conversion Shares, as determined on the basis of an independent valuation. The
Primary Parties have retained RP Financial to make such valuation. For its
services in making such appraisal and any expenses incurred in connection
therewith, RP Financial will receive a maximum fee of $30,000 plus out-of-pocket
expenses, together with a fee of no greater than $7,500 plus out-of-pocket
expenses for the preparation of a business plan and other services performed in
connection with the Holding Company's holding company application to the OTS.
The Primary Parties have agreed to indemnify RP Financial and its employees and
affiliates against certain losses (including any losses in connection with
claims under the federal securities laws) arising out of its services as
appraiser, except where RP Financial's liability results from its negligence or
bad faith.
The appraisal has been prepared by RP Financial in reliance upon the
information contained in this Prospectus, including the Consolidated Financial
Statements. RP Financial also considered the following factors, among others:
the present and projected operating results and financial condition of the
Primary Parties and the economic and demographic conditions in the Savings
Bank's existing market area; certain historical, financial and other information
relating to the Savings Bank; a comparative evaluation of the operating and
financial statistics of the Savings Bank with those of other similarly situated
publicly-traded companies located in South Carolina and other regions of the
United States; the aggregate size of the offering of the Conversion Shares; the
impact of the Conversion and Reorganization on the Savings Bank's capital and
earnings potential; the proposed dividend policy of the Holding Company and the
Savings Bank; and the trading market for the Savings Bank Common Stock and
securities of comparable companies and general conditions in the market for such
securities.
On the basis of the foregoing, RP Financial has advised the Primary
Parties in its opinion that the estimated pro forma market value of the MHC and
the Savings Bank, as converted, was $65.1 million as of December 5, 1997.
Because the holders of the Public Savings Bank Shares will continue to hold the
same aggregate percentage ownership interest in the Holding Company as they
currently hold in the Savings Bank (before giving effect to the payment of cash
in lieu of issuing fractional Exchange Shares and any Conversion Shares
purchased by the Savings Bank's stockholder in the Conversion Offerings), the
appraisal was multiplied by 53.02%, which represents the MHC's percentage
interest in the Savings Bank. The resulting amount represents the midpoint of
the valuation ($65.1 million), and the minimum and maximum of the valuation were
set at 15% below and above the midpoint, respectively, resulting in a range of
$55.3 million to $74.8 million. Based on such valuation, the Boards of Directors
of the Primary Parties determined that the Conversion Shares would be sold at
$20.00 per share, resulting in a range of 1,466,250 to 1,983,750 Conversion
Shares being offered, and that the Exchange Shares would be issued at $20.00
per share, resulting in a range of 1,299,231 to 1,757,783 Exchange Shares being
offered. Upon consummation of the Conversion and Reorganization, the Conversion
Shares and the Exchange Shares will represent approximately 53.02% and 46.98%,
respectively, of the Holding Company's total outstanding shares. The Boards of
Directors of the Primary Parties reviewed RP Financial's appraisal report,
including the methodology and the assumptions used by RP Financial, and
determined that the Estimated Valuation Range was reasonable and adequate. The
Boards of Directors of the Primary Parties also established the formula for
determining the Exchange Ratio. Based upon such formula and the Estimated
Valuation Range, the Exchange Ratio ranged from a minimum of 1.83281 to a
maximum of 2.47969 Exchange Shares for each Public Savings Bank Shares, with a
midpoint of 2.15625. Based upon these Exchange Ratios, the Holding Company
expects to issue between 1,299,231 and 1,757,783 shares of Exchange Shares to
the holders of Public Savings Bank Shares outstanding immediately prior to the
consummation of the Conversion and Reorganization. The Estimated Valuation Range
and the Exchange Ratio may be amended with the approval of the OTS, if required,
or if necessitated by subsequent developments in the financial condition of any
of the Primary Parties or market conditions generally. If the appraisal is
updated to below $55.3 million or above $86.1 million (the maximum of the
Estimated Valuation Range, as adjusted by 15%), such appraisal will be filed
with the SEC by post-effective amendment.
Based upon current market and financial conditions and recent practices
and policies of the OTS, in the event the Holding Company receives orders for
Conversion Shares in excess of $39.7 million
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(1,983,750 Conversion Shares) and up to $45.6 million (2,281,312 Conversion
Shares), the Holding Company may be required by the OTS to accept all such
orders. No assurances, however, can be made that the Holding Company will
receive orders for Conversion Shares in excess of the maximum of the Estimated
Valuation Range or that, if such orders are received, that all such orders will
be accepted because the Holding Company's final valuation and number of shares
to be issued are subject to the receipt of an updated appraisal from RP
Financial which reflects such an increase in the valuation and the approval of
such increase by the OTS. There is no obligation or understanding on the part of
management to take and/or pay for any shares of Conversion Shares to complete
the Conversion Offerings.
RP Financial's valuation is not intended, and must not be construed, as
a recommendation of any kind as to the advisability of purchasing such shares.
RP Financial did not independently verify the Savings Bank's Consolidated
Financial Statements and other information provided by the Savings Bank and the
MHC, nor did RP Financial value independently the assets or liabilities of the
Savings Bank. The valuation considers the Savings Bank and the MHC as going
concerns and should not be considered as an indication of the liquidation value
of the Savings Bank and the MHC. Moreover, because such valuation is necessarily
based upon estimates and projections of a number of matters, all of which are
subject to change from time to time, no assurance can be given that persons
purchasing Conversion Shares or receiving Exchange Shares in the Conversion and
Reorganization will thereafter be able to sell such shares at prices at or above
the Purchase Price or in the range of the foregoing valuation of the pro forma
market value thereof.
No sale of Conversion Shares or issuance of Exchange Shares may be
consummated unless prior to such consummation RP Financial confirms that nothing
of a material nature has occurred which, taking into account all relevant
factors, would cause it to conclude that the Purchase Price is materially
incompatible with the estimate of the pro forma market value of a share of
Common Stock upon consummation of the Conversion and Reorganization. If such is
not the case, a new Estimated Valuation Range may be set, a new Exchange Ratio
may be determined based upon the new Estimated Valuation Range, a new
Subscription and Community Offering and/or Syndicated Community Offering or
Public Offering may be held or such other action may be taken as the Primary
Parties shall determine and the OTS may permit or require.
Depending upon market or financial conditions following the
commencement of the Subscription Offering, the total number of Conversion Shares
to be issued in the Conversion Offerings may be increased or decreased without a
resolicitation of subscribers, provided that the product of the total number of
shares times the Purchase Price is not below the minimum or more than 15% above
the maximum of the Estimated Valuation Range. In the event market or financial
conditions change so as to cause the aggregate Purchase Price of the shares to
be below the minimum of the Estimated Valuation Range or more than 15% above the
maximum of such range, purchasers will be resolicited (i.e., permitted to
continue their orders, in which case they will need to affirmatively reconfirm
their subscriptions prior to the expiration of the resolicitation offering or
their subscription funds will be promptly refunded with interest at the Savings
Bank's passbook rate of interest, or be permitted to modify or rescind their
subscriptions). Any increase or decrease in the number of Conversion Shares will
result in a corresponding change in the number of Exchange Shares, so that upon
consummation of the Conversion and Reorganization, the Conversion Shares and the
Exchange Shares will represent approximately 53.02% and 46.98%, respectively, of
the Holding Company's total outstanding shares of Common Stock (exclusive of the
effects of the exercise of outstanding stock options).
An increase in the number of Conversion Shares as a result of an
increase in the appraisal of the estimated pro forma market value would decrease
both a subscriber's ownership interest and the Holding Company's pro forma net
earnings and stockholders' equity on a per share basis while increasing pro
forma net earnings and stockholders' equity on an aggregate basis. A decrease in
the number of Conversion Shares would increase both a subscriber's ownership
interest and the Holding Company's pro forma net earnings and stockholders'
equity on a per share basis while decreasing pro forma net earnings and
stockholders' equity on an aggregate basis. See "PRO FORMA DATA."
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The appraisal report of RP Financial has been filed as an exhibit to
this Registration Statement and Application for Conversion of which this
Prospectus is a part and is available for inspection in the manner set forth
under "ADDITIONAL INFORMATION."
Limitations on Purchases of Conversion Shares
The Plan of Conversion provides for certain limitations to be placed
upon the purchase of Common Shares by eligible subscribers and others in the
Conversion and Reorganization. Each subscriber must subscribe for a minimum of
25 Conversion Shares. The Plan of Conversion provides for the following purchase
limitations: (i) no person may purchase in either the Subscription Offering,
Direct Community Offering or Syndicated Community Offering more 50,000
Conversion Shares, (ii) no person, together with associates of or persons acting
in concert with such person, may purchase in either the Subscription Offering,
Direct Community Offering or Syndicated Community Offering more than 50,000
Conversion Shares, (iii) the maximum number of shares of Conversion Shares which
may be subscribed for or purchased in all categories in the Conversion and
Reorganization by any person, when combined with any Exchange Shares received,
shall not exceed 50,000 shares of Common Stock to be issued in the Conversion
and Reorganization, and (iv) the maximum number of shares of Conversion Shares
which may be subscribed for or purchased in all categories in the Conversion and
Reorganization by any person, together with any associate or any group of
persons acting in concert, when combined with any Exchange Shares received,
shall not exceed 50,000 shares of Common Stock to be issued in the Conversion
and Reorganization. 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.
Because OTS policy requires that the maximum purchase limitation
includes Exchange Shares to be issued to Public Stockholders in exchange for
their Public Savings Bank Shares, certain Public Stockholders may be limited in
their ability to purchase Conversion Shares, or even prevented from purchasing
Conversion Shares.
The Boards of Directors of the Primary Parties may, in their sole
discretion, increase the maximum purchase limitation set forth above up to 9.99%
of the Conversion Shares sold in the Conversion and Reorganization, provided
that orders for shares which exceed 5% of the Conversion Shares sold in the
Conversion and Reorganization may not exceed, in the aggregate, 10% of the
shares sold in the Conversion and Reorganization. The Savings Bank 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
Conversion Shares will be, and other large subscribers in the discretion of the
Holding Company and the Savings Bank 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 Savings Bank or a
majority-owned subsidiary of the Savings Bank) 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
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who is a director or officer of the Savings Bank 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 Savings Bank, 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 Shares purchased pursuant to the Conversion and Reorganization
will be freely transferable, except for shares purchased by directors and
officers of the Savings Bank and the Holding Company and by NASD members. See
"-- Restrictions on Transferability by Directors and Officers and NASD Members."
Delivery and Exchange of Stock Certificates
Conversion Stock. Certificates representing Conversion Shares will be
mailed by the Holding Company's transfer agent to the persons entitled thereto
at the addresses of such persons appearing on the Order Form as soon as
practicable following the consummation of the Conversion and Reorganization. Any
undeliverable certificates will be held by the Holding Company until claimed by
persons legally entitled thereto or otherwise disposed according to applicable
law. Purchasers of Conversion Shares may be unable to sell such shares until
certificates are available and delivered to them.
Exchange Shares. After the consummation of the Conversion and
Reorganization, each holder of a certificate(s) theretofore evidencing issued
and outstanding shares of Savings Bank Common Stock (other than the MHC), upon
surrender of the same to an agent, duly appointed by the Holding Company, which
is anticipated to be the transfer agent for the Common Stock ("Exchange Agent"),
shall be entitled to receive in exchange therefor a certificate(s) representing
the number of full Exchange Shares based on the Exchange Ratio. The Exchange
Agent shall mail a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to such certificate shall
pass, only upon delivery of such certificate to the Exchange Agent) advising
such holder of the terms of the Exchange Offering and the procedure for
surrendering to the Exchange Agent such certificates in exchange for a
certificate(s) evidencing Common Stock. The Savings Bank stockholders should not
forward Savings Bank Common Stock certificates to the Savings Bank or the
Exchange Agent until they have received the transmittal letter.
No holder of a certificate theretofore representing shares of Savings
Bank Common Stock shall be entitled to receive any dividends on the Common Stock
until the certificate representing such shares is surrendered in exchange for
certificates representing shares of Common Stock. In the event that dividends
are declared and paid by the Holding Company in respect of Common Stock after
the consummation of the Conversion and Reorganization, but before surrender of
certificates representing shares of Savings Bank Common Stock, dividends payable
in respect of shares of Common Stock not then issued shall accrue (without
interest). Any such dividends shall be paid (without interest) upon surrender of
the certificates representing such shares of Savings Bank Common Stock. After
the consummation of the Conversion and Reorganization, the Holding Company shall
be entitled to treat certificates representing shares of Savings Bank Common
Stock as evidencing ownership of the number of full shares of Common Stock into
which the shares of Savings Bank Common Stock represented by such certificates
shall have been converted, notwithstanding the failure on the part of the holder
thereof to surrender such certificates.
The Holding Company shall not be obligated to deliver a certificate(s)
representing shares of Common Stock to which a holder of Savings Bank Common
Stock would otherwise be entitled as a result of the Conversion and
Reorganization until such holder surrenders the certificate(s) representing the
shares of Savings Bank Common Stock for exchange as provided above, or, in
default thereof, an appropriate affidavit of loss and indemnity agreement and/or
a bond as may be required in each case by the Holding Company. If any
certificate evidencing shares of Common Stock is to be issued in a name other
than that in which the certificate evidencing Savings Bank Common
20
<PAGE>
Stock surrendered in exchange therefor is registered, it shall be a condition of
the issuance thereof that the certificate so surrendered shall be properly
endorsed and otherwise in proper form for transfer and that the person
requesting such exchange pay to the Exchange Agent any transfer or other tax
required by reason of the issuance of a certificate for shares of Common Stock
in any name other than that of the registered holder of the certificate
surrendered or otherwise establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable.
Restrictions on Repurchase of Stock
Pursuant to OTS regulations, OTS-regulated savings associations (and
their holding companies) may not for a period of three years from the date of an
institution's mutual-to-stock conversion repurchase any of its common stock from
any person, except in the event of (i) an offer made to all of its stockholders
to repurchase the common stock on a pro rata basis, approved by the OTS; or (ii)
the repurchase of qualifying shares of a director; or (iii) a purchase in the
open market by a tax-qualified or non-tax-qualified employee stock benefit plan
in an amount reasonable and appropriate to fund the plan. Furthermore,
repurchases 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 association. Any repurchases of
common stock by the Holding Company would be subject to these regulatory
restrictions unless the OTS would provide otherwise.
Restrictions on Transferability by Directors and Officers and NASD Members
Shares of Common Stock purchased in the Conversion Offerings by
directors and officers of the Holding Company may not be sold for a period of
one year following consummation of the Conversion and Reorganization, 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 Employee Stock
Ownership Plan ("ESOP") or the Management Recognition Plan ("MRP") or upon
exercise of options issued pursuant to the Stock Option Plan or purchased
subsequent to the Conversion and Reorganization 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 Savings Bank after adoption of the Plan of Conversion and
Reorganization) and their associates during the three-year period following
Conversion and Reorganization 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 and Reorganization. The registration under the
Securities Act of shares of the Common Stock to be issued in the Conversion and
Reorganization 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
21
<PAGE>
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.
USE OF PROCEEDS
The net proceeds from the sale of the Common Stock offered hereby are
estimated to range from $28.3 million to $38.5 million, or up to $44.4 million
if the Estimated Valuation Range is increased by 15%. The Holding Company has
received conditional OTS approval to purchase all of the capital stock of the
Savings Bank to be issued in the Conversion and Reorganization in exchange for
50% of the net proceeds of the Conversion Offerings. This will result in the
Holding Company retaining approximately $14.2 million to $19.3 million of net
proceeds, or up to $22.2 million if the Estimated Valuation Range is increased
by 15%, and the Savings Bank receiving an equal amount.
Receipt of 50% of the net proceeds of the sale of the Common Stock will
increase the Savings Bank's capital and will support the expansion of the
Savings Bank's existing business activities. The Savings Bank 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 and
mortgage-backed securities.
The net proceeds retained by the Holding Company initially will be
invested primarily in short-term U.S. Government and agency obligations and
mortgage-backed securities or in a deposit account either at the Savings Bank or
another financial institution. Such proceeds will be available for additional
contributions to the Savings Bank 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 also use a portion of the net proceeds retained by it to
refinance the ESOP's third party loan, which had an outstanding balance of
$804,000 at September 30, 1997.
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. In addition, the Holding
Company may consider exploring opportunities to expand into non-traditional
lines of business, such as securities brokerage, insurance agency and real
estate development activities, to the extent permitted by applicable law.
Currently, there are no specific plans, arrangements, agreements or
understandings, written or oral, regarding any diversification activities.
Following consummation of the Conversion and Reorganization, the
Holding Company's 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
22
<PAGE>
and the Savings Bank will be capitalized in excess of all applicable regulatory
requirements after any such repurchases and that capital will be adequate,
taking into account, among other things, the level of nonperforming and
classified assets, the Holding Company's and the Savings Bank's current and
projected results of operations and asset/liability structure, the economic
environment and tax and other regulatory considerations. For a discussion of the
regulatory limitations applicable to stock repurchases and current OTS policy
with respect thereto.
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, at the first annual meeting of stockholders following the
consummation of the Conversion and Reorganization. The Holding Company's Board
of Directors consists of nine persons, divided into three classes, each of which
will contain approximately one third of the Board. One class will have a term of
office expiring at the first annual meeting of stockholders; a second class will
have a term of office expiring at the second annual meeting of stockholders; and
a third class will have a term of office expiring at the third annual meeting of
stockholders.
The executive officers of the Holding Company are elected annually and
hold office until their respective successors have been elected and qualified or
until death, resignation or removal by the Board of Directors. The executive
officers of the Holding Company are:
Name Position
---- --------
Cordes G. Seabrook, Jr. Chairman of the Board
Robert W. Orr President and Chief Executive Officer
Thomas C. Hall Treasurer and Chief Financial Officer
Barry C. Visioli Senior Vice President
Sylvia B. Reed Corporate Secretary
Since the formation of the Holding Company, none of the executive
officers, directors or other personnel has received remuneration from the
Holding Company. For information concerning the principal occupations,
employment and compensation of the directors and executive officers of the
Holding Company during the past five years, see "MANAGEMENT OF THE SAVINGS BANK
- -- Biographical Information."
MANAGEMENT OF THE SAVINGS BANK
Directors and Executive Officers
The Board of Directors of the Savings Bank is presently composed of
nine members who are elected for terms of three years, approximately one-third
of whom are elected annually in accordance with the Bylaws of the Savings Bank.
The Savings Bank also has two non-voting Directors Emeriti. The executive
officers of the Savings Bank 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 Savings Bank, all of
whom will continue to serve as directors and executive officers of the Savings
Bank and the Holding Company.
23
<PAGE>
<TABLE>
<CAPTION>
Directors
Director Current Term
Name Age (1) Position Since Expires
- ---- ------- -------- ----- -------
<S> <C> <C> <C> <C>
Harold A. "Drew" Pickens, Jr. 64 Chairman of Board 1977 1998
Robert W. "Lujack" Orr 49 President, Managing Officer 1989 1998
and a Director
Jack F. McIntosh 69 Director 1988 1999
Charles W. Fant, Jr. 71 Director 1977 1999
Cordes G. Seabrook, Jr. 70 Director 1976 1999
Richard C. Ballenger 49 Director 1996 1999
F. Stevon Kay 46 Director 1996 1999
Jim Gray Watson 68 Director 1976 1998
Martha S. Clamp 55 Director 1988 1997
J. Roy Martin, Jr. 79 Director Emeritus 1988 --
Wade A. Watson, Jr. 79 Director Emeritus 1989 --
Executive Officers Who Are Not Directors
Thomas C. Hall 50 Senior Vice President -- --
and Treasurer
Barry C. Visioli 49 Senior Vice President -- --
Sylvia B. Reed 57 Corporate Secretary -- --
</TABLE>
- ---------------------
(1) As of September 30, 1997.
Biographical Information
Set forth below is certain information regarding the Directors and
executive officers of the Savings Bank. Unless otherwise stated, each Director
and executive officer has held his or her current occupation for the last five
years. There are no family relationships among or between the Directors or
executive officers except as noted below.
24
<PAGE>
Harold A. "Drew" Pickens, Jr. joined the Board of Directors of the Savings
Bank in 1997 and has served as Chairman of the Board since January 1996. He is
the owner of Harold A. Pickens and Sons, Inc., a commercial construction
contractor, with which he has been affiliated since 1956. Mr. Pickens serves as
an Elder at First Presbyterian Church, serves on the Anderson Area Medical
Center's Board of Directors, and is associated with the Boy Scouts.
25
<PAGE>
Robert W. "Lujack" Orr has been employed by the Savings Bank since 1974 and
has held a variety of positions, such as Senior Vice President/Funds Acquisition
and Executive Vice President, prior to assuming his current position as
President and Managing Officer on January 1, 1991. Mr. Orr has been a member of
the Board of Directors of the Savings Bank since 1989. Mr. Orr is past President
of the YMCA and an Elder of Central Presbyterian Church. He is a director of
First Trust, the mortgage banking company in which a service corporation
subsidiary of the Savings Bank has an equity investment.
Jack F. McIntosh is a partner in the law firm of McIntosh and Sherard,
Anderson, South Carolina, with which he has been affiliated for 41 years. Mr.
McIntosh joined the Board of Directors of the Savings Bank in 1998 and has
served as General Counsel for the Savings Bank's wholly-owned subsidiary, United
Service, since 1984. Mr. McIntosh is active in community affairs related to
health and education.
Charles W. Fant, Jr. joined the Board of Directors of the Savings Bank in
1970 and served as Chairman of the Board from 1990 until 1996. Mr. Fant is a
partner in the architectural firm of Fant & Fant Architects, Anderson, South
Carolina, with which he has been affiliated since 1956. Mr. Fant is active in
community affairs and is a member of the Board of Adjustment and Appeals for
both the City of Anderson and Anderson County, a member of the Rotary Club,
Anderson College Board of Visitors, and a Trustee of Wilmary Apartments (Housing
Ministry).
Cordes G. Seabrook, Jr. joined the Board of Directors of the Savings Bank
in 1976. He is retired from Value Systems located in Anderson, South Carolina,
owns a small business mentoring, and is a partner in Juno Investors, a real
estate holding company.
Richard C. Ballenger was appointed to the Board of Directors of the Savings
Bank in May 1996. Mr. Ballenger is the President of City Glass Company and D&B
Glass Company, Inc., with which he has been affiliated since 1972. He is an
Elder of First Presbyterian Church, a member of the Anderson Rotary Club, and is
on the Advisory Board of the Salvation Army.
F. Stevon Kay was elected to the Board of Directors of the Savings Bank in
May 1996. Mr. Kay is the President of Hill Electric Company, Inc., with which he
has been affiliated since 1969. He is a Board member of the Salvation Army Boys
and Girls Club and the President of the Anderson Youth Association. He is a
member of Concord Baptist Church.
Jim Gray Watson, the Savings Bank's former President and Chief Executive
Officer, was employed by the Savings Bank for 31 years prior to his retirement
in December 1990. Mr. Watson continues to serve as a member of the Savings
Bank's Board of Directors. He is involved in numerous charitable and community
organizations. He is an Elder of Central Presbyterian Church. He is a brother to
Wade A. Watson, Jr., Director Emeritus of the Savings Bank.
Martha C. Clamp, a semi-retired certified public accountant, joined the
Board of Directors of the Savings Bank in 1988. Ms. Clamp was employed for six
years as a staff accountant for the accounting firm of Cole, Hook & Cleary,
CPAs, Anderson, South Carolina, and was self-employed as an accountant from 1988
to 1995. She is a member of the Board of Directors of the Greater Anderson
Rotary Club.
J. Roy Martin, Jr. served as a member of the Savings Bank's Board of
Directors from 1970 until 1988. Since 1988, Mr. Martin has served as a Director
Emeritus of the Savings Bank.
Wade A. Watson, Jr., former President of the Savings Bank, served as a
member of the Savings Bank's Board of Directors from 1960 until 1989. Mr. Watson
has served as a Director Emeritus of the Savings Bank since 1989. He is an Elder
of Central Presbyterian Church and the brother of Jim Gray Watson, former
President and Chief Executive Officer of the Savings Bank.
26
<PAGE>
Thomas C. Hall has been employed by the Savings Bank since 1975 and
currently serves as Senior Vice President, Treasurer and Chief Financial Officer
responsible for areas of accounting, investments, data processing and deposits.
Mr. Hall is a member of the Financial Managers Society and a Board member of the
Foothills United Way.
Barry C. Visioli has been affiliated with the Savings Bank since 1973. He
serves as Senior Vice President and is responsible for Lending Operations. He is
a Council Member of the Salvation Army Boys and Girls Club, serves on the
Anderson County Board of Assessment Appeals, and is on the Industry Advisory
Council for School District Five. Mr. Visioli is also a director of First Trust,
the mortgage banking company in which a service corporation subsidiary of the
Savings Bank has an equity investment.
Sylvia B. Reed joined the Savings Bank in 1986 and currently serves as
Corporate Secretary and Assistant Vice President. Ms. Reed is a member and past
President and past Treasurer of the Anderson Chapter of the American Business
Women's Association, which furnishes college scholarships for students. She is a
member of the choir at Taylor Memorial Church.
27
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following tables set forth certain information concerning the
consolidated financial position and results of operations of the Savings Bank
and its subsidiaries at the dates and for the periods indicated. This
information is qualified in its entirety by reference to the detailed
information contained in the Consolidated Financial Statements and Notes thereto
presented elsewhere in the Prospectus.
<TABLE>
<CAPTION>
At September 30,
------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL CONDITION DATA:
Total assets............................................... $256,993 $209,827 $178,304 $171,533 $168,308
Cash and interest-bearing deposits......................... 13,499 13,585 6,630 8,700 5,797
Investment in limited partnership(1)....................... 5,004 -- -- -- --
Investment securities available for sale................... 11,326 2,494 800 299 --
Mortgage-backed securities available for sale.............. 35,863 43,125 46,344 50,064 12,742
Mortgage-backed securities held for investment............. -- -- -- -- 45,935
Loans receivable, net...................................... 178,772 140,758 116,539 104,852 97,004
Deposits................................................... 201,002 160,244 148,709 143,380 143,871
Borrowings................................................. 15,000 16,000 8,000 10,500 8,500
Stockholders' equity....................................... 30,602 29,091 18,232 14,637 13,921
At September 30,
-----------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In Thousands)
SELECTED OPERATING DATA:
Interest income............................................ $18,396 $14,921 $13,543 $12,075 $12,034
Interest expense........................................... 9,496 7,425 8,761 5,624 6,184
-------- -------- -------- -------- --------
Net interest income ....................................... 8,900 7,496 4,782 6,451 5,850
Provision for loan losses.................................. 655 349 362 120 364
-------- -------- -------- -------- --------
Net interest income after provision for loan losses........ 8,245 7,147 4,420 6,331 5,486
Other income............................................... 1,855 1,927 3,231 1,565 1,613
General and administrative expenses........................ 7,446 6,894 5,540 4,749 4,414
-------- -------- -------- -------- --------
Income before income taxes, change in accounting
method, and extraordinary item............................ 2,654 2,180 2,111 3,147 2,685
Income taxes............................................... 926 756 194 1,064 947
-------- -------- -------- -------- --------
Income before change in method of
accounting for income taxes............................... 1,728 1,424 1,917 2,083 1,738
Cumulative effect of change in method of
accounting for income taxes............................... -- -- -- 350 --
--------- -------- -------- -------- --------
Net income................................................. $ 1,728 $ 1,424 $ 1,917 $ 2,433 $ 1,738
======= ======= ======= ======= =======
</TABLE>
(footnotes on second following page)
28
<PAGE>
<TABLE>
<CAPTION>
Year Ended September 30,
----------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Earnings per share(2):
Before cumulative effect of change in
accounting for income taxes............... $1.15 $0.95 $1.27 $1.39 N/A
Cumulative effect of change in
accounting for income taxes............... $ -- $ -- $ -- $ .23 N/A
------ ------ ------ -----
Net income................................. $1.15 $0.95 $1.27 $1.62 N/A
===== ===== ===== =====
Dividends per share(3)....................... $1.35 $1.20 $1.05 $0.76 N/A
===== ===== ===== =====
Weighted average shares outstanding.......... 1,505,432 1,504,601 1,504,059 1,502,418 N/A
<CAPTION>
Year Ended September 30,
---------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SELECTED OTHER DATA:
Number of:
Real estate loans outstanding............... 3,446 2,653 2,846 2,889 3,423
Deposit accounts............................ 32,361 26,135 21,490 16,676 16,735
Full-service offices........................ 6 5 5 4 3
(footnotes on following page)
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
KEY OPERATING RATIOS:
At or For the
Year Ended September 30,
-------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Performance Ratios:
Return on average assets (net income divided by
average assets).............................................. 0.72% 0.75% 0.92% 1.20%(4) 1.03%
Return on average equity (net income divided by
average equity).............................................. 5.78 7.40 11.88 13.84(4) 13.36
Average equity to average assets.............................. 12.54 10.16 7.77 8.61 7.75
Interest rate spread (difference between yield
on interest-earning assets and average cost of
interest-bearing liabilities for the period)(5).............. 3.57 3.85 3.61 3.54 3.26
Net interest margin (net interest income as a
percentage of average interest-earning assets
for the period)(5)........................................... 3.96 4.16 2.90 3.86 3.59
Dividend payout ratio(3)...................................... 117.39 126.32 82.68 46.91 N/A
Non-interest expense to average assets........................ 3.20 3.72 2.74 2.74 2.63
Average interest-earning assets to average
interest-bearing liabilities................................. 109.36 107.69 86.56 109.36 108.66
Asset Quality Ratios:
Allowance for loan losses to total loans
at end of period............................................ 1.04 1.08 1.08 0.92 0.91
Net charge-offs to average outstanding loans
during the period............................................ 0.18 0.07 0.04 0.04 0.06
Ratio of non-performing assets to total assets................ 0.20 0.38 0.33 0.73 0.82
Capital Ratios:
Average equity to average assets.............................. 12.54 10.16 7.77 8.61 7.75
</TABLE>
- ----------------
(1) Represents a 20.625% equity investment in a limited partnership that
invests in mortgage servicing rights.
(2) The Savings Bank was not a public company before fiscal 1994.
(3) Takes into account dividends waived by the MHC. All dividends to the
MHC have been waived since the first quarter of fiscal 1994. The
dividend payout ratio based only on dividends actually paid to Public
Stockholders was 55.19%, 22.40%, 6.53% and 3.71% for the years ended
September 30, 1997, 1996, 1995 and 1994, respectively.
(4) Excludes the effect of the one-time change in method of accounting for
income taxes in fiscal 1994. Return on assets and return on average
equity were 1.40% and 16.16%, respectively.
(5) Excludes income on mutual funds totalling approximately $1.7 million in
fiscal 1995, which was reported as gains on sale and included in other
income.
30
<PAGE>
PRO FORMA DATA
Under the Plan of Conversion, the Conversion Shares must be sold at a
price equal to the estimated pro forma market value of the MHC and the Savings
Bank, as converted, based upon an independent valuation. The Estimated Valuation
Range as of December 5, 1997 is from a minimum of $29.3 million to a maximum of
$39.7 million with a midpoint of $34.5 million or, at a price per share of
$20.00, a minimum number of shares of 1,466,250, a maximum number of shares of
1,983,750 and a midpoint number of shares of 1,725,000. The actual net proceeds
from the sale of the Conversion Shares cannot be determined until the Conversion
and Reorganization is completed. However, net proceeds set forth on the
following table are based upon the following assumptions: (i) Sandler O'Neill
will receive fees of $428,625, $506,250, $583,875 and $673,145 at the minimum,
midpoint, maximum and 15% above the Estimated Valuation Range, respectively (see
"THE CONVERSION AND REORGANIZATION -- Plan of Distribution and Selling
Commissions); (ii) all of the Conversion Shares will be sold in the Subscription
and Direct Community Offerings; and (iii) Conversion and Reorganization
expenses, excluding the fees paid to Sandler O'Neill, will total approximately
$560,000 at each of the minimum, midpoint, maximum and 15% above the Estimated
Valuation Range. Actual expenses may vary from this estimate, and the fees paid
will depend upon the percentages and total number of shares sold in the
Subscription, Direct Community and Syndicated Community Offerings and other
factors.
