<PAGE>
As filed with the Securities and Exchange Commission on March 13, 1998
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
---------------------------------
ANSON BANCORP, INC.
(Name of small business issuer in its charter)
North Carolina 6036 56-2073894
(State or other jurisdiction (Primary Standard Industrial (I.R.S Employer
of incorporation or Classification Code Number) Identification
organization) Number)
211 South Greene Street/Post Office Box 249
Wadesboro, North Carolina 28170
(704) 694-2122
(Address and telephone number of principal executive offices and principal
place of business)
---------------
EUGENE M. WARD, President
Anson Bancorp, Inc.
211 South Greene Street
Wadesboro, North Carolina 28170
(704) 694-2122
(Name, address, and telephone number, of agent for service)
---------------
Copies to:
EDWARD C. WINSLOW III
JEAN C. BROOKS
Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P.
2000 Renaissance Plaza
Post Office Box 26000
Greensboro, North Carolina 27420
----------------------
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>
CALCULATION OF REGISTRATION FEE
===============================================================================================
Title of Each Class of Proposed Maximum Proposed Maximum
Securities Amount Offering Price Aggregate Amount of
to be Registered to be Registered Per Share Offering Price Registration Fee
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
no par value........... 872,850/(1)/ $10.00 $8,728,500 $2,574.91
===============================================================================================
</TABLE>
(1) The estimate maximum number of shares to be registered is based upon the
maximum of the valuation range of Anson Savings Bank, SSB and the
Registrant, as established by an independent appraisal, divided by the
proposed offering price per share.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
================================================================================
<PAGE>
PROSPECTUS
Up to 872,850 Shares of Common Stock
ANSON BANCORP, INC.
211 South Greene Street
Wadesboro, North Carolina 28170
(704) 694-2122
================================================================================
Anson Savings Bank, SSB (the "Bank") is converting from a North
Carolina chartered mutual savings bank to a North Carolina chartered stock
savings bank. As part of the Conversion, the Bank will become a wholly owned
subsidiary of Anson Bancorp, Inc. (the "Company"). The Company was formed in
March 2, 1998 and upon completion of the Conversion will own all of the shares
of the Bank. The Common Stock of the Company is being offered to the public in
accordance with a Plan of Conversion. The Plan of Conversion must be approved by
the Administrator of the Savings Institutions Division of the North Carolina
Department of Commerce (the "Administrator") and the Federal Deposit Insurance
Corporation (the "FDIC") and by a majority of the votes eligible to be cast by
members of the Bank. The offering will not go forward if the Bank does not
receive these approvals and the Company does not sell at least the minimum
number of shares.
The shares of Common Stock are first being offered pursuant to
nontransferable subscription rights in a Subscription Offering. Depositor and
borrower members as of certain eligibility dates will receive subscription
rights. Shares of Common Stock not subscribed for in the Subscription Offering
may be offered for sale in a Community Offering with preference given to certain
residents of Anson County, North Carolina.
================================================================================
TERMS OF OFFERING
An independent appraiser has estimated the market value of the converted Bank to
be between $5,610,000 and $7,590,000, which establishes the number of shares to
be offered at a price of $10.00 per share. Subject to the approval of the
Administrator, up to 872,850 shares, an additional 15% above the maximum number
of shares, may be offered. Based on these estimates, we are making the following
offering of shares of Common Stock:
. Price Per Share: $10.00
. Number of Shares Minimum/
Maximum, as adjusted: 561,000 to 872,850
. Offering Expenses: $488,000 to $566,000
. Net Proceeds to the Company
Minimum/Maximum, as adjusted: $5,122,000 to $8,163,000
. Net Proceeds Per Share
Minimum/Maximum, as adjusted: $9.13 to $9.35
<PAGE>
Please refer to Risk Factors beginning on page 1 of this document.
These securities are not deposits or accounts and are not insured or guaranteed
by the FDIC or any other government agency.
Neither the Securities and Exchange Commission, the Administrator, the FDIC, nor
any state securities regulator has approved or disapproved these securities or
determined if this prospectus is accurate or complete. Any representation to the
contrary is a criminal offense.
For information on how to subscribe, call the Stock Information Center at (704)
694-2122.
TRIDENT SECURITIES, INC.
The date of this Prospectus is , 1998.
---------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Questions and Answers About the Stock Offering....................................................................4
Summary...........................................................................................................6
Selected Financial and Other Data of the Bank.....................................................................9
Risk Factors.....................................................................................................10
Anson Bancorp, Inc...............................................................................................15
Anson Savings Bank, SSB..........................................................................................15
Use of Proceeds..................................................................................................16
Dividend Policy..................................................................................................18
Market for Common Stock..........................................................................................19
Capitalization...................................................................................................19
Pro Forma Data...................................................................................................22
Historical and Pro Forma Capital Compliance......................................................................27
Stock Purchases by Directors and Executive Officers..............................................................29
Management's Discussion and Analysis of Financial Condition and Results of Operations............................31
Business of the Company..........................................................................................42
Business of the Bank.............................................................................................43
Taxation.........................................................................................................62
Supervision and Regulation.......................................................................................64
Management of the Company........................................................................................75
Management of the Bank...........................................................................................76
Description of Capital Stock.....................................................................................84
Anti-Takeover Provisions Affecting the Company and the Bank......................................................86
Certain Provisions of the Charters and Bylaws of the Company and the Bank........................................91
The Conversion...................................................................................................91
Legal Opinions..................................................................................................108
Experts.........................................................................................................108
Registration Requirements.......................................................................................109
Additional Information..........................................................................................109
Glossary........................................................................................................A-1
</TABLE>
This document contains forward-looking statements which involve risks
and uncertainties. The Company's actual results may differ significantly from
the results discussed in the forward-looking statements. Factors that might
cause such a difference include, but are not limited to, those discussed in
"Risk Factors" beginning on page 1 of this document.
Please see the Glossary beginning on page A-1 for the meaning of
capitalized terms that are not defined in this document.
2
<PAGE>
ANSON SAVINGS BANK, SSB
WADESBORO, NORTH CAROLINA
[INSERT MAP FROM TRIDENT]
3
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE STOCK OFFERING
Q. What is a mutual to stock conversion?
A. The Conversion is a change in the Bank's form of organization.
Currently, the Bank operates as a North Carolina chartered mutual
savings bank with no stockholders. As a result of the Conversion, it
will become a North Carolina chartered stock savings bank. As part of
the Conversion, the Company is offering for sale shares of its Common
Stock. The Company will be the sole stockholder of the Bank and will
purchase the Bank's stock in exchange for a portion of the proceeds
from its offering.
Q. What is the purpose of the Conversion and the Offering?
A. As a stock savings bank operating through a holding company structure,
the Bank will have the ability to plan and develop long-term growth and
improve its future access to the capital markets. The stock offering
will increase the Bank's capital and the amount of funds available for
lending and investment activities. This provides greater flexibility to
diversify operations and expand into other geographic markets if the
Bank chooses to do so. If the Company's earnings are sufficient in the
future, stockholders might also receive dividends and benefit from the
possible long-term appreciation of the Company's stock price.
Q. How many shares of stock will be sold?
A. Between 561,000 and 759,000 shares of Common Stock will be sold, all at
a price of $10.00 per share. The number of shares to be sold may be
increased to 872,850 shares without further notice to you, subject to
receipt of approval of the Administrator, if market or financial
conditions change prior to completion of the Conversion.
Q. How do I purchase the stock?
A. You must complete and return the Order Form to the Company and the Bank
together with your payment or your authorization for withdrawal of the
payment amount from an account you have with the Bank, on or before
_____________, 1998. See pages 95 to 102.
Q. How much stock may I purchase?
A. The minimum purchase is 50 shares (or $500). The maximum purchase per
eligible depositor in the Subscription Offering is 10,000 shares (or
$100,000). In certain instances, your purchase might be grouped
together with purchases by persons with other accounts with whom you
are affiliated or related and in that event the aggregate purchases may
not exceed 15,000 shares (or $150,000). The Bank may decrease or
increase the maximum purchase limitation without notifying you.
If shares are sold in a Community Offering, the maximum number of
shares that may be purchased by any party in the Community Offering is
10,000 shares (or $100,000). As with the Subscription Offering, in
certain circumstances your purchase may be combined with the number of
shares purchased by other parties with whom such party is affiliated or
related and in that event the aggregate purchases may not exceed 15,000
shares (or $150,000). See pages 105-106.
4
<PAGE>
Q. What happens if there are not enough shares to fill all orders?
A. You might not receive any or all of the shares you want to purchase. If
there is an over subscription, the Common Stock will be offered on a
priority basis to the following persons:
. Eligible Accounts Holders - Persons who had a deposit account
with the Bank on September 30, 1996 with a balance of at least
$50.00. Any remaining shares will be offered to:
. Supplemental Eligible Account Holders - Persons who had a
deposit account with the Bank on March 31, 1998 with a balance
of at least $50.00. Any remaining shares will be offered to:
. Other Members - Other depositors and certain borrowers of the
Bank, as of [Record Date], 1998.
If the above persons do not subscribe for all of the shares, the
remaining shares will be offered to directors, officers and employees
of the Bank who are not Eligible Account Holders, Supplemental Eligible
Account Holders or Other Members and to certain members of the general
public with preference given to people who live in Anson County, North
Carolina. In the event there is an oversubscription in any category,
the shares will be allocated among all subscribers in that category in
accordance with a formula set out in the Plan and described in "THE
CONVERSION". See pages 96 to 97.
Q. What particular factors should I consider when deciding whether or not
to buy the stock?
A. In order to make an informed investment decision, you should read this
entire Prospectus, particularly the section entitled "Risk Factors."
Q. As a depositor or borrower member of the Bank, what will happen if I do
not purchase any stock?
A. You presently have voting rights while the Bank is in the mutual form;
however, once the Bank converts to the stock form you will lose your
voting rights unless you purchase stock. You are not required to
purchase stock. Your deposit account, certificate accounts and any
loans you may have with the Bank will not be affected. See pages 93 to
95.
Q. Who can help answer any other questions I may have about the stock
offering?
A. In order to make an informed investment decision, you should read this
entire document. In addition, you should contact:
Stock Information Center
Anson Bancorp, Inc.
211 South Greene Street
Wadesboro, North Carolina 28170
(704) 694-2122
5
<PAGE>
SUMMARY
This summary highlights selected information from this document and may
not contain all the information that is important to you. To understand the
stock offering fully, you should read carefully this entire document, including
the financial statements and the notes to the financial statements of the Bank.
Anson Bancorp, Inc.
Anson Bancorp, Inc. was formed on March 2, 1998 as a North Carolina
corporation to be the holding company for the Bank. The Company is not an
operating company and has not engaged in any significant business to date. The
holding company structure will provide greater flexibility in terms of
operations, expansion and diversification. See page 15.
Anson Savings Bank, SSB
The Bank is a community and customer oriented North Carolina chartered
mutual savings bank that has been in operation since December 4, 1889 with one
office located in Wadesboro, North Carolina. The Bank has been a member of the
Federal Home Loan Bank ("FHLB") system since 1939 and its deposits have been
federally insured since 1959. The Bank emphasizes residential mortgage lending,
primarily originating one-to-four-family mortgage loans in its primary market
area, Anson County, North Carolina. To a lesser extent, the Bank also makes
nonresidential real estate loans, construction loans and loans secured by
deposit accounts. The Bank is a portfolio lender, meaning that it does not
originate loans for sale in the secondary market. At December 31, 1997, the Bank
had total assets of $20.7 million, deposits of $16.7 million, and equity of $3.9
million. See pages 15 to 16.
The Stock Offering
The Company is offering between 561,000 and 759,000 shares of Common
Stock at $10.00 per share. Subject to approval by the Administrator, the number
of shares to be sold may be increased to 872,850 shares without future notice if
market or financial conditions change prior to completion of the Conversion.
Stock Purchases
The Company is first offering its shares of Common Stock in a
Subscription Offering. Depositor and borrower members as of certain eligibility
dates will receive subscription rights. The shares of Common Stock will be
offered on a priority basis as follows: Eligible Account Holders, Supplemental
Eligible Account Holders, Other Members and directors, officers and employees of
the Bank who do not qualify in the above-listed categories. Any remaining shares
may be offered in a Community Offering or in a Syndicated Community Offering.
See pages 95 to 103.
Subscription Rights
You may not sell or assign your subscription rights. Any transfer of
subscription rights is prohibited by law. All persons exercising their
subscription rights will be required to certify that they are purchasing shares
solely for their own account and that they have no agreement or understanding
regarding the sale or transfer of shares. The Bank intends to pursue any and all
legal and equitable remedies in the event the Bank
6
<PAGE>
becomes aware of the transfer of subscription rights. The Bank will reject
orders that are determined to involve the transfer of such rights.
The Offering Range and Determination of the Price Per Share
The offering range is based on an independent appraisal of the pro
forma market value of the Common Stock by Ferguson & Company ("Ferguson"), an
appraisal firm experienced in appraisals of savings institutions. The pro forma
market value of the shares is the Bank's market value after giving effect to the
sale of shares in this offering. Ferguson has estimated that in its opinion as
of February 27, 1998, such value ranged between $5,610,000 and $7,590,000 (with
a midpoint of $6,600,000) (the "Estimated Valuation Range"). The appraisal was
based in part upon the Bank's financial condition and operations and the effect
of the additional capital raised by the sale of Common Stock in this offering.
The $10.00 price per share was determined by our board of directors and is the
price most commonly used in stock offerings involving conversions of mutual
savings institutions. The appraisal will be updated prior to the consummation of
the Conversion. If the updated pro forma market value of the Common Stock is
either below $5,610,000 or above $8,728,500, the Company will notify you and you
will have the opportunity to modify or cancel your order. See pages 97 to 101.
Termination of the Offering
The Subscription Offering will terminate at 12:00 noon, Eastern Time,
on __________________, 1998. The Community Offering, if any, may terminate at
any time without notice but no later than __________________, 1998, without
approval by the Administrator.
Benefits to Management from the Offering
Following the Conversion, the Bank intends to implement a management
recognition plan ("MRP") under which directors and employees of the Bank will be
entitled to receive awards of restricted stock at no cost to them and a stock
option and incentive plan (the "Option Plan"), which will benefit the Bank's
employees and directors. However, the MRP and Option Plan may not be adopted
until at least six months after the Conversion and are subject to stockholder
approval and compliance with FDIC regulations if adopted within the first year
following the Bank's Conversion. See pages 79 to 84.
Use of the Proceeds from the Sale of Common Stock
The Company will retain up to 50% of the net proceeds from the offering
and will use the balance to purchase all the capital stock to be issued by the
Bank in the Conversion. The amount retained by the Company will serve as a
possible source of funds for the payment of dividends to stockholders or to
repurchase shares of Common Stock in the future and for general corporate
purposes. Net proceeds paid to the Bank will become part of the Bank's general
funds and will be initially invested in mortgage and other loans and investments
consistent with the Bank's investment policy. See pages 16 to 18.
Dividends
After the Conversion, the Board of Directors of the Company will have
the authority to declare dividends on the Common Stock, subject to statutory and
regulatory requirements. The Company expects to pay annual dividends on the
Common Stock at a rate of $0.30 per share. In addition, the Board of
7
<PAGE>
Directors may determine from time to time to pay special, nonrecurring cash
dividends. No assurances can be given that any dividends will in fact be paid on
the Common Stock. See page 18.
Market for the Common Stock
The Company, as a newly organized company, has never issued capital
stock; consequently, there is no market for its Common Stock at this time. The
Bank and the Company have engaged Trident Securities, Inc. ("Trident
Securities") as a financial advisor and to assist in the marketing of the shares
of Common Stock, on a best efforts basis, in the stock offering. The Company
intends to list the Common Stock over-the-counter through the OTC "Electronic
Bulletin Board" under the symbol "______". Since the size of the offering is
small, it is unlikely that an active and liquid trading market for the shares
will develop and be maintained. Investors should have a long-term investment
intent. Purchasers may not be able to sell their shares when they desire or to
sell the shares at a price equal to or above $10.00. See page 19.
Important Risks in Owning the Company's Common Stock
Before you decide to purchase stock in the offering, you should read
carefully the "Risk Factors" section beginning on page 10 of this document.
8
<PAGE>
SELECTED FINANCIAL
AND OTHER DATA OF THE BANK
Set forth below are summaries of historical financial and other data of
the Bank. This information is derived in part from, and should be read in
conjunction with, the Financial Statements and Notes to Financial Statements of
the Bank presented elsewhere herein and with the section of this Prospectus
entitled "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS."
<TABLE>
<CAPTION>
At or for the Six Months
Ended December 31, At or for the Year Ended June 30,
------------------------- ---------------------------------
1997 1996 1997 1996
---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Financial condition data:
Total assets $ 20,723 $ 20,695 $ 20,720 $ 21,456
Investments/(1)/ 8,794 8,346 8,700 9,122
Loans receivable, net 11,323 11,730 11,423 11,572
Deposits 16,656 16,889 16,791 17,623
Equity/(2)/ 3,859 3,624 3,756 3,621
Operating data:
Interest income 718 743 1,442 1,559
Interest expense 412 419 819 894
--- --- --- ---
Net interest income 306 324 623 665
---
Provision for loan losses - 1 5 7
------ ------ -- --
Net interest income after
provision for loan losses 306 323 618 658
Noninterest income 4 1 6 2
Noninterest expense/(3)/ 232 348 555 481
--- --- --- ---
Income (loss) before income taxes 78 (24) 69 179
Income tax expense (benefit) 17 (4) 19 52
-- ----- --- --
Net income (loss) $ 62 $ (20) $ 50 $ 127
======= ====== ==== =====
Selected Other Data:
Number of outstanding loans 383 404 397 408
Number of deposit accounts 1,702 2,083 1,754 1,876
Number of full-service offices open 1 1 1 1
Return on average assets/(4)/ .60% (.14) % .24% .58%
Return on average equity/(4)/ 3.24% (.82) % 1.34% 3.57%
Average equity to average assets 18.50% 17.16% 17.81% 16.37%
Interest rate spread 2.25% 2.37% 2.29% 2.39%
Net yield on average interest-
earning assets 3.09% 3.15% 3.15% 3.16%
Average interest-earning assets
to average interest-bearing liabilities 120.00% 119.00% 119.00% 118.00%
Ratio of noninterest expense to
average total assets/(4)/ 2.24% 3.29% 2.65% 2.23%
Nonperforming assets to total assets 1.51% 1.29% 1.16% .92%
Loan loss reserves to nonperforming
loans at period end 32.05% 35.63% 41.67% 47.98%
</TABLE>
- ---------------------------------------
(1) Includes interest-earning deposits, federal funds sold, FHLB stock and
investment securities.
(2) Includes unrealized gains on investments amounting to $244,000, $155,000,
$204,000 and $119,000 at December 31, 1997 and 1996, and June 30, 1997 and 1996,
respectively.
(3) Includes a non-recurring expense of $114,000 for the six months ended
December 31, 1996 and the year ended December 31, 1997 for a one-time premium to
recapitalize the SAIF.
(4) Annualized for the six months ended December 31, 1997 and 1996.
9
<PAGE>
RISK FACTORS
In addition to the other information presented in this Prospectus,
investors should carefully consider the following risk factors before deciding
whether to invest in the Common Stock.
Potential Impact of Changes in Interest Rates
The results of operations of the Bank, as with savings institutions
generally, are dependent to a large degree on its net interest income, which is
generally the difference between interest income from loans and investments and
interest expense on deposits and borrowings. Approximately 99.5% of the Bank's
mortgage loans have rates of interest which are fixed for the term of the loan
and are originated generally with terms of up to 15 years, while deposit
accounts have significantly shorter terms to maturity. Because the Bank's
interest-earning assets generally have fixed rates of interest and have longer
effective maturities than the Bank's interest-bearing liabilities, the yield on
the Bank's interest earning assets generally will adjust more slowly to changes
in interest rates than the cost of the Bank's interest-bearing liabilities. The
slower adjustment of interest earning assets as compared to interest-bearing
liabilities results in the Bank having a "negative gap." At December 31, 1997,
the Bank's cumulative one year interest rate gap as a percentage of total
interest-earning assets was negative 41.01% and its cumulative three year
interest rate gap as a percentage of total interest-earning assets was a
negative 39.00%. As a result, the Bank's net interest income will be adversely
affected by material and prolonged increases in interest rates. In addition,
rising interest rates may adversely affect the Bank's earnings because there
might be a lack of customer demand for loans.
See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Asset/Liability Management".
Changes in interest rates also can affect the average life of loans and
mortgage-backed securities. The relatively lower interest rates in recent
periods have resulted in increased prepayments of loans and mortgage-backed
securities, as borrowers refinanced their mortgages in order to reduce their
borrowing cost. Under these circumstances, the 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 prepaid loans or securities. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Asset/Liability Management."
Risk Associated with Nonconforming Loans
The Bank does not originate its one-to-four-family loans with the
intention that they will be sold in the secondary market. It generally
originates loans satisfying its underwriting requirements which are tailored for
its local community but which may not satisfy various requirements imposed by
FHLMC or FNMA. For example, the Bank may not require title insurance and may not
obtain all of the loan documentation normally required by FHLMC and FNMA. As a
result, to the extent such loans are sold in the secondary market, they may not
be sold on terms as favorable as those originated in conformity with secondary
market requirements. In addition, loans which are not originated in conformity
with the purchase requirements of FHLMC and FNMA, or nonconforming loans, are
generally thought to have greater risks of default and nonperformance; however,
the Bank has not experienced a greater level of nonperformance with its
nonconforming loans. See "BUSINESS OF THE BANK -- Origination and Sale of
Loans." These loans satisfy a need in the Bank's local community and generally
produce a higher yield than would be produced by conforming loans. At December
31, 1997, all of the loans in the Bank's portfolio were nonconforming.
10
<PAGE>
Anticipated Low Return on Equity Following Conversion
The Bank's return on equity was below industry standards for the six
months ended December 31, 1997. At December 31, 1997, the Bank's ratio of
average equity to average assets was 18.50%. On a pro forma basis at December
31, 1997, assuming the sale of 759,000 shares of Common Stock in the Conversion,
the Bank's ratio of equity to assets would have been 38.24%. With its higher
capital position as a result of the Conversion, it is doubtful that the Bank
will be able to quickly deploy the capital raised in the Conversion in loans and
other assets in a manner consistent with its underwriting standards and
operating philosophies and in a manner which will generate earnings to support
its high capital position. The cost of the implementation of the MRP following
the Conversion is also expected to reduce the Company's return on equity. As a
result, it is expected that the Company's return on equity initially will be
below industry norms. Consequently, investors expecting a return on equity which
will meet or exceed industry norms for the foreseeable future should carefully
evaluate and consider the risk that such returns will not be achieved.
Following the Conversion, the Company may consider plans to reduce
capital if the opportunities to deploy it prudently are not found. Such plans
may include payment of cash dividends and repurchasing shares. Any such steps
would be taken based on conditions as they exist following the Conversion and in
compliance with applicable regulations which limit the Company's ability to pay
dividends and repurchase its stock. See "USE OF PROCEEDS," "DIVIDEND POLICY" and
"SUPERVISION AND REGULATION -- Regulation of the Company -- General" and "--
Dividend Limitations" and "SUPERVISION AND REGULATION -- Regulation of the Bank
- -- Restrictions on Dividends and Other Capital Distributions."
Limited Market for the Common Stock
The Company, as a newly organized company, has never issued capital
stock, and consequently, there is no established market for the Common Stock at
this time. Following the completion of the offering, it is anticipated that the
Common Stock will be traded on the over-the-counter market with quotations
available through the OTC Electronic Bulletin Board. Trident Securities is
expected to make a market in the Common Stock, by developing and maintaining
historical stock trading records, soliciting potential buyers and sellers of
shares and attempting to match buy and sell orders. In connection with its
market making activities, Trident may buy or sell shares from time to time for
its own account. However, Trident Securities will not be subject to any
obligation with respect to such efforts.
An active and liquid public trading market for the securities of any
issuer, including the Common Stock, depends upon the presence in the marketplace
of both willing buyers and willing sellers of the securities at any given time.
Due to the size of the Company's offering (660,000 shares at the midpoint of the
Estimated Valuation Range), it is unlikely that a stockholder base large enough
to create an active trading market will develop and be maintained. Further, even
if a market develops, there can be no assurance that the shares of Common Stock
offered in the Conversion can be resold at or above the purchase price after
completion of the Conversion. Purchasers should consider the potentially
illiquid and long-term nature of their investment in the shares of the Common
Stock. The aggregate price of the Common Stock is based upon an independent
appraisal of the pro forma market value of the Common Stock. However, there can
be no assurance that an investor will be able to sell the Common Stock purchased
in the Conversion at or above the $10.00 purchase price.
11
<PAGE>
Risks Associated with Anson's Primary Market Area; Limited Lending
Opportunities; Competition
The Bank's office is located in Anson County, North Carolina, where the
Bank originates a substantial majority of its loans. Anson County is rural with
an approximate population of 24,309. Population growth and per capital income
levels for Anson County are lower than comparable levels for North Carolina and
the nation, while unemployment rates are higher. Management regards the Anson
County market as a low growth area in which there is significant competition
among financial services providers for market share. See "BUSINESS OF THE BANK
- -- Competition". The lower income levels and lower rates of growth in Anson
County has limited residential mortgage lending opportunities in its primary
market area, and management does not anticipate that residential mortgage
lending opportunities will increase in the future because of the lack of growth
in the local economy. In addition, lower income levels and low rates of growth
in Anson County could result in an increase in the number of delinquent or
nonperforming loans and reduce the value of the collateral securing such loans,
adversely affecting the Bank's financial condition and results of operations.
See "BUSINESS OF THE BANK -- Market Area".
Cost and Possible Dilutive Effect of the MRP and Option Plan
It is expected that the stockholders of the Company will be asked to
approve the Option Plan and the MRP at a meeting of stockholders after the
Conversion. Under the MRP, directors and employees of the Bank are expected to
be awarded an aggregate amount of Common Stock equal to 4% of the shares issued
in the Conversion. Under the Option Plan, directors and employees of the Bank
are expected to be granted options to purchase an aggregate amount of Common
Stock equal to 10% of the shares issued in the Conversion at exercise prices
equal to the market price of the Common Stock on the date of grants. Shares
issued to directors and certain employees under the MRP and the Option Plan may
be from authorized but unissued shares of Common Stock or they may be purchased
in the open market. In the event the shares issued under the MRP and the Option
Plan consist of newly issued shares of Common Stock, the interests of existing
stockholders would be diluted. If 759,000 shares of the Common Stock are issued
in the Conversion, it is expected that options to acquire 759,000 shares of the
Common Stock could be granted under the Option Plan, and awards of an additional
30,360 shares could be made under the MRP. At the maximum of the Estimated
Valuation Range, if all shares under the MRP and the Option Plan were newly
issued, the exercise price was $10.00 for the shares issued pursuant to the
options, and all of the options were exercised, the number of outstanding shares
of Common Stock would increase from 759,000 to 865,260, the pro forma book value
per share of the outstanding Common Stock at December 31, 1997 would have been
$13.49 compared with $13.98 if such plans did not exist, and the unannualized
pro forma net income per share of the outstanding Common Stock for the six
months ended December 31, 1997 would have been $0.21 compared with $0.22 if such
plans did not exist. The cost of the shares acquired by the MRP will be expensed
over any vesting period set forth in the MRP. If 759,000 shares of Common Stock
are issued in the Conversion and the MRP acquired 30,360 shares at a cost of
$10.00 per share, the total annual pre-tax expense of the MRP would be $60,720
per year assuming a straight line amortization method over a five-year life. See
"PRO FORMA DATA" and "MANAGEMENT OF THE BANK -- Proposed Management Recognition
Plan" and "-- Proposed Option Plan."
Anti-Takeover Considerations
Provisions in the Articles of Incorporation and Bylaws. The Company's
Articles of Incorporation and Bylaws contain certain provisions that may
discourage attempts to acquire control of the Company that are not negotiated
with the Company's Board of Directors. These provisions may result in the
Company
12
<PAGE>
being less attractive to a potential acquiror and may result in stockholders
receiving less for their shares than otherwise might be available in the event
of a takeover attempt. In addition, these provisions may have the effect of
discouraging takeover attempts that some stockholders might deem to be in their
best interests, including takeover proposals in which stockholders might receive
a premium for their shares over the then-current market price, as well as making
it more difficult for individual stockholders or a group of stockholders to
elect directors or to remove incumbent management. The Company's Board of
Directors believes, however, that these provisions are in the best interests of
the Company and its stockholders because such provisions encourage potential
acquirors to negotiate directly with the Board of Directors, which the Board of
Directors believes is in the best position to act on behalf of all stockholders.
These provisions include, among other things, (1) supermajority voting
requirements on certain matters, (2) a staggered board of directors, (3)
non-cumulative voting for any purpose, (4) limits on the calling of special
meetings, (5) the ability of the Board of Directors to issue preferred stock
without stockholder action, (6) the removal of directors before the end of their
term only for cause and (7) the ability of the Board of Directors to change the
number of directors within a range without stockholder action.
The amended Certificate of Incorporation and Bylaws of the Bank upon
its Conversion to stock form also contain certain provisions that might
discourage potential takeover attempts of the Bank. See "ANTITAKEOVER PROVISIONS
AFFECTING THE COMPANY AND THE BANK."
Regulatory Provisions. Regulations of the Administrator contain
provisions that, for a period of three years after the Conversion, prohibit any
person from directly or indirectly acquiring or offering to acquire beneficial
ownership of more than 10% of any class of equity security of the Company or the
Bank, with certain exceptions, without the prior approval of the Administrator.
If any person should acquire beneficial ownership of more than 10% of any class
of equity security without prior approval, any shares beneficially owned in
excess of 10% would not be counted as shares entitled to vote and would not be
voted in connection with any matter submitted to the stockholders for a vote.
See "ANTI-TAKEOVER PROVISIONS AFFECTING THE COMPANY AND THE BANK."
The Change in Bank Control Act, together with North Carolina
regulations, require that the consent of the Administrator and Federal Reserve
be obtained prior to any person or company acquiring "control" of a savings bank
or a bank holding company. Restrictions applicable to the operations of bank
holding companies and conditions imposed by the Federal Reserve in connection
with its approval of such acquisitions may deter potential acquirors from
seeking to obtain control of the Company. See "SUPERVISION AND REGULATION --
Regulation of the Company."
Agreements With Employees. In connection with the Conversion, the Bank
will enter into an employment agreement with Eugene M. Ward, President and Chief
Executive Officer. See "MANAGEMENT OF THE BANK -- Employment Agreement." In
addition, the Bank intends to adopt a Severance Plan which would benefit its
employees in the event there is a change in control of the Company or the Bank.
See "MANAGEMENT OF THE BANK -- Severance Plan." The existence of the employment
agreement and severance plan may tend to discourage mergers, consolidations,
acquisitions or other transactions that would result in a change in control of
the Company or the Bank. See "ANTI-TAKEOVER PROVISIONS AFFECTING THE COMPANY AND
THE BANK -- The Company -- Anti-Takeover Effect of Employment Agreement and
Benefit Plans."
13
<PAGE>
Dependence on Management
The success of the Bank's operations depends to a considerable degree
on its management and, in particular, its President and Chief Executive Officer,
Eugene M. Ward, and the loss of his services could adversely affect the Bank.
The Bank has attempted to provide for his continued employment by entering into
a three-year employment agreement with Mr. Ward. Mr. Ward could terminate his
employment at any time, however. See "MANAGEMENT OF THE BANK -- Employment
Agreement."
Financial Institution Regulation and Possible Legislation
The U.S. Congress is expected to consider legislation that may
eliminate the thrift industry as a separate industry. The Deposit Insurance
Funds Act of 1996 ("DIF Act") provides that the Savings Association Insurance
Fund ("SAIF") will be merged with the Bank Insurance Fund ("BIF") on January 1,
1999, but only if there are no thrift institutions in existence. The DIF Act
requires the Treasury Department to study the development of a common charter
for banks and thrifts and to submit a report of its finding to Congress, which
the Treasury Department has done. The Company cannot predict whether any
legislation will result from this process or what any such legislation may
provide. If Congress does not act to end the separate existence of the thrift
industry, the merger of the SAIF and BIF contemplated by the DIF Act will not
occur, without some amendment of the DIF Act. Although the SAIF currently meets
its statutory reserve ratios, there can be no assurance that it will continue to
do so. The financial burden of any future recapitalization of the SAIF, if
imposed solely on insured savings associations, would fall on a smaller
assessment base than in the past. This could increase the burden on individual
institutions, including the Bank. See SUPERVISION AND REGULATION."
Because the Bank is a North Carolina-chartered state savings bank, any
federal legislation providing for a common charter for banks and thrifts is not
expected to apply directly to the Bank. However, in addition to eliminating a
separate thrift industry, Congress is expected to consider legislation that will
restructure the banking and financial services industries generally. While such
legislation may not affect the Bank or the Company directly, it may restructure
the regulatory and competitive environments in which they operate. The Company
cannot predict the effects of such restructuring.
The Bank is subject to extensive regulation and supervision as a North
Carolina chartered savings bank. In addition, the Company, as a bank holding
company, is subject to extensive regulation and supervision. Any change in the
regulatory structure or the applicable statutes or regulations, whether by the
Administrator, the Federal Reserve, the FDIC, the North Carolina General
Assembly or the U.S. Congress, could have a material impact on the Company, the
Bank, or the Conversion.
Possible Year 2000 Computer Program Problems; Impact of Technological Advances
As is the case with substantially all financial institutions, rapid and
accurate data processing is essential to the operation of the Bank. There is
concern that in the year 2000 many computers will "read" entries for the year
2000 as the year 1900 and compute payment, interest or delinquency based on the
wrong date or be unable to compute payment, interest or delinquency.
All of the material data processing of the Bank that could be affected
by this problem is provided by a third party service bureau. The service bureau
of the Bank has advised the Bank that it expects to resolve this potential
problem before the year 2000. However, if the service bureau is unable to
resolve this
14
<PAGE>
potential problem in time, the Bank would likely experience significant data
processing delays, mistakes or failures. These delays, mistakes or failures
could have a significant adverse impact on the financial condition and results
of operations of the Bank.
In addition, the financial services industry frequently introduces new
technology-driven products and services which improve customer services and, if
used effectively, may enable financial institutions to reduce costs. The Bank's
future success will depend, in part, on its ability to address its customers
needs by using technology to provide products and services that will satisfy
customer demands for convenience, as well as increase the Bank's efficiencies in
its operations. There can be no assurances that the Bank will be able to
effectively implement new technology-driven products and services or be
successful in marketing such products and services in its market area.
ANSON BANCORP, INC.
The Company was incorporated under North Carolina law on March 2, 1998
at the direction of the Bank for the purpose of acquiring and holding all of the
outstanding capital stock of the Bank to be issued in connection with the
Conversion. The Company has received conditional approval from the Federal
Reserve and the Administrator to become a bank holding company and as such will
be subject to regulation by the Federal Reserve and the Administrator. This
structure will give the Company greater flexibility than the Bank currently has
to expand and diversify its business activities, although there are no current
plans regarding expansion or diversification. See "SUPERVISION AND REGULATION --
Regulation of the Company."
Prior to completion of the Conversion, the Company will not own any
material assets or transact any material business. Upon completion of the
Conversion, on an unconsolidated basis, the Company will have no significant
assets other than the stock of the Bank acquired in the Conversion, and the
portion of the net proceeds from the sale of Common Stock in the Conversion
which are retained by it. The Company will have no significant liabilities upon
completion of the Conversion. The management of the Company is described in
"MANAGEMENT OF THE COMPANY." The executive office of the Company is located at
the headquarters office of the Bank at 211 South Greene Street, Wadesboro, North
Carolina, and its telephone number is (704) 694-2122.
The existing management of the Company believes that it will be in the
best interests of the Company, the Bank and the Company's stockholders for the
Company to remain an independent company.
ANSON SAVINGS BANK, SSB
The Bank is a North Carolina-chartered mutual savings bank. The Bank
was organized in 1889 and has been a member of the FHLB system since 1939. The
deposits of the Bank are insured by the SAIF of the FDIC to the maximum amount
permitted by law.
The Bank is a member of the FHLB of Atlanta, which is one of the twelve
regional banks for federally insured savings institutions and other eligible
members comprising the FHLB system. As a North Carolina chartered savings bank,
the Bank is regulated by the Administrator. The Bank is also subject to
regulations of the FDIC with respect to certain other matters and, as a
subsidiary of the Company, will be
15
<PAGE>
indirectly subject to regulation by the Federal Reserve. See "SUPERVISION AND
REGULATION -- Regulation of the Company" and "-- Regulation of the Bank."
The Bank conducts business through its one full service office in
Wadesboro, North Carolina. The Bank's primary market area is Anson County, North
Carolina. At December 31, 1997, the Bank had total assets of $20.7 million, net
loans of $11.3 million, deposits of $16.7 million and retained earnings of $3.6
million.
The Bank is a community-oriented financial institution which offers a
variety of financial services to meet the needs of the communities it serves.
The Bank is principally engaged in the business of attracting deposits from the
general public and using such deposits to make one-to-four-family residential
real estate loans, non-residential real estate loans, construction loans and
loans secured by deposit accounts.
Revenues of the Bank are derived primarily from interest on loans. The
Bank also receives interest income from its investments and interest-earning
deposit balances. The Bank also receives non-interest income from transaction
and service fees and other sources. The major expenses of the Bank are interest
on deposits and general and administrative expenses such as compensation and
employee benefits, federal deposit insurance premiums, data processing expenses
and occupancy and related expenses.
USE OF PROCEEDS
Although the actual net proceeds from the sale of the Common Stock
cannot be determined until the Conversion is completed, it is presently
estimated that such net proceeds will be between $5.12 million and $7.05
million, based on the current Estimated Valuation Range. If the gross proceeds
of the shares sold are increased to 15% above the maximum of the Estimated
Valuation Range, it is estimated that net proceeds will equal $8.16 million. See
"PRO FORMA DATA" for the assumptions used to arrive at these amounts. The actual
net proceeds may vary materially from the estimated amounts described herein.
The Company expects to retain 50% of the proceeds of the Offering and will use
the balance to purchase the capital stock of the Bank to be issued in the
Conversion.
The Company expects to use the portion of the net proceeds it retains
for working capital and investment purposes. The Company does not expect to have
significant operating expenses and anticipates that initially it will invest the
net proceeds it retains primarily in interest-earning deposits, U.S. government,
federal agency and other marketable securities and mortgage-backed securities.
The types and amounts of such investments will vary from time to time based upon
the interest rate environment, asset/liability mix considerations and other
factors.
Net proceeds paid to the Bank initially will become part of the Bank's
general funds and will be invested primarily in mortgage and other loans, and
investments consisting primarily of interest-earning deposit balances, U.S.
government and federal agency obligations and other marketable securities in
accordance with the Bank's lending and investment policies. The relative amounts
to be invested in each of these types of investments will depend upon loan
demand, rates of return and asset/liability matching considerations at the time
the investments are to be made. Management is not able to predict the yields
which will be produced by the investment of the proceeds of the Offering because
such yields will be significantly influenced by general economic conditions and
the interest rate environment existing at the time
16
<PAGE>
the investments are made. Remaining net proceeds paid to the Bank will be used
for general corporate purposes.
The proceeds of the Offering will result in an increase in the Bank's
net worth and regulatory capital and may enhance the potential for growth
through increased lending and investment activities, branch expansion, ATMs or
otherwise. The net proceeds retained by the Company could be used to support the
future expansion of operations of the Company through the opening of a branch
office in or adjacent to the Bank's primary market area. The Company has no
current plans to open any additional office. Payments for shares of Common Stock
of the Company made through the withdrawal of existing deposit accounts at the
Bank will not result in the receipt of new funds for investment by the Bank.
Upon completion of the Conversion, the Board of Directors will have the
authority to adopt stock repurchase plans, subject to statutory and regulatory
requirements. Based upon facts and circumstances which may arise following the
Conversion, the Board of Directors may determine to repurchase stock in the
future. Such facts and circumstances may include but are not limited to (i)
market and economic factors such as the price at which the Common Stock is
trading, the volume of trading, the attractiveness of other investment
alternatives in terms of the rates of return and risks involved in the
investments, (ii) the ability to increase the book value and earnings per share
of the remaining outstanding shares, and improve the Company's return on equity;
(iii) the reduction of dilution to stockholders caused by having to issue
additional shares to cover the exercise of stock options or to fund employee
stock benefit plans; and (iv) any other circumstances in which repurchases would
be in the best interests of the Company and its stockholders.
Any stock repurchases will be subject to the determination of the Board
of Directors that both the Company and the Bank will be capitalized in excess of
applicable regulatory requirements after any such repurchases and that capital
will be adequate taking into account, among other things, the level of
nonperforming assets and other risks, the Company's and the Bank's current and
projected results of operations and asset/liability structure, the economic
environment and tax and other regulatory considerations. Federal regulations
require that, subject to certain exceptions, the Company must obtain approval of
the Federal Reserve prior to repurchasing Common Stock in excess of 10% of its
net worth during any twelve-month period. See "SUPERVISION AND REGULATION --
Regulation of the Company -- Dividend and Repurchase Limitations."
The Company and the Bank have no present intention to file consolidated
tax returns which will preserve for the Company the ability to use a portion of
the proceeds to make a return of capital in the future. However, the Company has
not made any decision to pay such a return of capital. The Company and the Bank
have agreed to notify the FDIC before making a return of capital during the
first three years following the Conversion. See "DIVIDEND POLICY."
At any time following approval of the MRP by the Company's
stockholders, it is expected that the MRP may acquire a number of shares of
Common Stock equal to 4% of the number of shares issued in the Conversion. See
"MANAGEMENT OF THE BANK -- Proposed Management Recognition Plan." Such shares
may be acquired in the open market or acquired through the Company's issuance of
authorized but unissued shares. In the event shares are acquired in the open
market, the funds for such purchase may be provided by the Bank from the
proceeds of the Conversion. It is estimated that between 20,400 and 30,360
shares may be acquired by the MRP Trust, assuming the issuance of between
561,000 and 759,000 shares, respectively, in the Conversion. If all such shares
were acquired by the MRP in the open market, and if such
17
<PAGE>
shares were acquired at a price of $10.00 per share, the Bank would contribute
between $204,000 and $276,000, respectively, to the MRP for this purpose.
DIVIDEND POLICY
Upon Conversion, the Board of Directors of the Company will have the
authority to declare semiannual dividends on the Common Stock, subject to
statutory and regulatory requirements. The Company expects to pay annual
dividends on the Common Stock at a rate of $0.30 per share which is equal to 3%
of the offering price for the Common Stock in the Conversion. The payment of
dividends is expected to begin as soon as practicable after completion of the
Conversion. In addition, the Board of Directors may determine from time to time
that it is prudent to pay special nonrecurring cash dividends. Special cash
dividends, if paid, may be in addition to, or in lieu of, regular cash
dividends. The Company's Board of Directors will periodically review its policy
concerning dividends. Declarations of dividends, if any, by the Board of
Directors will depend upon a number of factors, including investment
opportunities available to the Company and the Bank, capital requirements,
regulatory limitations, the Company's and the Bank's results of operations and
financial condition, tax considerations and general economic conditions. Upon
review of such considerations, the Board of Directors of the Company may
authorize dividends to be paid in the future if it deems such payment
appropriate and in compliance with applicable law and regulation. No assurances
can be given that any dividends will in fact be paid on the Common Stock or, if
dividends are paid, that they will not be reduced or discontinued in the future.
In connection with the Conversion, the Bank has agreed with the FDIC
that, within the first three years after completion of the Conversion, neither
the Company nor the Bank will pay any taxable dividend or make any taxable
distribution in excess of their current and retained earnings. The Company and
the Bank have agreed to notify the FDIC before making a return of capital during
the first three years following the Conversion.
The sources of income to the Company initially will consist of earnings
on the capital retained by the Company and dividends paid by the Bank to the
Company, if any. Consequently, future declarations of cash dividends by the
Company may depend upon dividend payments by the Bank to the Company, which
payments are subject to various restrictions. Under current North Carolina
regulations, the Bank could not declare or pay a cash dividend if the effect
thereof would be to reduce its net worth to an amount which is less than the
minimum required by the FDIC and the Administrator. In addition, for a period of
five years after the consummation of the Conversion, the Bank will be required,
under existing regulations, to obtain the prior written approval of the
Administrator before it can declare and pay a cash dividend on its capital stock
in an amount in excess of one-half of the greater of (i) its net income for the
most recent fiscal year, or (ii) the average of its net income after dividends
for the most recent fiscal year and not more than two of the immediately
preceding fiscal years, if applicable. See "SUPERVISION AND REGULATION --
Regulation of the Bank -- Restrictions on Dividends and Other Capital
Distributions." As a result of this limitation, if the Bank had been a stock
institution at the end of fiscal 1997 and for the two preceding fiscal years, it
could not have paid a dividend in excess of $_______ without the approval of the
Administrator.
As a converted institution, the Bank also will be subject to the
regulatory restriction that it will not be permitted to declare or pay a
dividend on or repurchase any of its capital stock if the effect thereof would
be to cause its regulatory capital to be reduced below the amount required for
the liquidation account established in connection with the Conversion. See "THE
CONVERSION -- Effects of Conversion --
18
<PAGE>
Liquidation Rights." Also, see "TAXATION -- Federal Income Taxation" for a
discussion of federal income tax provisions that may limit the ability of the
Bank to pay dividends to the Company without incurring a recapture tax.
MARKET FOR COMMON STOCK
The Company, as a newly organized company, has never issued capital
stock, and consequently, there is no established market for the Common Stock at
this time. Following the completion of the Offering, it is anticipated that the
Common Stock will be traded on the over-the-counter market with quotations
available through the OTC Electronic Bulletin Board. Trident Securities is
expected to make a market in the Common Stock, by developing and maintaining
historical stock trading records, soliciting potential buyers and sellers of
shares and attempting to match buy and sell orders. In connection with its
market making activities, Trident may buy or sell shares from time to time for
its own account. However, Trident Securities will not be subject to any
obligation with respect to such efforts.
An active and liquid public trading market for the securities of any
issuer, including the Common Stock, depends upon the presence in the marketplace
of both willing buyers and willing sellers of the securities at any given time.
Due to the size of the Company's offering (660,000 shares at the midpoint of the
Estimated Valuation Range), it is unlikely that a stockholder base large enough
to create an active trading market will develop and be maintained. Further, even
if a market develops, there can be no assurance that the shares of Common Stock
offered in the Conversion can be resold at or above the purchase price after
completion of the Conversion. Purchasers of Common Stock should consider the
potentially illiquid and long-term nature of their investment in the shares
being offered hereby. The aggregate price of the Common Stock is based upon an
independent appraisal of the pro forma market value of the Common Stock.
However, there can be no assurance that an investor will be able to sell the
Common Stock purchased in the Conversion at or above the $10.00 purchase price.
CAPITALIZATION
The following tables present the historical capitalization of the Bank
at December 31, 1997 and the pro forma capitalization of the Company at such
date after giving effect to the sale of the Common Stock and application of the
assumptions set forth under "PRO FORMA DATA," assuming that 561,000, 660,000,
759,000 and 872,850 shares of Common Stock are sold at $10.00 per share (the
minimum, midpoint, maximum and 15% above the maximum of the current Estimated
Valuation Range). A change in the number of shares issued in the Conversion may
materially affect such pro forma capitalization. See "USE OF PROCEEDS" and "THE
CONVERSION -- Purchase Price of Common Stock and Number of Shares Offered."
19
<PAGE>
<TABLE>
<CAPTION>
Company Pro Forma Capitalization at December 31, 1997
Based Upon Sale of
------------------------------------------------------
561,000 660,000
shares at a shares at a
price of price of
Capitalization $10.00 per $10.00 per
of Bank at ---------- ----------
12/31/97 share share
-------- ----- -----
(In Thousands)
<S> <C> <C> <C>
Deposits/(2)/ $16,656 $16,656 $16,656
Borrowings -- -- --
------- ------- -------
Total deposits and borrowings $16,656 $16,656 $16,656
======= ======= =======
Capital Stock:
Preferred stock, no par value per share:
authorized - 5,000,000 shares; assumed outstanding - none
$ -- $ -- $ --
Common Stock, no par value per share;
authorized - 20,000,000 shares; shares to be outstanding -
as shown -- -- --
Paid-in capital -- 5,122 6,087
Less:
Common Stock acquired by MRP/(3)/ -- (224) (264)
Retained earnings -- substantially restricted 3,614 3,614 3,614
Unrealized gains on available-for-sale securities, net of tax 244 245 245
--- --- ---
Total stockholders' equity $3,859 $8,757 $9,682
====== ====== ======
<CAPTION>
759,000 872,850
shares at a shares at a
price of price of
$10.00 per $10.00 per share(1)
---------- ----------------
share
-----
(In Thousands)
<S> <C> <C>
Deposits(2) $16,656 $16,656
Borrowings -- --
------- -------
Total deposits and borrowings $16,656 $16,656
======= =======
Capital Stock:
Preferred stock, no par value per share:
authorized - 5,000,000 shares; assumed outstanding - none
$ -- $ --
Common Stock, no par value per share;
authorized - 20,000,000 shares; shares to be outstanding -
as shown -- --
Paid-in capital 7,053 8,163
Less:
Common Stock acquired by MRP(3) (304) (349)
Retained earnings -- substantially restricted 3,614 3,614
Unrealized gains on available-for-sale securities, net of tax 245 245
--- ---
Total stockholders' equity $10,608 $11,672
======= =======
</TABLE>
20
<PAGE>
- -------------------------------
(1) Represents the number of shares of Common Stock that would be issued in
the Conversion after giving effect to a 15% increase in maximum
valuation in the Estimated Valuation Range.
(2) Withdrawals from deposit accounts for the purchase of Common Stock are
not reflected. Any such withdrawals would reduce pro forma deposits by
the amount of such withdrawals.
(3) Additionally, assumes that, after the Conversion, a number of shares
equal to 4% of the shares of Common Stock offered hereby will be
purchased by the MRP. The Common Stock acquired by the MRP is reflected
as a reduction of stockholders' equity. See "RISK FACTORS -- Cost and
Possible Dilutive Effect of the MRP and Option Plan, footnote 1 to the
tables under "PRO FORMA DATA" and "MANAGEMENT OF THE BANK -- Proposed
Management Recognition Plan".
21
<PAGE>
PRO FORMA DATA
The actual net proceeds from the sale of the Common Stock cannot be
determined until the Conversion is completed. However, net proceeds are
currently estimated to be between $5.12 million and $8.16 million, based upon
the following assumptions: (i) 52,000 shares of the Common Stock sold in the
Conversion will be sold to the directors and executive officers and their
associates (and that Trident Securities will not receive certain compensation
with respect to such sales), and none of the shares of Common Stock will be sold
in any Syndicated Community Offering pursuant to selected dealer agreements;
(ii) fees will be payable to Trident Securities with respect to the Subscription
and Community Offering as described in "THE CONVERSION -- Marketing
Arrangements;" and (iii) Conversion expenses, excluding the fees and commissions
to Trident Securities, will be approximately $366,000. Actual net proceeds may
vary depending upon the number of shares sold to directors, executive officers
and their associates, the number of shares, if any, sold in the Syndicated
Community Offering pursuant to selected dealer arrangements and the actual
expenses of the Conversion. Payments for shares made through withdrawals from
the existing Bank deposit accounts will not result in the receipt of new funds
for investment by the Bank. However, capital will increase and interest-bearing
liabilities will decrease by the amount of such withdrawals. See "THE CONVERSION
- -- Purchase Price of Common Stock and Number of Shares Offered."
Under the Plan, the Common Stock must be sold at an aggregate price
equal to not less than the minimum nor more than the maximum of the Estimated
Valuation Range based upon an independent appraisal. The Estimated Valuation
Range as of February 27, 1998 is from a minimum of $5,100,000 to a maximum of
$6,900,000 with a midpoint of $6,000,000. However, with the consent of the
Administrator and the FDIC, the aggregate price of the Common Stock sold may be
increased to up to 15% above the maximum of the Estimated Valuation Range, or to
$7,935,000, without a resolicitation and without any right to cancel, rescind or
change subscription orders, to reflect changes in market and financial
conditions following commencement of the Subscription Offering. See "THE
CONVERSION -- Purchase Price of Common Stock and Number of Shares Offered."
Pro forma consolidated net earnings and book value of the Company at or
for the six months ended December 31, 1997 and the year ended June 30, 1997 have
been based upon the following assumptions: (i) the sale of shares of Common
Stock in connection with the Conversion occurred at the beginning of the
periods, and yielded net proceeds available for investment of approximately
$4.90 million, $5.82 million, $6.75 million and $7.81 million (based upon the
issuance of 561,000, 660,000, 759,000 and 872,850 shares, respectively, at
$10.00 per share) on such dates; and (ii) such net proceeds were invested on a
consolidated basis at the beginning of the period at a yield of 5.55%, which
represents the average one-year treasury rate for the last week of December
1997. The Company did not use the arithmetic average of the Bank's
weighted-average yield on interest-earning assets and weighted-average interest
rate paid on deposits during the six months ended December 31, 1997 or the year
ended June 30, 1997. Management believes that the one-year Treasury rate is a
more appropriate rate for purposes of preparing the pro forma data because
proceeds from the Conversion are expected to be initially invested in
instruments with similar yields and maturities. The effect of withdrawals from
deposit accounts for the purchase of Common Stock has not been reflected. Such
withdrawals have no effect on pro forma stockholders' equity, and management
does not believe that such withdrawals will have a material impact on pro forma
net earnings or pro forma net earnings per share. In calculating pro forma net
earnings for the six months ended December 31, 1997 and year ended June 30,
1997, an effective combined federal and state income tax rate of 34.00% has been
assumed, resulting in a yield after taxes of 3.66%. Historical and pro forma per
share amounts have been calculated by dividing the Bank's historical amounts and
the Company's pro forma amounts by the indicated number of shares of Common
Stock, assuming that such number of shares had been outstanding during the
entire period.
22
<PAGE>
The following pro forma information is not intended to represent the
market value of the Common Stock, the value of net assets and liabilities or of
future results of operations. The assumption regarding investment yields should
not be considered indicative of actual yields for future periods. The following
information is not intended to be used as a basis for projection of results of
operations for future periods.