The pro forma consolidated net income of the Savings Bank for the year
ended September 30, 1997 has been calculated as if the Conversion and
Reorganization had been consummated at the beginning of the period and the
estimated net proceeds received by the Holding Company and the Savings Bank had
been invested at 5.68% at the beginning of the period, which represents the
yield on the one-year U.S. Treasury Bill at September 30, 1997. Although OTS
regulations require the use of the arithmetic average of the average yield on
all interest-earning assets and the average rate paid on all deposits in
computing investment returns on net proceeds, the yield on the one-year U.S.
Treasury Bill is used because management believes it more appropriately reflects
a market rate of return. As discussed under "USE OF PROCEEDS," the Holding
Company expects to retain 50% of the net proceeds of the Conversion Offerings
from which it will refinance the existing third-party ESOP loan, with an
outstanding balance of $804,000 at September 30, 1997. The new loan is expected
to have a 10-year term and an interest rate equal to the prime rate as published
in The Wall Street Journal on the closing date of the Conversion and
Reorganization (currently 8.50%). A pro forma after-tax return of 3.69% is used
for both the Holding Company and the Savings Bank for the period, after giving
effect to an incremental combined federal and state income tax rate of 35.0% for
the year ended September 30, 1997. 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 period 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.
The following table summarizes the historical net income and
stockholders' equity of the Savings Bank and the pro forma consolidated net
income and stockholders' equity of the Holding Company for the periods and at
the date indicated, based on the minimum, midpoint and maximum of the Estimated
Valuation Range and based on a 15% increase in the maximum of the Estimated
Valuation Range. No effect has been given to: (i) the shares to be reserved for
issuance under the 1998 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 and Reorganization; (ii) withdrawals from deposit
accounts for the purpose of purchasing Conversion Shares in the Conversion
Offerings; (iii) the issuance of shares from authorized but unissued shares to
the 1998 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 and
Reorganization; or (iv) the establishment of a liquidation account for the
benefit of Eligible Account Holders and Supplemental Eligible Account Holders.
See "THE CONVERSION AND REORGANIZATION -- Stock Pricing, Exchange Ratio and
Number of Shares Issued."
The following pro forma information may not be representative of the
financial effects of the Conversion and Reorganization at the date on which the
Conversion and Reorganization 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 according to 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.
31
<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(1)
--------- --------- --------- ------------------
1,466,250 1,725,000 1,983,750 2,281,312
Shares Shares Shares Shares
at $20.00 at $20.00 at $20.00 at $20.00
Per Share Per Share Per Share Per Share
--------- --------- --------- ---------
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Gross proceeds.............................. $29,325 $34,500 $39,675 $45,626
Less: estimated expenses.................... 990 1,070 1,150 1,240
-------- -------- -------- --------
Estimated net proceeds...................... 28,335 33,430 38,525 44,386
Less: Common Stock to be acquired by
1998 MRP........................... (1,173) (1,380) (1,587) (1,825)
Add: Assets consolidated from MHC(10)..... -- -- -- --
--------- --------- --------- ---------
Net investable proceeds................ $27,162 $32,050 $36,938 $42,561
======= ======= ======= =======
Consolidated net income:
Historical................................. 1,728 1,728 1,728 1,728
Pro forma income on net proceeds(2)........ 1,003 1,183 1,364 1,571
Pro forma 1996 MRP adjustments(3).......... (84) (84) (84) (84)
Pro forma 1998 MRP adjustments(4).......... (152) (179) (206) (237)
-------- -------- -------- --------
Pro forma net income..................... $2,495 $2,648 $2,802 $2,978
====== ====== ====== ======
Consolidated net income per share(5)(6):
Historical................................. $0.64 $0.55 $0.47 $0.41
Pro forma income on net proceeds........... 0.38 0.38 0.37 0.38
Pro forma 1996 MRP adjustments(3).......... (0.03) (0.03) (0.02) (0.02)
Pro forma 1998 MRP adjustments(4).......... (0.06) (0.06) (0.06) (0.06)
------- ------- ------- -------
Pro forma net income per share........... $0.93 $0.84 $0.76 $0.71
===== ===== ===== =====
Consolidated stockholders' equity
(book value):
Historical(10)............................. $31,731 $31,731 $31,731 $31,731
Estimated net proceeds..................... 28,335 33,430 38,525 44,386
Less: Common Stock to be acquired by
ESOP............................. (804) (804) (804) (804)
Common Stock acquired by
1996 MRP......................... (938) (938) (938) (938)
Common Stock to be acquired by
1998 MRP(4)...................... (1,173) (1,380) (1,587) (1,825)
--------- --------- --------- ---------
Pro forma stockholders' equity(7)........ $57,151 $62,039 $67,927 $72,550
======= ======= ======= =======
Consolidated stockholders' equity per
share(6)(8):
Historical(4)(10).......................... $11.48 $ 9.76 $ 8.48 $ 7.38
Estimated net proceeds..................... 10.24 10.27 10.29 10.32
Less: Common Stock acquired by
ESOP............................. (0.29) (0.25) (0.21) (0.19)
Common Stock acquired by
1996 MRP(3)...................... (0.34) (0.29) (0.25) (0.22)
Common Stock to be acquired by
1998 MRP(3)....................... (0.42) (0.42) (0.42) (0.42)
-------- -------- -------- --------
Pro forma stockholders' equity per
share(9)............................... $20.67 $19.07 $17.89 $16.87
====== ====== ====== ======
Purchase Price as a percentage of pro forma
stockholders' equity per share............. 96.76% 104.88% 111.79% 118.55%
===== ====== ====== ======
Purchase Price as a multiple of pro forma
net income per share....................... 21.51x 23.81x 26.32x 28.17x
===== ===== ===== =====
(footnotes on following page)
</TABLE>
32
<PAGE>
(1) Gives effect to the sale of an additional 297,562 Conversion Shares in the
Conversion and Reorganization, which may be issued to cover an increase in
the pro forma market value of the MHC and the Savings Bank, 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 MHC and the
Savings Bank, as converted. See "THE CONVERSION AND REORGANIZATION --
Stock Pricing, Exchange Ratio and Number of Shares to be Issued."
(2) No effect has been given to withdrawals from savings accounts for the
purpose of purchasing Conversion Shares. Since funds on deposit at the
Savings Bank 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 Savings Bank for investment following receipt of
the net proceeds of the Conversion Offerings will be reduced by the amount
of such withdrawals.
(3) In calculating the pro forma effect of the 1996 MRP, the table reflects
the effect of completed open market purchases of all remaining 1996 MRP
shares subsequent to September 30, 1997. Pro forma net income adjustments
reflect additional expenses required for a full-year amortization above
the actual expense (equal to $79,000 on a pre-tax basis) recorded for the
year ended September 30, 1997. Pro forma stockholders' equity adjustments
take into account 1996 MRP stock purchases as of September 30, 1997 and
open market purchases of all remaining shares completed subsequent to
September 30, 1997. As all shares for the 1996 MRP have, subsequent to
September 30, 1997, have been purchased in open market transactions, no
assumptions have been made for the effects of issuing authorized but
unissued shares. The total additional estimated pre-tax 1996 MRP expenses
not already reflected in net income was equal to $129,000 at each of the
minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range for the year ended September 30, 1997. No effect has been
given to the shares reserved for issuance under the 1996 Stock Option
Plan. See footnote 4 for an analysis of the combined effects of the 1996
and 1998 Stock Option Plans.
(4) In calculating the pro forma effect of the 1998 MRP, it is assumed that
the required stockholder approval has been received, that the shares were
acquired by the 1998 MRP at the beginning of the period presented in open
market purchases at the Purchase Price, that 20% of the amount contributed
was an amortized expense during such period, and that the combined federal
and state income tax rate is 35.0%. 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
2.08% and pro forma net income per share would be $0.92, $0.83, $0.77 and
$0.71 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
$20.66, $19.09, $17.94 and $16.93 at the minimum, midpoint, maximum and
15% above the maximum of the Estimated Valuation Range at September 30,
1997, respectively. Shares issued under the 1998 MRP vest 20% per year
and, for purposes of this table, compensation expense is recognized on a
straight-line basis over each vesting period. In the event the fair market
value per share is greater than $20.00 per share on the date shares are
awarded under the 1998 MRP, total 1998 MRP expense would increase. The
total estimated 1998 MRP expense was multiplied by 20% (the total percent
of shares for which expense is recognized in the first year) resulting in
pre-tax 1998 MRP expense of $235,000, $276,000, $317,000 and $365,000 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 1996
Stock Option Plan (previously approved by stockholders) or the proposed
1998 Stock Option Plan. Under the 1996 Stock Option Plan, 58,500 shares
were reserved for issuance and options have been granted thereunder at an
exercise price of $25.25 per share. If stockholders approve the 1998 Stock
Option Plan following the Conversion and Reorganization, the Holding
Company will have reserved for issuance under the 1998 Stock Option Plan
authorized but unissued shares of Common Stock representing an amount of
shares equal to 10% of the Conversion Shares sold in the Conversion
Offerings. If all of the options were to be exercised utilizing these
authorized but unissued shares rather than treasury shares which could be
acquired (for both the 1996 and 1998 Stock Option Plans), the voting
interests of existing stockholders would be diluted by approximately
8.25%. Assuming stockholder approval of the 1998 Stock Option Plan, and
that all options under the 1996 and 1998 Stock Option Plans were exercised
at September 30, 1997 at an exercise price of $25.25 (to be
33
<PAGE>
adjusted pursuant to the final Exchange Ratio) and $20.00 per share,
respectively, pro forma net earnings per share would be $0.90, $0.81,
$0.75 and $0.70, respectively, for the year ended September 30, 1997, and
pro forma stockholders' equity per share would be $20.38, $18.87, $17.76
and $16.79, respectively, for the year ended September 30, 1997 at the
minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range.
(5) Per share amounts are based upon shares outstanding of 2,696,003,
3,171,768, 3,647,533 and 4,194,664 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 Conversion Shares
sold in the Conversion and Reorganization, less the number of shares
assumed to be held by the ESOP not committed to be released within the
first year following the Conversion and Reorganization.
(6) Historical per share amounts have been computed as if the Conversion
Shares expected to be issued in the Conversion and Reorganization 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 and Reorganization, the ongoing ESOP
expense, or the proposed 1998 MRP expense described above.
(7) "Book value" represents the difference between the stated amounts of the
Savings Bank'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 and Reorganization, or the federal income tax consequences of
the restoration to income of the Savings Bank's special bad debt reserves
for income tax purposes which would be required in the unlikely event of
liquidation. See "THE CONVERSION AND REORGANIZATION -- Effects of
Conversion and Reorganization on Depositors and Borrowers of the Savings
Bank." 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 2,765,481,
3,253,507, 3,741,533 and 4,302,763 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.
(10) Assets of the MHC (other than investment in the Savings Bank) consist
solely of $47,000 of cash on deposit at the Savings Bank, which amount is
eliminated in consolidation.
34
<PAGE>
CAPITALIZATION
The following table presents the historical capitalization of the
Savings Bank 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 Conversion
Shares at the minimum, midpoint, maximum and maximum, as adjusted, of the
Estimated Valuation Range. The Conversion 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 Conversion Shares to be issued in the Conversion and
Reorganization would materially affect pro forma consolidated capitalization.
<TABLE>
<CAPTION>
Holding Company Pro Forma Consolidated Capitalization
Based Upon the Sale of
Savings ----------------------------------------------------------------
Bank 1,466,250 1,725,000 1,983,750 2,281,312
Capitalization Shares at Shares at Shares at Shares at
at $20.00 $20.00 $20.00 $20.00
September 30, 1997 Per Share(1) Per Share(1) Per Share(1) Per Share(2)
------------------ ------------ ----------- ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Deposits(3)........................... $201,002 $201,002 $201,002 $201,002 $201,002
FHLB advances......................... 15,000 15,000 15,000 15,000 15,000
ESOP debt(4).......................... 804 804 804 804 804
---------- ---------- ---------- ---------- ----------
Total deposits and borrowed funds..... $216,806 $216,806 $216,806 $216,806 $216,806
======== ======== ======== ======== ========
Stockholders' equity:
Preferred stock:
250,000 shares, $.01 par
value per share, authorized;
none issued or outstanding....... -- -- -- -- --
Common Stock:
7,500,000 shares, $.01 par
value per share, authorized;
specified number of shares
assumed to be issued and
outstanding(5)................... 1,509 14 17 20 23
Additional paid-in capital......... 11,652 41,482 46,574 51,666 57,525
Retained earnings(6)............... 18,382 18,382 18,382 18,382 18,382
Unrealized loss on securities
available-for-sale, net of tax.... 188 188 188 188 188
Less:
Savings Bank Common Stock
acquired by ESOP in MHC
Reorganization and
Additional Offering............. (804) (804) (804) (804) (804)
Common Stock to be acquired
by 1996 MRP(7).................. (325) (938) (938) (938) (938)
Common Stock to be acquired
by 1998 MRP(8).................. -- (1,173) (1,380) (1,587) (1,825)
---------- --------- --------- --------- ---------
Total stockholders' equity............ $30,602 $57,151 $62,039 $66,927 $72,551
======= ======= ======= ======= =======
</TABLE>
(footnotes on following page)
35
<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 Savings Bank or changes in market conditions or general
financial, economic and regulatory conditions, or the issuance of
additional shares under the 1998 Stock Option Plan.
(2) This column represents the pro forma capitalization of the Holding Company
if the aggregate number of Conversion Shares issued in the Conversion and
Reorganization 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 Conversion Shares
are not reflected. Such withdrawals will reduce pro forma deposits by the
amounts thereof.
(4) Represents outstanding balance on third party loan used by ESOP to acquire
shares of Savings Bank Common Stock in the MHC Reorganization and the
Additional Offering.
(5) The Savings Bank'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 and Reorganization.
(6) Retained earnings are substantially restricted by applicable regulatory
capital requirements. Additionally, the Savings Bank 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 Eligible Account Holders and Supplemental Eligible Account
Holders at the consummation of the Conversion and Reorganization and
adjusted downward thereafter as such account holders reduce their balances
or cease to be depositors. See "THE CONVERSION AND REORGANIZATION --
Effects of Conversion and Reorganization on Depositors and Borrowers of
the Savings Bank -- Liquidation Account."
(7) Pro forma consolidated capitalization reflects funding of remaining shares
authorized for awards under the 1996 MRP through open market purchases of
Common Stock.
(8) Assumes the purchase in the open market at the Purchase Price, pursuant to
the proposed 1998 MRP, of a number of shares equal to 4% of the shares of
Conversion Shares issued in the Conversion and Reorganization at the
minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range. The issuance of such additional Conversion Shares from
authorized but unissued shares of Common Stock would dilute the ownership
interest of stockholders by 2.08%. The shares are reflected as a reduction
of stockholders' equity. See "PRO FORMA DATA." The 1998 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
and Reorganization.
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 the Common Stock on the Nasdaq
National Market System under the symbol "PERT," there can be no assurance that
the Holding Company will meet Nasdaq National Market System listing
requirements, which include a minimum market capitalization, at least three
market makers and a minimum number of record holders. Sandler O'Neill has agreed
to make a market for the Common Stock following consummation of the Conversion
and Reorganization 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. Based on the level of market making in the Public Savings Bank
Shares, the Holding Company anticipates that prior to the completion of the
Conversion and Reorganization it will be able to obtain the commitment from at
least two additional broker-dealers to act as market maker for the Common Stock.
Additionally, the development of a liquid public market depends on the existence
of willing buyers and sellers, the presence of which is not within the control
of the Holding Company, the Savings Bank 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.
36
<PAGE>
Under such circumstances, investors in the Common Stock could have difficulty
disposing of their shares on short notice and should not view the Common Stock
as a short-term investment. Furthermore, there can be no assurance that
purchasers will be able to sell their shares at or above the Purchase Price or
that quotations will be available on the Nasdaq National Market System as
contemplated.
Since September 30, 1996 (the consummation date of the Additional
Offering), the Public Savings Bank Shares have been listed on the Nasdaq
SmallCap Market under the symbol "PERT." Before that date, the Public Savings
Bank Shares were unlisted and traded in privately negotiated transactions. At
September 30, 1997, there were 294 record holders of the Public Savings Bank
Shares (not including holders in nominee or "street name") and four market
makers in the Public Savings Bank Shares as reported by the Nasdaq Stock Market.
The following table sets forth the high and low trading prices, as reported by
Nasdaq, and cash dividends paid for each quarter during the fiscal 1997. Market
price data for fiscal 1996 is not presented because the Public Savings Bank
Shares traded in private transactions for which comparable data is unavailable.
The Savings Bank paid a quarterly cash dividend of $0.30 on the outstanding
Public Savings Bank Shares during fiscal 1996.
<TABLE>
<CAPTION>
Cash Dividend
Fiscal 1997 High Low Declared
- ----------- ---- --- --------
<S> <C> <C> <C>
Quarter Ended December 31, 1996............... $24.25 $20.25 $0.30
Quarter Ended March 31, 1997.................. 26.50 22.50 0.35
Quarter Ended June 30, 1997................... 29.75 24.00 0.35
Quarter Ended September 30, 1997.............. 57.00 30.25 -0.35
</TABLE>
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 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.
Conversion Regulations
OTS regulations prohibit any person from making an offer, announcing an
intent to make an offer or participating in any other arrangement to purchase
stock or acquiring stock or subscription rights in a converting institution (or
its holding company) from another person prior to completion of its conversion.
Further, without the prior written approval of the OTS, no person may make such
an offer or announcement of an offer to purchase shares or actually acquire
shares in the converting institution (or its holding company) for a period of
three years from the date of the completion of the conversion if, upon the
completion of such offer, announcement or acquisition, that person would become
the beneficial owner of more than 10% of the outstanding stock of the
institution (or its holding company). The OTS has defined "person" to include
any individual, group acting in concert, corporation, partnership, association,
joint stock company, trust, unincorporated organization or similar company, a
syndicate or any other group formed for the purpose of acquiring, holding or
disposing of securities of an insured institution. However, offers made
exclusively to an association (or its holding company) or an underwriter or
member of a selling group acting on the converting institution's (or its holding
company's) behalf for resale to the general public are excepted. The regulation
also provides civil penalties for willful violation or assistance in any such
violation of the regulation by any person connected with the management of the
converting institution (or its holding company) or who controls more than 10% of
the outstanding shares or voting rights of a converting or converted institution
(or its holding company).
As permitted by OTS regulations, the Savings Bank's Federal Stock Charter
contains a provision whereby the acquisition or offer to acquire ownership of
more than 10% of the issued and outstanding shares of any class of equity
securities of the Savings Bank by any person, either directly or through an
affiliate of such person, will be
37
<PAGE>
prohibited for a period of five years following the date of consummation of the
Conversion and Reorganization. Any stock in excess of 10% acquired in violation
of the Federal Stock Charter provision will not be counted as outstanding for
voting purposes. Furthermore, for five years from the consummation date of the
MHC Reorganization, stockholders of the Savings Bank will not be permitted to
call a special meeting of stockholders relating to a change of control of the
Savings Bank or a charter amendment and will not be permitted to cumulate their
votes in the election of directors.
Change of Control Regulations
Under the Change in Bank Control Act, no person may acquire control of an
insured federal savings and loan association or its parent holding company
unless the OTS has been given 60 days' prior written notice and has not issued a
notice disapproving the proposed acquisition. In addition, OTS regulations
provide that no company may acquire control of a savings association without the
prior approval of the OTS. Any company that acquires such control becomes a
"savings and loan holding company" subject to registration, examination and
regulation by the OTS.
Control, as defined under federal law, means ownership, control of or
holding irrevocable proxies representing more than 25% of any class of voting
stock, control in any manner of the election of a majority of the savings
association's directors, or a determination by the OTS that the acquiror has the
power to direct, or directly or indirectly to exercise a controlling influence
over, the management or policies of the institution. Acquisition of more than
10% of any class of a savings association's voting stock, if the acquiror also
is subject to any one of eight "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.
DESCRIPTION OF CAPITAL STOCK OF THE HOLDING COMPANY
General
The Holding Company is authorized to issue 7,500,000 shares of Common
Stock having a par value of $.01 per share and 250,000 shares of preferred stock
having a par value of $.01 per share. The Holding Company currently expects to
issue up to 3,741,533 shares of Common Stock (subject to adjustment up to
4,301,736 shares) and no shares of preferred stock in the Conversion and
Reorganization. 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.
38
<PAGE>
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. The holders of Common Stock of the
Holding Company will be entitled to receive and share equally in such dividends
as may be declared by the Board of Directors of the Holding Company out of funds
legally available therefor. If the Holding Company issues preferred stock, the
holders thereof may have a priority over the holders of the Common Stock with
respect to dividends.
Stock Repurchases. The Plan of Conversion and OTS regulations place
certain limitations on the repurchase of the Holding Company's capital stock.
See "THE CONVERSION AND REORGANIZATION -- Restrictions on Repurchase of Stock."
Voting Rights. Upon Conversion and Reorganization, 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 Federal law or
as are otherwise presented to them by the Board of Directors. Except as
discussed in "RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY," each holder
of Common Stock will be entitled to one vote per share and will not have any
right to cumulate votes in the election of directors. If the Holding Company
issues preferred stock, holders of the Holding Company preferred stock may also
possess voting rights. Certain matters require a vote of 80% of the outstanding
shares entitled to vote thereon. See "RESTRICTIONS ON ACQUISITION OF THE HOLDING
COMPANY."
As a federal stock savings bank, corporate powers and control of the
Savings Bank are vested in the Board of Directors, who elect the officers of the
Savings Bank and who fill any vacancies on the Board of Directors as it exists
upon Conversion and Reorganization. Subsequent to Conversion and Reorganization,
voting rights will be vested exclusively in the owners of the shares of capital
stock of the Savings Bank, 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 Savings Bank.
Liquidation. In the event of any liquidation, dissolution or winding up of
the Savings Bank, the Holding Company, as holder of the Savings Bank's capital
stock would be entitled to receive, after payment or provision for payment of
all debts and liabilities of the Savings Bank (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 AND REORGANIZATION"), all assets
of the Savings Bank 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 Reorganization 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
39
<PAGE>
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 "RESTRICTIONS ON ACQUISITION OF THE HOLDING
COMPANY."
Effect of Receivership on the Common Stock
In the event of the receivership of the Savings Bank, the FDIC, as
receiver, shall, by operation of law, succeed to, among other things, all the
rights, titles, powers and privileges of the Savings Bank and its stockholder,
the Holding Company. As provided by the procedures and priorities applicable to
receiverships of savings institutions, the holders of the Common Stock would be
entitled to receive any funds remaining after all depositors, creditors, other
claimants (other than holders of stock ranking junior to or on a parity with the
Common Stock) and administrative expenses are paid.
Transfer Agent and Registrar
ChaseMellon Securities is the transfer agent and registrar for shares of
the Common Stock.
REVIEW OF OTS ACTION
Any person aggrieved by a final action of the OTS which approves, with or
without conditions, or disapproves a plan of conversion pursuant to 12 C.F.R.
Part 563b may obtain review of such action by filing in the court of appeals of
the United States for the circuit in which the principal office or residence of
such person is located, or in the United States Court of Appeals for the
District of Columbia, a written petition praying that the final action of the
OTS be modified, terminated or set aside. Such petition must be filed within 30
days after the publication of notice of such final action in the Federal
Register, or 30 days after the mailing by the applicant of the notice to members
as provided for in 12 C.F.R. ss.563b.6(c), whichever is later. The further
procedure for review is as follows: A copy of the petition is forthwith
transmitted to the OTS by the clerk of the court and thereupon the OTS files in
the court the record in the proceeding, as provided in Section 2112 of Title 28
of the United States Code. Upon the filing of the petition, the court has
jurisdiction, which upon the filing of the record is exclusive, to affirm,
modify, terminate, or set aside in whole or in part, the final action of the
OTS. Review of such proceedings is as provided in Chapter 7 of Title 5 of the
United States Code. The judgment and decree of the court is final, except that
they are subject to review by the United States Supreme Court upon certiorari as
provided in Section 1254 of Title 28 of the United States Code.
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
Reorganization and will not deregister its Common Stock for a period of at least
three years following the completion of the Conversion and Reorganization. Upon
such registration, the proxy solicitation and tender offer rules, insider
trading reporting and restrictions, annual and periodic reporting and other
requirements of the Exchange Act will apply.
40
<PAGE>
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 Conversion and Reorganization have been opined upon by Breyer & Aguggia and
the South Carolina tax consequences of the Conversion and Reorganization have
been opined upon by Evans, Carter, Kunes & Bennett, P.A., Charleston, South
Carolina. Breyer & Aguggia and Evans, Carter, Kunes & Bennett, P.A. have
consented to the references herein to their opinions. Certain legal matters will
be passed upon for Sandler O'Neill by Muldoon, Murphy & Faucette, Washington,
D.C.
EXPERTS
The consolidated financial statements of the Savings Bank as of September
30, 1997 and 1996 and for each of the years in the three-year period ended
September 30, 1997, have been included herein and in the Registration Statement
in reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants, appearing elsewhere herein, and upon the authority of said
firm as experts in accounting and auditing.
RP Financial has consented to the publication herein of the summary of its
report to the Savings Bank setting forth its opinion as to the estimated pro
forma market value of the MHC and the Savings Bank, 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. 333-42517) under the Securities Act with respect to the
Common Stock offered in the Conversion and Reorganization. The 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 MHC has filed with the OTS an Application for Approval of Conversion,
which includes proxy materials for the Special Members' Meeting and the
Stockholders' Meeting and certain other information. The 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 OTS Southeast Regional Office, 1475 Peachtree Street, N.E.,
Atlanta, Georgia 30309.
Copies of the Holding Company's Certificate of Incorporation and Bylaws
may be obtained by written request to the Savings Bank.
BY ORDER OF THE BOARD OF DIRECTORS
SYLVIA B. REED
SECRETARY
Anderson, South Carolina
February __, 1998
41
<PAGE>
YOUR BOARD OF DIRECTORS URGES YOU TO CONSIDER CAREFULLY THE INFORMATION
CONTAINED IN THIS PROXY STATEMENT AND THE PROSPECTUS AND, WHETHER OR NOT YOU
PLAN TO BE PRESENT IN PERSON AT THE SPECIAL MEETING, TO FILL IN, DATE, SIGN AND
RETURN THE ENCLOSED PROXY CARD(S) AS SOON AS POSSIBLE TO ASSURE THAT YOUR VOTES
WILL BE COUNTED. THIS WILL NOT PREVENT YOU FROM VOTING IN PERSON IF YOU ATTEND
THE SPECIAL MEETING. YOU MAY REVOKE YOUR PROXY BY WRITTEN INSTRUMENT DELIVERED
TO THE SECRETARY OF THE SAVINGS BANK AT ANY TIME PRIOR TO OR AT THE SPECIAL
MEETING OR BY ATTENDING THE SPECIAL MEETING AND VOTING IN PERSON.
--------------------
THIS PROXY STATEMENT IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY STOCK. THE OFFER WILL BE MADE ONLY BY THE PROSPECTUS IN THOSE
JURISDICTIONS IN WHICH IT IS LAWFUL TO MAKE SUCH OFFER.
42
<PAGE>
EXHIBIT A
SOUTHBANC SHARES, M.H.C.
PERPETUAL BANK, A FEDERAL SAVINGS BANK
ANDERSON, SOUTH CAROLINA
AMENDED PLAN OF CONVERSION FROM MUTUAL HOLDING COMPANY TO STOCK
HOLDING COMPANY AND AGREEMENT AND PLAN OF REORGANIZATION
I. General
-------
For purposes of this section, all capitalized terms have the meanings
ascribed to them in Section II unless otherwise defined herein.
SouthBanc Shares, M.H.C., Anderson, South Carolina ("MHC") was formed
on October 26, 1993 to act as the federally chartered mutual holding company for
Perpetual Bank, A Federal Savings Bank, Anderson, South Carolina ("Savings
Bank"), a federally chartered capital stock savings bank. As of the date hereof,
the MHC beneficially and of record owns 800,000 shares of common stock, par
value $1.00 per share, of the Savings Bank ("Savings Bank Common Stock"),
representing approximately 53.02% of the outstanding voting stock of the Savings
Bank and the remaining 708,873 shares of Savings Bank Common Stock, or 46.98%,
are owned by persons other than the MHC ("Public Stockholders").
This Plan of Conversion from Mutual Holding Company to Stock Holding
Company and Agreement and Plan of Reorganization ("Plan") provides for the
conversion of the MHC to the stock form of organization and the reorganization
of the Savings Bank as a wholly owned subsidiary of a newly formed stock holding
company (collectively, "Conversion and Reorganization"). The Boards of Directors
of the MHC and the Savings Bank believe that the Conversion and Reorganization
is in the best interests of the MHC, the members of the MHC, the Savings Bank
and its stockholders. As a result of the Conversion and Reorganization, the
Savings Bank will be wholly owned by a stock holding company, which is a more
common structure and form of ownership than a mutual holding company. The Board
of Directors determined that the Plan equitably provides for the interests of
Members through the granting of subscription rights and the establishment of a
liquidation account and that consummation of the Conversion and Reorganization
would not adversely impact the stockholders' equity of the Savings Bank.
The Conversion and Reorganization will provide the Savings Bank with a
larger capital base which will enhance its ability to pursue lending and
investment opportunities, as well as opportunities for growth and expansion. The
Conversion and Reorganization also will provide a more flexible operating
structure, which will enable the Savings Bank to compete more effectively with
other financial institutions. In addition, the Conversion and Reorganization
will raise additional equity capital for the Savings Bank. Finally, the
Conversion and Reorganization has been structured to reunite the accumulated
earnings and profits retained by the MHC with the retained earnings of the
Savings Bank through a tax-free reorganization.
Pursuant to the Plan, the Savings Bank will form a new first-tier
subsidiary which will be incorporated under state law as a stock corporation
("Holding Company"). The Holding Company will then form an interim federal stock
savings bank ("Interim B") as a wholly owned subsidiary. As described in greater
detail herein, simultaneously with the conversion of the MHC to an interim
federal stock savings bank ("Interim A"), the Savings Bank, MHC and Holding
Company will undergo a reorganization in which Interim A will merge with and
into the Savings Bank, Interim B will merge with and into the Savings Bank, the
Holding Company will become the parent company of the Savings Bank, and the
Holding Company will issue and sell its Conversion Stock pursuant to this Plan.
On September 22, 1997, after careful study and consideration, the
Boards of Directors of the MHC and the Savings Bank adopted, and on December 22,
1997 and February 17, 1998, subsequently amended, this Plan. The Plan must be
approved by the affirmative vote of a majority of the total number of votes
eligible to be cast by Members of the MHC at a special meeting to be called for
that purpose and by the holders of at least two-thirds of the shares of
outstanding Savings Bank Common Stock eligible to vote at an annual meeting of
the Savings Bank
<PAGE>
Stockholders, or at a special meeting of the Savings Bank Stockholders called
for the purpose of submitting the Plan for approval. Prior to the submission of
the Plan to the Members and the Public Stockholders for consideration, the Plan
must be approved by the Office of Thrift Supervision ("OTS").
II. Definitions
-----------
For the purposes of this Plan, the following terms have the following
meanings:
A. Acting in Concert: (i) Knowing participation in a joint activity or
-----------------
interdependent conscious parallel action towards a common goal whether or not
pursuant to an express agreement; or (ii) a combination or pooling of voting or
other interests in the securities of an issuer for a common purpose pursuant to
any contract, understanding, relationship, agreement or other arrangement,
whether written or otherwise. A Person (as defined herein) who acts in concert
with another Person ("other party") shall also be deemed to be acting in concert
with any Person who is also acting in concert with that other party, except that
any Tax-Qualified Employee Stock Benefit Plan will not be deemed to be acting in
concert with its trustee or a Person who serves in a similar capacity solely for
the purpose of determining whether stock held by the trustee and stock held by
the Tax-Qualified Employee Benefit Plan will be aggregated.
B. Associate: When used to indicate a relationship with any Person,
---------
means (i) any corporation or organization (other than the Primary Parties or a
majority-owned subsidiary of either thereof) of which such Person is an officer
or partner or is, directly or indirectly, the beneficial owner of ten percent or
more of any class of equity securities, (ii) any trust or other estate in which
such Person has a substantial beneficial interest or as to which such Person
serves as trustee or in a similar fiduciary capacity, except that it does not
include a Tax-Qualified Employee Stock Benefit Plan and (iii) any relative or
spouse of such Person, or any relative of such spouse, who has the same home as
such Person or who is a director or officer of any of the MHC, Savings Bank or
Holding Company or any of their subsidiaries.
C. Capital Stock: Any and all authorized capital stock of the
-------------
Savings Bank.
D. Common Stock: Collectively, Conversion Stock and Exchange
------------
Stock.
E. Conversion and Reorganization: Collectively, (i) the
-----------------------------
conversion of the MHC into an interim federal stock savings bank ("Interim A")
and the simultaneous merger of Interim A with and into the Savings Bank, with
the Savings Bank being the surviving institution; (ii) the merger of an interim
federal stock savings bank subsidiary of the Holding Company ("Interim B") with
and into the Savings Bank, with the Savings Bank being the surviving institution
and becoming a wholly owned subsidiary of the Holding Company; (iii) the
exchange of shares of Savings Bank Common Stock (other than those held by the
MHC which shall be canceled) for shares of Holding Company Common Stock; and
(iv) the issuance of Conversion Stock by the Holding Company as provided for in
this Plan.
F. Conversion Stock: Holding Company Common Stock offered and
----------------
issued by the Holding Company in the Offerings pursuant to this Plan.
G. Direct Community Offering: The offering of Conversion Stock
-------------------------
for sale to the public.
H. Eligibility Record Date: June 30, 1996.
-----------------------
I. Eligible Account Holder: Holder of a Qualifying Deposit on
-----------------------
the Eligibility Record Date.
J. Exchange Ratio: The ratio at which shares of Holding Company Common
--------------
Stock will be exchanged for shares of Savings Bank Common Stock held by the
Public Stockholders upon consummation of the Conversion and Reorganization. The
exact rate shall be determined by the MHC and the Savings Bank at the time the
Purchase Price (as defined in Section XI.B.) is determined and shall equal the
rate that will result in the Public Stockholders
2
<PAGE>
owning in the aggregate approximately the same percentage of shares of common
stock of the Holding Company to be outstanding upon completion of the Conversion
and Reorganization as the percentage of Savings Bank Common Stock owned by them
in the aggregate immediately prior to consummation of the Conversion and
Reorganization, before giving effect to (i) the payment of cash in lieu of
issuing fractional shares of Holding Company Common Stock, and (ii) any shares
of Conversion Stock purchased by Public Stockholders or any Tax-Qualified
Employee Stock Benefit Plans.
K. Exchange Stock: Holding Company Common Stock issued to the
--------------
Public Stockholders in exchange for Savings Bank Common Stock.
L. FDIC: Federal Deposit Insurance Corporation.
----
M. Form AC Application: The application submitted by the MHC to
-------------------
the OTS on OTS Form AC for approval of the Conversion and Reorganization.
N. H-(e)1 Application: The application submitted to the OTS on
------------------
OTS Form H-(e)1 or, if applicable, OTS Form H-(e)1-S, for approval of the
Holding Company acquisition of all of the Capital Stock.
O. Holding Company: The corporation to be formed by the Savings
---------------
Bank under state law initially as a first tier, wholly owned subsidiary of the
Savings Bank. Upon completion of the Conversion, the Holding Company shall hold
all of the outstanding capital stock of the Savings Bank.
P. Holding Company Common Stock: The common stock, $0.01 par
----------------------------
value per share, of the Holding Company.
Q. Interim A: "Perpetual Interim "A" Bank, A Federal Savings
---------
Bank," which will be the interim federal stock savings bank resulting from the
conversion of the MHC to stock form immediately prior to the merger of Interim B
into the Savings Bank.
R. Interim B: "Perpetual Interim "B" Bank, A Federal Savings
---------
Bank," which will be formed as a wholly owned interim federal stock savings bank
subsidiary of the Holding Company, which will merge with and into the Savings
Bank immediately after the merger of Interim A into the Savings Bank.
S. Local Community: Anderson and Oconee Counties of the State of
---------------
South Carolina.
T. Market Maker: A dealer (i.e., any Person who engages directly
------------
or indirectly as agent, broker, or principal in the business of offering,
buying, selling, or otherwise dealing or trading in securities issued by another
Person) who, with respect to a particular security, (i) regularly publishes bona
fide, competitive bid and offer quotations in a recognized inter-dealer
quotation system or furnishes bona fide competitive bid and offer quotations on
request and (ii) is ready, willing and able to effect transactions in reasonable
quantities at its quoted prices with other brokers or dealers.
U. Member: Any Person qualifying as a member of the MHC pursuant
------
to its charter and bylaws.
V. MHC: SouthBanc Shares, M.H.C., Anderson, South Carolina.
---
W. Offerings: Collectively, the Subscription Offering, Direct
---------
Community Offering and Syndicated Community Offering.
X. Officer: An executive officer of any or all of the Primary
-------
Parties, which includes the Chief Executive Officer, President, Executive Vice
President, Senior Vice Presidents, Vice Presidents in charge of principal
3
<PAGE>
business functions, Secretary, Controller, and any Person performing functions
similar to those performed by the foregoing persons.
Y. Order Form(s): Form(s) to be used to purchase Conversion Stock
-------------
sent to Eligible Account Holders and other parties eligible to purchase
Conversion Stock in the Subscription Offering.
Z. Other Member: A Member (other than an Eligible Account Holder
------------
or Supplemental Eligible Account Holder) at the close of business on the Voting
Record Date.
AA. Person: An individual, a corporation, a partnership, an
------
association, a joint-stock company, a trust (including Individual Retirement
Accounts and KEOGH Accounts), any unincorporated organization, a government or
political subdivision thereof or any other entity.
BB. Plan: This Plan of Conversion from Mutual Holding Company to
----
Stock Holding Company and Agreement and Plan of Reorganization, as originally
adopted by the Boards of Directors of the MHC and the Savings Bank, or as
amended in accordance with its terms.
CC. Primary Parties: Collectively, the MHC, the Savings Bank and
---------------
the Holding Company.
DD. Public Stockholder: Any Person who owns Savings Bank Common
------------------
Stock, other than the MHC, as of the Voting Record Date.
EE. Qualifying Deposit: The deposit balance in any Savings Account
------------------
as of the close of business on the Eligibility Record Date or the Supplemental
Eligibility Record Date, as applicable; provided, however, that no Savings
Account with a deposit balance of less than $50.00 shall constitute a Qualifying
Deposit.
FF. Registration Statement: The registration statement on SEC Form
----------------------
S-1, or similar form, filed by the Holding Company with the SEC for the purpose
of registering the Conversion Stock under the Securities Act of 1933, as
amended.
GG. Savings Account(s): Withdrawable deposit(s) in the Savings
------------------
Bank, including certificates of deposit, demand deposit accounts and non-
interest-bearing deposit accounts.
HH. Savings Bank: Perpetual Bank, A Federal Savings Bank,
------------
Anderson, South Carolina.
II. Savings Bank Common Stock: The common stock of the Savings
-------------------------
Bank, par value $1.00 per share.
JJ. SEC: Securities and Exchange Commission.
---
KK. Special Meeting of Members: The special meeting of the
--------------------------
Members, and any adjournments thereof, held to consider and vote upon the Plan.
LL. Meeting of Stockholders: The meeting of the stockholders of
-----------------------
the Savings Bank, and any adjournments thereof, to be called and held for the
purpose of submitting the Plan for their approval. Such meeting may either be an
annual or special meeting.
MM. Subscription Offering: The offering of Conversion Stock to
---------------------
Eligible Account Holders, Supplemental Eligible Account Holders and Other
Members under the Plan.
NN. Subscription Rights: Nontransferable, non-negotiable, personal
-------------------
rights of Eligible Account Holders, Supplemental Eligible Account Holders and
Other Members to purchase Conversion Stock.
4
<PAGE>
OO. Supplemental Eligibility Record Date: The last day of the
------------------------------------
calendar quarter preceding the approval of the Plan by the OTS.
PP. Supplemental Eligible Account Holder: Holder of a Qualifying
------------------------------------
Deposit in the Savings Bank (other than an Officer or director of the Savings
Bank or their Associates) on the Supplemental Eligibility Record Date.
QQ. Syndicated Community Offering: The offering for sale by a
-----------------------------
syndicate of broker-dealers to the general public of shares of Conversion Stock
not purchased in the Subscription Offering and the Direct Community Offering.
RR. Tax-Qualified Employee Stock Benefit Plan: Any defined benefit
-----------------------------------------
plan or defined contribution plan of the Savings Bank or Holding Company, such
as an employee stock ownership plan, bonus plan, profit-sharing plan or other
plan, which, with its related trust, meets the requirements to be "qualified"
under section 401 of the Internal Revenue Code. A "non-tax-qualified employee
stock benefit plan" is any defined benefit plan or defined contribution plan
that is not so qualified.
SS. Voting Record Date(s): The date(s) fixed by the Boards of
---------------------
Directors of the MHC and the Savings Bank according to OTS regulations for
determining eligibility to vote at the Special Meeting of Members and at the
Meeting of Stockholders.
III. General Procedure for Conversion and Reorganization
---------------------------------------------------
A. Conversion of MHC to an Interim Federal Stock Savings Bank and
--------------------------------------------------------------
Merger of Such Interim Into the Savings Bank. The MHC will convert into
- --------------------------------------------
Perpetual Interim "A" Bank, a Federal Savings Bank (i.e. "Interim A") and
Interim A will simultaneously merge with and into the Savings Bank, with the
Savings Bank as the surviving entity ("MHC Merger"). As a result of the MHC
Merger, the Savings Bank Common Stock held by the MHC will be canceled and
Eligible Account Holders and Supplemental Eligible Account Holders will be
granted ratable interests in a liquidation account, to be established in
accordance with the procedures set forth in Section XIV hereof.
B. Merger of a Second Interim Federal Stock Savings Bank into
----------------------------------------------------------
Savings Bank and Exchange of Shares. Immediately after the MHC Merger, Perpetual
- -----------------------------------
Interim "B" Bank, A Federal Savings Bank (i.e., Interim B) will merge with and
into the Savings Bank, and the separate existence of Interim B will cease
("Savings Bank Merger"). The shares of the Holding Company Common Stock held by
the Bank will be canceled. The shares of common stock of Interim B held by the
Holding Company will be converted, on a one-to-one basis, into shares of Savings
Bank Common Stock, which will result in the Savings Bank becoming a wholly-owned
subsidiary of the Holding Company. The Public Stockholders will exchange their
shares of Savings Bank Common Stock for shares of Holding Company Common Stock
based upon the Exchange Ratio. In addition, all options to purchase shares of
Savings Bank Common Stock which are outstanding immediately prior to
consummation of the Conversion and Reorganization shall be converted to options
to purchase shares of Holding Company Common Stock, with the number of shares
subject to the option and the exercise price per share to be adjusted based upon
the Exchange Ratio so that the aggregate exercise price remains unchanged, and
with the duration of the option remaining unchanged. Upon consummation of the
Conversion and Reorganization, all of the Savings Bank Common Stock will be
owned by the Holding Company and the Public Stockholders will own the same
percentage of the Holding Company Common Stock as the percentage of the Savings
Bank Common Stock owned by them prior to the Conversion and Reorganization,
before giving effect to cash paid in lieu of any fractional interests of Savings
Bank Common Stock and any shares of Conversion Stock purchased by the Public
Stockholders in the Offering or by the Tax-Qualified Employee Stock Benefit
Plans thereafter. The Holding Company will then sell the Conversion Stock in the
Offerings in accordance with this Plan.
Following consummation of the Conversion and Reorganization, voting
rights with respect to the Savings Bank shall be held and exercised exclusively
by the Holding Company as holder of the outstanding Savings Bank Common Stock.
Voting rights with respect to the Holding Company shall be held and exercised
exclusively by
5
<PAGE>
holders of the Holding Company Common Stock. As a result of the MHC Merger, the
separate existence of the MHC and the voting rights of Members will cease.
IV. Steps Prior to Submission of the Plan to the Members and the Savings
--------------------------------------------------------------------
Bank Stockholders for Approval
------------------------------
Prior to submission of the Plan to the Members and to the stockholders
of the Savings Bank for approval, the Plan must be approved by the OTS. Prior to
such regulatory approval:
A. The Boards of Directors of the MHC and the Savings Bank each
shall adopt the Plan by a vote of not less than two-thirds of their entire
membership.
B. The MHC shall publish legal notice of the adoption of the Plan
in a newspaper having a general circulation in each community in which the MHC
and the Savings Bank maintains an office.
C. A press release relating to the proposed Conversion and
Reorganization may be submitted to the local media.
D. Copies of the Plan as adopted by the Boards of Directors of
the MHC and the Savings Bank shall be made available for inspection at each
office of the MHC and the Savings Bank.
E. The Savings Bank shall cause the Holding Company to be
incorporated under state law and the Board of Directors of the Holding Company
shall concur in the Plan by at least a two-thirds vote.
F. As soon as practicable following the adoption of this Plan,
the MHC shall file the Form AC Application, and the Holding Company shall file
the Registration Statement and the H-(e)1 Application. In addition, an
application to merge the MHC (following its conversion into an interim federal
stock savings bank) and the Savings Bank and an application to merge Interim B
and the Savings Bank shall both be filed with the OTS, either as exhibits to the
H-(e)1 Application, or separately. Upon filing the Form AC Application, the MHC
shall publish legal notice thereof in a newspaper having a general circulation
in each community in which the MHC and the Savings Bank maintains an office
and/or by mailing a letter to each Member, and also shall publish such other
notices of the Conversion and Reorganization as may be required in connection
with the H-(e)1 Application and by the regulations and policies of the OTS.
G. The MHC and the Savings Bank shall obtain an opinion of their
tax advisors or a favorable ruling from the U.S. Internal Revenue Service which
shall state that the Conversion and Reorganization shall not result in any gain
or loss for federal income tax purposes to the Primary Parties or to Eligible
Account Holders, Supplemental Eligible Account Holders and Other Members.
Receipt of a favorable opinion or ruling is a condition precedent to completion
of the Conversion and Reorganization.
V. Special Meeting of Members
--------------------------
Subsequent to the approval of the Plan by the OTS, the Special Meeting
shall be scheduled in accordance with the MHC's Bylaws. Promptly after receipt
of approval and at least 20 days but not more than 45 days prior to the Special
Meeting, the MHC shall distribute proxy solicitation materials to all Members
and beneficial owners of accounts held in fiduciary capacities where the
beneficial owners possess voting rights, as of the Voting Record Date. The proxy
solicitation materials shall include a copy of the proxy statement to be used in
connection with such solicitation and other documents authorized for use by the
regulatory authorities and may also include a copy of the Plan and/or a
prospectus ("Prospectus") as provided in Section VIII below. The MHC shall also
advise each Eligible Account Holder and Supplemental Eligible Account Holder not
entitled to vote at the Special Meeting of the proposed Conversion and
Reorganization and the scheduled Special Meeting, and provide a postage prepaid
card on which to indicate whether he wishes to receive a Prospectus, if the
Subscription Offering is not held concurrently with the proxy solicitation.
6
<PAGE>
Pursuant to OTS regulations, an affirmative vote of not less than a
majority of the total outstanding votes of the Members is required for approval
of the Plan. Voting may be in person or by proxy at the Special Meeting of
Members. The OTS shall be notified promptly of the actions of the Members at the
Special Meeting of Members.
VI. Meeting of Stockholders
-----------------------
Subsequent to the approval of the Plan by the OTS, the Meeting of
Stockholders shall be scheduled in accordance with the Savings Bank's Bylaws at
which the Plan will be considered for approval. Promptly after receipt of
approval and at least 20 days but not more than 45 days prior to such meeting,
the Savings Bank shall distribute proxy solicitation materials to Savings Bank
stockholders and beneficial owners of Savings Bank Common Stock held in
fiduciary capacities where the beneficial owners possess voting rights, as of
the Voting Record Date. The proxy solicitation materials shall include a copy of
the proxy statement to be used in connection with such solicitation and other
documents authorized for use by the regulatory authorities and may also include
a copy of the Plan and/or a Prospectus as provided in Paragraph VIII below. The
Savings Bank shall also advise each holder of Savings Bank Common Stock entitled
to vote at the meeting of the proposed Conversion and Reorganization and the
scheduled meeting, and provide a postage prepaid card on which to indicate
whether he wishes to receive the Prospectus, if the Subscription Offering is not
held concurrently with the proxy solicitation.
Pursuant to OTS regulations, an affirmative vote of not less than
two-thirds of the total outstanding votes of the stockholders of the Savings
Bank is required for approval of the Plan. Furthermore, pursuant to OTS policy,
the affirmative vote of not less than a majority of the total outstanding votes
of the stockholders of the Savings Bank (except the MHC) present in person or by
proxy is required for approval of the Plan. Voting may be in person or by proxy
at the Meeting of Stockholders. The OTS shall be notified promptly of the
actions of the stockholders of the Savings Bank at the Meeting of Stockholders.
VII. Summary Proxy Statements
------------------------
The Proxy Statements furnished to Members and to stockholders of the
Savings Bank may be in summary form; provided that a statement is made in
bold-face type that a more detailed description of the proposed transaction may
be obtained by returning an enclosed postage prepaid card or other written
communication requesting supplemental information. Without prior approval of the
OTS, the Special Meeting and the meeting of the stockholders of the Savings Bank
shall not be held less than 20 days after the last day on which the supplemental
information statement is mailed to requesting Members or requesting stockholder
of the Savings Bank. The supplemental information statement may be combined with
the Prospectus if the Subscription Offering is commenced concurrently with or
during the proxy solicitation of Members for the Special Meeting or of the
stockholders of the Savings Bank for the Meeting of Stockholders.
VIII. Offering Documents
------------------
The Holding Company may commence the Subscription Offering and,
provided that the Subscription Offering has commenced, may commence the Direct
Community Offering concurrently with or during the proxy solicitation relating
to the Special Meeting of Members and the Meeting of Stockholders. The Holding
Company may close the Subscription Offering before such meetings, provided that
the offer and sale of the Conversion Stock shall be conditioned upon approval of
the Plan by the Members at the Special Meeting and by the stockholders of the
Savings Bank at the Meeting of Stockholders. The MHC's and the Savings Bank's
proxy solicitation materials may require Eligible Account Holders, Supplemental
Eligible Account Holders, Other Members and the Savings Bank Stockholder to
return to the Savings Bank by a reasonable certain date a postage prepaid card
or other written communication requesting receipt of a Prospectus with respect
to the Subscription Offering, provided that if the Prospectus is not mailed
concurrently with the proxy solicitation materials, the Subscription Offering
shall not be closed until the expiration of 30 days after the mailing of the
proxy solicitation materials. If the Subscription Offering is not commenced
within 45 days after the Special Meeting, the Savings Bank may transmit, not
more than 30 days prior to the commencement of the Subscription Offering, to
each Eligible Account Holder, Supplemental
7
<PAGE>
Eligible Account Holder and other eligible subscribers who had been furnished
with proxy solicitation materials a notice which shall state that the Savings
Bank is not required to furnish a Prospectus to them unless they return by a
reasonable date certain a postage prepaid card or other written communication
requesting the receipt of the Prospectus.
Prior to commencement of the Subscription Offering, the Direct
Community Offering and the Syndicated Community Offering, the Holding Company
shall file the Registration Statement. The Holding Company shall not distribute
the final Prospectus until the Registration Statement containing same has been
declared effective by the SEC and the Prospectus has been declared effective by
the OTS.
IX. Combined Subscription and Direct Community Offering
---------------------------------------------------
Instead of a separate Subscription Offering, all Subscription Rights
may be exercised by delivery of properly completed and executed Order Forms to
the Savings Bank or selling group utilized in connection with the Direct
Community Offering and the Syndicated Community Offering. If a separate
Subscription Offering is not held, orders for Conversion Stock in the Direct
Community Offering shall first be filled pursuant to the priorities and
limitations stated in Paragraph XI.C. below.
X. Consummation of the Conversion and Reorganization
-------------------------------------------------
The effective date of the Conversion and Reorganization shall be the
date upon which the last of the following actions occurs: (i) the filing of
Articles of Combination with the OTS with respect to the MHC Merger, (ii) the
filing of Articles of Combination with the OTS with respect to the Savings Bank
Merger and (iii) the closing of the issuance of the shares of Conversion Stock
in the Offerings. The filing of Articles of Combination relating to the MHC
Merger and the Savings Bank Merger and the closing of the issuance of shares of
Conversion Stock in the Offerings shall not occur until all requisite
regulatory, Member approval and approval of the stockholders of the Savings Bank
have been obtained, all applicable waiting periods have expired and sufficient
subscriptions and orders for the Conversion Stock have been received. It is
intended that the closing of the MHC Merger, the Savings Bank Merger and the
sale of shares of Conversion Stock in the Offerings shall occur consecutively
and substantially simultaneously.
After the Conversion and Reorganization, the Savings Bank will succeed
to all the rights, interests, duties and obligations of the Savings Bank before
the Conversion and Reorganization, including but not limited to all rights and
interests of the Savings Bank in and to its assets and properties, whether real,
personal or mixed. The Savings Bank will continue to be a member of the Federal
Home Loan Bank System and all its insured savings deposits will continue to be
insured by the FDIC to the extent provided by applicable law.
XI. Conversion Stock Offering
-------------------------
A. Number of Shares
----------------
The number of shares of Conversion Stock to be offered pursuant to the
Plan shall be determined initially by the Boards of Directors of the Primary
Parties in conjunction with the determination of the Purchase Price (as defined
in Section XI.B. below). The number of shares to be offered may be subsequently
adjusted by the Board of Directors prior to completion of the Offerings.
B. Independent Evaluation and Purchase Price of Conversion Stock
-------------------------------------------------------------
All shares of Conversion Stock sold in the Conversion and
Reorganization, including shares sold in any Direct Community Offering, shall be
sold at a uniform price per share, and referred to herein as the "Purchase
Price." The Purchase Price shall be determined by the Board of Directors of the
Primary Parties immediately prior to the simultaneous completion of all such
sales contemplated by this Plan on the basis of the estimated pro forma market
8
<PAGE>
value of the MHC, as converted, and the Savings Bank at such time. Such
estimated pro forma market value shall be determined for such purpose by an
independent appraiser on the basis of such appropriate factors not inconsistent
with the regulations of the OTS. Immediately prior to the Subscription Offering,
a subscription price range shall be established which shall vary from 15% above
to 15% below the average of the minimum and maximum of the estimated price
range. The maximum subscription price (i.e., the per share amount to be remitted
when subscribing for shares of Conversion Stock) shall then be determined within
the subscription price range by the Board of Directors of the Primary Parties.
The subscription price range and the number of shares to be offered may be
revised after the completion of the Subscription Offering with OTS approval
without a resolicitation of proxies or Order Forms or both.
C. Method of Offering Shares
-------------------------
Subscription Rights shall be issued at no cost to Eligible Account
Holders, Supplemental Eligible Account Holders and Other Members pursuant to
priorities established by this Plan and the regulations of the OTS. In order to
effect the Conversion and Reorganization, all shares of Conversion Stock
proposed to be issued in connection with the Conversion and Reorganization must
be sold and, to the extent that shares are available, no subscriber shall be
allowed to purchase less than 25 shares; provided, however, that if the purchase
price is greater than $20.00 per share, the minimum number of shares which must
be subscribed for shall be adjusted so that the aggregate actual purchase price
required to be paid for such minimum number of shares does not exceed $500.00.
The priorities established for the purchase of shares are as follows:
1. Category 1: Eligible Account Holders
-------------------------------------
a. Each Eligible Account Holder shall receive,
without payment, Subscription Rights entitling such Eligible
Account Holder to purchase that number of shares of Conversion
Stock which is equal to the greater of the maximum purchase
limitation established for the Direct Community Offering, one-
tenth of one percent of the total offering or 15 times the
product (rounded down to the next whole number) obtained by
multiplying the total number of shares of Conversion Stock to
be issued by a fraction of which the numerator is the amount
of the Qualifying Deposit of the Eligible Account Holder and
the denominator is the total amount of Qualifying Deposits of
all Eligible Account Holders. If the allocation made in this
paragraph results in an oversubscription, shares of Conversion
Stock shall be allocated among subscribing Eligible Account
Holders so as to permit each such account holder, to the
extent possible, to purchase a number of shares of Conversion
Stock sufficient to make his total allocation equal to 100
shares of Conversion Stock or the total amount of his
subscription, whichever is less. Any shares of Conversion
Stock not so allocated shall be allocated among the
subscribing Eligible Account Holders on an equitable basis,
related to the amounts of their respective Qualifying Deposits
as compared to the total Qualifying Deposits of all Eligible
Account Holders.
b. Subscription Rights received by Officers and
directors of the Primary Parties and their Associates, as
Eligible Account Holders, based on their increased deposits in
the Savings Bank in the one-year period preceding the
Eligibility Record Date shall be subordinated to all other
subscriptions involving the exercise of Subscription Rights
pursuant to this Category.
2. Category 2: Supplemental Eligible Account Holders
--------------------------------------------------
a. In the event that the Eligibility Record Date is
more than 15 months prior to the date of the latest amendment
to the Form AC Application filed prior to OTS approval, then,
and only in that event, each Supplemental Eligible Account
Holder shall receive, without payment, Subscription Rights
entitling such Supplemental Eligible Account Holder to
purchase that number of shares of Conversion Stock which is
equal to the greater of the maximum purchase limitation
established for the Direct Community Offering, one-tenth of
one percent of the total offering or
9
<PAGE>
15 times the product (rounded down to the next whole number)
obtained by multiplying the total number of shares of
Conversion Stock to be issued by a fraction of which the
numerator is the amount of the Qualifying Deposit of the
Supplemental Eligible Account Holder and the denominator is
the total amount of the Qualifying Deposits of all
Supplemental Eligible Account Holders.
b. Subscription Rights received pursuant to this
category shall be subordinated to Subscription Rights granted
to Eligible Account Holders.
c. Any Subscription Rights to purchase shares of
Conversion Stock received by an Eligible Account Holder in
accordance with Category 1 shall reduce to the extent thereof
the Subscription Rights to be distributed pursuant to this
Category.
d. In the event of an oversubscription for shares
of Conversion Stock pursuant to this Category, shares of
Conversion Stock shall be allocated among the subscribing
Supplemental Eligible Account Holders as follows:
(1) Shares of Conversion Stock shall be
allocated so as to permit each such Supplemental
Eligible Account Holder, to the extent possible, to
purchase a number of shares of Conversion Stock
sufficient to make his total allocation (including the
number of shares of Conversion Stock, if any,
allocated in accordance with Category Number 1) equal
to 100 shares of Conversion Stock or the total amount
of his or her subscription, whichever is less.
(2) Any shares of Conversion Stock not
allocated in accordance with subparagraph (1) above
shall be allocated among the subscribing Supplemental
Eligible Account Holders on an equitable basis,
related to the amounts of their respective Qualifying
Deposits as compared to the total Qualifying Deposits
of all subscribing Supplemental Eligible Account
Holders.
3. Category 3: Other Members
--------------------------
a. Other Members shall receive, without payment,
Subscription Rights to purchase shares of Conversion Stock,
after satisfying the subscriptions of Eligible Account Holders
and Supplemental Eligible Account Holders pursuant to Category
Nos. l and 2 above, subject to the following conditions:
(1) Each such Other Member shall be entitled
to subscribe for the greater of the maximum purchase
limitation established for the Direct Community
Offering or one-tenth of one percent of the total
offering.
(2) In the event of an oversubscription for
shares of Conversion Stock pursuant to Category 3, the
shares of Conversion Stock available shall be
allocated among the subscribing Other Members pro rata
on the basis of the amounts of their respective
subscriptions.
D. Direct Community Offering and Syndicated Community Offering
-----------------------------------------------------------
1. Any shares of Conversion Stock not purchased through the
exercise of Subscription Rights set forth in Category Nos. 1 through 3
above may be sold by the Holding Company to Persons under such terms
and conditions as may be established by the Savings Bank's Board of
Directors with the concurrence of the OTS. The Direct Community
Offering may commence concurrently with or as soon as possible after
10
<PAGE>
the completion of the Subscription Offering and must be completed
within 45 days after completion of the Subscription Offering, unless
extended with the approval of the OTS. No Person may purchase in the
Direct Community Offering more than 50,000 shares of Conversion Stock
issued in the Conversion and Reorganization. The right to purchase
shares of Conversion Stock under this Category is subject to the right
of the Savings Bank or the Holding Company to accept or reject such
orders in whole or in part. In the event of an oversubscription for
shares in this Category, the shares available shall be allocated among
prospective purchasers pro rata on the basis of the amounts of their
respective orders. The offering price for which such shares are sold to
the general public in the Direct Community Offering shall be the
Purchase Price.
2. Orders received in the Direct Community Offering first
shall be filled up to a maximum of 2% of the Conversion Stock and
thereafter remaining shares shall be allocated on an equal number of
shares basis per order until all orders have been filled.
3. The Conversion Stock offered in the Direct Community
Offering shall be offered and sold in a manner that will achieve the
widest distribution thereof. Preference shall be given in the Direct
Community Offering first to the Public Stockholders (who are not
Eligible Account Holders, Supplemental Eligible Account Holders or
Other Members) and then to natural Persons and trusts of natural
Persons residing in the Local Community.
4. Subject to such terms, conditions and procedures as may
be determined by the Savings Bank and the Holding Company, all shares
of Conversion Stock not subscribed for in the Subscription Offering or
ordered in the Direct Community Offering may be sold by a syndicate of
broker-dealers to the general public in a Syndicated Community
Offering. No Person may purchase in the Syndicated Community Offering
more 50,000 shares of Conversion Stock issued in the Conversion and
Reorganization. Each order for Conversion Stock in the Syndicated
Community Offering shall be subject to the absolute right of the
Savings Bank and the Holding Company to accept or reject any such order
in whole or in part either at the time of receipt of an order or as
soon as practicable after completion of the Syndicated Community
Offering. The Savings Bank and the Holding Company may commence the
Syndicated Community Offering concurrently with, at any time during, or
as soon as practicable after the end of the Subscription Offering
and/or Direct Community Offering, provided that the Syndicated
Community Offering must be completed within 45 days after the
completion of the Subscription Offering, unless extended by the Savings
Bank and the Holding Company with the approval of the OTS.
5. If for any reason a Syndicated Community Offering of
shares of Conversion Stock not sold in the Subscription Offering and
the Direct Community Offering cannot be effected, or in the event that
any insignificant residue of shares of Conversion Stock is not sold in
the Subscription Offering, Direct Community Offering or Syndicated
Community Offering, the Savings Bank and the Holding Company shall use
their best efforts to obtain other purchasers for such shares in such
manner and upon such conditions as may be satisfactory to the OTS.
6. In the event a Direct Community Offering or Syndicated
Community Offering do not appear feasible, the Savings Bank will
immediately consult with the OTS to determine the most viable
alternative available to effect the completion of the Conversion.
Should no viable alternative exist, the Savings Bank may terminate the
Conversion with the concurrence of the OTS.
E. Limitations Upon Purchases
--------------------------
The following additional limitations and exceptions shall be imposed
upon purchases of shares of Conversion Stock:
11
<PAGE>
1. The maximum number of shares of Conversion Stock which
may be subscribed for or purchased in all categories in the Conversion
and Reorganization by any Person, when combined with any Exchange Stock
received, shall not exceed 50,000 shares of Common Stock issued in the
Conversion and Reorganization.
2. The maximum number of shares of Conversion Stock which
may be subscribed for or purchased in all categories in the Conversion
and Reorganization by any Person together with any Associate or any
group or Persons Acting in Concert, when combined with any Exchange
Stock received, shall not exceed 50,000 shares of Common Stock issued
in the Conversion and Reorganization.
3. Officers and directors of the Primary Parties and
Associates thereof may not purchase in the aggregate more than 31% of
the shares issued in the Conversion and Reorganization, including any
Exchange Stock received.
4. The Boards of Directors of the Primary Parties will not
be deemed to be Associates or a group of Persons Acting in Concert with
other directors or trustees solely as a result of membership on the
Board of Directors.