<TABLE>
<CAPTION>
At or for the Six Months Ended December 31, 1997
--------------------------------------------------------------------------
561,000 660,000 759,000 872,850
shares at $10.00 shares at $10.00 shares at $10.00 shares at $10.00
per share per share per share per share
(Minimum) (Midpoint) (Maximum) (Supermaximum)
---------------- ---------------- ---------------- ----------------
(Dollars in Thousands, except per share amounts)
<S> <C> <C> <C> <C>
Gross proceeds $5,610 $6,600 $7,590 $8,729
Less offering expenses and commissions (488) (513) (537) (566)
----- ----- ----- -----
Estimated net Conversion proceeds 5,122 6,087 7,053 8,163
Less Common Stock to be acquired by MRP/(1)/ (224) (264) (304) (349)
----- ----- ----- -----
Estimated proceeds available for investment $4,898 $5,823 $6,749 $7,813
====== ====== ====== ======
Pro forma net income:
Historical net income $62 $62 $62 $62
Pro forma adjustments:
Pro forma income on net proceeds/(2)/ 90 107 124 143
Pro forma MRP adjustments/(1)/ (16) (17) (20) (23)
---- ---- ---- ----
Pro forma net income $137 $151 $166 $182
---- ==== ==== ====
Pro forma net income per share/(3)/
Historical net income per share $0.11 $0.09 $0.08 $0.08
Pro forma adjustments:
Pro forma income on net proceeds/(2)/ 0.16 0.16 0.16 0.16
Pro forma MRP adjustments/(1)/ (0.03) (0.03) (0.03) (0.03)
------ ------ ------ ------
Pro forma net income per share $0.24 $0.23 $0.22 $0.21
===== ===== ===== =====
Number of shares used in calculating income per share/(4)/ 561,000 660,000 759,000 872,850
======= ======= ======= =======
Stockholders' equity (book value)/(3)/
Historical retained earnings $3,859 $3,859 $3,859 $3,859
Estimated net conversion proceeds 5,122 6,087 7,053 8,163
Less common stock acquired by:
MRP/(2)/ (224) (264) (304) (349)
----- ----- ----- -----
Pro forma stockholders' equity/(3)/ $8,757 $9,682 $10,608 $11,672
====== ====== ======= =======
Pro forma stockholders' equity per share/(4)/
Historical retained earnings $6.88 $5.85 $5.09 $4.42
Estimated net conversion proceeds 9.13 9.22 9.29 9.35
Less common stock acquired by:
MRP/(1)/ (0.40) (0.40) (0.40) (0.40)
------ ------ ------ ------
Pro forma stockholders' equity per share/(3)/ $15.61 $14.67 $13.98 $13.37
====== ====== ====== ======
Pro forma price to book value/(5)/ 64.1% 68.2% 71.5% 74.8%
===== ===== ===== =====
Pro forma price to earnings (P/E ratio)/(6)/ 20.8x 21.7x 22.7x 23.8x
==== ==== ==== ====
Number of shares used in calculating equity per share/(4)/ 561,000 660,000 759,000 872,850
======= ======= ======= =======
</TABLE>
23
<PAGE>
- ----------------------------------------
(1) It is assumed that the MRP will purchase a number of shares equal to 4%
of the shares of Common Stock issued in the Conversion for issuance to
directors, officers and employees, subject to approval by the Company's
stockholders. If the MRP is approved by the stockholders, the MRP
intends to acquire the Common Stock either through open market
purchases or from authorized but unissued shares of Common Stock of the
Company. Funds used by the MRP to purchase the shares will be
contributed to the MRP by the Bank. In calculating the pro forma effect
of the MRP, it is assumed that the required stockholder approval has
been received, that the shares were acquired by the MRP at the
beginning of the period presented in open market purchases at the
Conversion purchase price of $10.00 per share, and that 20% of the
amount contributed was amortized to expense annually during the period
(the MRP will be amortized over a five-year period), net of income tax
at an assumed combined federal and state rate of 34%. The issuance of
authorized but unissued shares of the Company's Common Stock to the MRP
instead of open market purchases would dilute the voting interests of
existing stockholders by approximately 3.9%; pro forma net earnings per
share would be $0.24, $0.23, $0.22 and $0.21 at the minimum, midpoint,
maximum and 15% above the maximum of the range, respectively, for the
six-month period ended December 31, 1997; pro forma price to earnings
ratio would be 20.8, 21.7, 22.7 and 23.8; and pro forma stockholders'
equity per share would be $15.39, $14.49, $13.82 and $13.24 at the
minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range, respectively, at December 31, 1997. There can be no
assurance that stockholder approval of the MRP will be obtained, or
that the actual purchase price of the shares will be equal to the
Conversion purchase price. See "MANAGEMENT OF THE BANK -- Proposed
Management Recognition Plan."
(2) No effect has been given to the issuance of additional shares of Common
Stock pursuant to the Option Plan. See "MANAGEMENT OF THE BANK --
Proposed Option Plan." If the Option Plan is approved by the
stockholders, an amount equal to 10% of the Common Stock issued in the
Conversion, or 56,100, 66,000, 75,900 and 87,285 shares at the minimum,
midpoint, maximum and 15% above the maximum of the range, respectively,
will be reserved for future issuance upon the exercise of the options
to be granted under the Option Plan. The issuance of Common Stock
pursuant to exercise of options under the Option Plan will result in
the dilution of existing stockholders' interests. Assuming stockholder
approval of the Option Plan and exercise of all options at the
beginning of the period at an exercise price of $10.00 per share, and
the issuance of authorized but unissued shares upon exercise of such
options, the pro forma net earnings per share would be $0.24, $0.22,
$0.21 and $0.21, respectively, and pro forma stockholders' equity per
share would be $15.10, $14.25, $13.62, and $13.07, respectively, at the
minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range.
(3) The retained earnings of the Bank will be substantially restricted
after the Conversion. See "DIVIDEND POLICY," "SUPERVISION AND
REGULATION -- Regulation of the Bank -- Restrictions on Dividends and
Other Capital Distributions."
(4) Earnings per share is calculated based on the number of shares
outstanding indicated in the previous tables which include shares to be
acquired by the MRP. The FASB has issued Statement #128, Earnings per
Share (EPS), which requires presentation of EPS for basic and diluted
per-share amounts. Diluted per-share amounts assume the Conversion,
exercise or issuance of all potential common stock instruments.
Application is required for annual and interim periods ending after
December 15, 1997 with earlier application not permitted.
(5) Pro forma net earnings per share have been annualized for purposes of
this ratio.
24
<PAGE>
<TABLE>
<CAPTION>
At or For the Year Ended June 30, 1997
--------------------------------------------------------------------------
561,000 660,000 759,000 872,850
shares at $10.00 shares at $10.00 shares at $10.00 shares at $10.00
per share per share per share per share
(Minimum) (Midpoint) (Maximum) (Supermaximum)
---------------- ---------------- ---------------- ----------------
(Dollars in Thousands, except per share amounts)
<S> <C> <C> <C> <C>
Gross proceeds $5,610 $6,600 $7,590 $8,729
Less offering expenses and commissions (488) (513) (537) (566)
----- ----- ----- -----
Estimated net Conversion proceeds 5,122 6,087 7,053 8,163
Less Common Stock to be acquired by MRP/(1)/ (224) (264) (304) (349)
----- ----- ----- -----
Estimated proceeds available for investment $4,898 $5,823 $6,749 $7,813
====== ====== ====== ======
Pro forma net income:
Historical net income $50 $50 $50 $50
Pro forma adjustments:
Pro forma income on net proceeds/(2)/ 179 213 247 286
Pro forma MRP adjustments/(1)/ (30) (35) (41) (46)
---- ---- ---- ----
Pro forma net income $200 $228 $257 $290
---- ==== ==== ====
Pro forma net income per share/(3)/
Historical net income per share $0.09 $0.08 $0.07 $0.06
Pro forma adjustments:
Pro forma income on net proceeds/(2)/ 0.32 0.32 0.33 0.33
Pro forma MRP adjustments/(1)/ (0.05) (0.05) (0.05) (0.05)
------ ------ ------ ------
Pro forma net income per share $0.36 $0.35 $0.34 $0.33
===== ===== ===== =====
Number of shares used in calculating income per share/(4)/ 561,000 660,000 759,000 872,850
======= ======= ======= =======
Stockholders' equity (book value)/(3)/
Historical retained earnings $3,756 $3,756 $3,756 $3,756
Estimated net conversion proceeds 5,122 6,087 7,053 8,163
Less common stock acquired by:
MRP/(1)/ (224) (264) (304) (349)
----- ----- ----- -----
Pro forma stockholders' equity/(3)/ $8,654 $9,579 $10,505 $11,569
====== ====== ======= =======
Pro forma stockholders' equity per share/(4)/
Historical retained earnings $6.71 $5.69 $4.96 $4.30
Estimated net conversion proceeds 9.13 9.22 9.29 9.35
Less common stock acquired by:
MRP/(1)/ (0.40) (0.40) (0.40) (0.40)
------ ------ ------ ------
Pro forma stockholders' equity per share/(3)/ $15.43 $14.51 $13.84 $13.25
====== ====== ====== ======
Pro forma price to book value/(4)/ 64.8% 68.9% 72.2% 75.4%
===== ===== ===== =====
Pro forma price to earnings (P/E ratio) 27.8x 28.6x 29.4x 30.3x
==== ==== ==== ====
Number of shares used in calculating equity per share/(3)/ 561,000 660,000 759,000 872,850
======= ======= ======= =======
</TABLE>
25
<PAGE>
- ------------------------------------------
(1) It is assumed that the MRP will purchase a number of shares equal to 4%
of the shares of Common Stock issued in the Conversion for issuance to
directors, officers and employees, subject to approval by the Company's
stockholders. If the MRP is approved by the stockholders, the MRP
intends to acquire the Common Stock either through open market
purchases or from authorized but unissued shares of Common Stock of the
Company. Funds used by the MRP to purchase the shares will be
contributed to the MRP by the Bank. In calculating the pro forma effect
of the MRP, it is assumed that the required stockholder approval has
been received, that the shares were acquired by the MRP at the
beginning of the period presented in open market purchases at the
Conversion purchase price of $10.00 per share, and that 20% of the
amount contributed was amortized to expense annually during the period
(the MRP will be amortized over a five-year period), net of income tax
at an assumed combined federal and state rate of 34%. The issuance of
authorized but unissued shares of the Company's Common Stock to the MRP
instead of open market purchases would dilute the voting interests of
existing stockholders by approximately 3.9%; pro forma net earnings per
share would be $0.36, $0.35, $0.34 and $0.33 at the minimum, midpoint,
maximum and 15% above the maximum of the range, respectively, for the
year ended June 30, 1997; pro forma price to earnings ratio would be
27.8, 28.6, 29.4 and 30.3 at the minimum, midpoint, maximum and 15%
above the maximum of Estimated Valuation Range, respectively, at June
30, 1997. There can be no assurance that stockholder approval of the
MRP will be obtained, or that the actual purchase price of the shares
will be equal to the Conversion purchase price. See "MANAGEMENT OF THE
BANK -- Proposed Management Recognition Plan."
(2) No effect has been given to the issuance of additional shares of Common
Stock pursuant to the Option Plan. See "MANAGEMENT OF THE BANK --
Proposed Option Plan." If the Option Plan is approved by the
stockholders, an amount equal to 10% of the Common Stock issued in the
Conversion, or 56,100, 60,000, 75,900 and 79,350 shares at the minimum,
midpoint, maximum and 15% above the maximum of the range, respectively,
will be reserved for future issuance upon the exercise of the options
to be granted under the Option Plan. The issuance of Common Stock
pursuant to exercise of options under the Option Plan will result in
the dilution of existing stockholders' interests. Assuming stockholder
approval of the Option Plan and exercise of all options at the
beginning of the period at an exercise price of $10.00 per share, and
the issuance of authorized but unissued shares upon exercise of such
options, the pro forma net earnings per share would be $0.36, $0.35,
$0.34 and $0.34, respectively, at the minimum, midpoint, maximum and
15% above the maximum of Estimated Valuation Range, respectively, at
June 30, 1997.
(3) The retained earnings of the Bank will be substantially restricted
after the Conversion. See "DIVIDEND POLICY," "SUPERVISION AND
REGULATION -- Regulation of the Bank -- Restrictions on Dividends and
Other Capital Distributions."
(4) Earnings per share is calculated based on the number of shares
outstanding indicated in the previous tables which include shares to be
acquired by the MRP. The FASB has issued Statement #128, Earnings per
Share (EPS), which requires presentation of EPS for basic and diluted
per-share amounts. Diluted per-share amounts assume the conversion,
exercise or issuance of all potential common stock instruments.
Application is required for annual and interim periods ending after
December 15, 1997 with earlier application not permitted.
26
<PAGE>
HISTORICAL AND PRO FORMA CAPITAL COMPLIANCE
The Bank is subject to the North Carolina savings bank requirement that
net worth, computed in accordance with the requirements of the Administrator,
equal or exceed 5% of total assets. As of December 31, 1997, the Bank's net
worth, computed in accordance with such requirements, was 17.9% of total assets.
In addition, the Bank is subject to the capital requirements of the FDIC. The
FDIC requires that institutions which receive the highest rating during their
examination process and are not experiencing or anticipating significant growth
must maintain a leverage ratio of Tier I capital to total assets (as defined in
FDIC regulations) of at least 3%. All other institutions are required to
maintain a ratio of 1% or 2% above the 3% minimum with an absolute minimum
leverage ratio of not less than 4%. The FDIC also imposes requirements that (i)
the ratio of Tier I capital to risk-weighted assets equal at least 4% and (ii)
the ratio of total capital to risk-weighted assets equal at least 8%. As
demonstrated in the table below, the Bank exceeds the FDIC Tier I and risk-based
capital requirements and North Carolina capital requirements on a historical and
pro forma basis.
The following table presents (i) the Bank's historical regulatory
capital position on December 31, 1997 and June 30, 1997 and (ii) the Bank's pro
forma regulatory capital position on such dates after giving effect to the
assumptions set forth under "PRO FORMA DATA" and "CAPITALIZATION" and further
assuming that the Company will retain 50% of the net proceeds of the Common
Stock sold in the Conversion.
27
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Regulatory Capital Position at December 31, 1997/1/
-------------------------------------------------------------
Historical
at Minimum of 561,000 Midpoint of 660,000
December 31, 1997 Shares at Shares at
----------------- $10.00 per share $10.00 per share
---------------- ----------------
Percent of Percent of Percent of
---------- ---------- ----------
Regulatory Regulatory Regulatory
---------- ---------- ----------
Amount Assets/(2)/ Amount Assets/(2)/ Amount Assets/(2)/
------ ----------- ------ ----------- ------ -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Capital under generally accepted accounting
principles $3,859 18.6% $6,420 27.6% $6,903 29.0%
====== ===== ====== ===== ====== =====
Tier 1 (leverage) capital $3,615 17.4% $6,176 26.5% $6,659 28.0%
Tier 1 (leverage) capital requirement /(3)/ 829 4.0% 931 4.0% 951 4.0%
--- ---- --- ---- --- ----
Excess $2,786 13.4% $5,245 22.5% $5,708 24.0%
====== ===== ====== ===== ====== -----
Tier 1 risk based capital $3,615 46.5% $6,176 74.6% $6,659 79.5%
Tier 1 risk based capital requirement 311 4.0% 331 4.0% 335 4.0%
--- ---- --- ---- --- ----
Excess $3,304 42.5% $5,845 70.6% $6,324 75.5%
====== ===== ====== ===== ====== -----
Total risk based capital $3,712 47.8% $6,273 75.8% $6,756 80.7%
Total risk based capital requirement 621 8.0% 662 8.0% 670 8.0%
--- ---- --- ---- --- ----
Excess $3,091 39.8% $5,611 67.8% $6,086 72.7%
====== ===== ====== ===== ====== -----
NC regulatory capital $3,712 17.9% $6,273 26.9% $6,756 28.4%
NC regulatory capital requirement 1,036 5.0% 1,164 5.0% 1,188 5.0%
----- ---- ----- ---- ----- ----
Excess $2,676 12.9% $5,109 21.9% $5,568 23.4%
====== ===== ====== ===== ====== -----
<CAPTION>
Maximum, as Adjusted,
Maximum of 759,000 of 872,850
Shares at Shares at
$10.00 per share $10.00 per share
---------------- ----------------
Percent of Percent of
---------- ----------
Regulatory Regulatory
---------- ----------
Amount Assets/(2)/ Amount Assets/(2)/
------ ----------- ------ -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Capital under generally accepted accounting
principles $7,386 30.5% $8,440 33.4%
====== ===== ====== =====
Tier 1 (leverage) capital $7,142 29.5% $8,196 32.4%
Tier 1 (leverage) capital requirement /(3)/ 970 4.0% 1,012 4.0%
--- ---- ----- ----
Excess $6,172 25.5% $7,184 28.4%
====== ===== ====== =====
Tier 1 risk based capital $7,142 84.3% $8,196 94.4%
Tier 1 risk based capital requirement 339 4.0% 347 4.0%
--- ---- --- ----
Excess $6,803 80.3% $7,849 90.4%
====== ===== ====== =====
Total risk based capital $7,239 85.4% $8,293 95.5%
Total risk based capital requirement 678 8.0% 695 8.0%
--- ---- --- ----
Excess $6,561 77.4% $7,598 87.5%
====== ===== ====== =====
NC regulatory capital $7,239 29.9% $8,293 32.8%
NC regulatory capital requirement 1,213 5.0% 1,265 5.0%
----- ---- ----- ----
Excess $6,027 24.9% $7,028 27.8%
====== ===== ====== =====
</TABLE>
- --------------------------------
(1) Assumes a bank-only calculation for regulatory requirements.
(2) For the Tier 1 (leverage) capital and North Carolina regulatory capital
calculations, percent is of total average assets. Average assets after
investment of net proceeds from the offering at the minimum, midpoint,
maximum and 15% above the maximum total $23.3 million, $23.8 million,
$24.3 million and $25.3 million, respectively. For the Tier 1
risk-based capital and total risk-based capital calculations, percent
is of total risk-weighted assets. Net proceeds were assumed to be
invested in short-term treasury securities (0% risk-weight) and
one-to-four- family residential mortgage loans (50% risk-weight) with a
weighted average risk-weight of 20%. Total risk-weighted assets after
investment of net proceeds from the offering at the minimum, midpoint,
maximum and 15% above the maximum total $8.3 million, $8.4 million,
$8.5 million and $8.7 million, respectively.
(3) As a North Carolina-chartered savings bank, the Bank is subject to the
capital requirements of the FDIC and the Administrator. The FDIC
requires state-chartered savings banks, including the Bank, to have a
minimum leverage ratio of Tier 1 capital to total assets of at least
3%; provided, however, that all institutions, other than those (i)
receiving the highest rating during the examination process and (ii)
not anticipating any significant growth, are required to maintain a
ratio of 1% to 2% above the stated minimum, with an absolute minimum
leverage ratio of at least 4%. For the purposes of this table, the Bank
has assumed that its leverage capital requirement is 4% of total
average assets.
28
<PAGE>
STOCK PURCHASES BY DIRECTORS AND EXECUTIVE OFFICERS
Directors, officers and employees of the Bank will be entitled to
subscribe for shares of Common Stock in the Subscription Offering in their
capacities as such and to the extent they qualify as Eligible Account Holders,
Supplemental Eligible Account Holders and Other Members. Shares purchased by
such persons will be purchased at the same price per share--$10.00--that will be
paid by other purchasers in the Offering. They may also purchase Common Stock in
the Community Offering or in the Syndicated Community Offering, if any, subject
to the maximum purchase limitations applicable to all purchasers of shares in
the Conversion.
The following table sets forth for the named executive officer and each
of the directors of the Bank who intends to purchase Common Stock, and for all
executive officers and directors as a group (including in each case, except as
otherwise noted, all associates of such persons) the aggregate dollar amount of
Common Stock for which such director or executive officer has informed the Bank
he intends to subscribe. The amounts reflected in the table are estimates only
and the actual shares of Common Stock actually subscribed for by the listed
individuals may differ from the amounts reflected in the table. The following
table assumes that sufficient shares will be available to satisfy the
subscriptions of the Bank's executive officers and directors.
<TABLE>
<CAPTION>
Anticipated
Anticipated Number
Amount of Shares As a Percent
to be Paid to be of Shares
Name for Shares Purchased/1/ Issued/2/
- ---- ---------- --------- ------
<S> <C> <C> <C>
Preston A. Burns, Chairman $100,000 10,000 1.52%
John J. Crawford, Director 100,000 10,000 1.52%
W. Kenneth Huntley, Director 50,000 5,000 0.76%
Emmett S. Patterson, Director 10,000 1,000 0.15%
John R. Potter, Director 25,000 2,500 0.38%
H. Patrick Taylor, Jr., Director 150,000 15,000 2.27%
Eugene M. Ward, Director, President and Chief 100,000 10,000 1.52%
Executive Officer
All executive officers and directors as a group (9 $537,000 53,700 8.14%
-------- ------ -----
persons)
</TABLE>
29
<PAGE>
- ---------------------
(1) Grants under the proposed MRP and shares subject to option under the
Option Plan, if approved by the stockholders of the Company at a
meeting of stockholders following the Conversion, are not aggregated
with shares of Common Stock purchased by the executive officers and
directors listed above. Under the proposed MRP, if approved by the
stockholders of the Company, a number of shares equal to 4% of the
shares issued in the Conversion are expected to be issued to directors
and certain employees of the Bank. Such shares could be purchased in
the open market at any time following approval of the MRP by the
Company's stockholders or could be issued out of authorized but
unissued shares. Recipients of shares under the MRP will have voting
control over such shares regardless of whether such shares have vested.
See "MANAGEMENT OF THE BANK -- Proposed Management Recognition Plan."
(2) Based upon the issuance of 660,000 shares of Common Stock which is the
number of shares to be issued at the midpoint of the Estimated
Valuation Range. The same individuals would subscribe for 9.57% of the
shares issued based upon the issuance of 561,000 shares of Common Stock
which is the number of shares to be issued at the minimum of the
Estimated Valuation Range.
Without the prior written consent of the Administrator, shares of
Common Stock purchased by directors or executive officers of the Bank in the
Conversion cannot be sold during a period of one year following the Conversion,
except upon death of the director or executive officer. Such restriction also
applies to any shares issued to such person as a stock dividend, stock split or
otherwise with respect to any of such originally restricted stock.
In addition, the North Carolina conversion regulations provide that
directors and executive officers and their associates are prohibited from
purchasing outstanding shares of Common Stock for a period of three years
following the Conversion, except from or through a broker or dealer registered
with the SEC or Secretary of State of North Carolina, unless the prior written
approval of the Administrator is obtained. This provision does not apply to
negotiated transactions involving more than 1% of the Company's outstanding
Common Stock or to purchases of stock made by or held by one or more
tax-qualified or non-tax-qualified employee stock benefit plans of the Bank or
the Company which may be attributable to individual executive officers or
directors. Purchases and sales of Common Stock by officers and directors will
also be subject to the short-swing trading prohibitions contained in Section
16(b) of the Exchange Act, and the short-swing trading and other rules
promulgated pursuant to the Exchange Act.
30
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Management's discussion and analysis of financial condition and results
of operations is intended to assist in understanding the financial condition and
results of operations of the Bank. The information contained in this section
should be read in conjunction with the Financial Statements, the accompanying
Notes to Financial Statements, and the other sections contained in this
Prospectus.
The Company was incorporated under North Carolina law on March 2, 1998
at the direction of the Bank for the purpose of acquiring and holding all of the
outstanding stock of the Bank to be issued in the Conversion. The Company's
principal business activities after the Conversion are expected to be conducted
solely through the Bank.
The Bank's results of operations depend primarily on net interest
income, which is the difference between interest income from interest-earning
assets and interest expense on interest-bearing liabilities. The Bank's
principal operating expenses, aside from interest expense, consist of
compensation and employee benefits, office occupancy costs, data processing
expenses and federal deposit insurance premiums.
Capital Resources and Liquidity
The objective of the Bank's liquidity management is to ensure the
availability of sufficient cash flows to meet all financial commitments and to
capitalize on opportunities for expansion. Liquidity management addresses the
Bank's ability to meet deposit withdrawals on demand or at contractual maturity,
to repay borrowings as they mature, and to fund new loans and investments as
opportunities arise.
The Bank's primary sources of internally generated funds are principal
and interest payments on loans receivable, cash flows generated from operations,
and cash flows generated by investment, including mortgage-backed securities.
External sources of funds include increases in deposits and advances from the
Federal Home Loan Bank of Atlanta (FHLB). In recent years, advances from the
FHLB have not been a primary source of liquidity for the Bank.
North Carolina-chartered savings banks must maintain liquid assets
equal to at least 10% of total assets. The computation of liquidity under North
Carolina regulation allows the inclusion of mortgage-backed securities and
investments with readily marketable value, including investments with maturities
in excess of five years. The Bank believes that it will have sufficient funds
available to meet its anticipated future loan commitments as well as other
liquidity needs.
Following the Conversion, the Company will initially conduct no
business other than holding the capital stock of the Bank. In order to provide
sufficient funds for its operations, the Company expects to retain at the
Company level and invest 50% of the net proceeds of the Conversion. In the
future, the Company's primary source of funds, other than income from its
investments is expected to be dividends from the Bank. As a North
Carolina-chartered stock savings bank, the Bank may not declare or pay a cash
dividend on or repurchase any of its capital stock if the effect of such
transaction would be to reduce the net worth of the institution to an amount
which is less than the minimum amount required by applicable federal and state
regulations. In addition, for a period of five years after the Conversion, the
Bank must obtain
31
<PAGE>
written approval from the State of North Carolina Administrator before declaring
or paying a cash dividend on its capital stock in an amount in excess of
one-half of the greater of (i) its net income for the most recent fiscal year
end, or (ii) the average of its net income after dividends for the most recent
fiscal year end and not more than two of the immediately preceding fiscal year
ends. As a result of this limitation, if the Bank had been a stock institution
at the end of fiscal 1997 and for the two preceding years, it could not have
paid a cash dividend in excess of $61,000 without approval of the Administrator.
In connection with the Conversion, the Company and the Bank have agreed with the
FDIC that, within the first year after completion of the Conversion, they will
not pay any dividend or make any distribution that represents, or is
characterized as, or is treated for tax purposes as a return of capital. In
addition, after the Conversion, the Bank will be subject to the restriction that
it will not be permitted to declare or pay a cash dividend on or repurchase any
of its capital stock if the effect thereof would be to cause its net worth to be
reduced below the amount required for the liquidation account to be established
in connection with the Conversion. (See "THE CONVERSION -- Effects of
Conversion" and " -- Liquidation Rights."
Operating Strategy
The primary goals of management are to increase the Bank's
profitability, monitor its capital position and enhance its banking franchise.
The Bank's results of operations are dependent primarily on net interest income,
which is the difference between the income earned on its interest-earning
assets, such as loans and investments, and the cost of its interest-bearing
liabilities, consisting of deposits. The Bank's operations are affected to a
much lesser degree by non-interest income, such as transaction and other service
fee income, and other sources of income. The Bank's net income is also affected
by, among other things, provisions for loan losses and operating expenses. The
Bank's principal operating expenses, aside from interest expense, consists of
compensation and employee benefits, office occupancy costs, data processing
expenses and federal deposit insurance premiums. The Bank's results of
operations are also significantly affected by general economic and competitive
conditions, particularly changes in market interest rates, government
legislation and policies concerning monetary and fiscal affairs, housing and
financial institutions and the attendant actions of regulatory authorities.
In guiding the operations of the Bank, management has implemented
various strategies designed to continue the institution's profitability while
maintaining its safety and soundness. These strategies include: (i) emphasizing
one-to-four family residential lending; (ii) maintaining asset quality; (iii)
controlling operating expenses; and (iv) monitoring interest-rate risk. It is
anticipated, subject to market conditions, that the strategies presently in
place will be continued following completion of the Conversion.
Emphasis on One-to-Four-Family Residential Housing. The Bank has been
predominantly a one-to-four family residential lender. As of December 31, 1997,
approximately 95.88% of its loan portfolio, before net items, was composed of
permanent one-to-four-family residential loans. As of such date, an additional
4.27% of its loan portfolio, before net items, was composed of nonresidential
real estate loans and 3.23% of its loan portfolio before net items was composed
of construction loans. As a result, the Bank has developed expertise in mortgage
loan underwriting and origination. The Bank has established methods to generate
loan origination through contacts with realtors, homebuilders and past and
present customers. The institution also uses advertising and community
involvement to gain exposure within the communities is operates.
32
<PAGE>
Maintenance of Asset Quality. At December 31, 1997, the Bank's ratio of
nonperforming assets to total assets was 1.51%. Since 1991, no net loan
charge-offs have been necessary. The Bank has attempted to maintain asset
quality through its underwriting and collection procedures.
Control of Noninterest Expenses. The Bank closely monitors its
noninterest expenses and seeks to control them while maintaining the necessary
personnel to properly serve its customers. Since June 30, 1996, the Bank's ratio
of noninterest expenses to average assets has averaged 2.4%. Exclusive of a
one-time charge for federal deposit insurance premiums amount of $114,000 in
September 1996, the Bank's ratio of noninterest expenses to average assets
averaged 2.18%.
Interest Rate Risk
The Bank's asset/liability management, or interest rate risk
management, program is focused primarily on evaluating and managing the
composition of its assets and liabilities in view of various interest rate
scenarios. Factors beyond the Bank's control, such as market interest rates and
competition, may also have an impact on the Bank's interest income and interest
expense.
In the absence of other factors, the yield or return associated with
the Bank's earning assets generally will increase from existing levels when
interest rates rise over an extended period of time, and conversely interest
income will decrease when interest rates decrease. In general, interest expense
will increase when interest rates rise over an extended period of time, and
conversely interest expense will decrease when interest rates decrease.
Therefore, by controlling the increases and decreases in its interest income and
interest expense which are brought about by changes in market and interest
rates, the Bank can significantly influence its net interest income.
Net Portfolio Value Analysis. In addition to the interest rate gap
analysis as discussed below, management monitors the Bank's interest rate
sensitivity through the use of a model which estimates the change in net
portfolio value ("NPV") in response to a range of assumed changes in market
interest rates. NPV is the present value of expected cash flows from assets,
liabilities, and off-balance sheet items. The model estimates the effect on the
Bank's NPV of instantaneous and permanent 100 to 400 basis point increases and
decreases in market interest rates.
33
<PAGE>
The following table presents information regarding possible changes in
the Bank's NPV as of September 30, 1997, based on information provided by the
FHLB of Atlanta's interest rate risk model.
<TABLE>
<CAPTION>
Change
in Interest Net Portfolio Value
Rates in basis -------------------
Points
(Rate Shock) Amount $Change %Change
------------ ------ ------- -------
($000's)
<S> <C> <C> <C>
Up 400 $2,479 $(1,139) (31%)
Up 300 2,780 (838) (23%)
Up 200 3,081 (537) (15%)
Up 100 3,349 (269) (7%)
Static 3,618 -- --
Down 100 3,750 132 4%
Down 200 3,881 263 7%
Down 300 3,991 373 10%
Down 400 4,101 483 13%
</TABLE>
The table set forth above indicates that, in the event of a 200 basis
point decrease in interest rates, the Bank could experience a 7.0% increase in
NPV. In the event of a 200 basis point increase in interest rates, the Bank
could experience a 15.0% decrease in NPV.
Interest Rate Gap Analysis. As a part of the Bank's interest rate risk
management policy, the Bank calculates an interest rate "gap". Interest rate
"gap" analysis is a common, though imperfect, measure of interest rate risk,
which measures the relative dollar amounts of interest-earning assets and
interest-bearing liabilities which reprice within a specific time period, either
through maturity or rate adjustment. The "gap" is the different between the
amounts of such liabilities maturing or otherwise repricing within that period
which exceeds the amount of interest-earning assets maturity or otherwise
repricing within the same period. Accordingly, in a declining interest rate
environment, an institution with a negative gap would generally be expected,
absent the effects of other factors, to experience a lower decease in the yield
of its assets relative to the cost of its liabilities and its income should be
positively affected. Conversely, the cost of funds for an institution with a
negative gap would generally be expected to increase more quickly than the yield
on its assets in a rising interest rate environment, and such institution's net
interest income generally would be expected to be adversely affected by rising
interest rates. Changes in interest rates generally have the opposite effect on
an institution with a "positive gap."
The Bank's one year interest sensitivity gap as a percentage of total
interest-earning assets at December 31, 1997 was a negative 41.01%. At December
31, 1997 the Bank's three year and five-year
34
<PAGE>
cumulative interest sensitivity gaps as a percentage of total interest-earning
assets were negative 39.00% and negative 32.49%, respectively.
The following table sets forth the amounts of interest-earning assets
and interest-bearing liabilities outstanding at December 31, 1997 which are
projected to reprice or mature in each of the future time periods shown. Except
as stated below, the amounts of assets and liabilities shown which reprice or
mature within a particular period were determined in accordance with the
contractual terms of the assets or liability. Loans with adjustable rates are
shown as being due at the end of the next upcoming adjustment period. Passbook
accounts, money market deposit accounts or other transaction accounts are
assumed to be subject to immediate repricing and depositor availability and have
been placed in the shortest period. In making the gap computations, none of the
assumptions sometimes made regarding prepayments rates and deposit decay rates
have been used for any other interest-earning assets or interest-bearing
liabilities. In addition, the table does not reflect scheduled principal
payments which will be received throughout the lives of the loans. The interest
rate sensitivity of the Bank's assets and liabilities illustrated in the
following table would vary substantially if different assumptions were used or
if actual experience differed from that indicated by such assumptions.
<TABLE>
<CAPTION>
Terms to Repricing at December 31, 1997
-------------------------------------------------------------------------------
Six Six More Than More Than
Months Months to 1 Years to 3 Years to More than
or Less 1 Year 3 Years 5 Years 5 Years Total
------- --------- ---------- ---------- --------- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans receivable:
Adjustable rate residential 1-4 family $ 60 $ -- $ -- $ --- $ -- $ 60
Fixed rate residential 1-4 family 194 68 345 1,197 8,727 10,531
Other secured real estate - fixed -- 44 -- 78 633 755
Other loans 77 -- -- -- -- 77
Interest-bearing deposits 5,290 -- -- -- -- 5,290
Investments 1,630 -- 1,000 41 692 3,363
FHLB common stock -- -- -- -- 143 143
--------- --------- --------- --------- -------- --------
Total interest-earning assets $ 7,251 $ 112 $ 1,345 $ 1,316 $ 10,195 $ 20,219
========= ========= ========= ========= ======== ========
INTEREST-BEARING LIABILITIES:
Deposits:
Passbook and statement accounts 3,585 -- -- -- -- 3,585
Money market deposit accounts 101 -- -- -- -- 101
Certificates of deposit 5,833 6,135 940 -- -- 12,908
--------- --------- --------- --------- -------- --------
Total interest-bearing liabilities $ 9,519 $ 6,135 $ 940 $ -- $ -- $ 16,594
========= ========= ========= ========= ======== ========
INTEREST SENSITIVITY GAP PER PERIOD (2,268) (6,023) 405 1,316 10,195 3,625
CUMULATIVE INTEREST SENSITIVITY GAP (2,268) (8,291) (7,886) (6,570) 3,625 3,625
CUMULATIVE GAP AS A PERCENTAGE OF
TOTAL INTEREST-EARNING ASSETS (11.21)% (41.01)% (39.00)% (32.49)% 17.93% 17.93%
CUMULATIVE INTEREST-EARNING ASSETS
AS A PERCENTAGE OF INTEREST-BEARING 76.17% 47.03% 52.48% 60.41% 121.85% 121.85%
LIABILITIES
</TABLE>
35
<PAGE>
Computations of prospective effects of hypothetical interest rate
changes are based on numerous assumptions, including relative levels of market
interest rates, loan prepayments and deposit decay, and should not be relied
upon as indicative of actual results. Further, the computations do not reflect
any actions management may undertake in response to changes in interest rates.
Certain shortcomings are inherent in the method of analysis presented
in both the NPV and net interest income computations and in the gap computations
presented in the tables above. Although certain assets and liabilities may have
similar maturities or periods within which they will reprice, they may react
differently to changes in market interest rates. The interest rates on certain
types of assets and liabilities may fluctuate in advance of changes in market
interest rates, while interest rates on other types may lag behind changes in
market rates. Additionally, adjustable-rate mortgages have interest rate caps
which restrict changes in interest rates on a short-term basis and over the life
of the assets. Further, in the event of a change in interest rates, prepayment
and early withdrawal levels would likely deviate significantly from those
assumed in the tables. Finally, the ability of many borrowers to service their
adjustable-rate debt may decrease in the event of a sustained interest rate
increase.
The Bank's net income during recent periods has been positively
impacted by decreasing interest rates, and its net income in the near future is
likely to be reduced if interest rates increase. However, management did not
view the Bank's interest rate sensitivity position at December 31, 1997 to be
unacceptable in view of the Bank's historical results of operations and highly
capitalized position.
The Bank does not originate its loans for sale, or sell its loans, in
the secondary market. This tends to increase its exposure to interest rate risk.
Net Interest Income
Net interest income represents the difference between income derived
from interest-earning assets and interest expense incurred on interest-bearing
liabilities. Net interest income is affected by both (i) the difference between
the rates of interest earned on interest-earning assets and the rates paid on
interest-bearing liabilities ("interest rate spread") and (ii) the relative
amounts of interest-earning assets and interest-bearing liabilities ("net
earning balance"). The following table sets forth information relating to
average balances of the Bank's assets and liabilities for the six months ended
December 31, 1997 and 1996 and for the years ended June 30, 1997 and 1996. For
the periods indicated, the table reflects the average yield on interest-earning
assets and the average cost of interest-bearing liabilities (derived by dividing
income or expense by the monthly average balance of interest-earning assets or
interest-bearing liabilities, respectively) as well as the net yield on
interest-earning assets (which reflects the impact of the net earning balance).
36
<PAGE>
<TABLE>
<CAPTION>
For the Six Months Ended December 31,
At ----------------------------------------------------------------------
December 31,
1997/(1)/ 1997 1996
------------ --------------------------------- ---------------------------------
Average Average Average
Yield/ Average Yield/ Average Yield/
Balance Rate Balance Interest Rate/(2)/ Balance Interest Rate/(2)/
------- ---- ------- -------- --------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Interest-earning deposits $5,290 5.48% $5,335 $150 5.62% $5,032 $137 5.45%
Investments/(3)/ 3,504 6.19% 3,059 93 6.08% 3,686 111 6.02%
---
Loans/(4)/ 11,323 7.84% 11,558 475 8.24% 11,842 495 8.36%
--- ------- ---- ------- ---- ------- ----
Total interest-earning assets 20,117 6.94% 19,952 718 7.21% 20,560 743 7.23%
---- ----
Other Assets 606 744 633
------- ------- -------
Total Assets $20,723 $20,696 $21,193
======= ======= =======
Interest-bearing liabilities:
Deposits $16,655 4.92% $16,567 411 4.96% $17,243 419 4.86%
Other Liabilities 209 301 313
Retained Earnings 3,859 3,828 3,637
------- ------- -------
Total liabilities and retained
earnings $20,723 $20,696 $21,193
======= ======= =======
Net interest income and interest
rate spread/(5)/ 2.02% $307 2.25% $324 2.37%
==== ====
Net yield on interest-earning 3.09% 3.15%
assets/(6)/
Ratio of interest-earning assets
to interest-bearing liabilities 120.00% 119.00%
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended June 30,
--------------------------------------------------------------------
1997 1996
--------------------------------- ------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Interest-earning deposits $4,783 $263 5.50% $4,218 $242 5.74%
Investments/(3)/ 3,635 215 5.91% 4,675 285 6.10%
---
Loans/(4)/ 11,771 963 8.18% 12,145 1,032 8.50%
--- ------- ----- ------- -----
Total interest-earning assets 20,189 1,441 7.14% 21,038 1,559 7.41%
----- -----
Other Assets 731 539
------- -------
Total Assets $20,920 $21,577
======= =======
Interest-bearing liabilities:
Deposits $16,899 819 4.85% $17,796 894 5.02%
Other Liabilities 296 249
Retained Earnings 3,725 3,532
------- -------
Total liabilities and retained
earnings $20,920 $21,577
======= =======
Net interest income and interest
rate spread/(5)/ $622 2.29% $665 2.39%
==== ====
Net yield on interest-earning 3.15% 3.16%
assets/(6)/
Ratio of interest-earning assets
to interest-bearing liabilities 119.00% 118.00%
</TABLE>
- ---------------------------------------------------
(1) The weighted average rate represents the coupon associated with each asset
and liability, weighted by the principle balance associated with each asset
and liability.
(2) Average yield/rate for the six months ended December 31,
1997 and 1996.
(3) Includes investment securities and FHLB of Atlanta common stock.
(4) Loans placed on nonperforming status have been included in the computation
of average balances.
(5) Interest rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(6) Net yield on interest-earning assets represents net interest income divided
by average interest-earning assets.
37
<PAGE>
Rate/Volume Analysis
The following table analyzes the dollar amount of changes in interest
income and interest expense for major components of interest-earning assets and
interest-bearing liabilities. The table distinguishes between (i) changes
attributable to volume (changes in volume multiplied by the prior period's
rate), (ii) changes attributable to rate (changes in rate multiplied by the
prior period's volume), and (iii) net change (the sum of the previous columns).
The change attributable to both rate and volume (changes in rate multiplied by
changes in volume) has been allocated equally to both the changes attributable
to volume and the changes attributable to rate.
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30,
December 31, 1997 vs. 1996
-----------------------
1997 vs. 1996
-----------------------
Increase (Decrease) Increase (Decrease)
------------------- -------------------
Attributable to Attributable to
--------------- ---------------
Volume Rate Total Volume Rate Total
------ ---- ----- ------ ---- -----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest income on:
Interest-earning balances 9 4 13 32 (10) 22
Investments (19) 1 (18) (62) (8) (70)
Loans (12) (7) (19) (32) (38) (70)
---- ---- ------ ---- ---- ----
Total interest income (22) (2) (24) (62) (56) (118)
Interest expense:
Deposits (16) 8 (8) (45) (30) (75)
------ --- ----- ------ ------ ------
Net interest income (6) (10) (16) (17) (26) (43)
-------- ------- ------- ------- ------- ------
</TABLE>
Comparison of Financial Condition
Total assets of the Bank amounted to $20.73 million at December 31,
1997, compared to $20.72 million at June 31, 1997 and $21.45 million at June 30,
1996. The decline from June 30, 1996 to December 31, 1997 is primarily
attributed to the decrease in investments and loans receivable.
The principal category of earnings assets is loans receivable which
amounted to $11.32 million, $11.42 million and $11.57 million at December 31,
1997, June 30, 1997 and 1996, respectively. Loan originations for the six months
ended December 31, 1997 total $1.03 million and were funded by loan principal
repayments of $1.14 million as the loan portfolio decreased by $100,000. Loan
originations for the year ended June 30, 1997 totaled $1.90 million and
principal repayments for 1997 totaled $2.05 million. The Bank experience a net
decrease in the loan portfolio of $149,000 over 1996. Management believes
competitive rates within its community contributed to the decreased loan demand
in 1997. The Bank
38
<PAGE>
maintains underwriting and credit standards designed to maintain the quality of
the loan portfolio. Nonperforming loans at December 31, 1997, June 30, 1997 and
1996 totaled $312,000, $240,000 and $198,000, respectively and were 2.76%, 2.10%
and 1.71% of total loans, respectively.
In addition to loans, the Bank invests in U.S. Treasury and Government
agency securities. Management does not engage in the practice of trading
securities, rather, Anson's investment portfolio consists primarily of
investments designated and held to maturity. Investment securities, including
interest-bearing deposits and FHLB stock, at December 31, 1997, June 30, 1997
and 1996 totaled $8.79 million, $8.70 million and $9.12 million, respectively.
The decline in investments and loans is primarily attributed to the decline in
deposits.
The Bank has experienced some decline in savings deposits. At December
31, 1997 and June 30, 1997, the Bank's deposits decreased $135,000 and $832,000
to $16.66 million and $16.79 million, respectively. The Bank has priced its
deposits in a fashion to be at or near the top of the market because of its
dependence on the local market for funds availability.
The Bank's equity, which consists entirely of retained earnings and
unrealized gains on securities available for sale, net of tax, amounted to $3.86
million, $3.76 million and $3.62 million at December 31, 1997, June 30, 1997 and
1996, respectively. The Bank has classified a portion if its investments as
available for sale which requires reporting such investments at market with
unrealized gains or losses, net of tax, shown as a separate component of equity.
The equity component for net unrealized gains (losses) at December 31, 1997,
June 30, 1997 and 1996 amounted to $244,000, $204,000 and $119,000,
respectively.
Comparison of Results of Operations for the Six Months Ended December 31, 1997
and 1996
Net Income. The Bank's net income for the six months ended December 31,
1997 and 1996 was $62,000 and $(20,000) loss, respectively. Net income was
positively affected in 1997 by an overall sustained downward trend in interest
rates. Net income was negatively affected for the six months ended December 31,
1996 by a one-time charge of $114,000 related to a one-time assessment of
deposit insurance premiums by the United States Government. See "Insurance
Premium Surcharge". Exclusive of the one-time assessment for insurance premiums,
net income for the six months ended December 31, 1997 and 1996 would have been
approximately $62,000 and $71,000, respectively. Net interest income has
declined in conjunction with the decrease in interest earning assets and
liabilities.
Net Interest Income. Net interest income has decreased 5% to $306,000
for the six months ended December 31, 1997 from $324,000 for the six months
ended December 31, 1996. This general decline in net interest income reflects
the decrease in both loans receivable and deposits and the downward trend in
interest rate spread.
Provisions for Loan Losses. The provision for loan losses was $0 and
$500 for the six months ended December 31, 1997 and 1996, respectively. The
provisions and the resulting loan loss allowances are amounts management
believes will be adequate to absorb possible losses on existing loans. At
December 31, 1997 and 1996, the Bank's loan loss allowances totaled $100,000 and
$95,500, respectively, representing 32% and 36%, respectively, of nonperforming
loans at such dates. Loans are charged off against the allowance when management
believes collectibility is unlikely, although management continues to actively
pursue collection of loans which have been charged off. Management decisions
regarding the provisions and resulting allowance are based both on prior loan
loss experience and other factors, such as existing loan
39
<PAGE>
levels and types of loans outstanding, nonperforming loans, industry standards
and general economic conditions. The Bank experienced no loan charge-offs during
the six months ended December 31, 1997 and 1996.
Noninterest Income. Noninterest income consists primarily of fees
related to safe deposit boxes and other miscellaneous items and amounted to
$4,000 and $1,000 for the six months ended December 31, 1997 and 1996,
respectively.
Noninterest Expense. Noninterest expense consisted primarily of
operating expenses for compensation and employee benefits, occupancy, federal
deposit insurance premiums, data processing charges and other operating
expenses. Noninterest expense decreased to $232,000 from $349,000 for the six
months ended December 31, 1997 and 1996. Exclusive of the impact of a one-time
insurance premium surcharge in December, 1996, see "Insurance Premium
Surcharge", noninterest expense decreased from $235,000 to $232,000 for the six
months ended December 31, 1996 to the six months ended December 31, 1997. The
Bank anticipates that its noninterest expense may increase in the future because
of costs associated with funding the MRP with operating as a publicly held
company and with purchasing the computer equipment necessary for year 2000
compliance. See "MANAGEMENT OF THE BANK -- Proposed Management Recognition Plan"
and "RISK FACTORS -- Possible Year 2000 Computer Problems; Impact of
Technological Advances".
Income Taxes. Income tax expense (benefit) was $17,000 and $(4,000) for
the six month periods ended December 31, 1997 and 1996, respectively. The
fluctuations were primarily attributable to corresponding fluctuations in income
before income taxes.
Comparison of Results of Operations for the Years Ended June 30, 1997 and 1996
Net Income. The Bank's net income for the years ended June 30, 1997 and
1996 was $50,000 and $127,000, respectively. Net income was positively affected
in 1997 by an overall sustained downward trend in interest rates. Net income was
negatively affected for the year ended June 30, 1997 by a one-time charge of
$114,000 related to a one-time assessment of deposit insurance premiums by the
United States Government, see "Insurance Premium Surcharge". Exclusive of the
one-time assessment for insurance premiums, net income for years ended June 30,
1997 and 1996 would have been approximately $127,000 and $128,000, respectively.
Net Interest Income. Net interest income for the fiscal year ended June
30, 1997 decreased 6% from the fiscal year ended June 30, 1996 from $655,000 to
$623,000. This general decline in net interest income reflects the decrease in
both loans receivable and deposits and the downward trend in interest rate
spread.
Provision for Loan Losses. The provision for loan losses was $5,000 and
$7,000 for the years ended June 30, 1997 and 1996, respectively. For the years
ended June 30, 1997 and 1996, the Bank's loan loss allowances totaled $100,000
and $95,000, respectively, representing 42% and 48%, respectively, of
nonperforming loans at such dates. The Bank experienced no loan charge-offs
during the years ended June 30, 1997 and 1996.
40
<PAGE>
Noninterest Income. Noninterest income consists primarily of fees
related to safe deposit boxes and other miscellaneous items and amounted to
$6,000 and $2,000 for the years ended June 30, 1997 and 1996, respectively.
Noninterest Expense. Noninterest expense for the years ended June 30,
1997 and 1996 were $555,000 and $481,000, respectively. Exclusive of the impact
of a one-time insurance premium surcharge discussed above, general and
administrative expenses decreased from $481,000 to $441,000 for fiscal years
ended June 30, 1997 and June 30, 1996, respectively. This reduction is largely
due to a reduction in payroll and the related tax and fringe benefits.
Income Taxes. Income tax expense decreased to $19,000 in the fiscal
year ended June 30, 1997 from $52,000 in the fiscal year ended June 30, 1996.
The fluctuations were primarily attributable to corresponding fluctuations in
income before income taxes.
Insurance Premium Surcharge
A comprehensive continuing appropriations bill which was passed by the
United States Congress and signed by the President on September 30, 1996,
provided for a one-time assessment to recapitalized the Savings Association
Insurance Fund (SAIF). The assessment equaled 65.7 cents per each $100 of
insured domestic deposits and was payable in 1996. This assessment had the
effect of reducing the capital of the Bank by the amount of the assessment, net
of the income tax benefit. The assessment was $114,000 before income taxes and
was accrued as an expense during the quarter ended September 30, 1996. As a
result of this expense, the Bank experienced a net loss for that fiscal quarter
and the six months ended December 31, 1996. (See "SUPERVISION AND REGULATION --
Regulation of the Bank -- Insurance Deposit.")
Recapture of Bad Debts
Recently enacted federal legislation has repealed the reserve method of
accounting for thrift loan debt reserves and would require thrifts to recapture
into income over a six-year period their post-1987 additions to their excess bad
debt tax reserves, thereby generating additional tax liability. At December 31,
1997, the Bank had no material post-1987 excess reserves.
Impact of Inflation and Changing Prices
The Financial Statements and Notes thereto presented herein have been
prepared in accordance with generally accepting accounting principles, which
require the measurement of financial position and operating results in terms of
historical dollars without considering the change in the relative purchasing
power of money over time and due to inflation. The impact of inflation is
reflected in the increased cost of the Bank's operations. Unlike most industrial
companies, nearly all the assets and liabilities of the Bank are monetary in
nature. As a result, interest rates have a greater impact on the Bank's
performance than do the effects of general levels of inflation. Interest rates
do not necessarily move in the same direction or to the same extent as the price
of goods and services.
Impact of New Accounting Standards
The FASB has issued SFAS No. 123, Accounting for Stock-Based
Compensation, which the Bank has not been required to adopt as of December 31,
1997.
41
<PAGE>
The Statement, which will be in effect for the Bank's fiscal year
ending June 30, 1998, will require that an entity account for stock based
compensation plans using a fair value based method which measures compensation
cost at the grant date based upon the value of the award, which is then
recognized over the service period, usually the vesting period. The accounting
requirements of the Statement apply to grants of awards entered into in fiscal
years that begin after December 15, 1995. The Statement allows entities to
continue to use APB Opinion No. 25 to measure compensation cost, but requires
that the pro forma effects on net income and earnings per share be disclosed to
reflect the difference between the compensation cost, if any, from applying APB
Opinion No. 25 and the related cost measured by the fair value method defined in
the Statement. The Statement is not expected to have a material effect on the
Bank's financial statements, should the Bank elect to adopt a restricted stock
plan subsequent to conversion to the stock form, because management is expected
to elect to continue to use the accounting and reporting permitted by APB
Opinion No. 25 and will disclose the differences, if any, in notes to the
financial statements as pro forma effects of not utilizing the fair value method
prescribed in SFAS No. 123.
In February, 1997 the FASB issued SFAS No. 129, "Disclosure of
Information about Capital Structure", which is effective for financial
statements for periods ending after December 31, 1997. This statement applies to
both public and nonpublic entities. The Bank anticipates that adoption of this
statement will not have a material effect on the Bank.
In June, 1997 the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", which establishes standards for reporting and display of comprehensive
income and its components in a full set for general financial statements. Under
this statement, enterprises are required to classify items of "other
comprehensive income" by their nature in the financial statements and display
the balance of other comprehensive income separate in the equity section of a
statement of financial position. Statement 130 is effective for both interim and
annual periods beginning after December 15, 1997. Comparative financial
statements provided for earlier periods are required to be reclassified to
reflect the provisions of the statement. It is not anticipated the adoption of
this statement will materially effect the Bank's current method of financial
reporting.
Also in June, 1997 the FASB issued SFAS No. 131, "Disclosure about
Segments of an Enterprise and Related Information". This statement establishes
standards for the way public enterprises are to report information about
operating segments in annual financial statements and requires those enterprises
to report selected information about operating segments in interim financial
reports issued to shareholders. Statement 131 is effective for financial
statements for period beginning after December 15, 1997. In the initial year of
application, comparative information for earlier years is to be restated unless
it is impractical to do so. It is not anticipated that the adoption of this
statement will materially effect the Bank's current method of financial
reporting.
BUSINESS OF THE COMPANY
Prior to the Conversion, the Company will not transact any material
business. Following the Conversion, in addition to directing, planning and
coordinating the business activities of the Bank, the Company will invest the
proceeds of the Conversion which are retained by it. See "USE OF PROCEEDS." Upon
consummation of the Conversion, the Company will have no significant assets
other than the shares of the Bank's capital stock acquired in the Conversion and
that portion of the net proceeds of the Conversion retained by it, and it will
have no significant liabilities. Cash flow to the Company will be dependent upon
42
<PAGE>
investment earnings from the net proceeds retained by it and any dividends
received from the Bank. Initially, the Company will neither own nor lease any
property, but will instead use the premises, equipment and furniture of the
Bank. At the present time, the Company does not intend to employ any persons
other than its officers (who are not anticipated to be separately compensated by
the Company), but will utilize the support staff of the Bank from time to time.
Additional employees will be hired as appropriate to the extent the Company
expands its business in the future. In the future, the Company may consider
using some of the proceeds of the Conversion retained by it to expand its
operations in its existing primary market and other nearby areas by acquiring
other financial institutions or their branches. The Company has no current plans
with respect to any such acquisitions, however. Existing management of the
Company believes that it is in the best interest of the Company and its
shareholders for the Company to remain an independent company.
BUSINESS OF THE BANK
General
The Bank is engaged primarily in the business of attracting deposits
from the general public and using such deposits to make mortgage loans secured
by real estate. The Bank makes one-to-four-family residential real estate loans,
loans secured by nonresidential real property, and construction loans. The Bank
also makes loans which are not secured by real property, such as loans secured
by pledged deposit accounts. The Bank's primary source of revenue is interest
income from its lending activities. The Bank's other major sources of revenue
are interest and dividend income from investments, interest income from its
interest-earning deposit balances in other depository institutions, and
transaction and fee income from its lending and deposit activities. The major
expenses of the Bank are interest on deposits and general and administrative
expenses such as employee compensation and benefits, federal deposit insurance
premiums, data processing expenses and occupancy expenses.
As a North Carolina chartered savings bank, the Bank is subject to
examination and regulation by the FDIC and the Administrator. Upon consummation
of the Conversion, the Bank, as a subsidiary of the Company, will be subject to
indirect regulation by the Federal Reserve. The business and regulation of the
Bank are subject to legislative and regulatory changes from time to time. See
"SUPERVISION AND REGULATION -- Regulation of the Bank."
Market Area
The Bank's primary market area is Anson County, North Carolina. The
Bank also makes loans to residents of Union, Stanley and Mecklenburg counties in
North Carolina from time to time. Anson County is rural with a population of
24,309 located on the North Carolina/South Carolina border and Wadesboro is
located 50 miles east of Charlotte, North Carolina.
Employment in the Bank's primary market area is diversified among
manufacturing, mining, agriculture, retail and wholesale trade, government and
service. Other non-manufacturing employers include the county government, school
systems and the county hospital.
In recent years unemployment rates in Anson County have been high,
averaging 9.2% in 1995. But a steady increase in employment over the last year
resulted in an average yearly employment of 7.5% through September 1996.
However, this rate is still above that of North Carolina and national averages.
Comparative data indicates that income levels in Anson County are below the
North Carolina and the national average for
43
<PAGE>
1997. From 1990-1994, population in Anson County increased by 1.6% which was
below the national and North Carolina averages. Management regards Anson County
as a low-growth area in which there is significant competition among financial
service providers for market shares. Due primarily of the economic factors
discussed above, the Bank has limited residential mortgage lending opportunities
in its local market area and does not anticipate that residential mortgage
lending opportunities will increase in the future because of lack of growth in
the local economy. See "BUSINESS OF THE BANK -- Competition." Management
believes that opportunities for future earnings growth in the Bank's primary
market area are limited in light of these factors. In addition, lower income
levels and low rates of growth in Anson County could result in an increase in
the number of delinquent or nonperforming loans and reduce the value of the
collateral securing such loans, adversely affecting the Bank's financial
condition and results of operations. See "RISK FACTORS -- Risks Associated with
Anson's Primary Market Area; Limited Lending Opportunities; Competition".
Lending Activities
General. The Bank's primary source of revenue is interest and fee
income from its lending activities, consisting primarily of mortgage loans for
the purchase or refinancing of one-to-four-family residential real property
located in its primary market area. The Bank also makes loans secured by
multi-family and nonresidential properties, construction loans, and loans
secured by pledged deposit accounts. Less than 1.0% of the Bank's loan
portfolio, before net items, is not secured by real estate. On December 31,
1997, the Bank's largest single outstanding loan had a balance of approximately
$265,000. In addition to interest earned on loans, the Bank receives fees in
connection with loan originations, loan modifications, late payments, loan
assumptions and other miscellaneous services. The Bank generally does not sell
its loans; loans are originated with the intention that they will be held in the
Bank's loan portfolio. The Bank also originates mortgage loans with a call
feature that varies from five to 15 years, enabling the Bank to call the loan
and increase the interest rate from the original fixed contractual rate.
Interest on such loans is amortized over the contractual life of the loan. For
purposes of the discussion and in the tables that follow, such loans with call
provisions are shown as fixed rate loans maturing at the date of the call
provisions.
Loan Portfolio Composition. The Bank's net loan portfolio totaled
approximately $11.3 million at December 31, 1997 representing 54.6% of the
Bank's total assets at such date. At December 31, 1997, 95.8% of the Bank's loan
portfolio, before net items, was composed of one-to-four-family residential
mortgage loans. Nonresidential real estate loans represented 4.27% of the Bank's
loan portfolio, before net items, on such date. Construction loans represented
3.23% of the Bank's loan portfolio, before net items, on such date. As of
December 31, 1997, 0.05% of the loans in the Bank's loan portfolio, before net
items, had adjustable interest rates.
The following table sets forth the composition of the Bank's loan
portfolio by type of loan at the dates indicated.
44
<PAGE>
<TABLE>
<CAPTION>
At December 31, At June 30,
----------------------------------------- -----------------------------------------
1997 1996 1997 1996
------------------ ---------------- ------------------- -----------------
% of % of % of % of
Amount Total Amount Total Amount Total Amount Total
------ ----- ------ ----- ------ ----- ------ -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate loans:
One-to-four-family residential $10,857 95.88% $11,295 96.29% $10,888 95.32% $11,241 97.14%
Nonresidential 483 4.27 375 3.20 543 4.75 400 3.46
Construction 366 3.23 319 2.72 349 3.06 199 1.72
--- ---- --- ---- --- ------- --- ----
Total real estate loans 11,706 103.38 11,989 102.21 11,780 103.13 11,840 102.32
Other loans:
Loans secured by deposits 77 .68 45 .38 75 .66 46 .40
-- --- -- --- -- --- -- ---
Total other loans 77 .68 45 .38 75 .66 46 .40
-- --- -- --- -- --- -- ---
Total loans 11,783 104.06 12,034 102.59 11,855 103.79 11,886 102.72
Less:
Allowance for loan losses 100 .88 95 .81 100 .88 95 .82
Undisbursed portion of construction loans 319 2.82 164 1.40 288 2.52 174 1.50
Net deferred loan origination fees 41 .36 45 .38 44 .39 46 .40
-- --- -- --- -- --- -- ---
Total reductions 460 4.06 304 2.59 432 3.79 315 2.72
--- ---- --- ---- --- ---- --- ----
Total loans receivable, net $11,323 100.00% $11,730 100.00% $11,423 100.00% $11,571 100.00%
======= ====== ======= ====== ======= ====== ======= ======
</TABLE>
45
<PAGE>
The following table sets forth the time to contractual maturity of the
Bank's loan portfolio at December 31, 1997. Loans which have adjustable rates
are shown as being due in the period during which rates are next subject to
change, while fixed rate and other loans are shown as due in the period of
contractual maturity. Demand loans, loans having no stated maturity and
overdrafts are reported as due in one year or less. The table does not include
prepayments or scheduled principal repayments. Amounts in the table are net of
loans in process and are net of unamortized loan fees.
<TABLE>
<CAPTION>
At December 31, 1997
-----------------------------------------------------------------------
More Than More Than
1 Year 1 Year to 3 Years to More Than
or Less 3 Years 5 Years 5 Years Total
------- --------- --------- ------- -----
(In Thousands)
<S> <C> <C> <C> <C> <C>
TOTAL LOANS:
- -----------
Real estate loans:
Adjustable rate residential 1-4 family $60 $ -- $ -- $ -- $60
Fixed rate residential 1-4 family 262 345 1,197 8,727 10,531
Other real estate loans - fixed 44 -- 78 633 755
Other loans 77 -- -- -- 77
---- ---- ----- ----- ------
Total 443 345 1,275 9,360 11,423
Less:
Allowance for loan losses (100) -- -- -- (100)
---- ---- ----- ----- ------
Totals $343 $345 $1,275 $9,360 $11,323
==== ==== ===== ===== ======
</TABLE>
The following table sets forth the dollar amount at December 31, 1997
of all loans maturing or repricing on or after December 31, 1998 which have
fixed or adjustable interest rates.
<TABLE>
<CAPTION>
Fixed Adjustable
Rates Rates
----- ----------
(In Thousands)
<S> <C> <C>
Real estate loans $10,980 $ --
Other loans -- --
------- -----
$10,980 $ --
======= =====
</TABLE>
Origination and Sale of Loans. The Bank generally does not originate
its one-to-four-family residential mortgage or other loans with the intention
that they will be sold in the secondary market. Although the Bank believes that
many of its one-to-four-family residential loans could be sold to investors,
some of such loans could be sold only after the Bank incurred certain costs
and/or discounted the purchase price. As a result, with respect to potential
private sales of whole loans, the Bank's loan portfolio may be less valuable
than would be the case if it was composed entirely of loans originated in
conformity with secondary market requirements.
46
<PAGE>
The table below sets forth the Bank's loan origination, purchase and
sale activity and loan portfolio repayment experience during the periods
indicated.
<TABLE>
<CAPTION>
Six Months Ended
December 31, Year Ended June 30,
---------------------- --------------------
1997 1996 1997 1996
---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C>
Loans receivable, net, beginning of period $11,423 $11,572 $11,572 $11,910
Loan originations:
Residential 1-4 family 839 776 1,365 1,619
Nonresidential real estate -- -- -- 67
Residential construction 171 264 486 253
Loans secured by deposits 22 8 53 69
------- ------- ------- -------
Total loan originations 1,032 1,048 1,904 2,008
Loans purchased -- -- -- --
Principal repayments (1,135) (892) (2,051) (2,342)
Other changes, net /(1)/ 3 2 (2) (4)
------- ------- ------- -------
Increase (decrease) in loans receivable (100) (149) (149) (338)
------- ------- ------- -------
Loans receivable, net, end of period $ 11,323 $ 11,423 $ 11,423 $ 11,572
======= ======= ======= =======
</TABLE>
--------------------
(1) Includes changes in deferred loan fees and the allowance for loan
losses.
One-to-Four-Family Residential Real Estate Lending. The Bank's primary
lending activity, which it intends to continue to emphasize, is the origination
of fixed and adjustable rate first mortgage loans to enable borrowers to
purchase or refinance one-to-four-family residential real property. Consistent
with the Bank's emphasis on being a community-oriented financial institution, it
is and has been the Bank's strategy to focus its lending efforts in its primary
market area. On December 31, 1997, approximately 95.9% of the Bank's real estate
loan portfolio, before net items, consisted of one-to-four-family residential
real estate loans. These include both loans secured by detached single-family
residences and condominiums and loans secured by housing containing not more
than four separate dwelling units. Of such loan amounts, less than one percent
had adjustable interest rates.
The Bank does not originate its one-to-four-family loans with the
intention that they will be sold in the secondary market. The Bank generally
originates loans satisfying its underwriting requirements which are tailored for
its local community but which may not satisfy various requirements imposed by
FHLMC or FNMA. For example, the Bank may not require title insurance and may not
obtain all the loan documentation normally required by FHLMC and FNMA. As a
result, to the extent such loans are sold in the secondary market, they may not
be sold on terms as favorable as those originated in conformity with secondary
market requirements. In addition, loans which are not originated in conformity
with the purchase requirements of
47
<PAGE>
FHLMC and FNMA, or nonconforming loans, are generally thought to have greater
risks of default and nonperformance; however, the Bank has not experienced a
higher level of nonperformance with its nonconforming loans. These loans satisfy
a need in the Bank's local community and generally produce a higher yield than
would be produced by conforming loans. The Bank plans to continue its practice
of originating primarily nonconforming loans.
The Bank originates conventional mortgage loans secured by owner
occupied property in amounts of up to 95% of the value of the property. Private
mortgage insurance is generally required if the loan amount exceeds 80% of the
value of the property. The loans have both fixed and adjustable rates. The
maximum term for fixed and adjustable rate loans is 30 years. The interest rates
on adjustable rate loans are generally adjustable every year and are tied to the
one-year United States treasury bill rate. The loans have rate caps which limit
the amount of changes at the time of each adjustment and over the lives of the
loans. The Bank offers loans which require monthly payments.
Adjustable rate loans are generally considered to involve a greater
degree of credit risk than fixed rate loans because borrowers may have
difficulty meeting their payment obligations if interest rates and required
payment amounts increase substantially. Substantially all of the fixed-rate
loans in the Bank's mortgage loan portfolio have due on sale provisions allowing
the Bank to declare the unpaid balance due and payable in full upon the sale or
transfer of an interest in the property securing the loan.
While one-to-four-family residential loans are normally originated for
between 15 to 25 year terms, such loans customarily remain outstanding for
shorter periods because borrowers often prepay their loans in full upon sale of
the property pledged as security or upon refinancing the original loan. Thus,
average loan maturity is a function of, among other factors, the level of
purchase and sale activity in the real estate market, prevailing interest rates,
and the interest rates payable on outstanding loans.
The Bank generally does not require title insurance for its
one-to-four-family residential loans but does require an attorney's opinion of
title. The Bank also generally requires that fire and extended coverage casualty
insurance (and, if appropriate, flood insurance) be maintained in an amount at
least equal to the loan amount or replacement cost of the improvements on the
property securing the loans, whichever is greater.
Nonresidential Real Estate Lending. On December 31, 1997, the Bank had
$483,000 outstanding in loans secured by nonresidential properties, comprising
approximately 4.3% of its loan portfolio, before net items, as of that date.
These loans are secured by office, retail and church properties. These loans
generally do not exceed 80% of the appraised value of the real estate securing
the loans. Nonresidential real estate loans have terms of up to 15 years. See
"-- One-to-Four-Family Residential Real Estate Lending."
The Bank requires title insurance or an attorney's opinion in
connection with its nonresidential real estate loans. The Bank also requires
that fire and extended coverage casualty insurance (and, if appropriate, flood
insurance) be maintained in an amount at least equal to the loan amount or the
replacement cost of the improvements on the property securing the loans,
whichever is greater.
Loans secured by nonresidential real estate generally are larger than
one-to-four-family residential loans and involve greater concentration of assets
and a greater degree of risk. Payments on these loans depend to a large degree
on results of operations and management of the properties and may be affected to
a greater extent by adverse conditions in the real estate market or the economy
in general. Since commercial lending is frequently secured by leased or
operating commercial properties, repayment frequently depends upon the results
of operations of the tenant or operating entity. Nonresidential loans also
generally involve more
48
<PAGE>
specialized and complicated underwriting decisions than one-to-four-family
residential real estate lending. The Bank intends to continue to make
nonresidential real estate loans.
Construction Lending. The Bank makes construction loans for the
construction of single-family dwellings, and for the construction of
multi-family and commercial buildings. The aggregate outstanding balance of such
loans on December 31, 1997 was approximately $366,000, representing
approximately 3.2% of the Bank's loan portfolio, before net items, and included
construction loans in process of approximately $319,000. Some of these loans
were made to persons who are constructing properties for the purpose of
occupying them; others were made to builders who were constructing properties
for sale. Construction loans are "construction-permanent" loans which generally
provide for the payment of interest only during a construction period, after
which the loans convert to a permanent loan at fixed or adjustable interest
rates having terms similar to one-to-four-family residential loans.
Construction loans for one-to-four-family real estate to be occupied by
the borrower may have a maximum loan-to-value ratio of 95% of the appraised
value of the property with private mortgage insurance. Other construction loans
are made at loan to value ratios of up to 80%. Title insurance or an attorney's
opinion is generally required for construction loans. In addition, the Bank
generally requires builders risk or casualty insurance (and, if appropriate,
flood insurance) on such loans.
Loans Secured by Deposits. The Bank also offers loans secured by
deposit accounts. At December 31, 1997, such loans totaled $77,000, representing
0.68% of the Bank's loan portfolio, before net items. The interest rates on
these loans are variable and are generally 2% above the interest rate being paid
on the deposit account serving as collateral. The maximum amounts of these loans
is generally 90% of the related deposit account.
Loan Solicitation, Processing and Underwriting. Loan originations are
derived from a number of sources such as referrals from real estate brokers,
present depositors and borrowers, builders, attorneys, walk-in customers and in
some instances, other lenders.
During its loan approval process, the Bank assesses the applicant's
ability to make principal and interest payments on the loan and the value of the
property securing the loan. The Bank obtains detailed written loan applications
to determine the borrower's ability to repay and verifies responses on the loan
application through the use of credit reports, financial statements, and other
confirmations. Under current practice, the responsible officer or loan officer
of the Bank analyzes the loan application and the property involved, and an
appraiser inspects and appraises the property. The Bank generally requires
independent fee appraisals on all loans in excess originated primarily on the
basis of real estate collateral. The Bank also obtains information concerning
the income, financial condition, employment and the credit history of the
applicant.
All real estate loans must be approved by the Bank's loan committee
which is made up of any three members of the Bank's board of directors. Loans
secured by deposits are approved by any two employees of the Bank, at least one
of which must be an officer.
Normally, upon approval of a residential mortgage loan application, the
Bank gives a commitment to the applicant that it will make the approved loan at
a stipulated rate any time within a 15-day period. The loan is typically funded
at such rate of interest and on other terms which are based on market conditions
existing as of the date of the commitment. As of December 31, 1997, the Bank had
$132,000 in such unfunded
49
<PAGE>
mortgage loan commitments. In addition, on such date the Bank had $319,000 in
undisbursed construction loans.
Interest Rates, Terms, Points and Fees. Interest rates and fees charged
on the Bank's loans are affected primarily by the market demand for loans,
competition, the supply of money available for lending purposes and the Bank's
cost of funds. These factors are affected by, among other things, general
economic conditions and the policies of the federal government, including the
Federal Reserve, tax policies and governmental budgetary matters.
In addition to earning interest on loans, the Bank receives fees in
connection with originating loans. Fees for loan modifications, late payments,
loan assumptions and other miscellaneous services in connection with loans are
also charged by the Bank.
Nonperforming Assets and Asset Classification. When a borrower fails to
make a required payment on a loan and does not cure the delinquency promptly,
the loan is classified as delinquent. In this event, the normal procedure
followed by the Bank is to make contact with the borrower at prescribed
intervals in an effort to bring the loan to a current status, and late charges
are assessed as allowed by law. In most cases, delinquencies are cured. If a
delinquency is not cured, the Bank normally, subject to any required prior
notice to the borrower, commences foreclosure proceedings. If the loan is not
reinstated within the time permitted for reinstatement, or the property is not
redeemed prior to sale, the property may be sold at a foreclosure sale. In
foreclosure sales, the Bank may acquire title to the property through
foreclosure, in which case the property so acquired is offered for sale and may
be financed by a loan involving terms more favorable to the borrower than those
normally offered. Any property acquired as a result of foreclosure or by deed in
lieu of foreclosure is classified as real estate owned until such time as it is
sold or otherwise disposed of by the Bank in an effort to recover its
investment. As of December 31, 1997, the Bank had no real estate acquired in
settlement of loans. Real estate acquired through, or in lieu of, loan
foreclosure is initially recorded at fair value at the date of foreclosure,
establishing a new cost basis. After foreclosure, valuations are periodically
performed by management, and the real estate is carried at the lower of cost or
fair value minus costs to sell. Costs relating to the development and
improvement of the property are capitalized, and costs relating to holding the
property are charged to expenses.
Interest on loans is recorded as borrowers' monthly payments become
due. Accrual of interest on loans continues until the Board of Directors decides
to institute foreclosure procedures.
The following table sets forth information with respect to
nonperforming assets identified by the Bank, including real estate owned at the
date indicated. At such dates, the Bank had no loans which were "troubled debt
restructurings", as defined in SFAS No. 15, Accounting by Debtors and Creditors
for Troubled Debt Restructurings.
<TABLE>
<CAPTION>
At December 31, At June 30,
------------------------------ -------------------------
1997 1996 1997 1996
------------- ------------ ---------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Accruing loans past due 90 days or more 312 268 240 198
---- ---- ---- ----
Total non-performing loans 312 268 240 198
Foreclosed real estate -- -- ---- ----
---- ---- ---- ----
Total nonperforming assets $312 $268 $240 $198
==== ==== ==== ====
Non-performing assets to total assets 1.51% 1.29% 1.16% 0.92%
==== ==== ==== ====
</TABLE>
50
<PAGE>
Applicable regulations require the Bank to "classify" its own assets on
a regular basis. In addition, in connection with examinations of savings
institutions, regulatory examiners have authority to identify problem assets
and, if appropriate, classify them. Problem assets are classified as
"substandard," "doubtful" or "loss," depending on the presence of certain
characteristics as discussed below.
An asset is considered "substandard" if not adequately protected by the
current net worth and paying capacity of the obligor or the collateral pledged,
if any. "Substandard" assets include those characterized by well-defined
weakness with possible risk of loss if the deficiency is not corrected. Assets
classified as "doubtful" have all of the weaknesses inherent in those classified
"substandard" with the added characteristic that the weaknesses present make
"collection or liquidation in full," on the basis of currently existing facts,
conditions, and values, "highly questionable." Assets classified "loss" are
those considered "uncollectible" and of such little value that their continuance
as assets without the establishment of a loss reserve is not warranted.
As of December 31, 1997, the Bank had approximately $312,000 of loans
internally classified as "substandard," no loans classified as "doubtful" and no
loans classified as "loss." Total classified loans as of June 30, 1997 and 1996
were approximately $240,000 and approximately $198,000, respectively.
When an insured institution classifies problem assets as either
substandard or doubtful, it is required to establish general allowances for loan
losses in an amount deemed prudent by management. These allowances represent
loss allowances which have been established to recognize the inherent risk
associated with lending activities and the risks associated with particular
problem assets. When an insured institution classifies problem assets as "loss,"
it charges off, or writes down the balance of, the asset. The Bank's
determination as to the classification of its assets and the amount of its
valuation allowances is subject to review by the FDIC and the Administrator
which can order the establishment of additional loss allowances.
The Bank also identifies assets which possess credit deficiencies or
potential weaknesses deserving close attention by management. These assets are
maintained on a "watch list" and do not yet warrant adverse classification. At
December 31, 1997, the Bank's watch list consisted of one loan with an aggregate
outstanding balance of approximately $43,000.
Allowance for Loan Losses. In originating loans, the Bank recognizes
that credit losses will be experienced and that the risk of loss will vary with,
among other things, the type of loan being made, the creditworthiness of the
borrower over the term of the loan and, in the case of a secured loan, the
quality of the security for the loan as well as general economic conditions. It
is management's policy to maintain an allowance for loan losses based on, among
other things, the Bank's historical loan loss experience, evaluation of economic
conditions and regular reviews of delinquencies and loan portfolio quality.
Specific allowances are provided for individual loans when ultimate collection
is considered questionable by management after reviewing the current status of
loans which are contractually past due and considering the net realizable value
of the security for the loans.
Management continues to actively monitor the Bank's asset quality, to
charge off loans against the allowance for loan losses when appropriate and to
provide specific loss reserves when necessary. Although management believes it
uses the best information available to make determinations with respect to the
allowance for loan losses, future adjustments may be necessary if economic
conditions differ substantially from the economic conditions in the assumptions
used in making the initial determinations.
51
<PAGE>
The following table describes the activity related to the Bank's
allowance for loan losses for the periods indicated.
<TABLE>
<CAPTION>
Six Months Ended
December 31, Year Ended June 30,
------------------ ---------------------
1997 1996 1997 1996
---- ---- ---- ----
(Dollars In Thousands)
<S> <C> <C> <C> <C>
Balance, beginning of period $100 $ 95 $ 95 $ 88
---- ---- ---- ----
Loans Charged off:
Real Estate -- -- -- --
Other -- -- -- --
------ ------ ------ ------
Total loans charged off -- -- -- --
Recoveries:
Real Estate -- -- -- --
Other -- -- -- --
------ ------ ------ ------
Net loans charged off (recovered) -- -- -- --
Provision for loan losses -- 1 5 7
------ ------ ------ ------
Balance at end of period $100 $ 96 $100 $ 95
==== ==== ==== ====
Ratio of net charge-offs (recoveries) to
average loans outstanding during the
period 0% 0% 0% 0%
== == == ==
</TABLE>
The following table sets forth the composition of the allowance for
loan losses by type of loan at the dates indicated. The allowance is allocated
to specific categories of loans for statistical purposes only, and may be
applied to loan losses incurred in any loan category.
52
<PAGE>
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------
1997 1996
------------------------------------- -----------------------------------
Percent of Amount Percent of Amount
Allowance of Loans Allowance of Loans
Amount of to Total to Gross Amount of to Total to Gross
Allowance Allowance Loans Allowance Allowance Loans
--------- ---------- -------- --------- ---------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Real estate loans:
Residential 1-4 family $40 40% 92.1% $40 41.7% 93.8%
Nonresidential 20 20 4.1 16 16.7 3.1
Construction 20 20 3.1 20 20.8 2.7
-- --- ---- -- ----- ----
Total real estate loans 80 80 99.3 76 79.2 99.6
Other loans:
Loans secured by deposits -- -- 0.7 -- -- 0.4
---- ---- ----- ---- ---- ----
Total other loans -- -- 0.7 -- -- 0.4
---- ---- ----- ---- ---- ----
Unallocated 20 20 -- 20 20.8 --
-- --- ------ -- ----- ------
Total allowance for loan losses $100 100% 100% $96 100.0% 100.0%
==== ==== ==== === ====== ======
<CAPTION>
At June 30,
-------------------------------------------------------------------
1997 1996
--------------------------------------- ------------------------------------
Percent of Amount Percent of Amount
Allowance of Loans Allowance of Loans
Amount of to Total to Gross Amount of to Total to Gross
Allowance Allowance Loans Allowance Allowance Loans
--------- ---------- -------- --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Real estate loans:
Residential 1-4 family $40 40% 91.8% $40 42.1% 94.5%
Nonresidential 20 20 4.6 15 15.7 3.4
Construction 20 20 2.9 20 21.1 1.7
-- --- ---- -- ----- ----
Total real estate loans 80 80 99.3 75 78.9 99.6
Other loans:
Loans secured by deposits -- -- 0.7 -- -- 0.4
---- ---- ---- ---- ----- -----
Total other loans -- -- 0.7 -- -- 0.4
---- ---- ---- ---- ----- -----
Unallocated 20 20 -- 20 21.1 --
-- -- ------ -- ----- ------
Total allowance for loan losses $100 100% 100.0% $95 100.0% 100.0%
==== ==== ====== === ====== ======
</TABLE>
53
<PAGE>
Investment Securities
Interest and dividend income from investment securities generally
provides the second largest source of income to the Bank after interest on
loans. In addition, the Bank receives interest income from deposits in other
financial institutions. At December 31, 1997, the Bank's investment portfolio
totaled approximately $8.79 million and consisted of U.S. government and agency
securities, interest-earning deposits in other financial institutions,
certificates of deposit and stock of the FHLB of Atlanta.
The FASB has issued SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities" which addresses the accounting and reporting for
investments in equity securities that have readily determinable fair values and
for all investments in debt securities. These investments are to be classified
in three categories and accounted for as follows: (1) debt securities that the
entity has the positive intent and ability to hold to maturity are classified as
held-to-maturity and reported at amortized cost; (2) debt and equity securities
that are bought and held principally for the purpose of selling them in the near
term are classified as trading securities and reported at fair value, with net
unrealized gains and losses included in earnings; and (3) debt and equity
securities not classified as either held-to-maturity or trading securities are
classified as securities available-for-sale and reported at fair value, with
unrealized gains and losses excluded from earnings and reported as a separate
component of equity. At December 31, 1997, the Bank had no trading securities.
The Bank adopted SFAS No. 115 as of July 1, 1994. The adoption affected only the
held-to- maturity and available-for-sale classifications. Net unrealized
securities gains on the securities available-for- sale of $244,000, net of
related deferred taxes of $127,000, are reported as a separate component of
equity in its financial statements at December 31, 1997. See Notes 2 and 6 of
"Notes to Financial Statements."
The amortized cost of securities classified as held-to-maturity or
available-for-sale is adjusted for amortization of premiums and accretion of
discounts to maturity. Such amortization is included in interest income from
investments. Interest and dividends are included in interest income from
investments. Realized gains and losses, and declines in value judged to be other
than temporary are included in net securities gains (losses). The cost of
securities sold is based on the specific identification method. Prior to the
adoption of SFAS No. 115, the Bank stated its debt securities at amortized cost
and its marketable equity securities at the lower of cost or market. Accumulated
changes in net unrealized losses on marketable equity securities were included
in retained earnings.
As a member of the FHLB of Atlanta, the Bank is required to maintain an
investment in stock of the FHLB of Atlanta equal to the greater of 1% of the
Bank's outstanding home loans or 5% of its outstanding advances from the FHLB of
Atlanta. No ready market exists for such stock, which is carried at cost. As of
December 31, 1997, the Bank's investment in stock of the FHLB of Atlanta was
$143,000.
North Carolina regulations require the Bank to maintain a minimum
amount of liquid assets which may be invested in specified short-term
securities. See "SUPERVISION AND REGULATION -- Regulation of the Bank --
Liquidity." The Bank is also permitted to make certain other securities
investments.
The Bank's current investment policy provides that investment decisions
will be made by Eugene M. Ward, President and Chief Executive Officer, and
reviewed monthly by the Board of Directors. The investment policy provides that
the objectives of the investment portfolio are to: (i) provide and maintain
liquidity within regulatory guidelines, (ii) maintain a balance of high quality,
diversified investments, (iii) provide collateral for pledging requirements,
(iv) serve as a counter-cyclical balance to earnings, and (v) maximum returns
without sacrificing liquidity and safety.
54
<PAGE>
Permitted investments include U.S. Treasury obligations, FHLB daily and
time deposits, insured certificates of deposit, federal agency securities and
federal funds.
The following table sets forth the carrying value of the Bank's
investment portfolio at the dates indicated.
<TABLE>
<CAPTION>
At December 31, At June 30,
-------------------------- ------------------------
1997 1996 1997 1996
---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Securities available for sale:
U.S. government and agency securities $380 $250 $318 $194
---- ---- ---- ----
Securities held to maturity:
U.S. government and agency securities 1,500 1,992 2,496 1,994
Mortgage-backed securities 732 898 800 940
--- --- --- ---
Total securities held to maturity 2,232 2,890 3,296 2,934
----- ----- ----- -----
Total investment securities 2,612 3,140 3,614 3,128
----- ----- ----- -----
Interest-earning balances in other banks 6,039 5,067 4,944 5,851
Federal Home Loan Bank stock 143 143 143 143
----- ----- ----- -----
6,182 5,210 5,087 5,994
----- ----- ----- -----
Total investments $8,794 $8,350 $8,701 $9,122
====== ====== ====== ======
</TABLE>
At December 31, 1997, the market value of the Bank's investment
securities available for sale and held to maturity were $380,000 and $2.23
million, respectively.
55
<PAGE>
The following table sets forth certain information regarding the
carrying value, weighted average yields and contractual maturities of the Bank's
investment portfolio as of December 31, 1997.
<TABLE>
<CAPTION>
More than Six Months More than One Year
Less Than Six Months to One Year to Five Years
-------------------- -------------------- ------------------
Weighted Weighted Weighted
Carrying Average Carrying Average Carrying Average
Value Yield Value Yield Value Yield
-------- -------- -------- --------- -------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Securities available for sale:
FHLMC Stock $380 _____% $ -- --% $ -- --%
Securities held to maturity:
U.S. government and agency securities -- -- 500 5.70 1,000 5.64
Mortgage-backed securities -- -- -- -- 43 7.76
Other:
Interest-earning balances in other banks 6,039 5.48 -- -- -- --
Federal Home Loan Bank stock -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Total $6,419 5.16 $500 .95% $1,043 5.73%
====== ==== ==== ==== ====== =====
<CAPTION>
More than Five Years
to Ten Years After Ten Years Total
-------------------- -------------------- -----------------------
Weighted Weighted Weighted
Carrying Average Carrying Average Carrying Average
Value Yield Value Yield Value Yield
-------- -------- -------- -------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Securities available for sale:
FHLMC Stock $ -- --% $ -- --% $380 ___%
Securities held to maturity:
U.S. government and agency securities -- -- -- -- 1,500 5.66
Mortgage-backed securities 259 7.00 430 6.50 732 6.95
Other:
Interest-earning balances in other banks -- -- -- -- 6,039 5.48
Federal Home Loan Bank stock -- -- 143 7.25 143 7.25
-------- ------- --- ---- ---- ----
Total $259 7.00% $573 6.69% $8,794 5.43%
==== ===== ==== ===== ====== =====
</TABLE>
56
<PAGE>
Sources of Funds
General. Deposits are the primary source of the Bank's funds for
lending and other investment purposes. In addition to deposits, the Bank derives
funds from loan principal repayments, interest payments, investment income and
principal repayments, interest from its own interest-earning deposits, interest
income and advances from the FHLB of Atlanta and otherwise from its operations.
Loan repayments are a relatively stable source of funds while deposit inflows
and outflows may be significantly influenced by general interest rates and money
market conditions. Borrowings may be used on a short-term basis to compensate
for reductions in the availability of funds from other sources. They may also be
used on a longer term basis for general business purposes.
Deposits. The Bank attracts both short-term and long-term deposits from
the general public by offering a variety of accounts and rates. The Bank offers
passbook savings accounts, statement savings accounts, negotiable order of
withdrawal accounts, money market deposit accounts, non-interest-bearing
accounts, and fixed interest rate certificates with varying maturities. At
December 31, 1997, 77.8% of the Bank's deposits consisted of certificate
accounts, 21.6% consisted of passbook savings accounts and 0.61% consisted of
money market deposit accounts. Deposit flows are greatly influenced by economic
conditions, the general level of interest rates, competition, and other factors,
including the restructuring of the thrift industry. The Bank's savings deposits
traditionally have been obtained primarily from its primary market area. The
Bank utilizes traditional marketing methods to attract new customers and savings
deposits, including print, television and radio media advertising and direct
mailings. The Bank does not advertise for deposits outside of its local market
area or utilize the services of deposit brokers.
The following table sets forth certain other information regarding the
Bank's savings deposits at the dates indicated.
57
<PAGE>
<TABLE>
<CAPTION>
At December 31, 1997 At June 30, 1997
---------------------------------- ----------------------------------
----- -----
Weighted Weighted
Average % of Average % of
Amount Rate Deposits Amount Rate Deposits
------ -------- -------- ------ -------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Demand accounts:
Passbook savings $3,585 3.25% 21.60% $3,673 3.25% 21.96%
Money market deposit accounts 101 3.05 0.61 105 3.10 0.63
------ ---- ---- ------ ---- ----
3,686 3.24 22.21 3,778 3.24 22.59
Certificate of accounts with
original maturities of:
6 months 3,955 5.07 23.84 4,372 5.08 26.14
12 months 2,101 5.11 12.66 2,414 5.15 14.43
14, 18, 30 and 36 months 6,852 5.67 41.29 6,163 5.74 36.84
----- ---- ----- ----- ---- -----
Total certificates 12,908 5.40 77.79 12,949 5.41 77.41
------ ---- ----- ------ ---- -----
Total deposits $16,594 4.92% 100.00% $16,727 4.92% 100.00%
======= ===== ======= ======= ===== =======
<CAPTION>
At June 30, 1996
--------------------------------
Weighted
Average % of
Amount Rate Deposits
------ -------- --------
(Dollars in Thousands)
<S> <C> <C> <C>
Demand accounts:
Passbook savings $4,149 3.25% 23.66%
Money market deposit accounts 181 3.10 1.02
------ ---- ----
4,330 3.24 24.68
Certificate of accounts with
original maturities of:
6 months 5,619 5.01 32.04
12 months 2,809 5.22 16.02
14, 18, 30 and 36 months 4,781 5.56 27.26
----- ---- -----
Total certificates 13,209 5.26 75.32
------ ---- -----
Total deposits $17,539 4.76% 100.00%
======= ===== =======
</TABLE>
58
<PAGE>
The following table presents the maturities and weighted average rates
paid on all certificates of deposit as of December 31, 1997.
<TABLE>
<CAPTION>
Amount Due During the Year Ending December 31,
----------------------------------------------------
1998 1999 2000 Thereafter Total
--------------- --------------- --------------- --------------- ---------------
Weighted Weighted Weighted Weighted Weighted
Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate
------ -------- ------ -------- ------ -------- ------ ------- ------ --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Certificates of
$100,000 or more $1,251 5.95% $ -- -- % $ -- -- % $ -- --% $1,251 5.95%
Certificates of less
than $100,000 8,948 5.28% 2,196 5.51% 513 5.77% -- -- 11,657 5.34
----- ----- ----- ----- --- ----- -------- ------- ------ ------
Total $10,199 5.36% $2,196 5.1% $513 5.77% $ -- --- $12,908 5.40%
======= ===== ====== ==== ==== ===== ======== ========= ====== ======
</TABLE>
59
<PAGE>
As of December 31, 1997, the aggregate amount of time certificates of
deposit in amounts greater than or equal to $100,000 outstanding was
approximately $1.3 million. The following table presents the maturity of these
time certificates of deposit at such date.
<TABLE>
<CAPTION>
At
December 31, 1997
-----------------
(In Thousands)
<S> <C>
6 Months or less $ 539
Over 6 months through 12 months 712
Over 12 months ---
----------
Total $1,251
======
</TABLE>
Borrowings. The Bank's principal available source of long-term
borrowings are advances from the FHLB of Atlanta. The FHLB system functions in a
reserve credit capacity for savings institutions. As a member, the Bank is
required to own capital stock in the FHLB of Atlanta and is authorized to apply
for advances from the FHLB of Atlanta on the security of that stock and a
floating lien on certain of its real estate secured loans and other assets. Each
credit program has its own interest rate and range of maturities. Depending on
the program, limitations on the amount of advances are based either on a fixed
percentage of an institution's net worth or on the FHLB of Atlanta's assessment
of the institution's creditworthiness. The Bank has had no borrowings
outstanding from the FHLB of Atlanta since 1987 and has no immediate plans to
seek any advances from the FHLB of Atlanta.
Subsidiaries
As a North Carolina-chartered savings bank, the Bank is able to invest
up to 10% of its total assets in subsidiary service corporations. However, any
investment in service corporations which would cause the Bank to exceed an
investment of 3% of assets must receive prior approval of the FDIC. The Bank has
no subsidiaries.
Properties
The Bank operates from one office located in Wadesboro, North Carolina.
Specific information related to this office as of December 31, 1997 is as
follows:
<TABLE>
<CAPTION>
Net Book Value
---------------------------------------------
Furniture, Fixtures
and
Land Building Equipment
---- -------- ---------
<S> <C> <C> <C>
211 South Greene Street
Wadesboro, North Carolina $30,808 $180,392 $3,695
======= ======== ======
</TABLE>
The properties are considered by the Bank's management to be in good condition.
60
<PAGE>
Legal Proceedings
From time to time, the Bank is a party to legal proceedings which arise
in the ordinary course of its business. Most commonly, such proceedings are
commenced by the Bank to enforce obligations owed to it. From time to time,
claims are asserted against the Bank directly or as defenses and counterclaims
in actions filed by the Bank. At this time, the Bank is not a party to any legal
proceeding which is expected to have a material effect on its financial
condition or results of operations.
Competition
The Bank is the only financial institution headquartered in Anson
County and has operated there for more than 100 years. It faces strong
competition both in attracting deposits and making real estate and other loans.
Its most direct competition for deposits has historically come from other
savings institutions, credit unions, brokerage firms and commercial banks
located in its primary market area, including large financial institutions which
have greater financial and marketing resources available to them. As of June 30,
1997, there were four FDIC-insured depository institutions with nine offices in
Anson County, North Carolina. Based upon 1997 comparative data, the Bank had
10.9% and 8.3% of the federally insured deposits in Wadesboro and Anson County,
respectively.
The Bank has also faced additional significant competition for
investors' funds from short-term money market securities and other corporate and
government securities. The ability of the Bank to attract and retain savings
deposits depends on its ability to generally provide a rate of return, liquidity
and risk comparable to that offered by competing investment opportunities.
The Bank experiences strong competition for real estate loans from
other savings institutions, commercial banks, and mortgage banking companies.
The Bank competes for loans primarily through the interest rates and loan fees
it charges, the efficiency and quality of services it provides borrowers, and
its more flexible underwriting standards. Competition may increase as a result
of the continuing reduction of restrictions on the interstate operations of
financial institutions. See "RISK FACTORS -- Risks Associated with Anson's
Primary Market Area; Limited Lending Opportunities; Competition."
Employees
As of December 31, 1997, the Bank had 5 full-time employees. The Bank
provides its employees with basic and major medical insurance, dental insurance,
disability insurance, life insurance, sick leave and vacation benefits. The Bank
also maintains a non-contributory defined benefit pension plan ("Pension Plan")
for its employees. All full-time employees of the Bank who have completed one
year of service and who are at least twenty-one (21) years of age are covered
under the Pension Plan. Participants are fully vested in amounts contributed to
the Pension Plan on their behalf after seven (7) years of service, as follows:
less than 3 years of service, 0%; 3 years, 20%; 4 years, 40%; 5 years, 60%; 6
years, 80%; 7 years, 100%. Benefits under the Pension Plan are payable in the
event of the participant's retirement, death, disability or termination of
employment.
The Boards of Directors of the Company and the Bank are expected to
adopt, and stockholders of the Company will be asked to approve, a MRP and a
Option Plan at a meeting of stockholders after the first anniversary following
the Conversion. See "MANAGEMENT OF THE BANK -- Proposed Option Plan" and
"--Proposed Management Recognition Plan."
61
<PAGE>
Employees are not represented by any union or collective bargaining
group, and the Bank considers its employee relations to be good.
TAXATION
Federal Income Taxation
Savings institutions such as the Bank are subject to the taxing
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), for
corporations, as modified by certain provisions specifically applicable for
financial or thrift institutions. Income is reported using the accrual method of
accounting. The maximum corporate federal income tax rate is 35%.
For fiscal years beginning prior to December 31, 1995, thrift
institutions which qualified under certain definitional tests and other
conditions of the Code were permitted certain favorable provisions regarding
their deductions from taxable income for annual additions to their bad debt
reserve. A reserve could be established for bad debts on qualifying real
property loans (generally loans secured by interests in real property improved
or to be improved) under (i) a method based on a percentage of the institution's
taxable income, as adjusted (the "percentage of taxable income method") or (ii)
a method based on actual loss experience (the "experience method"). The reserve
for nonqualifying loans was computed using the experience method.
The addition to the bad debt reserve under the percentage of taxable
income method was limited to 8% of taxable income. This method could not raise
the reserve to exceed 6% of qualifying real property loans at the end of the
year. Moreover, the current year addition for qualifying real property loans,
when added to the experience method deduction for nonqualifying loans, could not
exceed the amount by which 12% of total deposits or withdrawable accounts
exceeded the sum of surplus, undivided profits and reserves at the beginning of
the year. The experience method was the amount necessary to increase the balance
of the reserve at the close of the year to the greater of (i) the amount which
bore the same ratio to loans outstanding at the close of the year as the total
net bad debts sustained during the current and five preceding years bore to the
sum of the loans outstanding at the close of such six years or (ii) the balance
in the reserve account at the close of the last taxable year beginning before
1988 (assuming that the loans outstanding have not declined since such date).
In order to qualify for the percentage of taxable income method, an
institution had to have at least 60% of its assets as "qualifying assets," which
generally included, cash, obligations of the United States government or an
agency or instrumentality thereof or of a state or political subdivision,
residential real estate-related loans, or loans secured by savings accounts and
property used in the conduct of its business. In addition, it had to meet
certain other supervisory tests and operate principally for the purpose of
acquiring savings and investing in loans.
Institutions which became ineligible to use the percentage of taxable
income method had to change to either the reserve method or the specific
charge-off method that applied to banks. Large thrift institutions, those
generally exceeding $500 million in assets, had to convert to the specific
charge-off method. In computing its bad debt reserve for federal income taxes,
the Bank used the reserve method in fiscal years 1996 and 1997.
62
<PAGE>
Bad debt reserve balances in excess of the balance computed under the
experience method or amounts maintained in a supplemental reserve built up prior
to 1962 ("excess bad debt reserve") must be included in taxable income upon
certain distributions to shareholders. Distributions in redemption or
liquidation of stock or distributions with respect to its stock in excess of
earnings and profits accumulated in years beginning after December 31, 1951, are
treated as a distribution from the excess bad debt reserve. When such a
distribution takes place, the thrift is required to reduce its reserve by such
amount and simultaneously recognize the amount as an item of taxable income
increased by the amount of income tax imposed on the inclusion. Dividends not in
excess of earnings and profits accumulated since December 31, 1951 will not
require inclusion of part or all of the bad debt reserve in taxable income. The
Bank has accumulated earnings and profits since December 31, 1951 and has an
excess bad debt reserve. Distributions in excess of current and accumulated
earnings and profits will increase taxable income. Net retained earnings at
December 31, 1997 includes approximately $1.0 million for which no provision for
federal income tax has been made.
Legislation passed by the U.S. Congress and signed by the President in
August 1996 contains a provision that repeals the percentage of taxable income
method of accounting for thrift bad debt reserves for tax years beginning after
December 31, 1995. The legislation will trigger bad debt reserve recapture for
post- 1987 excess reserves over a six-year period. At December 31, 1997, the
Bank's post-1987 excess reserves subject to recapture were not significant.
The Bank may also be subject to the corporate alternative minimum tax
("AMT"). This tax is applicable only to the extent it exceeds the regular
corporate income tax. The AMT is imposed at the rate of 20% of the corporation's
alternative minimum taxable income ("AMTI") subject to applicable statutory
exemptions. AMTI is calculated by adding certain tax preference items and making
certain adjustments to the corporation's regular taxable income. Preference
items and adjustments generally applicable to financial institutions include,
but are not limited to, the following: (i) the excess of the bad debt deduction
over the amount that would have been allowable on the basis of actual
experience; (ii) interest on certain tax-exempt bonds issued after August 7,
1986; and (iii) 75% of the excess, if any, of a corporation's adjusted earnings
and profits over its AMTI (as otherwise determined with certain adjustments).
Net operating loss carryovers, subject to certain adjustments, may be utilized
to offset up to 90% of the AMTI. Credit for AMT paid may be available in future
years to reduce future regular federal income tax liability to the extent it
exceeds the year's AMT. The Bank has not been subject to the AMT in recent
years.
The Bank's federal income tax returns have not been audited in the last
ten tax years.
State and Local Taxation
Under North Carolina law, the corporate income tax is 7.5% of federal
taxable income as computed under the Code, subject to certain prescribed
adjustments. In addition, for tax years beginning in 1991, 1992, 1993 and 1994,
corporate taxpayers were required to pay a surtax equal to 4%, 3%, 2% and 1%,
respectively, of the state income tax otherwise, payable by it. An annual state
franchise tax is imposed at a rate of 0.15% applied to the greatest of the
institutions (i) capital stock, surplus and undivided profits, (ii) investment
in tangible property in North Carolina or (iii) appraised valuation of property
in North Carolina.
The North Carolina corporate tax rate will drop to 7.25% in 1998, 7% in
1999, and 6.9% thereafter.
63
<PAGE>
SUPERVISION AND REGULATION
Regulation of the Company
Bank holding companies and state savings banks are extensively
regulated under both federal and state law. The following is a brief summary of
certain statutes and rules and regulations that affect or will affect the
Company and the Bank. This summary is qualified in its entirety by reference to
the particular statute and regulatory provisions referred to below and is not
intended to be an exhaustive description of the statutes or regulations
applicable to the business of the Company and the Bank. Supervision, regulation
and examination of the Company and the Bank by the regulatory agencies are
intended primarily for the protection of depositors rather than shareholders of
the Company.
General. The Company was organized for the purpose of acquiring and
holding all of the capital stock of the Bank to be issued in the Conversion. As
a savings bank holding company subject to the Bank Holding Company Act of 1956,
as amended ("BHCA"), the Company is subject to certain regulations of the
Federal Reserve. Under the BHCA, the Company's activities and those of its
subsidiaries are limited to banking, managing or controlling banks, furnishing
services to or performing services for its subsidiaries or engaging in any other
activity which the Federal Reserve determines to be so closely related to
banking or managing or controlling banks as to be a proper incident thereto. The
BHCA prohibits the Company from acquiring direct or indirect control of more
than 5% of the outstanding voting stock or substantially all of the assets of
any bank or savings bank or merging or consolidating with another bank holding
company or savings bank holding company without prior approval of the Federal
Reserve.
Additionally, the BHCA prohibits the Company from engaging in, or
acquiring ownership or control of, more than 5% of the outstanding voting stock
of any company engaged in a nonbanking business unless such business is
determined by the Federal Reserve to be so closely related to banking as to be
properly incident thereto.
Similarly, Federal Reserve approval (or, in certain cases,
non-disapproval) must be obtained prior to any person acquiring control of the
Company. Control is conclusively presumed to exist if, among other things, a
person acquires more than 25% of any class of voting stock of the holding
company or controls in any manner the election of a majority of the directors of
the holding company. Control is presumed to exist if a person acquires more than
10% of any class of voting stock and the stock is registered under Section 12 of
the Exchange Act or the acquiror will be the largest shareholder after the
acquisition.
There are a number of obligations and restrictions imposed on bank
holding companies and their depository institution subsidiaries by law and
regulatory policy that are designed to minimize potential loss to the depositors
of such depository institutions and the FDIC insurance funds in the event the
depository institution becomes in danger of default or in default. For example,
to avoid receivership of an insured depository institution subsidiary, a bank
holding company is required to guarantee the compliance of any insured
depository institution subsidiary that may become "undercapitalized" with the
terms of any capital restoration plan filed by such subsidiary with its
appropriate federal banking agency up to the lesser of (i) an amount equal to 5%
of the institution's total assets at the time the institution became
undercapitalized or (ii) the amount which is necessary (or would have been
necessary) to bring the institution into compliance with all capital standards
as of the time the institution fails to comply with such capital restoration
plan. Under a policy of the Federal Reserve with respect to bank holding company
operations, a bank holding company is required to serve as a source of financial
strength to its subsidiary depository institutions and to commit resources to
support such institutions in circumstances where it might not do so absent such
policy. The
64
<PAGE>
Federal Reserve under the BHCA also has the authority to require a bank holding
company to terminate any activity or to relinquish control of a nonbank
subsidiary (other than a nonbank subsidiary of a bank) upon the Federal
Reserve's determination that such activity or control constitutes a serious risk
to the financial soundness and stability of any bank subsidiary of the bank
holding company.
In addition, insured depository institutions under common control are
required to reimburse the FDIC for any loss suffered by either the SAIF or the
BIF as a result of the default of a commonly controlled insured depository
institution or for any assistance provided by the FDIC to a commonly controlled
insured depository institution in danger of default. The FDIC may decline to
enforce the cross-guarantee provisions if it determines that a waiver is in the
best interest of the SAIF or the BIF or both. The FDIC's claim for damages is
superior to claims of stockholders of the insured depository institution or its
holding company but is subordinate to claims of depositors, secured creditors
and holders of subordinated debt (other than affiliates) of the commonly
controlled insured depository institutions.
Federal regulations require that the Company must notify the Federal
Reserve Bank of Richmond prior to repurchasing Common Stock in excess of ten
percent of its net worth during a rolling twelve month period.
As a result of the Company's ownership of the Bank, the Company is
registered under the savings bank holding company laws of North Carolina.
Accordingly, the Company is also subject to regulation and supervision by the
Administrator.
Capital Adequacy Guidelines for Holding Companies. The Federal Reserve
has adopted capital adequacy guidelines for bank holding companies and banks
that are members of the Federal Reserve system and have consolidated assets of
$150 million or more. For bank holding companies with less than $150 million in
consolidated assets, the guidelines are applied on a bank-only basis unless the
parent bank holding company (i) is engaged in nonbank activity involving
significant leverage or (ii) has a significant amount of outstanding debt that
is held by the general public.
Bank holding companies are required to comply with the Federal
Reserve's risk-based capital guidelines. Under these regulations, the minimum
ratio of total capital to risk-weighted assets (including certain off-balance
sheet activities, such as standby letters of credit) is 8%. At least half of the
total capital is required to be "Tier I capital," principally consisting of
common stockholders' equity, noncumulative perpetual preferred stock, and a
limited amount of cumulative perpetual preferred stock, less certain goodwill
items. The remainder ("Tier II capital") may consist of a limited amount of
subordinated debt, certain hybrid capital instruments and other debt securities,
perpetual preferred stock, and a limited amount of the general loan loss
allowance. In addition to the risk-based capital guidelines, the Federal Reserve
has adopted a minimum Tier I capital (leverage) ratio, under which a bank
holding company must maintain a minimum level of Tier I capital to average total
consolidated assets of at least 3% in the case of a bank holding company which
has the highest regulatory examination rating and is not contemplating
significant growth or expansion. All other bank holding companies are expected
to maintain a Tier I capital (leverage) ratio of at least 1% to 2% above the
stated minimum.
Dividend and Repurchase Limitations. In connection with the Conversion,
the Bank has agreed with the FDIC that, during the first three years after
consummation of the Conversion, neither the Company nor the Bank will pay any
taxable dividend or make any other taxable distribution to its stockholders in
excess of their current or retained earnings. Also, the Company and the Bank
have agreed to notify the FDIC before making a return of capital during the
first three years following the Conversion. The Company must obtain Federal
Reserve approval prior to repurchasing Common Stock for in excess of 10% of its
net worth during
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any twelve-month period unless the Company (i) both before and after the
redemption satisfies capital requirements for "well capitalized" state member
banks; (ii) received a one or two rating in its last examination; and (iii) is
not the subject of any unresolved supervisory issues.
Although the payment of dividends and repurchase of stock by the
Company are subject to the requirements and limitations of North Carolina
corporate law, except as set forth in this paragraph, neither the Administrator
nor the FDIC have promulgated any regulations specifically limiting the right of
the Company to pay dividends and repurchase shares. However, the ability of the
Company to pay dividends or repurchase shares may be dependent upon the
Company's receipt of dividends from the Bank. The Bank's ability to pay
dividends is limited. See " -- Regulation of the Bank -- Restrictions on
Dividends and Other Capital Distributions."
Capital Maintenance Agreement. In connection with the Administrator's
approval of the Company's application to acquire control of the Bank, the
Company was required to execute a Capital Maintenance Agreement whereby it has
agreed to maintain the Bank's capital in an amount sufficient to enable the Bank
to satisfy all regulatory capital requirements.
Federal Securities Law. The Company has registered its Common Stock
with the SEC pursuant to Section 12(g) of the Exchange Act and will not
deregister the Common Stock for a period of three years following the completion
of the Conversion. As a result of such registration, the proxy and tender offer
rules, insider trading reporting requirements, annual and periodic reporting and
other requirements of the Exchange Act are applicable to the Company.
The registration under the Securities Act of the Offering of the Common
Stock does not cover the resale of such shares. Shares of the Common Stock
purchased by persons who are not affiliates of the Company may be resold without
registration. Shares purchased by an affiliate of the Company are subject to the
resale provisions of Rule 144 under the Securities Act. So long as the Company
meets the current public information requirements of Rule 144 under the
Securities Act, each affiliate of the 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) will 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
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
Company to permit affiliates to have their shares registered for sale under the
Securities Act under certain circumstances. There are currently no demand
registration rights outstanding. However, in the event the Company at some
future time determines to issue additional shares from its authorized but
unissued shares, the Company might offer registration rights to certain of its
affiliates who want to sell their shares.
Regulation of the Bank
General. Federal and state legislation and regulation have
significantly affected the operations of federally insured savings institutions
and other federally regulated financial institutions in the past several years
and have increased competition among savings institutions, commercial banks and
other providers of financial services. In addition, federal legislation has
imposed new limitations on investment authority, and higher insurance and
examination assessments on savings institutions and has made other changes that
may adversely affect the future operations and competitiveness of savings
institutions with other financial institutions, including commercial banks and
their holding companies. The operations of regulated depository institutions,
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including the Bank, will continue to be subject to changes in applicable
statutes and regulations from time to time.
The Bank is a North Carolina chartered savings bank, is a member of the
FHLB system, and its deposits are insured by the FDIC through the SAIF. It is
subject to examination and regulation by the FDIC and the Administrator and to
regulations governing such matters as capital standards, mergers, establishment
of branch offices, subsidiary investments and activities, and general investment
authority. Generally, North Carolina state chartered savings banks whose
deposits are issued by the SAIF are subject to restrictions with respect to
activities and investments, transactions with affiliates and loans-to-one
borrower similar to those applicable to SAIF insured savings associations. Such
examination and regulation is intended primarily for the protection of
depositors and the federal deposit insurance funds.
The Bank is subject to various regulations promulgated by the Federal
Reserve including, without limitation, Regulation B (Equal Credit Opportunity),
Regulation D (Reserves), Regulation E (Electronic Fund Transfers), Regulation O
(Loans to Executive Officers, Directors and Principal Shareholders), Regulation
Z (Truth in Lending), Regulation CC (Availability of Funds) and Regulation DD
(Truth in Savings). As creditors of loans secured by real property and as owners
of real property, financial institutions, including the Bank, may be subject to
potential liability under various statutes and regulations applicable to
property owners generally, including statutes and regulations relating to the
environmental condition of real property.
The FDIC has extensive enforcement authority over North
Carolina-chartered savings banks, including the Bank. This enforcement authority
includes, among other things, the ability to assess civil money penalties, to
issue cease and desist or removal orders and to initiate injunctive actions. In
general, these enforcement actions may be initiated in response to violations of
laws and regulations and unsafe or unsound practices.
The grounds for appointment of a conservator or receiver for a North
Carolina savings bank on the basis of an institution's financial condition
include: (i) insolvency, in that the assets of the savings bank are less than
its liabilities to depositors and others; (ii) substantial dissipation of assets
or earnings through violations of law or unsafe or unsound practices; (iii)
existence of an unsafe or unsound condition to transact business; (iv)
likelihood that the savings bank will be unable to meet the demands of its
depositors or to pay its obligations in the normal course of business; and (v)
insufficient capital or the incurring or likely incurring of losses that will
deplete substantially all of the institution's capital with no reasonable
prospect of replenishment of capital without federal assistance.