5. The Boards of Directors of the Primary Parties, with the
approval of the OTS and without further approval of Members or
stockholders of the Savings Bank, may, as a result of market conditions
and other factors, increase or decrease the purchase limitation
described herein or the number of shares of Conversion Stock to be sold
in the Conversion and Reorganization. The Boards of Directors of the
Primary Parties may, in their sole discretion, increase the maximum
purchase limitation set forth above up to 9.99% of the Conversion
Shares sold in the Conversion and Reorganization, provided that orders
for shares which exceed 5% of the Conversion Shares sold in the
Conversion and Reorganization may not exceed, in the aggregate, 10% of
the shares sold in the Conversion and Reorganization. If the Primary
Parties increase the maximum purchase limitations or the number of
shares of Conversion Stock to be sold in the Conversion and
Reorganization, the Primary Parties are only required to resolicit
Persons who subscribed for the maximum purchase amount and may, in the
sole discretion of the Primary Parties, resolicit certain other large
subscribers. If the Primary Parties decrease the maximum purchase
limitations or the number of shares of Conversion Stock to be sold in
the Conversion and Reorganization, the orders of any Person who
subscribed for the maximum purchase amount shall be decreased by the
minimum amount necessary so that such Person shall be in compliance
with the then maximum number of shares permitted to be subscribed for
by such Person.
Notwithstanding anything to the contrary contained in this Plan, and
except as may be required by the OTS, Public Stockholders will not be required
to sell or divest any Holding Company Common Stock or be limited in receiving
Exchange Stock even if their percentage ownership of the Savings Bank Common
Stock when converted into Exchange Stock would exceed an applicable purchase
limitation.
Each Person purchasing Conversion Stock in the Conversion and
Reorganization shall be deemed to confirm that such purchase does not conflict
with the purchase limitations under the Plan or otherwise imposed by law, rule
or regulation. In the event that such purchase limitations are violated by any
Person (including any Associate or group of Persons affiliated or otherwise
Acting in Concert with such Person), the Holding Company shall have the right to
purchase from such Person at the actual Purchase Price per share all shares
acquired by such Person in excess of such purchase limitations or, if such
excess shares have been sold by such Person, to receive from such Person the
difference between the actual Purchase Price per share paid for such excess
shares and the price at which such excess shares were sold by such Person. This
right of the Holding Company to purchase such excess shares shall be assignable
by the Holding Company.
12
<PAGE>
F. Restrictions On and Other Characteristics of the Conversion
-----------------------------------------------------------
Stock
-----
1. Transferability. Conversion Stock purchased by Officers
---------------
and directors of the Primary Parties shall not be sold or otherwise
disposed of for value for a period of one year from the effective date
of Conversion and Reorganization, except for any disposition (i)
following the death of the original purchaser or (ii) resulting from an
exchange of securities in a merger or acquisition approved by the
regulatory authorities having jurisdiction.
The Conversion Stock issued by the Holding Company to such
Officers and directors shall bear a legend giving appropriate notice of
the one-year holding period restriction. Said legend shall state as
follows:
"The shares evidenced by this certificate are restricted as to
transfer for a period of one year from the date of this
certificate pursuant to Part 563b of the Rules and Regulations
of the Office of Thrift Supervision. These shares may not be
transferred prior thereto without a legal opinion of counsel
that said transfer is permissible under the provisions of
applicable laws and regulations."
In addition, the Holding Company shall give appropriate
instructions to the transfer agent of the Holding Company Common Stock
with respect to the foregoing restrictions. Any shares of Holding
Company Common Stock subsequently issued as a stock dividend, stock
split or otherwise, with respect to any such restricted stock, shall be
subject to the same holding period restrictions for such Persons as may
be then applicable to such restricted stock.
2. Subsequent Purchases by Officers and Directors. Without
----------------------------------------------
prior approval of the OTS, if applicable, Officers and directors of the
Savings Bank and officers and directors of the Holding Company, and
their Associates, shall be prohibited for a period of three years
following completion of the Conversion and Reorganization from
purchasing outstanding shares of Holding Company Common Stock, except
from a broker or dealer registered with the SEC. Notwithstanding this
restriction, purchases involving more than 1% of the total outstanding
shares of Holding Company Stock and purchases made and shares held by a
Tax-Qualified or non-Tax-Qualified Employee Stock Benefit Plan which
may be attributable to such directors and Officers may be made in
negotiated transactions without OTS permission or the use of a broker
or dealer.
3. Repurchase and Dividend Rights. For a period of three years
------------------------------
following the consummation of the Conversion and Reorganization, any
repurchases of Holding Company Stock by the Holding Company from any
Person shall be subject to the then applicable rules and regulations
and policies of the OTS. The Savings Bank may not declare or pay a cash
dividend on or repurchase any of its Capital Stock if the result
thereof would be to reduce the regulatory capital of the Savings Bank
below the amount required for the liquidation account described in
Paragraph XIV. Further, any dividend declared or paid on the Capital
Stock shall comply with the then applicable rules and regulations of
the OTS.
4. Voting Rights. After the Conversion and Reorganization,
-------------
holders of Savings Accounts in and obligors on loans of the Savings
Bank will not have voting rights in the Savings Bank. Exclusive voting
rights with respect to the Holding Company shall be vested in the
holders of Holding Company Stock; holders of Savings Accounts in and
obligors on loans of the Savings Bank will not have any voting rights
in the Holding Company except and to the extent that such Persons
become stockholders of the Holding Company, and the Holding Company
will have exclusive voting rights with respect to the Savings Bank's
Capital Stock.
13
<PAGE>
G. Mailing of Offering Materials and Collation of Subscriptions
------------------------------------------------------------
The sale of all shares of Conversion Stock offered pursuant to the Plan
must be completed within 24 months after approval of the Plan at the Special
Meeting. After approval of the Plan by the OTS and the declaration of the
effectiveness of the Prospectus, the Holding Company shall distribute
Prospectuses and Order Forms for the purchase of shares of Conversion Stock in
accordance with the terms of the Plan.
The recipient of an Order Form shall be provided not less than 20 days
nor more than 45 days from the date of mailing, unless extended, properly to
complete, execute and return the Order Form to the Holding Company or the
Savings Bank. Self-addressed, postage prepaid, return envelopes shall accompany
all Order Forms when they are mailed. Failure of any eligible subscriber to
return a properly completed and executed Order Form within the prescribed time
limits shall be deemed a waiver and a release by such eligible subscriber of any
rights to purchase shares of Conversion Stock under the Plan.
The sale of all shares of Conversion Stock proposed to be issued in
connection with the Conversion and Reorganization must be completed within 45
days after the last day of the Subscription Offering, unless extended by the
Holding Company with the approval of the OTS.
H. Method of Payment
-----------------
Payment for all shares of Conversion Stock may be made in cash, by
check or by money order, or if a subscriber has a Savings Account(s), such
subscriber may authorize the Savings Bank to charge the subscriber's Savings
Account(s). The Savings Bank shall pay interest at not less than the passbook
rate on all amounts paid in cash or by check or money order to purchase shares
of Conversion Stock in the Subscription Offering from the date payment is
received until the Conversion and Reorganization is completed or terminated. The
Savings Bank is not permitted knowingly to loan funds or otherwise extend any
credit to any Person for the purpose of purchasing Conversion Stock.
If a subscriber authorizes the Savings Bank to charge the subscriber's
Savings Account(s), the funds shall remain in the subscriber's Savings
Account(s) and shall continue to earn interest, but may not be used by such
subscriber until the Conversion and Reorganization is completed or terminated,
whichever is earlier. The withdrawal shall be given effect only concurrently
with the sale of all shares of Conversion Stock proposed to be sold in the
Conversion and Reorganization and only to the extent necessary to satisfy the
subscription at a price equal to the aggregate Purchase Price. The Savings Bank
shall allow subscribers to purchase shares of Conversion Stock by withdrawing
funds from certificate accounts held with the Savings Bank without the
assessment of early withdrawal penalties. In the case of early withdrawal of
only a portion of such account, the certificate evidencing such account shall be
canceled if the remaining balance of the account is less than the applicable
minimum balance requirement. In that event, the remaining balance shall earn
interest at the passbook rate.
I. Undelivered, Defective or Late Order Forms; Insufficient
--------------------------------------------------------
Payment
-------
If an Order Form (i) is not delivered and is returned to the Holding
Company or the Savings Bank by the United States Postal Service (or the Holding
Company or Savings Bank is unable to locate the addressee); (ii) is not returned
to the Holding Company or Savings Bank, or is returned to the Holding Company or
Savings Bank after expiration of the date specified thereon; (iii) is
defectively completed or executed; or (iv) is not accompanied by the total
required payment for the shares of Conversion Stock subscribed for (including
cases in which the subscribers' Savings Accounts are insufficient to cover the
authorized withdrawal for the required payment), the Subscription Rights of the
Person to whom such rights have been granted shall not be honored and shall be
treated as though such Person failed to return the completed Order Form within
the time period specified therein. Alternatively, the Holding Company or Savings
Bank may, but shall not be required to, waive any irregularity relating to any
Order Form or require the submission of a corrected Order Form or the remittance
of full payment for the shares of Conversion Stock subscribed for by such date
as the Holding Company or Savings Bank may specify. Subscription orders, once
14
<PAGE>
tendered, shall not be revocable. The Holding Company's and Savings Bank's
interpretation of the terms and conditions of the Plan and of the Order Forms
shall be final.
J. Members in Non-Qualified States or in Foreign Countries
-------------------------------------------------------
The Primary Parties will make reasonable efforts to comply with the
securities laws of all states in the United States in which persons entitled to
subscribe for stock pursuant to the Plan reside. However, the Primary Parties
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 Primary Parties
determine that compliance with the securities laws of such state would be
impracticable for reasons of cost or otherwise, including but not limited to a
request or requirement that the Primary Parties or their officers, directors or
trustees register as a broker, dealer, salesman or selling agent, under the
securities laws of such state, or a request or requirement to register or
otherwise qualify the Subscription Rights or Common Stock for sale or submit any
filing with respect thereto in such state. Where the number of persons eligible
to subscribe for shares in one state is small relative to other states, the
Primary Parties 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.
XII. Post Conversion and Reorganization Filing and Market Making
-----------------------------------------------------------
In connection with the Conversion and Reorganization, the Holding
Company shall register the Common Stock with the SEC pursuant to the Securities
Exchange Act of 1934, as amended, and shall undertake not to deregister such
Conversion Stock for a period of three years thereafter.
The Holding Company shall use its best efforts to encourage and assist
Market Makers to establish and maintain a market for the shares of its stock.
The Holding Company shall also use its best efforts to list its stock on The
Nasdaq Stock Market or on a national or regional securities exchange.
XIII. Status of Savings Accounts and Loans Subsequent to Conversion and
-----------------------------------------------------------------
Reorganization
--------------
All Savings Accounts shall retain the same status after Conversion and
Reorganization as these accounts had prior to Conversion and Reorganization.
Each Savings Account holder shall retain, without payment, a withdrawable
Savings Account(s) after the Conversion and Reorganization, equal in amount to
the withdrawable value of such holder's Savings Account(s) prior to Conversion
and Reorganization. All Savings Accounts will continue to be insured by the
Savings Association Insurance Fund of the FDIC up to the applicable limits of
insurance coverage. All loans granted by the Savings Bank shall retain the same
status after the Conversion and Reorganization as they had prior to the
Conversion and Reorganization. See Paragraph III.B. with respect to the
termination of voting rights of Members.
XIV. Liquidation Account
-------------------
After the Conversion and Reorganization, holders of Savings Accounts
shall not be entitled to share in any residual assets in the event of
liquidation of the Savings Bank. However, the Savings Bank shall, at the time of
the Conversion and Reorganization, establish a liquidation account in an amount
equal to the amount of dividends with respect to the Savings Bank Common Stock
waived by the MHC plus the greater of (i) the Savings Bank's total retained
earnings as of the date of the latest statement of financial condition contained
in the final offering circular used in connection with the Savings Bank's
reorganization as a majority owned subsidiary of the MHC, or (ii) 53.02% of the
Savings Bank's total stockholders' equity as of the date of the latest statement
of financial condition contained in the final Prospectus used in connection with
the Conversion and Reorganization. The function of the liquidation account shall
be to establish a priority on liquidation and, except as provided in Section
XI.F.3. above,
15
<PAGE>
the existence of the liquidation account shall not operate to restrict the use
or application of any of the net worth accounts of the Savings Bank.
The liquidation account shall be maintained by the Savings Bank
subsequent to the Conversion and reorganization for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders who retain their
Savings Accounts in the Savings Bank. Each Eligible Account Holder and
Supplemental Eligible Account Holder shall, with respect to each Savings Account
held, have a related inchoate interest in a portion of the liquidation account
balance ("subaccount").
The initial subaccount balance for a Savings Account held by an
Eligible Account Holder and/or a Supplemental Eligible Account Holder shall be
determined by multiplying the opening balance in the liquidation account by a
fraction of which the numerator is the amount of such holder's Qualifying
Deposit in the Savings Account and the denominator is the total amount of the
Qualifying Deposits of all Eligible Account Holders and Supplemental Eligible
Account Holders. Such initial subaccount balance shall not be increased, and it
shall be subject to downward adjustment as provided below.
If the deposit balance in any Savings Account of an Eligible Account
Holder or Supplemental Eligible Account Holder at the close of business on any
annual closing date subsequent to the Eligibility Record Date is less than the
lesser of (i) the deposit balance in such Savings Account at the close of
business on any other annual closing date subsequent to the Eligibility Record
Date or the Supplemental Eligibility Record Date or (ii) the amount of the
Qualifying Deposit in such Savings Account on the Eligibility Record Date or the
Supplemental Eligibility Record Date, then the subaccount balance for such
Savings Account shall be adjusted by reducing such subaccount balance in an
amount proportionate to the reduction in such deposit balance. In the event of a
downward adjustment, such subaccount balance shall not be subsequently
increased, notwithstanding any increase in the deposit balance of the related
Savings Account. If any such Savings Account is closed, the related subaccount
balance shall be reduced to zero.
In the event of a complete liquidation of the Savings Bank, 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 Savings Bank 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.
XV. Regulatory Restrictions on Acquisition of Holding Company
---------------------------------------------------------
A. OTS regulations provide that for a period of three years following
completion of the Conversion and Reorganization, no Person (i.e, individual, a
group Acting in Concert, a corporation, a partnership, an association, a joint
stock company, a trust, or any unincorporated organization or similar company, a
syndicate or any other group formed for the purpose of acquiring, holding or
disposing of securities of an insured institution or its holding company) shall
directly, or indirectly, offer to purchase or actually acquire the beneficial
ownership of more than 10% of any class of equity security of the Holding
Company without the prior approval of the OTS. However, approval is not required
for purchases directly from the Holding Company or the underwriters or selling
group acting on its behalf with a view towards public resale, or for purchases
not exceeding 1% per annum of the shares outstanding. Civil penalties may be
imposed by the OTS for willful violation or assistance of any violation. Where
any Person, directly or indirectly, acquires beneficial ownership of more than
10% of any class of equity security of the Holding Company within such
three-year period, without the prior approval of the OTS, stock of the Holding
Company beneficially owned by such Person in excess of 10% shall not be counted
as shares entitled to vote and shall not be voted by any Person or counted as
voting shares in connection with any matter submitted to the stockholders for a
vote. The provisions of this regulation shall not apply to the acquisition of
securities by Tax-
16
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Qualified Employee Stock Benefit Plans provided that such plans do not have
beneficial ownership of more than 25% of any class of equity security of the
Holding Company.
B. The Holding Company may provide in its articles of
incorporation, or similar document, a provision that, for a specified period of
up to five years following the date of the completion of the Conversion and
Reorganization, no Person shall directly or indirectly offer to acquire or
actually acquire the beneficial ownership of more than 10% of any class of
equity security of the Holding Company. Such provisions would not apply to
acquisition of securities by Tax-Qualified Employee Stock Benefit Plans provided
that such plans do not have beneficial ownership of more than 25% of any class
of equity security of the Holding Company. The Holding Company may provide in
its articles of incorporation, or similar document, for such other provisions
affecting the acquisition of its stock as shall be determined by its Board of
Directors.
XVI. Directors and Officers of the Savings Bank
------------------------------------------
The Conversion and Reorganization is not intended to result in any
change in the directors or Officers of the Savings Bank. Each Person serving as
a director of the Savings Bank at the time of Conversion and Reorganization
shall continue to serve as a member of the Savings Bank's Board of Directors,
subject to the Savings Bank's Federal Stock Charter and Bylaws. The Persons
serving as Officers immediately prior to the Conversion and Reorganization will
continue to serve at the discretion of the Board of Directors in their
respective capacities as Officers of the Savings Bank. In connection with the
Conversion and Reorganization, the Savings Bank and the Holding Company may
enter into employment agreements on such terms and with such officers as shall
be determined by the Boards of Directors of the Savings Bank and the Holding
Company.
XVII. Executive Compensation
----------------------
The Savings Bank and the Holding Company may adopt, subject to any
required approvals, executive compensation or other benefit programs, including
but not limited to compensation plans involving stock options, stock
appreciation rights, restricted stock grants, employee recognition programs and
the like.
XVIII. Amendment or Termination of Plan
--------------------------------
If necessary or desirable, the Plan may be amended by a two-thirds vote
of the Savings Bank's Board of Directors or the MHC's Board of Directors, at any
time prior to the Special Meeting of Members and the Meeting of Stockholders. At
any time thereafter, the Plan may be amended by a two-thirds vote of the
respective Boards of Directors only with the concurrence of the OTS. The Plan
may be terminated by a two-thirds vote of the Board of Directors at any time
prior to the Special Meeting of Members or the Meeting of Stockholders, and at
any time following such meetings with the concurrence of the OTS. In its
discretion, the Boards of Directors of the MHC and the Savings Bank may modify
or terminate the Plan upon the order of the regulatory authorities without a
resolicitation of proxies or another Special Meeting of Members or Meeting of
Stockholders.
In the event that mandatory new regulations pertaining to conversions
are adopted by the OTS prior to the completion of the Conversion and
Reorganization, the Plan shall be amended to conform to the new mandatory
regulations without a resolicitation of proxies or another Special Meeting of
Members or another Meeting of Stockholders. In the event that new conversion
regulations adopted by the OTS prior to completion of the Conversion and
Reorganization contain optional provisions, the Plan may be amended to utilize
such optional provisions at the discretion of the Board of Directors without a
resolicitation of proxies or another Special Meeting of Members or another
Meeting of Stockholders.
By adoption of the Plan, the Members and the Savings Bank stockholders
authorize the Boards of Directors of the MHC and the Savings Bank to amend
and/or terminate the Plan under the circumstances set forth above.
17
<PAGE>
XIX. Expenses of the Conversion and Reorganization
---------------------------------------------
The Primary Parties shall use their best efforts to assure that
expenses incurred in connection with the Conversion and Reorganization are
reasonable.
XX. Contributions to Tax-Qualified Plans
------------------------------------
The Holding Company and/or the Savings Bank may make discretionary
contributions to the Tax-Qualified Employee Stock Benefit Plans, provided such
contributions do not cause the Savings Bank to fail to meet its regulatory
capital requirements.
* * *
18
<PAGE>
ANNEX A
PLAN OF MERGER
This Plan of Merger, dated as of __________ ___, 1998, is made by and
between SouthBanc Shares, M.H.C. ("MHC"), a federally chartered mutual holding
company, and Perpetual Bank, A Federal Savings Bank ("Savings Bank" or
"Surviving Corporation"), a federally chartered savings bank (collectively, the
"Constituent Corporations").
WITNESSETH:
WHEREAS, the MHC and the Savings Bank have adopted a Plan of Conversion
from Mutual Holding Company to Stock Holding Company and Agreement and Plan of
Reorganization ("Plan of Conversion") pursuant to which (i) the MHC will convert
to a federally-chartered interim stock savings bank and simultaneously merge
with and into the Savings Bank, with the Savings Bank as the surviving entity
("MHC Merger"), (ii) the Savings Bank and a newly-formed interim federal savings
bank will merge, pursuant to which the Savings Bank will become a wholly-owned
subsidiary of a newly formed stock corporation ("Holding Company") ("Savings
Bank Merger"), and (iii) the Holding Company will offer shares of its common
stock in the manner set forth in the Plan of Conversion (collectively, the
"Conversion and Reorganization"); and
WHEREAS, the MHC and the Savings Bank desire to provide for the terms
and conditions of the MHC Merger;
NOW, THEREFORE, the MHC and the Savings Bank hereby agree as follows:
1. EFFECTIVE DATE. The MHC Merger shall become effective on the
date specified in the endorsement of the Articles of Combination relating to the
MHC Merger by the Secretary of the Office of Thrift Supervision ("OTS") pursuant
to 12 C.F.R. 552.13(k), or any successor thereto ("Effective Date").
2. THE MHC MERGER AND EFFECT THEREOF. Subject to the terms and
conditions set forth herein and the prior approval of the OTS of the Conversion
and Reorganization, as defined in the Plan of Conversion, and the expiration of
all applicable waiting periods, the MHC shall convert from the mutual form to a
federal interim stock savings bank and simultaneously merge with and into the
Savings Bank, which shall be the Surviving Corporation. Upon consummation of the
MHC Merger, the Surviving Corporation shall be considered the same business and
corporate entity as each of the Constituent Corporations and the Surviving
Corporation shall be subject to and be deemed to have assumed all of the
property, rights, privileges, powers, franchises, debts, liabilities,
obligations, duties and relationships of each of the Constituent Corporations
and shall have succeeded to all of each of their relationships, fiduciary or
otherwise, as fully and to the same extent as if such property, rights,
privileges, powers, franchises, debts, obligations, duties and relationships had
been originally acquired, incurred or entered into by the Surviving Corporation.
In addition, any reference to either of the Constituent Corporations in any
contract or document, whether executed or taking effect before or after the
Effective Date, shall be considered a reference to the Surviving Corporation if
not inconsistent with the other provisions of the contract or document; and any
pending action or other judicial proceeding to which either of the Constituent
Corporations is a party shall not be deemed to have abated or to have been
discontinued by reason of the MHC Merger, but may be prosecuted to final
judgment, order or decree in the same manner as if the MHC Merger had not
occurred or the Surviving Corporation may be substituted as a party to such
action or proceeding, and any judgment, order or decree may be rendered for or
against it that might have been rendered for or against either of the
Constituent Corporations if the MHC Merger had not occurred.
A-1
<PAGE>
3. CANCELLATION OF SAVINGS BANK COMMON STOCK HELD BY THE MUTUAL
HOLDING COMPANY AND MEMBER INTERESTS; LIQUIDATION ACCOUNT.
(a) On the Effective Date: (i) each share of common stock, $1.00 par
value per share, of the Savings Bank ("Savings Bank Common Stock") issued and
outstanding immediately prior to the Effective Date and held by the MHC shall,
by virtue of the MHC Merger and without any action on the part of the holder
thereof, be canceled, (ii) the interests in the MHC of any person, firm or
entity who or which qualified as a member of the MHC in accordance with its
mutual charter and bylaws and the laws of the United States prior to the MHC's
conversion from mutual to stock form ("Members") shall, by virtue of the MHC
Merger and without any action on the part of any Member, be canceled, and (iii)
the Savings Bank shall establish a liquidation account on behalf of each
depositor member of the MHC as provided for in the Plan of Conversion.
(b) At or after the Effective Date and prior to the Savings Bank
Merger, each certificate or certificates theretofore, evidencing issued and
outstanding shares of Savings Bank Common Stock, other than any such certificate
or certificates held by the MHC, which shall be canceled, shall continue to
represent issued and outstanding shares of Savings Bank Common Stock.
4. RIGHTS OF DISSENT AND APPRAISAL ABSENT. No holder of Savings
Bank Common Stock shall have any dissenter or appraisal rights in connection
with the MHC Merger.
5. NAME OF SURVIVING CORPORATION. The name of the Surviving
Corporation shall be "Perpetual Bank, A Federal Savings Bank."
6. DIRECTORS OF THE SURVIVING CORPORATION. Upon and after the
Effective Date, until changed in accordance with the Charter and Bylaws of the
Surviving Corporation and applicable law, the number of directors of the
Surviving Corporation shall be nine. The names of those persons who, upon and
after the Effective Date, shall be directors of the Surviving Corporation are
set forth below. Each such director shall serve for the term which expires at
the annual meeting of stockholders of the Surviving Corporation in the year set
forth after his respective name, and until a successor is elected and qualified.
Name Term Expires
---- ------------
Harold A. "Drew" Pickens 1998
Robert W. "Lujack" Orr 1997
Martha S. Clamp 1997
Jack F. McIntosh 1999
Charles W. Fant, Jr. 1999
Cordes G. Seabrook, Jr. 1999
Jim Gray Watson 1998
Richard C. Ballenger 1997
F. Stevon Kay 1998
The address of each director is 907 N. Main Street, Anderson, South
Carolina 29621.
7. OFFICERS OF THE SURVIVING CORPORATION. Upon and after the
Effective Date, until changed in accordance with the Federal Stock Charter and
Bylaws of the Surviving Corporation and applicable law, the officers of the
Savings Bank immediately prior to the Effective Date shall be the officers of
the Surviving Corporation.
8. OFFICES. Upon the Effective Date, all offices of the Savings
Bank shall be offices of the Surviving Corporation. As of the Effective Date,
the home office of the Surviving Corporation shall remain at 907 N. Main Street,
Anderson, South Carolina, and the locations of the branch offices of the
Surviving Corporation shall
A-2
<PAGE>
be 104 Whitehall Road, Anderson, South Carolina; 2821 South Main Street,
Anderson, South Carolina; Windsor Place Winn Dixie, S.C. Highway 81, Anderson,
South Carolina; 3898 Liberty Highway, Anderson, South Carolina; and 1007 Bypass
123, Seneca, South Carolina.
9. CHARTER AND BYLAWS. On and after the Effective Date, the Charter
of the Savings Bank as in effect immediately prior to the Effective Date shall
be the Federal Stock Charter of the Surviving Corporation until amended in
accordance with the terms thereof and applicable law, except that the Federal
Stock Charter shall be amended to provide for the establishment of a liquidation
account in accordance with applicable the Plan of Conversion. On and after the
Effective Date, the Bylaws of the Savings Bank as in effect immediately prior to
the Effective Date shall be the Bylaws of the Surviving Corporation until
amended in accordance with the terms thereof and applicable law.
10. STOCKHOLDER AND MEMBER APPROVALS. The affirmative votes of the
holders of Savings Bank Common Stock and of the Members as set forth in the Plan
of Conversion shall be required to approve the Plan of Conversion, of which this
Plan of Merger is a part, on behalf of the Savings Bank and the MHC,
respectively.
11. ABANDONMENT OF PLAN. This Plan of Merger may be abandoned by
either the MHC or the Savings Bank at any time before the Effective Date in the
manner set forth in the Plan of Conversion.
12. AMENDMENTS. This Plan of Merger may be amended in the manner set
forth in the Plan of Conversion by a subsequent writing signed by the parties
hereto upon the approval of the Boards of Directors of the Constituent
Corporations.
13. SUCCESSORS. This Agreement shall be binding on the successors of
the Constituent Corporations.
14. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of South Carolina, except to the extent
superseded by the laws of the United States.
IN WITNESS WHEREOF, the MHC and the Savings Bank have caused this Plan
of Merger to be executed by their duly authorized officers as of the day and
year first above written.
Attest: SOUTHBANC SHARES, M.H.C.
By:
- ------------------------- -------------------------------------
Sylvia B. Reed Robert W. "Lujack" Orr
Corporate Secretary President and Chief Executive Officer
Attest: PERPETUAL BANK, A FEDERAL SAVINGS BANK
By:
- ------------------------- -------------------------------------
Sylvia B. Reed Robert W. "Lujack" Orr
Corporate Secretary President and Chief Executive Officer
A-3
<PAGE>
ANNEX B
PLAN OF REORGANIZATION
This Plan of Reorganization, dated as of _____________ ___, 1998, is
made by and among Perpetual Bank, A Federal Savings Bank ("Savings Bank" or the
"Surviving Corporation"), a federally chartered savings bank and majority owned
subsidiary of SouthBanc Shares, M.H.C. ("MHC"), a federally chartered mutual
holding company; ________________ ("Holding Company"), a ____________
corporation organized by the Savings Bank; and Perpetual Interim "B" Bank, A
Federal Savings Bank ("Interim B"); a to-be formed interim federal stock savings
bank.
WITNESSETH:
WHEREAS, the Savings Bank has organized the Holding Company as a
first-tier, wholly owned subsidiary for the purpose of becoming the stock
holding company of the Savings Bank upon completion of the Conversion and
Reorganization as defined in the Plan of Conversion from Mutual Holding Company
to Stock Holding Company and Agreement and Plan of Reorganization ("Plan of
Conversion") adopted by the Boards of Directors of the MHC and the Savings Bank;
and
WHEREAS, the MHC owns as of the date hereof _____% of the outstanding
common stock of the Savings Bank, par value $1.00 per share ("Savings Bank
Common Stock), will convert to a federally-chartered interim stock savings bank
and simultaneously merge with and into the Savings Bank pursuant to the Plan of
Conversion and the Plan of Merger included as Annex A thereto ("MHC Merger"),
pursuant to which all shares of Savings Bank Common Stock held by the MHC will
be canceled; and
WHEREAS, the formation of a stock holding company by the Savings Bank
will be facilitated by causing the Holding Company to become the sole
stockholder of a newly-formed interim stock savings bank ("Interim B") and then
merge Interim B with and into the Savings Bank, pursuant to which the Savings
Bank will reorganize as a wholly-owned subsidiary of the Holding Company
("Reorganization") and, in connection therewith, all outstanding shares of
Savings Bank Common Stock will be converted automatically into and become shares
of common stock of the Holding Company, par value $____ per share ("Holding
Company Common Stock"); and
WHEREAS, Interim B is being organized by the officers of the Savings
Bank as an interim Federal stock savings bank with the Holding Company as its
sole stockholder in order to effect the Reorganization; and
WHEREAS, the Savings Bank and Interim B ("Constituent Corporations")
and the Holding Company desire to provide for the terms and conditions of the
Reorganization.
NOW, THEREFORE, the Savings Bank, Interim B and the Holding Company
hereby agree as follows:
1. EFFECTIVE DATE. The Reorganization shall become effective on the
date specified in the endorsement of the articles of combination relating to the
Reorganization by the Office of Thrift Supervision ("OTS") pursuant to 12 C.F.R.
ss.552.13(k), or any successor thereto ("Effective Date").
2. THE MERGER AND EFFECT THEREOF. Subject to the terms and
conditions set forth herein and the prior approval of the OTS of the Conversion
and the Reorganization, as defined in the Plan of Conversion, and the expiration
of all applicable waiting periods, Interim B shall merge with and into the
Savings Bank, with the Savings Bank as the Surviving Corporation. Upon
consummation of the Reorganization, the Surviving Corporation shall be
considered the same business and corporate entity as each of the Constituent
Corporations and thereupon and thereafter all the property, rights, powers and
franchises of each of the Constituent Corporations shall vest in the Surviving
Corporation and the Surviving Corporation shall be subject to and be deemed to
have assumed all of the property, rights, privileges, powers, franchises, debts,
liabilities, obligations and duties of each of the Constituent
B-1
<PAGE>
Corporations and shall have succeeded to all of each of their relationships,
fiduciary or otherwise, fully and to the same extent as if such property,
rights, privileges, powers, franchises, debts, obligations, duties and
relationships had been (originally acquired, incurred or entered into by the
Surviving Corporation. In addition any reference to either of the Constituent
Corporations in any contract or document, whether executed or taking effect
before or after the Effective Date, shall be considered a reference to the
Savings Bank if not inconsistent with the other provisions of the contract or
document; and any pending action or other judicial proceeding of which either of
the Constituent Corporations is a party shall not be deemed to have abated or to
have been discontinued by reason of the Reorganization, but may be prosecuted to
final judgment, order or decree in the same manner as if the Reorganization had
not occurred or the Surviving Corporation may be substituted as a party to such
action or proceeding, and any judgment, order or decree may be rendered for or
against it that might have been rendered for or against either of the
Constituent Corporations if the Reorganization had not occurred.