Transactions with Affiliates. Under current federal law, transactions
between the Bank and any affiliate are governed by Sections 23A and 23B of the
Federal Reserve Act. An affiliate of the Bank is any company or entity that
controls, is controlled by or is under common control with the savings bank.
Generally, subsidiaries of a bank, other than a bank subsidiary, and certain
other types of companies are not considered to be affiliates. Generally,
Sections 23A and 23B (i) limit the extent to which the Bank or its subsidiaries
may engage in "covered transactions" with any one affiliate to an amount equal
to 10% of such the Bank's capital stock and surplus, and contain an aggregate
limit on all such transactions with all affiliates to an amount equal to 20% of
such capital stock and surplus and (ii) require that all such transactions be on
terms substantially the same, or at least as favorable, to the Bank or the
subsidiary as those provided to a nonaffiliate. The term "covered transaction"
includes the making of loans or other extensions of credit to an affiliate, the
purchase of assets from an affiliate, the purchase of, or an investment in, the
securities of an affiliate, the acceptance of securities of an affiliate as
collateral for a loan or extension of credit to any person, or issuance of a
guarantee, acceptance or letter of credit on behalf of an affiliate.
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Further, current federal law has extended to savings banks the
restrictions contained in Section 22(h) of the Federal Reserve Act and its
implementing regulations with respect to loans to directors, executive officers
and principal stockholders. Under Section 22(h), loans to directors, executive
officers and stockholders who own more than 10% of a savings bank, and certain
affiliated entities of any of the foregoing, may not exceed, together with all
other outstanding loans to such person and affiliated entities, the savings
bank's loans-to-one borrower limit as established by federal law and all loans
to such persons may not exceed the institution's unimpaired capital and
unimpaired surplus. Section 22(h) also prohibits loans above amounts prescribed
by the appropriate federal banking agency to directors, executive officers and
stockholders who own more than 10% of a savings bank, and their respective
affiliates, unless such loan is approved in advance by a majority of the
disinterested directors of the board of directors of the savings bank and the
Company. Any "interested" director may not participate in the voting. The
Federal Reserve has prescribed the loan amount (which includes all other
outstanding loans to such person), as to which such prior board of director
approval is required, as being the greater of $25,000 or 5% of unimpaired
capital and unimpaired surplus (up to $500,000). Further, pursuant to Section
22(h) the Federal Reserve requires that loans to directors, executive officers,
and principal stockholders be made on terms substantially the same as offered in
comparable transactions to other persons and not involve more than the normal
risk of repayment or present other unfavorable features. Section 22(h) also
generally prohibits a depository institution from paying the overdrafts of any
of its executive officers or directors.
Deposit Insurance. The Bank's deposit accounts are insured by the FDIC
under the SAIF to the maximum extent permitted by law. The 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
discussed below. The matrix so created results in nine assessment risk
classifications, with rates that, until September 30, 1996, ranged from 0.23%
for well capitalized, financially sound institutions with only a few minor
weaknesses to 0.31% for undercapitalized institutions that pose a substantial
risk to the SAIF unless effective corrective action is taken.
Pursuant to the 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 paying 0%. This assessment schedule is the same as that for
the BIF, which reached its designated reserve ratio in 1995. In addition, since
January 1, 1997, SAIF members are charged an assessment of 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.
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The DIF Act provides for the merger of the BIF and the SAIF into the
Deposit Insurance Fund on January 1, 1999, but only if no insured depository
institution is a savings association on that date. The DIF Act contemplates the
development of a common charter for all federally chartered depository
institutions and the abolition of separate charters for national banks and
federal savings associations. It is not known what form the common charter may
take and what effect, if any, the adoption of a new charter would have on the
operation of the 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 Bank.
Community Reinvestment Act. The Bank, like other financial
institutions, is subject to the Community Reinvestment Act, as amended ("CRA").
A purpose of this Act is to encourage financial institutions to help meet the
credit needs of its entire community, including the needs of low- and
moderate-income neighborhoods. A savings bank is evaluated and rated under three
categories: a lending test, an investment test and a service test. For each of
these three tests, the savings bank is given a rating of either "outstanding,"
"high satisfactory," "low satisfactory," "needs to improve" or "substantial
non-compliance." A set of criteria for each rating is included in the
regulation. If an institution disagrees with a particular rating, the
institution has the burden of rebutting the presumption by clearly establishing
that the quantitative measures do not accurately present its actual performance,
or that demographics, competitive conditions or economic or legal limitations
peculiar to the service area should be considered. The ratings received under
the three tests are used to determine the overall composite CRA rating or
"outstanding," "satisfactory," "needs to improve" or "substantial
non-compliance."
During the Bank's last compliance examination, which was performed by
the FDIC under the old CRA regulations in July 1996, the Bank received a
"satisfactory" rating with respect to CRA compliance. The Bank's rating with
respect to CRA compliance would be a factor to be considered by the Federal
Reserve and FDIC in considering applications submitted by the Bank to acquire
branches or to acquire or combine with other financial institutions and take
other actions and could result in the denial of such applications.
Capital Requirements Applicable To The Bank. The FDIC requires the Bank
to have a minimum leverage ratio of Tier I capital (principally consisting of
common stockholders' equity, noncumulative perpetual preferred stock and
minority interests in consolidated subsidiaries, less certain intangible items,
goodwill items, identified losses and investments in securities subsidiaries) to
total assets of at least 3%; provided, however that all institutions, other than
those (i) receiving the highest rating during the examination process and (ii)
not anticipating or experiencing any significant growth, are required to
maintain a ratio of 1% or 2% above the stated minimum, with an absolute minimum
leverage ratio of not less than 4%. The FDIC also requires the Bank to have a
ratio of total capital to risk-weighted assets, including certain off-balance
sheet activities, such as standby letters of credit, of at least 8%. At least
half of the total capital is required to be Tier I capital. The remainder ("Tier
II capital") may consist of a limited amount of subordinated debt, certain
hybrid capital instruments, other debt securities, certain types of preferred
stock and a limited amount of loan loss allowance.
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An institution which fails to meet minimum capital requirements may be
subject to a capital directive which is enforceable in the same manner and to
the same extent as a final cease and desist order, and must submit a capital
plan within 60 days to the FDIC. If the leverage ratio falls to 2% or less, the
bank may be deemed to be operating in an unsafe or unsound condition, allowing
the FDIC to take various enforcement actions, including possible termination of
insurance or placement of the institution in receivership. At December 31, 1997,
the Bank had a leverage ratio of 17.4%.
The Administrator requires that net worth equal at least 5% of total
assets. Intangible assets must be deducted from net worth and assets when
computing compliance with this requirement.
At December 31, 1997, the Bank complied with each of the capital
requirements of the FDIC and the Administrator. For a description of the Bank's
required and actual capital levels on December 31, 1997, see "HISTORICAL AND PRO
FORMA CAPITAL COMPLIANCE."
Each federal banking agency was required by law to revise its
risk-based capital standards to ensure that those standards take adequate
account of interest rate risk, concentration of credit risk, and the risk of
nontraditional activities, as well as reflect the actual performance and
expected risk of loss on multi-family mortgages. On August 2, 1995, the federal
banking agencies issued a joint notice of adoption of final risk- based capital
rules to take account of interest rate risk. The final regulation required an
assessment of the need for additional capital on a case-by-case basis,
considering both the level of measured exposure and qualitative risk factors.
The final rule also stated an intent to, in the future, establish an explicit
minimum capital charge for interest rate risk based on the level of a bank's
measured interest rate risk exposure. The final regulation has not had a
material impact on the Bank's capital requirements.
Effective June 26, 1996, the federal banking agencies issued a joint
policy statement announcing the agencies' election not to adopt a standardized
measure and explicit capital charge for interest rate risk at that time. Rather,
the policy statement (i) identifies the main elements of sound interest rate
risk management, (ii) describes prudent principles and practices for each of
those elements, and (iii) describes the critical factors affecting the agencies'
evaluation of a bank's interest rate risk when making a determination of capital
adequacy. The joint policy statement is not expected to have a material impact
on the Bank's management of interest rate risk.
In December 1994, the FDIC adopted a final rule changing its risk-based
capital rules to recognize the effect of bilateral netting agreements in
reducing the credit risk of two types of financial derivatives interest and
exchange rate contracts. Under the rule, savings banks are permitted to net
positive and negative mark-to-market values of rate contracts with the same
counterparty, subject to legally enforceable bilateral netting contracts that
meet certain criteria. This represents a change from the prior rules which
recognized only a very limited form of netting. The Bank does not anticipate
that this rule will have a material effect upon its financial condition or
results of operations.
Loans-To-One-Borrower. The Bank is subject to the Administrator's
loans-to-one-borrower limits. Under these limits, no loans and extensions of
credit to any borrower outstanding at one time and not fully secured by readily
marketable collateral shall exceed 15% of the net worth of the savings bank.
Loans and extensions of credit fully secured by readily marketable collateral
may comprise an additional 10% of net worth. These limits also authorize savings
banks to make loans-to-one-borrower, for any purpose, in an amount not to exceed
$500,000. A savings bank also is authorized to make loans-to-one-borrower to
develop domestic residential housing units, not to exceed the lesser of $30
million or 30% of the savings bank's net
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worth, provided that the purchase price of each single-family dwelling in the
development does not exceed $500,000 and the aggregate amount of loans made
under this authority does not exceed 150% of net worth. These limits also
authorize a savings bank to make loans-to-one-borrower to finance the sale of
real property acquired in satisfaction of debts in an amount up to 50% of net
worth.
As of December 31, 1997, the largest aggregate amount of loans which
the Bank had to any one borrower was $265,000. The Bank had no loans outstanding
which management believes violate the applicable loans-to-one-borrower limits.
The Bank does not believe that the loans-to-one-borrower limits will have a
significant impact on its business, operations and earnings.
Federal Home Loan Bank System. The FHLB system provides a central
credit facility for member institutions. As a member of the FHLB of Atlanta, the
Bank is required to own capital stock in the FHLB of Atlanta in an amount at
least equal to the greater of 1% of the aggregate principal amount of its unpaid
residential mortgage loans, home purchase contracts and similar obligations at
the end of each calendar year, or 5% of its outstanding advances (borrowings)
from the FHLB of Atlanta. On December 31, 1997, the Bank was in compliance with
this requirement with an investment in FHLB of Atlanta stock of $143,000.
Each FHLB is required to contribute at least 10% of its reserves and
undivided profits to fund the principal and a portion of the interest on certain
bonds and certain other obligations which are used to fund the resolution of
troubled savings association cases, and to transfer a percentage of its annual
net earnings to the Affordable Housing Program. These contributions continue to
reduce the FHLB of Atlanta's earnings and the Bank's dividends on its FHLB of
Atlanta stock.
Federal Reserve System. Federal Reserve regulations require savings
banks, not otherwise exempt from the regulations, to maintain reserves against
their transaction accounts (primarily negotiable order of withdrawal accounts)
and certain nonpersonal time deposits. The reserve requirements are subject to
adjustment by the Federal Reserve. As of December 31, 1997, the Bank was in
compliance with the applicable reserve requirements of the Federal Reserve.
Restrictions on Acquisitions. Federal law generally provides that no
"person," acting directly or indirectly or through or in concert with one or
more other persons, may acquire "control," as that term is defined in FDIC
regulations, of a state savings bank without giving at least 60 days' written
notice to the FDIC and providing the FDIC an opportunity to disapprove the
proposed acquisition. Pursuant to regulations governing acquisitions of control,
control of an insured institution is conclusively deemed to have been acquired
by, among other things, the acquisition of more than 25% of any class of voting
stock. In addition, control is presumed to have been acquired, subject to
rebuttal, upon the acquisition of more than 10% of any class of voting stock.
Such acquisitions of control may be disapproved if it is determined, among other
things, that (i) the acquisition would substantially lessen competition; (ii)
the financial condition of the acquiring person might jeopardize the financial
stability of the savings bank or prejudice the interests of its depositors; or
(iii) the competency, experience or integrity of the acquiring person or the
proposed management personnel indicates that it would not be in the interest of
the depositors or the public to permit the acquisitions of control by such
person.
For three years following completion of the Conversion, North Carolina
conversion regulations require the prior written approval of the Administrator
before any person may directly or indirectly offer to acquire or acquire the
beneficial ownership of more than 10% of any class of an equity security of the
Bank. If any person were to so acquire the beneficial ownership of more than 10%
of any class of any equity security without prior written approval, the
securities beneficially owned in excess of 10% would not be counted as
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shares entitled to vote and would not be voted or counted as voting shares in
connection with any matter submitted to stockholders for a vote. Approval is not
required for (i) any offer with a view toward public resale made exclusively to
the Bank or its underwriters or the selling group acting on its behalf or (ii)
any offer to acquire or acquisition of beneficial ownership of more than 10% of
the common stock of the Bank by a corporation whose ownership is or will be
substantially the same as the ownership of the Bank, provided that the offer or
acquisition is made more than one year following the consummation of the
Conversion. The regulation provides that within one year following the
Conversion, the Administrator would approve the acquisition of more than 10% of
beneficial ownership only to protect the safety and soundness of the
institution. During the second and third years after the Conversion, the
Administrator may approve such an acquisition upon a finding that (i) the
acquisition is necessary to protect the safety and soundness of the Company and
the Bank or the Boards of Directors of the Company and the Bank support the
acquisition and (iii) the acquiror is of good character and integrity and
possesses satisfactory managerial skills, the acquiror will be a source of
financial strength to the Company and the Bank and the public interests will not
be adversely affected.
Liquidity. The Bank is subject to the Administrator's requirement that
the ratio of liquid assets to total assets equal at least 10%. The computation
of liquidity under North Carolina regulation allows the inclusion of
mortgage-backed securities and investments which, in the judgment of the
Administrator, have a readily marketable value, including investments with
maturities in excess of five years. On December 31, 1997, the Bank's liquidity
ratio, calculated in accordance with North Carolina regulations, was
approximately 41%. At December 31, 1997, the Bank had stable, core-like time
deposits of $100,000 or more of approximately $1.3 million.
Additional Limitations on Activities. FDIC law and regulations
generally provide that the Bank may not engage as principal in any type of
activity, or in any activity in an amount, not permitted for national banks, or
directly acquire or retain any equity investment of a type or in an amount not
permitted for national banks. The FDIC has authority to grant exceptions from
these prohibitions (other than with respect to non-service corporation equity
investments) if it determines no significant risk to the insurance fund is posed
by the amount of the investment or the activity to be engaged in and if the Bank
is and continues to be in compliance with fully phased-in capital standards.
National banks are generally not permitted to hold equity investments other than
shares of service corporations and certain federal agency securities. Moreover,
the activities in which service corporations are permitted to engage are limited
to those of service corporations for national banks.
Savings banks are also generally prohibited from directly or indirectly
acquiring or retaining any corporate debt security that is not of investment
grade (generally referred to as "junk bonds"). State savings banks are also
required to notify the FDIC at least 30 days prior to the establishment or
acquisition of any subsidiary, or at least 30 days prior to conducting any such
new activity. Any such activities must be conducted in accordance with the
regulations and orders of the FDIC and the Administrator.
Prompt Corrective Regulatory Action. Federal law provides the federal
banking agencies with broad powers to take corrective action to resolve problems
of insured depository institutions. The extent of these powers depends upon
whether the institutions in question are "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized," or
"critically undercapitalized." Under the FDIC regulations applicable to the
Bank, an institution is considered "well capitalized" if it has (i) a total
risk-based capital ratio of 10% or greater, (ii) a Tier I risk-based capital
ratio of 6% or greater, (iii) a leverage ratio of 5% or greater and (iv) is not
subject to any order or written directive to meet and maintain a specific
capital level for any capital measure. An "adequately capitalized" institution
is defined as one that has (i) a total risk-based capital ratio of 8% or
greater, (ii) a Tier I risk-based capital ratio of 4% or greater and (iii) a
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leverage ratio of 4% or greater (or 3% or greater in the case of an institution
with the highest examination rating and which is not experiencing or
anticipating significant growth). An institution is considered (A)
"undercapitalized" if it has (i) a total risk-based capital ratio of less than
8%, (ii) a Tier I risk-based capital ratio of less than 4% or (iii) a leverage
ratio of less than 4% (or 3% in the case of an institution with the highest
examination rating and which is not experiencing or anticipating significant
growth); (B) "significantly undercapitalized" if the institution has (i) a total
risk-based capital ratio of less than 6%, or (ii) a Tier I risk-based capital
ratio of less than 3% or (iii) a leverage ratio of less than 3% and (C)
"critically undercapitalized" if the institution has a ratio of tangible equity
to total assets equal to or less than 2%.
Interstate Banking. The Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Banking Act"), effective September 29,
1995, permits adequately capitalized bank and savings bank holding companies to
acquire control of banks and savings banks in any state. The states may
specifically permit interstate acquisitions prior to September 29, 1995, by
enacting legislation that provides for such transactions. North Carolina adopted
nationwide reciprocal interstate acquisition legislation in 1994.
Such interstate acquisitions are subject to certain restrictions.
States may require the bank or savings bank being acquired to have been in
existence for a certain length of time but not in excess of five years. In
addition, no bank or saving bank may acquire more than 10% of the insured
deposits in the United States or more than 30% of the insured deposits in any
one state, unless the state has specifically legislated a higher deposit cap.
States are free to legislate stricter deposit caps.
The Interstate Banking Act also provides for interstate branching,
effective June 1, 1997, allowing interstate branching in all states, provided
that a particular state has not specifically denied interstate branching by
legislation prior to such time. Unlike interstate acquisitions, a state may deny
interstate branching if it specifically elects to do so by June 1, 1997. States
may choose to allow interstate branching prior to June 1, 1997 by opting-in to a
group of states that permits these transactions. These states generally allow
interstate branching via a merger of an out-of-state bank with an in-state bank,
or on a de novo basis. North Carolina has enacted legislation permitting
branching transactions.
It is anticipated that the Interstate Banking Act will increase
competition within the markets in which the Bank now operates, although the
extent to which such competition will increase in such markets or the timing of
such increase cannot be predicted.
Restrictions on Dividends and Other Capital Distributions. A North
Carolina chartered stock savings bank may not declare or pay a cash dividend on,
or repurchase any of, its capital stock if the effect of such transaction would
be to reduce the net worth of the institution to an amount which is less than
the minimum amount required by applicable federal and state regulations. In
addition, a North Carolina-chartered stock savings bank, for a period of five
years after its Conversion from mutual to stock form, must obtain the written
approval from the Administrator before declaring or paying a cash dividend on
its capital stock in an amount in excess of one-half of the greater of (i) the
institution's net income for the most recent fiscal year end, or (ii) the
average of the institution's net income after dividends for the most recent
fiscal year end and not more than two of the immediately preceding fiscal year
ends, if applicable. Under FDIC regulations, no stock repurchases may be made by
the savings bank during the first year following a Conversion from mutual to
stock, except that stock repurchases of no greater than 5% of the bank's
outstanding shares may be repurchased during the first year where compelling and
valid business reasons are established to the satisfaction of the FDIC.
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<PAGE>
Also, without the prior written approval of the Administrator, a North
Carolina-chartered stock savings bank, for a period of five years after its
Conversion from mutual to stock form, may not repurchase any of its capital
stock. The Administrator will give approval to repurchase only upon a showing
that the proposed repurchase will not adversely affect the safety and soundness
of the institution.
In addition, the Bank is not permitted to declare or pay a cash
dividend on or repurchase any of its capital stock if the effect thereof would
be to cause its net worth to be reduced below the amount required for the
liquidation account established in connection with the Bank's Conversion from
mutual to stock ownership.
In connection with the Conversion, the Bank has agreed with the FDIC
that, during the first three years after the Conversion, neither the Company nor
the Bank will pay any taxable dividend or make any other taxable distribution in
excess of their current and retained earnings. The Bank has also agreed to
notify the FDIC before making a return of capital during the first three years
following the Conversion.
Restrictions on Benefit Plans. FDIC regulations provide that for a
period of one year from the date of the Conversion, the Bank may not implement
or adopt a stock option plan or restricted stock plan, other than a
tax-qualified plan or an employee stock ownership plan, unless: (1) the plans
are fully disclosed in the Conversion proxy soliciting and stock offering
material, (2) all such plans are approved by a majority of the Company's
stockholders prior to implementation and no earlier than six months following
the Conversion, (3) for stock option plans, the exercise price must be at least
equal to the market price of the stock at the time of grant, and (4) for
restricted stock plans, no stock issued in connection with the Conversion may be
used to fund the plan.
The FDIC regulations provide that, in reviewing plans submitted to the
stockholders within one year after the consummation of the Conversion, the FDIC
will presume that excessive compensation will result if stock based benefit
plans fail to satisfy percentage limitations on management stock-based benefit
plans set forth in the regulations of the Office of Thrift Supervision ("OTS").
Those regulations provide that (1) for stock option plans, the total number of
shares for which options may be granted may not exceed 10% of the shares issued
in the Conversion, (2) for restricted stock plans, the shares issued may not
exceed 3% of the shares issued in the Conversion (4% for institutions with
tangible capital of 10% or greater after the Conversion), (3) the aggregate
amount of stock purchased by an employee stock ownership plan shall not exceed
10% (8% for well-capitalized institutions utilizing a 4% restricted stock plan),
(4) no individual employee may receive more than 25% of the available awards
under any plan, and (5) directors who are not employees may not receive more
than 5% individually or 25% in the aggregate of the awards under any plan. The
awards and grants to be made under the MRP and Option Plan will conform to these
requirements if such plans are submitted for stockholder approval within one
year after the Conversion is consummated.
Other North Carolina Regulations. As a North Carolina chartered savings
bank, the Bank derives its authority from, and is regulated by, the
Administrator. The Administrator has the right to promulgate rules and
regulations necessary for the supervision and regulation of North Carolina
savings banks under his jurisdiction and for the protection of the public
investing in such institutions. The regulatory authority of the Administrator
includes, but is not limited to, the establishment of reserve requirements; the
regulation of the payment of dividends; the regulation of stock repurchases, the
regulation of incorporators, stockholders, directors, officers and employees;
the establishment of permitted types of withdrawable accounts and types of
contracts for savings programs, loans and investments; and the regulation of the
conduct and management of savings banks, chartering and branching of
institutions, mergers, conversions and conflicts of interest. North Carolina law
requires that the Bank maintain federal deposit insurance as a condition of
doing business.
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The Administrator conducts regular examinations of North Carolina
chartered savings banks. The purpose of such examinations is to assure that
institutions are being operated in compliance with applicable North Carolina law
and regulations and in a safe and sound manner. These examinations are usually
conducted on a joint basis with the FDIC. In addition, the Administrator is
required to conduct an examination of any institution when he has good reason to
believe that the standing and responsibility of the institution is of doubtful
character or when he otherwise deems it prudent. The Administrator is empowered
to order the revocation of the license of an institution if he finds that it has
violated or is in violation of any North Carolina law or regulation and that
revocation is necessary in order to preserve the assets of the institution and
protect the interests of its depositors. The Administrator has the power to
issue cease and desist orders if any person or institution is engaging in, or
has engaged in, any unsafe or unsound practice or unfair and discriminatory
practice in the conduct of its business or in violation of any other law, rule
or regulation.
A North Carolina chartered savings bank must maintain net worth,
computed in accordance with the Administrator's requirements, of 5% of total
assets and liquidity of 10% of total assets, as discussed above. Additionally, a
North Carolina-chartered savings bank is required to maintain general valuation
allowances and specific loss reserves in the same amounts as required by the
FDIC.
Subject to limitation by the Administrator, North Carolina chartered
savings banks may make any loan or investment or engage in any activity which is
permitted to federally chartered institutions. However, a North Carolina
chartered savings bank cannot invest more than 15% of its total assets in
business, commercial, corporate and agricultural loans. In addition to such
lending authority, North Carolina chartered savings banks are authorized to
invest funds, in excess of loan demand, in certain statutorily permitted
investments, including but not limited to (i) obligations of the United States,
or those guaranteed by it; (ii) obligations of the State of North Carolina;
(iii) bank demand or time deposits; (iv) stock or obligations of the federal
deposit insurance fund or a FHLB; (v) savings accounts of any savings
institution as approved by the board of directors; and (vi) stock or obligations
of any agency of the State of North Carolina or of the United States or of any
corporation doing business in North Carolina whose principal business is to make
education loans.
North Carolina law provides a procedure by which savings institutions
may consolidate or merge, subject to approval of the Administrator. The approval
is conditioned upon findings by the Administrator that, among other things, such
merger or consolidation will promote the best interests of the members or
stockholders of the merging institutions. North Carolina law also provides for
simultaneous mergers and conversions and for supervisory mergers conducted by
the Administrator.
Future Requirements. Statutes and regulations are regularly introduced
which contain wide-ranging proposals for altering the structures, regulations
and competitive relationships of financial institutions. It cannot be predicted
whether or what form any proposed statute or regulation will be adopted or the
extent to which the business of the Company and the Bank may be affected by such
statute or regulation.
MANAGEMENT OF THE COMPANY
The Board of Directors of the Company currently consists of seven
directors: Preston A. Burns, John J. Crawford, W. Kenneth Huntley, Emmett S.
Patterson, John R. Potter, H. Patrick Taylor, Jr. and Eugene M. Ward. Each of
these persons is also a director of the Bank, and biographical information with
respect to each is set forth under "MANAGEMENT OF THE BANK -- Directors" and "
- -- Executive Officers." Each director is elected for a one-year term. However,
at such time, if any, as the number of directors is at least nine, the Articles
of Incorporation and Bylaws of the Company provide for staggered elections so
that approximately
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<PAGE>
one-third of the directors will each be initially elected to one, two and
three-year terms, respectively, and thereafter, all directors will be elected to
terms of three years each.
The executive officers of the Company, each of whom is also currently
an executive officer of the Bank, and each of whom serves at the discretion of
the Board of Directors of the Company, are as follows:
<TABLE>
<CAPTION>
Age at Position Held
Name December 31, 1997 With the Company
---- ----------------- ----------------
<S> <C> <C>
Eugene M. Ward 63 President and Chief Executive
Officer
Nancy H. Allen 52 Treasurer and Assistant
Secretary
Veda H. Edwards 57 Secretary
</TABLE>
Biographical information with respect to each of these officers is set
forth below under "MANAGEMENT OF THE BANK -- Executive Officers." There are no
other employees of the Company. No officer, director or employee of the Company
has received remuneration from the Company to date, and it is currently expected
that no compensation will be paid by the Company after the Conversion.
Information concerning the principal occupations and employment of, and
compensation paid by the Bank to, the directors and executive officers of the
Company is set forth under "MANAGEMENT OF THE BANK." See "MANAGEMENT OF THE BANK
- -- Employment Agreement" for a description of the employment agreement expected
to be entered into with the Chief Executive Officer of the Company and the Bank.
MANAGEMENT OF THE BANK
Directors
The direction and control of the Bank, as a mutual North Carolina
chartered savings bank, has been vested in its seven-member Board of Directors
elected by the depositor and borrower members of the Bank. Upon Conversion of
the Bank to capital stock form, each director of the Bank immediately prior to
the Conversion will continue to serve as a director of the Bank as a stock
institution. All directors currently serve for one-year terms. The Bank's
proposed Bylaws, which would become effective after the Conversion, provide for
staggered elections of its directors, if and when the number of directors equals
at least nine, so that approximately one-third of the directors would be elected
each year for three-year terms. Upon consummation of the Conversion, the Company
will own all of the issued and outstanding shares of capital stock of the Bank,
and the Company will elect the directors of the Bank. The Company now plans to
nominate and re-elect all members of the Bank's existing board of directors when
their existing terms expire. The following table sets forth certain information
with respect to the persons who currently serve as members of the Board of
Directors of the Bank.
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<PAGE>
<TABLE>
<CAPTION>
Age on
December 31, Principal Occupation Director
Name 1997 During Last Five Years Since
- ---- ------ ---------------------- --------
<S> <C> <C> <C>
Preston A. Burns, 83 Retired, former President of Wadesboro Auto 1958
Chairman Supply
John J. Crawford 77 Retired, former owner of Crawford Motor 1960
Company
W. Kenneth Huntley 48 President, Huntley Oil and Gas Company, Inc. 1989
Emmett S. Patterson 59 General Manager and Executive Vice President, 1988
PeeDee Electric Membership Corporation
John R. Potter 79 Retired, former Anson County Agricultural 1962
Extension Agent
H. Patrick Taylor, Jr. 73 Attorney 1961
Eugene M. Ward 63 President, Anson Savings Bank, SSB 1962
</TABLE>
Board Meetings and Committees
The Bank's Board of Directors has regular monthly meetings, and held 12
regular and special meetings in the fiscal year ended June 30, 1997. The Board
has also established three committees to whom certain responsibilities have been
delegated - an Executive Committee, a Nominating/Compensation Committee and a
Proxy Committee. In addition, all of the directors serve on the Loan Committee
and the Audit Committee; however, only 3 directors are asked to attend any one
meeting of the Loan Committee. No director attended fewer than 75% of the total
number of Board meetings and meetings of Board committees (other than the Loan
Committee) on which he served during the year ended June 30, 1997. In addition,
no director attended few than 75% of the total number of Loan Committee meetings
he was requested to attend during the year ended June 30, 1997.
The Executive Committee is composed of directors Preston Burns, Eugene
Ward, John Potter and John Crawford. The Executive Committee makes
recommendations to the full Board and acts on policies adopted by the full Board
in the absence of a meeting of the entire Board. The Executive Committee meets
on an as needed basis and did not meet during the year ended June 30, 1997.
The Nominating/Compensation Committee is composed of directors John
Crawford, John Potter and Emmett Patterson. This committee recommends
individuals to be elected to serve as directors of the Bank and recommends to
the Board of Directors the compensation to be paid to the Bank's officers. The
Nominating/Compensation Committee generally meets on an annual basis and met one
time during the year ended June 30, 1997.
The Proxy Committee is composed of directors John Potter, Kenneth
Huntley, and John Crawford. The Proxy Committee meets on an as needed basis and
met one time during the year ended June 30, 1997.
The full Board of Directors serves as a Loan Committee with any three
directors constituting a quorum for purposes of approving loans. The Loan
Committee meets on an as needed basis and met 35 times during the year ended
June 30, 1997.
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<PAGE>
The full Board of Directors also serves the function of an Audit
Committee. The Board meets with and retains independent auditors, oversees the
adequacy of internal controls, insuring compliance with the Bank's policies and
procedures and with generally accepted accounting principles.
Directors' Fees
For their service on the Bank's Board of Directors, all members of the
Bank's Board of Directors, including Mr. Ward, receive an annual retainer of
$600.00 and an additional $200.00 per meeting attended. Board fees are subject
to adjustment annually. The Executive Committee members, including Mr. Ward,
receive $50.00 per meeting attended; all of the directors, excluding Mr. Ward,
receive $50.00 per month for their services on the Loan Committee.
Executive Officers
The Bank has three executive officers. The following table sets forth
certain information with respect such executive officers:
<TABLE>
<CAPTION>
Name and Principal Age on Positions and Occupations Employed By
Position December 31, 1997 During Last Five Years the Bank Since
-------- ----------------- ------------------------ --------------
<S> <C> <C> <C>
Eugene M. Ward 63 President and Chief Executive 1962
Officer
Nancy H. Allen 52 Treasurer and Assistant 1964
Secretary
Veda H. Edwards 57 Secretary 1959
</TABLE>
Executive Compensation
The following table sets forth for the fiscal year ended June 30, 1997
certain information regarding compensation received by (i) the chief executive
officer of the Bank and (ii) all other executive officers whose cash
compensation exceeded $100,000 (there were none).
<TABLE>
<CAPTION>
Other Annual
Name and Compensation All Other
Principal Position Salary Bonus ($)/2/ Compensation
------------------ ------ ----- ------------ ------------
<S> <C> <C> <C> <C>
Eugene M. Ward, President and $64,000/1/ $7,320 --- $395/3/
Director
</TABLE>
- --------------------
/1/ Includes directors' fees of $3,000 received by Mr. Ward.
/2/ Under the "Other Annual Compensation" category, perquisites for the
fiscal year ended June 30, 1997 did not exceed the lesser of $50,000 or
10% of salary and bonus as reported for Mr. Ward.
/3/ Represents the amount of the insurance premium paid by the Bank for
term life insurance for the benefit of Mr. Ward.
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<PAGE>
The Bank's Nominating/Compensation Committee determines the
compensation of the executive officers. The salaries of each of the executive
officers is determined based upon the executive officer's contributions to the
Bank's overall profitability, maintenance of regulatory compliance standards,
professional leadership, and management effectiveness in meeting the needs of
day to day operations. The Board of Directors also compares the compensation of
the Bank's executive officers with compensation paid to executives of comparable
financial institutions in North Carolina and executives of other businesses in
the Bank's market area. Mr. Ward participates in the deliberations of the Board
of Directors regarding compensation of executive officers other than himself. He
does not participate in the discussion or decisions regarding his own
compensation.
Bonus Compensation
The Board of Directors of the Bank has established a plan for awarding
an annual bonus to all employees of the Bank. Under the terms of the annual
bonus plan, if the profits of the Bank exceed a certain target amount, which
target amount is determined annually by the Bank's Board of Directors, an
aggregate amount equal to 10% of the profits of the Bank is divided pro rata
among the full-time employees based on each employee's base salary. However, the
annual bonus paid to each of the Bank's employees may not exceed 20% of each
such employee's annual base salary. However, as is the case with the Bank's
compensation arrangements in general, the Bank's bonus compensation is subject
to regulatory oversight and, therefore, could be changed in the future in
response to regulatory requirements or otherwise.
Other Benefits
The Bank maintains a Pension Plan for its employees. All full-time
employees of the Bank who have completed one year of service and who are at
least twenty-one (21) years of age are covered under the Pension Plan.
Participants are fully vested in amounts contributed to the Pension
Plan on their behalf after six (6) years of service, as follows: less than 2
years of service, 0%; 2 years, 20%; 3 years, 40%; 4 years, 60%; 5 years, 80%; 6
years, 100%. Benefits under the Pension Plan are payable in the event of the
participant's retirement, death, disability or termination of employment.
Normal retirement age under the Pension Plan is the later of (a) age
sixty-five (65), or (b) the fifth anniversary of the participant's joining the
plan ("Normal Retirement Age"). Subject to certain restrictions on maximum
benefits required by federal law, upon reaching Normal Retirement Age, each
participant will receive a retirement benefit in the form of a straight life
annuity, determined pursuant to a formula which takes into consideration a
participant's "average monthly compensation" and up to seven (7) years of
service. For purposes of the Pension Plan, a participant's "average monthly
compensation" is defined as a participant's compensation converted to a monthly
amount and then averaged over the five (5) consecutive plan years of the last
ten (10) calendar years immediately preceding his retirement.
As of June 30, 1997, Mr. Ward's expected benefit under the Pension Plan
at Normal Retirement Age was $33,444 per year.
The Bank also provides its employees with group medical, dental, life
and disability insurance benefits and provides vacation leave.
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<PAGE>
Employment Agreement
In connection with the Conversion, the Bank will enter into an
employment agreement with Eugene M. Ward, President and Chief Executive Officer,
in order to establish his duties and compensation and to provide for his
continued employment with the Bank. The agreement will provide for an initial
annual base salary of $__________ and an initial term of employment of three
years. Commencing on the first anniversary date and continuing on each
anniversary date thereafter, following a performance evaluation of the employee,
each agreement may be extended for an additional year so that the remaining term
shall be three years, unless written notice of non-renewal is given by the Board
of Directors. The agreements also provide that the base salary shall be reviewed
by the Board of Directors not less often than annually. In the event of a change
in control (as defined below), Mr. Ward's base salary shall be increased by at
least 6% annually and the agreements will automatically be extended so that it
will have a three-year term after the change in control. In addition, the
employment agreement provides for possible profitability and discretionary
bonuses and participation in all other pension, profit-sharing or retirement
plans maintained by the Bank or the Company for employees of the Bank, as well
as fringe benefits normally associated with Mr. Ward's office. It is
contemplated that Mr. Ward will receive holiday bonuses computed on the same
basis as those paid to other employees. The employment agreement provides that
it may be terminated by the Bank for cause, as defined in the agreement, and
that they may otherwise be terminated by the Bank (subject to vested rights) or
by Mr. Ward.
The employment agreement provides that the nature of Mr. Ward's
compensation, duties or benefits cannot be diminished following a change in
control of the Bank or the Company. For purposes of the employment agreement, a
change in control generally will occur if (i) after the effective date of the
employment agreement, any "person" (as such term is defined in Sections 3(a)(9)
and 13(d)(3) of the Exchange Act) directly or indirectly, acquires beneficial
ownership of voting stock, or acquires irrevocable proxies or any combination of
voting stock and irrevocable proxies, representing 25% or more of any class of
voting securities of either the Company or the Bank, or acquires in any manner
control of the election of a majority of the directors of either the Company or
the Bank, (ii) either the Company or the Bank consolidates or merges with or
into another corporation, association or entity, or is otherwise reorganized,
where neither the Company nor the Bank is the surviving corporation in such
transaction, or (iii) all or substantially all of the assets of either the
Company or the Bank are sold or otherwise transferred to, or are acquired by,
any other entity or group. The agreement also provides that, in the event of the
employee's death following a change in control, the remaining payments to be
made under the agreements will be made to the employee's beneficiary or the
beneficiary's estate.
The employment agreement could have the effect of making it less likely
that the Bank or the Company will be acquired by another entity. See
"ANTI-TAKEOVER PROVISIONS AFFECTING THE COMPANY AND THE BANK -- The Company --
Anti-Takeover Effect of Employment Agreement and Benefit Plans."
Severance Plan
In connection with the Conversion, the Bank's Board of Directors plans
to adopt a Severance Plan for the benefit of its employees. The Severance Plan
provides that in the event there is a "change in control" (as defined in the
Severance Plan) of the Bank or the Company and (i) the Bank or any successor of
the Bank terminates the employment of any full time employee of the Bank in
connection with, or within 24 months after the change in control, other than for
"cause" (as defined in the Severance Plan), or (ii) an employee terminates his
or her employment with the Bank or any successor following a decrease in the
level of such employee's
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<PAGE>
annual base salary rate or a transfer of such employee to a location more than
40 miles distant from the employee's primary work station within 24 months after
a change in control, the employee shall be entitled to a severance benefit equal
to the following: (a) if the employee has been an employee for less than twenty
(20) years, the employee shall be entitled to a benefit equal to the greater of
(1) an amount equal to two weeks' salary at the employee's existing salary rate
multiplied times the employee's number of complete years of service as a Bank
employee or (2) the amount of one month's salary at the employee's salary rate
at the time of termination; or (b) if the employee has been an employee for at
least twenty (20) years, the employee shall be entitled to a benefit equal to
the greater of (1) an amount equal to two weeks' salary of the employee's
existing salary rate multiplied times the employee's number of complete years of
service as a Bank employee or (2) an amount equal to two years of the employee's
annual salary at the employee's existing salary rate. Officers of the Bank who,
at the time of a "change in control," are parties to an employment agreement
having a remaining term of more than two years are not covered by the Severance
Plan.
Proposed Management Recognition Plan
The Boards of Directors of the Company and the Bank intend to adopt the
MRP, subject to approval of the stockholders of the Company at a meeting to be
held no sooner than six months following the Conversion. The MRP will serve as a
means of providing the directors and employees of the Bank with an ownership
interest in the Company in a manner designed to encourage such persons to
continue their service to the Bank. All directors and certain employees of the
Bank would receive benefits under the MRP.
The Company's directors are expected to act by majority as trustees of
the trust associated with the MRP (the "MRP Trust"). The trustees of the MRP
Trust (the "MRP Trustees") will have the responsibility to hold and invest all
funds contributed to the MRP Trust.
At any time following approval of the MRP by the Company's
stockholders, the Company and the Bank expect to contribute sufficient funds to
the MRP Trust so that the MRP Trust could purchase a number of shares of Common
Stock equal to 4% of the shares issued in the Conversion. Such shares would be
provided by the issuance of authorized but unissued shares of Common Stock or
shares purchased by the MRP Trust in the open market. Whether such shares will
be purchased in the open market or newly issued by the Company, and the timing
of such purchases, will depend on market and other conditions and the
alternative uses of capital available to the Company. Shares issued to
recipients under the MRP will be restricted and subject to forfeiture as
described below.
Recipients would not be required to pay for shares issued to them under
the MRP. To the extent that the MRP acquires authorized but unissued shares of
Common Stock after the Conversion, the interests of existing shareholders will
be diluted. Assuming the issuance of 759,000 shares in the Conversion and
receipt of stockholder approval, 30,360 shares would be issued pursuant to the
MRP. Under applicable regulations, if the proposed MRP is submitted to and
approved by the stockholders of the Company within one year after consummation
of the Conversion, (i) no employee of the Bank (including Mr. Ward) could
receive more than 25% of the shares issued under the MRP, or 7,590 shares,
assuming the issuance of 759,000 shares in the Conversion, (ii) the six
non-employee directors of the Bank could receive restricted stock grants for an
aggregate of not more than 25% of the shares issued under the MRP, or 7,590
shares, assuming the issuance of 759,000 shares in the Conversion and (iii) none
of the six non-employee directors of the Bank could receive individually more
than 5% of the shares issued under the MRP, or 1,518 shares, assuming the
issuance of 759,000 shares in the Conversion. If the MRP is submitted to and
approved by the Company's stockholders more than one year after consummation of
the Conversion, the regulatory percentage limitations set forth above would not
apply.
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<PAGE>
After the grant of shares of Common Stock under the MRP, recipients
will be entitled to vote all vested and unvested shares and receive all
dividends and other distributions with respect thereto. If the MRP is submitted
for stockholder approval within twelve months after consummation of the
Conversion, the MRP will provide that 20% of the shares granted will vest and
become nonforfeitable on the first anniversary of the date of the grant under
the MRP, and 20% will vest and become nonforfeitable on each subsequent
anniversary date, so that the shares would be completely vested at the end of
five years after the date of grant. Grants of Common Stock under the MRP will
immediately vest upon the disability or death of a recipient.
If the MRP is submitted to the Company's stockholders and approved by
them more than one year after the consummation of the Conversion, the MRP may
provide for a different or no vesting schedule and may provide that grants of
Common Stock under the MRP will become automatically vested upon retirement or
upon a change in control of the Company or the Bank. In such event, it is
expected that a "change in control" would have the same meaning as is set forth
in the employment agreement with Mr. Ward. See "-- Employment Agreement."
Until shares become vested, the right to direct the voting of such
shares and the right to receive dividends thereon may not be sold, assigned,
transferred, exchanged, pledged or otherwise encumbered. If the recipient of
shares under the MRP terminates his service to the Bank prior to the time shares
become vested (and such shares are not automatically vested under the terms of
the MRP), unvested shares would be forfeited to the MRP and would be subject to
future allocations to others. In addition, the recipient would be required to
repay all dividends received with respect to shares that did not become vested.
It is expected that the MRP will provide that it cannot be terminated upon a
change in control of the Company or the Bank unless the acquiror provides for an
equivalent benefit.
If the MRP is approved by the stockholders, the Bank expects to
recognize a compensation expense for the MRP awards in the amount of the fair
market value of the Common Stock granted. The expense would be recognized pro
rata over the years during which shares vest. The recipients of stock grants
would be required to recognize ordinary income equal to the fair market value of
the stock.
Proposed Option Plan
The Boards of Directors of the Company and the Bank intend to adopt the
Option Plan, subject to approval of the stockholders of the Company at a meeting
to be held no sooner than six months following the Conversion. As soon as
practicable following stockholder approval of the Option Plan, Common Stock in
the aggregate amount equal to 10% of the shares issued in the Conversion would
be reserved for future issuance by the Company upon the exercise of the stock
options granted under the Option Plan. Assuming the issuance of between 561,000
and 759,000 shares in the Conversion, an aggregate of between 56,100 and 75,900
shares of Common Stock would be reserved for issuance. However, some or all of
the shares issued upon the exercise of options granted under the Option Plan may
be purchased in the open market at the time of exercise.
Assuming the Option Plan is approved by the stockholders of the
Company, the Option Plan would be administered by a committee of the Company's
Board of Directors. Options granted under the Option Plan will have an option
exercise price of not less than the fair market value of the Common Stock on the
date the options are granted. Options granted under the Option Plan will have a
term of ten years, will not be transferable except upon death and will continue
to be exercisable upon retirement, death or disability. If the Option Plan is
submitted for stockholder approval within twelve months after consummation of
the Conversion, options granted under the Option Plan will have a vesting
schedule which will provide that 20% of the options granted would vest and
become nonforfeitable on the first anniversary of the date of the option
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<PAGE>
grant and 20% will vest and become nonforfeitable on each subsequent anniversary
date, so that the options would be completely vested at the end of five years
after the date of the option grant. Options would become 100% vested upon death
or disability.
If the Option Plan is submitted to and approved by the Company's
stockholders more than one year after consummation of the Conversion, the Option
Plan may provide for a different or no vesting schedule and may provide that
options will become automatically vested upon retirement or upon a change in
control of the Company or the Bank. In such event, it is expected that a "change
in control" would have the same meaning as is set forth in the employment
agreement with Mr. Ward. See "-- Employment Agreement." The Option Plan is
expected to provide that the Plan cannot be terminated upon a change in control
of the Company or the Bank unless the acquiror provides for an equivalent
benefit to holders of unvested options.
Under applicable regulations, if the proposed Option Plan is submitted
to and approved by the stockholders of the Company within one year after
consummation of the Conversion, (i) no employee of the Bank (including Mr. Ward)
could receive more than 25% of the options issued under the Option Plan, or
options to purchase 18,975 shares, assuming the issuance of 759,000 shares in
the Conversion, (ii) the six non-employee directors of the Bank could receive
not more than 25% of the options issued under the Option Plan, or options to
purchase 18,975 shares, assuming the issuance of 759,000 shares in the
Conversion, and (iii) none of the six non-employee directors of the Bank could
receive individually more than 5% of the options issued under the Option Plan,
or options to purchase 3,795 shares, assuming the issuance of 759,000 shares in
the Conversion. If the Option Plan is submitted to and approved by the Company's
stockholders more than one year after consummation of the Conversion, the
regulatory percentage limitations set forth above would not apply.
Options granted to employees under the Option Plan may be "incentive
stock options" which are designed to result in beneficial tax treatment to the
employee but no tax deduction to the Company or the Bank. The holder of an
incentive stock option generally is not taxed for federal income tax purposes on
either the grant or the exercise of the option. However, the optionee must
include in his or her federal alternative minimum tax income any excess (the
"Bargain Element") of the acquired common stock's fair market value at the time
of exercise over the exercise price paid by the optionee. Furthermore, if the
optionee sells, exchanges, gives or otherwise disposes of such common stock
(other than in certain types of transactions) either within two years after the
option was granted or within one year after the option was exercised (an "Early
Disposition"), the optionee generally must recognize the Bargain Element as
compensation income for regular federal income tax purposes. Any gain realized
on the disposition in excess of the Bargain Element is subject to recognition
under the usual rules applying to dispositions of property. If a taxable sale or
exchange is made after such holding periods are satisfied, the difference
between the exercise price and the amount realized upon the disposition of the
common stock generally will constitute a capital gain or loss for tax purposes.
If an optionee exercises an incentive stock option and delivers shares of common
stock as payment for part or all of the exercise price of the stock purchased
("Payment Stock"), no gain or loss generally will be recognized with respect to
the Payment Stock; provided, however, if the Payment Stock was acquired pursuant
to the exercise of an incentive stock option, the optionee will be subject to
recognizing as compensation income the Bargain Element on the Payment Stock as
an Early Disposition if the exchange for the new shares occurs prior to the
expiration of the holding periods for the Payment Stock. The Company generally
would not recognize gain or loss or be entitled to a deduction upon either the
grant of an incentive stock option or the optionee's exercise of an incentive
stock option. However, if there is an Early Disposition, the Company generally
would be entitled to deduct the Bargain Element as compensation paid the
optionee.
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Options granted to directors under the Option Plan would be
"non-qualified stock options." In general, the holder of a non-qualified stock
option will recognize compensation income equal to the amount by which the fair
market value of the common stock received on the date of exercise exceeds the
sum of the exercise price and any amount paid for the non-qualified stock
option. If the optionee elects to pay the exercise price in whole or in part
with common stock, the optionee generally will not recognize any gain or loss on
the common stock surrendered in payment of the exercise price. The Company would
not recognize any income or be entitled to claim any deduction upon the grant of
a non-qualified stock option. At the time the optionee is required to recognize
compensation income upon the exercise of the non-qualified stock option, the
Company would recognize a compensation expense and be entitled to claim a
deduction in the amount equal to such compensation income.
If the Option Plan is approved by the stockholders of the Company, the
options granted to employees and directors pursuant to the Option Plan would be
issued in recognition of the recipients' past service to the Bank and as an
incentive for their continued performance. No cash consideration will be paid
for the options.
Certain Indebtedness and Transactions of Management
The Bank makes loans to executive officers and directors of the Bank in
the ordinary course of its business. These loans are made on the same terms,
including interest rates and collateral, as those then prevailing for comparable
transactions with nonaffiliated persons, and do not involve more than the normal
risk of collectibility or present any other unfavorable features. The Bank does
not make loans to executive officers and directors of the Bank on terms more
favorable than could be obtained by persons not affiliated with the Bank. There
were no loans outstanding at December 31, 1997 which were made to directors and
officers and their affiliates.
DESCRIPTION OF CAPITAL STOCK
The Company
The Company is authorized to issue 20,000,000 shares of Common Stock
and 5,000,000 shares of preferred stock. Neither the authorized Common Stock nor
the authorized preferred stock has any par value.
Common Stock. General. The Company's Common Stock will represent
nonwithdrawable capital, will not be an account of an insurable type, and will
not be insured by the FDIC or any other governmental entity. Upon payment of the
purchase price for the Common Stock, all such stock will be duly authorized,
validly issued, fully paid, and nonassessable.
Dividends. The holders of the Company's Common Stock will be entitled
to receive and share ratably in such dividends on Common Stock as may be
declared by the Board of Directors of the Company out of funds legally available
therefor, subject to applicable statutory and regulatory restrictions. See
"SUPERVISION AND REGULATION -- Regulation of the Company -- Restrictions on
Dividends." The ability of the Company to pay dividends may be dependent on the
receipt of dividends from the Bank. See "DIVIDEND POLICY," "SUPERVISION AND
REGULATION -- Regulation of the Bank -- Restrictions on Dividends and Other
Capital Distributions," and "TAXATION."
Stock Repurchases. The shares of Common Stock do not have any
redemption provisions. Stock repurchases are subject to North Carolina corporate
laws regarding capital distributions.
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Voting Rights. Upon Conversion, the holders of Common Stock, as the
only class of capital stock of the Company then outstanding, will possess
exclusive voting rights with respect to the Company. Such holders will have the
right to elect the Company's Board of Directors and to act on such other matters
as are required to be presented to stockholders under North Carolina law or as
are otherwise presented to them. Each holder of Common Stock will be entitled to
one vote per share. The holders of Common Stock will have no right to vote their
shares cumulatively in the election of directors. As a result, the holders of a
majority of the shares of Common Stock will have the ability to elect all of the
directors on the Company's Board of Directors.
Liquidation Rights. In the event of a liquidation, dissolution or
winding up of the Company, the holders of Common Stock of the Company would be
entitled to ratably receive, after payment of or making of adequate provisions
for, all debts and liabilities of the Company and after the rights, if any, of
preferred stockholders of the Company, all remaining assets of the Company
available for distribution.
Preemptive Rights. Holders of the Common Stock of the Company will not
be entitled to preemptive rights with respect to any shares which may be issued
by the Company.
Shares Owned by Directors and Executive Officers. All shares of Common
Stock issued in the Conversion to directors and executive officers of the
Company and the Bank will contain a restriction providing that such shares may
not be sold without the written permission of the Administrator for a period of
one year following the date of purchase, except in the event of death of the
director or the executive officer.
Preferred Stock. None of the 5,000,000 shares of the Company's
authorized preferred stock have been issued and none will be issued in the
Conversion. Such stock may be issued in one or more series with such rights,
preferences and designations as the Board of Directors of the Company may from
time to time determine subject to applicable law and regulations. If and when
such shares are issued, holders of such shares may have certain preferences,
powers and rights (including voting rights) senior to the rights of the holders
of the Common Stock. The Board of Directors can (without stockholder approval)
issue preferred stock with voting and conversion rights which could, among other
things, adversely affect the voting power of the holders of the Common Stock and
assist management in impeding an unfriendly takeover or attempted change in
control of the Company that some stockholders may consider to be in their best
interests but to which management is opposed. See "ANTI-TAKEOVER PROVISIONS
AFFECTING THE COMPANY AND THE BANK --The Company -- Restrictions in Articles of
Incorporation and Bylaws." The Company has no current plans to issue preferred
stock.
Restrictions on Acquisition. Acquisitions of the Company and
acquisitions of the capital stock of the Company are restricted by provisions in
the Articles of Incorporation and Bylaws of the Company and by various federal
and state laws and regulations. See "ANTI-TAKEOVER PROVISIONS AFFECTING THE
COMPANY AND THE BANK -- The Company -- Restrictions in Articles of Incorporation
and Bylaws" and "-- Regulatory Restrictions."
The Bank
Common Stock. After consummation of the Conversion, the Bank will be
authorized to issue 100,000 shares of common stock, no par value ("the Bank
Common Stock"). The Bank Common Stock will represent nonwithdrawable capital,
will not be an account of an insurable type, and will not be insured by the FDIC
or any other governmental entity.
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Dividends. The payment of dividends by the Bank is subject to
limitations which are imposed by North Carolina law and regulations. See
"DIVIDEND POLICY" and "SUPERVISION AND REGULATION -- Regulation of the Bank --
Restrictions on Dividends and Other Capital Distributions." In addition, federal
income tax law considerations may affect the ability of the Bank to pay
dividends and make other capital distributions. See "TAXATION." The holders of
the Bank Common Stock will be entitled to receive and share ratably in such
dividends on the Bank Common Stock as may be declared by the Board of Directors
of the Bank out of funds legally available therefor, subject to applicable
statutory and regulatory restrictions.
Voting Rights. As a mutual North Carolina chartered savings bank, the
Bank currently has no stockholders, and voting rights in the Bank are currently
held by the Bank's members (depositors and borrowers). Members elect the Bank's
Board of Directors and vote on such other matters as are required to be
presented to them under North Carolina law.
Upon Conversion, the Company, as sole stockholder of the Bank, will
possess the exclusive voting rights with respect to the Bank Common Stock, will
elect the Bank's Board of Directors and will act on such other matters as are
required to be presented to stockholders under North Carolina law or as are
otherwise presented to stockholders by the Bank's Board of Directors. The
holders of the Bank Common Stock will have no right to vote their shares
cumulatively in the election of directors of the Bank.
Liquidation Rights. After the Conversion, in the event of any
liquidation, dissolution or winding up of the Bank, the Company, as holder of
all of the Bank's outstanding capital stock, would be entitled to receive all
remaining assets of the Bank available for distribution, after payment of or
making of adequate provisions for, all debts and liabilities of the Bank
(including all deposit accounts and accrued interest thereon) and after
distribution of the balance in the liquidation account established in connection
with the Conversion to Eligible Account Holders and Supplemental Eligible
Account Holders. See "THE CONVERSION -- Effects of Conversion -- Liquidation
Rights."
Preemptive Rights. Holders of the Bank Common Stock will not be
entitled to preemptive rights with respect to any shares which may be issued by
the Bank.
Restrictions on Acquisition. Acquisitions of the Bank and acquisitions
of its capital stock are restricted by various federal and state laws and
regulations. See "ANTI-TAKEOVER PROVISIONS AFFECTING THE COMPANY AND THE BANK --
The Bank."
ANTI-TAKEOVER PROVISIONS AFFECTING THE COMPANY AND THE BANK
The Company
Restrictions in Articles of Incorporation and Bylaws. The Articles of
Incorporation and Bylaws of the Company contain certain provisions that are
intended to encourage a potential acquiror to negotiate any proposed acquisition
of the Company directly with the Company's Board of Directors. An unsolicited
non-negotiated takeover proposal can seriously disrupt the business and
management of a corporation and cause it great expense. Accordingly, the Board
of Directors believes it is in the best interests of the Company and its
stockholders to encourage potential acquirors to negotiate directly with
management. The Board of Directors believes that these provisions will encourage
such negotiations and discourage hostile takeover attempts. It is also the Board
of Directors' view that these provisions should not discourage persons from
proposing a merger or transaction at prices reflective of the true value of the
Company and that otherwise is
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in the best interests of all stockholders. However, these provisions may have
the effect of discouraging offers to purchase the Company or its securities
which are not approved by the Board of Directors but which certain of the
Company's stockholders may deem to be in their best interests or pursuant to
which stockholders would receive a substantial premium for their shares over the
current market prices. Therefore, the existence of such anti-takeover provisions
in fact may not always be in the best interests of all shareholders.
Stockholders who might desire to participate in such a takeover not supported by
management may not have an opportunity to do so. Such provisions will also
render the removal of the current Board of Directors and management more
difficult. Nevertheless, the Boards of Directors of the Bank and the Company
believe these provisions are in the best interests of the stockholders because
they will assist the Company's Board of Directors in managing the affairs of the
Company in the manner they believe to be in the best interests of stockholders
generally and because a company's board of directors is often best able in terms
of knowledge regarding the company's business and prospects, as well as
resources, to negotiate the best transaction for its stockholders as a whole.
The following description of certain of the provisions of the Articles
of Incorporation and Bylaws of the Company is necessarily general and reference
should be made in each instance to such Articles of Incorporation and Bylaws.
See "ADDITIONAL INFORMATION" regarding how to obtain a copy of these documents.
Board of Directors. The Bylaws of the Company provide that the number
of directors shall not be less than five nor more than 15. The initial number of
directors is seven, but such number may be changed by resolution of the Board of
Directors. These provisions have the effect of enabling the Board of Directors
to elect directors friendly to management in the event of a non-negotiated
takeover attempt and may make it more difficult for a person seeking to acquire
control of the Company to gain majority representation on the Board of Directors
in a relatively short period of time. The Company believes these provisions to
be important to continuity in the composition and policies of the Board of
Directors.
The Articles of Incorporation provide that, if and when the number of
directors is at least nine, there will be staggered elections of directors so
that the directors will each be initially elected to one, two or three-year
terms, and thereafter (so long as the number of directors is nine or more) all
directors will be elected to terms of three years each. This provision also has
the effect of making it more difficult for a person seeking to acquire control
of the Company to gain majority representation on the Board of Directors.
The Articles of Incorporation and Bylaws of the Company provide that
directors may be removed prior to the end of their term only for cause.
Cumulative Voting. The Articles of Incorporation do not provide for
cumulative voting for any purpose. Cumulative voting in election of directors
entitles a stockholder to cast a total number of votes equal to the number of
directors to be elected multiplied by the number of his or her shares and to
distribute that number of votes among such number of nominees as the stockholder
chooses. The absence of cumulative voting for directors limits the ability of a
minority stockholder to elect directors. Because the holder of less than a
majority of the Company's shares cannot be assured representation on the Board
of Directors, the absence of cumulative voting may discourage accumulations of
the Company's shares or proxy contests that would result in changes in the
Company's management. The Board of Directors believes that (i) elimination of
cumulative voting will help to assure continuity and stability of management and
policies; (ii) directors should be elected by a majority of the stockholders to
represent the interests of the stockholders as a whole rather than be the
special representatives of particular minority interests; and (iii) efforts to
elect directors representing specific minority interests are potentially
divisive and could impair the operations of the Company.
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Special Meetings. The Bylaws of the Company provide that special
meetings of stockholders of the Company may be called by the Chairman of the
Board, the Chief Executive Officer, the President, or by the Board of Directors.
If a special meeting is not called by such persons or entities, stockholder
proposals cannot be presented to the stockholders for action until the next
annual meeting.
Capital Stock. The Articles of Incorporation of the Company authorize
the issuance of 20,000,000 shares of common stock and 5,000,000 shares of
preferred stock. The shares of common stock and preferred stock authorized in
addition to the number of shares of Common Stock to be issued pursuant to the
Conversion were authorized to provide the Company's Board of Directors with
flexibility to issue additional shares, without further stockholder approval,
for proper corporate purposes, including financing, acquisitions, stock
dividends, stock splits, director and employee stock options, grants of
restricted stock to directors and certain employees and other appropriate
purposes. However, issuance of additional authorized shares may also have the
effect of impeding or deterring future attempts to gain control of the Company.
The Board of Directors also has sole authority to determine the terms
of any one or more series of preferred stock, including voting rights,
conversion rates, dividend rights, and liquidation preferences, which could
adversely affect the voting power of the holders of the Common Stock and
discourage an attempt to acquire control of the Company. The Board of Directors
does not intend to issue any preferred stock, except on terms which it deems to
be in the best interests of the Company and its stockholders. However, the Board
of Directors has the power, to the extent consistent with its fiduciary duties,
to issue preferred stock to persons friendly to management or otherwise in order
to impede attempts by third parties to acquire voting control of the Company and
to impede other transactions not favored by management. The Board of Directors
currently has no plans for the issuance of additional shares of Common Stock
(except for such shares as may be necessary to fund a MRP and a Option Plan) or
of shares of preferred stock.
Director Nominations. The Bylaws of the Company require a stockholder
who intends to nominate a candidate for election to the Board of Directors at a
stockholders' meeting to give written notice to the Secretary of the Company at
least 50 days (but not more than 90 days) in advance of the date of the meeting
at which such nominations will be made. The nomination notice is also required
to include specified information concerning the nominee and the proposing
stockholder. The Board of Directors of the Company believes that it is in the
best interests of the Company and its stockholders to provide sufficient time
for the Board of Directors to study all nominations and to determine whether to
recommend to the stockholders that such nominees be considered.
Supermajority Voting Provisions. The Company's Articles of
Incorporation require the affirmative vote of 75% of the outstanding shares
entitled to vote to approve a merger, consolidation, or other business
combination, unless the transaction is approved, prior to consummation, by the
vote of at least 75% of the number of the Continuing Directors (as defined in
the Articles of Incorporation) on the Company's Board of Directors. "Continuing
Directors" generally includes all members of the Board of Directors who are not
affiliated with any individual, partnership, trust or other person or entity (or
the affiliates and associates of such person or entity) which is a beneficial
owner of 10% or more of the voting shares of the Company. This provision could
tend to make the acquisition of the Company more difficult to accomplish without
the cooperation or favorable recommendation of the Company's Board of Directors.
Anti-Takeover Effect of Employment Agreements and Benefit Plans. If
approved by the stockholders of the Company at a meeting of stockholders
following the Conversion, the MRP and the Option Plan will provide for the
ownership of additional shares of Common Stock by the employees and the
directors of the Bank and for voting control by directors and certain employees
over shares held by the MRP and Option
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Plan which are attributable to grants made to them under such plans even though
the grants are not yet vested. See "MANAGEMENT OF THE BANK -- Proposed
Management Recognition Plan" and "-- Proposed Option Plan."
If (i) the Option Plan is approved by the stockholders of the Company
within one year after the Conversion and all of the stock options which could be
granted to directors and executive officers under the Option Plan are granted
and exercised or the shares for such options are acquired by the Option Plan and
all option shares are acquired in the open market, (ii) the MRP is approved by
the stockholders of the Company within one year after the Conversion, all of the
MRP shares which could be granted to directors and executive officers are
granted and issued and all such shares are acquired in the open market, (iii)
the Company did not issue any additional shares of its Common Stock, the shares
held by directors and executive officers and their associates as a group,
including (a) shares purchased outright in the Conversion, (b) shares purchased
pursuant to the Option Plan and (c) shares granted under the MRP, would give
such persons effective control over as much as 19.37% or 16.88%, at the minimum
and maximum of the Estimated Valuation Range, respectively, of the Common Stock
issued and outstanding.
The existence of the employment agreements with employees could make a
business combination with the Bank more costly and could discourage such
transactions. See "MANAGEMENT OF THE BANK -- Employment Agreements."
Regulatory Restrictions. Applicable North Carolina regulations provide
that for a period of three years following the Conversion, the prior written
approval of the Administrator will be required before any person may, directly
or indirectly, acquire beneficial ownership of or make any offer to acquire any
stock or other equity security of the Company if, after the acquisition or
consummation of such offer, such person would be the beneficial owner of more
than 10% of such class of stock or other class of equity security of the
Company. If any person were to so acquire the beneficial ownership of more than
10% of any class of any equity security without prior written approval, the
securities beneficially owned in excess of 10% would not be counted as shares
entitled to vote and would not be voted or counted as voting shares in
connection with any matter submitted to stockholders for a vote. Approval is not
required for (i) any offer with a view toward public resale made exclusively to
the Company or its underwriters or the selling group acting on its behalf or
(ii) any offer to acquire or acquisition of beneficial ownership of more than
10% of the common stock of the Company by a corporation whose ownership is or
will be substantially the same as the ownership of the Company, provided that
the offer or acquisition is made more than one year following the consummation
of the Conversion. The regulation provides that within one year following the
Conversion, the Administrator would approve the acquisition of more than 10% of
beneficial ownership only to protect the safety and soundness of the
institution. During the second and third years after the Conversion, the
Administrator may approve such an acquisition upon a finding that (i) the
acquisition is necessary to protect the safety and soundness of the Company and
the Bank or the Board of Directors of the Company and the Bank support the
acquisition and (ii) the acquiror is of good character and integrity and
possesses satisfactory managerial skills, the acquiror will be a source of
financial strength to the Company and the Bank and the public interests will not
be adversely affected.
The Change in Bank Control Act, together with North Carolina
regulations, require that the consent of the Administrator and Federal Reserve
be obtained prior to any person or company acquiring "control" of a North
Carolina-chartered savings bank or a North Carolina-chartered savings bank
Company. Upon acquiring control, such acquiror will be deemed to be a bank
Company. Control is conclusively presumed to exist if, among other things, an
individual or company acquires the power, directly or indirectly, to direct the
management or policies of the Company or the Bank or to vote 25% or more of any
class of voting stock.
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Control is rebuttably presumed to exist under the Change in Bank Control Act if,
among other things, a person acquires more than 10% of any class of voting
stock, and the issuer's securities are registered under Section 12 of the
Exchange Act or the person would be the single largest stockholder. Restrictions
applicable to the operations of bank holding companies and conditions imposed by
the Federal Reserve in connection with its approval of such acquisitions may
deter potential acquirors from seeking to obtain control of the Company.
See "SUPERVISION AND REGULATION -- Regulation of the Company."
The Bank
Upon consummation of the Conversion, the Bank will become a
wholly-owned subsidiary of the Company, and, consequently, restrictions on the
acquisition of the Bank would have a more limited effect than if the Bank's
common stock were held directly by the stockholders purchasing in the
Conversion. However, restrictions on the acquisition of the Bank may discourage
takeover attempts of the Company in order to gain immediate control of the Bank.
Regulatory Restrictions. The Administrator and the Federal Reserve have
conditionally approved the Company's acquisition of all of the stock of the Bank
issued in the Conversion. For three years following completion of a conversion,
North Carolina conversion regulations require the prior written approval of the
Administrator before any person may directly or indirectly offer to acquire or
acquire the beneficial ownership of more than 10% of any class of an equity
security of a converting state savings bank such as the Bank. If any person were
to so acquire the beneficial ownership of more than 10% of any class of any
equity security without prior written approval, the securities beneficially
owned in excess of 10% would not be counted as shares entitled to vote and would
not be voted or counted as voting shares in connection with any matter submitted
to stockholders for a vote. Approval is not required for (i) any offer with view
toward public resale made exclusively to the Bank or its underwriters or the
selling group acting on its behalf or (ii) any offer to acquire or acquisition
of beneficial ownership of more than 10% of the common stock of the Bank by a
corporation whose ownership is or will be substantially the same as the
ownership of the Bank, provided that the offer or acquisition is made more than
one year following the consummation of the Conversion. Similarly, Federal
Reserve approval is required before any person or entity may acquire "control"
of the Bank. See "-- The Company-- Regulatory Restrictions."
Board of Directors. The amended Articles of Incorporation of the Bank
upon consummation of the Conversion will provide that the number of directors
may be no less than five. The initial number of directors will be five, but such
number may be changed by resolution of the Board of Directors. This provision
has the effect of enabling the Board of Directors to elect directors friendly to
management in the event of a non-negotiated takeover attempt. The Bank's Bylaws
also provide for staggered elections of directors if and when the total number
of directors is at least nine. These provisions are designed to make it more
difficult for a person seeking to acquire control of the Bank to gain majority
representation on the Board of Directors in a relatively short period of time.
The Bank believes these provisions to be important to continuity in the
composition and policies of its Board of Directors.
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CERTAIN PROVISIONS OF THE CHARTERS AND BYLAWS OF
THE COMPANY AND THE BANK
Limitations of Liability
The Charters of both the Company and the Bank provide that the
directors of each shall not be personally liable to the corporation they serve
or its stockholders for money damages for breach of any duty as a director to
the fullest extent permitted by North Carolina law. The North Carolina Business
Corporation Act authorizes such provisions, but provides that they shall not be
effective with respect to (i) acts or omissions of directors that the director
knew or believed at the time were clearly in conflict with the best interests of
the corporation, (ii) transactions from which the director derived an improper
personal benefit, (iii) liability for certain unlawful distributions of
corporation assets, and (iv) with respect to acts or omissions that occurred
prior to the effectiveness of the provisions. The Bank's mutual charter contains
a similar provision.
Indemnification
The Bylaws of both the Company and the Bank provide that any person who
serves as a director, officer, employee or agent of the corporation shall have a
right to be indemnified by the corporation they serve to the full extent allowed
by applicable law for liability or litigation expense arising out of activities
in such capacities. Both the Bylaws and the North Carolina Business Corporation
Act provide that there shall be no indemnification for liability or expense
arising out of activities which were known or believed by such persons at the
time of such activities to be clearly in conflict with the best interests of the
corporation. The Bank's mutual bylaws contain a similar provision.
Disclosure of SEC Position on Indemnification for Securities Act Liabilities
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company and the Bank pursuant to the foregoing provisions, or otherwise, the
Company and the Bank have been advised that in the opinion of the SEC 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 such liabilities (other than the payment by the Company and the Bank of
expenses incurred or paid by a director, officer or controlling person of the
Company and the Bank 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 Company and the Bank 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.
THE CONVERSION
THE BOARD OF DIRECTORS OF THE BANK HAS ADOPTED AND THE ADMINISTRATOR HAS
APPROVED COMPLETION OF THE TRANSACTIONS DESCRIBED IN THE PLAN SUBJECT TO
APPROVAL BY THE MEMBERS OF THE BANK AND TO THE SATISFACTION OF CERTAIN OTHER
CONDITIONS. APPROVAL BY THE ADMINISTRATOR DOES NOT CONSTITUTE A RECOMMENDATION
OR ENDORSEMENT OF THE PLAN BY THE ADMINISTRATOR.
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General
The Bank was organized and has operated as a traditional savings and
loan association. It recognizes that the banking and financial services
industries are in the process of fundamental changes, reflecting changes in the
local, national and international economies, technological changes and changes
in state and federal laws. As a result, for several years the Bank has been
studying the environment in which it operates and its strategic options.
As a result of its study of its strategic options, the Bank adopted the
Plan. The Bank believes that converting the bank from the mutual to stock form
and organizing the Company will provide increased flexibility for the Bank and
the Company to react to changes in their operating environment, regardless of
the strategies ultimately chosen.
The existing management of the Bank and the Company believes that at
this time it is in the best interests of the Bank, the Company and the
stockholders of the Company for the Company to remain an independent financial
institution. Assuming the consummation of the Conversion, the Company and the
Bank intend to pursue the business strategy described in this Prospectus with
the goal of enhancing shareholder value over the long term. Neither the Company
nor the Bank has any existing plan to consider any business combination, and
neither company has any agreement or understanding with respect to any possible
business combination.
The Board of Director's adoption of the Plan is subject to approval by
the members of the Bank and receipt of required regulatory approvals. Pursuant
to the Plan, the Bank will be converted from a North Carolina-chartered mutual
savings bank to a North Carolina-chartered stock savings bank and will become a
wholly-owned subsidiary of the Company. The Company will issue the Common Stock
to be sold in the Conversion and will use that portion of the net proceeds
thereof which it does not retain to purchase the capital stock of the Bank. By
letter dated ________________, 1998, the Administrator approved the Plan,
subject to approval by the members of the Bank and satisfaction of certain other
conditions. The Special Meeting will be held on _________________, 1998 for the
purpose of considering approval of the Plan.
Consummation of the Conversion is contingent also upon receipt of the
approvals of the Federal Reserve and the Administrator for the Company to
acquire the Bank. Those approvals have been received. The Conversion cannot be
consummated until the expiration of the Bank Merger Act of 1956 waiting period
which began to run upon approval by the Federal Reserve of the Company's
application and expires ________________, 1998. Finally, consummation of the
Conversion is contingent upon receipt from the FDIC of a final non-objection
letter with respect to the transaction. The FDIC has issued a conditional
notification that it does not intend to object to the Conversion.
The following is a summary of all material provisions of the Plan. It
is qualified in its entirety by the provisions of the Plan, which contains a
more detailed description of the terms of the Conversion. The Plan is attached
as Attachment I to the Bank's Proxy Statement for the Special Meeting which has
been delivered to all members of the Bank. The Plan can also be obtained by
written request from the Bank. See "ADDITIONAL INFORMATION."
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Purposes of Conversion
The Bank, as a mutual savings bank, now has no stockholders and no
authority to issue capital stock. By converting to the stock form of
organization, the Bank will be structured in the form used by most commercial
banks, other business entities and a substantial number of savings institutions.
Conversion to a North Carolina-chartered capital stock savings bank and the
formation of a Company offers a number of advantages which may be important to
the future and performance of the Bank, including (i) a larger capital base for
the Bank's operations, (ii) an enhanced future access to capital markets and
(iii) an opportunity for depositors of the Bank to become stockholders of the
Company.
After completion of the Conversion, the unissued common and preferred
stock authorized by the Company's Articles of Incorporation will permit the
Company, subject to market conditions, to raise additional equity capital
through further sales of securities. Following the Conversion, the Company will
also be able to use stock-related incentive programs to attract, retain and
provide incentives for qualified directors and executive and other personnel of
the Company and the Bank. See "MANAGEMENT OF THE BANK -- Stock Based Benefits."
Formation of the Company will provide greater flexibility than the Bank
would otherwise have to expand and diversify its business activities through
existing or newly formed subsidiaries, or through acquisitions of, or mergers
with, both mutual and stock institutions, as well as other companies. However,
there are no current plans, arrangements, understandings or agreements regarding
any such business combinations.
Effects of Conversion
General. Each person with a deposit account in the Bank has pro rata
rights, based upon the balance in his or her account, in the net worth of the
Bank upon liquidation. However, this right is tied to the depositor's account
and has no tangible market value separate from such deposit account. Further,
the Bank's depositors can realize value with respect to their interests only in
the unlikely event that the Bank is liquidated and has a positive net worth. In
such an event, the depositors of record at that time, as owners, would share pro
rata in any residual surplus after other claims, including those with respect to
the deposit accounts of depositors, are paid.
Upon the Bank's Conversion to stock form, its Certificate of
Incorporation will be amended to authorize the issuance of permanent
nonwithdrawable capital stock to represent the ownership of the Bank, including
its net worth. The capital stock will be separate and apart from deposit
accounts and will not be insured by the FDIC or any other governmental entity.
Certificates will be issued to evidence ownership of the capital stock. All of
the outstanding capital stock of the Bank will be acquired by the Company, which
in turn will issue its Common Stock to purchasers in the Conversion. The stock
certificates issued by the Company will be transferable and, therefore, subject
to applicable law, the stock could be sold or traded if a purchaser is available
with no effect on any deposit account the seller may hold at the Bank.
Voting Rights. Under the Bank's current Certificate of Incorporation
and Bylaws, deposit account holders and borrowers have voting rights with
respect to certain matters relating to the Bank, including the election of
directors. After the Conversion, (i) neither deposit account holders nor
borrowers will have voting rights with respect to the Bank and will therefore
not be able to elect directors of the Bank or control its affairs; (ii) voting
rights with respect to the Bank will be vested in the Company as the sole
stockholder of the Bank; and (iii) voting rights with respect to the Company
will be vested in the Company's stockholders. Each
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purchaser of Common Stock will be entitled to vote on any matters to be
considered by the Company's stockholders. For a description of the voting rights
of the holders of Common Stock, see "DESCRIPTION OF CAPITAL STOCK."
Deposit Accounts and Loans. The account balances, interest rates and
other terms of deposit accounts at the Bank and the existing deposit insurance
coverage of such accounts will not be affected by the Conversion (except to the
extent that a depositor directs the Bank to withdraw funds to pay for his or her
Common Stock). Furthermore, the Conversion will not affect any loan account, the
balances, interest rates, maturities or other terms of these accounts, or the
obligations of borrowers under their individual contractual arrangements with
the Bank.
Continuity. The Bank will continue without interruption, during and
after completion of the Conversion, to provide its services to depositors and
borrowers pursuant to existing policies and will maintain its office operated by
the existing management and employees of the Bank.
Liquidation Rights. In the unlikely event of a complete liquidation of
the Bank, either before or after Conversion, account holders would have claims
for the amount of their deposit accounts, including accrued interest, and would
receive the protection of deposit insurance up to applicable limits. In addition
to deposit insurance coverage, depositor liquidation rights before and after
Conversion would be as follows:
Liquidation Rights Prior to the Conversion. Prior to the Conversion, in
the event of a complete liquidation of the Bank, each holder of a deposit
account in the Bank would receive such holder's pro rata share of any assets of
the Bank remaining after payment of claims of all creditors (including the
claims of all depositors to the withdrawal value of their accounts, including
accrued interest). Such holder's pro rata share of such remaining assets, if
any, would be in the same proportion of such assets as the value of such
holder's deposit account was to the total value of all deposit accounts in the
Bank at the time of liquidation.
Liquidation Rights After the Conversion. As required by North Carolina
conversion regulations, the Plan provides that, upon completion of the
Conversion, a memorandum account called a "Liquidation Account" will be
established for the benefit of Eligible Account Holders and Supplemental
Eligible Account Holders. The amount of the Liquidation Account will be equal to
the net worth of the Bank as of the date of its latest statement of financial
condition contained in the final prospectus relating to the sale of shares of
Common Stock in the Conversion. Under applicable regulations, the Bank will not
be permitted to pay dividends on, or repurchase any of, its capital stock if its
net worth would thereby be reduced below the aggregate amount then required for
the Liquidation Account. See "DIVIDEND POLICY" and SUPERVISION AND REGULATION --
Regulation of the Bank -- Restrictions on Dividends and Other Capital
Distributions." After the Conversion, Eligible Account Holders and Supplemental
Eligible Account Holders will be entitled, in the event of a liquidation of the
Bank, to receive liquidating distributions of any assets remaining after payment
of all creditors' claims (including the claims of all depositors to the
withdrawal values of their deposit accounts, including accrued interest), before
any distributions are made on the Bank's capital stock, equal to their
proportionate interests at that time in the Liquidation Account.
Each Eligible Account Holder and Supplemental Eligible Account Holder
will have an initial interest ("subaccount balance") in the Liquidation Account
for each deposit account held as of September 30, 1997 (the Eligibility Record
Date) or as of March 31, 1998 (the Supplemental Eligibility Record Date),
respectively. Each initial subaccount balance will be the amount determined by
multiplying the total opening balance in the Liquidation Account by the
Qualifying Deposit (a deposit of at least $50 as of the Eligibility Record Date
or Supplemental Eligibility Record Date, as applicable) of such deposit account
divided by the total of all
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Qualifying Deposits on that date. If the amount in the deposit account on any
subsequent annual closing date of the Bank is less than the balance in such
deposit account on any other annual closing date or the balance in such an
account on the Eligibility Record Date or Supplemental Eligibility Record Date,
as the case may be, this interest in the Liquidation Account will be reduced by
an amount proportionate to any such reduction, and will not thereafter be
increased despite any subsequent increase in the related deposit account. An
Eligible Account Holder's or Supplemental Eligible Account Holder's interest in
the Liquidation Account will cease to exist if the deposit account is closed.
The Liquidation Account will never increase and will be correspondingly reduced
as the interests in the Liquidation Account are reduced or cease to exist. In
the event of a liquidation, any assets remaining after the above liquidation
rights of Eligible Account Holders and Supplemental Eligible Account Holders are
satisfied would be distributed to the Company, as sole stockholder of the Bank.
A merger, consolidation, sale of bulk assets or similar combination or
transaction with another FDIC- insured depository institution, whether or not
the Bank is the surviving institution, would not be viewed as a complete
liquidation for purposes of distribution of the Liquidation Account. In any such
transaction, the Liquidation Account would be assumed by the surviving
institution to the full extent authorized by regulations of the Administrator as
then in effect.
Offering of Common Stock
As part of the Conversion, the Company is making the Subscription
Offering of Common Stock in the priorities and to the persons described below
under "-- Subscription Offering." In addition, any shares which remain
unsubscribed for in the Subscription Offering will be offered in the Community
Offering to members of the general public, with priority being given to natural
persons and trusts of natural persons residing or located in the Local
Community, including IRAs, Keogh accounts and similar retirement accounts
established for the benefit of natural persons who are residents of the Local
Community. See "-- Community Offering." If necessary, all shares of Common Stock
not purchased in the Subscription Offering and Community Offering, if any, may
be offered for sale to the general public through a syndicate of registered
broker-dealers as selected dealers to be managed by Trident Securities. See "--
Syndicated Community Offering." The Plan requires that the aggregate dollar
amount of the Common Stock sold equal not less than the minimum nor more than
the maximum of the Estimated Valuation Range which is established in connection
with the Conversion; provided, however, with the consent of the Administrator
and the FDIC the aggregate dollar amount of the Common Stock sold may be
increased to as much as 15% above the maximum of the Estimated Valuation Range,
without a resolicitation of subscribers or any right to cancel subscriptions, in
order to reflect changes in market and financial conditions following
commencement of the Subscription Offering. See "-- Purchase Price of Common
Stock and Number of Shares Offered." If the Syndicated Community Offering is not
feasible or successful and Common Stock having an aggregate value of at least
the minimum of the Estimated Valuation Range is not subscribed for in the
Subscription and Community Offering, the Company will consult with the
Administrator to determine an appropriate alternative method of selling all
shares of Common Stock offered in the Conversion and not subscribed for in the
Offering. The same per share price ($10.00) will be paid by purchasers in the
Subscription, Community and Syndicated Community Offering.
The Subscription Offering will expire at the Expiration Time, which is
12:00 noon, Eastern Time, on ___________________, 1998, unless, with the
approval of the Administrator, the offering period is extended by the Company
and the Bank. The Community Offering, if any, may begin at any time after the
Subscription Offering begins and will terminate at the Expiration Time or at any
time thereafter, but not later than ________________, 1998, unless extended with
the approval of the Administrator. The Syndicated
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Community Offering, if any, or other sale of all shares not subscribed for in
the Subscription and Community Offering, will be made as soon as practicable
following the Expiration Time. The sale of the Common Stock must, under the
North Carolina conversion regulations, be completed within 45 days after the
Expiration Time unless such period is extended with the approval of the
Administrator. In the event such an extension is approved, subscribers would be
resolicited and would be given the opportunity to increase (subject to maximum
purchase limitations), decrease (subject to minimum purchase limitations) or
rescind their subscriptions. If a subscriber fails to respond to the
resolicitation by the end of the resolicitation period, the subscription of such
subscriber will be canceled, funds submitted with the subscription will be
refunded promptly with interest at the Bank's passbook savings rate, and holds
on accounts from which withdrawals were designated will be released. Any such
solicitation will be by means of an amended prospectus filed with the SEC. In
such event, substantial additional printing, legal and accounting expenses may
be incurred in completing the Conversion.
The commencement and completion of any required Community or Syndicated
Community Offering will be subject to market conditions and other factors beyond
the Company's control. Accordingly, no assurance can be given that any required
Community or Syndicated Community Offering or other sale of Common Stock will be
commenced at any particular time or as to the length of time that will be
required to complete the sale of all shares of Common Stock offered, and
significant changes may occur in the estimated pro forma market value of the
Common Stock, together with corresponding changes in the offering price, the
number of shares being offered, and the net proceeds realized from the sale of
the Common Stock. The Plan requires that the Conversion be completed within 24
months after the date of approval of the Plan by the Bank's members.
Subscription Offering
In accordance with North Carolina conversion regulations,
non-transferable Subscription Rights have been granted under the Plan to the
following persons in the following order of priority: (i) the Bank's Eligible
Account Holders, who are depositors as of September 30, 1996 who had aggregate
deposits at the close of business on such date of at least $50.00 ("Qualifying
Deposits"); (ii) the Bank's Supplemental Eligible Account Holders, who are
depositors as of December 31, 1997 who had Qualifying Deposits on such date;
(iii) the Bank's Other Members, who are depositor and borrower members as of
______________, 1998, the voting record date for the Special Meeting, who are
not Eligible Account Holders or Supplemental Eligible Account Holders; and (iv)
directors, officers and employees of the Bank who are not Eligible Account
Holders, Supplemental Eligible Account Holders or Other Members, in the
priorities and subject to the limitations described herein. All subscriptions
received will be subject to the availability of Common Stock after satisfaction
of subscriptions of all persons having prior rights in the Subscription
Offering, and to the maximum purchase limitations and other terms and conditions
set forth in the Plan and described below.
In order to ensure proper identification of Subscription Rights, it is
the responsibility of subscribers in the Subscription Offering to provide
correct account verification information on the Order Forms.
Eligible Account Holders. Each Eligible Account Holder has been
granted, without payment therefor, non-transferable Subscription Rights to
purchase Common Stock up to the maximum purchase limitation described in
"--Minimum and Maximum Purchase Limitations." If Eligible Account Holders
subscribe for more shares of Common Stock than are available for purchase, the
shares offered will first be allocated among the subscribing Eligible Account
Holders so as to enable each subscribing Eligible Account Holder to the extent
possible, to purchase the number of shares necessary to make his or her total
allocation
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of Common Stock equal to the lesser of 100 shares of Common Stock or the number
of shares subscribed for by such Eligible Account Holder. Any shares remaining
after such allocation will be allocated among the subscribing Eligible Account
Holders whose subscriptions remain unsatisfied in the proportion that each such
Eligible Account Holder's Qualifying Deposits bears to the total of the
Qualifying Deposits of all such Eligible Account Holders.
Supplemental Eligible Account Holders. To the extent that shares remain
available for purchase after satisfaction of subscriptions of Eligible Account
Holders, each Supplemental Eligible Account Holder has been granted, without
payment therefor, non-transferable Subscription Rights to purchase Common Stock
up to the maximum purchase limitation described in "-- Minimum and Maximum
Purchase Limitations." If Supplemental Eligible Account Holders subscribe for
more shares of Common Stock than are available for purchase, the shares offered
will first be allocated among the subscribing Supplemental Eligible Account
Holders so as to enable each subscribing Supplemental Eligible Account Holder to
the extent possible, to purchase the number of shares necessary to make his or
her total allocation of Common Stock equal to the lesser of 100 shares of Common
Stock or the number of shares subscribed for by such Supplemental Eligible
Account Holder. Any shares remaining after such allocation will be allocated
among the subscribing Supplemental Eligible Account Holders whose subscriptions
remain unsatisfied in the proportion that each such Supplemental Eligible
Account Holder's Qualifying Deposits bears to the total of the Qualifying
Deposits of all such Supplemental Eligible Account Holders.
Other Members. To the extent that shares remain available for purchase
after satisfaction of subscriptions of Eligible Account Holders and Supplemental
Eligible Account Holders, members of the Bank as of ________________, 1998 (the
voting record date for the Special Meeting), other than Eligible Account Holders
and Supplemental Eligible Account Holders (Other Members) have each been
granted, without payment therefor, non-transferable Subscription Rights to
purchase Common Stock up to the maximum purchase limitation described in "--
Minimum and Maximum Purchase Limitations." If Other Members subscribe for more
shares of Common Stock than remain available for purchase by Other Members,
shares will be allocated among the subscribing Other Members in the proportion
that the number of votes eligible to be cast by each Other Member bears to the
total number of votes eligible to be cast at the Special Meeting by all Other
Members whose subscriptions remain unsatisfied.
Employees, Officers, and Directors. To the extent that shares remain
available for purchase after satisfaction of subscriptions of Eligible Account
Holders, Supplemental Eligible Account Holders and Other Members, the Bank's
employees, officers and directors who are not Eligible Account Holders,
Supplemental Eligible Account Holders or Other Members have each been granted,
without payment therefor, non-transferable Subscription Rights to purchase
Common Stock up to the maximum purchase limitation described in "-- Minimum and
Maximum Purchase Limitations." If more shares are subscribed for by such
employees, officers and directors than are available for purchase by them, the
available shares will be allocated among subscribing employees, officers and
directors pro rata on the basis of the amount of their respective subscriptions.
Community Offering
Any shares of Common Stock which remain unsubscribed for in the
Subscription Offering may be offered by the Company to members of the general
public in the Community Offering, which may commence at any time after
commencement of the Subscription Offering, with priority given to natural
persons and trusts of natural persons residing or located in Anson County in
North Carolina (the Local Community), including IRA accounts, Keogh accounts and
similar retirement accounts established for the benefit of natural persons
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who are residents of, the Local Community. The Community Offering may terminate
at the Expiration Time or at any time thereafter, but no later than
________________, 1998, unless further extended with the consent of the
Administrator. The opportunity to subscribe for shares of Common Stock in the
Community Offering is subject to the right of the Bank and the Company, in their
sole discretion, to accept or reject any such orders, in whole or in part,
either at the time of receipt of an order or as soon as practicable following
the termination of the Community Offering. In the event the Bank and the Company
reject any such orders after receipt, subscribers will be promptly notified and
all funds submitted with subscriptions will be returned with interest at the
Bank's passbook savings rate.
In the event that subscriptions by subscribers in the Community
Offering whose orders would otherwise be accepted exceed the shares available
for purchase in the Community Offering, then subscriptions of natural persons
and trusts of natural persons residing in the Local Community, including IRAs,
Keogh accounts and similar retirement accounts established for the benefit of
natural persons who are residents of the Local Community ("First Priority
Community Subscribers") will be filled in full up to applicable purchase
limitations (to the extent such subscriptions are not rejected by the Bank and
the Company) prior to any allocation to other subscribers in the Community
Offering.
In the event of an oversubscription by First Priority Community
Subscribers whose orders would otherwise be accepted, shares of Common Stock
will be allocated first to each First Priority Community Subscriber whose order
is accepted in full or in part by the Bank and the Company in the entire amount
of such order up to a number of shares no greater than 7,500 shares, which
number shall be determined by the Board of Directors of the Bank prior to the
time the Conversion is consummated with the intent to provide for a wide
distribution of shares among such subscribers. Any shares remaining after such
allocation will be allocated to each First Priority Community Subscriber whose
order is accepted in full or in part on an equal number of shares basis until
all orders are filled. Such allocation shall also be applied to subscriptions by
other subscribers in the Community Offering, in the event shares are available
for such subscribers but there is an oversubscription by them.
In order to ensure proper allocation of shares in the event of an
oversubscription, it is the responsibility of subscribers in the Community
Offering to provide correct addresses of residence on the Order Forms.
Syndicated Community Offering
The Plan provides that, if necessary, all shares of Common Stock not
purchased in the Subscription and Community Offering, if any, may be offered for
sale to the general public in a Syndicated Community Offering through a
syndicate of registered broker-dealers as selected dealers ("Selected Dealers")
to be formed and managed by Trident Securities acting as agent of the Company in
the sale of the Common Stock. The Company and the Bank have the right to reject
orders, in whole or in part, in their sole discretion in the Syndicated
Community Offering. Neither Trident Securities nor any registered broker-dealer
shall have any obligation to take or purchase any shares of the Common Stock in
the Syndicated Community Offering; however, Trident Securities has agreed to use
its best efforts in the sale of shares in the Syndicated Community Offering.
Common Stock sold in the Syndicated Community Offering will be sold at the
purchase price of $10.00 per share which is the same price as all other shares
being offered in the Conversion.
It is estimated that the Selected Dealers will receive a negotiated
commission based on the amount of Common Stock sold by the Selected Dealer,
payable by the Company. During the Syndicated Community Offering, Selected
Dealers may only solicit indications of interest from their customers to place
orders with
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the Company as of a certain date (the "Order Date") for the purchase of shares
of Common Stock. When and if Trident Securities and the Company believe that
enough indications and orders have been received in the Offering to consummate
the Conversion, Trident Securities will request, as of the Order Date, Selected
Dealers to submit orders to purchase shares for which they have received
indications of interest from their customers. Selected Dealers will send
confirmations of the orders to such customers on the next business day after the
Order Date. Selected Dealers will debit the accounts of their customers on a
date which will be three business days from the Order Date ("Debit Date").
Customers who authorize Selected Dealers to debit their brokerage accounts are
required to have the funds for payment in their account on but not before the
Debit Date. On the next business day following the Debit Date, Selected Dealers
will remit funds to the account that the Company established for each Selected
Dealer. After payment has been received by the Company from Selected Dealers,
funds will earn interest at the Bank's passbook savings rate until the
consummation of the Conversion. In the event the Conversion is not consummated
as described above, funds with interest will be returned promptly to the
Selected Dealers, who, in turn, will promptly credit their customers' brokerage
accounts.
The Syndicated Community Offering may close at any time after the
Expiration Time at the discretion of the Bank and the Company, but in no case
later than ____________________, 1998.
Prospectus Delivery
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 later than five days or hand delivered any
later than two days prior to the Expiration Time. Execution of the Order Form
will confirm receipt or delivery of a Prospectus in accordance with Rule 15c2-8.
Order Forms will be distributed only with a Prospectus. Neither the Company, the
Bank, nor Trident Securities is obligated to deliver a Prospectus and an Order
Form by any means other than the U.S. Postal Service.
Fractional Shares
In making allocations in the event of oversubscriptions, all
computations will be rounded down to the nearest whole share; no fractional
shares will be issued. Excess and other amounts sent by subscribers which are
not used to satisfy subscriptions will be refunded with interest at the Bank's
passbook savings rate, and amounts designated for withdrawal from deposit
accounts will be released.
Purchase Price of Common Stock and Number of Shares Offered
The purchase price of shares of Common Stock sold in the Offering will
be $10.00 per share. The purchase price was determined by the Boards of
Directors of the Company and the Bank in consultation with the Bank's financial
advisor and sales agent, Trident Securities. The North Carolina regulations
governing conversions of North Carolina-chartered mutual savings banks to stock
form require that the aggregate purchase price of the shares of Common Stock of
the Company sold in connection with the Conversion be equal to not less than the
minimum, nor more than the maximum, of the Estimated Valuation Range which is
established by an independent appraisal in the Conversion and is described
below; provided, however, that with the consent of the Administrator and the
FDIC the aggregate purchase price of the Common Stock sold may be increased to
up to 15% above the maximum of the Estimated Valuation Range, without a
resolicitation of subscribers or any right to cancel, rescind or change
subscription orders, to reflect changes in market and financial conditions
following commencement of the Subscription Offering.
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FDIC rules with respect to appraisals require that the independent
appraisal must include a complete and detailed description of the elements of
the appraisal report, justification for the methodology employed and sufficient
support for the conclusions reached. The appraisal report must include a full
discussion of each peer group member and documented analytical evidence
supporting variances from peer group statistics. The appraisal report must also
include a complete analysis of the converting institution's pro forma earnings,
which should include the institution's full potential once it fully deploys the
capital from the Conversion pursuant to its business plan.
The Bank has retained Ferguson, an independent appraisal firm
experienced in the valuation and appraisal of savings institutions and their
holding companies, to prepare an appraisal of the pro forma market value of the
Bank and the Company and to assist the Bank in preparing a business plan. For
its services in determining such valuation and assisting with the business plan,
Ferguson will receive an aggregate fee of $25,000 and will be reimbursed for its
out-of-pocket expenses.
Ferguson has informed the Bank that its appraisal has been made in
reliance upon the information contained in this Prospectus, including the
financial statements of the Bank. Ferguson has further informed the Bank that it
also considered the following factors, among others, in making the appraisal:
(i) the present and projected operating results and financial condition of the
Company and the Bank; (ii) the economic and demographic conditions in the Bank's
existing market area; (iii) certain historical, financial and other information
relating to the Bank; (iv) the proposed dividend policy of the Company; (v) a
comparative evaluation of the operating and financial statistics of the Bank
with those of other savings institutions; (vi) the aggregate size of the
offering of the Common Stock; and (vii) the trading market for the securities of
institutions Ferguson believes to be comparable in relevant respects to the
Company and the Bank and general conditions in the markets for such securities.
In addition, Ferguson has advised the Bank that it has considered the effect of
the Conversion on the net worth and earnings potential of the Company and the
Bank.
On the basis of its consideration of the above factors, Ferguson has
advised the Bank that, in its opinion, at February 27, 1998, the Estimated
Valuation Range of the Bank and the Company was from a minimum of $5,610,000 to
a maximum of $7,590,000, with a midpoint of $6,600,000. Based upon such
valuation and a purchase price for shares offered in the Conversion of $10.00
per share, the number of shares to be offered ranges from a minimum of 561,000
shares to a maximum of 759,000 shares, with a midpoint of 660,000 shares.
The Board of Directors of the Bank has reviewed the methodology and
assumptions used by Ferguson in preparing the appraisal and has determined that
the Estimated Valuation Range, as well as the methodology and assumptions used,
were reasonable and appropriate.
Upon completion of the Offering, Ferguson will confirm or update its
valuation of the estimated aggregate pro forma market value of the Bank and the
Company. Based on the confirmed or updated appraisal, a determination will be
made of the total number of shares of Common Stock which shall be offered and
sold in the Conversion.
With the consent of the Administrator and the FDIC, the aggregate price
of the shares sold in the Conversion may be increased by up to 15% above the
maximum of the Estimated Valuation Range, or to $8,728,500 (872,850 shares),
without a resolicitation of subscribers and without any right to cancel, rescind
or change subscription orders, to reflect changes in market and financial
conditions following commencement of the Subscription Offering.
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No sale of shares of Common Stock may be consummated unless, after the
expiration of the offering period, Ferguson confirms to the Bank, the Company,
the Administrator and the FDIC, that, to the best of its knowledge, nothing of a
material nature has occurred which, taking into account all relevant factors,
would cause Ferguson to conclude that the aggregate purchase price of the Common
Stock sold in the Conversion is incompatible with its estimate of the aggregate
pro forma market value of the Bank and the Company at the conclusion of the
Offering. If the aggregate pro forma market value of the Bank and the Company as
of such date is within the Estimated Valuation Range (or, with the consent of
the Administrator and FDIC, not more than 15% above the maximum of the Estimated
Valuation Range), then such pro forma market value will determine the number of
shares of Common Stock to be sold in the Conversion. If there has occurred a
change in the aggregate pro forma market value of the Bank and the Company so
that the aggregate pro forma market value is below the minimum of the Estimated
Valuation Range or more than 15% above the maximum of the Estimated Valuation
Range, a resolicitation of subscribers may be made based upon a new Estimated
Valuation Range, the Plan may be terminated or such other actions as the
Administrator and the FDIC may permit may be taken.
In the event of a resolicitation, subscribers would be given a
specified time period within which to respond to the resolicitation. If a
subscriber fails to respond to the resolicitation by the end of such period, the
subscription of such subscriber will be canceled, funds submitted with the
subscription will be refunded promptly with interest at the Bank's passbook
savings rate, and holds on accounts from which withdrawals were designated will
be released. Any such resolicitation will be by means of an amended prospectus
filed with the SEC. A resolicitation may delay completion of the Conversion. If
the Plan is terminated, all funds will be returned promptly with interest at the
Bank's passbook savings rate from the date payment was deemed received, and
holds on funds authorized for withdrawal from deposit accounts will be released.
See "-- Exercise of Subscription Rights and Purchases in the Community
Offering."
The valuation by Ferguson is not intended, and must not be construed,
as a recommendation of any kind as to the advisability of purchasing Common
Stock. Ferguson did not independently verify the financial statements and other
information provided by the Bank, nor did Ferguson value independently the
assets or liabilities of the Bank. The valuation considers the Bank as a going
concern and should not be considered as an indication of the liquidation value
of the Bank or the Company. Moreover, because such valuation is necessarily
based upon estimates and projections of a number of matters, all of which are
subject to change from time to time, no assurance can be given that persons
purchasing such shares in the Conversion will thereafter be able to sell shares
at prices in the range of the foregoing valuation of the pro forma market value
thereof.
A copy of the complete appraisal by Ferguson is on file and available
for inspection at the office of the Savings Institutions Division of the North
Carolina Department of Commerce, Tower Building, Suite 301, 1110 Navaho Drive,
Raleigh, North Carolina 27609. A copy is also available for inspection at the
Stock Information Center, 211 South Greene Street, Wadesboro, North Carolina
28170. A copy of the appraisal has also been filed as an exhibit to the
Registration Statement filed with the SEC with respect to the Common Stock
offered hereby. See "ADDITIONAL INFORMATION."
Exercise of Subscription Rights and Purchases in Community Offering
In order for Subscription Rights to be effectively exercised in the
Subscription Offering and in order to purchase in the Subscription Offering, the
original signed Order Forms (including an original signed form of certification)
and the required payment for the aggregate dollar amount of Common Stock desired
or appropriate instructions authorizing withdrawal from one or more the Bank
deposit accounts (other than
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negotiable order of withdrawal accounts or other demand deposit accounts), must
be received by the Bank by the Expiration Time, which is 12:00 noon, Eastern
Time, on ________________, 1998. Subscription Rights (i) for which the Bank does
not receive original signed Order Forms by the Expiration Time (unless such time
is extended), or (ii) for which Order Forms are executed defectively or are not
accompanied by full payment (or appropriate withdrawal instructions) for
subscribed shares, will expire whether or not the Bank has been able to locate
the persons entitled to such rights. In order to purchase in the Community
Offering, the Order Forms, accompanied by the required payment for the aggregate
dollar amount of Common Stock desired or appropriate instructions authorizing
withdrawal from one or more of the Bank's deposit accounts (other than
negotiable order of withdrawal accounts or other demand deposit accounts), must
be received by the Bank prior to the time the Community Offering terminates,
which could be at any time at or subsequent to the Expiration Time. No orders
will be accepted from persons who do not have Subscription Rights in the
Subscription Offering unless a Community Offering is commenced.
In the event that an Order Form is not delivered and is returned to the
Bank by the United States Postal Service (or the Bank is unable to locate the
addressee), is not received or is received after the Expiration Time, is
defectively completed or executed, or is not accompanied by full payment for the
shares subscribed for (including instances where a savings account or
certificate balance from which withdrawal is authorized is insufficient to fund
the amount of such required payment), the subscription rights for the person to
whom such rights have been granted will lapse as though that person failed to
return the completed Order Form within the time period specified. The Bank may,
but will not be required to, waive any irregularity on any Order Form or require
the submission of corrected Order Forms or the remittance of full payment for
subscribed shares by such date as the Bank specify. The waiver of an
irregularity on an order form in no way obligates the Bank to waive any other
irregularity on that, or any irregularity on any other Order Form. Waivers will
be considered on a case-by-case basis. Photocopies of Order Forms, including
copies sent by facsimile, payments from private third parties, payments made by
wire transfer or electronic transfers of funds will not be accepted. The Bank's
interpretation of the terms and conditions of the Plan and of the acceptability
of the Order Forms will be final. The Bank has the right to investigate any
irregularity on any Order Form.
Executed Order Forms once received by the Bank, may not be modified,
amended or rescinded without the consent of the Bank. The Bank has the right to
extend the subscription period subject to applicable regulations, unless
otherwise ordered by the Administrator, or to waive or permit correction of
incomplete or improperly executed Order Forms, but does not represent that it
will do so.
The amount to be remitted with the Order Forms shall be the aggregate
dollar amount that a subscriber or purchaser desires to invest in the
Subscription and Community Offering. Complete payment must accompany all
completed Order Forms submitted in the Subscription and Community Offering in
order for subscriptions to be valid. See "-- Purchase Price of Common Stock and
Number of Shares Offered."
Payment for shares will be permitted to be made by any of the following
means: (i) in cash, if delivered in person to either office of the Bank; (ii) by
check, bank draft, negotiable order of withdrawal or money order, provided that
the foregoing will only be accepted subject to collection and payment; or (iii)
by appropriate authorization of withdrawal from any deposit account in the Bank
(other than a negotiable order of withdrawal account or other demand deposit
account). Order Forms directing that payment for shares be made by authorization
of withdrawal will be accepted only if, at the time the Order Forms are
received, there exists sufficient funds in the account from which withdrawal is
authorized to pay the full purchase price for the number of shares ordered. In
order to ensure proper identification of Subscription Rights and proper
allocations in the event of an oversubscription, it is the responsibility of
subscribers to provide correct
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account verification information on the Order Forms. Order Forms submitted by
unauthorized purchasers or in amounts exceeding purchase limitations will not be
honored.
For purposes of determining the withdrawal balance of deposit accounts
from which withdrawals have been authorized, such withdrawals will be deemed to
have been made upon receipt of appropriate authorization therefor, but interest
will be paid by the Bank on the amount deemed to have been withdrawn at the
contractual rate of interest paid on such accounts until the date on which the
Conversion is completed or terminated.
Interest will be paid by the Bank on payments for Common Stock made in
cash or by check, bank draft, negotiable order of withdrawal or money order at
the Bank's passbook savings rate. Such interest shall be paid from the date the
order is accepted for processing and payment in good funds is received by the
Bank until consummation or termination of the Conversion. The Bank shall be
entitled to invest all amounts paid on subscriptions for Common Stock for its
own account until completion or termination of the Conversion. The Bank may not
knowingly lend funds or otherwise extend credit to any person to purchase Common
Stock. After amounts submitted for payment are applied to the purchase price for
shares sold, they will no longer earn interest, and they will not be insured by
the FDIC or any other government agency or other entity.
The Order Forms contain appropriate means by which authorization of
withdrawals from deposit accounts may be made to pay for subscribed shares. Once
such a withdrawal has been authorized, none of the designated withdrawal amount
may be withdrawn (except by the Bank as payment for Common Stock) until the
Conversion is completed or terminated. Savings accounts will be permitted to be
established for the purpose of making payment for subscribed shares of Common
Stock. Funds authorized for withdrawal will continue to earn interest at the
applicable contract interest rate until completion or termination of the
Conversion or, in the case of an order submitted in the Community Offering,
until it is determined that such order cannot or will not be accepted.
Notwithstanding any regulatory provision regarding penalties for early
withdrawal from certificate accounts, payment for subscribed shares of Common
Stock will be permitted through authorization of withdrawals from such accounts
without the assessment of such penalties. However, if after such withdrawal the
applicable minimum balance requirement ceases to be satisfied, such certificate
account will be canceled and the remaining balance thereof will earn interest at
the Bank's passbook savings rate.
Upon completion or termination of the Conversion, the Bank will return
to subscribers all amounts paid with subscriptions which are not applied to the
purchase price for shares, plus interest at its passbook savings rate from the
date good funds are received until the consummation or termination of the
Conversion, and the Bank will release deposit account withdrawal orders given in
connection with the subscriptions to the extent funds are not withdrawn and
applied toward the purchase of shares.
Delivery of Stock Certificates
Certificates representing Common Stock issued in the Conversion will be
mailed by the Company's transfer agent to persons entitled thereto at the
address of such persons appearing on the Order Forms as soon as practicable
following consummation of the Conversion. Any certificates returned as
undeliverable will be held by the Company until claimed by persons legally
entitled thereto or otherwise disposed of in accordance with applicable law.
Until certificates for Common Stock are available and delivered to subscribers,
subscribers may not be able to sell the shares of Common Stock for which they
have subscribed, even though trading of the Common Stock may have commenced.
Shares sold prior to receipt of a stock certificate are the responsibility of
the purchaser. Allocations of Common Stock will be deemed final only upon
stockholder receipt of the certificate representing the Common Stock.
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Persons in Non-Qualified or Foreign Jurisdictions
The Company will make reasonable efforts to comply with the securities
laws of all states of the United States in which Eligible Account Holders,
Supplemental Eligible Account Holders, or Other Members entitled to subscribe
for shares of Common Stock reside. However, no shares of Common Stock or
Subscription Rights under the Plan will be offered or sold in a foreign country,
or in a state in the United States (i) where a small number of persons otherwise
eligible to subscribe for shares under the Plan reside or (ii) if the Company
determines that compliance with the securities laws of such state would be
impracticable for reasons of cost or otherwise, including, but not limited to, a
requirement that the Company, the Bank or any employee or representative thereof
register as a broker, dealer, agent or salesperson or register or otherwise
qualify the Subscription Rights or Common Stock for sale in such state. No
payments will be made in lieu of the granting of Subscription Rights to persons
residing in such jurisdictions.
Marketing Arrangements
The Bank has retained Trident Securities to consult with and advise the
Bank and the Company and to assist the Company, on a best-efforts basis, in the
marketing of shares in the Offering. Trident Securities is a broker-dealer
registered with the SEC and a member of the NASD. Trident Securities is
headquartered in Raleigh, North Carolina, and its telephone number is (919)
781-8900. Trident Securities will assist the Bank and the Company in the
Conversion as follows: (i) it will act as marketing advisor with respect to the
Subscription Offering and will assist the Company on a best-efforts basis in the
marketing of the Common Stock in the Community Offering and Syndicated Community
Offering; (ii) members of its staff will conduct training sessions to educate
directors, officers and employees of the Bank regarding the Conversion process;
and (iii) it will provide assistance in the establishment and supervision of the
Stock Information Center, including training staff to record and tabulate orders
for the purchase of Common Stock and to respond to customer inquiries.
For rendering its services, the Bank has agreed to pay Trident
Securities a commission equal to 2.5% of the aggregate dollar amount of Common
Stock sold in the Subscription and Community Offering, excluding shares
purchased by directors, executive officers and their "associates" (as defined in
the Plan). The Bank has also agreed to pay to Selected Dealers, if any,
negotiated commissions.
The Bank has agreed to reimburse Trident Securities for its reasonable
out-of-pocket expenses, including but not limited to travel, communications,
legal fees and postage, and to indemnify Trident Securities against certain
claims or liabilities, including certain liabilities under the Securities Act.
Trident has agreed that the Bank is not required to pay its legal fees to the
extent they exceed $27,500 or its other out of pocket expenses to the extent
they exceed $10,000. Total fees and commissions to Trident Securities are
expected to be between $126,855 and $204,788 at the minimum and 15% above the
maximum, respectively, of the Estimated Valuation Range. See "PRO FORMA DATA"
for the assumptions used to determine these estimates.
Sales of Common Stock will be made primarily through registered
representatives affiliated with Trident Securities or by the broker-dealers
managed by Trident Securities. In addition, subject to applicable law, executive
officers of the Company and the Bank may participate in the solicitation of
offers to purchase Common Stock. Other employees of the Bank may participate in
the Offering in clerical capacities, providing administrative support in
effecting sales transactions and answering questions of a mechanical nature
relating to the proper execution of the Order Forms. Other questions of
prospective purchasers, including questions as to the advisability or nature of
the investment, will be directed to registered representatives. Such other
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employees have been instructed not to solicit offers to purchase Common Stock or
provide advice regarding the purchase of Common Stock. A Stock Information
Center will be established in the Bank's office, in an area separate from the
Bank's banking operations. Employees will inform prospective purchasers that
their questions should be directed to the Stock Information Center and will
provide such persons with the telephone number of the Stock Information Center.