3. CONVERSION OF STOCK.
(a) On the Effective Date, (i) each share of Savings Bank Common Stock
issued and outstanding immediately prior to the Effective Date shall, by virtue
of the Reorganization and without any action on the part of the holder thereof,
be converted into the right to receive Holding Company Common Stock based on the
Exchange Ratio, as defined in the Plan of Conversion, plus the right to receive
cash in lieu of any fractional share interest, as determined in accordance with
Section 3(c) hereof, (ii) each share of common stock, par value $1.00 per share,
of Interim B ("Interim B Common Stock") issued and outstanding immediately prior
to the Effective Date shall, by virtue of the Reorganization and without any
action on the part of the holder thereof, be converted into one share of Savings
Bank Common Stock, and (ii) each share of Holding Company Common Stock issued
and outstanding immediately prior to the Effective Date shall, by virtue of the
Reorganization and without any action on the part of the holder thereof, be
canceled. By voting in favor of this Plan of Reorganization, the Holding
Company, as the sole stockholder of Interim B, shall have agreed (i) to issue
shares of Holding Company Common Stock in accordance with the terms hereof and
(ii) to cancel all previously issued and outstanding shares of Holding Company
Common Stock upon the effectiveness of the Reorganization.
(b) On and after the Effective Date, there shall be no registrations of
transfers on the stock transfer books of Interim B or the Savings Bank of shares
of Interim B Common Stock or Savings Bank Common Stock which were outstanding
immediately prior to the Effective Date.
(c) Notwithstanding any other provision hereof, no fractional shares of
Holding Company Common Stock shall be issued to holders of Savings Bank Common
Stock. In lieu thereof, the holder of shares of Savings Bank Common Stock
entitled to a fraction of a share of Holding Company Common Stock shall, at the
time of surrender of the certificate or certificates representing such holder
shares, receive an amount of cash equal to the product arrived at by multiplying
such fraction of a share of Holding Company Common Stock by the Purchase Price,
as defined in the Plan of Conversion. No such holder shall be entitled to
dividends, voting rights or any other rights in respect of any fractional share.
4. EXCHANGE OF SHARES.
(a) At or after the Effective Date, each holder of a certificate or
certificates theretofore evidencing issued and outstanding shares of Savings
Bank Common Stock, upon surrender of the same to an agent, duly appointed by the
Holding Company ("Exchange Agent"), shall be entitled to receive in exchange
therefor certificate(s) representing the number full shares of Holding Company
Common Stock for which the shares of Savings Bank Common Stock theretofore
represented by the certificate or certificates so surrendered shall have been
converted as provided in Section 3(a) hereof. The Exchange Agent shall mail to
each holder of record of an outstanding certificate which immediately prior to
the Effective Date evidenced shares of Savings Bank Common Stock, and which is
to be exchanged for Holding Company Common Stock as provided in Section 3(a)
hereof, a form of letter of transmittal which shall specify that delivery shall
be effected, and risk of loss and title to such certificate shall pass, only
upon delivery of such certificate to the Exchange Agent advising such holder of
the terms of the exchange effected by the
B-2
<PAGE>
Reorganization and of the procedure for surrendering to the Exchange Agent such
certificate in exchange for certificate or certificates evidencing Holding
Company Common Stock.
(b) No holder of a certificate theretofore represent shares of Savings
Bank Common Stock shall be entitled to receive any dividends in respect of the
Holding Company Common Stock into which such shares shall have been converted by
virtue of the Bank Merger until the certificate representing such shares of
Savings Bank Common Stock is surrendered in exchange for certificates
representing shares of Holding Company Common Stock. In the event that dividends
are declared and paid by the Holding Company in respect of Holding Company
Common Stock after the Effective Date but prior to surrender of certificates
representing shares of Savings Bank Common Stock, dividends payable in respect
of shares of Holding Company Common Stock not then issued shall accrue (without
interest). Any such dividends shall be paid (without interest) upon surrender of
the certificates representing such shares of Savings Bank Common Stock. The
Holding Company shall be entitled, after the Effective Date, to treat
certificates representing shares of Savings Bank Common Stock as evidencing
ownership of the number of full shares of Holding Company Common Stock into
which the shares of Savings Bank Common Stock represented by such certificates
shall have been converted, notwithstanding the failure on the part of the holder
thereof to surrender such certificates.
(c) The Holding Company shall not be obligated to deliver a certificate
or certificates representing shares of Holding Company Common Stock to which a
holder of Savings Bank Common Stock would otherwise be entitled as a result of
the Reorganization until such holder surrenders the certificate or certificates
representing the shares of Savings Bank Common Stock for exchange as provided in
this Section 4, or, in default thereof, an appropriate Affidavit of Loss and
Indemnification Agreement and/or an indemnity bond as may be required in each
case by the Holding Company. If any certificate evidencing shares of Holding
Company Common Stock is to be issued in a name other than that in which the
Certificate evidencing Savings Bank Common Stock surrendered in exchanged
therefor is registered, it shall be a condition of the issuance thereof that the
certificate so surrendered shall be properly endorsed and otherwise in proper
form for transfer and that the person requesting such exchange pay to the
Exchange Agent any transfer or other tax required by reason of the issuance of a
certificate for shares of Holding Company Common Stock in any name other than
that of the registered holder of the certificate surrendered or otherwise
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable.
(d) If, between the date hereof and the Effective Date, the shares of
Savings Bank Common Stock shall be changed into a different number or class of
shares by reason of any reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment or a stock dividend thereon
shall be declared with a record date within said period, the Exchange Ratio
specified in Section 3(a) hereof shall be adjusted accordingly.
5. RIGHTS OF DISSENT AND APPRAISAL ABSENT. No holders of Savings
Bank Common Stock shall have any dissenter or appraisal rights in connection
with the Reorganization.
6. NAME OF SURVIVING CORPORATION. The name of the Surviving
Corporation shall be "Perpetual Bank, A Federal Savings Bank."
7. DIRECTORS OF THE SURVIVING CORPORATION. Upon and after the
Effective Date, until changed in accordance with the Charter and Bylaws of the
Surviving Corporation and applicable law, the number of directors of the
Surviving Corporation shall be nine. The names of those persons who, upon and
after the Effective Date, shall be directors of the Surviving Corporation are
set forth below. Each such director shall serve for the term which expires at
the annual meeting of stockholders of the Surviving Corporation in the year set
forth after his respective name, and until a successor is elected and qualified.
B-3
<PAGE>
Name Term Expires
---- ------------
Harold A. "Drew" Pickens 1998
Robert W. "Lujack" Orr 1997
Martha S. Clamp 1997
Jack F. McIntosh 1999
Charles W. Fant, Jr. 1999
Cordes G. Seabrook, Jr. 1999
Jim Gray Watson 1998
Richard C. Ballenger 1997
F. Stevon Kay 1998
The address of each director is 907 N. Main Street, Anderson, South
Carolina 29521.
8. OFFICERS OF THE SURVIVING CORPORATION. Upon and after the
Effective Date, until changed in accordance with the Charter and Bylaws of the
Surviving Corporation and applicable law, the officers of the Savings Bank
immediately prior to the Effective Date shall be the officers of the Surviving
Corporation.
9. OFFICES. Upon the Effective Date, all offices of the Savings
Bank shall be offices of the Surviving Corporation. As of the Effective Date,
the home office of the Surviving Corporation shall remain at 907 N. Main Street,
Anderson, South Carolina, and the locations of the branch offices of the
Surviving Corporation shall be 104 Whitehall Road, Anderson, South Carolina;
2821 South Main Street, Anderson, South Carolina; Windsor Place Winn Dixie, S.C.
Highway 81, Anderson, South Carolina; and 3898 Liberty Highway, Anderson, South
Carolina.
10. CHARTER AND BYLAWS. On and after the Effective Date, the Charter
and Bylaws of the Savings Bank as in effect immediately prior to the Effective
Date shall be the Charter and Bylaws of the Surviving Corporation until amended
in accordance with the terms thereof and applicable law.
11. SAVINGS ACCOUNTS. Upon the Effective Date, any savings accounts
of Interim, without reissue, shall be and become savings accounts of the
Surviving Corporation without change in their respective terms, including,
without limitation, maturity minimum required balances or withdrawal value.
12. STOCK COMPENSATION PLANS. By voting in favor of this Agreement,
the Holding Company shall have approved adoption of the Savings Bank's 1993
Stock Option Plan, 1996 Stock Option Plan, 1993 Management Development and
Recognition Plan and 1996 Management Development and Recognition Plan
(collectively, the "Plans") as plans of the Holding Company and shall have
agreed to issue Holding Company Common Stock in lieu of Savings Bank Common
Stock pursuant to the terms of such Plans. As of the Effective Date, rights
outstanding under the Plans shall be assumed by the Holding Company and
thereafter shall be rights only for shares of Holding Company Common Stock, with
each such right being for a number of shares of Holding Company Common Stock
equal to the number of shares of Savings Bank Common Stack that were available
thereunder immediately prior to the Effective Date times the Exchange Ratio, as
defined in the plan of conversion, and the price of each such right shall be
adjusted to reflect the Exchange Ratio and so that the aggregate purchase price
of the right is unaffected, but with no change in any other term or condition of
such right. The Holding Company shall make appropriate amendments to the Plans
to reflect the adoption of the Plans by the Holding Company without adverse
effect upon the rights outstanding thereunder.
13. STOCKHOLDER APPROVAL. The affirmative votes of the holders of
Savings Bank Common Stock set forth in the Plan of Conversion shall be required
to approve the Plan of Conversion and Agreement and Plan of Reorganization, of
which this Plan of Reorganization is a part, on behalf of the Savings Bank. The
approval of the Holding Company, as the sole holder of the Interim B Common
Stock, shall be required to approve the Plan of Conversion, of which this Plan
of Reorganization is a part, on behalf of Interim B.
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<PAGE>
14. REGISTRATION; OTHER APPROVALS. In addition to the approvals set
forth in Sections 1 and 13 hereof and in the Plan of Conversion, the obligations
of the parties hereto to consummate the Reorganization shall be subject to the
Holding Company Common Stock to be issued hereunder in exchange for Savings Bank
Common Stock being registered under the Securities Act of 1933, as amended, and
registered or qualified under applicable state securities laws, as well as the
receipt of all other approvals, consents or waivers as the parties may deem
necessary or advisable.
15. ABANDONMENT OF PLAN. This Plan of Reorganization may be
abandoned by either the Savings Bank or Interim B at any time before the
Effective Date in the manner set forth in the Plan of Conversion.
16. AMENDMENTS. This Plan of Reorganization may be amended in the
manner set forth in the Plan of Conversion by a subsequent writing signed by the
parties hereto upon the approval of the Board of Directors of each of the
parties hereto.
17. SUCCESSORS. This Plan of Reorganization shall be binding on the
successors of the parties hereto.
18. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of South Carolina, except to the extent
superseded by the laws of the United States.
IN WITNESS WHEREOF, the Parties hereto have cause this Plan of
Reorganization to be duly executed on its behalf by its officers thereunto duly
authorized, all as of the date first above written.
Attest: SOUTHBANC SHARES, M.H.C.
By:
- ------------------------ -------------------------------------
Sylvia B. Reed Robert W. "Lujack" Orr
Corporate Secretary President
Attest: _________________
By:
- ------------------------ -------------------------------------
Sylvia B. Reed Robert W. "Lujack" Orr
Corporate Secretary President
Attest: PERPETUAL INTERIM "B" BANK, A FEDERAL
SAVINGS BANK
By:
- ------------------------ -------------------------------------
Sylvia B. Reed Robert W. "Lujack" Orr
Corporate Secretary President
B-5
<PAGE>
REVOCABLE PROXY
SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
OF
SOUTHBANC SHARES, M.H.C.
FOR THE SPECIAL MEETING OF MEMBERS
TO BE HELD ON MARCH __, 1998
The undersigned member of SouthBanc Shares, M.H.C. ("MHC") hereby
appoints the Board of Directors, with full powers of substitution, as
attorneys-in-fact and agents for and in the name of the undersigned, to vote
such shares as the undersigned may be entitled to cast at the Special Meeting of
Members ("Meeting") of the MHC, to be held at the main office of the Savings
Bank, 907 N. Main Street, Anderson, South Carolina, on the date and time
indicated on the Notice of Special Meeting of Members, and at any adjournment
thereof. They are authorized to cast all votes to which the undersigned is
entitled, as follows:
FOR AGAINST
(1) To approve an Amended Plan of Conversion and Agreement and Plan
of Reorganization adopted by the Board of Directors on September
22, 1997, to convert the MHC from a federally chartered mutual
holding company to a stock holding company, to be known as
"SouthBanc Shares, Inc.," and the reorganization of Perpetual Bank,
A Federal Savings Bank as wholly-owned subsidiary thereof,
including the adoption of Certificate of Incorporation and Bylaws for
the stock holding company, pursuant to the laws of the United States
and the rules and regulations of the Office of Thrift Supervision.
[ ] [ ]
NOTE: The Board of Directors is not aware of any other matter that may come
before the Meeting.
<PAGE>
THIS PROXY WILL BE VOTED FOR THE PROPOSITIONS
STATED IF NO CHOICE IS MADE HEREIN
Should the undersigned be present and elect to vote at said Meeting or
at any adjournment thereof and, after notification to the Secretary of the MHC
at said Meeting of the member's decision to terminate this Proxy, then the power
of said attorney-in-fact or agents shall be deemed terminated and of no further
force and effect.
The undersigned acknowledges receipt of a Notice of Special Meeting of
Members of the MHC called on the date and time indicated on the Notice of
Special Meeting, and a Proxy Statement relating to said Meeting from the MHC,
prior to the execution of this Proxy.
- --------------------------
Date
- --------------------------
Signature
- --------------------------
Signature
Note: Only one signature is required in the case of a joint account. If
signing as a trustee, executor, administrator or in some other fiduciary
capacity, so indicate.
<PAGE>
EXHIBIT 99.6
______________, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Perpetual Savings Bank, A Federal Savings Bank, which will be held at the
main office of the Savings Bank, 907 N. Main Street, Anderson, South Carolina,
on _________, March __, 1998, at __:00 __.m., Eastern Time.
The attached Notice of Annual Meeting of Stockholders and Proxy
Statement describe the formal business to be transacted at the meeting. In
addition to the routine matters of electing directors and ratifying the
appointment of independent auditors, you will be asked to approve an Amended
Plan of Conversion from Mutual Holding Company to Stock Holding Company and
Agreement and Plan of Reorganization ("Plan of Conversion"). The Plan of
Conversion provides for the conversion of SouthBanc Shares, M.H.C. from a mutual
holding company to a stock holding company, to be known as SouthBanc Shares,
Inc. ("Holding Company"), and the reorganization of the Savings Bank as a
wholly-owned subsidiary of the Holding Company.
During the meeting, we will also report on the operations of the Savings
Bank. Directors and Officers of the Savings Bank, as well as a representative of
KPMG Peat Marwick LLP, the Savings Bank's independent auditors, will be present
to respond to appropriate questions from stockholders.
Detailed information regarding the Savings Bank's activities and
operating performance during the fiscal year ended September 30, 1997, is
contained in the Holding Company's Prospectus dated _____________, 1998, which
also is enclosed. The Prospectus is provided in lieu of the Savings Bank's
Annual Report to Stockholders.
Your vote is important, regardless of the number of shares you own. THE
BOARD OF DIRECTORS URGES YOU TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS
SOON AS POSSIBLE EVEN IF YOU CURRENTLY PLAN TO ATTEND THE ANNUAL MEETING. This
will not prevent you from voting in person at the Annual Meeting, but will
assure that your vote is counted if you are unable to attend.
Sincerely,
Robert W. Orr
President
<PAGE>
PERPETUAL SAVINGS BANK, A FEDERAL SAVINGS BANK
907 N. MAIN STREET
ANDERSON, SOUTH CAROLINA 29621
(864) 225-0241
- -------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH , 1998
- -------------------------------------------------------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders
("Meeting") of Perpetual Savings Bank, A Federal Savings Bank ("Savings Bank")
will be held at the main office of the Savings Bank, 907 N. Main Street,
Anderson, South Carolina, on _________, March __, 1998, at __:00 __.m., Eastern
Time.
A Proxy Card and a Proxy Statement for the Meeting are enclosed.
The Meeting is for the purpose of considering and acting upon:
1. To approve an Amended Plan of Conversion from Mutual Holding
Company to Stock Holding Company and Agreement and Plan of
Reorganization ("Plan of Conversion") providing for the
conversion of SouthBanc Shares, M.H.C. ("MHC"), the mutual
holding company of the Savings Bank, to a stock holding
company, with the concurrent issuance and sale of all of the
Savings Bank's outstanding common stock to SouthBanc Shares,
Inc. ("Holding Company"), a Delaware corporation, and the
issuance and sale of the Holding Company's common stock to the
public; and the other transactions provided for in the Plan of
Conversion;
2. The election of three directors of the Savings Bank;
3. The approval of the appointment of KPMG Peat Marwick LLP as
independent auditors for the Savings Bank for the fiscal year
ending September 30, 1998; and
4. Such other matters as may properly come before the Meeting or
any adjournments thereof.
NOTE: The Board of Directors is not aware of any other business to
come before the Meeting.
Any action may be taken on any one of the foregoing proposals at the
Meeting on the date specified above, or on any date or dates to which, by
original or later adjournment, the Meeting may be adjourned. Pursuant to the
Savings Bank's Bylaws, the Board of Directors has fixed the close of business on
_____________, 1998, as the record date for the determination of the
stockholders entitled to notice of and to vote at the Meeting and any
adjournments thereof.
You are requested to complete and sign the enclosed form of Proxy,
which is solicited by the Board of Directors, and to mail it promptly in the
enclosed envelope. The Proxy will not be used if you attend the Meeting and vote
in person.
BY ORDER OF THE BOARD OF DIRECTORS
SYLVIA B. REED
SECRETARY
Anderson, South Carolina
February __, 1998
- -------------------------------------------------------------------------------
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE SAVINGS BANK THE
EXPENSE OF FURTHER REQUESTS FOR PROXIES IN ORDER TO INSURE A QUORUM. A SELF-
ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED
IF MAILED IN THE UNITED STATES.
- -------------------------------------------------------------------------------
<PAGE>
PROXY STATEMENT
OF
PERPETUAL SAVINGS BANK, A FEDERAL SAVINGS BANK
907 N. MAIN STREET
ANDERSON, SOUTH CAROLINA 29621
(864) 225-0241
- -------------------------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
MARCH , 1998
- -------------------------------------------------------------------------------
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Perpetual Savings Bank, A Federal
Savings Bank ("Savings Bank") to be used at the Annual Meeting of Stockholders
(as may be adjourned or postponed, the "Meeting") of the Savings Bank. The
Meeting will be held at the Savings Bank's main office, 907 N. Main Street,
Anderson, South Carolina, on _________, March __, 1998, at __:00 __.m., Eastern
Time. The accompanying Notice of Annual Meeting of Stockholders and this Proxy
Statement are being first mailed to stockholders on or about February ___, 1998.
- -------------------------------------------------------------------------------
REVOCATION OF PROXIES
- -------------------------------------------------------------------------------
Stockholders who execute proxies retain the right to revoke them at any
time. Unless so revoked, the shares represented by such proxies will be voted at
the Meeting. Proxies may be revoked by written notice delivered in person or
mailed to the Secretary of the Savings Bank at the above address, or the filing
of a later proxy prior to a vote being taken on a particular proposal at the
Meeting. A proxy will not be voted if a stockholder attends the Meeting and
votes in person. Proxies solicited by the Board of Directors of the Savings Bank
will be voted in accordance with the directions given therein. Where no
instructions are indicated, executed proxies will be voted for the nominees for
directors set forth below and in favor of the other proposals set forth herein.
- -------------------------------------------------------------------------------
VOTING SECURITIES AND SECURITIES OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------------------------------------------------------------------------------
Stockholders of record as of the close of business on _____________,
1998 ("Voting Record Date"), are entitled to one vote for each share of common
stock of the Savings Bank ("Savings Bank Common Stock") then held. As of the
Voting Record Date, _________ shares of Savings Bank Common Stock were issued
and outstanding, _________ of which were owned by SouthBanc Shares, M.H.C.
("MHC"), the Savings Bank's mutual holding company. All share data included
herein has been adjusted to reflect all stock dividends paid by the Savings
Bank.
The presence, in person or by proxy, of at least a majority of the
total number of outstanding shares of Common Stock entitled to vote is necessary
to constitute a quorum at the Meeting. Since the MHC owns more than 50% of the
outstanding shares of Common Stock, the votes cast by the MHC will constitute
the presence of a quorum and will determine the outcome of the Proposal II
(Election of Directors) and Proposal III (Approval of Appointment of Independent
Auditors) set forth herein. Proposal I (Approval of Plan of Conversion from
Mutual Holding Company to Stock Holding Company and Agreement and Plan of
Reorganization) must be approved by the holders of at least two-thirds of the
outstanding shares of Savings Bank Common Stock and by the holders of at least a
majority of the outstanding shares of Savings Bank Common Stock present in
person or by proxy at the Meeting (other than those held by the MHC).
1
<PAGE>
The nominees for directors who receive a plurality of the votes cast by
the holders of the outstanding Common Stock entitled to vote at the Meeting will
be elected. Votes may be cast for or withheld from each nominee. Votes that are
withheld will have no effect on the outcome of the election because directors
will be elected by a plurality of votes cast. An affirmative majority of the
votes cast is required to ratify the appointment of independent auditors.
Abstentions and "broker non-votes" (i.e., shares held by brokers or
nominees as to which instructions have not been received and the broker or
nominee does not have discretionary voting power) will be treated as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum. The vote of a stockholder who abstains will, however, have the same
effect as a vote "against" a proposal. "Broker non-votes" will have no effect on
whether or not a proposal passes.
Persons and groups beneficially owning in excess of 5% of the Common
Stock are required to file with the Office of Thrift Supervision ("OTS"), and
provide a copy to the Savings Bank, certain reports disclosing such ownership
pursuant to the Securities Exchange Act of 1934, as amended ("Exchange Act").
Based upon such reports, the following table sets forth, as of the Voting Record
Date, certain information as to those persons who were beneficial owners of more
than 5% of the outstanding shares of Common Stock and as to the shares of Common
Stock beneficially owned by the Savings Bank's named executive officers and by
all officers and directors of the Savings Bank as a group. See "PROPOSAL II --
ELECTION OF DIRECTORS" for information concerning the beneficial ownership of
shares of Common Stock by each of the Savings Bank's directors.
Number of Shares Percent of Shares
Name Beneficially Owned (1) Outstanding
- ---- ---------------------- -----------
Beneficial Owners of More Than 5%
SouthBanc Shares, M.H.C.
Directors
Harold A. Pickens, Jr.
Martha S. Clamp
Jack F. McIntosh
Charles W. Fant, Jr.
Cordes G. Seabrook, Jr.
Jim Gray Watson
Richard C. Ballenger
F. Stevon Kay
Named Executive Officers*
Robert W. Orr**
Thomas C. Hall (2)
Barry C. Visioli (3)
All Officers and
Directors as a
Group (21 persons) (4)
(footnotes on following page)
2
<PAGE>
* Under OTS regulations, the term "named executive officer" is defined to
include the chief executive officer, regardless of compensation level,
and the four most highly compensated executive officers, other than the
chief executive officer, whose total annual salary and bonus for the
last completed fiscal year exceeded $100,000. Messrs. Orr, Hall and
Visioli were the Savings Bank's only "named executive officers" for the
fiscal year ended September 30, 1997.
** Mr. Orr is also a director of the Savings Bank.
(1) In accordance with Rule 13d-3 under the Exchange Act, a person is
deemed to be the beneficial owner, for purposes of this table, of any
shares of Common Stock if he or she has voting and/or investment power
with respect to such security. The table includes shares owned by
spouses, other immediate family members in trust, shares held in
retirement accounts or funds for the benefit of the named individuals,
and other forms of ownership, over which shares the persons named in
the table may possess voting and/or investment power. Shares which are
subject to stock options that are exercisable within 60 days of the
Voting Record Date are deemed to be beneficially owned.
(2) Includes _____ shares of Common Stock which may be received upon the
exercise of stock options that are exercisable within 60 days of the
Voting Record Date.
(3) Includes _____ shares of Common Stock which may be received upon the
exercise of stock options that are exercisable within 60 days of the
Voting Record Date.
(4) Includes _____ shares of Common Stock which may be received upon the
exercise of stock options that are exercisable within 60 days of the
Voting Record Date.
- -------------------------------------------------------------------------------
PROPOSAL I -- APPROVAL OF PLAN OF CONVERSION FROM MUTUAL HOLDING COMPANY
TO STOCK HOLDING COMPANY AND AGREEMENT AND PLAN OF REORGANIZATION
- -------------------------------------------------------------------------------
On September 22, 1997, the Boards of Directors of the MHC and the
Savings Bank unanimously adopted, and on December 22, 1997 unanimously amended,
the Plan of Conversion, pursuant to which the MHC will convert from a mutual
holding company to a stock holding company and the Savings Bank simultaneously
reorganize as a wholly-owned subsidiary of the Holding Company, a newly formed
Delaware corporation. The following discussion of all material aspects of the
Plan of Conversion is qualified in its entirety by reference to the Plan of
Conversion, which is attached hereto as Exhibit A. The OTS has approved the Plan
of Conversion subject to its approval by the members of the MHC entitled to vote
on the matter at the Special Meeting of Members called for that purpose to be
held on ____________, 1998, its approval by the stockholders of the Savings Bank
entitled to vote on the matter at the Stockholders' Meeting called for that
purpose to be held on ____________, 1998, and its approval by the stockholders
of the Savings Bank (excluding the MHC) entitled to vote on the matter at the
Stockholders' Meeting, and subject to the satisfaction of certain other
conditions imposed by the OTS in its approval.
Pursuant to the Plan of Conversion, (i) the MHC will convert from a
federally-chartered mutual holding company to a federally-chartered interim
stock savings bank (i.e. Interim A) and simultaneously merge with and into the
Savings Bank, pursuant to which the MHC will cease to exist and the shares of
Savings Bank Common Stock held by the MHC will be canceled, and (ii) An interim
federal stock savings bank ("Interim B") will be formed as a wholly-owned
subsidiary of the Holding Company and will merge with and into the Savings Bank.
As a result of the merger of Interim B with and into the Savings Bank, the
Savings Bank will become a wholly owned subsidiary of the Holding Company and
the Public Savings Bank Shares will be converted into the Exchange Shares
pursuant to the Exchange Ratio, which will result in the holders of such shares
owning in the aggregate approximately the same percentage of the Common Stock to
be outstanding upon the completion of the Conversion and Reorganization (i.e.,
the Conversion Shares and the Exchange Shares) as the percentage of Savings Bank
Common Stock owned by them in the aggregate immediately prior to consummation of
the Conversion and
3
<PAGE>
Reorganization, but before giving effect to (a) the payment of cash in lieu of
issuing fractional Exchange Shares and (b) any shares of Conversion Stock
purchased by the Savings Bank's stockholders in the Conversion Offerings.
As part of the Conversion and Reorganization, the Holding Company is
offering Conversion Shares in the Subscription Offering to holders of
Subscription Rights in the following order of priority: (i) Eligible Account
Holders (depositors of the Savings Bank with $50.00 or more on deposit as of the
close of business on June 30, 1996); (ii) Supplemental Eligible Account Holders
(depositors of the Savings Bank with $50.00 or more on deposit as of the close
of business on December 31, 1997); and (iii) Other Members (depositors of the
Savings Bank as of the close of business on ___________, 1998 and borrowers of
the Savings Bank with loans outstanding as of the close of business on October
26, 1993, which continue to be outstanding as of the close of business on
__________, 1997).
Concurrently with the Subscription Offering, any Conversion Shares not
subscribed for in the Subscription Offering may be offered for sale in the
Direct Community Offering to members of the general public, with priority being
given first to Public Stockholders as of the close of business on the Voting
Record Date (who are not Eligible Account Holders, Supplemental Eligible Account
Holders or Other Members) and then to natural persons and trusts of natural
persons residing in the Local Community. Conversion Shares 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 Savings Bank 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 Savings Bank will consult with the regulatory authorities to
determine an appropriate alternative method for selling the unsubscribed
Conversion Shares. The Plan of Conversion provides that the Conversion and
Reorganization must be completed within 24 months after the date of the approval
of the Plan of Conversion by the members of the MHC.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF PLAN OF
CONVERSION.
- -------------------------------------------------------------------------------
INCORPORATION BY REFERENCE
- -------------------------------------------------------------------------------
Each person receiving this Proxy Statement is also receiving the
accompanying Prospectus of SouthBanc Shares, Inc. dated ______________, 1998.
Although such Prospectus is incorporated herein by reference, this Proxy
Statement does not constitute an offer to buy or a solicitation of an offer to
buy the common stock of the Holding Company.
The Savings Bank urges each recipient of this Proxy Statement to read
carefully the sections of the Prospectus that describe (i) the Conversion and
Reorganization (see "THE CONVERSION AND REORGANIZATION") and the (ii) business
of the Holding Company and the Savings Bank (see "BUSINESS OF THE HOLDING
COMPANY" and "BUSINESS OF THE SAVINGS BANK" in the Prospectus), (iii) reasons
for the Conversion and Reorganization and management's belief that the
Conversion and Reorganization is in the best interests of the Savings Bank and
its stockholders, (iv) employment agreements, severance agreements, severance
plans and stock benefit plans that the Savings Bank and/or the Holding Company
intend to implement in connection with the Conversion and Reorganization (see
"MANAGEMENT OF THE SAVINGS BANK" in the Prospectus), (v) the common stock of the
Holding Company (see "DESCRIPTION OF CAPITAL STOCK OF THE HOLDING COMPANY" in
the Prospectus), (vi) the historical capitalization of the Savings Bank and the
pro forma capitalization of the Holding Company (see "CAPITALIZATION" in the
Prospectus), (vii) the historical and pro forma capital compliance of the
Savings Bank (see "HISTORICAL AND PRO FORMA CAPITAL COMPLIANCE" in the
Prospectus), (viii) pro forma financial information with respect to the
Conversion and Reorganization (see "PRO FORMA DATA" in the Prospectus), (ix) the
Holding Company and the Savings Bank's respective intended use of proceeds of
the Conversion Offerings (see "USE OF PROCEEDS" in the Prospectus), (x) the
Holding
4
<PAGE>
Company's proposed dividend policy (See "DIVIDEND POLICY" in the Prospectus),
(xi) restrictions on the acquisition of the Holding Company, including anti-
takeover provisions in the Holding Company's Articles of Incorporation and
Bylaws (see "RESTRICTIONS ON THE ACQUISITION OF THE HOLDING COMPANY" in the
Prospectus), (xii) a comparison of the rights of the holders of Savings Bank
Common Stock and rights of the holders of the Holding Company's common stock,
and (xiii) the consolidated financial statements of the Savings Bank appearing
in the Prospectus.
- -------------------------------------------------------------------------------
PROPOSAL II -- ELECTION OF DIRECTORS
- -------------------------------------------------------------------------------
The Savings Bank's Board of Directors consists of nine members. The
Savings Bank's Bylaws provide that directors are elected for terms of three
years, one-third of whom are elected annually. The Nominating Committee has
nominated for election as directors Harold A. Pickens, Jr. and Robert W. Orr for
the terms set forth in the table on the following page. The nominees are current
members of the Board of Directors of the Savings Bank. Stockholders are not
permitted to cumulate their votes for the election of directors.
If any nominee is unable to serve, the shares represented by all valid
proxies will be voted for the election of such substitute as the Board of
Directors may recommend or the Board of Directors may amend the Bylaws and
reduce the size of the Board. At this time, the Board knows of no reason why any
nominee might be unable to serve.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL OF THE NOMINEES
NAMED BELOW FOR DIRECTORS OF THE SAVINGS BANK.
The following table sets forth certain information as to each nominee
and director continuing in office.
<TABLE>
<CAPTION>
Year First
Appointed Year
Principal Occupation or Elected Term
Name Age(1) for Past Five Years Director Expires
---- ------ ------------------- -------- -------
<S> <C> <C> <C> <C>
BOARD NOMINEES
Richard C. Ballenger 49 President of City Glass Company and 1996 2000(2)
D&B Glass Company, Inc.