Stock orders will be accepted at the Bank's office and will be promptly
forwarded to the Stock Information Center for processing. Sales of Common Stock
by registered representatives will be made from the Stock Information Center. In
addition, the Bank may hire one or more temporary clerical persons to assist in
typing, opening mail, answering the phone, and with other clerical duties. An
employee of the Bank will also be present at the Stock Information Center to
process funds and answer questions regarding payment for stock, including
verification of account numbers in the case of payment by withdrawal
authorization and similar matters. Subject to applicable state law, the Company
will rely on Rule 3a4-1 under the Exchange Act, and sales of Common Stock will
be conducted within the requirements of Rule 3a4-1, so as to permit officers and
current full and part-time the Bank employees to participate in the sale of
Common Stock. No officer, director or employee of the Company or the Bank will
be compensated in connection with his or her participation by the payment of
commissions or other remuneration based either directly or indirectly on the
transactions in the Common Stock.
The engagement of Trident Securities and the work performed by Trident
Securities pursuant to its engagement should not be construed by purchasers of
Common Stock as constituting an endorsement or recommendation relating to such
investment or a verification of the accuracy or completeness of information
contained in this Prospectus.
Minimum and Maximum Purchase Limitations
Each person subscribing for Common Stock in the Conversion must
subscribe for at least fifty shares of the Common Stock to be offered in the
Conversion. In addition, the maximum number of shares of Common Stock which may
be purchased in the Conversion by (i) any person or entity, (ii) persons or
entities exercising Subscription Rights through a single account or (iii) group
of persons or entities otherwise acting in concert, is 10,000 shares. In
addition, no person or entity, or group of persons or entities acting in
concert, together with any associate (as defined in the Plan), may subscribe for
more than 15,000 shares of Common Stock sold in the Conversion. The Board of
Directors of the Bank may in its absolute discretion (i) reduce the
above-described 10,000 and 15,000 share maximum purchase limitations to an
amount not less than 1% of the number of shares offered and sold in the
Conversion or (ii) increase such 10,000 and 15,000 share maximum purchase
limitations to an amount of up to 5% of the shares of Common Stock offered and
sold. Any reduction or increase in the maximum purchase limitation by the Bank's
Board of Directors may occur at any time prior to consummation of the
Conversion, either before or after the Special Meeting on ________________,
1998. In the event the 10,000 or 15,000 share maximum purchase limitation is
increased, any subscriber or group of subscribers in the Subscription, Community
or Syndicated Community Offering who has subscribed for the maximum amount which
is increased, and certain other large subscribers in the discretion of the
Company, shall be given the opportunity to increase their subscriptions up to
the then applicable maximum purchase limitation.
The Plan further provides that for purposes of the foregoing
limitations the term "associate" is used to indicate any of the following
relationships with a person:
(i) any relative or spouse of such person, or any relative of such
spouse, who has the same home as such person or who is a
director or officer of the Bank, the Company or any subsidiary
of the Bank or of the Company;
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(ii) any corporation or organization (other than the Bank, the
Company or a majority-owned subsidiary of the Bank or the
Company) of which the person is an officer or partner or is,
directly or indirectly, the beneficial owner of 10% or more of
any class of equity security; and
(iii) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person
serves as a trustee or in a similar fiduciary capacity, except
for any tax-qualified employee stock benefit plan or any
charitable trust which is exempt from federal taxation
pursuant to Section 501(c)(3) of the Code.
For purposes of the foregoing limitations, directors and officers of
the Bank or the Company shall not be deemed to be associates or a group of
persons acting in concert solely as a result of their serving in such
capacities.
For purposes of the foregoing limitations, persons will be deemed to be
"acting in concert" if they are (i) knowingly participating in a joint activity
or interdependent conscious parallel action towards a common goal (whether or
not pursuant to an express agreement), with respect to the purchase, ownership,
voting or sale of Common Stock or (ii) engaged in a combination or pooling of
voting or other interests in the securities of the Company for a common purpose
pursuant to any contract, understanding, relationship, agreement or other
arrangement, whether written or otherwise. The Company and the Bank will presume
that certain persons are acting in concert based upon, among other things, joint
account relationships, accounts with the same address registration and the fact
that such persons have filed joint Schedules 13D with the SEC with respect to
other companies.
Approval, Interpretation, Amendment and Termination
Under the Plan, the Administrator's approval thereof, and applicable
North Carolina conversion regulations, consummation of the Conversion is subject
to satisfaction of certain conditions, including the following: (i) approval of
the Plan by the affirmative vote of a majority of the votes eligible to be cast
by members of the Bank at the Special Meeting; (ii) sale of shares of Common
Stock for an aggregate purchase price equal to not less than the minimum or more
than the maximum of the Estimated Valuation Range unless the aggregate purchase
price is increased to as much as 15% above the maximum with the consent of the
Administrator and FDIC, and (iii) receipt by the Company and the Bank of
favorable opinions of counsel or other tax advisor as to the federal and state
tax consequences of the Conversion. See "-- Income Tax Consequences."
If all conditions for consummation of the Conversion are not satisfied,
no Common Stock will be issued, the Bank will continue to operate as a North
Carolina-chartered mutual savings bank, all subscription funds will be promptly
returned with interest at the Bank's passbook savings rate, and all deposit
withdrawal authorizations (and holds placed on such accounts) will be canceled.
In such an event, the Company would not acquire control of the Bank.
All interpretations by the Bank and the Company of the Plan and of the
Order Forms and related materials for the Subscription and Community Offering
will be final, subject to the authority of the Administrator. The Bank and the
Company may reject Order Forms that are not properly completed. However, the
Company and the Bank retain the right, but will not be required, to waive
irregularities in submitted Order Forms or to require the submission of
corrected Order Forms or the remittance of full payment for all shares
subscribed for by such dates as they may specify. In addition, the Plan may be
substantively amended by a two-thirds vote of the Bank's Board of Directors at
any time prior to the Special Meeting, and
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at any time thereafter by a two-thirds vote of the Bank's Board of Directors
with the concurrence of the Administrator and the FDIC. If the Bank determines
upon the advice of counsel and after consultation with the Administrator that
any such amendment is material, subscribers would be given the opportunity to
increase, decrease or cancel their subscriptions. Also, as required by the
regulations of the Administrator, the Plan provides that the transactions
contemplated thereby may be terminated by a two-thirds vote of the Bank's Board
of Directors at any time prior to the Special Meeting and may be terminated by a
two-thirds vote of the Bank's Board of Directors at any time thereafter but
prior to the completion of the Conversion with the concurrence of the
Administrator, notwithstanding approval of the Plan by the Members at the
Special Meeting.
Certain Restrictions on Transfer of Subscription Rights; False or Misleading
Order Forms
The Subscription Rights granted under the Plan are non-transferable.
Subscription Rights may be exercised only by the person to whom they are issued
and only for his or her own account. Persons exercising Subscription Rights are
required to certify that they are purchasing shares for their own accounts
within the purchase limitations set forth in the Plan and that they have no
agreement or understanding for the sale or transfer of such shares.
The Bank reserves the right to make an independent investigation of any
facts or circumstances brought to its attention that indicate or tend to
indicate that one or more persons acting independently or as a group acting in
concert may be attempting to violate or circumvent the regulatory prohibition on
transferability of Subscription Rights. The nature and extent of such
investigation will be at the Bank's sole discretion and the Bank may require a
holder of Subscription Rights to provide certified affidavits and other
documentation to satisfy the Bank that its Plan and North Carolina and federal
conversion regulations regarding nontransferability are not being subverted by
actions of holders of Subscription Rights. In extreme cases the Bank reserves
the right to seek legal advice from the General Counsel for the Administrator as
to compliance with all regulations governing the Conversion, including the
nontransferability of Subscription Rights.
The Plan provides that, if the Bank's Board of Directors determines
that a subscriber (i) has submitted a false or misleading information on his or
her Order Forms or otherwise in connection with the attempted purchase of
shares, (ii) has attempted to purchase shares of Common Stock in violation of
provisions of the Plan or (iii) fails to cooperate with attempts by the Bank or
the Company or their employees or agents to verify information with respect to
purchase rights, the Board of Directors may reject the order of such subscriber.
Income Tax Consequences
The Bank has received an opinion from its special counsel, Brooks,
Pierce, McLendon, Humphrey & Leonard, L.L.P., of Greensboro, North Carolina, to
the effect that for federal income tax purposes: (i) the Conversion will
constitute a tax free reorganization with respect to the Bank and no gain or
loss will be recognized by the Bank either in its mutual or stock form; (ii) no
gain or loss will be recognized by the Bank upon the purchase of the Bank's
stock by the Company or upon the sale by the Company of its Common Stock; (iii)
no gain or loss will be recognized by the Bank's depositors with respect to
their deposit accounts at the Bank as a consequence of the Conversion; (iv) the
tax basis of depositors' deposit accounts at the Bank will not be changed as a
result of the Conversion; (v) assuming the Subscription Rights have no value, no
gain or loss will be recognized by Eligible Account Holders, Supplemental
Eligible Account Holders, Other Members, or directors, officers and employees of
the Bank upon either the issuance to them of the Subscription Rights or the
exercise or lapse thereof; (vi) no gain or loss will be recognized by Eligible
Account Holders or Supplemental Eligible Account Holders upon the distribution
to them of interests in the Liquidation Account;
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(vii) assuming the Subscription Rights have no value, the tax basis for Common
Stock purchased in the Conversion will be the amount paid therefor; and (viii)
the tax basis of interests in the Liquidation Account will be zero. The Bank has
been further advised by its special counsel, Brooks, Pierce, McLendon, Humphrey
& Leonard, L.L.P., that the tax effects of the Conversion under North Carolina
tax laws will be consistent with the federal income tax consequences.
Several of the foregoing legal opinions are premised on the assumption
that the Subscription Rights will have no value. The Bank has been advised by
Ferguson that, in its opinion, the Subscription Rights will not have any
ascertainable value, based on the fact that such rights are acquired by the
recipients without cost, are non-transferable, are of short duration and afford
the recipients the right only to purchase Common Stock at a price equal to its
estimated fair market value as of the date such rights are issued, which will be
the same price paid by all purchasers in the Conversion. The opinion of Ferguson
is not binding on the IRS and if the Subscription Rights were ultimately
determined to have ascertainable value, recipients of Subscription Rights would
have to include in gross income an amount equal to the value of the Subscription
Rights received by them. The basis of the Common Stock purchased pursuant to
Subscription Rights would be increased by the amount of income realized with
respect to the receipt or exercise of the Subscription Rights. Moreover,
recipients of Subscription Rights could then have to report the transaction to
the IRS. Each Eligible Account Holder, Supplemental Eligible Account Holder,
Other Member or other recipient of Subscription Rights is encouraged to consult
with his, her or its own tax advisor as to the tax consequences in the event the
Subscription Rights are deemed to have ascertainable value.
No legal opinion has been or will be received with respect to any tax
consequences of the Conversion not specifically described above, including the
tax consequences to Eligible Account Holders, Supplemental Eligible Account
Holders, Other Members, other recipients of Subscription Rights or purchasers of
Common Stock under the laws of any other state, local or foreign taxing
jurisdiction to which they may be subject. Special counsel expresses no opinion
regarding the value of the Subscription Rights.
LEGAL OPINIONS
The validity of the issuance of the Common Stock in the Conversion has
been passed upon for the Company by its special counsel, Brooks, Pierce,
McLendon, Humphrey & Leonard, L.L.P., Greensboro, North Carolina, which firm has
also rendered its opinion to the Bank concerning certain federal and North
Carolina income tax aspects of the Conversion as described herein under "THE
CONVERSION -- Income Tax Consequences." Certain legal matters will be passed
upon for Trident Securities by Thacher Proffitt & Wood, Washington, D.C.
EXPERTS
The Financial Statements of the Bank as of June 30, 1997 and 1996 and
for each of the years in the two-year period ended June 30, 1997 have been
included herein in reliance upon the report of Faulkner and Thompson, P.A.,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
Ferguson has consented to being named as an expert herein and to the
summary herein of its appraisal report as to the estimated pro forma market
value of the Bank and the Company and its opinion with respect to Subscription
Rights.
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REGISTRATION REQUIREMENTS
The Company will register its Common Stock with the SEC pursuant to
Section 12 of the Exchange Act in connection with the Conversion and will not
deregister the Common Stock for a period of three years following the completion
of the Conversion. Upon such registration, the proxy and tender offer rules,
insider trading reporting requirements and restrictions, annual and periodic
reporting and other requirements of the Exchange Act will be applicable to the
Company.
ADDITIONAL INFORMATION
The Company has filed a registration statement with the SEC on Form S-1
under the Securities Act, with respect to the Common Stock offered hereby. As
permitted by the rules and regulations of the SEC, this Prospectus does not
contain all of the information set forth in the registration statement. Such
information can be examined and copied at the public reference facilities of the
SEC located at Room 1024, 450 Fifth Street, N. W., Washington, D.C. 20549, and
at the regional offices of the SEC at 75 Park Place, Fourteenth Floor, New York,
New York 10007 and Room 3190, John C. Kluczynski Building, 230 South Dearborn
Street, Chicago, Illinois 60604. Copies of such material can be obtained by mail
from the SEC at prescribed rates from the Public Reference Section of the SEC at
450 Fifth Street, N. W., Washington, D.C. 20549. In addition, the SEC maintains
a World Wide Web site that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
SEC, including the Company; the address is (http://www.sec.gov.). The statements
contained in this Prospectus as to the contents of any contract or other
document filed as an exhibit to the registration statement are, of necessity,
brief descriptions of each material feature thereof and are not necessarily
complete; each such statement is qualified by reference to such contract or
document.
The Bank has filed an Application to Convert a Mutual Savings Bank to a
Stock Owned Savings Bank with the Administrator. Pursuant to the North Carolina
conversion regulations, this Prospectus omits certain information contained in
such Application. The Application, which contains a copy of Ferguson's
appraisal, may be inspected at the office of the Administrator, Savings
Institutions Division, North Carolina Department of Commerce, Tower Building,
Suite 301, 1110 Navaho Drive, Raleigh, North Carolina 27609. Copies of the Plan,
which includes a copy of the Bank's proposed Amended Certificate of
Incorporation and Stock Bylaws, and copies of the Company's Articles of
Incorporation and Bylaws are available for inspection at each office of the Bank
and may be obtained by writing to the Bank at 211 South Greene Street,
Wadesboro, North Carolina 28170, Attention: Eugene M. Ward, President, or by
telephoning the Bank at (704) 694-2122. A copy of Ferguson's independent
appraisal is also available for inspection at the Stock Information Center, 211
South Greene Street, Wadesboro, North Carolina 28170.
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Index to Financial Statements
Page
----
Report of Independent Auditors...............................................F-2
Financial Statements
Statements of Financial Condition........................................F-3
Statements of Operations.................................................F-4
Statements of Equity.....................................................F-5
Statements of Cash Flows.................................................F-6
Notes to Financial Statements............................................F-8
All schedules are omitted because of the absence of the conditions under
which they are required or because the required information is included in
the financial statements of Anson Savings Bank, S.S.B. or related notes. No
financial statements are provided for the Holding Company since it was not
in operation for any of the periods presented.
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
------------------------------
The Board of Directors
Anson Savings Bank, S.S.B.
Wadesboro, North Carolina
We have audited the accompanying statements of financial condition of
Anson Savings Bank, S.S.B. (the Bank) as of June 30, 1997 and 1996, and the
related statements of operations, equity and cash flows for the years then
ended. These financial statements are the responsibility of the Bank's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Anson Savings Bank,
S.S.B. as of June 30, 1997 and 1996 and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
August 26, 1997
Charlotte, North Carolina
F-2
<PAGE>
ANSON SAVINGS BANK, S.S.B.
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31, June 30,
--------------------- -----------------------------------
1997 1997 1996
--------------------- --------------- ---------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents
Non-interest bearing deposits and cash $ 171,850 $ 197,056 $ 252,484
Interest earning deposits 3,289,475 3,843,554 3,050,877
Federal funds sold 750,000 600,000 300,000
--------------- -------------- ---------------
4,211,325 4,640,610 3,603,361
Investment securities
Held to maturity (fair value at December 31,
1997, June 30, 1997 and 1996 of $4,386,630,
$3,933,344 and $5,559,174, respectively) 4,374,212 3,938,524 5,577,031
Available for sale 380,459 317,521 193,914
Loans receivable, net 11,323,178 11,422,892 11,571,502
Premises and equipment, net 214,895 222,125 233,083
Interest receivable 52,493 59,976 85,909
Other assets 109,457 61,719 133,714
Deferred income taxes 57,000 57,000 57,000
--------------- -------------- ---------------
$ 20,723,019 $ 20,720,367 $ 21,455,514
=============== ============== ===============
LIABILITIES AND EQUITY
LIABILITIES
Savings deposits, plus accrued interest
thereon $ 16,655,697 $ 16,791,101 $ 17,623,069
Accounts payable and accrued expenses 49,747 36,624 50,965
Accrued pension obligation - - 62,589
Deferred income taxes 158,701 136,200 98,000
--------------- -------------- ---------------
16,864,145 16,963,925 17,834,623
COMMITMENTS - Notes 4, 12 and 14
EQUITY
Retained earnings - substantially restricted 3,614,437 3,552,442 3,502,297
Unrealized gains on securities
available for sale, net of tax 244,437 204,000 118,594
--------------- -------------- ---------------
3,858,874 3,756,442 3,620,891
--------------- -------------- ---------------
$ 20,723,019 $ 20,720,367 $ 21,455,514
=============== ============== ===============
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE>
ANSON SAVINGS BANK, S.S.B.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the six months ended For the years ended
December 31, June 30,
--------------------------------------- ---------------------------------
1997 1996 1997 1996
----------------- ----------- ------------ --------------
(Unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 475,383 $ 493,791 $ 963,385 $ 1,032,084
Interest on investments and
deposits in other banks 242,747 249,482 478,076 526,444
----------------- ----------- ------------ --------------
Total interest income 718,130 743,273 1,441,461 1,558,528
INTEREST EXPENSE
Interest on savings deposits 411,866 419,310 818,740 893,945
----------------- ----------- ------------ --------------
Net interest income 306,264 323,963 622,721 664,583
PROVISION FOR LOAN LOSSES -- 500 5,000 7,000
----------------- ----------- ------------ --------------
Net interest income after
provision for loan losses 306,264 323,463 617,721 657,583
NON-INTEREST INCOME 4,269 1,289 5,963 1,678
NON-INTEREST EXPENSE
Salaries and employee benefits 134,185 132,028 246,347 244,703
Federal insurance premiums 5,228 125,034 130,552 40,628
Data processing 15,846 15,643 31,946 31,139
Examinations and audit 16,640 12,360 26,268 34,581
Occupancy including depreciation 10,480 14,146 22,598 25,050
Other 49,175 49,523 97,128 104,860
----------------- ----------- ------------ --------------
Total non-interest expense 231,554 348,734 554,739 480,961
----------------- ----------- ------------ --------------
Income (loss) before income
taxes 78,979 (23,982) 68,945 178,300
INCOME TAXES
Current expense 16,984 8,800 18,800 54,000
Deferred expense (benefit) -- (12,400) -- (2,000)
----------------- ----------- ------------ --------------
16,984 (3,600) 18,800 52,000
----------------- ----------- ------------ --------------
Net income (loss) $ 61,995 $ (20,382) $ 50,145 $ 126,300
================= =========== ============ ==============
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE>
ANSON SAVINGS BANK, S.S.B.
STATEMENTS OF EQUITY
<TABLE>
<CAPTION>
Unrealized gains
Retained Earnings on securities
substantially available Total
restricted for sale Equity
----------------- ---------------- -------------
<S> <C> <C> <C>
BALANCE AT JUNE 30, 1995 $ 3,375,997 $ 94,605 $ 3,470,602
Net income 126,300 - 126,300
Changes in unrealized gain on
securities available
for sale, net of tax - 23,989 23,989
------------- ------------- -------------
BALANCE AT JUNE 30, 1996 3,502,297 118,594 3,620,891
Net income 50,145 - 50,145
Changes in unrealized gain on
securities available
for sale, net of tax - 85,406 85,406
------------- ------------- -------------
BALANCE AT JUNE 30, 1997 3,552,442 204,000 3,756,442
Net income (unaudited) 61,995 - 61,995
Changes in unrealized gain on
securities available for
sale, net of tax (unaudited) - 40,437 40,437
------------- ------------- -------------
BALANCE AT DECEMBER 31, 1997
(Unaudited) $ 3,614,437 $ 244,437 $ 3,858,874
============= ============= =============
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE>
ANSON SAVINGS BANK, S.S.B.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the six months ended For the years ended
December 31, June 30,
--------------------------------- -----------------------------
1997 1996 1997 1996
------------ ------------ ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 61,995 $ (20,382) $ 50,145 $ 126,300
Adjustments to reconcile net
income (loss) to net cash provided
by (used for) operating activities
Provision for loan losses - 500 5,000 7,000
Provision for depreciation 7,230 12,600 14,419 17,212
Deferred income taxes - (12,400) - (2,000)
(Increase) decrease in assets
Interest receivable 7,483 (16,288) 25,933 (3,268)
Other assets (47,738) 6,426 71,995 28,507
Increase (decrease) in
liabilities
Accounts payable and
accrued expenses 13,123 (50,433) (76,931) (34,068)
----------- ----------- -----------
Net cash provided by
(used for) operating
activities 42,093 (79,977) 90,561 139,683
----------- ----------- ----------- -----------
INVESTING ACTIVITIES
Decrease (increase) in loans
receivable 99,714 (158,844) 143,610 336,853
Purchases of securities
held to maturity (2,499,922) (2,498,203) (2,501,384) (4,997,148)
Proceeds from maturities of
securities held to maturity 2,064,234 3,545,040 4,139,891 5,658,620
Purchases of premises and
equipment - (1,432) (3,461) (18,626)
----------- ----------- ----------- -----------
Net cash provided by
(used for) investing
activities (335,974) 886,561 1,778,656 979,699
----------- ----------- ----------- -----------
</TABLE>
(Continued)
F-6
<PAGE>
ANSON SAVINGS BANK, S.S.B.
STATEMENTS OF CASH FLOWS
(Continued)
<TABLE>
<CAPTION>
For the six months ended For the years ended
December 31, June 30,
------------------------------- -------------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C>
FINANCING ACTIVITIES
Net decrease in savings deposits $ (135,404) $ (733,877) $ (831,968) $ (131,711)
---------- ---------- ---------- ----------
Increase (decrease) in cash
and cash equivalents $ (429,285) $ 72,707 $ 1,037,249 $ 987,671
---------- ---------- ---------- ----------
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD $ 4,640,610 $ 3,603,361 $ 3,603,361 $ 2,615,690
---------- ---------- ---------- ----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 4,211,325 $ 3,676,068 $ 4,640,610 $ 3,603,361
========== ========== ========== ==========
SUPPLEMENTAL DISCLOSURE:
Total increase in unrealized
gain on securities available
for sale, net of tax $ 40,437 $ 36,248 $ 85,406 $ 23,989
========== ========== ========== ==========
Cash paid during the period
for interest $ 415,331 $ 431,623 $ 840,875 $ 888,560
========== ========== ========== ==========
Cash paid during the period
for income taxes $ 6,294 $ 25,382 $ 25,382 $ 35,525
========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements.
F-7
<PAGE>
ANSON SAVINGS BANK, S.S.B.
NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Anson Savings, S.S.B. (the Bank)
conform to generally accepted accounting principles and to general
practice within the savings bank industry. The following is a description
of the more significant accounting and reporting policies that the Bank
follows in preparing its financial statements.
Organization and Operations
Anson Savings Bank, S.S.B. (the Bank) is a state chartered savings bank
primarily engaged in the business of obtaining savings deposits and
providing loans to the general public in Anson County, North Carolina.
The Bank qualifies as a savings and loan for tax purposes.
Unaudited Financial Statements
The unaudited financial statements furnished reflect all adjustments,
consisting of normal recurring accruals which are, in the opinion of
management, necessary for a fair presentation of the financial position
as of December 31, 1997 and the results of operations,changes in equity
and cash flows for the six months ended December 31, 1997 and 1996. The
results for the six month periods are not necessarily indicative of the
operating results of the Bank for the entire year.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Investment Securities
The Bank accounts for investment securities in accordance with Statement
of Financial Accounting Standard (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". Under SFAS No. 115, debt
securities are classified upon purchase as available for sale, held to
maturity or trading. Such assets classified as available for sale are
carried at market value. Unrealized holding gains or losses are reported
as a component of equity net of deferred income taxes. Securities
classified as held to maturity are carried at cost, adjusted for the
amortization of premiums and the accretion of discounts. In order to
qualify as held to maturity the Bank must have the intent and ability to
hold the securities to maturity. Trading securities are carried at
market value. Gains or losses on disposition of securities are based on
the difference between the net proceeds and the adjusted carrying amount
of the securities sold, using the specific identification method. The
Bank held no trading securities at December 31, 1997, June 30, 1997 or
1996.
F-8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES, Continued
Loans
The Bank's loan portfolio consists principally of long-term conventional
mortgage loans secured by first deeds of trust. Loans are stated at the
principal balance outstanding and origination fees and certain direct
originating costs are capitalized and recognized as an adjustment of the
yield of the related loan. Interest income on loans is accrued and taken
into income based upon the interest method. The recognition of interest
income is discontinued when, in management's judgment, the interest is
not collectible in the normal course of business.
The Bank accounts for impaired loans in accordance with SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan". This standard
requires that all creditors value loans at the loan's fair value if it
is probable that the creditor will be unable to collect all amounts due
according to the terms of the loan agreement. Fair value may be
determined based upon the present value of expected cash flows, market
prices of the loan, if available, or value of the underlying collateral.
Expected cash flows are required to be discounted at the loan's
effective interest rate. SFAS No. 114 was amended by SFAS No. 118 to
allow a creditor to use existing methods for recognizing interest income
on an impaired loan and by requiring additional disclosures about how a
creditor recognizes interest income on an impaired loan. When the
ultimate collectibility of an impaired loan's principal is in doubt,
wholly or partially, all cash receipts are applied to principal. When
this doubt does not exist, cash receipts are applied under the
contractual terms of the loan agreement first to principal then to
interest income. Once the recorded principal balance has been reduced to
zero, future cash receipts are applied to interest income, to the extent
that any interest has been foregone. Further cash receipts are recorded
as recoveries of any amounts previously charged off.
A loan is also considered impaired if its terms are modified in a
troubled debt restructuring. For these accruing impaired loans, cash
receipts are typically applied to principal and interest receivable in
accordance with the terms of the restructured loan agreement. Interest
income is recognized on these loans using the accrual method of
accounting. As of December 31, 1997 and 1996 and June 30, 1997 and 1996,
the Bank had no impaired loans.
Allowance for loan losses
The allowance for loan losses is based on management's ongoing
evaluation of the loan portfolio and reflects an amount that, in
management's opinion, is adequate to absorb losses in the existing
portfolio. In evaluating the portfolio, management takes into
consideration numerous factors, including current economic conditions,
prior loan loss experience, adequacy of collateral, the composition of
the loan portfolio, and management's estimate of anticipated
F-9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES, Continued
credit losses. Loans are charged against the allowance at such time as
they are determined to be losses. Subsequent recoveries are credited to
the allowance. Management considers the year-end allowance appropriate
and adequate to cover possible losses in the loan portfolio; however,
management's judgment is based upon a number of assumptions about future
events, which are believed to be reasonable, but which may or may not
prove valid. Thus, there can be no assurance that charge-offs in future
periods will not exceed the allowance for loan losses or that additional
increases in the allowance for loan losses will not be required.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation
and amortization. For financial reporting purposes, depreciation is
computed by use of the straight-line method over the estimated useful
lives of the various classes of assets.
Income Taxes
Deferred tax liabilities and assets are determined based on the
difference between the financial statement carrying amounts and tax
bases of assets and liabilities using enacted tax rates in effect for
the years in which the differences are expected to reverse. The
significant components of deferred tax assets and liabilities arise
principally from temporary differences related to unrealized gains on
investments, depreciation expense, loan loss reserves, deferred loan fee
income and prepaid pension.
Cash Equivalents
The Bank considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
Reclassifications
Certain 1996 balance sheet and income statement accounts have been
reclassified to conform to the 1997 presentation. This reclassification
had no effect on income or equity for any period.
F-10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 2 - INVESTMENT SECURITIES
Investment securities are as follows:
<TABLE>
<CAPTION>
December 31, 1997
-----------------------------------------------------------------
(Unaudited)
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Securities held to maturity:
U.S. Treasury and other U.S.
Government Agency bonds:
Due within one year $ 499,922 $ 2,375 $ -- $ 502,297
Due after one year through five years 1,000,000 7,657 -- 1,007,656
--------- --------- --------- ---------
1,499,922 10,032 -- 1,509,954
--------- --------- --------- ---------
Government National Mortgage
Association Securities:
Due after one year through five years 41,431 1,608 -- 43,039
Due after five years through ten years 259,236 6,130 -- 265,366
Due after ten years 431,023 -- 5,352 425,671
--------- --------- --------- ---------
731,690 7,738 5,352 734,076
--------- --------- --------- ---------
Federal Home Loan Bank stock 142,600 -- -- 142,600
--------- --------- --------- ---------
Fixed-rate, fixed-term deposits 2,000,000 -- -- 2,000,000
--------- --------- --------- ---------
Total $4,374,212 $ 17,770 $ 5,352 $4,386,630
========= ========= ========= =========
Securities available for sale:
Federal Home Loan Mortgage
Corporation stock $ 8,883 $ 371,576 $ -- $ 380,459
========= ========= ========= =========
</TABLE>
F-11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 2 - INVESTMENT SECURITIES, Continued
<TABLE>
<CAPTION>
June 30, 1997
-----------------------------------------------------------------
(Unaudited)
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Securities held to maturity:
U.S. Treasury and other U.S.
Government Agency bonds:
Due within one year $ 1,496,406 $ 3,594 $ -- $1,500,000
Due after one year through five years 1,000,000 -- -- 1,000,000
--------- --------- --------- ---------
2,496,406 3,594 -- 2,500,000
--------- --------- --------- ---------
Government National Mortgage
Association Securities:
Due after one year through five years 47,016 2,362 -- 49,378
Due after five years through ten years 281,481 2,625 -- 284,106
Due after ten years 471,021 -- 13,761 457,260
--------- --------- --------- ---------
799,518 4,987 13,761 790,744
--------- --------- --------- ---------
Federal Home Loan Bank stock 142,600 -- -- 142,600
--------- --------- --------- ---------
Fixed-rate, fixed-term deposits 500,000 -- -- 500,000
--------- --------- --------- ---------
Total $ 3,938,524 $ 8,581 $ 13,761 $3,933,344
========= ========= ========= =========
Securities available for sale:
Federal Home Loan Mortgage
Corporation stock $ 8,883 $ 308,638 $ -- $ 317,521
========= ========= ========= =========
</TABLE>
F-12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 2 - INVESTMENT SECURITIES, Continued
<TABLE>
<CAPTION>
June 30, 1996
-----------------------------------------------------------------
(Unaudited)
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Securities held to maturity:
U.S. Treasury and other U.S.
Government Agency bonds:
Due within one year $ 1,494,709 $ 4,119 $ 351 $ 1,498,477
Due after one year through five years 499,258 -- 3,984 495,274
--------- ---------- ---------- ---------
1,993,967 4,119 4,335 1,993,751
--------- ---------- ---------- ---------
Government National Mortgage
Association Securities:
Due after one year through five years $ 82,323 $ 3,536 $ -- $ 85,859
Due after five years through ten years 33,195 3,340 -- 36,535
Due after ten years 824,896 -- 24,517 800,379
--------- ---------- ---------- ---------
940,414 6,876 24,517 922,773
--------- ---------- ---------- ---------
Federal Home Loan Bank stock 142,600 -- -- 142,600
--------- ---------- ---------- ---------
Fixed-rate, fixed-term deposits 2,500,000 -- -- 2,500,000
--------- ---------- ---------- ---------
Total $ 5,577,031 $ 10,995 $ 28,852 $5,559,174
========== ========== ========== =========
Securities available for sale:
Federal Home Loan Mortgage
Corporation stock $ 8,883 $ 185,031 $ -- $ 193,914
========== ========== ========== =========
</TABLE>
NOTE 3 - FEDERAL HOME LOAN BANK STOCK
Federal Home Loan Bank (FHLB) stock is a required deposit with the FHLB
that is classified as a restricted investment security, carried at cost
and evaluated for impairment. These shares can only be sold at their par
value of $100 per share and only to the FHLB or to another member
institution.
F-13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 4 - LOANS RECEIVABLE
Loans receivable are summarized as follows:
<TABLE>
<CAPTION>
December 31, June 30,
------------------- ---------------------------------------
1997 1997 1996
------------------- ---------------- -----------------
<S> <C> <C> <C>
Principal Balances: (Unaudited)
Real estate loans
One-to-four family
residential $ 10,857,928 $ 10,887,058 $ 11,242,399
Nonresidential 482,713 543,015 400,040
Secured by deposits 76,599 75,131 45,787
Construction loans 365,858 349,794 198,942
------------------- ---------------- -----------------
11,783,098 11,854,998 11,887,168
------------------- ---------------- -----------------
Allowance for loan losses (100,000) (100,000) $ (95,000)
Undisbursed portion of construction
loans (318,714) (288,281) (174,194)
Net deferred loan origination fees (41,198) (43,825) (46,472)
------------------- ---------------- -----------------
(459,912) (432,106) (315,666)
------------------- ---------------- -----------------
$ 11,323,178 $ 11,422,892 $ 11,571,502
=================== ================ =================
</TABLE>
Loan commitments outstanding were $132,000 at December 31, 1997 and $169,400
and $239,500 at June 30, 1997 and 1996, respectively. At December 31, 1997,
June 30, 1997 and 1996, there were no loans that were in a nonaccrual status.
Set forth below is an analysis of the allowance for loan losses:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, June 30,
------------------------------------ ------------------------------------
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
(Unaudited)
<S> <C> <C> <C> <C>
Balance, beginning of period $ 100,000 $ 95,000 $ 95,000 $ 88,000
Loans charged-off - - - -
Recoveries of loans charged-off - - - -
Provision for loan losses - 500 5,000 7,000
--------------- --------------- --------------- ---------------
Balance, end of period $ 100,000 $ 95,500 $ 100,000 $ 95,000
================ =============== =============== ===============
</TABLE>
F-14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 5 - PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
December 31, June 30,
-------------------------------------------------------------
1997 1997 1996
------------------- ---------------- -------------
(Unaudited)
<S> <C> <C> <C>
Land $ 30,808 $ 30,808 $ 30,808
Land improvements 2,774 2,774 2,774
Building 562,545 562,545 559,277
Furniture and equipment 227,590 227,590 227,397
------------------- ---------------- -------------
823,717 823,717 820,256
Less allowances for depreciation 608,822 601,592 587,173
------------------- ---------------- -------------
$ 214,895 $ 222,125 $ 233,083
================== =============== =============
</TABLE>
NOTE 6 - INTEREST RECEIVABLE
Accrued interest receivable consisted of the following:
<TABLE>
<CAPTION>
December 31, June 30,
-------------------------------------------------------------
1997 1997 1996
------------------- ---------------- -------------
(Unaudited)
<S> <C> <C> <C>
Accrued interest on interest bearing
deposits and investments $ 44,207 $ 42,497 $ 79,509
Accrued interest on loans receivable 8,286 7,479 6,400
------------------- ---------------- -------------
$ 52,493 $ 59,976 $ 85,909
================== =============== =============
</TABLE>
F-15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 7 - COMPOSITION OF SAVINGS DEPOSITS
The composition of savings deposits by interest rate is as follows:
<TABLE>
<CAPTION>
December 31, 1997 June 30, 1997
-------------------------------- --------------------------------
Amount % Amount %
--------------- ------------- --------------- -------------
(Unaudited)
<S> <C> <C> <C> <C>
3.25 % passbook $ 3,645,425 21.88 % $ 3,441,163 20.49 %
Term certificates, 3.25% 31,002 .19 41,521 .25
Term certificates, 4.4% - 5.5% 8,613,564 51.71 8,872,711 52.84
Term certificates, 5.6% - 7.0% 3,460,166 20.78 3,345,034 19.92
Money market, 3.1% 100,895 .61 104,710 .62
Deposits greater than $100,000,
3.25% - 7.0% 743,138 4.46 920,991 5.49
--------------- ------------- --------------- -------------
16,594,190 16,726,130
Accrued interest payable on
deposits 61,507 .37 64,971 .39
--------------- ------------- --------------- -------------
$ 16,655,697 100.00 % $ 16,791,101 100.00 %
=============== ============= =============== =============
</TABLE>
June 30, 1996
-----------------------------
Amount %
---------------- ----------
3.25 % passbook $ 4,145,598 23.52 %
Term certificates, 3.25% - 3.92% 50,935 .29
Term certificates, 4.1% - 5.5% 9,559,472 54.24
Term certificates, 5.6% - 7.0% 2,967,162 16.84
Money market, 3.3% 181,405 1.03
Deposits greater than $100,000,
3.25% - 7.0% 634,390 3.60
---------------- --------
17,538,962
Accrued interest payable on
deposits 84,107 .48
---------------- --------
$ 17,623,069 100.00 %
================ ========
F-16
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 7 - COMPOSITION OF SAVINGS DEPOSITS, Continued
Scheduled maturities of certificate accounts are as follows:
December 31, 1997
-----------------
(Unaudited)
1998 $ 10,198,756
1999 2,195,991
2000 512,993
--------------
$ 12,907,740
===============
Interest expense on savings deposits consists of the following components
for the six months ended December 31 and the years ended June 30:
<TABLE>
<CAPTION>
December 31, June 30,
-------------------------------- ---------------------------------
1997 1996 1997 1996
------------- ------------ ------------- ---------------
(Unaudited)
<S> <C> <C> <C> <C>
Passbook accounts $ 61,750 $ 65,196 $ 128,355 $ 134,829
Money market accounts 1,580 2,369 3,994 4,942
Certificate accounts 348,536 351,745 686,391 754,174
-------------- ------------- ------------- --------------
$ 411,866 $ 419,310 $ 818,740 $ 893,945
============== ============= ============= ==============
</TABLE>
NOTE 8 - INCOME TAXES
The differences between income taxes at the U.S. statutory rate and the
effective income taxes as reflected in the financial statements are as
follows:
<TABLE>
<CAPTION>
Six months ended Year ended
December 31, June 30,
------------------------------- -------------------------------
1997 1996 1997 1996
------------- ------------- -------------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
Income tax expense at federal
statutory rate of 34% $ 27,000 $ (8,200) $ 23,400 $ 61,000
Effect of graduated income
tax rates (15,000) (4,600) (4,600) (8,000)
Other 4,984 - - (1,000)
----------- --------- --------- ---------
$ 16,984 $ (3,600) $ 18,800 $ 52,000
=========== ========= ========= =========
</TABLE>
F-17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 8 - INCOME TAXES, Continued
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Bank's deferred tax assets are as follows:
<TABLE>
<CAPTION>
December 31, June 30,
-------------------- ---------------------------------------
1997 1997 1996
-------------------- ----------------- ----------------
(Unaudited)
<S> <C> <C> <C>
Deferred tax assets:
Deferred revenue $ 18,000 $ 18,000 $ 18,000
Loan loss reserve 39,000 39,000 37,000
Other - - 2,000
------------------- ---------------- ---------------
Total deferred income
tax assets $ 57,000 $ 57,000 $ 57,000
=================== ================ ===============
Deferred tax liabilities:
Unrealized gain on investments $ 127,000 $ 103,200 $ 66,000
Book basis versus tax basis
for premises and equipment 8,000 8,000 8,000
Prepaid pension 22,000 21,000 18,000
Other 1,701 4,000 6,000
------------------- ---------------- ---------------
Total deferred income tax
liabilities $ 158,701 $ 136,200 $ 98,000
=================== ================ ===============
</TABLE>
Legislation has been passed which repeals the "reserve" method of
accounting for thrift bad debt reserves for the first tax year beginning
after December 31, 1995 (the fiscal year ending June 30, 1996 for the
Bank). This legislation requires all thrifts (including the Bank) to
account for bad debts using either the specific charge-off method
(available to all thrifts) or the experience method (available only to
thrifts that qualify as "small banks", i.e. under $500 million in assets).
The Bank currently uses the experience method of accounting for its tax
bad debt reserves. The legislation also suspends recapture of bad debt
reserves taken through 1987 (i.e., the base year reserve), but requires
thrifts to recapture or repay bad debt deductions taken after 1987 over
six years. As of December 31, 1997, bad debt reserves subject to recapture
were not significant. As permitted under SFAS 109, no deferred tax
liability is provided for approximately $1,000,000 ($340,000 approximate
tax effect) of such tax bad debt reserves that arose prior to October 1,
1988.
F-18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 9 - PENSION PLAN
The Bank established a noncontributory defined benefit plan in 1990 which
covers substantially all employees. The plan benefits as of June 30, 1994
were frozen and the current plan benefits are based on plan years of
service and the employee's compensation during the last ten years of
service. The Bank's policy is to fund pension costs accrued. Pension
expense for the six months ended December 31, 1997 and 1996 and the years
ended June 30, 1997 and 1996, was approximately $25,000, $19,000, $38,000
and $38,000, respectively. The components of pension expense are as
follows:
<TABLE>
<CAPTION>
Six months ended Year ended
December 31, June 30,
------------------------------ ---------------------------------
1997 1996 1997 1996
------------- ------------ ------------- --------------
(Unaudited)
<S> <C> <C> <C> <C>
Service costs $ 22,000 $ 17,000 $ 34,000 $ 31,000
Interest cost on projected
benefit obligation 14,000 11,000 22,000 18,000
Expected return on plan
assets (9,000) (7,000) (14,000) (15,000)
Amortization (2,000) (2,000) (4,000) 4,000
------------ ----------- ------------ ------------
Net period pension cost $25,000 $19,000 $38,000 $38,000
============ =========== ============ ============
</TABLE>
A summary of the Plan's funded status and the pension liability
recognized in the Bank's financial statements at December 31, 1997,
June 30, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
Six months ended For the years ended
December 31, June 30,
----------------------- -------------------------------
1997 1997 1996
----------------------- --------------- --------------
(Unaudited)
<S> <C> <C> <C>
Accumulated benefit obligation $ 317,000 $ 294,700 $ 249,400
=============== ============= =============
Plan assets at fair value $ 318,000 $ 295,500 $ 237,700
--------------- ------------- -------------
Projected benefit obligation for service rendered to date:
Vested (254,000) (236,000) (249,400)
Additional benefits based on
estimated future salary levels (107,000) (99,500) (24,900)
-------------- ------------ ----------
(361,000) (335,500) (274,300)
-------------- ------------ ----------
(continued)
</TABLE>
F-19
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 9 - PENSION PLAN, Continued
<TABLE>
<CAPTION>
Six months ended For the years ended
December 31, June 30,
----------------------- -------------------------------
1997 1997 1996
----------------------- --------------- --------------
(Unaudited)
<S> <C> <C> <C>
Projected benefit obligation in
excess of plan assets $ (43,000) $ (40,000) $ (36,600)
Unrecognized net transition liability 57,000 53,000 56,600
Unrecognized net prior service cost gain (72,000) (67,600) (72,200)
Unrecognized net loss 113,000 105,100 103,200
Minimum liability - - (62,500)
---------- --------- -----------
(Accrued) prepaid pension cost $ 55,000 $ 50,500 $ (11,500)
========== ========= ===========
</TABLE>
Assumptions used in the actuarial calculation at December 31, 1997, June
30, 1997 and 1996 were 8% for the weighted-average discount rate and
expected long-term rate of return on assets and 4% for the rate of
increase in compensation levels. At December 31, 1997, June 30, 1997 and
1996, 92% of the plan assets were invested in a certificate of deposit at
the Bank.
NOTE 10 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments"
requires disclosure of fair value information, whether or not recognized
in the statement of financial position, when it is practical to estimate
the fair value. SFAS 107 defines a financial instrument as cash, evidence
of an ownership interest in an entity or contractual obligations which
require the exchange of cash or other financial instruments. Certain items
are specifically excluded from the disclosure requirements, including the
Bank's common stock, premises and equipment and other assets and
liabilities.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to
estimate that value:
Cash and Cash Equivalents and Short-Term Investments
For cash and cash equivalents and short-term investments, the carrying
amount is a reasonable estimate of fair value.
Investment Securities
Fair values for securities, excluding restricted equity securities, are
based on quoted market prices and dealer quotes. The carrying values of
restricted equity securities approximate fair values.
F-20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 10 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, Continued
Loans Receivable
Fair values of real estate loans and savings deposit loans are estimated
using discounted cash flow analyses, with interest rates currently being
offered for loans with similar terms to borrowers of similar credit
quality.
Accrued Interest
The carrying amounts of accrued interest approximate fair values.
Savings Deposits
The fair value of savings accounts and certain money market deposits is
the amount payable on demand at the reporting date. The fair value of
certificates of deposit is based upon the discounted value of the
contractual cash flows. The discount rates used in these calculations
approximates the current rates offered for deposits of similar remaining
maturities.
Commitments to Extend Credit
The fair value of commitments to extend credit is estimated using the
fees currently charged to enter into similar agreements, taking into
account the remaining terms of the agreements and the present
creditworthiness of the counterparties. For fixed-rate loan commitments,
fair value also considers the difference between current levels of
interest rates and the committed rates.
The estimated fair value of the Bank 's financial instruments were as
follows at:
<TABLE>
<CAPTION>
December 31, 1997
--------------------------------------
Carrying Fair
Amount Value
--------------- --------------
Financial Assets: (Unaudited)
<S> <C> <C>
Cash, interest bearing deposits,
and federal funds sold $ 4,211,325 $ 4,211,325
Investments
Securities available for sale 380,459 380,459
Securities held to maturity 4,374,212 4,386,630
Loans receivable 11,323,178 11,454,531
Interest receivable 52,493 52,493
Financial Liabilities:
Savings deposits 16,655,697 16,685,382
Unrecognized Financial Instruments:
Commitments to extend credit 132,000 132,000
</TABLE>
F-21
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 11 - RELATED PARTIES
The Bank has entered into transactions with its officers and directors.
The aggregate amount of loans to such related parties at December 31,
1997, June 30, 1997 and 1996, were $0, $890 and $2,621, respectively.
During the six months ended December 31, 1997 and the years ended June 30,
1997 and 1996, new loans to such related parties amounted to $0, $0 and
$2,621, and repayments amounted to $890, $1,731 and $27,254, respectively.
Such loans were made substantially on the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with other borrowers and do not involve more than the normal
risks of collectibility. The Bank also had related party deposits of
$649,677, $531,244 and $518,834 at December 31, 1997, June 30, 1997 and
1996, respectively.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
In the normal course of business, there are various outstanding
commitments and contingent liabilities, such as commitments to extend
credit, which are not reflected in the accompanying financial statements.
Although these commitments do expose the Bank to certain types of risk,
management does not expect losses to result from these transactions.
Commitments to extend credit are legally binding agreements to lend to a
customer. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee.
Existing credit and commitments are reviewed continually to ensure there
is no deterioration in the credit worthiness of the borrower. Outstanding
commitments at December 31, 1997 are $132,000. Collateral held is obtained
based on management's credit evaluation of the customer and generally
includes either real property or savings deposits.
NOTE 13 - REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements
administered by its primary federal regulator, the Federal Deposit
Insurance Corporation (FDIC) and the State of North Carolina. Failure to
meet the minimum regulatory capital requirements can initiate certain
mandatory, and possible additional discretionary actions by regulators,
that if undertaken, could have a direct material effect on the Bank and
the financial statements. Under the regulatory capital adequacy guidelines
and the regulatory framework for prompt corrective action, the Bank must
meet specific capital guidelines involving quantitative measures of the
Bank's assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices. The Bank's capital
amounts and classification under the prompt corrective action guidelines
are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
F-22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 13 - REGULATORY MATTERS, Continued
The FDIC requires the Bank to have a minimum leverage ratio of Tier I
Capital (principally consisting of retained earnings and any future common
stockholders' equity, less any intangible assets) to all assets of at
least 3%, provided that it receives the highest rating during the
examination process. For institutions that receive less than the highest
rating, the Tier I capital requirements is 1% to 2% above the stated
minimum. The FDIC also requires the Bank to have a ratio of total capital
to risk-weighted assets of 8%, of which at least 4% must be in the form of
Tier I capital. The state regulations require a net worth equal to at
least 5% of total assets.
As shown below, at December 31, 1997 the Bank complied with all the
capital requirements described above and also all of the requirements to
be classified as well-capitalized.
<TABLE>
<CAPTION>
Leverage Tier I N.C.
Ratio of Risk- Savings
GAAP Tier I Adjusted Risk-Based Bank
Equity Capital Capital Capital Capital
-------- --------- --------- ------------- ----------
(Dollars in Thousands)
(Unaudited)
<S> <C> <C> <C> <C> <C>
GAAP Equity $ 3,860 $ 3,860 $ 3,860 $ 3,860 $ 3,860
========
Unrealized gains on
securities available for sale (245) (245) (245) (245)
General loan loss allowance -- -- 97 97
-------- -------- -------- --------
Regulatory capital 3,615 3,615 3,712 3,712
Minimum capital requirement 829 311 621 1,036
-------- -------- -------- --------
Excess regulatory capital $ 2,786 $ 3,304 $ 3,091 $ 2,676
======== ======== ======== ========
Total assets at December 31, 1997 $ 20,723 $ 20,723
======== ========
Risk-weighted assets at December 31, 1997 $ 7,767 $ 7,767
======== ========
Capital as a percentage of assets:
Actual 17.4 % 46.5 % 47.8 % 17.9 %
Required 4.0 4.0 8.0 5.0
-------- -------- -------- --------
Excess 13.4 % 42.5 % 39.8 % 12.9 %
======== ======== ======== ========
</TABLE>
F-23
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 14 - SUBSEQUENT EVENTS - PLAN OF CONVERSION (UNAUDITED)
On December 11, 1997, the Board of Directors of the Bank unanimously
adopted a Plan of Holding Company Conversion whereby the Bank will convert
from a North Carolina-chartered mutual savings bank to a North
Carolina-chartered stock savings bank and will become a wholly-owned
subsidiary of a holding company formed in connection with the conversion.
The holding company will issue common stock to be sold in the conversion
and will use that portion of the net proceeds thereof which it does not
retain to purchase the capital stock of the Bank. The Plan is subject to
approval by regulatory authorities and the members of the Bank at a
special meeting.
The stockholders of the holding company will be asked to approve a
proposed stock option plan and a proposed management recognition plan at a
meeting of the stockholders after the conversion. Shares issued to
directors and employees under these plans may be from authorized but
unissued shares of common stock or they may be purchased in the open
market. In the event that options or shares are issued under these plans,
such issuances will be included in the earnings per share calculation;
thus, the interests of existing stockholders would be diluted.
At the time of conversion, the Bank will establish a liquidation account
in an amount equal to its net worth as reflected in its latest statement
of financial condition used in its final conversion prospectus. The
liquidation account will be maintained for the benefit of eligible deposit
account holders who continue to maintain their deposit accounts in the
Bank after conversion. Only in the event of a complete liquidation will
each eligible deposit account holder be entitled to receive a subaccount
balance for deposit accounts then held before any liquidation distribution
may be made with respect to common stock. Dividends paid by the Bank
subsequent to the conversion cannot be paid from this liquidation account.
The Bank may not declare or pay a cash dividend on or repurchase any of
its common stock if its net worth would thereby be reduced below either
the aggregate amount then required for the liquidation account or the
minimum regulatory capital requirements imposed by federal and state
regulations.
Conversion costs of approximately $17,500 have been incurred and are
included in prepaid expenses and other assets of December 31, 1997. If the
conversion is ultimately successful, conversion costs will be accounted
for as a reduction of the stock proceeds. If the conversion is
unsuccessful, conversion costs will be charged to the Bank's operations.
NOTE 15 - RECENTLY ISSUED ACCOUNTING STANDARDS
In February, 1997 the FASB issued SFAS No. 129, "Disclosure of Information
about Capital Structure", which is effective for financial statements for
periods ending after December 31, 1997. This statement applies to both
public and nonpublic entities. The Bank anticipates that adoption of this
standard will not have a material effect on the Bank.
F-24
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 15 - RECENTLY ISSUED ACCOUNTING STANDARDS, Continued
In June, 1997 the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", which establishes standards for reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. Under this statement, enterprises are required to
classify items of "other comprehensive income" by their nature in the
financial statements and display the balance of other comprehensive income
separate in the equity section of a statement of financial position.
Statement 130 is effective for both interim and annual periods beginning
after December 15, 1997. Comparative financial statements provided for
earlier periods are required to be reclassified to reflect the provisions
of the statement. It is not anticipated that the adoption of these
statement will materially affect the Bank's current method of financial
reporting.
Also in June, 1997 the FASB issued SFAS No. 131, "Disclosure about
Segments of an Enterprise and Related Information". This statement
establishes standards for the way public enterprises are to report
information about operating segments in annual financial statements and
requires those enterprises to report selected information about operating
segments in interim financial reports issued to shareholders. Statement
131 is effective for financial statements for periods beginning after
December 15, 1997. In the initial year of application, comparative
information for earlier years is to be restated unless it is impractical
to do so. It is not anticipated that the adoption of this statement will
materially affect the Bank's current method of financial reporting.
NOTE 16 - YEAR 2000
The Bank recognizes that there is a business risk in computerized systems
as the calendar rolls over into the next century. The Federal Financial
Institutions Examination Council (FFIEC) issued an interagency statement
on May 5, 1997 outlining five phases for institutions to effectively
manage the Year 2000 challenge. The phases were: Awareness; Assessment;
Renovation; Validation; and, Implementation. The FFIEC encouraged
institutions to have all critical applications identified and priorities
set by September 30, 1997 and to have renovation work largely completed
and testing well underway by December 31, 1998. The Bank has an ongoing
program designed to ensure that its operational and financial systems will
not be adversely affected by year 2000 software failures, due to
processing errors arising from calculations using the year 2000 date. The
Board of Directors and management of the Bank have established year 2000
compliance as a strategic initiative. While the Bank believes that it has
available resources to assure year 2000 compliance, it is to some extent
dependent on vendor cooperation. At the present time, the Bank expects its
most critical application software vendor to have all of its system in
compliance by December 31, 1998. The Bank expects to install the necessary
software releases in 1998 and have testing of such systems substantially
completed by December 31, 1998.
At this time, the Bank has not determined the cost of making any
modifications to correct any year 2000 problems; however, equipment and
software expenses are not expected to materially differ from past results.
The Bank routinely upgrades and purchases technologically advanced
software and hardware on a continual basis and expects to specifically
evaluate and test such purchases for year 2000 compliance.
F-25
<PAGE>
GLOSSARY
Administrator The Administrator of the Savings Institutions Division
of the North Carolina Department of Commerce
Bank Anson Savings Bank, SSB
BIF Bank Insurance Fund of the FDIC
Common Stock The Common Stock, no par value per share, of Anson
Bancorp, Inc.
Community Offering Offering for sale to certain members of the
general public of any shares of Common Stock not
subscribed for in the Subscription Offering, including
the possible offering of Common Stock in a Syndicated
Community Offering
Company Anson Bancorp, Inc.