Robert W. "Lujack" Orr 49 President, Managing Officer and a Director 1989 2000(2)
of the Savings Bank and the Holding Company
Martha S. Clamp 55 Self-employed certified public accountant 1988 2000(2)
DIRECTORS CONTINUING IN OFFICE
Harold A. "Drew" 64 Chairman of Board of the Savings Bank and 1977 1998
Pickens, Jr. the Holding Company
Jim Gray Watson 68 Former President and Chief Executive Officer 1976 1998
of the Savings Bank prior to his retirement
in December 1990
F. Stevon Kay 46 President of Hill Electric Company, Inc. 1996 1998
</TABLE>
(table continued on following page)
5
<PAGE>
<TABLE>
<CAPTION>
Year First
Appointed Year
Principal Occupation or Elected Term
Name Age(1) for Past Five Years Director Expires
---- ------ ------------------- -------- -------
<S> <C> <C> <C> <C>
DIRECTORS CONTINUING IN OFFICE (continued)
Jack F. McIntosh 69 Partner in the law firm of McIntosh and 1988 1999
Sherard, Anderson, South Carolina
Charles W. Fant, Jr. 71 Partner in the architectural firm of 1977 1999
Fant & Fant Architects, Anderson, South
Carolina
Cordes G. Seabrook, Jr. 70 Partner in Value Systems, Gastonia, North 1976 1999
Carolina, an association management company
</TABLE>
(1) At September 30, 1997.
(2) Assuming election or re-election at the Meeting.
- --------------------------------------------------------------------------------
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
The business of the Savings Bank is conducted through meetings and
activities of its Board of Directors and its committees. During the fiscal year
ended September 30, 1997, the Board of Directors held 12 regular meetings. No
director attended fewer than 75% of the total meetings of the Board of Directors
of the Savings Bank and committees on which such director served.
The Executive Committee of the Board of Directors, which consists of
Directors Fant (Chairman), Pickens, Seabrook, Watson and Orr, meets as necessary
in between meetings of the full Board of Directors. All actions of the Executive
Committee must be ratified by the full Board of Directors. The Executive
Committee reviews directors' and officers' compensation and makes
recommendations to the full Board of Directors in this regard. The Executive
Committee also recommends prospective new Board members to the full Board of
Directors and insures that all directors, directors emeriti and officers are
acting in compliance with the Savings Bank's Charter and Bylaws. The Executive
Committee met once during the fiscal year ended September 30, 1997.
The Audit Committee of the Savings Bank consists of Directors Pickens
(Chairman), Clamp, Orr and Watson and Thomas C. Hall, Senior Vice President, and
Doris Hoover, a Savings Bank staff member. This committee is responsible for
developing and monitoring the Savings Bank's audit program. The committee
selects the Savings Bank's outside auditor and meets with them to discuss the
results of the annual audit and any related matters. The members of the
committee also receive and review all the reports and findings and other
information presented to them by the Savings Bank's officers regarding financial
reporting policies and practices. In addition, the Savings Bank's Internal
Auditor and Compliance Coordinator operate under the direction of the Audit
Committee and report quarterly to the committee. The committee meets quarterly.
The Audit Committee met four times during the fiscal year ended September 30,
1997.
The Savings Bank's full Board of Directors serves as a Nominating
Committee. The Board of Directors met once in its capacity as the nominating
committee during the 1997 fiscal year.
6
<PAGE>
The Savings Bank also has standing Loan, Pension Plan, Strategic Planning
and Asset/Liability Management Committees.
- --------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
Summary Compensation Table
The following information is provided for the named executive officers.
<TABLE>
<CAPTION>
===================================================================================================================================
SUMMARY COMPENSATION TABLE
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Compensation
- -----------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Awards Payouts
- -----------------------------------------------------------------------------------------------------------------------------------
Name and Other
Principal Annual Restricted All Other
Position Compen- Stock LTIP ompensa-
with the Salary Bonus sation Awards Options Payouts tion
Savings Bank Year ($)(1) ($) ($) ($)(2) (#) ($) ($)(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert W. Orr, 1997 $95,000 $59,299 $ -- 330,525 10,250 -- $14,658
President and
Managing Officer 1996 71,350 61,017 5,750 -- -- -- 13,085
1995 69,077 58,889 5,750 -- -- -- 12,185
Thomas C. Hall, 1997 80,000 50,616 -- 330,525 10,250 -- 12,409
Senior Vice
President 1996 60,902 52,082 2,880 -- -- -- 10,904
1995 58,962 50,265 2,870 -- -- -- 10,218
Barry C. Visioli 1997 70,000 48,552 -- 330,525 10,250 -- 11,263
Senior Vice
President 1996 58,418 49,958 2,880 -- -- -- 10,483
1995 56,557 48,216 2,870 -- -- -- 9,844
====================================================================================================================================
</TABLE>
- ----------------------
(1) Includes salary and directors' fees.
(2) Represents the value of shares of Savings Bank Common Stock awarded under
the 1996 MRP that vest in equal installment over a five-year period
beginning on April 7, 1998. Dividends are paid on such awards if and when
dividends are declared and paid by the Savings Bank. At September 30,
1997, the value of the awards were $330,525 for each of Mr. Orr, Mr. Hall
and Mr. Visioli (5,850 shares at $56.50 per share).
(3) Represents employer 401(k) Plan contributions.
7
<PAGE>
Employment Agreements
The MHC and the Savings Bank currently maintain employment agreements
with Messrs. Orr, Hall and Visioli that were entered into in connection with the
MHC Reorganization. In connection with the Conversion and Reorganization, the
Holding Company and the Savings Bank (collectively, the "Employers") will enter
into three-year employment agreements ("Employment Agreements") with these same
individuals (individually, the "Executive"), which have substantially the same
terms as and will replace the existing agreements.
Under the Employment Agreements, the initial salary levels for Messrs.
Orr, Hall and Visioli will be $98,800, $83,200 and $72,800, respectively, which
amounts will be paid by the Savings Bank and may be increased at the discretion
of the Board of Directors. On each anniversary of the commencement date of the
Employment Agreements, the term of each agreement may be extended for an
additional year at the discretion of the Board. The agreement is terminable by
the Employers at any time, by the Executive if the Executive is assigned duties
inconsistent with his initial position, duties, responsibilities and status, or
upon the occurrence of certain events specified by federal regulations. In the
event that an Executive's employment is terminated without cause or upon the
Executive's voluntary termination in certain circumstances, the Savings Bank
would be required to honor the terms of the agreement through the expiration of
the then current term, including payment of current cash compensation and
continuation of employee benefits.
The Employment Agreements also provide for severance payments and other
benefits in the event of involuntary termination of employment in connection
with any change in control of the Employers. Severance payments also will be
provided on a similar basis in connection with a voluntary termination of
employment where, subsequent to a change in control, an Executive is assigned
duties inconsistent with his position, duties, responsibilities and status
immediately prior to such change in control. The term "change in control" is
defined in the agreement as having occurred when, among other things, (a) a
person other than the Holding Company purchases shares of Common Stock pursuant
to a tender or exchange offer for such shares, (b) any person (as such term is
used in Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the
beneficial owner, directly or indirectly, of securities of the Holding Company
representing 25% or more of the combined voting power of the Holding Company's
then outstanding securities, (c) the membership of the Board of Directors
changes as the result of a contested election, or (d) shareholders of the
Holding Company approve a merger, consolidation, sale or disposition of all or
substantially all of the Holding Company's assets, or a plan of partial or
complete liquidation.
The maximum value of the severance benefits under the Employment
Agreements is 2.99 times the Executive's average annual compensation during the
five-year period preceding the effective date of the change in control (the
"base amount"). The Employment Agreements provide that the value of the maximum
benefit may be distributed, at the Executive's election, (i) in the form of a
lump sum cash payment equal to 2.99 times the Executive's 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 present 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 each Executive elected to receive a lump sum cash
payment, Messrs. Orr, Hall and Visioli would be entitled to payments of
approximately $220,000, $187,000 and $176,000, respectively. 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 Agreements restrict the Executive's right to compete
against the Employers for a period of one year from the date of termination of
the agreement if an Executive's employment is terminated without cause, except
if such termination occurs after a change in control.
8
<PAGE>
Option Grants Table
The following table sets forth all grants of options to the named
executive officers for the fiscal year ended September 30, 1997.
<TABLE>
<CAPTION>
================================================================================================================================
OPTION GRANTS IN LAST FISCAL YEAR
- --------------------------------------------------------------------------------------------------------------------------------
Individual Grants
- --------------------------------------------------------------------------------------------------------------------------------
Percent of
Total Options
Number of Granted to Exercise
Options Employees in Price Expiration
Name Granted Fiscal Year Per Share Date
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert W. Orr 10,250 26% $25.25 April 2007
- --------------------------------------------------------------------------------------------------------------------------------
Thomas C. Hall 10,250 26% $25.25 April 2007
- --------------------------------------------------------------------------------------------------------------------------------
Barry C. Visioli 10,250 26% $25.25 April 2007
================================================================================================================================
</TABLE>
Option Exercise/Value Table
The following table sets forth all exercises of options by the named
executive officers for the fiscal year ended September 30, 1997.
<TABLE>
<CAPTION>
=================================================================================================================================
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
- ---------------------------------------------------------------------------------------------------------------------------------
Value of
Number of Unexercised
Number of Unexercised In-the-Money
Shares Options at Options at
Acquired Dollar Fiscal Year End Fiscal Year End
on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert W. Orr 2,956 $57,642 --/-- $--/$--
- ---------------------------------------------------------------------------------------------------------------------------------
Thomas C. Hall -- -- 2,300/-- $106,950/$--
- ---------------------------------------------------------------------------------------------------------------------------------
Barry C. Visioli -- -- 2,300/-- $106,950/$--
=================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
DIRECTORS' COMPENSATION
- --------------------------------------------------------------------------------
Directors (including Directors Emeriti, but excluding directors who are
full-time employees) receive annual compensation of $10,800, payable $900
monthly, and $100 for each committee meeting attended. No fees are paid
9
<PAGE>
for attending special meetings of the Board. The Savings Bank's Chairman of the
Board receives compensation of $12,000 per year. The Savings Bank paid a total
of $109,000 in directors' and committee fees for the fiscal year ended September
30, 1997. Director compensation is deducted by $100 for each meeting absence.
Directors also participate in the Savings Bank's stock option programs.
- --------------------------------------------------------------------------------
PROPOSAL III -- APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
KPMG Peat Marwick LLP was the Savings Bank's independent auditors for
the fiscal year ended September 30, 1997. The Board of Directors has appointed
KPMG Peat Marwick LLP as independent auditors for the fiscal year ending
September 30, 1998, subject to approval by the Savings Bank's stockholders. A
representative of KPMG Peat Marwick LLP is expected to be present at the Meeting
to respond to stockholders' questions and will have the opportunity to make a
statement if he so desires.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
APPROVAL OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS OF
THE SAVINGS BANK FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 1998.
- --------------------------------------------------------------------------------
TRANSACTIONS WITH THE SAVINGS BANK
- --------------------------------------------------------------------------------
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 Savings Bank's policy is not to make any new
loans or extensions of credit to the Savings Bank'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 Savings
Bank'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.
The aggregate amount of loans by the Savings Bank to its executive officers and
directors was $___ million at September 30, 1997.
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
The Board of Directors of the Savings Bank is not aware of any business
to come before the Meeting other than those matters described above in this
Proxy Statement. However, if any other matters should properly come before the
Meeting, it is intended that proxies in the accompanying form will be voted in
respect thereof in accordance with the judgment of the person or persons voting
the proxies.
The cost of solicitation of proxies will be borne by the Savings Bank.
In addition to solicitations by mail, directors, officers and regular employees
of the Savings Bank may solicit proxies personally or by telegraph or telephone
without additional compensation.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Holding Company's Prospectus dated ____________, 1998, which
includes consolidated financial statements of the Savings Bank, has been mailed
to all stockholders of record as of the close of business on the Voting Record
Date. Any stockholder who has not received a copy of such Prospectus may obtain
a copy by writing
10
<PAGE>
to the Secretary of the Savings Bank. The Prospectus is incorporated herein to
the extent set forth under the section, "Incorporation By Reference."
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- --------------------------------------------------------------------------------
Upon consummation of the Conversion and Reorganization, the
stockholders of the Savings Bank will become stockholders of the Holding
Company. In order to be eligible for inclusion in the Holding Company's proxy
materials for its Annual Meeting of Stockholders next year, any stockholder
proposal to take action at such meeting must be received at the Holding
Company's main office at 907 N. Main Street, Anderson, South Carolina, no later
than ___________, 1998. Any such proposals shall be subject to the requirements
of the proxy solicitation rules adopted under the Exchange Act.
BY ORDER OF THE BOARD OF DIRECTORS
SYLVIA B. REED
SECRETARY
Anderson, South Carolina
February ___, 1998
- --------------------------------------------------------------------------------
A COPY OF THE FORM 10-KSB AS FILED WITH THE OFFICE OF THRIFT SUPERVISION WILL BE
FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE RECORD DATE UPON WRITTEN
REQUEST TO SYLVIA B. REED, SECRETARY, PERPETUAL SAVINGS BANK, A FEDERAL SAVINGS
BANK, 907 N. MAIN STREET, ANDERSON, SOUTH CAROLINA 20621.
- --------------------------------------------------------------------------------
11
<PAGE>
EXHIBIT A
SOUTHBANC SHARES, M.H.C.
PERPETUAL BANK, A FEDERAL SAVINGS BANK
ANDERSON, SOUTH CAROLINA
AMENDED PLAN OF CONVERSION FROM MUTUAL HOLDING COMPANY TO STOCK
HOLDING COMPANY AND AGREEMENT AND PLAN OF REORGANIZATION
I. General
-------
For purposes of this section, all capitalized terms have the meanings
ascribed to them in Section II unless otherwise defined herein.
SouthBanc Shares, M.H.C., Anderson, South Carolina ("MHC") was formed
on October 26, 1993 to act as the federally chartered mutual holding company for
Perpetual Bank, A Federal Savings Bank, Anderson, South Carolina ("Savings
Bank"), a federally chartered capital stock savings bank. As of the date hereof,
the MHC beneficially and of record owns 800,000 shares of common stock, par
value $1.00 per share, of the Savings Bank ("Savings Bank Common Stock"),
representing approximately 53.02% of the outstanding voting stock of the Savings
Bank and the remaining 708,873 shares of Savings Bank Common Stock, or 46.98%,
are owned by persons other than the MHC ("Public Stockholders").
This Plan of Conversion from Mutual Holding Company to Stock Holding
Company and Agreement and Plan of Reorganization ("Plan") provides for the
conversion of the MHC to the stock form of organization and the reorganization
of the Savings Bank as a wholly owned subsidiary of a newly formed stock holding
company (collectively, "Conversion and Reorganization"). The Boards of Directors
of the MHC and the Savings Bank believe that the Conversion and Reorganization
is in the best interests of the MHC, the members of the MHC, the Savings Bank
and its stockholders. As a result of the Conversion and Reorganization, the
Savings Bank will be wholly owned by a stock holding company, which is a more
common structure and form of ownership than a mutual holding company. The Board
of Directors determined that the Plan equitably provides for the interests of
Members through the granting of subscription rights and the establishment of a
liquidation account and that consummation of the Conversion and Reorganization
would not adversely impact the stockholders' equity of the Savings Bank.
The Conversion and Reorganization will provide the Savings Bank with a
larger capital base which will enhance its ability to pursue lending and
investment opportunities, as well as opportunities for growth and expansion. The
Conversion and Reorganization also will provide a more flexible operating
structure, which will enable the Savings Bank to compete more effectively with
other financial institutions. In addition, the Conversion and Reorganization
will raise additional equity capital for the Savings Bank. Finally, the
Conversion and Reorganization has been structured to reunite the accumulated
earnings and profits retained by the MHC with the retained earnings of the
Savings Bank through a tax-free reorganization.
Pursuant to the Plan, the Savings Bank will form a new first-tier
subsidiary which will be incorporated under state law as a stock corporation
("Holding Company"). The Holding Company will then form an interim federal stock
savings bank ("Interim B") as a wholly owned subsidiary. As described in greater
detail herein, simultaneously with the conversion of the MHC to an interim
federal stock savings bank ("Interim A"), the Savings Bank, MHC and Holding
Company will undergo a reorganization in which Interim A will merge with and
into the Savings Bank, Interim B will merge with and into the Savings Bank, the
Holding Company will become the parent company of the Savings Bank, and the
Holding Company will issue and sell its Conversion Stock pursuant to this Plan.
On September 22, 1997, after careful study and consideration, the
Boards of Directors of the MHC and the Savings Bank adopted, and on December 22,
1997 and February 17, 1998, subsequently amended, this Plan. The Plan must be
approved by the affirmative vote of a majority of the total number of votes
eligible to be cast by Members of the MHC at a special meeting to be called for
that purpose and by the holders of at least two-thirds of the shares of
outstanding Savings Bank Common Stock eligible to vote at an annual meeting of
the Savings Bank
<PAGE>
Stockholders, or at a special meeting of the Savings Bank Stockholders called
for the purpose of submitting the Plan for approval. Prior to the submission of
the Plan to the Members and the Public Stockholders for consideration, the Plan
must be approved by the Office of Thrift Supervision ("OTS").
II. Definitions
-----------
For the purposes of this Plan, the following terms have the following
meanings:
A. Acting in Concert: (i) Knowing participation in a joint activity
-----------------
or interdependent conscious parallel action towards a common goal whether or not
pursuant to an express agreement; or (ii) a combination or pooling of voting or
other interests in the securities of an issuer for a common purpose pursuant to
any contract, understanding, relationship, agreement or other arrangement,
whether written or otherwise. A Person (as defined herein) who acts in concert
with another Person ("other party") shall also be deemed to be acting in concert
with any Person who is also acting in concert with that other party, except that
any Tax-Qualified Employee Stock Benefit Plan will not be deemed to be acting in
concert with its trustee or a Person who serves in a similar capacity solely for
the purpose of determining whether stock held by the trustee and stock held by
the Tax-Qualified Employee Benefit Plan will be aggregated.
B. Associate: When used to indicate a relationship with any Person,
---------
means (i) any corporation or organization (other than the Primary Parties or a
majority-owned subsidiary of either thereof) of which such Person is an officer
or partner or is, directly or indirectly, the beneficial owner of ten percent or
more of any class of equity securities, (ii) any trust or other estate in which
such Person has a substantial beneficial interest or as to which such Person
serves as trustee or in a similar fiduciary capacity, except that it does not
include a Tax-Qualified Employee Stock Benefit Plan and (iii) any relative or
spouse of such Person, or any relative of such spouse, who has the same home as
such Person or who is a director or officer of any of the MHC, Savings Bank or
Holding Company or any of their subsidiaries.
C. Capital Stock: Any and all authorized capital stock of the
-------------
Savings Bank.
D. Common Stock: Collectively, Conversion Stock and Exchange Stock.
------------
E. Conversion and Reorganization: Collectively, (i) the conversion
-----------------------------
of the MHC into an interim federal stock savings bank ("Interim A") and the
simultaneous merger of Interim A with and into the Savings Bank, with the
Savings Bank being the surviving institution; (ii) the merger of an interim
federal stock savings bank subsidiary of the Holding Company ("Interim B") with
and into the Savings Bank, with the Savings Bank being the surviving institution
and becoming a wholly owned subsidiary of the Holding Company; (iii) the
exchange of shares of Savings Bank Common Stock (other than those held by the
MHC which shall be canceled) for shares of Holding Company Common Stock; and
(iv) the issuance of Conversion Stock by the Holding Company as provided for in
this Plan.
F. Conversion Stock: Holding Company Common Stock offered and
----------------
issued by the Holding Company in the Offerings pursuant to this Plan.
G. Direct Community Offering: The offering of Conversion Stock for
-------------------------
sale to the public.
H. Eligibility Record Date: June 30, 1996.
-----------------------
I. Eligible Account Holder: Holder of a Qualifying Deposit on the
-----------------------
Eligibility Record Date.
J. Exchange Ratio: The ratio at which shares of Holding Company
--------------
Common Stock will be exchanged for shares of Savings Bank Common Stock held by
the Public Stockholders upon consummation of the Conversion and Reorganization.
The exact rate shall be determined by the MHC and the Savings Bank at the time
the Purchase Price (as defined in Section XI.B.) is determined and shall equal
the rate that will result in the Public Stockholders
2
<PAGE>
owning in the aggregate approximately the same percentage of shares of common
stock of the Holding Company to be outstanding upon completion of the Conversion
and Reorganization as the percentage of Savings Bank Common Stock owned by them
in the aggregate immediately prior to consummation of the Conversion and
Reorganization, before giving effect to (i) the payment of cash in lieu of
issuing fractional shares of Holding Company Common Stock, and (ii) any shares
of Conversion Stock purchased by Public Stockholders or any Tax-Qualified
Employee Stock Benefit Plans.
K. Exchange Stock: Holding Company Common Stock issued to the
--------------
Public Stockholders in exchange for Savings Bank Common Stock.
L. FDIC: Federal Deposit Insurance Corporation.
----
M. Form AC Application: The application submitted by the MHC to
-------------------
the OTS on OTS Form AC for approval of the Conversion and Reorganization.
N. H-(e)1 Application: The application submitted to the OTS on OTS
------------------
Form H-(e)1 or, if applicable, OTS Form H-(e)1-S, for approval of the Holding
Company acquisition of all of the Capital Stock.
O. Holding Company: The corporation to be formed by the Savings
---------------
Bank under state law initially as a first tier, wholly owned subsidiary of the
Savings Bank. Upon completion of the Conversion, the Holding Company shall hold
all of the outstanding capital stock of the Savings Bank.
P. Holding Company Common Stock: The common stock, $0.01 par value
----------------------------
per share, of the Holding Company.
Q. Interim A: "Perpetual Interim "A" Bank, A Federal Savings Bank,"
---------
which will be the interim federal stock savings bank resulting from the
conversion of the MHC to stock form immediately prior to the merger of Interim B
into the Savings Bank.
R. Interim B: "Perpetual Interim "B" Bank, A Federal Savings Bank,"
---------
which will be formed as a wholly owned interim federal stock savings bank
subsidiary of the Holding Company, which will merge with and into the Savings
Bank immediately after the merger of Interim A into the Savings Bank.
S. Local Community: Anderson and Oconee Counties of the State of
---------------
South Carolina.
T. Market Maker: A dealer (i.e., any Person who engages directly or
------------
indirectly as agent, broker, or principal in the business of offering, buying,
selling, or otherwise dealing or trading in securities issued by another Person)
who, with respect to a particular security, (i) regularly publishes bona fide,
competitive bid and offer quotations in a recognized inter-dealer quotation
system or furnishes bona fide competitive bid and offer quotations on request
and (ii) is ready, willing and able to effect transactions in reasonable
quantities at its quoted prices with other brokers or dealers.
U. Member: Any Person qualifying as a member of the MHC pursuant
------
to its charter and bylaws.
V. MHC: SouthBanc Shares, M.H.C., Anderson, South Carolina.
---
W. Offerings: Collectively, the Subscription Offering, Direct
---------
Community Offering and Syndicated Community Offering.
X. Officer: An executive officer of any or all of the Primary
-------
Parties, which includes the Chief Executive Officer, President, Executive Vice
President, Senior Vice Presidents, Vice Presidents in charge of principal
3
<PAGE>
business functions, Secretary, Controller, and any Person performing functions
similar to those performed by the foregoing persons.
Y. Order Form(s): Form(s) to be used to purchase Conversion Stock
-------------
sent to Eligible Account Holders and other parties eligible to purchase
Conversion Stock in the Subscription Offering.
Z. Other Member: A Member (other than an Eligible Account Holder or
------------
Supplemental Eligible Account Holder) at the close of business on the Voting
Record Date.
AA. Person: An individual, a corporation, a partnership, an
------
association, a joint-stock company, a trust (including Individual Retirement
Accounts and KEOGH Accounts), any unincorporated organization, a government or
political subdivision thereof or any other entity.
BB. Plan: This Plan of Conversion from Mutual Holding Company to
----
Stock Holding Company and Agreement and Plan of Reorganization, as originally
adopted by the Boards of Directors of the MHC and the Savings Bank, or as
amended in accordance with its terms.
CC. Primary Parties: Collectively, the MHC, the Savings Bank and the
---------------
Holding Company.
DD. Public Stockholder: Any Person who owns Savings Bank Common
------------------
Stock, other than the MHC, as of the Voting Record Date.
EE. Qualifying Deposit: The deposit balance in any Savings Account
------------------
as of the close of business on the Eligibility Record Date or the Supplemental
Eligibility Record Date, as applicable; provided, however, that no Savings
Account with a deposit balance of less than $50.00 shall constitute a Qualifying
Deposit.
FF. Registration Statement: The registration statement on SEC Form
----------------------
S-1, or similar form, filed by the Holding Company with the SEC for the purpose
of registering the Conversion Stock under the Securities Act of 1933, as
amended.
GG. Savings Account(s): Withdrawable deposit(s) in the Savings Bank,
------------------
including certificates of deposit, demand deposit accounts and non-interest-
bearing deposit accounts.
HH. Savings Bank: Perpetual Bank, A Federal Savings Bank, Anderson,
------------
South Carolina.
II. Savings Bank Common Stock: The common stock of the Savings Bank,
-------------------------
par value $1.00 per share.
JJ. SEC: Securities and Exchange Commission.
---
KK. Special Meeting of Members: The special meeting of the Members,
--------------------------
and any adjournments thereof, held to consider and vote upon the Plan.
LL. Meeting of Stockholders: The meeting of the stockholders of the
-----------------------
Savings Bank, and any adjournments thereof, to be called and held for the
purpose of submitting the Plan for their approval. Such meeting may either be an
annual or special meeting.
MM. Subscription Offering: The offering of Conversion Stock to
---------------------
Eligible Account Holders, Supplemental Eligible Account Holders and Other
Members under the Plan.
NN. Subscription Rights: Nontransferable, non-negotiable, personal
-------------------
rights of Eligible Account Holders, Supplemental Eligible Account Holders and
Other Members to purchase Conversion Stock.
4
<PAGE>
OO. Supplemental Eligibility Record Date: The last day of the
------------------------------------
calendar quarter preceding the approval of the Plan by the OTS.
PP. Supplemental Eligible Account Holder: Holder of a Qualifying
------------------------------------
Deposit in the Savings Bank (other than an Officer or director of the Savings
Bank or their Associates) on the Supplemental Eligibility Record Date.
QQ. Syndicated Community Offering: The offering for sale by a
-----------------------------
syndicate of broker-dealers to the general public of shares of Conversion Stock
not purchased in the Subscription Offering and the Direct Community Offering.
RR. Tax-Qualified Employee Stock Benefit Plan: Any defined benefit
-----------------------------------------
plan or defined contribution plan of the Savings Bank or Holding Company, such
as an employee stock ownership plan, bonus plan, profit-sharing plan or other
plan, which, with its related trust, meets the requirements to be "qualified"
under section 401 of the Internal Revenue Code. A "non-tax-qualified employee
stock benefit plan" is any defined benefit plan or defined contribution plan
that is not so qualified.
SS. Voting Record Date(s): The date(s) fixed by the Boards of
---------------------
Directors of the MHC and the Savings Bank according to OTS regulations for
determining eligibility to vote at the Special Meeting of Members and at the
Meeting of Stockholders.
III. General Procedure for Conversion and Reorganization
---------------------------------------------------
A. Conversion of MHC to an Interim Federal Stock Savings Bank and
--------------------------------------------------------------
Merger of Such Interim Into the Savings Bank. The MHC will convert into
- --------------------------------------------
Perpetual Interim "A" Bank, a Federal Savings Bank (i.e. "Interim A") and
Interim A will simultaneously merge with and into the Savings Bank, with the
Savings Bank as the surviving entity ("MHC Merger"). As a result of the MHC
Merger, the Savings Bank Common Stock held by the MHC will be canceled and
Eligible Account Holders and Supplemental Eligible Account Holders will be
granted ratable interests in a liquidation account, to be established in
accordance with the procedures set forth in Section XIV hereof.
B. Merger of a Second Interim Federal Stock Savings Bank into
----------------------------------------------------------
Savings Bank and Exchange of Shares. Immediately after the MHC Merger, Perpetual
- -----------------------------------
Interim "B" Bank, A Federal Savings Bank (i.e., Interim B) will merge with and
into the Savings Bank, and the separate existence of Interim B will cease
("Savings Bank Merger"). The shares of the Holding Company Common Stock held by
the Bank will be canceled. The shares of common stock of Interim B held by the
Holding Company will be converted, on a one-to-one basis, into shares of Savings
Bank Common Stock, which will result in the Savings Bank becoming a wholly-owned
subsidiary of the Holding Company. The Public Stockholders will exchange their
shares of Savings Bank Common Stock for shares of Holding Company Common Stock
based upon the Exchange Ratio. In addition, all options to purchase shares of
Savings Bank Common Stock which are outstanding immediately prior to
consummation of the Conversion and Reorganization shall be converted to options
to purchase shares of Holding Company Common Stock, with the number of shares
subject to the option and the exercise price per share to be adjusted based upon
the Exchange Ratio so that the aggregate exercise price remains unchanged, and
with the duration of the option remaining unchanged. Upon consummation of the
Conversion and Reorganization, all of the Savings Bank Common Stock will be
owned by the Holding Company and the Public Stockholders will own the same
percentage of the Holding Company Common Stock as the percentage of the Savings
Bank Common Stock owned by them prior to the Conversion and Reorganization,
before giving effect to cash paid in lieu of any fractional interests of Savings
Bank Common Stock and any shares of Conversion Stock purchased by the Public
Stockholders in the Offering or by the Tax-Qualified Employee Stock Benefit
Plans thereafter. The Holding Company will then sell the Conversion Stock in the
Offerings in accordance with this Plan.
Following consummation of the Conversion and Reorganization, voting
rights with respect to the Savings Bank shall be held and exercised exclusively
by the Holding Company as holder of the outstanding Savings Bank Common Stock.
Voting rights with respect to the Holding Company shall be held and exercised
exclusively by
5
<PAGE>
holders of the Holding Company Common Stock. As a result of the MHC Merger, the
separate existence of the MHC and the voting rights of Members will cease.
IV. Steps Prior to Submission of the Plan to the Members and the Savings
--------------------------------------------------------------------
Bank Stockholders for Approval
------------------------------
Prior to submission of the Plan to the Members and to the stockholders
of the Savings Bank for approval, the Plan must be approved by the OTS. Prior to
such regulatory approval:
A. The Boards of Directors of the MHC and the Savings Bank each
shall adopt the Plan by a vote of not less than two-thirds of their entire
membership.
B. The MHC shall publish legal notice of the adoption of the Plan
in a newspaper having a general circulation in each community in which the MHC
and the Savings Bank maintains an office.
C. A press release relating to the proposed Conversion and
Reorganization may be submitted to the local media.
D. Copies of the Plan as adopted by the Boards of Directors of the
MHC and the Savings Bank shall be made available for inspection at each office
of the MHC and the Savings Bank.
E. The Savings Bank shall cause the Holding Company to be
incorporated under state law and the Board of Directors of the Holding Company
shall concur in the Plan by at least a two-thirds vote.
F. As soon as practicable following the adoption of this Plan, the
MHC shall file the Form AC Application, and the Holding Company shall file the
Registration Statement and the H-(e)1 Application. In addition, an application
to merge the MHC (following its conversion into an interim federal stock savings
bank) and the Savings Bank and an application to merge Interim B and the Savings
Bank shall both be filed with the OTS, either as exhibits to the H-(e)1
Application, or separately. Upon filing the Form AC Application, the MHC shall
publish legal notice thereof in a newspaper having a general circulation in each
community in which the MHC and the Savings Bank maintains an office and/or by
mailing a letter to each Member, and also shall publish such other notices of
the Conversion and Reorganization as may be required in connection with the H-
(e)1 Application and by the regulations and policies of the OTS.
G. The MHC and the Savings Bank shall obtain an opinion of their
tax advisors or a favorable ruling from the U.S. Internal Revenue Service which
shall state that the Conversion and Reorganization shall not result in any gain
or loss for federal income tax purposes to the Primary Parties or to Eligible
Account Holders, Supplemental Eligible Account Holders and Other Members.
Receipt of a favorable opinion or ruling is a condition precedent to completion
of the Conversion and Reorganization.