Conversion Simultaneous conversion of the Bank to stock form, the
issuance of the Bank's outstanding capital stock to the
Company and the Company's offer and sale of Common Stock
Eligible Account
Holders Savings account holders of Anson Savings Bank, SSB with
account balances of at least $50.00 as of the close of
business on September 30, 1996
ERISA Employee Retirement Income Security of 1974, as amended
Estimated
Valuation Range Estimated pro forma market value of the common stock
ranging from $5,610,000 to $7,590,000. The maximum of
the Estimated Valuation Range may be increased to
$8,728,500 without a resolicitation of subscribers.
Exchange Act Securities Exchange Act of 1934, as amended
Expiration Time 12:00 noon, local time, on _________________, 1998
FASB Financial Accounting Standards Board
FDIC Federal Deposit Insurance Corporation
Federal Reserve System The Board of Governors of the Federal Reserve System
Ferguson Ferguson & Company
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
IRS Internal Revenue Service
A-1
<PAGE>
MRP Management Recognition Plan to be adopted no earlier
than six months after the Conversion
NASD National Association of Securities Dealers, Inc.
NPV Net Portfolio Value
Offering Subscription Offering, Community Offering and Syndicated
Community Offering, collectively
Option Plan Stock option plan to be adopted no earlier than six
months after the Conversion
Order Form Form for ordering stock accompanied by a certification
concerning certain matters
Other Members Savings account holders (other than Eligible Account
Holders and Supplemental Eligible Account Holders) and
certain borrowers (borrowers whose loans were
outstanding on _________________ and continue to be
outstanding) who are entitled to vote at the Special
Meeting due to the existence of a savings account or a
borrowing relationship, respectively, on the Voting
Record Date for the Special Meeting
OTC Bulletin Board An electronic stock data system operated by Nasdaq
Plan of Conversion Plan of the Bank to convert from a North Carolina
chartered mutual savings bank to a North Carolina
chartered stock savings bank and the issuance of all of
the Bank's outstanding capital stock to the Company and
the issuance of the Company's stock to the public
Purchase Price $10.00 per share price of the Common Stock
SAIF Savings Association Insurance Fund of the FDIC
SEC Securities and Exchange Commission
Securities Act Securities Act of 1933, as amended
SFAS Statement of Financial Accounting Standards adopted by
FASB
Special Meeting Special Meeting of members of the Bank called for the
purpose of approving the Plan
Subscription Offering Offering of non-transferable rights to subscribe for the
Common Stock, in order of priority, to Eligible Account
Holders, Supplemental Eligible Account Holders and Other
Members
Supplemental Eligible
Account Holders Depositors, who are not Eligible Account Holders of the
Bank, with account balances of at least $50.00 on March
31, 1998
A-2
<PAGE>
Syndicated Community Offering of shares of Common Stock remaining after the
Offering Subscription Offering and undertaken prior to the end
and as part of the Community Offering, and which may, at
the Company's and the Bank's discretion be made to the
general public on a best efforts basis by a selling
group of broker-dealers.
Trident Securities Trident Securities, Inc.
Voting Record Date The close of business on ___________________, 1998, the
date for determining members entitled to vote at the
Special Meeting.
A-3
<PAGE>
================================================================================
No dealer, salesperson or other person has been authorized to give any
information or to make any representation other than as contained in this
Prospectus and, if given or made, such information or representation must not be
relied upon as having been authorized by Anson Bancorp, Inc. or Anson Savings
Bank, SSB. This Prospectus does not constitute an offer to sell or the
solicitation of an offer to buy any security other than the shares of Common
Stock offered hereby to any person in any jurisdiction in which such offer or
solicitation is not authorized, or in which the person making such offer or
solicitation is not qualified to do so, or to any person to whom it is unlawful
to make such offer or solicitation. Neither the delivery of this Prospectus nor
any sale hereunder shall, under any circumstances, create any implication that
information herein is correct as of any time subsequent to the date hereof.
Anson Bancorp, Inc.
(Proposed Holding Company for
Anson Savings Bank, Inc.)
Up to 872,850 Shares
Common Stock
($10.00 par value per share)
PROSPECTUS
TRIDENT SECURITIES, INC.
____________, 1998
THESE SECURITIES ARE NOT DEPOSITS OR ACCOUNTS AND ARE NOT FEDERALLY INSURED OR
GUARANTEED
Until ___________, 1998, all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be required
to deliver a prospectus. This is in addition to the obligation of dealers to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers. The Registrant's
-----------------------------------------
Articles of Incorporation provide that, to the fullest extent permitted by the
North Carolina Business Corporation Act (the "NCBCA"), no person who serves as a
director shall be personally liable to the Registrant or any of its stockholders
or otherwise for monetary damages for breach of any duty as director. The
Registrant's Bylaws state that any person who at any time serves or has served
as a director or officer of the Registrant, or who, while serving as a director
or officer of the Registrant, serves or has served at the request of the
Registrant as a director, officer, partner, trustee, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, or
as a trustee or administrator under an employee benefit plan, shall have a right
to be indemnified by the Registrant to the fullest extent permitted by law
against (a) reasonable expenses, including attorneys' fees, incurred by him in
connection with any threatened, pending or completed civil, criminal,
administrative, investigative, or arbitrative action, suit, or proceeding (and
any appeal therein), whether or not brought by or on behalf of the Registrant,
seeking to hold him liable by reason of the fact that he is or was acting in
such capacity, and (b) reasonable payments made by him in satisfaction of any
judgment, money decree, fine (including an excise tax assessed with respect to
an employee benefit plan) or penalty for which he may have become liable in any
such action, suit or proceeding, or in connection with a settlement approved by
the Board of Directors of any such action, suit or proceeding.
Sections 55-8-50 through 55-8-58 of the NCBCA contain provisions
prescribing the extent to which directors and officers shall or may be
indemnified. Section 55-8-51 of the NCBCA permits a corporation, with certain
exceptions, to indemnify a present or former director against liability if (i)
the director conducted himself in good faith, (ii) the director reasonably
believed (x) that the director's conduct in the director's official capacity
with the corporation was in its best interests and (y) in all other cases the
director's conduct was at least not opposed to the corporation's best interests,
and (iii) in the case of any criminal proceeding, the director had no reasonable
cause to believe the director's conduct was unlawful. A corporation may not
indemnify a director in connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the corporation or in
connection with a proceeding charging improper personal benefit to the director.
The above standard of conduct is determined by the board of directors, or a
committee or special legal counsel or the shareholders as prescribed in Section
55-8-55.
Sections 55-8-52 and 55-8-26 of the NCBCA require a corporation to
indemnify a director or officer in the defense of any proceeding to which the
director or officer was a party against reasonable expenses when the director or
officer is wholly successful in the director's or officer's defense, unless the
articles of incorporation provide otherwise. Upon application, the court may
order indemnification of the director or officer if the director or officer is
adjudged fairly and reasonably so entitled under Section 55-8-54.
II-1
<PAGE>
In addition, Section 55-8-57 permits a corporation to provide for
indemnification of directors, officers, employees or agents, in its articles of
incorporation or bylaws or by contract or resolution, against liability in
various proceedings and to purchase and maintain insurance policies on behalf of
these individuals.
The foregoing is only a general summary of certain aspects of North
Carolina law dealing with indemnification of directors and officers and does not
purport to be complete. It is qualified in its entirety by reference to the
relevant statutes, which contain detailed specific provisions regarding the
circumstances under which and the person for whose benefit indemnifications
shall or may be made.
Item 25. Other Expenses of Issuance and Distribution. Set forth below is an
-------------------------------------------
estimate of the amount of fees and expenses (other than the Underwriters
commissions) to be incurred in connection with the issuance and distribution of
the shares.
Registration and Filing Fees.............................. $ 25,000
Postage and Printing...................................... $ 50,000
Accounting Fees and Expenses.............................. $ 40,000
Appraisal Fees and Expenses............................... $ 32,500
Legal Fees and Expenses................................... $125,000
Sales Agent Expenses...................................... $ 37,500
Data Processing Expenses.................................. $ 6,000
Transfer Agent............................................ $ 7,500
Sales Agent Fees and Commissions.......................... $171,000*
Other..................................................... $ 50,000
--------
$544,500
========
*At the maximum of the Valuation Range.
Item 26. Recent Sales of Unregistered Securities. On March 10, 1998,
---------------------------------------
Registrant sold one share of common stock, no par value per share, to Eugene M.
Ward for an aggregate purchase price of $10.00. Such sale was exempt from
registration under Section 4(2) of Securities Act of 1933.
Item 27. Exhibits. The following exhibits and financial statement schedules
--------
are filed herewith or will, as noted, be filed by amendment.
II-2
<PAGE>
(a) Exhibits
--------
Exhibit No.
(Per Exhibit
Tables in
Item 601 of
Regulation S-B) Description
--------------- -----------
(1)(a) Engagement letter dated September 11, 1997 between
Anson Savings Bank, SSB and Trident Securities, Inc.
(1)(b) Form of Sales Agency Agreement among Anson Bancorp,
Inc., Anson Savings Bank, SSB and Trident Securities,
Inc. (to be filed supplementally)
(2) Plan of Holding Company Conversion of Anson Savings
Bank, SSB
(3)(i) Articles of Incorporation of Anson Bancorp, Inc.
(3)(ii) Bylaws of Anson Bancorp, Inc.
(4) Form of Stock Certificate for Anson Bancorp, Inc. and
Anson Savings Bank, SSB (to be filed supplementally)
(5) Opinion and consent of Brooks, Pierce, McLendon,
Humphrey & Leonard, L.L.P. as to legality of securities
to be registered hereby
(8)(a) Opinion and consent of Brooks, Pierce, McLendon,
Humphrey & Leonard, L.L.P. as to federal and state tax
consequences
(8)(b) Opinion of Ferguson & Company as to the value of
subscription rights
(10)(a) Letter Agreement dated November 12, 1997 between Anson
Savings Bank, SSB and Ferguson & Company
(10)(b) Form of Employment Agreement between Anson Savings
Bank, SSB and Eugene M. Ward
II-3
<PAGE>
Exhibit No.
(Per Exhibit
Tables in
Item 601 of
Regulation S-K) Description
--------------- -----------
(10)(c) Form of the Management Recognition Plan of Anson
Savings Bank, SSB if the Plan is adopted and
approved by the stockholders of Anson Bancorp, Inc.
within one year after the conversion of Anson
Savings Bank, Inc., SSB to stock form
(10)(d) Form of Stock Option Plan of Anson Bancorp, Inc. if
the Plan is adopted and approved by the
stockholders of Anson Bancorp, Inc. within one year
after the conversion of Anson Savings Bank, Inc.,
SSB to stock form
(10)(e) Form of Anson Savings Bank, Inc., SSB Severance
Plan
(10)(f) Form of Capital Maintenance Agreement between Anson
Bancorp, Inc. and Anson Savings Bank, Inc., SSB
(23)(a) Consent of Faulkner & Thompson, P.A.
(23)(b) Consent of Ferguson & Company
(27) Financial Data Schedule
(99)(a) Appraisal Report of Ferguson & Company as of
February 28, 1998
(99)(b) Form of Stock Order Form (to be filed
supplementally)
(99)(c) Form of Summary Proxy Statement
(b) Financial Statement Schedules
-----------------------------
All schedules have been omitted as not applicable or not required under the
rules of Regulation S-X.
II-4
<PAGE>
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:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act of 1933 ("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 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 such
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering thereof.
(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 to 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.
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 such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense
II-5
<PAGE>
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-6
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Wadesboro, State of North Carolina on March 12, 1998.
ANSON BANCORP, INC.
By: /s/ Eugene M. Ward
-----------------------------------
Eugene M. Ward, Director,
President and Chief Executive
Officer
Signatures Title Date
---------- ----- ----
/s/ Eugene M. Ward Director, President and Chief March 12, 1998
- ----------------------------- Executive Officer (Principal
Eugene M. Ward Executive Officer)
/s/ Nancy H. Allen Treasure (Principal Financial March 12, 1998
- ----------------------------- and Accounting Officer)
Nancy H. Allen
/s/ Preston A. Burns Chairman of the Board March 12, 1998
- -----------------------------
Preston A. Burns
/s/ John J. Crawford Director March 12, 1998
- -----------------------------
John J. Crawford
/s/ W. Kenneth Huntley Director March 12, 1998
- -----------------------------
W. Kenneth Huntley
Director March 12, 1998
- -----------------------------
Emmett S. Patterson
/s/ John R. Potter
- ----------------------------- Director March 12, 1998
John R. Potter
/s/ H. Patrick Taylor, Jr.
- ----------------------------- Director March 12, 1998
H. Patrick Taylor, Jr.
<PAGE>
Exhibit (1)(a)
TRIDENT SECURITIES LETTERHEAD
September 11, 1997
Board of Directors
Anson Savings Bank, SSB
211 South Greene Street
Wadesboro, North Carolina 28170
Re: Conversion Stock Marketing
Gentlemen:
This letter sets forth the terms of the proposed engagement between TRIDENT
SECURITIES, INC. ("TRIDENT") and Anson Savings Bank, SSB (the "Bank") concerning
our investment banking services in connection with the conversion of the Bank
from a mutual to a capital stock form of organization.
TRIDENT is prepared to assist the Bank in connection with the offering of
its shares of common stock during the subscription offering and community
offering as such terms are defined in the Bank's Plan of Conversion. The
specific terms of the services contemplated hereunder shall be set forth in a
definitive sales agency agreement (the "Agreement") between TRIDENT and the Bank
to be executed on the date the offering circular/prospectus is declared
effective by the appropriate regulatory authorities. The price of the shares
during the subscription offering and community offering will be the price
established by the Bank's Board of Directors, based upon an independent
appraisal as approved by the appropriate regulatory authorities, provided such
price is mutually acceptable to TRIDENT and the Bank.
In connection with the subscription offering and community offering,
TRIDENT will act as financial advisor and exercise its best efforts to assist
the Bank in the sale of its common stock during the subscription offering and
community offering. Additionally, TRIDENT may enter into agreements with other
National Association of Securities Dealers, Inc., ("NASD") member firms to act
as selected dealers, assisting in the sale of the common stock. TRIDENT and the
Bank will determine the selected dealers to assist the Bank during the community
offering. At the appropriate time, TRIDENT in conjunction with its counsel,
will conduct an examination of the relevant documents and records of the Bank as
TRIDENT deems necessary and appropriate. The Bank will make all documents,
records and other information deemed necessary by TRIDENT or its counsel
available to them upon request.
<PAGE>
For its services hereunder, TRIDENT will receive the following compensation
and reimbursement from the Bank:
1. A commission equal to two and one half percent (2.5%) of the aggregate
dollar amount of capital stock sold in the subscription and community
offerings, excluding any shares of conversion stock sold to the Bank's
directors, executive officers and the employee benefit plan.
Additionally, commissions will be excluded on those shares sold to
"associates" of the Bank's directors and executive officers. The term
"associates" as used herein shall have the same meaning as that found
in the Bank's Plan of Conversion.
2. For stock sold by other NASD member firms under selected dealer's
agreements, the commission shall not exceed a fee to be agreed upon
jointly by TRIDENT and the Bank to reflect market requirements at the
time of the stock allocation in a Syndicated Community Offering.
3. The foregoing fees and commissions are to be payable to TRIDENT at
closing as defined in the Agreement to be entered into between the
Bank and TRIDENT.
4. TRIDENT shall be reimbursed for allocable expenses incurred by them,
including legal fees, whether or not the Agreement is consummated.
TRIDENT's out-of-pocket expenses will not exceed $10,000 and its legal
fees will not exceed $27,500. The Bank will forward to TRIDENT a check
in the amount of $10,000 as an advance payment to defray the allocable
expenses of TRIDENT.
It further is understood that the Bank will pay all other expenses of the
conversion including but not limited to its attorneys' fees, NASD filing fees,
and filing and registration fees and fees of either TRIDENT's attorneys or the
attorneys relating to any required state securities law filings, telephone
charges, air freight, rental equipment, supplies, transfer agent charges, fees
relating to auditing and accounting and costs of printing all documents
necessary in connection with the foregoing.
For purposes of TRIDENT's obligation to file certain documents and to make
certain representations to the NASD in connection with the conversion, the Bank
warrants that: (a) the Bank has not privately placed any securities within the
last 18 months; (b) there have been no material dealings within the last 12
months between the Bank and any NASD member or any person related to or
associated with any such member; (c) none of the officers or directors of the
Bank has any affiliation with the NASD; (d) except as contemplated by this
engagement letter with TRIDENT, the Bank has no financial or management
consulting contracts outstanding with any other person; (e) the Bank has not
granted TRIDENT a right of first refusal with respect to the underwriting of any
future offering of the Bank stock; and (f) there has been no intermediary
between TRIDENT and the Bank in connection with the public offering of the
Bank's shares, and no person is being compensated in any manner for providing
such service.
<PAGE>
Board of Directors
September 11, 1997
Page 3
The Bank agrees to indemnify and hold harmless TRIDENT and each person, if
any, who controls the firm against all losses, claims, damages or liabilities,
joint or several and all legal or other expenses reasonably incurred by them in
connection with the investigation or defense thereof (collectively, "Losses"),
to which they may become subject under the securities laws or under the common
law, that arise out of or are based upon the conversion or the engagement
hereunder of TRIDENT. If the foregoing indemnification is unavailable for any
reason, the Bank agrees to contribute to such Losses in the proportion that its
financial interest in the conversion bears to that of the indemnified parties.
If the Agreement is entered into with respect to the common stock to be issued
in the conversion, the Agreement will provide for indemnification, which will be
in addition to any rights that TRIDENT or any other indemnified party may have
at common law or otherwise. The indemnification provision of this paragraph will
be superseded by the indemnification provisions of the Agreement entered into by
the Bank and TRIDENT.
This letter is merely a statement of intent and is not a binding legal
agreement except as to paragraph (4) above with regard to the obligation to
reimburse TRIDENT for allocable expenses to be incurred prior to the execution
of the Agreement and the indemnity described in the preceding paragraph. While
TRIDENT and the Bank agree in principle to the contents hereof and propose to
proceed promptly, and in good faith, to work out the arrangements with respect
to the proposed offering, any legal obligations between TRIDENT and the Bank
shall be only as set forth in a duly executed Agreement. Such Agreement shall
be in form and content satisfactory to TRIDENT and the Bank, as well as their
counsel, and TRIDENT's obligations thereunder shall be subject to, among other
things, there being in TRIDENT's opinion no material adverse change in the
condition or obligations of the Bank or no market conditions which might render
the sale of the shares by the Bank hereby contemplated inadvisable.
<PAGE>
Board of Directors
September 11, 1997
Page 4
Please acknowledge your agreement to the foregoing by signing below and
returning to TRIDENT one copy of this letter along with the advance payment of
$10,000. This proposal is open for your acceptance for a period of thirty (30)
days from the date hereof.
Yours very truly,
TRIDENT SECURITIES, INC.
By: /s/ Willis Smith, II
--------------------------------------
Willis Smith, II
Senior Vice President
Agreed and accepted to this 26th day
of September, 1998.
Anson Savings Bank, SSB
By: /s/ Eugene M. Ward,
------------------------------
Eugene M. Ward, President
<PAGE>
Exhibit (2)
-----------
PLAN OF HOLDING COMPANY CONVERSION
OF
ANSON SAVINGS BANK, SSB
Wadesboro, North Carolina
From Mutual to Stock Organization
I. General
On December 11, 1997, the Board of Directors of Anson Savings Bank, SSB,
Wadesboro, North Carolina (the "Savings Bank") adopted a Plan of Holding Company
Conversion pursuant to which the Savings Bank will convert from a North
Carolina-chartered mutual savings bank to a North Carolina-chartered capital
stock savings bank and simultaneously become a wholly-owned subsidiary of Anson
Bancorp, Inc., a bank holding company organized under North Carolina law.
This Plan is subject to the prior approval of the Administrator, Savings
Institutions Division, North Carolina Department of Commerce, and must be
adopted by the affirmative vote of the members of the Savings Bank holding not
less than a majority of the total outstanding votes eligible to be cast. In
addition, in order to consummate the conversion herein described, this Plan must
be filed with the Federal Deposit Insurance Corporation ("FDIC") and must not
have been objected to by the FDIC in accordance with applicable FDIC
regulations.
II. Definitions
As used in this Plan, the terms set forth below have the following
meanings:
A. Acting in Concert: The term "acting in concert" means (i) knowing
participation in a joint activity or interdependent conscious parallel action
towards a common goal, whether or not pursuant to an express agreement, with
respect to the purchase, ownership, voting or sale of Common Stock; or (ii) a
combination or pooling of voting or other interests in the securities of the
Holding Company for a common purpose pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or otherwise. The
Holding Company and the Savings Bank may presume that certain persons are acting
in concert based upon, among other things, joint account relationships and the
fact that such persons have filed joint Schedules 13D with the SEC with respect
to other companies.
B. Actual Purchase Price: The actual price per share, determined as
provided in Article VI hereof, at which the shares of common stock of the
Holding Company will be issued and sold by the Holding Company to subscribers.
C. Administrator: Administrator, Savings Institutions Division, North
Carolina Department of Commerce.
D. Affiliate: The term "affiliate" of, or a person "affiliated with," a
specified person, means a person that directly or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with,
the person specified.
1
<PAGE>
E. Aggregate Valuation Range: The range of value for the aggregate
number of shares of common stock of the Holding Company to be offered in the
Conversion, which range is established pursuant to Article VI hereof and which
shall be from a low of 15 percent (15%) below the estimated aggregate pro forma
market value of the Savings Bank and the Holding Company to a high of 15 percent
(15%) above the estimated aggregate pro forma market value of the Savings Bank
and the Holding Company, as such range may be amended from time to time by an
independent appraiser.
F. Amended Charter: The Savings Bank's North Carolina stock savings bank
charter in the form permitted by the Administrator.
G. Applications: The Savings Bank's Application to Convert a Mutual
Savings Bank to a Stock Owned Savings Bank and the Holding Company's Acquisition
Application, including amendments thereto, as filed with the Administrator
pursuant to the Regulations.
H. Associate: The term "Associate," when used to indicate a relationship
with any Person, means (i) any corporation or organization (other than the
Savings Bank, the Holding Company or any of their majority-owned subsidiaries)
of which such Person is an officer or partner or is, directly or indirectly, the
beneficial owner of ten percent (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, except for a tax-qualified employee stock benefit plan or a charitable
trust which is exempt from federal taxation pursuant to Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended, and (iii) any relative or spouse of
such Person, or any relative of such spouse, who has the same home as such
Person or who is a director or officer of the Savings Bank, the Holding Company,
or any of their parents or subsidiaries.
I. Charter: The North Carolina mutual savings bank charter of Anson
Savings Bank, SSB.
J. Community Offering: The offering for sale of shares of Conversion
Stock to the general public, subsequent to termination of the Subscription
Offering, with priority given to natural persons and trusts of natural persons
residing in the Local Community (including Retirement Accounts established for
the benefit of natural persons who are residents of such area).
K. Conversion: The conversion of the Savings Bank to a North Carolina-
chartered stock savings bank, the deposit accounts of which will be insured by
the SAIF of the FDIC, pursuant to, and in accordance with, the regulations of
the FDIC, the Regulations, the Plan and the Applications.
2
<PAGE>
L. Conversion Stock: The shares of common stock of the Holding Company
to be issued and sold in the Conversion.
M. Converted Savings Bank: Anson Savings Bank, Inc., the North Carolina
capital stock savings bank resulting from the Conversion.
N. Directors: The Board of Directors of the Savings Bank, the Converted
Savings Bank or the Holding Company (as applicable).
O. Eligibility Record Date: The close of business on September 30, 1996.
P. Eligible Account Holder: The holder of a Qualifying Deposit on the
Eligibility Record Date, with the beneficial owner of a Retirement Account being
deemed the holder thereof.
Q. Executive Officer: An officer of the Savings Bank, the Converted
Savings Bank or the Holding Company (as applicable) performing a policy-making
function for such entity.
R. FDIC: The Federal Deposit Insurance Corporation.
S. Federal Reserve Board: The Board of Governors of the Federal Reserve
System.
T. First Priority Community Subscribers: Natural persons and trusts of
natural persons residing in the Local Community, including Retirement Accounts
established for the benefit of natural persons residing in the Local Community.
U. Holding Company: The North Carolina corporation under the name of
Anson Bancorp, Inc. which, upon completion of the Conversion, will become a bank
holding company owning all of the outstanding capital stock of the Converted
Savings Bank.
V. Liquidation Account: That account established by the Converted
Savings Bank pursuant to Article XI of this Plan.
W. Local Community: Anson County, North Carolina.
X. Market Maker: A dealer (i.e., any person who engages directly or
indirectly as agent, broker or principal in the business of offering, buying,
selling, or otherwise dealing or trading in securities issued by another person)
who, with respect to a particular security, (i) regularly publishes bona fide,
competitive bid and offer quotations in a recognized inter-dealer quotation
system; or (ii) furnishes bona fide competitive bid and offer quotations on
request; and (iii) is ready, willing, and able to effect transactions in
reasonable quantities at its quoted prices with other brokers or dealers.
Y. Members: All persons or entities who qualify as members of the
Savings Bank pursuant to its Charter and bylaws prior to the Conversion,
including beneficial owners of Retirement Accounts at the Savings Bank.
Z. Notice: The Savings Bank's Notice of Intent to Convert to Stock Form,
including amendments thereto, as filed with the FDIC pursuant to 12 C.F.R. Part
303.
3
<PAGE>
AA. Order Forms: The order forms to be used to subscribe for Conversion
Stock in the Subscription and Community Offerings pursuant to the Plan.
BB. Other Members: The following as of the Voting Record Date: (1)
holders of Savings Accounts at the Savings Bank (other than Eligible Account
Holders and Supplemental Eligible Account Holders), with the beneficial owners
of Retirement Accounts being deemed the holders of such accounts, and (2) those
Persons or entities (other than Eligible Account Holders and Supplemental
Eligible Account Holders) who are borrowers from the Savings Bank whose
borrowings are still in existence as of the Voting Record Date.
CC. Person: An individual, a corporation, a partnership, an association,
a joint stock company, a trust, an unincorporated organization, or a government
or political subdivision thereof.
DD. Plan: This Plan of Holding Company Conversion and any duly adopted
amendments thereto.
EE. Prospectus: The document containing information about and a
description of the Savings Bank, the Holding Company, this Plan and the process
of issuing the Conversion Stock, which will be distributed to the Members in the
Subscription Offering and which may be distributed to the general public in the
Community Offering and Syndicated Community Offering.
FF. Proxy Statement: The written information distributed by the Savings
Bank to the Members in its solicitation of their votes in connection with
consideration of the Plan at the Special Meeting, which written information may
be in summary form.
GG. Qualifying Deposit: A balance of $50 or more in any Savings Account
in the Savings Bank as of the Eligibility Record Date or the Supplemental
Eligibility Record Date, as applicable. Each deposit account which is deemed to
be a separate account for purposes of FDIC insurance shall be deemed to be a
separate account for purposes of determining whether a Qualifying Deposit
exists.
HH. Regulations: The Rules and Regulations of the Administrator set forth
in North Carolina Administrative Code Title 4, Chapter 16, Subchapter 16G.
II. Retirement Accounts: Individual retirement accounts, Keogh savings
accounts or similar retirement accounts.
JJ. SAIF: The Savings Association Insurance Fund of the FDIC.
KK. Savings Accounts: Withdrawable deposits, certificates or other
savings and deposit accounts of the Savings Bank, including money market deposit
accounts and negotiable order of withdrawal accounts, held by Members. Each
such deposit, certificate or other deposit account which is deemed to be a
separate account for FDIC insurance shall be deemed to be a separate Savings
Account for purposes of the Plan.
LL. Savings Bank: Anson Savings Bank, SSB, Wadesboro, North Carolina, a
North Carolina-chartered mutual savings bank.
4
<PAGE>
MM. SEC: The Securities and Exchange Commission.
NN. Special Meeting: The Special Meeting of Members called for the
purpose of considering approval of the Plan.
OO. Subscription Offering: The offering of shares of Conversion Stock to
Eligible Account Holders, Supplemental Eligible Account Holders, Other Members,
and Directors, officers and employees of the Savings Bank pursuant to the Plan.
PP. Subscription Rights: Non-transferable, non-negotiable, personal
rights distributed, without payment, to Eligible Account Holders, Supplemental
Eligible Account Holders, Other Members, and Directors, officers and employees
of the Savings Bank to subscribe for shares of Conversion Stock in the
Subscription Offering pursuant to the Plan.
QQ. Supplemental Eligibility Record Date: The last day of the calendar
quarter preceding the approval of the Applications by the Administrator, if the
establishment of such date is required by the Regulations.
RR. Supplemental Eligible Account Holder: The holder of a Qualifying
Deposit (other than an Executive Officer or Director of the Savings Bank or any
Associate of such Person), on the Supplemental Eligibility Record Date, with the
beneficial owner of a Retirement Account being deemed the holder thereof.
SS. Syndicated Community Offering: The offering for sale of shares of
Conversion Stock to the general public through a syndicate of registered broker-
dealers to be formed and managed by the sales agent in the Subscription Offering
and Community Offering.
TT. Voting Record Date: The date fixed by the Board of Directors of the
Savings Bank for determining Members entitled to vote at the Special Meeting.
III. Steps Prior to Submission of Plan of Conversion to the Members for Approval
Prior to submission of the Plan to the Members of the Savings Bank for
approval, the Savings Bank must receive the Administrator's approval of the
Applications and the FDIC must have issued a notice of non-objection to the
proposed conversion or the time period for FDIC review and objection shall have
expired without objection by the FDIC. The following steps must be taken prior
to such regulatory approvals:
A. The Board of Directors of the Savings Bank shall adopt and approve the
Plan by the affirmative vote of not less than two-thirds of its members.
B. The Savings Bank shall notify its members of the adoption of the Plan
by publishing a statement in a newspaper having a general circulation in the
communities in which the Savings Bank maintains offices or by mailing a letter
to each of its Members.
C. Copies of the Plan shall be made available for inspection at each
office of the Savings
5
<PAGE>
Bank.
D. The Holding Company shall submit an application to the Federal Reserve
Board pursuant to Federal law for permission to become a savings bank holding
company in order to enable it to acquire 100% of the capital stock of the
Converted Savings Bank, and such application shall be approved and any required
waiting period shall have expired.
E. The Savings Bank shall submit the requisite number of copies of the
Applications to the Administrator and the requisite number of copies of the
Notice to the FDIC. Upon receipt of advice from the Administrator that the
Applications have been received, are properly executed and not materially
incomplete, the Savings Bank shall publish a "Notice of Filing of an Application
for Holding Company Conversion" in a newspaper of general circulation in each
community in which the Savings Bank maintains an office. The Savings Bank also
shall prominently display a copy of such notice in each of its offices.
F. The Savings Bank shall obtain an opinion of counsel or tax advisor or
a favorable ruling from the Internal Revenue Service to the effect that the
Conversion of the Savings Bank from a North Carolina-chartered mutual savings
bank to a North Carolina-chartered capital stock savings bank, the sale of the
Conversion Stock to subscribers in the Subscription, Community and Syndicated
Community Offerings and the issuance of the shares of common stock of the
Converted Savings Bank to the Holding Company, all in accordance with the terms
of the Plan, should not result in any gain or loss for federal or North Carolina
income tax purposes, to the Savings Bank, the Converted Savings Bank, the
Holding Company or the Members of the Savings Bank. Receipt of a favorable
opinion or ruling is a condition precedent to completion of the Conversion.
G. The Holding Company shall file a registration statement with the SEC
with respect to the Conversion Stock to be offered pursuant to the Plan and such
registration statement shall be declared effective.
IV. Meeting of Members
Upon receipt of Administrator approval of the Applications and (i) receipt
from the FDIC of a conditional intention to issue a notice of non-objection or
(ii) expiration of the time period for FDIC review and objection without receipt
of an objection by the FDIC, a Special Meeting of the Members of the Savings
Bank shall be scheduled in accordance with the Savings Bank's bylaws for the
purpose of voting on approval of the Plan. Promptly after receipt of
Administrator approval and at least 20 days, but not more than 45 days, prior to
the Special Meeting, the Savings Bank will distribute proxy solicitation
materials to all Members as of the Voting Record Date. The proxy materials will
include the Proxy Statement and the Prospectus and other documents authorized
for use by the regulatory authorities and may also include a copy of the Plan,
the Amended Charter and other materials as provided in Article VII hereof.
At the Special Meeting, an affirmative vote of not less than a majority of
the total votes entitled to be cast by the Savings Bank's Members will be
required for approval of the Plan. Voting may be in person or by proxy. The
Administrator shall be promptly notified of the results of the vote of the
Members at the Special Meeting.
6
<PAGE>
V. Procedure
The Conversion Stock shall be offered for sale in the Subscription Offering
to Eligible Account Holders, Supplemental Eligible Account Holders, Other
Members, and Directors, officers and employees of the Savings Bank. The
Subscription Offering may commence concurrently with or during the solicitation
of proxies for the Special Meeting. The Community Offering may commence at any
time following commencement of the Subscription Offering. The Syndicated
Community Offering, if any, may commence concurrently with or during the
Community Offering or as promptly thereafter as is practicable. The
Subscription Offering may be closed before the Special Meeting, provided that
the offer and sale of the Conversion Stock shall be conditioned upon approval of
the Plan by the Members at the Special Meeting.
The period for the Subscription Offering shall not be less than 20 days nor
more than 45 days, unless extended by the Savings Bank and the Holding Company.
Any unsubscribed shares of Conversion Stock are to be offered for sale to the
general public in the Community Offering with priority being given to natural
persons and trusts of natural persons residing in the Local Community, including
Retirement Accounts established for the benefit of natural persons who reside in
such area. The Community Offering may commence, subject to the availability of
shares, at any time following commencement of the Subscription Offering. Any
shares of Conversion Stock offered but not subscribed for in the Subscription
and Community Offerings may, in the discretion of the Savings Bank and the
Holding Company, be offered for sale in the Syndicated Community Offering.
Completion of the sale of all shares of Conversion Stock not sold in the
Subscription Offering shall occur within 45 days after termination of the
Subscription Offering, subject to extension of such 45-day period by the Savings
Bank and the Holding Company with the approval of the Administrator. The Boards
of Directors of the Savings Bank and the Holding Company may seek one or more
extensions of such 45-day period if necessary to complete the sale of all shares
of Conversion Stock. In connection with any such extension, subscribers shall be
permitted to increase, decrease or rescind their subscriptions to the extent
required by the Administrator in approving the extensions. As provided in
Article XIII hereof, completion of the sale of all shares of Conversion Stock
must occur in any event within 24 months after the date of the Special Meeting.
VI. Stock Offering
A. Purchase Price and Number of Shares of Conversion Stock
-------------------------------------------------------
The total number of shares and the subscription price per share of the
Conversion Stock being issued and sold by the Holding Company in the Conversion
will be determined by the Holding Company. The aggregate purchase price at which
all shares of the Conversion Stock will be sold in the Conversion will be based
upon the aggregate pro forma market value of the Converted Savings Bank and the
Holding Company after giving effect to the issuance of the Conversion Stock, as
determined by an independent appraisal. The aggregate purchase price will be
within the Aggregate Valuation Range as stated in the approval or amended
approval of the Plan by the Administrator; provided, however, that with the
consent of the Administrator and the FDIC, the aggregate purchase price of the
Conversion Stock sold may be increased to up to 15% above the maximum of the
Aggregate Valuation Range, without any resolicitation of subscribers or any
right to cancel, rescind or change subscription orders, to reflect changes in
market and financial conditions following commencement of the Subscription
Offering. The appraisal will be made by an investment banking or financial
consulting
7
<PAGE>
firm selected by the Savings Bank and which is experienced and expert in the
area of savings institution appraisals. Such appraisal will be updated prior to
the commencement of the Subscription Offering, if necessary, and will be further
updated upon completion of the later of the Subscription Offering, the Community
Offering or the Syndicated Community Offering.
The Actual Purchase Price per share at which the Conversion Stock will be
offered to subscribers in the Subscription, Community and Syndicated Community
Offerings will be determined by the Holding Company immediately prior to the
commencement of the Subscription Offering. All shares of Conversion Stock sold
in the Conversion will be sold at the same price per share.
B. Method of Offering Shares
-------------------------
On the date Order Forms are mailed, Subscription Rights to purchase shares
will be issued at no cost to Eligible Account Holders, Supplemental Eligible
Account Holders (if applicable), Other Members, and Directors, officers and
employees of the Savings Bank pursuant to priorities established by this Plan
and the Regulations. With respect to Eligible Account Holders, Supplemental
Eligible Account Holders and Voting Members who are beneficial owners of
Retirement Accounts, such persons have the right to exercise Subscription Rights
only to the extent Subscription Rights granted with respect to such Retirement
Accounts are not exercised directly by such Retirement Accounts. Each subscriber
shall purchase the number of whole shares indicated on the Order Form of such
subscriber, subject to the purchase limitations set forth herein, and any excess
amounts shall be refunded. To the extent that shares are available, no
subscriber will be allowed to purchase Conversion Stock having an aggregate
purchase price of less than $500.
The priorities established by applicable Regulations for the purchase of
shares are as follows:
8
<PAGE>
1. Category No. 1: Eligible Account Holders
Each Eligible Account Holder shall receive, without payment, Subscription
Rights to purchase an amount of Conversion Stock equal to the maximum purchase
limitation set forth in Section D.1 of this Article. Subscription Rights of
Eligible Account Holders shall be superior to those of all other subscription
rights granted in the Conversion. In the event of an oversubscription for the
Conversion Stock among Eligible Account Holders, shares shall be allocated among
Eligible Account Holders as follows. The Conversion Stock shall be allocated
among subscribing Eligible Account Holders so as to permit each such Eligible
Account Holder, to the extent possible, to purchase the lesser of (a) the number
of shares for which such Eligible Account Holder subscribed, or (b) 100 shares.
Any shares remaining after that allocation shall be allocated among subscribing
Eligible Account Holders whose subscriptions remain unsatisfied in the
proportion that the amount of Qualifying Deposits of each such Eligible Account
Holder bears to the total amount of Qualifying Deposits of all Eligible Account
Holders whose subscriptions remain unsatisfied. If the amount so allocated
exceeds the amount subscribed for by any one or more Eligible Account Holders,
the excess shall be reallocated (one or more times as necessary) among those
Eligible Account Holders whose subscriptions are still not fully satisfied on
the same principle described above until all available shares have been
allocated or all subscriptions satisfied. All computations shall be rounded
down to the nearest whole share.
2. Category No. 2: Supplemental Eligible Account Holders
In the event that the Eligibility Record Date is more than 15 months prior
to the date of the latest amendment of the Applications filed prior to
Administrator approval, then, and only in that event, each Supplemental Eligible
Account Holder of the Savings Bank shall receive, without payment, Subscription
Rights to purchase an amount of Conversion Stock equal to the maximum purchase
limitation set forth in Section D.1 of this Article. Subscription Rights
received pursuant to this Category shall be subordinated to all Subscription
Rights received pursuant to Category No. 1. Any Subscription Rights received by
an Eligible Account Holder in accordance with Category No. 1 shall reduce, to
the extent thereof, the Subscription Rights to be distributed to such account
holder pursuant to this Category.
In the event of an oversubscription for the Conversion Stock, shares shall
be allocated among the Supplemental Eligible Account Holders as follows. The
Conversion Stock shall be allocated among subscribing Supplemental Eligible
Account Holders so as to permit each such Supplemental Eligible Account Holder,
to the extent possible, to purchase the lesser of (including the number of
shares, if any allocated in accordance with Category No. 1) (a) the number of
shares for which such Supplemental Eligible Account Holder subscribed, or (b)
100 shares. Any shares remaining after that allocation shall be allocated among
subscribing Supplemental Eligible Account Holders whose subscriptions remain
unsatisfied in the proportion that the amount of the Qualifying Deposits of each
such Supplemental Eligible Account Holder bears to the total amount of
Qualifying Deposits of all Supplemental Eligible Account Holders whose
subscriptions remain unsatisfied. If the amount so allocated exceeds the amount
subscribed for by any one or more Supplemental Eligible Account Holders, the
excess shall be reallocated (one or more times as necessary) among those
Supplemental Eligible Account Holders whose subscriptions are still not fully
satisfied on the same principle described above until all available shares have
been allocated or all subscriptions satisfied. All computations shall be
rounded down to the nearest whole share.
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3. Category No. 3: Other Members
Each Other Member shall receive, without payment, Subscription Rights to
purchase an amount of Conversion Stock equal to the maximum purchase limitation
set forth in Section D.1 of this Article. Subscription Rights received pursuant
to this Category shall be subordinated to all Subscription Rights received
pursuant to Category Nos. 1 and 2.
In the event of an oversubscription for shares of Conversion Stock under
this Category, the Conversion Stock available shall be allocated among the
subscribing Other Members whose subscriptions are not satisfied in the
proportion that the number of votes eligible to be cast by each such Other
Member at the Special Meeting bears to the total number of votes eligible to be
cast by all Other Members whose subscriptions remain unsatisfied. If the amount
so allocated exceeds the amount subscribed for by any one or more Other Member,
the excess shall be reallocated (one or more times as necessary) among those
Other Members whose subscriptions are still not satisfied on the same principle
described above until all available shares have been allocated or all
subscriptions satisfied. All computations shall be rounded down to the nearest
whole share.
4. Category No. 4: Directors, Officers and Employees
Each Director and officer of the Savings Bank, and each employee of the
Savings Bank, as of the date of the commencement of the Subscription Offering
shall receive, without payment, Subscription Rights to purchase an amount of
Conversion Stock equal to the maximum purchase limitation set forth in Section
D.1 of this Article. Subscription Rights received pursuant to this Category
shall be subordinated to all Subscription Rights received pursuant to Category
Nos. 1-3. Any Subscription Rights received by a Director, officer or employee
in accordance with Category Nos. 1-3, shall reduce, to the extent thereof, the
Subscription Rights to be distributed to such Director, officer or employee
pursuant to this Category.
In the event of an oversubscription for shares of Conversion Stock under
this Category, the shares available shall be allocated among the subscribing
Directors, officers and employees of the Savings Bank whose subscriptions are
not satisfied pro rata on the basis of the amounts of their respective
subscriptions. All computations shall be rounded down to the nearest whole
share.
5. Category No. 5: Community Offering
Any shares of Conversion Stock not purchased through the exercise of
Subscription Rights received pursuant to Category Nos. 1-4 above may be sold to
the general public in a Community Offering. The Community Offering may
commence, subject to the availability of shares, at any time following
commencement of the Subscription Offering and may terminate at any time
thereafter. The Community Offering must be completed within 45 days after the
last day of the Subscription Offering, unless extended by the Savings Bank and
the Holding Company with the approval of the Administrator.
The Savings Bank and the Holding Company may accept or reject, in whole or
in part, orders received in the Community Offering in their sole discretion.
In the event that subscriptions by subscribers in the Community Offering
whose orders would otherwise be accepted exceed the shares available for
purchase in the Community Offering, then
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(i) subscriptions of First Priority Community Subscribers will be filled
in full up to applicable purchase limitations (to the extent such
subscriptions are not rejected by the Savings Bank and the Holding
Company),
(ii) then subscriptions of other subscribers in the Community Offering will
be filled up to applicable purchase limitations (to the extent such
subscriptions are not rejected by the Savings Bank and the Holding
Company).
In the event of an oversubscription by First Priority Community Subscribers
whose orders would otherwise be accepted, shares of Conversion Stock will be
allocated first to each First Priority Community Subscriber whose order is
accepted in full or in part by the Savings Bank and the Holding Company in the
entire amount of such order up to a number of shares no greater than the number
which would have an aggregate purchase price of $75,000, which number shall be
determined by the Board of Directors of the Savings Bank prior to the time the
Conversion is consummated with the intent to provide for a wide distribution of
shares among such subscribers. Any shares remaining after such allocation will
be allocated to each First Priority Community Subscriber whose order is accepted
in full or in part on an equal number of shares basis until all orders are
filled. Such allocation shall also be applied to subscriptions by other
subscribers in the Community Offering, in the event shares are available for
subscribers in such category but there is an oversubscription within such
category. All computations shall be rounded down to the nearest whole share.
The Conversion Stock to be offered in this Category No. 5 will be offered
and sold in a manner that will achieve the widest distribution of such stock.
6. Category No. 6: Syndicated Community Offering
If necessary, all shares of Conversion Stock not purchased in the
Subscription and Community Offerings, if any, may, at the option of the Savings
Bank and Holding Company, be offered for sale to the general public in a
Syndicated Community Offering through a syndicate of registered broker-dealers
as selected dealers to be formed and managed by the sales agent in the
Subscription and Community Offerings. The Holding Company and Savings Bank have
the right to reject orders, in whole or part, in their sole discretion in the
Syndicated Community Offering. During the Syndicated Community Offering, shares
of Conversion Stock will be sold subject to such conditions, terms and
procedures as may be determined by the Holding Company and the Savings Bank.
Shares of Conversion Stock sold in the Syndicated Community Offering will be
sold in a manner calculated to achieve the widest distribution of Conversion
Stock.
The Syndicated Community Offering may close as early as the Community
Offering, or thereafter at the discretion of the Savings Bank and the Holding
Company. The Syndicated Community Offering may run concurrently with the
Community Offering or subsequent to such offering.
D. Additional Limitations Upon Purchases of Shares of Conversion Stock
The following additional limitations and exceptions shall apply to all
purchases of Conversion Stock in the Conversion:
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1. The aggregate purchase price of shares of Conversion Stock purchased
by any Person (or Persons exercising Subscription Rights through a single
account), or a group of Persons acting in concert, shall not exceed $100,000
(which limit may be decreased or increased by the Board of Directors of the
Savings Bank in accordance with Section D.5 of this Article).
2. In addition to the purchase limitation provided for in Section D.1 of
this Article, no Person (or group of Persons acting in concert), together with
any Associate, shall purchase shares of Common Stock having an aggregate
purchase price of more than $150,000 (which limit may be increased or decreased
by the Board of Directors of the Savings Bank in accordance with Section D.5 of
this Article).
3. The Boards of Directors of the Savings Bank and Holding Company will
not be deemed to be Associates or a group acting in concert solely as a result
of membership on the Boards of Directors.
4. To the extent that Conversion Stock is available, no subscriber will
be allowed to purchase Conversion Stock having an aggregate purchase price of
less than $500.
5. Either before or subsequent to approval of the Plan by the Members and
prior to consummation of the sale of the Conversion Stock, the Board of
Directors of the Savings Bank may, in its sole discretion, (i) increase the
maximum purchase limitations set forth in Sections D.1 and D.2 of this Article
to an amount not greater than five percent (5%) of the aggregate purchase price
of shares of Conversion Stock offered and sold in the Conversion or (ii) reduce
such maximum purchase limitations to an amount not less than one percent (1%) of
the aggregate purchase price of shares of Conversion Stock offered and sold in
the Conversion, each without further approval of the Members.
6. Each person purchasing Conversion Stock in the Conversion shall be
deemed to confirm that such purchase does not conflict with the purchase
limitations under the Plan or otherwise imposed by law, rule or regulation.
7. Subscription Rights to purchase the Conversion Stock received by
Executive Officers and Directors of the Savings Bank and their Associates, based
on their increased deposits in the Savings Bank in the one-year period preceding
the Eligibility Record Date shall be subordinated to all other subscriptions
involving the exercise of Subscription Rights to purchase the Conversion Stock
pursuant to Category No. 1.
E. Restrictions on and Other Characteristics of Stock Being Sold
1. Transferability. Conversion Stock purchased by Directors or Executive
---------------
Officers of the Converted Savings Bank shall not be sold or otherwise disposed
of for value for a period of not less than one year from the date of purchase
without written permission of the Administrator, except for any disposition of
such shares following the death of the original purchaser.
The Conversion Stock issued by the Holding Company to Directors and
Executive Officers of the Converted Savings Bank shall bear a legend giving
appropriate notice of the one-year holding period restriction. This legend will
state as follows:
The shares of stock evidenced by this Certificate may not be sold, except
in the event
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of the death of the registered holder, for a period of one year from the
date of this certificate without the prior written consent of the
Administrator, Savings Institutions Division, North Carolina Department of
Commerce.
In addition, the Holding Company shall give appropriate instructions to the
transfer agent with respect to the applicable restrictions relating to the
transfer of restricted stock. Any shares subsequently issued as a stock
dividend, stock split, or otherwise with respect to any such restricted stock,
shall be subject to the same holding period restrictions for Directors and
Executive Officers of the Converted Savings Bank as may be then applicable to
such restricted stock.
No Director, Executive Officer or Associate of a Director or Executive
Officer of the Converted Savings Bank shall purchase any outstanding shares of
common stock of the Holding Company for a period of three years following the
Conversion without the prior written approval of the Administrator, except (a)
through a broker or dealer registered with the SEC or the Secretary of State of
North Carolina or (b) in a "negotiated transaction" involving more than one
percent of the then outstanding shares of capital stock of the Holding Company
or (c) through the purchase of common stock made by and held by one or more tax-
qualified or non-tax-qualified employee stock benefit plans of the Converted
Savings Bank or the Holding Company which may be attributable to Executive
Officers or Directors. As used herein, the term "negotiated transaction" means a
transaction in which the securities are offered and the terms and arrangements
relating to any sale are arrived at through direct communications between the
seller or any Person acting on his or her behalf and the purchaser or his or her
investment representative. The term "investment representative" shall mean a
professional investment advisor acting as agent for the purchaser and
independent of the seller and not acting on behalf of the seller in connection
with the transaction.
2. Repurchase and Dividend Rights. Subject to the Regulations and
regulations of the FDIC, the Converted Savings Bank may not declare or pay a
cash dividend on or repurchase any of its capital stock if the effect thereof
would cause the regulatory capital of the Converted Savings Bank to be reduced
below (a) the amount required for the Liquidation Account or (b) the net worth
requirements of the Administrator or the minimum capital requirements of the
FDIC. As set forth in the Regulations and regulations of the FDIC, there exist
additional limitations on the ability of the Converted Savings Bank to pay
dividends and repurchase stock without the written approval of the Administrator
and the FDIC.
The above limitations shall not preclude payments of dividends or
repurchases of capital stock by the Converted Savings Bank or the Holding
Company in the event applicable federal or state regulatory limitations are
liberalized subsequent to the Conversion.
3. Voting Rights. After the Conversion, holders of Savings Accounts and
obligors on loans will not have voting rights in the Converted Savings Bank.
Exclusive voting rights shall be vested in the Holding Company as the owner of
all of the capital stock of the Converted Savings Bank. Each holder of common
stock of the Holding Company will be entitled to vote on any matter coming
before the stockholders of the Holding Company for consideration and will be
entitled to one vote for each share of common stock of the Holding Company owned
by such stockholder.
4. Preemptive Rights. Holders of common stock of the Holding Company
shall not have preemptive rights to acquire additional or treasury shares of the
Holding Company. Holders of common stock of the Converted Savings Bank shall
not have preemptive rights to acquire additional or
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treasury shares of the Savings Bank.
F. Mailing of Offering Materials and Collation of Subscriptions
After (i) approval of the Plan by the Administrator, (ii) receipt of a
notice of non-objection by the FDIC or expiration of the time period for FDIC
review and objection without receipt of an objection from the FDIC and (iii) the
SEC's declaration of the effectiveness of the registration statement containing
the Prospectus, the Holding Company shall distribute the Prospectus and Order
Forms for the purchase of shares to holders of Subscription Rights in accordance
with the terms of the Plan.
As set forth in the Prospectus, each such recipient of an Order Form will
be given a period of not less than 20 days nor more than 45 days from the date
of mailing, unless extended, to properly complete, execute and return the Order
Form to the Savings Bank on behalf of the Holding Company. Self-addressed,
postage-paid return envelopes will accompany these forms when mailed. The
Savings Bank will collate the returned executed forms upon completion of the
subscription period. Failure of any eligible subscriber in the Subscription or
Community Offerings to return a properly completed and executed Order Form with
full payment for all shares subscribed for within the prescribed time limits
shall be deemed a waiver and a release by such person of any rights to purchase
shares hereunder.
The Savings Bank may require a Person to provide evidence satisfactory to
the Savings Bank that such Person qualifies as an Eligible Account Holder,
Supplemental Eligible Account Holder, Other Member, or First Priority Community
Subscriber, as the case may be. All determinations as to whether a Person
qualifies to purchase in a particular category shall be made by the Savings Bank
in its sole discretion and shall be final and conclusive.
The Savings Bank reserves the right to make an independent investigation of
any facts or circumstances brought to its attention that indicate or tend to
indicate that one or more persons acting independently or as a group acting in
concert may be attempting to violate or circumvent the regulatory prohibition on
transferability of Subscription Rights. The nature and extent of such
investigation will be at the Savings Bank's sole discretion and the Savings Bank
may require a holder of Subscription Rights to provide certified affidavits and
other documentation to satisfy the Savings Bank that the Plan and North Carolina
and federal conversion regulations regarding nontransferability are not being
subverted by actions of holders of Subscription Rights. In extreme cases the
Savings Bank reserves the right to seek legal advice from the General Counsel
for the Administrator as to compliance with all regulations governing the
Conversion, including the nontransferability of Subscription Rights.
If the Board of Directors of the Savings Bank determines that a subscriber
(i) has submitted false or misleading information on an Order Form or otherwise,
(ii) has attempted to purchase shares of Conversion Stock in violation of
provisions of this Plan or applicable law or (iii) has failed to cooperate with
attempts by the Savings Bank, its employees or agents to verify information with
respect to purchase rights, such Board of Directors may reject the order of such
subscriber.
G. Method of Payment
Payment for all shares of Conversion Stock subscribed for in the
Subscription and Community Offerings may be made in cash, if delivered in
person, by check or money order, or if the subscriber
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has a Savings Account (other than a demand deposit or NOW account), by
withdrawal authorization from the Savings Account for the purchase amount.
Unless payment is to be made by withdrawal from a Savings Account, it shall
accompany the Order Forms.
If a subscriber authorizes the withdrawal from his or her Savings Account,
the funds may be withdrawn from the subscriber's Savings Account at any time
after receipt of the subscriber's stock order form and will continue to earn
interest at the applicable rate for such Savings Account until the Conversion is
completed or terminated. The withdrawal will be given effect only to the
extent necessary to satisfy the subscription at a price equal to the aggregate
Actual Purchase Price of the Conversion Stock sold to the subscriber. The
Savings Bank will allow subscribers to purchase shares of Conversion Stock by
withdrawing funds from certificate accounts without the assessment of early
withdrawal penalties. In the case of early withdrawal of only a portion of such
account, the certificate evidencing such account shall be canceled if the
remaining balance of the account is less than the applicable minimum balance
requirement. In that event, the remaining balance will earn interest at the
passbook savings rate. This waiver of the early withdrawal penalty is
applicable only to withdrawals made in connection with the purchase of
Conversion Stock under the Plan.
A subscriber who is the beneficial owner of a Retirement Account may pay
for shares of Conversion Stock subscribed for by authorizing and directing the
Savings Bank on the Order Form to roll over the subscriber's Retirement Account
to a self-directed Retirement Account at an independent trustee, who shall then
be directed to make a withdrawal from such Retirement Account in an amount equal
to the Actual Purchase Price of such shares. Such shares shall then become part
of the Retirement Account estate.
All amounts received for the purchase of Conversion Stock in the
Subscription Offering and the Community Offering (other than by charge against
the Subscriber's account or as provided above) shall be placed in a special
escrow account with the Savings Bank. The Savings Bank shall pay interest to
the subscriber at the passbook savings rate on such amounts paid to purchase
Conversion Stock from the date payment is received until the Conversion is
completed or terminated, as the case may be. The Savings Bank shall deliver
all amounts received for the purchase of Conversion Stock in the Subscription
Offering and the Community Offering to the Holding Company on the date the
Conversion is consummated.