V. Special Meeting of Members
--------------------------
Subsequent to the approval of the Plan by the OTS, the Special Meeting
shall be scheduled in accordance with the MHC's Bylaws. Promptly after receipt
of approval and at least 20 days but not more than 45 days prior to the Special
Meeting, the MHC shall distribute proxy solicitation materials to all Members
and beneficial owners of accounts held in fiduciary capacities where the
beneficial owners possess voting rights, as of the Voting Record Date. The proxy
solicitation materials shall include a copy of the proxy statement to be used in
connection with such solicitation and other documents authorized for use by the
regulatory authorities and may also include a copy of the Plan and/or a
prospectus ("Prospectus") as provided in Section VIII below. The MHC shall also
advise each Eligible Account Holder and Supplemental Eligible Account Holder not
entitled to vote at the Special Meeting of the proposed Conversion and
Reorganization and the scheduled Special Meeting, and provide a postage prepaid
card on which to indicate whether he wishes to receive a Prospectus, if the
Subscription Offering is not held concurrently with the proxy solicitation.
6
<PAGE>
Pursuant to OTS regulations, an affirmative vote of not less than a
majority of the total outstanding votes of the Members is required for approval
of the Plan. Voting may be in person or by proxy at the Special Meeting of
Members. The OTS shall be notified promptly of the actions of the Members at the
Special Meeting of Members.
VI. Meeting of Stockholders
-----------------------
Subsequent to the approval of the Plan by the OTS, the Meeting of
Stockholders shall be scheduled in accordance with the Savings Bank's Bylaws at
which the Plan will be considered for approval. Promptly after receipt of
approval and at least 20 days but not more than 45 days prior to such meeting,
the Savings Bank shall distribute proxy solicitation materials to Savings Bank
stockholders and beneficial owners of Savings Bank Common Stock held in
fiduciary capacities where the beneficial owners possess voting rights, as of
the Voting Record Date. The proxy solicitation materials shall include a copy of
the proxy statement to be used in connection with such solicitation and other
documents authorized for use by the regulatory authorities and may also include
a copy of the Plan and/or a Prospectus as provided in Paragraph VIII below. The
Savings Bank shall also advise each holder of Savings Bank Common Stock entitled
to vote at the meeting of the proposed Conversion and Reorganization and the
scheduled meeting, and provide a postage prepaid card on which to indicate
whether he wishes to receive the Prospectus, if the Subscription Offering is not
held concurrently with the proxy solicitation.
Pursuant to OTS regulations, an affirmative vote of not less than
two-thirds of the total outstanding votes of the stockholders of the Savings
Bank is required for approval of the Plan. Furthermore, pursuant to OTS policy,
the affirmative vote of not less than a majority of the total outstanding votes
of the stockholders of the Savings Bank (except the MHC) present in person or by
proxy is required for approval of the Plan. Voting may be in person or by proxy
at the Meeting of Stockholders. The OTS shall be notified promptly of the
actions of the stockholders of the Savings Bank at the Meeting of Stockholders.
VII. Summary Proxy Statements
------------------------
The Proxy Statements furnished to Members and to stockholders of the
Savings Bank may be in summary form; provided that a statement is made in
bold-face type that a more detailed description of the proposed transaction may
be obtained by returning an enclosed postage prepaid card or other written
communication requesting supplemental information. Without prior approval of the
OTS, the Special Meeting and the meeting of the stockholders of the Savings Bank
shall not be held less than 20 days after the last day on which the supplemental
information statement is mailed to requesting Members or requesting stockholder
of the Savings Bank. The supplemental information statement may be combined with
the Prospectus if the Subscription Offering is commenced concurrently with or
during the proxy solicitation of Members for the Special Meeting or of the
stockholders of the Savings Bank for the Meeting of Stockholders.
VIII. Offering Documents
------------------
The Holding Company may commence the Subscription Offering and,
provided that the Subscription Offering has commenced, may commence the Direct
Community Offering concurrently with or during the proxy solicitation relating
to the Special Meeting of Members and the Meeting of Stockholders. The Holding
Company may close the Subscription Offering before such meetings, provided that
the offer and sale of the Conversion Stock shall be conditioned upon approval of
the Plan by the Members at the Special Meeting and by the stockholders of the
Savings Bank at the Meeting of Stockholders. The MHC's and the Savings Bank's
proxy solicitation materials may require Eligible Account Holders, Supplemental
Eligible Account Holders, Other Members and the Savings Bank Stockholder to
return to the Savings Bank by a reasonable certain date a postage prepaid card
or other written communication requesting receipt of a Prospectus with respect
to the Subscription Offering, provided that if the Prospectus is not mailed
concurrently with the proxy solicitation materials, the Subscription Offering
shall not be closed until the expiration of 30 days after the mailing of the
proxy solicitation materials. If the Subscription Offering is not commenced
within 45 days after the Special Meeting, the Savings Bank may transmit, not
more than 30 days prior to the commencement of the Subscription Offering, to
each Eligible Account Holder, Supplemental
7
<PAGE>
Eligible Account Holder and other eligible subscribers who had been furnished
with proxy solicitation materials a notice which shall state that the Savings
Bank is not required to furnish a Prospectus to them unless they return by a
reasonable date certain a postage prepaid card or other written communication
requesting the receipt of the Prospectus.
Prior to commencement of the Subscription Offering, the Direct
Community Offering and the Syndicated Community Offering, the Holding Company
shall file the Registration Statement. The Holding Company shall not distribute
the final Prospectus until the Registration Statement containing same has been
declared effective by the SEC and the Prospectus has been declared effective by
the OTS.
IX. Combined Subscription and Direct Community Offering
---------------------------------------------------
Instead of a separate Subscription Offering, all Subscription Rights
may be exercised by delivery of properly completed and executed Order Forms to
the Savings Bank or selling group utilized in connection with the Direct
Community Offering and the Syndicated Community Offering. If a separate
Subscription Offering is not held, orders for Conversion Stock in the Direct
Community Offering shall first be filled pursuant to the priorities and
limitations stated in Paragraph XI.C. below.
X. Consummation of the Conversion and Reorganization
-------------------------------------------------
The effective date of the Conversion and Reorganization shall be the
date upon which the last of the following actions occurs: (i) the filing of
Articles of Combination with the OTS with respect to the MHC Merger, (ii) the
filing of Articles of Combination with the OTS with respect to the Savings Bank
Merger and (iii) the closing of the issuance of the shares of Conversion Stock
in the Offerings. The filing of Articles of Combination relating to the MHC
Merger and the Savings Bank Merger and the closing of the issuance of shares of
Conversion Stock in the Offerings shall not occur until all requisite
regulatory, Member approval and approval of the stockholders of the Savings Bank
have been obtained, all applicable waiting periods have expired and sufficient
subscriptions and orders for the Conversion Stock have been received. It is
intended that the closing of the MHC Merger, the Savings Bank Merger and the
sale of shares of Conversion Stock in the Offerings shall occur consecutively
and substantially simultaneously.
After the Conversion and Reorganization, the Savings Bank will succeed
to all the rights, interests, duties and obligations of the Savings Bank before
the Conversion and Reorganization, including but not limited to all rights and
interests of the Savings Bank in and to its assets and properties, whether real,
personal or mixed. The Savings Bank will continue to be a member of the Federal
Home Loan Bank System and all its insured savings deposits will continue to be
insured by the FDIC to the extent provided by applicable law.
XI. Conversion Stock Offering
-------------------------
A. Number of Shares
The number of shares of Conversion Stock to be offered pursuant to the
Plan shall be determined initially by the Boards of Directors of the Primary
Parties in conjunction with the determination of the Purchase Price (as defined
in Section XI.B. below). The number of shares to be offered may be subsequently
adjusted by the Board of Directors prior to completion of the Offerings.
B. Independent Evaluation and Purchase Price of Conversion Stock
All shares of Conversion Stock sold in the Conversion and
Reorganization, including shares sold in any Direct Community Offering, shall be
sold at a uniform price per share, and referred to herein as the "Purchase
Price." The Purchase Price shall be determined by the Board of Directors of the
Primary Parties immediately prior to the simultaneous completion of all such
sales contemplated by this Plan on the basis of the estimated pro forma market
8
<PAGE>
value of the MHC, as converted, and the Savings Bank at such time. Such
estimated pro forma market value shall be determined for such purpose by an
independent appraiser on the basis of such appropriate factors not inconsistent
with the regulations of the OTS. Immediately prior to the Subscription Offering,
a subscription price range shall be established which shall vary from 15% above
to 15% below the average of the minimum and maximum of the estimated price
range. The maximum subscription price (i.e., the per share amount to be remitted
when subscribing for shares of Conversion Stock) shall then be determined within
the subscription price range by the Board of Directors of the Primary Parties.
The subscription price range and the number of shares to be offered may be
revised after the completion of the Subscription Offering with OTS approval
without a resolicitation of proxies or Order Forms or both.
C. Method of Offering Shares
-------------------------
Subscription Rights shall be issued at no cost to Eligible Account
Holders, Supplemental Eligible Account Holders and Other Members pursuant to
priorities established by this Plan and the regulations of the OTS. In order to
effect the Conversion and Reorganization, all shares of Conversion Stock
proposed to be issued in connection with the Conversion and Reorganization must
be sold and, to the extent that shares are available, no subscriber shall be
allowed to purchase less than 25 shares; provided, however, that if the purchase
price is greater than $20.00 per share, the minimum number of shares which must
be subscribed for shall be adjusted so that the aggregate actual purchase price
required to be paid for such minimum number of shares does not exceed $500.00.
The priorities established for the purchase of shares are as follows:
1. Category 1: Eligible Account Holders
-------------------------------------
a. Each Eligible Account Holder shall receive,
without payment, Subscription Rights entitling such Eligible
Account Holder to purchase that number of shares of Conversion
Stock which is equal to the greater of the maximum purchase
limitation established for the Direct Community Offering,
one-tenth of one percent of the total offering or 15 times the
product (rounded down to the next whole number) obtained by
multiplying the total number of shares of Conversion Stock to
be issued by a fraction of which the numerator is the amount
of the Qualifying Deposit of the Eligible Account Holder and
the denominator is the total amount of Qualifying Deposits of
all Eligible Account Holders. If the allocation made in this
paragraph results in an oversubscription, shares of Conversion
Stock shall be allocated among subscribing Eligible Account
Holders so as to permit each such account holder, to the
extent possible, to purchase a number of shares of Conversion
Stock sufficient to make his total allocation equal to 100
shares of Conversion Stock or the total amount of his
subscription, whichever is less. Any shares of Conversion
Stock not so allocated shall be allocated among the
subscribing Eligible Account Holders on an equitable basis,
related to the amounts of their respective Qualifying Deposits
as compared to the total Qualifying Deposits of all Eligible
Account Holders.
b. Subscription Rights received by Officers and
directors of the Primary Parties and their Associates, as
Eligible Account Holders, based on their increased deposits in
the Savings Bank in the one-year period preceding the
Eligibility Record Date shall be subordinated to all other
subscriptions involving the exercise of Subscription Rights
pursuant to this Category.
2. Category 2: Supplemental Eligible Account Holders
--------------------------------------------------
a. In the event that the Eligibility Record Date is
more than 15 months prior to the date of the latest amendment
to the Form AC Application filed prior to OTS approval, then,
and only in that event, each Supplemental Eligible Account
Holder shall receive, without payment, Subscription Rights
entitling such Supplemental Eligible Account Holder to
purchase that number of shares of Conversion Stock which is
equal to the greater of the maximum purchase limitation
established for the Direct Community Offering, one-tenth of
one percent of the total offering or
9
<PAGE>
15 times the product (rounded down to the next whole number)
obtained by multiplying the total number of shares of
Conversion Stock to be issued by a fraction of which the
numerator is the amount of the Qualifying Deposit of the
Supplemental Eligible Account Holder and the denominator is
the total amount of the Qualifying Deposits of all
Supplemental Eligible Account Holders.
b. Subscription Rights received pursuant to this
category shall be subordinated to Subscription Rights granted
to Eligible Account Holders.
c. Any Subscription Rights to purchase shares of
Conversion Stock received by an Eligible Account Holder in
accordance with Category 1 shall reduce to the extent thereof
the Subscription Rights to be distributed pursuant to this
Category.
d. In the event of an oversubscription for shares
of Conversion Stock pursuant to this Category, shares of
Conversion Stock shall be allocated among the subscribing
Supplemental Eligible Account Holders as follows:
(1) Shares of Conversion Stock shall
be allocated so as to permit each such Supplemental
Eligible Account Holder, to the extent possible, to
purchase a number of shares of Conversion Stock
sufficient to make his total allocation (including
the number of shares of Conversion Stock, if any,
allocated in accordance with Category Number 1) equal
to 100 shares of Conversion Stock or the total amount
of his or her subscription, whichever is less.
(2) Any shares of Conversion Stock
not allocated in accordance with subparagraph (1)
above shall be allocated among the subscribing
Supplemental Eligible Account Holders on an equitable
basis, related to the amounts of their respective
Qualifying Deposits as compared to the total
Qualifying Deposits of all subscribing Supplemental
Eligible Account Holders.
3. Category 3: Other Members
--------------------------
a. Other Members shall receive, without payment,
Subscription Rights to purchase shares of Conversion Stock,
after satisfying the subscriptions of Eligible Account Holders
and Supplemental Eligible Account Holders pursuant to Category
Nos. l and 2 above, subject to the following conditions:
(1) Each such Other Member shall be
entitled to subscribe for the greater of the maximum
purchase limitation established for the Direct
Community Offering or one-tenth of one percent of the
total offering.
(2) In the event of an
oversubscription for shares of Conversion Stock
pursuant to Category 3, the shares of Conversion
Stock available shall be allocated among the
subscribing Other Members pro rata on the basis of
the amounts of their respective subscriptions.
D. Direct Community Offering and Syndicated Community Offering
-----------------------------------------------------------
1. Any shares of Conversion Stock not purchased through the
exercise of Subscription Rights set forth in Category Nos. 1 through 3
above may be sold by the Holding Company to Persons under such terms
and conditions as may be established by the Savings Bank's Board of
Directors with the concurrence of the OTS. The Direct Community
Offering may commence concurrently with or as soon as possible after
10
<PAGE>
the completion of the Subscription Offering and must be completed
within 45 days after completion of the Subscription Offering, unless
extended with the approval of the OTS. No Person may purchase in the
Direct Community Offering more than 50,000 shares of Conversion Stock
issued in the Conversion and Reorganization. The right to purchase
shares of Conversion Stock under this Category is subject to the right
of the Savings Bank or the Holding Company to accept or reject such
orders in whole or in part. In the event of an oversubscription for
shares in this Category, the shares available shall be allocated among
prospective purchasers pro rata on the basis of the amounts of their
respective orders. The offering price for which such shares are sold to
the general public in the Direct Community Offering shall be the
Purchase Price.
2. Orders received in the Direct Community Offering first
shall be filled up to a maximum of 2% of the Conversion Stock and
thereafter remaining shares shall be allocated on an equal number of
shares basis per order until all orders have been filled.
3. The Conversion Stock offered in the Direct Community
Offering shall be offered and sold in a manner that will achieve the
widest distribution thereof. Preference shall be given in the Direct
Community Offering first to the Public Stockholders (who are not
Eligible Account Holders, Supplemental Eligible Account Holders or
Other Members) and then to natural Persons and trusts of natural
Persons residing in the Local Community.
4. Subject to such terms, conditions and procedures as may
be determined by the Savings Bank and the Holding Company, all shares
of Conversion Stock not subscribed for in the Subscription Offering or
ordered in the Direct Community Offering may be sold by a syndicate of
broker-dealers to the general public in a Syndicated Community
Offering. No Person may purchase in the Syndicated Community Offering
more 50,000 shares of Conversion Stock issued in the Conversion and
Reorganization. Each order for Conversion Stock in the Syndicated
Community Offering shall be subject to the absolute right of the
Savings Bank and the Holding Company to accept or reject any such order
in whole or in part either at the time of receipt of an order or as
soon as practicable after completion of the Syndicated Community
Offering. The Savings Bank and the Holding Company may commence the
Syndicated Community Offering concurrently with, at any time during, or
as soon as practicable after the end of the Subscription Offering
and/or Direct Community Offering, provided that the Syndicated
Community Offering must be completed within 45 days after the
completion of the Subscription Offering, unless extended by the Savings
Bank and the Holding Company with the approval of the OTS.
5. If for any reason a Syndicated Community Offering of
shares of Conversion Stock not sold in the Subscription Offering and
the Direct Community Offering cannot be effected, or in the event that
any insignificant residue of shares of Conversion Stock is not sold in
the Subscription Offering, Direct Community Offering or Syndicated
Community Offering, the Savings Bank and the Holding Company shall use
their best efforts to obtain other purchasers for such shares in such
manner and upon such conditions as may be satisfactory to the OTS.
6. In the event a Direct Community Offering or Syndicated
Community Offering do not appear feasible, the Savings Bank will
immediately consult with the OTS to determine the most viable
alternative available to effect the completion of the Conversion.
Should no viable alternative exist, the Savings Bank may terminate the
Conversion with the concurrence of the OTS.
E. Limitations Upon Purchases
--------------------------
The following additional limitations and exceptions shall be imposed
upon purchases of shares of Conversion Stock:
11
<PAGE>
1. The maximum number of shares of Conversion Stock which
may be subscribed for or purchased in all categories in the Conversion
and Reorganization by any Person, when combined with any Exchange Stock
received, shall not exceed 50,000 shares of Common Stock issued in the
Conversion and Reorganization.
2. The maximum number of shares of Conversion Stock which
may be subscribed for or purchased in all categories in the Conversion
and Reorganization by any Person together with any Associate or any
group or Persons Acting in Concert, when combined with any Exchange
Stock received, shall not exceed 50,000 shares of Common Stock issued
in the Conversion and Reorganization.
3. Officers and directors of the Primary Parties and
Associates thereof may not purchase in the aggregate more than 31% of
the shares issued in the Conversion and Reorganization, including any
Exchange Stock received.
4. The Boards of Directors of the Primary Parties will not
be deemed to be Associates or a group of Persons Acting in Concert with
other directors or trustees solely as a result of membership on the
Board of Directors.
5. The Boards of Directors of the Primary Parties, with the
approval of the OTS and without further approval of Members or
stockholders of the Savings Bank, may, as a result of market conditions
and other factors, increase or decrease the purchase limitation
described herein or the number of shares of Conversion Stock to be sold
in the Conversion and Reorganization. The Boards of Directors of the
Primary Parties may, in their sole discretion, increase the maximum
purchase limitation set forth above up to 9.99% of the Conversion
Shares sold in the Conversion and Reorganization, provided that orders
for shares which exceed 5% of the Conversion Shares sold in the
Conversion and Reorganization may not exceed, in the aggregate, 10% of
the shares sold in the Conversion and Reorganization. If the Primary
Parties increase the maximum purchase limitations or the number of
shares of Conversion Stock to be sold in the Conversion and
Reorganization, the Primary Parties are only required to resolicit
Persons who subscribed for the maximum purchase amount and may, in the
sole discretion of the Primary Parties, resolicit certain other large
subscribers. If the Primary Parties decrease the maximum purchase
limitations or the number of shares of Conversion Stock to be sold in
the Conversion and Reorganization, the orders of any Person who
subscribed for the maximum purchase amount shall be decreased by the
minimum amount necessary so that such Person shall be in compliance
with the then maximum number of shares permitted to be subscribed for
by such Person.
Notwithstanding anything to the contrary contained in this Plan, and
except as may be required by the OTS, Public Stockholders will not be required
to sell or divest any Holding Company Common Stock or be limited in receiving
Exchange Stock even if their percentage ownership of the Savings Bank Common
Stock when converted into Exchange Stock would exceed an applicable purchase
limitation.
Each Person purchasing Conversion Stock in the Conversion and
Reorganization shall be deemed to confirm that such purchase does not conflict
with the purchase limitations under the Plan or otherwise imposed by law, rule
or regulation. In the event that such purchase limitations are violated by any
Person (including any Associate or group of Persons affiliated or otherwise
Acting in Concert with such Person), the Holding Company shall have the right to
purchase from such Person at the actual Purchase Price per share all shares
acquired by such Person in excess of such purchase limitations or, if such
excess shares have been sold by such Person, to receive from such Person the
difference between the actual Purchase Price per share paid for such excess
shares and the price at which such excess shares were sold by such Person. This
right of the Holding Company to purchase such excess shares shall be assignable
by the Holding Company.
12
<PAGE>
F. Restrictions On and Other Characteristics of the Conversion
-----------------------------------------------------------
Stock
-----
1. Transferability. Conversion Stock purchased by Officers
---------------
and directors of the Primary Parties shall not be sold or otherwise
disposed of for value for a period of one year from the effective date
of Conversion and Reorganization, except for any disposition (i)
following the death of the original purchaser or (ii) resulting from an
exchange of securities in a merger or acquisition approved by the
regulatory authorities having jurisdiction.
The Conversion Stock issued by the Holding Company to such
Officers and directors shall bear a legend giving appropriate notice of
the one-year holding period restriction. Said legend shall state as
follows:
"The shares evidenced by this certificate are restricted as to
transfer for a period of one year from the date of this
certificate pursuant to Part 563b of the Rules and Regulations
of the Office of Thrift Supervision. These shares may not be
transferred prior thereto without a legal opinion of counsel
that said transfer is permissible under the provisions of
applicable laws and regulations."
In addition, the Holding Company shall give appropriate
instructions to the transfer agent of the Holding Company Common Stock
with respect to the foregoing restrictions. Any shares of Holding
Company Common Stock subsequently issued as a stock dividend, stock
split or otherwise, with respect to any such restricted stock, shall be
subject to the same holding period restrictions for such Persons as may
be then applicable to such restricted stock.
2. Subsequent Purchases by Officers and Directors. Without
----------------------------------------------
prior approval of the OTS, if applicable, Officers and directors of the
Savings Bank and officers and directors of the Holding Company, and
their Associates, shall be prohibited for a period of three years
following completion of the Conversion and Reorganization from
purchasing outstanding shares of Holding Company Common Stock, except
from a broker or dealer registered with the SEC. Notwithstanding this
restriction, purchases involving more than 1% of the total outstanding
shares of Holding Company Stock and purchases made and shares held by a
Tax-Qualified or non-Tax-Qualified Employee Stock Benefit Plan which
may be attributable to such directors and Officers may be made in
negotiated transactions without OTS permission or the use of a broker
or dealer.
3. Repurchase and Dividend Rights. For a period of three
------------------------------
years following the consummation of the Conversion and Reorganization,
any repurchases of Holding Company Stock by the Holding Company from
any Person shall be subject to the then applicable rules and
regulations and policies of the OTS. The Savings Bank may not declare
or pay a cash dividend on or repurchase any of its Capital Stock if the
result thereof would be to reduce the regulatory capital of the Savings
Bank below the amount required for the liquidation account described in
Paragraph XIV. Further, any dividend declared or paid on the Capital
Stock shall comply with the then applicable rules and regulations of
the OTS.
4. Voting Rights. After the Conversion and Reorganization,
-------------
holders of Savings Accounts in and obligors on loans of the Savings
Bank will not have voting rights in the Savings Bank. Exclusive voting
rights with respect to the Holding Company shall be vested in the
holders of Holding Company Stock; holders of Savings Accounts in and
obligors on loans of the Savings Bank will not have any voting rights
in the Holding Company except and to the extent that such Persons
become stockholders of the Holding Company, and the Holding Company
will have exclusive voting rights with respect to the Savings Bank's
Capital Stock.
13
<PAGE>
G. Mailing of Offering Materials and Collation of Subscriptions
------------------------------------------------------------
The sale of all shares of Conversion Stock offered pursuant to the Plan
must be completed within 24 months after approval of the Plan at the Special
Meeting. After approval of the Plan by the OTS and the declaration of the
effectiveness of the Prospectus, the Holding Company shall distribute
Prospectuses and Order Forms for the purchase of shares of Conversion Stock in
accordance with the terms of the Plan.
The recipient of an Order Form shall be provided not less than 20 days
nor more than 45 days from the date of mailing, unless extended, properly to
complete, execute and return the Order Form to the Holding Company or the
Savings Bank. Self-addressed, postage prepaid, return envelopes shall accompany
all Order Forms when they are mailed. Failure of any eligible subscriber to
return a properly completed and executed Order Form within the prescribed time
limits shall be deemed a waiver and a release by such eligible subscriber of any
rights to purchase shares of Conversion Stock under the Plan.
The sale of all shares of Conversion Stock proposed to be issued in
connection with the Conversion and Reorganization must be completed within 45
days after the last day of the Subscription Offering, unless extended by the
Holding Company with the approval of the OTS.
H. Method of Payment
-----------------
Payment for all shares of Conversion Stock may be made in cash, by
check or by money order, or if a subscriber has a Savings Account(s), such
subscriber may authorize the Savings Bank to charge the subscriber's Savings
Account(s). The Savings Bank shall pay interest at not less than the passbook
rate on all amounts paid in cash or by check or money order to purchase shares
of Conversion Stock in the Subscription Offering from the date payment is
received until the Conversion and Reorganization is completed or terminated. The
Savings Bank is not permitted knowingly to loan funds or otherwise extend any
credit to any Person for the purpose of purchasing Conversion Stock.
If a subscriber authorizes the Savings Bank to charge the subscriber's
Savings Account(s), the funds shall remain in the subscriber's Savings
Account(s) and shall continue to earn interest, but may not be used by such
subscriber until the Conversion and Reorganization is completed or terminated,
whichever is earlier. The withdrawal shall be given effect only concurrently
with the sale of all shares of Conversion Stock proposed to be sold in the
Conversion and Reorganization and only to the extent necessary to satisfy the
subscription at a price equal to the aggregate Purchase Price. The Savings Bank
shall allow subscribers to purchase shares of Conversion Stock by withdrawing
funds from certificate accounts held with the Savings Bank without the
assessment of early withdrawal penalties. In the case of early withdrawal of
only a portion of such account, the certificate evidencing such account shall be
canceled if the remaining balance of the account is less than the applicable
minimum balance requirement. In that event, the remaining balance shall earn
interest at the passbook rate.
I. Undelivered, Defective or Late Order Forms; Insufficient
--------------------------------------------------------
Payment
-------
If an Order Form (i) is not delivered and is returned to the Holding
Company or the Savings Bank by the United States Postal Service (or the Holding
Company or Savings Bank is unable to locate the addressee); (ii) is not returned
to the Holding Company or Savings Bank, or is returned to the Holding Company or
Savings Bank after expiration of the date specified thereon; (iii) is
defectively completed or executed; or (iv) is not accompanied by the total
required payment for the shares of Conversion Stock subscribed for (including
cases in which the subscribers' Savings Accounts are insufficient to cover the
authorized withdrawal for the required payment), the Subscription Rights of the
Person to whom such rights have been granted shall not be honored and shall be
treated as though such Person failed to return the completed Order Form within
the time period specified therein. Alternatively, the Holding Company or Savings
Bank may, but shall not be required to, waive any irregularity relating to any
Order Form or require the submission of a corrected Order Form or the remittance
of full payment for the shares of Conversion Stock subscribed for by such date
as the Holding Company or Savings Bank may specify. Subscription orders, once
14
<PAGE>
tendered, shall not be revocable. The Holding Company's and Savings Bank's
interpretation of the terms and conditions of the Plan and of the Order Forms
shall be final.
J. Members in Non-Qualified States or in Foreign Countries
-------------------------------------------------------
The Primary Parties will make reasonable efforts to comply with the
securities laws of all states in the United States in which persons entitled to
subscribe for stock pursuant to the Plan reside. However, the Primary Parties
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 Primary Parties
determine that compliance with the securities laws of such state would be
impracticable for reasons of cost or otherwise, including but not limited to a
request or requirement that the Primary Parties or their officers, directors or
trustees register as a broker, dealer, salesman or selling agent, under the
securities laws of such state, or a request or requirement to register or
otherwise qualify the Subscription Rights or Common Stock for sale or submit any
filing with respect thereto in such state. Where the number of persons eligible
to subscribe for shares in one state is small relative to other states, the
Primary Parties 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.
XII. Post Conversion and Reorganization Filing and Market Making
-----------------------------------------------------------
In connection with the Conversion and Reorganization, the Holding
Company shall register the Common Stock with the SEC pursuant to the Securities
Exchange Act of 1934, as amended, and shall undertake not to deregister such
Conversion Stock for a period of three years thereafter.
The Holding Company shall use its best efforts to encourage and assist
Market Makers to establish and maintain a market for the shares of its stock.
The Holding Company shall also use its best efforts to list its stock on The
Nasdaq Stock Market or on a national or regional securities exchange.
XIII. Status of Savings Accounts and Loans Subsequent to Conversion and
-----------------------------------------------------------------
Reorganization
--------------
All Savings Accounts shall retain the same status after Conversion and
Reorganization as these accounts had prior to Conversion and Reorganization.
Each Savings Account holder shall retain, without payment, a withdrawable
Savings Account(s) after the Conversion and Reorganization, equal in amount to
the withdrawable value of such holder's Savings Account(s) prior to Conversion
and Reorganization. All Savings Accounts will continue to be insured by the
Savings Association Insurance Fund of the FDIC up to the applicable limits of
insurance coverage. All loans granted by the Savings Bank shall retain the same
status after the Conversion and Reorganization as they had prior to the
Conversion and Reorganization. See Paragraph III.B. with respect to the
termination of voting rights of Members.
XIV. Liquidation Account
-------------------
After the Conversion and Reorganization, holders of Savings Accounts
shall not be entitled to share in any residual assets in the event of
liquidation of the Savings Bank. However, the Savings Bank shall, at the time of
the Conversion and Reorganization, establish a liquidation account in an amount
equal to the amount of dividends with respect to the Savings Bank Common Stock
waived by the MHC plus the greater of (i) the Savings Bank's total retained
earnings as of the date of the latest statement of financial condition contained
in the final offering circular used in connection with the Savings Bank's
reorganization as a majority owned subsidiary of the MHC, or (ii) 53.02% of the
Savings Bank's total stockholders' equity as of the date of the latest statement
of financial condition contained in the final Prospectus used in connection with
the Conversion and Reorganization. The function of the liquidation account shall
be to establish a priority on liquidation and, except as provided in Section
XI.F.3. above,
15
<PAGE>
the existence of the liquidation account shall not operate to restrict the use
or application of any of the net worth accounts of the Savings Bank.
The liquidation account shall be maintained by the Savings Bank
subsequent to the Conversion and reorganization for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders who retain their
Savings Accounts in the Savings Bank. Each Eligible Account Holder and
Supplemental Eligible Account Holder shall, with respect to each Savings Account
held, have a related inchoate interest in a portion of the liquidation account
balance ("subaccount").
The initial subaccount balance for a Savings Account held by an
Eligible Account Holder and/or a Supplemental Eligible Account Holder shall be
determined by multiplying the opening balance in the liquidation account by a
fraction of which the numerator is the amount of such holder's Qualifying
Deposit in the Savings Account and the denominator is the total amount of the
Qualifying Deposits of all Eligible Account Holders and Supplemental Eligible
Account Holders. Such initial subaccount balance shall not be increased, and it
shall be subject to downward adjustment as provided below.
If the deposit balance in any Savings Account of an Eligible Account
Holder or Supplemental Eligible Account Holder at the close of business on any
annual closing date subsequent to the Eligibility Record Date is less than the
lesser of (i) the deposit balance in such Savings Account at the close of
business on any other annual closing date subsequent to the Eligibility Record
Date or the Supplemental Eligibility Record Date or (ii) the amount of the
Qualifying Deposit in such Savings Account on the Eligibility Record Date or the
Supplemental Eligibility Record Date, then the subaccount balance for such
Savings Account shall be adjusted by reducing such subaccount balance in an
amount proportionate to the reduction in such deposit balance. In the event of a
downward adjustment, such subaccount balance shall not be subsequently
increased, notwithstanding any increase in the deposit balance of the related
Savings Account. If any such Savings Account is closed, the related subaccount
balance shall be reduced to zero.
In the event of a complete liquidation of the Savings Bank, 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 Savings Bank 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.
XV. Regulatory Restrictions on Acquisition of Holding Company
---------------------------------------------------------
A. OTS regulations provide that for a period of three years
following completion of the Conversion and Reorganization, no Person (i.e,
individual, a group Acting in Concert, a corporation, a partnership, an
association, a joint stock company, a trust, or any unincorporated organization
or similar company, a syndicate or any other group formed for the purpose of
acquiring, holding or disposing of securities of an insured institution or its
holding company) shall directly, or indirectly, offer to purchase or actually
acquire the beneficial ownership of more than 10% of any class of equity
security of the Holding Company without the prior approval of the OTS. However,
approval is not required for purchases directly from the Holding Company or the
underwriters or selling group acting on its behalf with a view towards public
resale, or for purchases not exceeding 1% per annum of the shares outstanding.
Civil penalties may be imposed by the OTS for willful violation or assistance of
any violation. Where any Person, directly or indirectly, acquires beneficial
ownership of more than 10% of any class of equity security of the Holding
Company within such three-year period, without the prior approval of the OTS,
stock of the Holding Company beneficially owned by such Person in excess of 10%
shall not be counted as shares entitled to vote and shall not be voted by any
Person or counted as voting shares in connection with any matter submitted to
the stockholders for a vote. The provisions of this regulation shall not apply
to the acquisition of securities by Tax-
16
<PAGE>
Qualified Employee Stock Benefit Plans provided that such plans do not have
beneficial ownership of more than 25% of any class of equity security of the
Holding Company.
B. The Holding Company may provide in its articles of
incorporation, or similar document, a provision that, for a specified period of
up to five years following the date of the completion of the Conversion and
Reorganization, no Person shall directly or indirectly offer to acquire or
actually acquire the beneficial ownership of more than 10% of any class of
equity security of the Holding Company. Such provisions would not apply to
acquisition of securities by Tax-Qualified Employee Stock Benefit Plans provided
that such plans do not have beneficial ownership of more than 25% of any class
of equity security of the Holding Company. The Holding Company may provide in
its articles of incorporation, or similar document, for such other provisions
affecting the acquisition of its stock as shall be determined by its Board of
Directors.
XVI. Directors and Officers of the Savings Bank
------------------------------------------
The Conversion and Reorganization is not intended to result in any
change in the directors or Officers of the Savings Bank. Each Person serving as
a director of the Savings Bank at the time of Conversion and Reorganization
shall continue to serve as a member of the Savings Bank's Board of Directors,
subject to the Savings Bank's Federal Stock Charter and Bylaws. The Persons
serving as Officers immediately prior to the Conversion and Reorganization will
continue to serve at the discretion of the Board of Directors in their
respective capacities as Officers of the Savings Bank. In connection with the
Conversion and Reorganization, the Savings Bank and the Holding Company may
enter into employment agreements on such terms and with such officers as shall
be determined by the Boards of Directors of the Savings Bank and the Holding
Company.
XVII. Executive Compensation
----------------------
The Savings Bank and the Holding Company may adopt, subject to any
required approvals, executive compensation or other benefit programs, including
but not limited to compensation plans involving stock options, stock
appreciation rights, restricted stock grants, employee recognition programs and
the like.
XVIII. Amendment or Termination of Plan
--------------------------------
If necessary or desirable, the Plan may be amended by a two-thirds vote
of the Savings Bank's Board of Directors or the MHC's Board of Directors, at any
time prior to the Special Meeting of Members and the Meeting of Stockholders. At
any time thereafter, the Plan may be amended by a two-thirds vote of the
respective Boards of Directors only with the concurrence of the OTS. The Plan
may be terminated by a two-thirds vote of the Board of Directors at any time
prior to the Special Meeting of Members or the Meeting of Stockholders, and at
any time following such meetings with the concurrence of the OTS. In its
discretion, the Boards of Directors of the MHC and the Savings Bank may modify
or terminate the Plan upon the order of the regulatory authorities without a
resolicitation of proxies or another Special Meeting of Members or Meeting of
Stockholders.
In the event that mandatory new regulations pertaining to conversions
are adopted by the OTS prior to the completion of the Conversion and
Reorganization, the Plan shall be amended to conform to the new mandatory
regulations without a resolicitation of proxies or another Special Meeting of
Members or another Meeting of Stockholders. In the event that new conversion
regulations adopted by the OTS prior to completion of the Conversion and
Reorganization contain optional provisions, the Plan may be amended to utilize
such optional provisions at the discretion of the Board of Directors without a
resolicitation of proxies or another Special Meeting of Members or another
Meeting of Stockholders.
By adoption of the Plan, the Members and the Savings Bank stockholders
authorize the Boards of Directors of the MHC and the Savings Bank to amend
and/or terminate the Plan under the circumstances set forth above.
17
<PAGE>
XIX. Expenses of the Conversion and Reorganization
---------------------------------------------
The Primary Parties shall use their best efforts to assure that
expenses incurred in connection with the Conversion and Reorganization are
reasonable.
XX. Contributions to Tax-Qualified Plans
------------------------------------
The Holding Company and/or the Savings Bank may make discretionary
contributions to the Tax-Qualified Employee Stock Benefit Plans, provided such
contributions do not cause the Savings Bank to fail to meet its regulatory
capital requirements.
* * *
18
<PAGE>
ANNEX A
-------
PLAN OF MERGER
This Plan of Merger, dated as of __________ ___, 1998, is made by and
between SouthBanc Shares, M.H.C. ("MHC"), a federally chartered mutual holding
company, and Perpetual Bank, A Federal Savings Bank ("Savings Bank" or
"Surviving Corporation"), a federally chartered savings bank (collectively, the
"Constituent Corporations").
WITNESSETH:
WHEREAS, the MHC and the Savings Bank have adopted a Plan of Conversion
from Mutual Holding Company to Stock Holding Company and Agreement and Plan of
Reorganization ("Plan of Conversion") pursuant to which (i) the MHC will convert
to a federally-chartered interim stock savings bank and simultaneously merge
with and into the Savings Bank, with the Savings Bank as the surviving entity
("MHC Merger"), (ii) the Savings Bank and a newly-formed interim federal savings
bank will merge, pursuant to which the Savings Bank will become a wholly-owned
subsidiary of a newly formed stock corporation ("Holding Company") ("Savings
Bank Merger"), and (iii) the Holding Company will offer shares of its common
stock in the manner set forth in the Plan of Conversion (collectively, the
"Conversion and Reorganization"); and
WHEREAS, the MHC and the Savings Bank desire to provide for the terms
and conditions of the MHC Merger;
NOW, THEREFORE, the MHC and the Savings Bank hereby agree as follows:
1. EFFECTIVE DATE. The MHC Merger shall become effective on the
date specified in the endorsement of the Articles of Combination relating to the
MHC Merger by the Secretary of the Office of Thrift Supervision ("OTS") pursuant
to 12 C.F.R. 552.13(k), or any successor thereto ("Effective Date").
2. THE MHC MERGER AND EFFECT THEREOF. Subject to the terms and
conditions set forth herein and the prior approval of the OTS of the Conversion
and Reorganization, as defined in the Plan of Conversion, and the expiration of
all applicable waiting periods, the MHC shall convert from the mutual form to a
federal interim stock savings bank and simultaneously merge with and into the
Savings Bank, which shall be the Surviving Corporation. Upon consummation of the
MHC Merger, the Surviving Corporation shall be considered the same business and
corporate entity as each of the Constituent Corporations and the Surviving
Corporation shall be subject to and be deemed to have assumed all of the
property, rights, privileges, powers, franchises, debts, liabilities,
obligations, duties and relationships of each of the Constituent Corporations
and shall have succeeded to all of each of their relationships, fiduciary or
otherwise, as fully and to the same extent as if such property, rights,
privileges, powers, franchises, debts, obligations, duties and relationships had
been originally acquired, incurred or entered into by the Surviving Corporation.
In addition, any reference to either of the Constituent Corporations in any
contract or document, whether executed or taking effect before or after the
Effective Date, shall be considered a reference to the Surviving Corporation if
not inconsistent with the other provisions of the contract or document; and any
pending action or other judicial proceeding to which either of the Constituent
Corporations is a party shall not be deemed to have abated or to have been
discontinued by reason of the MHC Merger, but may be prosecuted to final
judgment, order or decree in the same manner as if the MHC Merger had not
occurred or the Surviving Corporation may be substituted as a party to such
action or proceeding, and any judgment, order or decree may be rendered for or
against it that might have been rendered for or against either of the
Constituent Corporations if the MHC Merger had not occurred.
A-1
<PAGE>
3. CANCELLATION OF SAVINGS BANK COMMON STOCK HELD BY THE MUTUAL
HOLDING COMPANY AND MEMBER INTERESTS; LIQUIDATION ACCOUNT.
(a) On the Effective Date: (i) each share of common stock, $1.00 par
value per share, of the Savings Bank ("Savings Bank Common Stock") issued and
outstanding immediately prior to the Effective Date and held by the MHC shall,
by virtue of the MHC Merger and without any action on the part of the holder
thereof, be canceled, (ii) the interests in the MHC of any person, firm or
entity who or which qualified as a member of the MHC in accordance with its
mutual charter and bylaws and the laws of the United States prior to the MHC's
conversion from mutual to stock form ("Members") shall, by virtue of the MHC
Merger and without any action on the part of any Member, be canceled, and (iii)
the Savings Bank shall establish a liquidation account on behalf of each
depositor member of the MHC as provided for in the Plan of Conversion.
(b) At or after the Effective Date and prior to the Savings Bank
Merger, each certificate or certificates theretofore, evidencing issued and
outstanding shares of Savings Bank Common Stock, other than any such certificate
or certificates held by the MHC, which shall be canceled, shall continue to
represent issued and outstanding shares of Savings Bank Common Stock.
4. RIGHTS OF DISSENT AND APPRAISAL ABSENT. No holder of Savings
Bank Common Stock shall have any dissenter or appraisal rights in connection
with the MHC Merger.
5. NAME OF SURVIVING CORPORATION. The name of the Surviving
Corporation shall be "Perpetual Bank, A Federal Savings Bank."
6. DIRECTORS OF THE SURVIVING CORPORATION. Upon and after the
Effective Date, until changed in accordance with the Charter and Bylaws of the
Surviving Corporation and applicable law, the number of directors of the
Surviving Corporation shall be nine. The names of those persons who, upon and
after the Effective Date, shall be directors of the Surviving Corporation are
set forth below. Each such director shall serve for the term which expires at
the annual meeting of stockholders of the Surviving Corporation in the year set
forth after his respective name, and until a successor is elected and qualified.
Name Term Expires
---- ------------
Harold A. "Drew" Pickens 1998
Robert W. "Lujack" Orr 1997
Martha S. Clamp 1997
Jack F. McIntosh 1999
Charles W. Fant, Jr. 1999
Cordes G. Seabrook, Jr. 1999
Jim Gray Watson 1998
Richard C. Ballenger 1997
F. Stevon Kay 1998
The address of each director is 907 N. Main Street, Anderson, South
Carolina 29621.
7. OFFICERS OF THE SURVIVING CORPORATION. Upon and after the
Effective Date, until changed in accordance with the Federal Stock Charter and
Bylaws of the Surviving Corporation and applicable law, the officers of the
Savings Bank immediately prior to the Effective Date shall be the officers of
the Surviving Corporation.
8. OFFICES. Upon the Effective Date, all offices of the Savings
Bank shall be offices of the Surviving Corporation. As of the Effective Date,
the home office of the Surviving Corporation shall remain at 907 N. Main Street,
Anderson, South Carolina, and the locations of the branch offices of the
Surviving Corporation shall
A-2
<PAGE>
be 104 Whitehall Road, Anderson, South Carolina; 2821 South Main Street,
Anderson, South Carolina; Windsor Place Winn Dixie, S.C. Highway 81, Anderson,
South Carolina; 3898 Liberty Highway, Anderson, South Carolina; and 1007 Bypass
123, Seneca, South Carolina.
9. CHARTER AND BYLAWS. On and after the Effective Date, the Charter
of the Savings Bank as in effect immediately prior to the Effective Date shall
be the Federal Stock Charter of the Surviving Corporation until amended in
accordance with the terms thereof and applicable law, except that the Federal
Stock Charter shall be amended to provide for the establishment of a liquidation
account in accordance with applicable the Plan of Conversion. On and after the
Effective Date, the Bylaws of the Savings Bank as in effect immediately prior to
the Effective Date shall be the Bylaws of the Surviving Corporation until
amended in accordance with the terms thereof and applicable law.
10. STOCKHOLDER AND MEMBER APPROVALS. The affirmative votes of the
holders of Savings Bank Common Stock and of the Members as set forth in the Plan
of Conversion shall be required to approve the Plan of Conversion, of which this
Plan of Merger is a part, on behalf of the Savings Bank and the MHC,
respectively.
11. ABANDONMENT OF PLAN. This Plan of Merger may be abandoned by
either the MHC or the Savings Bank at any time before the Effective Date in the
manner set forth in the Plan of Conversion.
12. AMENDMENTS. This Plan of Merger may be amended in the manner set
forth in the Plan of Conversion by a subsequent writing signed by the parties
hereto upon the approval of the Boards of Directors of the Constituent
Corporations.
13. SUCCESSORS. This Agreement shall be binding on the successors of
the Constituent Corporations.
14. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of South Carolina, except to the extent
superseded by the laws of the United States.
IN WITNESS WHEREOF, the MHC and the Savings Bank have caused this Plan
of Merger to be executed by their duly authorized officers as of the day and
year first above written.
Attest: SOUTHBANC SHARES, M.H.C.
By:
- ------------------------ -------------------------------------
Sylvia B. Reed Robert W. "Lujack" Orr
Corporate Secretary President and Chief Executive Officer
Attest: PERPETUAL BANK, A FEDERAL SAVINGS BANK
By:
- ------------------------ -------------------------------------
Sylvia B. Reed Robert W. "Lujack" Orr
Corporate Secretary President and Chief Executive Officer
A-3
<PAGE>
ANNEX B
-------
PLAN OF REORGANIZATION
This Plan of Reorganization, dated as of _____________ ___, 1998, is
made by and among Perpetual Bank, A Federal Savings Bank ("Savings Bank" or the
"Surviving Corporation"), a federally chartered savings bank and majority owned
subsidiary of SouthBanc Shares, M.H.C. ("MHC"), a federally chartered mutual
holding company; ________________ ("Holding Company"), a ____________
corporation organized by the Savings Bank; and Perpetual Interim "B" Bank, A
Federal Savings Bank ("Interim B"); a to-be formed interim federal stock savings
bank.
WITNESSETH:
WHEREAS, the Savings Bank has organized the Holding Company as a
first-tier, wholly owned subsidiary for the purpose of becoming the stock
holding company of the Savings Bank upon completion of the Conversion and
Reorganization as defined in the Plan of Conversion from Mutual Holding Company
to Stock Holding Company and Agreement and Plan of Reorganization ("Plan of
Conversion") adopted by the Boards of Directors of the MHC and the Savings Bank;
and
WHEREAS, the MHC owns as of the date hereof _____% of the outstanding
common stock of the Savings Bank, par value $1.00 per share ("Savings Bank
Common Stock), will convert to a federally-chartered interim stock savings bank
and simultaneously merge with and into the Savings Bank pursuant to the Plan of
Conversion and the Plan of Merger included as Annex A thereto ("MHC Merger"),
pursuant to which all shares of Savings Bank Common Stock held by the MHC will
be canceled; and
WHEREAS, the formation of a stock holding company by the Savings Bank
will be facilitated by causing the Holding Company to become the sole
stockholder of a newly-formed interim stock savings bank ("Interim B") and then
merge Interim B with and into the Savings Bank, pursuant to which the Savings
Bank will reorganize as a wholly-owned subsidiary of the Holding Company
("Reorganization") and, in connection therewith, all outstanding shares of
Savings Bank Common Stock will be converted automatically into and become shares
of common stock of the Holding Company, par value $____ per share ("Holding
Company Common Stock"); and
WHEREAS, Interim B is being organized by the officers of the Savings
Bank as an interim Federal stock savings bank with the Holding Company as its
sole stockholder in order to effect the Reorganization; and
WHEREAS, the Savings Bank and Interim B ("Constituent Corporations")
and the Holding Company desire to provide for the terms and conditions of the
Reorganization.
NOW, THEREFORE, the Savings Bank, Interim B and the Holding Company
hereby agree as follows:
1. EFFECTIVE DATE. The Reorganization shall become effective on the
date specified in the endorsement of the articles of combination relating to the
Reorganization by the Office of Thrift Supervision ("OTS") pursuant to 12 C.F.R.
ss.552.13(k), or any successor thereto ("Effective Date").
2. THE MERGER AND EFFECT THEREOF. Subject to the terms and
conditions set forth herein and the prior approval of the OTS of the Conversion
and the Reorganization, as defined in the Plan of Conversion, and the expiration
of all applicable waiting periods, Interim B shall merge with and into the
Savings Bank, with the Savings Bank as the Surviving Corporation. Upon
consummation of the Reorganization, the Surviving Corporation shall be
considered the same business and corporate entity as each of the Constituent
Corporations and thereupon and thereafter all the property, rights, powers and
franchises of each of the Constituent Corporations shall vest in the Surviving
Corporation and the Surviving Corporation shall be subject to and be deemed to
have assumed all of the property, rights, privileges, powers, franchises, debts,
liabilities, obligations and duties of each of the Constituent
B-1
<PAGE>
Corporations and shall have succeeded to all of each of their relationships,
fiduciary or otherwise, fully and to the same extent as if such property,
rights, privileges, powers, franchises, debts, obligations, duties and
relationships had been (originally acquired, incurred or entered into by the
Surviving Corporation. In addition any reference to either of the Constituent
Corporations in any contract or document, whether executed or taking effect
before or after the Effective Date, shall be considered a reference to the
Savings Bank if not inconsistent with the other provisions of the contract or
document; and any pending action or other judicial proceeding of which either of
the Constituent Corporations is a party shall not be deemed to have abated or to
have been discontinued by reason of the Reorganization, but may be prosecuted to
final judgment, order or decree in the same manner as if the Reorganization had
not occurred or the Surviving Corporation may be substituted as a party to such
action or proceeding, and any judgment, order or decree may be rendered for or
against it that might have been rendered for or against either of the
Constituent Corporations if the Reorganization had not occurred.
3. CONVERSION OF STOCK.
(a) On the Effective Date, (i) each share of Savings Bank Common Stock
issued and outstanding immediately prior to the Effective Date shall, by virtue
of the Reorganization and without any action on the part of the holder thereof,
be converted into the right to receive Holding Company Common Stock based on the
Exchange Ratio, as defined in the Plan of Conversion, plus the right to receive
cash in lieu of any fractional share interest, as determined in accordance with
Section 3(c) hereof, (ii) each share of common stock, par value $1.00 per share,
of Interim B ("Interim B Common Stock") issued and outstanding immediately prior
to the Effective Date shall, by virtue of the Reorganization and without any
action on the part of the holder thereof, be converted into one share of Savings
Bank Common Stock, and (ii) each share of Holding Company Common Stock issued
and outstanding immediately prior to the Effective Date shall, by virtue of the
Reorganization and without any action on the part of the holder thereof, be
canceled. By voting in favor of this Plan of Reorganization, the Holding
Company, as the sole stockholder of Interim B, shall have agreed (i) to issue
shares of Holding Company Common Stock in accordance with the terms hereof and
(ii) to cancel all previously issued and outstanding shares of Holding Company
Common Stock upon the effectiveness of the Reorganization.
(b) On and after the Effective Date, there shall be no registrations of
transfers on the stock transfer books of Interim B or the Savings Bank of shares
of Interim B Common Stock or Savings Bank Common Stock which were outstanding
immediately prior to the Effective Date.
(c) Notwithstanding any other provision hereof, no fractional shares of
Holding Company Common Stock shall be issued to holders of Savings Bank Common
Stock. In lieu thereof, the holder of shares of Savings Bank Common Stock
entitled to a fraction of a share of Holding Company Common Stock shall, at the
time of surrender of the certificate or certificates representing such holder
shares, receive an amount of cash equal to the product arrived at by multiplying
such fraction of a share of Holding Company Common Stock by the Purchase Price,
as defined in the Plan of Conversion. No such holder shall be entitled to
dividends, voting rights or any other rights in respect of any fractional share.
4. EXCHANGE OF SHARES.
(a) At or after the Effective Date, each holder of a certificate or
certificates theretofore evidencing issued and outstanding shares of Savings
Bank Common Stock, upon surrender of the same to an agent, duly appointed by the
Holding Company ("Exchange Agent"), shall be entitled to receive in exchange
therefor certificate(s) representing the number full shares of Holding Company
Common Stock for which the shares of Savings Bank Common Stock theretofore
represented by the certificate or certificates so surrendered shall have been
converted as provided in Section 3(a) hereof. The Exchange Agent shall mail to
each holder of record of an outstanding certificate which immediately prior to
the Effective Date evidenced shares of Savings Bank Common Stock, and which is
to be exchanged for Holding Company Common Stock as provided in Section 3(a)
hereof, a form of letter of transmittal which shall specify that delivery shall
be effected, and risk of loss and title to such certificate shall pass, only
upon delivery of such certificate to the Exchange Agent advising such holder of
the terms of the exchange effected by the
B-2
<PAGE>
Reorganization and of the procedure for surrendering to the Exchange Agent such
certificate in exchange for certificate or certificates evidencing Holding
Company Common Stock.
(b) No holder of a certificate theretofore represent shares of Savings
Bank Common Stock shall be entitled to receive any dividends in respect of the
Holding Company Common Stock into which such shares shall have been converted by
virtue of the Bank Merger until the certificate representing such shares of
Savings Bank Common Stock is surrendered in exchange for certificates
representing shares of Holding Company Common Stock. In the event that dividends
are declared and paid by the Holding Company in respect of Holding Company
Common Stock after the Effective Date but prior to surrender of certificates
representing shares of Savings Bank Common Stock, dividends payable in respect
of shares of Holding Company Common Stock not then issued shall accrue (without
interest). Any such dividends shall be paid (without interest) upon surrender of
the certificates representing such shares of Savings Bank Common Stock. The
Holding Company shall be entitled, after the Effective Date, to treat
certificates representing shares of Savings Bank Common Stock as evidencing
ownership of the number of full shares of Holding Company Common Stock into
which the shares of Savings Bank Common Stock represented by such certificates
shall have been converted, notwithstanding the failure on the part of the holder
thereof to surrender such certificates.
(c) The Holding Company shall not be obligated to deliver a certificate
or certificates representing shares of Holding Company Common Stock to which a
holder of Savings Bank Common Stock would otherwise be entitled as a result of
the Reorganization until such holder surrenders the certificate or certificates
representing the shares of Savings Bank Common Stock for exchange as provided in
this Section 4, or, in default thereof, an appropriate Affidavit of Loss and
Indemnification Agreement and/or an indemnity bond as may be required in each
case by the Holding Company. If any certificate evidencing shares of Holding
Company Common Stock is to be issued in a name other than that in which the
Certificate evidencing Savings Bank Common Stock surrendered in exchanged
therefor is registered, it shall be a condition of the issuance thereof that the
certificate so surrendered shall be properly endorsed and otherwise in proper
form for transfer and that the person requesting such exchange pay to the
Exchange Agent any transfer or other tax required by reason of the issuance of a
certificate for shares of Holding Company Common Stock in any name other than
that of the registered holder of the certificate surrendered or otherwise
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable.
(d) If, between the date hereof and the Effective Date, the shares of
Savings Bank Common Stock shall be changed into a different number or class of
shares by reason of any reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment or a stock dividend thereon
shall be declared with a record date within said period, the Exchange Ratio
specified in Section 3(a) hereof shall be adjusted accordingly.
5. RIGHTS OF DISSENT AND APPRAISAL ABSENT. No holders of Savings
Bank Common Stock shall have any dissenter or appraisal rights in connection
with the Reorganization.
6. NAME OF SURVIVING CORPORATION. The name of the Surviving
Corporation shall be "Perpetual Bank, A Federal Savings Bank."
7. DIRECTORS OF THE SURVIVING CORPORATION. Upon and after the
Effective Date, until changed in accordance with the Charter and Bylaws of the
Surviving Corporation and applicable law, the number of directors of the
Surviving Corporation shall be nine. The names of those persons who, upon and
after the Effective Date, shall be directors of the Surviving Corporation are
set forth below. Each such director shall serve for the term which expires at
the annual meeting of stockholders of the Surviving Corporation in the year set
forth after his respective name, and until a successor is elected and qualified.
B-3
<PAGE>
Name Term Expires
---- ------------
Harold A. "Drew" Pickens 1998
Robert W. "Lujack" Orr 1997
Martha S. Clamp 1997
Jack F. McIntosh 1999
Charles W. Fant, Jr. 1999
Cordes G. Seabrook, Jr. 1999
Jim Gray Watson 1998
Richard C. Ballenger 1997
F. Stevon Kay 1998
The address of each director is 907 N. Main Street, Anderson, South
Carolina 29521.
8. OFFICERS OF THE SURVIVING CORPORATION. Upon and after the
Effective Date, until changed in accordance with the Charter and Bylaws of the
Surviving Corporation and applicable law, the officers of the Savings Bank
immediately prior to the Effective Date shall be the officers of the Surviving
Corporation.
9. OFFICES. Upon the Effective Date, all offices of the Savings
Bank shall be offices of the Surviving Corporation. As of the Effective Date,
the home office of the Surviving Corporation shall remain at 907 N. Main Street,
Anderson, South Carolina, and the locations of the branch offices of the
Surviving Corporation shall be 104 Whitehall Road, Anderson, South Carolina;
2821 South Main Street, Anderson, South Carolina; Windsor Place Winn Dixie, S.C.
Highway 81, Anderson, South Carolina; and 3898 Liberty Highway, Anderson, South
Carolina.
10. CHARTER AND BYLAWS. On and after the Effective Date, the Charter
and Bylaws of the Savings Bank as in effect immediately prior to the Effective
Date shall be the Charter and Bylaws of the Surviving Corporation until amended
in accordance with the terms thereof and applicable law.
11. SAVINGS ACCOUNTS. Upon the Effective Date, any savings accounts
of Interim, without reissue, shall be and become savings accounts of the
Surviving Corporation without change in their respective terms, including,
without limitation, maturity minimum required balances or withdrawal value.
12. STOCK COMPENSATION PLANS. By voting in favor of this Agreement,
the Holding Company shall have approved adoption of the Savings Bank's 1993
Stock Option Plan, 1996 Stock Option Plan, 1993 Management Development and
Recognition Plan and 1996 Management Development and Recognition Plan
(collectively, the "Plans") as plans of the Holding Company and shall have
agreed to issue Holding Company Common Stock in lieu of Savings Bank Common
Stock pursuant to the terms of such Plans. As of the Effective Date, rights
outstanding under the Plans shall be assumed by the Holding Company and
thereafter shall be rights only for shares of Holding Company Common Stock, with
each such right being for a number of shares of Holding Company Common Stock
equal to the number of shares of Savings Bank Common Stack that were available
thereunder immediately prior to the Effective Date times the Exchange Ratio, as
defined in the plan of conversion, and the price of each such right shall be
adjusted to reflect the Exchange Ratio and so that the aggregate purchase price
of the right is unaffected, but with no change in any other term or condition of
such right. The Holding Company shall make appropriate amendments to the Plans
to reflect the adoption of the Plans by the Holding Company without adverse
effect upon the rights outstanding thereunder.
13. STOCKHOLDER APPROVAL. The affirmative votes of the holders of
Savings Bank Common Stock set forth in the Plan of Conversion shall be required
to approve the Plan of Conversion and Agreement and Plan of Reorganization, of
which this Plan of Reorganization is a part, on behalf of the Savings Bank. The
approval of the Holding Company, as the sole holder of the Interim B Common
Stock, shall be required to approve the Plan of Conversion, of which this Plan
of Reorganization is a part, on behalf of Interim B.
B-4
<PAGE>
14. REGISTRATION; OTHER APPROVALS. In addition to the approvals set
forth in Sections 1 and 13 hereof and in the Plan of Conversion, the obligations
of the parties hereto to consummate the Reorganization shall be subject to the
Holding Company Common Stock to be issued hereunder in exchange for Savings Bank
Common Stock being registered under the Securities Act of 1933, as amended, and
registered or qualified under applicable state securities laws, as well as the
receipt of all other approvals, consents or waivers as the parties may deem
necessary or advisable.
15. ABANDONMENT OF PLAN. This Plan of Reorganization may be
abandoned by either the Savings Bank or Interim B at any time before the
Effective Date in the manner set forth in the Plan of Conversion.
16. AMENDMENTS. This Plan of Reorganization may be amended in the
manner set forth in the Plan of Conversion by a subsequent writing signed by the
parties hereto upon the approval of the Board of Directors of each of the
parties hereto.
17. SUCCESSORS. This Plan of Reorganization shall be binding on the
successors of the parties hereto.
18. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of South Carolina, except to the extent
superseded by the laws of the United States.
IN WITNESS WHEREOF, the Parties hereto have cause this Plan of
Reorganization to be duly executed on its behalf by its officers thereunto duly
authorized, all as of the date first above written.
Attest: SOUTHBANC SHARES, M.H.C.
By:
- ------------------------ -------------------------------------
Sylvia B. Reed Robert W. "Lujack" Orr
Corporate Secretary President
Attest: _________________
By:
- ------------------------ -------------------------------------
Sylvia B. Reed Robert W. "Lujack" Orr
Corporate Secretary President
Attest: PERPETUAL INTERIM "B" BANK, A FEDERAL
SAVINGS BANK
By:
- ------------------------ -------------------------------------
Sylvia B. Reed Robert W. "Lujack" Orr
Corporate Secretary President
B-5
<PAGE>
REVOCABLE PROXY PERPETUAL
SAVINGS BANK, A FEDERAL SAVINGS BANK ANNUAL
MEETING OF STOCKHOLDERS
- -------------------------------------------------------------------------------
, 1998
- -------------------------------------------------------------------------------
The undersigned hereby appoints the full Board of Directors with full
powers of substitution, as attorneys and proxies for the undersigned, to vote
all shares of common stock of Perpetual Savings Bank, A Federal Savings Bank
which the undersigned is entitled to vote at the Annual Meeting of Stockholders,
to be held at the main office of the Savings Bank, 907 N. Main Street, Anderson,
South Carolina, on _________, ____________, 1998, at __:00 __.m., Eastern Time,
and at any and all adjournments thereof, as follows:
<TABLE>
<CAPTION>
FOR AGAINST
--- -------
<S> <C> <C> <C>
1. To approve an Amended Plan of Conversion from Mutual [ ] [ ]
Holding Company to Stock Holding Company and Agreement
and Plan of Reorganization providing for the conversion of
SouthBanc Shares, M.H.C., the mutual holding company of
Perpetual Savings Bank, A Federal Savings Bank ("Savings
Bank"), to a stock holding company, with the concurrent
issuance and sale of all of the Savings Bank's outstanding
common stock to SouthBanc Shares, Inc. ("Holding Company"), a
Delaware corporation, and the issuance and sale of the Holding
Company's common stock to the public; and the other
transactions provided for in the Plan of Conversion.
VOTE
FOR WITHHELD
--- --------
2. The election as directors of all nominees listed below [ ] [ ]
(except as marked to the contrary below).
Richard C. Ballenger
Robert W. Orr
Martha S. Clamp
INSTRUCTION: To withhold your vote
for any individual nominee, write
that nominee's name on the line below.
-----------------------------------------
FOR AGAINST ABSTAIN
--- ------- -------
3. The approval of the appointment of KPMG Peat [ ] [ ] [ ]
Marwick LLP as independent auditors for the
Savings Bank for the fiscal year ending
September 30, 1998.
4. Such other matters as may properly come before
the Meeting or any adjournments thereof.
</TABLE>
The Board of Directors recommends a vote "FOR" the above proposals.
- --------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE PROPOSITIONS STATED. IF ANY OTHER BUSINESS IS
PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY
IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO
OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
- --------------------------------------------------------------------------------
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Annual
Meeting or at any adjournment thereof and after notification to the Secretary of
the Savings Bank at the Meeting of the Stockholder's decision to terminate this
proxy, then the power of said attorneys and proxies shall be deemed terminated
and of no further force and effect.
The undersigned acknowledges receipt from the Savings Bank, prior to
the execution of this proxy, of the Notice of Annual Meeting of Stockholders, a
proxy statement for the Annual Meeting of Stockholders, and a Prospectus of
SouthBanc Shares, Inc. dated _____________, 1998.
Dated: , 1998
---------------------------
- ------------------------- -------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
- ------------------------ ------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this proxy card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, only one signature is required but each
holder should sign if possible.
- -------------------------------------------------------------------------------
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
- -------------------------------------------------------------------------------