H. Undelivered, Defective or Late Order Forms: Insufficient Payment
If an Order Form in the Subscription or Community Offering (a) is not
delivered and is returned by the United States Postal Service (or the Savings
Bank is unable to locate the addressee); (b) is not received by the Savings Bank
or is received by the Savings Bank after the date specified for receipt therein;
(c) is defectively completed or executed; (d) is not accompanied by the total
required payment for the shares of Conversion Stock subscribed for (including
cases in which the subscriber's Savings Account is insufficient to cover the
amount of such required payment pursuant to a withdrawal authorization) or (e)
is not accompanied by immediately available funds, the Subscription Rights and
other rights to purchase of the person to whom such rights have been granted
will be deemed waived and will not be honored. The Savings Bank may, but will
not be required to, waive any irregularity relating to any Order Form or require
the submission of a corrected Order Form or the remittance of full payment for
subscribed shares by such date as the Savings Bank may specify. Subscription
orders, once tendered, cannot be revoked. The Savings Bank's interpretation of
the terms and conditions of this
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Plan and acceptability of the Order Forms will be final.
I. Members in Non-Qualified States or in Foreign Countries
The Holding Company will make reasonable efforts to comply with the
securities laws of all states of the United States in which Eligible Account
Holders, Supplemental Eligible Account Holders, or Other Members entitled to
subscribe for shares of Conversion Stock reside. However, the Holding Company
shall not elect to offer or sell shares of Conversion Stock or Subscription
Rights under the Plan of Conversion in a foreign country, and may elect not to
offer or sell shares of Conversion Stock or Subscription Rights in a state in
the United States (i) where a small number of persons otherwise eligible to
subscribe for shares under this Plan reside or (ii) if the Holding Company
determines that compliance with the securities laws of such state would be
impracticable for reasons of cost or otherwise, including, but not limited to, a
requirement that the Holding Company, the Savings Bank or any employee or
representative thereof register as a broker, dealer, agent or salesperson or
register or otherwise qualify the Subscription Rights or Conversion Stock for
sale in such state. No payments will be made in lieu of the granting of
Subscription Rights to persons residing in such jurisdictions.
J. Acquisition of Capital Stock of the Converted Savings Bank
One half of the net proceeds from the sale of the Conversion Stock will be
used by the Holding Company to purchase all of the outstanding capital stock of
the Converted Savings Bank.
VII. Amended Charter and Bylaws
As part of the Conversion and this Plan, the Amended Charter and new
bylaws of the Converted Savings Bank will be adopted to authorize the Converted
Savings Bank to operate as a North Carolina capital stock savings bank under the
name Anson Savings Bank, Inc. The Amended Charter and new bylaws for the
Converted Savings Bank are attached hereto as Annex I and Annex II,
respectively. By approving the Plan, the Members will thereby approve the
Amended Charter and new bylaws. Accordingly, the Amended Charter and new bylaws
may be amended in the same manner as the Plan pursuant to Article XIII.
VIII. Consummation of Conversion
After approval of the Plan by the Members, completion of the issuance and
sale of the Conversion Stock, and provided the Amended Charter and new bylaws
have been filed with and approved by the Administrator, the Conversion will
become effective. The effective time of such Conversion will be the date of
completion of such issuance and sale unless a later date is specified by the
Savings Bank. The Conversion shall constitute a change of form of organization
of the Savings Bank and shall not impair or affect any contracts, rights,
liabilities, obligations, interest and relations of whatever kind of the Savings
Bank.
The Conversion of the Savings Bank from a North Carolina-chartered mutual
savings bank to a North Carolina-chartered capital stock savings bank shall be
deemed to be an extension of the corporate existence of the Savings Bank, and
all property of the Savings Bank including all its rights, title and interest in
and to all property of whatever kind, whether real, personal or mixed, and
things in action, and every right, privilege, interest and asset of any
conceivable value or benefit then existing,
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belonging or pertaining to it, or which would inure to it, shall immediately by
act of law and without any conveyance or transfer, and without any further act
or deed, be vested in and become the property of the Converted Savings Bank,
which shall have, hold and enjoy the same in its own right as fully and to the
same extent as the same was possessed, held and enjoyed by the Savings Bank, and
the Converted Savings Bank shall succeed to all the rights, obligations and
relations of the Savings Bank.
IX. Registration and Market Making
Upon completion of the Conversion, the Conversion Stock will be registered
with the SEC pursuant to the Securities Exchange Act of 1934, as amended. In
connection with the registration, the Holding Company hereby undertakes not to
deregister such stock for a period of three years thereafter.
The Holding Company will use its best efforts to encourage and assist a
Market Maker to establish and maintain a market for the shares of the Conversion
Stock. The Holding Company will also use its best efforts to list the
Conversion Stock on a national or regional securities exchange or on the
National Association of Securities Dealers Inc. Automated Quotation System.
X. Status of Savings Accounts and Loans Subsequent to Conversion
All Savings Accounts will retain the same status after Conversion as these
accounts had prior to Conversion. Each Savings Account holder shall retain,
without payment, a Savings Account or Accounts in the Converted Savings Bank,
equal in amount to the withdrawable value of such account holder's Savings
Account or Accounts in the Savings Bank prior to Conversion. All Savings
Accounts will continue to be insured by the SAIF of the FDIC up to the
applicable limits of insurance coverage. All loans shall retain the same status
after Conversion as such loans had prior to Conversion.
XI. Liquidation Account
After the Conversion, holders of Savings Accounts and borrowers will not
have voting rights in the Converted Savings Bank and will not be entitled to
share in the residual assets after liquidation of the Converted Savings Bank.
However, pursuant to the Regulations, the Savings Bank shall, at the time of
Conversion, establish a Liquidation Account on the records of the Converted
Savings Bank in an amount equal to its total regulatory capital as of the date
of the latest statement of financial condition contained in the final Prospectus
used in connection with the Conversion or such other amount as shall be required
by the Regulations. The function of the Liquidation Account is to establish a
priority on liquidation and, except as provided in Article VI.E.2 above, the
existence of the Liquidation Account shall not operate to restrict the use or
applications of any of the net worth, regulatory capital or other accounts of
the Converted Savings Bank.
The Liquidation Account shall be maintained by the Converted Saving Bank
subsequent to Conversion for the benefit of Eligible Account Holders and
Supplemental Eligible Account Holders (as applicable) who maintain Savings
Accounts in the Converted Savings Bank. Each Eligible Account Holder and
Supplemental Eligible Account Holder shall, with respect to each Savings Account
held, have a related inchoate interest in a portion of the Liquidation Account
balance (the "subaccount balance").
The initial subaccount balance for a Savings Account held by an Eligible
Account Holder or a
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Supplemental Eligible Account Holder shall be determined by multiplying the
total opening balance in the Liquidation Account by a fraction, of which the
numerator is the amount of the Qualifying Deposits in the related Savings
Account on the Eligibility Record Date or the Supplemental Eligibility Record
Date (as applicable) and of which the denominator is the total amount of all
Qualifying Deposits of all Eligible Account Holders or Supplemental Eligible
Account Holders (as applicable) on such dates. Each such initial subaccount
balance in the Liquidation Account shall never be increased, but shall be
subject to downward adjustment as provided below.
If the deposit balance in any Savings Account of an Eligible Account
Holder or Supplemental Eligible Account Holder at the close of business on any
annual closing date subsequent to the Eligibility Record Date or Supplemental
Eligibility Record Date (as applicable) is less than the lesser of (a) the
deposit balance in such Savings Account at the close of business on any previous
annual closing date subsequent to the Eligibility Record Date or the
Supplemental Eligibility Record Date, as applicable, or (b) the amount of the
Qualifying Deposit in such Savings Account on the Eligibility Record Date or the
Supplemental Eligibility Record Date, as applicable, then the subaccount balance
for such Savings Account shall be adjusted by reducing such subaccount balance
in an amount proportionate to the reduction in such deposit balance. In the
event of a downward adjustment, the subaccount balance shall not be subsequently
increased, notwithstanding any increase in the deposit balance of the related
Savings Account. The subaccount balance of a Savings Account holder shall be
maintained for as long as the Savings Account holder maintains an account with
the same social security number with the Converted Savings Bank.
In the event of a complete liquidation of the Converted Savings Bank (and
only in such event), each Eligible Account Holder and Supplemental Eligible
Account Holder, as applicable, shall be entitled to receive a liquidation
distribution from the Liquidation Account in the amount of the then current
adjusted subaccount balances for Savings Accounts then held, after the payment
of creditors of the Converted Savings Bank, including deposit account holders,
but before any liquidation distribution may be made to the Converted Savings
Bank's stockholders. No merger, consolidation, purchase of bulk assets with
assumption of deposit accounts and other liabilities, or similar combination or
transaction with or by another FDIC-insured institution shall be considered to
be a complete liquidation for this purpose. In such transactions, the
Liquidation Account shall be assumed by the surviving institution.
XII. Management
The Savings Bank or the Holding Company have entered or will enter into
contracts of employment with selected executives; and, subject to approval of
the stockholders of the Holding Company, the Holding Company intends to approve
and adopt stock option plans for employees and directors of the Holding Company
and/or the Savings Bank and a management recognition plan providing for the
issuance of restricted stock of the Holding Company to certain employees and
directors of the Holding Company and/or the Savings Bank.
XIII. Amendment or Termination of Plan
If necessary or desirable, the Plan may be amended at any time prior to
submission of the Plan and proxy materials to the Members by a two-thirds vote
of the Board of Directors of the Savings Bank. After submission of the Plan and
proxy materials to the Members, the Plan may be amended by a two-thirds vote of
the Board of Directors of the Savings Bank, but only with the concurrence of the
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Administrator.
In the event that mandatory new regulations pertaining to conversions are
adopted by the Administrator or FDIC prior to the completion of the Conversion,
the Plan will be amended as provided above to conform to the new mandatory
regulations without a re-solicitation of proxies or another Special Meeting. In
the event that new conversion regulations adopted by the Administrator or FDIC
prior to completion of the Conversion contain optional provisions, the Plan may
be amended as provided above to utilize such optional provisions without a re-
solicitation of proxies or another Special Meeting.
The Plan may be terminated by a two-thirds vote of the Board of Directors
of the Savings Bank at any time prior to the Special Meeting, and at any time
following such Special Meeting with the concurrence of the Administrator. The
Plan shall terminate automatically if the sale of all shares of Conversion Stock
required to be sold is not completed within 12 months of the date of the Special
Meeting, unless the Administrator agrees in writing to an extension of up to an
additional 12 months.
By adoption of the Plan, the Members authorize the Board of Directors of
the Savings Bank to amend or terminate the Plan under the circumstances set
forth above.
XIV. Expenses of the Conversion
The Savings Bank will use its best efforts to assure that expenses incurred
in connection with the Conversion shall be reasonable.
XV. Prohibition on Extensions of Credit
The Savings Bank, the Holding Company or any subsidiary of either of them
may not knowingly loan funds or otherwise extend unsecured credit or credit
secured by the Holding Company's Conversion Stock to any person to purchase
shares of Conversion Stock.
XVI. Contributions to Tax-Qualified Employee Stock Benefit Plans
The Savings Bank may make scheduled discretionary contributions to a tax-
qualified employee stock benefit plan, provided such contributions do not cause
the Savings Bank to fail to meet its net worth requirements.
19
<PAGE>
ANNEX I
Amended and Restated Certificate of Incorporation
of
Anson Savings Bank, Inc.
ARTICLE I
The name of the corporation is Anson Savings Bank, Inc. (the "Savings
Bank").
ARTICLE II
The principal office of the Savings Bank shall be located at 211 South
Greene Street, Wadesboro, Anson County, North Carolina. The street address of
the registered office of the Savings Bank is 211 South Greene Street, Wadesboro,
North Carolina, the mailing address of the registered office of the Savings Bank
is P.O. Box 249, Wadesboro, North Carolina 28170-0249, and the name of the
registered agent at the address is Eugene M. Ward.
ARTICLE III
The period of duration of the Savings Bank is perpetual.
ARTICLE IV
The purposes for which the Savings Bank is organized are to pursue any and
all of the lawful objectives of a stock savings bank chartered under the
provisions of the General Statutes of North Carolina and to exercise all of the
express, implied, and incidental powers conferred thereby and by all acts
amendatory thereof and supplemental thereto, subject to the constitutions and
laws of the State of North Carolina and the United States as they are now in
effect, or as they may hereafter be amended, and subject to all lawful and
applicable rules, regulations and orders of appropriate regulatory authorities.
ARTICLE V
The Savings Bank shall have authority to issue 100,000 shares of stock.
These shares shall be all of one class, designated as common stock with no par
value.
ARTICLE VI
The minimum amount of consideration to be received for its shares of stock
before the Savings Bank shall commence business as a stock savings bank is $100.
<PAGE>
ARTICLE VII
The shareholders of the Savings Bank do not have preemptive rights to
---
acquire additional or treasury shares of the Savings Bank.
ARTICLE VIII
Pursuant to the requirements of the rules and regulations of the
Administrator of the Savings Institutions Division, North Carolina Department of
Commerce, the Savings Bank shall establish and maintain a liquidation account
for the benefit of its "Eligible Account Holders" and "Supplemental Eligible
Account Holders," if applicable, as defined in the Plan of Holding Company
Conversion adopted by the Savings Bank in connection with its conversion to the
stock form of ownership. In the event of a complete liquidation of the Savings
Bank, it shall comply with such rules and regulations with respect to the amount
and the priorities on liquidation of each Eligible Account Holder's or
Supplemental Eligible Account Holder's inchoate interest in the liquidation
account, to the extent it is still in existence; provided, however, that an
Eligible Account Holder's or Supplemental Eligible Account Holder's inchoate
interest in the liquidation account shall not entitle such person or entity to
any voting rights at meetings of the Savings Bank's shareholders.
ARTICLE IX
The business and affairs of the Savings Bank shall be managed by a Board of
Directors. The number of directors shall be fixed by the Savings Bank's Bylaws
but shall not be less than five (5). Terms of directors may be classified as
stated in the Savings Bank's Bylaws.
ARTICLE X
To the fullest extent that the law of North Carolina as it exists on the
effective date of this Article, or as it may thereafter be amended, permits the
elimination of liability of directors, no director of the Savings Bank shall be
personally liable to the Savings Bank or any of its shareholders for monetary
damages for any breach of duty as a director. No amendment to or repeal of this
Article shall apply to or have any effect on the liability or alleged liability
of any director of the Savings Bank for or with respect to any act or failure to
act on the part of such director occurring prior to such amendment or repeal.
The provisions of this Article shall not be deemed to limit or preclude
indemnification of a director by the Savings Bank for any liability of a
director which has not been eliminated by the provisions of this Article.
2
<PAGE>
ARTICLE XI
Any addition, alteration or amendment to this Charter shall be made in
accordance with the provisions of Chapter 54C of the General Statutes of North
Carolina and any amendments thereto.
ANSON SAVINGS BANK, SSB
ATTEST:
By:
By: -------------------------------
------------------------------- Eugene M. Ward, President
______________ Secretary
STATE OF NORTH CAROLINA
COUNTY OF ANSON
This is to certify that on this ________ day of __________________, 1997,
before me, a Notary Public, personally appeared Eugene M. Ward and
____________________, each of whom, being by me first duly sworn, declared that
he signed the foregoing instrument in the capacity indicated, that he was
authorized so to sign, and that the statements contained therein are true.
Witness my hand and official seal, this _____ day of ______________, 1997.
----------------------------------
Notary Public
(OFFICIAL SEAL)
My Commission Expires: ___________
3
<PAGE>
ANNEX II
BYLAWS
OF
ANSON SAVINGS BANK, INC.
ARTICLE I.
OFFICES
-------
Section 1. Principal Office. The principal office of the Savings Bank
--------- ----------------
shall be located at 211 South Greene Street, Wadesboro, North Carolina 28170-
2645.
Section 2. Registered Office. The registered office of the Savings Bank
--------- -----------------
required by law to be maintained in the State of North Carolina may be, but need
not be, identical with the principal office.
ARTICLE II.
MEETING OF SHAREHOLDERS
-----------------------
Section 1. Place of Meetings. All meetings of shareholders shall be held
--------- -----------------
at the principal office of the Savings Bank, or at such other place, either
within or without the State of North Carolina, as shall be designated in the
notice of the meeting or agreed upon by a majority of the shareholders entitled
to vote thereat.
Section 2. Annual Meetings. The annual meeting of shareholders shall be
--------- ---------------
held during the first five calendar months following the end of the Savings
Bank's fiscal year, or any day (except Saturday, Sunday or a legal holiday)
during that period as shall be determined by the Board of Directors, for the
purpose of electing directors of the Savings Bank, receiving annual reports of
officers, and transacting such other business as may be properly brought before
the meeting.
Section 3. Substitute Annual Meeting. If the annual meeting shall not be
--------- -------------------------
held on the date designated by these Bylaws, a substitute annual meeting may be
called in accordance with the provisions of Section 4 of this Article II. A
meeting so called shall be designated and treated for all purposes as the annual
meeting.
<PAGE>
Section 4. Special Meetings. Special meetings of the shareholders may be
--------- ----------------
called at any time by the President, or a majority of the Board of Directors by
giving notice as hereinafter provided, and, unless the Savings Bank shall at
such time have a class of shares registered under Section 12 of the Securities
Exchange Act of 1934, as amended, shall be called by any of the foregoing
pursuant to the written request of the holders of not less than one-tenth of all
votes entitled to be cast on any issue proposed to be considered at the meeting.
Section 5. Notice of Meetings. Written or printed notice stating the
--------- ------------------
time, place and date of the meeting shall be delivered not less than ten (10)
nor more than sixty (60) days before the date thereof, either in person or by
mail, by or at the direction of the Board of Directors, the President or the
Secretary to each shareholder of record entitled to vote at such meeting unless
applicable law or the Saving Bank's articles of incorporation require that such
notice shall be given to all shareholders with respect to such meeting. If
mailed, such notice shall be deemed to be effective when deposited in the United
States mail, correctly addressed to the shareholder at the shareholder's address
as it appears on the current record of shareholders of the Savings Bank, with
postage thereon prepaid.
In the case of an annual or substitute annual meeting, the notice of
meeting need not specifically state the business to be transacted thereat unless
such a statement expressly is required by the provisions of the North Carolina
Business Corporation Act. In the case of a special meeting, the notice of
meeting specifically shall state the purpose or purposes for which the meeting
is called.
If any meeting of shareholders is adjourned to a different date, time or
place, notice need not be given of the new date, time or place if the new date,
time or place is announced at the meeting before adjournment and if a new record
date is not fixed for the adjourned meeting. If a new record date for the
adjourned meeting is or must be fixed pursuant to North Carolina law, notice of
the adjourned meeting must be given as provided in this Section to persons who
are shareholders as of the new record date.
Section 6. Waiver of Notice. Any shareholder may waive notice of any
--------- ----------------
meeting before or after the meeting. The waiver must be in writing, signed by
the shareholder, and delivered to the Savings Bank for inclusion in the minutes
or filing with the corporate records. A shareholder's attendance, in person or
by proxy, at a meeting (a) waives objection to lack of notice or defective
notice of the meeting, unless the shareholder or the shareholder's proxy at the
beginning of the meeting objects to holding the meeting or transacting business
thereat, and (b) waives objection to consideration of a particular matter at the
meeting that is not within the purpose or purposes described in the meeting
notice, unless the shareholder or his proxy objects to considering the matter
before it is voted upon.
Section 7. Voting List. Before each meeting of shareholders, an
--------- -----------
alphabetical list of the shareholders entitled to notice of such meeting shall
be prepared by the Secretary of the Savings Bank. The list shall be arranged by
voting group and within each voting group by class or series of shares and show
the address of and number of shares held by each shareholder. The list shall be
kept on file at the principal office of the Savings Bank for the period
beginning two (2) business days after notice of the meeting is given and
continuing through the meeting, and shall be available for inspection by any
shareholder or the agent or attorney of any shareholder at any time prior to the
meeting during regular business hours and at any time during the meeting or any
adjournment thereof.
<PAGE>
Section 8. Voting Group. All shares of one or more classes or series that
--------- ------------
under the Savings Bank's articles of incorporation or the North Carolina
Business Corporation Act are entitled to vote and be counted together
collectively on a matter at a meeting of shareholders constitute a voting group.
All shares entitled by the Savings Bank's articles of incorporation or the North
Carolina Business Corporation Act to vote generally on a matter are for that
purpose a single voting group. Classes or series of shares shall not be entitled
to vote separately by voting group unless expressly authorized by the Savings
Bank's articles of incorporation or specifically required by law.
Section 9. Quorum. Shares entitled to vote generally as a single voting
--------- ------
group or as a separate voting group may take action on a matter at the meeting
of shareholders only if a quorum of those shares is present at the meeting. A
majority of the votes entitled to be cast on the matter by the voting group
shall constitute a quorum of that voting group for action on that matter.
Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
In the absence of a quorum at the opening of any meeting of shareholders,
such meeting may be adjourned from time to time by a vote of a majority of the
votes cast on the motion to adjourn; and at any adjourned meeting any business
may be transacted which might have been transacted at the original meeting if a
quorum exists with respect to the matter proposed.
Section 10. Proxies. Shares may be voted either in person or by one or
---------- -------
more agents authorized by a written proxy executed by the shareholder or by the
shareholder's duly authorized attorney-in-fact. A proxy shall not designate as
a holder any corporation or partnership including any person acting on behalf of
any corporation or partnership, or any person other than a living natural
person. However, a proxy may designate the holder of a specified title or
office, if a natural person, or a committee composed solely of natural persons,
including a committee composed of the Board of Directors of the Savings Bank.
Section 11. Voting of Shares. Subject to the provisions of the Savings
---------- ----------------
Bank's articles of incorporation, each outstanding share shall be entitled to
one vote on each matter submitted to a vote at a meeting of shareholders.
Except in the election of directors as provided in Section 3 of Article
III, if a quorum exists, action on a matter by a voting group at a meeting of
shareholders is approved if the votes cast within the voting group favoring the
action exceed the votes cast opposing the action, unless a greater vote is
required by law or the Savings Bank's articles of incorporation or these Bylaws.
Section 12. Informal Action by Shareholders. Any action which may be
---------- -------------------------------
taken at a meeting of shareholders may be taken without a meeting if one or more
written consents, setting forth the action so taken, shall be signed by all of
the persons who would be entitled to vote upon such action at a meeting, and
delivered to the Secretary of the Savings Bank for inclusion in the minutes or
filing with the corporate records.
If the Savings Bank is required by law to give notice to nonvoting
shareholders of action to be
3
<PAGE>
taken by unanimous written consent of the voting shareholders, then the Savings
Bank shall give the nonvoting shareholders, if any, written notice of the
proposed action at least ten (10) days before the action is taken.
ARTICLE III.
DIRECTORS
---------
Section 1. General Powers. The business and affairs of the Savings Bank
--------- --------------
shall be managed by the Board of Directors or by such Executive Committee as the
Board may establish.
Section 2. Number, Term and Qualifications. The number of Directors of
--------- -------------------------------
the Savings Bank shall be no less than five (5) and no more than nine (9), with
the exact number to be fixed from time to time by the Board of Directors. Each
Director shall hold office until his death, resignation, retirement, removal,
disqualification, or his successor shall have been elected and qualified.
Section 3. Election of Directors. Except as provided in Section 5 of this
--------- ---------------------
Article III, the directors shall be elected at the annual meeting of
shareholders, and those persons who receive the highest number of votes at a
meeting at which a quorum is present shall be deemed to have been elected. If
any shareholder so demands, election of directors shall be by ballot. At all
times when the number of directors shall be nine (9) or more, the Board of
Directors shall be divided into three (3) classes, as nearly equal in number as
possible, and each class shall be elected for staggered terms of three (3) years
or until successors are duly elected and qualified.
Section 4. Removal. Any director may be removed at any time with or
--------- -------
without cause by a vote of shareholders holding a majority of the votes entitled
to be cast at an election of the directors. If any directors are so removed, new
directors may be elected at the same meeting.
Section 5. Vacancies. Any vacancy occurring in the Board of Directors,
--------- ---------
including without limitation a vacancy resulting from an increase in the number
of directors or from the failure by the shareholders to elect the full
authorized number of directors, may be filled by the shareholders, a majority of
the remaining directors, though less than a quorum, or by the sole remaining
director. A director elected to fill a vacancy shall be elected to serve the
remaining term of the director replaced, or if a director is not elected to
replace a previously elected director, the new director shall be elected to
serve until the next shareholders' meeting at which directors are elected. The
shareholders may elect a director at any time to fill any vacancy not filled by
the directors.
Section 6. Compensation. The Board of Directors may provide for the
--------- ------------
compensation of directors for their services as such and for the payment or
reimbursement of any or all expenses incurred by them in connection with such
services.
4
<PAGE>
ARTICLE IV.
MEETINGS OF DIRECTORS
---------------------
Section 1. Regular Meetings. A regular meeting of the Board of Directors
--------- ----------------
shall be held immediately after, and at the same place as, the annual meeting of
shareholders. In addition, the Board of Directors may provide, by resolution,
the time and place, either within or without the State of North Carolina, for
the holding of additional regular meetings.
Section 2. Special Meetings. Special meetings of the Board of Directors
--------- ----------------
may be called by or at the request of the President, Vice President acting in
his absence or incapacity, or any three Directors, upon notice either in person
or by mail. Such meetings shall be held either within or without the State of
North Carolina as fixed by the person or persons calling any such meeting.
Section 3. Notice of Meetings. The applicable provisions of North
--------- ------------------
Carolina law shall govern meetings of the Board of Directors, notice of
meetings, waiver of notice, quorums and actions of the Board of Directors.
Section 4. Quorum. A majority of the number of directors shall constitute
--------- ------
a quorum for the transaction of business at any meeting of the Board of
Directors.
Section 5. Manner of Acting. Except as otherwise provided in these
--------- ----------------
Bylaws, the act of the majority of the directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors.
Section 6. Presumption of Assent. A director of the Savings Bank who is
--------- ---------------------
present at a meeting of the Board of Directors at which action on any matter is
taken shall be presumed to have assented to the action unless his contrary vote
is recorded or his dissent is otherwise entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the person acting
as the secretary of the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the Secretary of the Savings Bank immediately
after the adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
Section 7. Informal Action by Directors. Action taken by the directors
--------- ----------------------------
without a meeting is nevertheless Board action if written consent to the action
is signed by all the directors and filed with the minutes of the proceedings of
the Board or other corporate records, whether done before or after the actions
are taken.
ARTICLE V.
OFFICERS
--------
Section 1. Officers of the Savings Bank. The officers of the Savings Bank
--------- ----------------------------
shall consist of a President, a Secretary, a Treasurer, and such Vice
Presidents, Assistant Secretaries, Assistant Treasurers and other officers as
the Board of Directors may from time to time elect. Any two or more offices may
be held by the same person, except the offices of President and Secretary, but
no officer
5
<PAGE>
may act in any more than one capacity where action of two or more officers is
required.
Section 2. Election and Term. The officers of the Savings Bank shall be
--------- -----------------
elected by the Board of Directors. Such election may be held at any regular or
special meeting of the Board. Each officer shall hold office until his death,
resignation, retirement, removal, disqualification or his successor is elected
and qualified.
Section 3. Removal. Any officer or agent elected or appointed by the
--------- -------
Board of Directors may be removed by the Board whenever in its judgment the best
interests of the Savings Bank will be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Section 4. President. The President shall be the principal executive
--------- ---------
officer and managing officer of the Savings Bank and, subject to the control of
the Board of Directors, shall supervise and control all of the business and
affairs of the Savings Bank. He or she shall sign, with the Secretary, an
Assistant Secretary, or with any other proper officer authorized by the Board of
Directors and whose signature is required, certificates for shares of the
Savings Bank and any deeds, mortgages, bonds, contracts, or other instruments
which may be lawfully executed on behalf of the Savings Bank, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be delegated by the Board of
Directors or these Bylaws to some other officer or agent of the Savings Bank;
and, in general, he or she shall perform all duties incident to the office of
the President and such other duties as may be prescribed by the Board of
Directors from time to time.
Section 5. Vice Presidents. In the absence of the President or in the
--------- ---------------
event of his death, inability or refusal to act, the Vice Presidents, unless
otherwise determined by the Board of Directors, shall perform the duties of the
President, and when so acting shall have all the powers of and be subject to all
the restrictions upon the President. Any Vice President, with any other proper
officer whose signature is required, may sign certificates for shares of the
Savings Bank and shall perform such other duties as from time to time may be
assigned to him or her by the President or Board of Directors.
Section 6. Secretary. The Secretary shall: (a) keep the minutes of the
--------- ---------
meetings of shareholders and of the Board of Directors in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these Bylaws or as required by law; (c) be custodian of
the corporate records and of the seal of the Savings Bank and see that the seal
of the Savings Bank is affixed to all documents the execution of which on behalf
of the Savings Bank under its seal is duly authorized; (d) have general charge
of the stock transfer books of the Savings Bank and shall keep, at the
registered or principal office of the Savings Bank a record of shareholders
showing the name and address of each shareholder and the number and class of the
shares held by each; (e) be authorized, with any other proper officer, to sign
certificates for shares of the Savings Bank and shall sign such other
instruments as may require the Secretary's signature; and (f) in general perform
all duties incident to the office of Secretary and such other duties as from
time to time may be assigned to him or her by the President or by the Board of
Directors.
Section 7. Assistant Secretaries. In the absence of the Secretary or in
--------- ---------------------
the event of his or her death, inability or refusal to act, the Assistant
Secretaries, unless otherwise determined by the Board of Directors, shall
perform the duties of the Secretary, and when so acting shall have all the
6
<PAGE>
powers of and be subject to all the restrictions upon the Secretary. Any
Assistant Secretary, with any other proper officer, may sign certificates for
shares of the Savings Bank. They shall perform such other duties as may be
assigned to them by the Secretary, by the President, or by the Board of
Directors.
Section 8. Treasurer. The Treasurer shall: (a) have charge and custody
--------- ---------
of and be responsible for all funds and securities of the Savings Bank; receive
and give receipts for money due and payable to the Savings Bank from any source
whatsoever, and deposit all such moneys in the name of the Savings Bank in such
depositories as shall be selected by the Board of Directors of the Savings Bank;
(b) have authority, with any other proper officer, to sign certificates for
shares of the Savings Bank; and (c) in general perform all of the duties
incident to the office of Treasurer and such other duties as from time to time
may be assigned to him by the President or by the Board of Directors, or by
these Bylaws.
Section 9. Assistant Treasurers. In the absence of the Treasurer or in
--------- --------------------
the event of his or her death, inability or refusal to act, the Assistant
Treasurers, unless otherwise determined by the Board of Directors, shall perform
the duties of the Treasurer, and when so acting shall have all the powers of and
be subject to all the restrictions upon the Treasurer. Any Assistant Treasurer,
with any other proper officer, may sign certificates for shares of the Savings
Bank. They shall perform such other duties as may be assigned to them by the
Treasurer, by the President, or by the Board of Directors.
ARTICLE VI.
CONTRACTS, LOANS, CHECKS AND DEPOSITS
-------------------------------------
Section 1. Contracts. The Board of Directors may authorize any officer or
--------- ---------
officers, agent or agents, to enter into any contract or execute and deliver any
instruments in the name of and on behalf of the Savings Bank, and such authority
may be general or confined to specific instances.
Section 2. Loans. No loan shall be contracted on behalf of the Savings
--------- -----
Bank and no evidences of indebtedness shall be issued in its name unless
authorized by Article VI of these Bylaws or authorized by a resolution of the
Board of Directors. Such authority may be general or confined to specific
instances.
Section 3. Checks and Drafts. All checks, drafts or other orders for the
--------- -----------------
payment of money issued in the name of the Savings Bank shall be signed by such
President or such other officer or officers, agent or agents of the Savings Bank
and in such manner as shall from time to time be determined by resolution of the
Board of Directors.
Section 4. Deposits. All funds of the Savings Bank not otherwise employed
--------- --------
shall be deposited from time to time to the credit of the Savings Bank in such
depositories as the Board of Directors shall direct.
7
<PAGE>
ARTICLE VII.
DEPOSIT ACCOUNTS
----------------
Section 1. Classes of Deposit Accounts. The Savings Bank may issue as
--------- ---------------------------
many classes of deposit accounts as the Board of Directors shall establish,
subject to such regulations and limitations as the Administrator of the Savings
Institutions Division of the North Carolina Department of Commerce and the
Federal Deposit Insurance Corporation may prescribe. Such classes of deposit
accounts may include passbook accounts, certificate accounts, NOW accounts,
trust accounts, demand accounts and such other accounts as are permitted by law.
The minutes of the meetings of the Board of Directors of the Savings Bank shall
define each class of deposit account being offered to the public and shall show
all changes made in the class or classes of deposit accounts available to the
customers of the Savings Bank.
Section 2. Withdrawals. The Savings Bank shall have the right to pay the
--------- -----------
withdrawal value of its deposit accounts at any time upon written application
therefor and to pay the holders thereof the withdrawal value thereof. Upon
receipt of a written application from any holder of a deposit account of all or
any part of the withdrawal value thereof, the Savings Bank shall within thirty
(30) days pay the amount requested. If the Savings Bank is unable to pay all
withdrawals requested at the end of thirty (30) days from the date of such
requests, it shall then pay all withdrawals requested in accordance with the
applicable provisions of the General Statutes of North Carolina, as amended, and
the regulations of the Federal Deposit Insurance Corporation. Holders of
deposit accounts for which application for withdrawal has been made shall remain
holders of deposit accounts until paid and shall not become creditors.
When a certificate or agreement between the Savings Bank and the account
holder specifies a particular period of time for notice of withdrawals,
withdrawals shall be made in accordance with such certificate or agreement.
Section 3. Forced Retirement. If so provided in the deposit account
--------- -----------------
contract, the Savings Bank may redeem all or any part of its deposit accounts
which have not been pledged as security for loans. The Savings Bank shall give
at least thirty (30) days notice of such redemption by certified mail addressed
to the holder of each deposit account at his or her last address as recorded on
the books of the Savings Bank. The Savings Bank may not redeem any of its
deposit accounts when it has any request for withdrawal which has been on file
and unpaid for more than thirty (30) days. Also, the Savings Bank may not
redeem any fixed-term deposit accounts which have not matured. The redemption
price of each deposit account redeemed shall be the full value thereof, as
determined by the Board of Directors, but in no event shall the redemption price
be less than the withdrawal amount of such deposit accounts. If notice of
redemption is duly given and sufficient funds are available for such redemption,
interest shall cease to accrue on the deposit account as of the redemption date.
After the redemption date all rights with respect to the deposit account shall
terminate, except for the right of the deposit account holder to receive the
redemption price thereof without interest.
Section 4. New Account Books. The Savings Bank may issue a new account
--------- -----------------
book or certificate, or other evidence of ownership of a deposit account, in the
name of the holder of record at
8
<PAGE>
any time when requested by such holder or his or her legal representative upon
proof satisfactory to the Savings Bank that the original account book or
certificate has been lost or destroyed. Such proof of loss shall ordinarily
include a written verification by the holder or his or her legal representative
that the account book or certificate has been lost or destroyed and the account
has not been pledged or assigned. Such new account book or certificate shall
expressly state that it is issued in lieu of the one lost or destroyed and that
the Savings Bank shall in no way be liable thereafter on account of the original
book or certificate. When issuing such a new account book or certificate, the
Savings Bank may, at its option, require the holder of record to give to the
Savings Bank a bond in such sum as it may direct, or such other indemnification
as it may dictate, in order to indemnify the Savings Bank against any loss that
might result from the issuance of the new account book, certificate, or other
evidence of ownership of a deposit account.
ARTICLE VIII.
LOANS AND INVESTMENTS
---------------------
Section 1. General Lending Authority. Funds of the Savings Bank shall be
--------- -------------------------
loaned in compliance with the General Statutes of North Carolina, the
regulations promulgated by the Administrator of the Savings Institutions
Division of the North Carolina Department of Commerce and applicable federal
statutes and regulations, and in such sums and at such times as the Board of
Directors may determine.
Section 2. Manner of Making Loans. The Board of Directors shall establish
--------- ----------------------
and maintain procedures by which loans are to be considered, approved, and made
by the Savings Bank. Such loan procedures may be amended by resolution of the
Board of Directors.
The Board of Directors may establish a Loan Committee to implement the
Board's loan procedures and to consider and approve loans.
The Board of Directors may designate one or more of the Savings Bank's
officers to serve as Loan Officers. Such Loan Officers shall have authority to
approve loans as determined by the Board.
All actions taken on loan applications to the Savings Bank shall be
reported to the Board of Directors at its meeting next following such actions.
Section 3. Appraisals. The Board of Directors shall cause all loans
--------- ----------
secured by real estate to be appraised and approved as provided by law.
ARTICLE IX.
CERTIFICATES FOR SHARES AND THEIR TRANSFER
------------------------------------------
Section 1. Certificate For Shares. If the shares of the Savings Bank are
--------- ----------------------
represented by certificates, the certificates shall be in such form as required
by law and as determined by the Board of Directors and shall be signed by the
President or any Vice President and either the Secretary or an
9
<PAGE>
Assistant Secretary or the Treasurer or an Assistant Treasurer. All certificates
for shares shall be numbered consecutively or otherwise identified and shall
indicate thereon a reference to any and all restrictive conditions of said
shares. Certificates representing shares of the Savings Bank may be issued to
every shareholder for the fully paid shares owned thereby; the name and address
of the persons to whom they are issued, the number of shares, and the date of
issue shall be entered on the stock transfer books of the Savings Bank. If the
shares are not represented by certificates, then within a reasonable time after
issuance or transfer of such shares, the Savings Bank shall deliver to the
shareholder to whom such shares have been issued or transferred a written
statement of the information required by law to be on certificates.
Section 2. Transfer of Shares. If the shares are represented by
--------- ------------------
certificates, transfer of shares shall be made on the stock transfer books of
the Savings Bank only upon surrender of the certificates for the shares sought
to be transferred by the record holder thereof or by such shareholder's duly
authorized agent, transferee or legal representative. All certificates
surrendered for transfer shall be canceled before new certificates for the
transferred shares shall be issued. If the shares are not represented by
certificates, transfer of shares shall be made on the stock transfer books of
the Savings Bank only upon the furnishing of proper evidence of authority to
transfer by the holder of record thereof or such shareholder's duly authorized
agent, transferee or legal representative. Transfer of shares may be restricted
by an agreement of the shareholder(s).
Section 3. Fixing Record Date. The Board of Directors of the Savings Bank
--------- ------------------
may fix a date selected by it as the record date for one or more voting groups
in order to determine (a) the shareholders entitled to notice of a meeting of
shareholders, (b) the shareholders entitled to demand a special meeting, if any,
(c) the shareholders entitled to vote, or (d) the shareholders entitled to take
any other action. A record date fixed under this Section may not be more than
seventy (70) days before the meeting or action requiring a determination of
shareholders.
A determination of shareholders entitled to notice of or to vote at a
meeting of shareholders is effective for any adjournment of the meeting unless
the Board of Directors fixes a new record date for the adjourned meeting, which
it must do if the meeting is adjourned to a date more than one hundred twenty
(120) days after the date fixed for the original meeting.
If no record date is fixed by the Board of Directors for the determination
of shareholders entitled to notice of or to vote at a meeting of shareholders,
the close of business on the day before the first notice of the meeting is
delivered to shareholders shall be the record date for such determination of
shareholders.
Section 4. Lost Certificates. The Board of Directors may authorize the
--------- -----------------
issuance of a new share certificate in place of a certificate theretofore issued
by the Savings Bank claimed to have been lost or destroyed, upon receipt of an
affidavit of such fact from the person claiming the loss or destruction. When
authorizing such issuance of a new certificate, the Board shall require the
claimant to give the Savings Bank a bond in such sum as the Board may direct to
indemnify the Savings Bank against loss from any claim with respect to the
certificate claimed to have been lost or destroyed; provided, however, that the
Board, by resolution reciting the circumstances justifying such action, may
authorize the issuance of the new certificate without requiring such a bond.
Section 5. Holder of Record. Except as otherwise required by law, the
--------- ----------------
Savings Bank may
10
<PAGE>
treat as the absolute owner of shares and as the person exclusively entitled to
receive notification and distributions, to vote and otherwise to exercise the
rights, powers, and privileges of ownership of such shares, the person in whose
name the shares stand of record on its books.
Section 6. Reacquired Shares. Shares of the Savings Bank that have been
--------- -----------------
issued and thereafter reacquired by the Savings Bank shall constitute authorized
but unissued shares.
ARTICLE X.
GENERAL PROVISIONS
------------------
Section 1. Distributions. The Board of Directors from time to time may
--------- -------------
authorize, and the Savings Bank may pay, distributions and share dividends on
the Savings Bank's outstanding shares in the manner and upon the terms and
conditions provided by law and by the Savings Bank's articles of incorporation.
Section 2. Seal. The corporate seal of the Savings Bank shall consist of
--------- ----
two concentric circles between which is the name of the Savings Bank and in the
center of which is inscribed SEAL; and such seal, as impressed on the margin
hereof, is hereby adopted as the corporate seal of the Savings Bank.
Section 3. Indemnity. In addition to any indemnification required or
--------- ---------
permitted by law, and except as otherwise provided in these Bylaws, any person
who at any time serves or has served as a director, officer, employee, partner,
trustee or agent of the Savings Bank and any such person who serves or has
served at the request of the Savings Bank as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, or as a trustee or administrator under an employee benefit plan,
shall have a right to be indemnified by the Savings Bank to the full extent
allowed by applicable law against liability and litigation expense arising out
of such status or activities in such capacity. "Liability and litigation
expense" shall include costs and expenses of litigation (including reasonable
attorneys' fees), judgments, fines and amounts paid in settlement which are
actually and reasonably incurred in connection with or as a consequence of any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, including appeals.
Promptly after the final disposition or termination of any matter which
involves liability or litigation expense as described above or at such earlier
time as it sees fit, the Savings Bank shall determine whether any person
described in this Section 3 is entitled to indemnification thereunder. Such
determination shall be limited to the following issues: (i) whether the
persons to be indemnified are persons described in this Section 3, (ii) whether
the liability or litigation expense incurred arose out of the status or
activities of such persons as described in this Section 3, (iii) whether
liability was actually incurred and litigation expense was actually and
reasonably incurred, and (iv) whether the indemnification requested is not
permitted by applicable law. Such determination shall be made by a majority
vote of directors who were not parties to the action, suit or proceeding (or, in
connection with "threatened" actions, suits or proceedings, who were not
"threatened parties"). If at least two such disinterested directors are not
obtainable, or, even if obtainable, if at least half of the number of
disinterested directors so direct, such determination shall be made by
independent legal counsel in
11
<PAGE>
written opinion.
Litigation expense incurred by a person described in this Section 3 in
connection with a matter described in this Section 3 shall be paid by the
Savings Bank in advance of the final disposition or termination of such matter,
if the Savings Bank receives an undertaking, dated, in writing and signed by the
person to be indemnified, to repay all such sums unless such person is
ultimately determined to be entitled to be indemnified by the Savings Bank as
provided in this Section 3. Requests for payments in advance of final
disposition or termination shall be submitted in writing unless this requirement
is waived by the Savings Bank.
Notwithstanding the foregoing, no advance payment shall be made as to any
payment or portion of a payment for which the determination is made that the
person requesting payment will not be entitled to indemnification. Such
determination may be made only by a majority vote of disinterested directors or
by independent legal counsel as next provided. If there are not at least two
disinterested directors, the notice of all requests for advance payment shall be
delivered for review to independent legal counsel for the Savings Bank. Such
counsel shall have the authority to disapprove any advance payment or portion of
a payment for which it plainly appears that the person requesting payment will
not be entitled to indemnification.
The Savings Bank shall not be obligated to indemnify persons described in
this Section 3 for any amounts paid in settlement unless the Savings Bank
consents in writing to the settlement. The Savings Bank shall not unreasonably
withhold its consent to proposed settlements. The Savings Bank's consent to a
proposed settlement shall not constitute an agreement by the Savings Bank that
any person is entitled to indemnification hereunder. The Savings Bank shall
waive the requirement of this section for its written consent as fairness and
equity may require.
A person described in this Section 3 may apply to the Savings Bank in
writing for indemnification or advance expenses. Such applications shall be
addressed to the Secretary or, in the absence of the Secretary, to any officer
of the Savings Bank. The Savings Bank shall respond in writing to such
applications as follows: to a request for indemnity under this Section 3, within
ninety days after receipt of the application; to a request for advance expenses
under this Section 3, within fifteen days after receipt of the application.
If any action is necessary or appropriate to authorize the Savings Bank to
pay the indemnification required by these Bylaws, the Board of Directors shall
take such action, including (i) making a good faith evaluation of the
indemnification request, (ii) giving notice to, and obtaining approval by, the
shareholders of the Savings Bank, and (iii) taking any other action.
The right to indemnification or advance expenses provided herein shall be
enforceable in any court of competent jurisdiction. A legal action may be
commenced if a claim for indemnity or advance expenses is denied in whole or in
part, or upon the expiration of the time periods provided above. In any such
action, if the claimant establishes the right to indemnification, he or she
shall also have the right to be indemnified against the litigation expense
(including, without limitation, reasonable attorneys' fees) of such action.
As provided by N.C. Gen. Stat. (S)55-8-57, the Savings Bank shall have the
power to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of
12
<PAGE>
the Savings Bank, or who is or was serving at the request of the Savings Bank as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, or as a trustee or administrator under
an employee benefit plan, against any liability asserted against him and
incurred by him in any such capacity or arising out of his status as such,
whether or not the Savings Bank has the power to indemnify him against such
liability.
The right to indemnification provided herein shall not be deemed exclusive
of any other rights to which any persons seeking indemnity may be entitled apart
from the provisions of this bylaw, except there shall be no right to
indemnification as to any liability or litigation expense for which such person
is entitled to receive payment under any insurance policy other than a
directors' and officers' liability insurance policy maintained by the Savings
Bank. Such right inures to the benefit of the heirs and legal representatives
of any persons entitled to such right. Any person who at any time after the
adoption of this bylaw serves or has served in any status or capacity described
in this Section 3, shall be deemed to be doing or to have done so in reliance
upon, and as consideration for, the right of indemnification provided herein.
Any repeal or modification hereof shall not affect any rights or obligations
then existing. The right provided herein shall not apply as to persons serving
institutions which are hereafter merged into or combined with the Savings Bank,
except after the effective date of such merger or combination and only as to
status and activities after such date.
If this Article or any portion hereof shall be invalidated on any ground by
any court or agency of competent jurisdiction, then the Savings Bank shall
nevertheless indemnify each person described in this Section 3 to the full
extent permitted by the portion of this Article that is not invalidated and also
to the full extent (not exceeding the benefits described herein) permitted or
required by other applicable law.
Section 4. Fiscal Year. The fiscal year of the Savings Bank shall be the
--------- -----------
twelve-month period which ends on June 30th.
Section 5. Amendments. Except as otherwise provided herein, or required
--------- ----------
by law, these Bylaws may be amended or repealed and new Bylaws may be adopted by
the affirmative vote of a majority of the Directors then holding office at any
regular or special meeting of the Board of Directors. No bylaw adopted, amended
or repealed by the shareholders shall be readopted, amended or repealed by the
Board of Directors unless the Savings Bank's articles of incorporation or a
bylaw adopted by the shareholders authorizes the Board of Directors to adopt,
amend or repeal that particular bylaw or the Bylaws generally.
The shareholders may amend or repeal these Bylaws even though these Bylaws
also may be amended or repealed by the Board of Directors.
Adopted this _____ day of _____________, 1997.
- ---------------------------------------------
Secretary
13
<PAGE>
Exhibit (3)(i)
--------------
ARTICLES OF INCORPORATION
OF
ANSON BANCORP, INC.
ARTICLE I
The name of the corporation is Anson Bancorp, Inc. (the "Corporation").
ARTICLE II
Section 2.1. Total Authorized Shares of Capital Stock. The Corporation
----------- ----------------------------------------
shall have authority to issue a total of 25,000,000 shares of capital stock,
none of which shall have any par value, divided into classes as follows:
Class Number of Shares
----- ----------------
Common Stock 20,000,000
Preferred Stock 5,000,000
Section 2.2. Common Stock. The shares of Common Stock shall be of one and
----------- ------------
the same class. Subject to the rights of holders of the Preferred Stock as
determined by the Board of Directors pursuant to Section 2.3 hereof and by the
North Carolina Business Corporation Act ("NCBCA") as now constituted or
hereafter amended, the holders of shares of Common Stock shall have one vote per
share on all matters on which holders of shares of Common Stock are entitled to
vote and shall be entitled to participate pro rata after preferential rights of
holders of Preferred Stock in the distribution of the net assets of the
Corporation upon dissolution.
1
<PAGE>
Section 2.3. Preferred Stock. The shares of Preferred Stock may be issued
----------- ---------------
from time to time by the Corporation, and the Board of Directors may create and
divide such shares into series within that class, and such shares and the shares
of each such series shall have such voting powers, full or limited, or no voting
powers, and such designations, preferences, limitations and relative rights (or
qualifications, conditions or restrictions thereon) as the Board of Directors
may and hereby is authorized to determine.
ARTICLE III
The street address and county of the initial registered office of the
Corporation is 211 South Greene Street, Wadesboro, Anson County, North Carolina.
The mailing address of the initial registered office of the Corporation is 211
South Greene Street, Wadesboro, North Carolina 28170. The name of the initial
registered agent is Eugene M. Ward.
ARTICLE IV
The name and address of the incorporator is as follows:
Eugene M. Ward
211 South Greene Street
Wadesboro, North Carolina 28170
ARTICLE V
To the fullest extent permitted by the NCBCA as it exists or may hereafter
be amended, no person who is serving or has served as a director of the
Corporation shall be personally liable to the Corporation or any of its
shareholders or otherwise for monetary damages for breach of any duty as a
director. No amendment or repeal of this Article, nor the adoption of any
provision to these Articles of Incorporation inconsistent with this Article,
shall eliminate or reduce the protection granted herein with respect to any
matter that occurred
2
<PAGE>
prior to such amendment, repeal, or adoption.
ARTICLE VI
The provisions of Article 9 and Article 9A of the NCBCA entitled "The North
Carolina Shareholder Protection Act" and "The North Carolina Control Share
Acquisition Act," respectively, shall not be applicable to the Corporation.
ARTICLE VII
Section 7.1. Definitions and Terms With Respect to Article VII. For
----------- -------------------------------------------------
purposes of this Article VII, the following definitions shall apply:
(a) The terms "Business Combination" shall mean any transaction in
connection with (i) a combination or merger of the Corporation, (ii) the
acquisition of more than ten percent (10%) of the Corporation's outstanding
Voting Shares, or (iii) a purchase or sale of a substantial portion of the
assets of the Corporation or a Subsidiary thereof (a purchase or sale of 20% or
more of the total assets of the Corporation or a Subsidiary as of the end of the
most recent quarterly period being deemed as "substantial") in each case, as
applicable, which requires the approval of, or notice to and absence of
objection by (i) any federal or state regulatory authority of banks, savings
banks, savings and loan associations or their holding companies, (ii) the
Federal Trade Commission or the Anti-Trust Division of the United States
Department of Justice, or (iii) the shareholders of the Corporation, but
excluding any reorganization, acquisition, merger, purchase or sale of assets,
or combination initiated by the Corporation upon the vote of at least fifty-one
percent (51%) of the Continuing Directors.
3
<PAGE>
(b) The term "Continuing Director" shall mean any member of the Board
of Directors of the Corporation who is unaffiliated with the Related Person and
was a member of the Board of Directors prior to the time that the Related Person
became a Related Person, and any successor of a Continuing Director who is
unaffiliated with the Related Person and is recommended to succeed a Continuing
Director by a majority of the Continuing Directors.
(c) The term "Person" shall mean an individual, a corporation, a
limited liability company, a partnership, an association, a joint stock company,
a trust, or an unincorporated organization or similar company, and also includes
a syndicate or any group of any of the foregoing formed or acting together in
concert for the purpose of acquiring, holding or disposing of the equity
securities or assets of the Corporation or any Subsidiary.
(d) The term "Related Person" shall mean any individual, partnership,
corporation, trust or other person or entity (together with its "affiliates" and
"associates," as defined in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended (the "1934 Act")) which as
of the date of its offer with respect to a Business Combination is a "beneficial
owner" (as defined in Rule 13d-3 under the 1934 Act) in the aggregate of ten
percent (10%) or more of the outstanding Voting Shares of the Corporation. A
Related Person shall be deemed to have acquired a share of the Voting Stock of
the Corporation at the time when such Related Person became the beneficial owner
thereof.
(e) The term "Subsidiary" shall mean any corporation or other entity
of which the Person in question owns not less than fifty percent (50%) of any
class of equity securities, directly or indirectly.
4
<PAGE>
(f) The term "Voting Shares" shall mean any shares of the authorized
stock of the Corporation entitled to vote generally in the election of
directors.
(g) The term "Whole Board of Directors" shall mean the total number of
directors which the Corporation would have if there were no vacancies on the
Board.
Section 7.2. Rights of Shareholders. The affirmative vote of the holders
----------- ----------------------
of seventy-five percent (75%) or more of the outstanding Voting Shares, voting
separately as a class, shall be required for the approval or authorization of
any Business Combination, provided, however, that the seventy-five percent (75%)
voting requirement shall not be applicable and such Business Combination may be
approved by the shareholder vote required by law and any other provision of
these Articles of Incorporation if the Business Combination is approved by the
Board of Directors of the Corporation by the affirmative vote of (a) at least
seventy-five percent (75%) of the Whole Board of Directors, and (b) if such
Business Combination is proposed by a Related Person, at least seventy-five
percent (75%) of the Continuing Directors, in either case at a duly called or
convened regular or special meeting of the Board of Directors.
Section 7.3. Fiduciary Obligations. Nothing contained in this Article
----------- ---------------------
VII shall be construed to relieve any Related Person from any fiduciary
obligation imposed by law or equity.
Section 7.4. Standards of Board of Directors' Evaluation of an Offer.
----------- -------------------------------------------------------
The Board of Directors of the Corporation, when evaluating any offer of another
Person to effect a Business Combination shall, in connection with the exercise
of its judgment in determining what is in the best interests of the Corporation
and its shareholders, give due consideration to
5
<PAGE>
all relevant factors, including, without limitation: (i) the social and economic
effects of acceptance of such offer on its depositors, borrowers, other
customers, employees, and creditors of the Corporation and its Subsidiaries, and
on the communities in which the Corporation and its Subsidiaries operate or are
located; (ii) the ability of the Corporation and its Subsidiaries to fulfill the
objectives of a bank and/or savings bank and/or savings and loan association
holding company, as applicable, and of commercial banking and/or savings bank
and/or savings and loan entities, as applicable, under applicable federal and
state statutes and regulations; (iii) the business and financial condition and
prospects and earnings prospects of the Person or Persons proposing the Business
Combination, including, but not limited to, debt service and other existing
financial obligations, financial obligations to be incurred in connection with
the Business Combination, and other likely financial obligations of such Person
or Persons, and the possible effect of such conditions and prospects upon the
Corporation and its Subsidiaries and the communities in which the Corporation
and its Subsidiaries are located; (iv) the competence, experience, and integrity
of the Person or Persons proposing the Business Combination and its or their
management; and (v) the prospects for successful conclusion of the proposed
Business Combination. The provisions of this Article VII shall be deemed solely
to grant discretionary authority to the Board of Directors and shall not be
deemed to provide any constituency the right to be considered or to compel the
consideration of its interests.
Section 7.5. Amendment and Repeal of Article VII. Notwithstanding any
----------- -----------------------------------
other provision of these Articles of Incorporation or the Bylaws of the
Corporation (and notwithstanding the fact that a lesser percentage may be
specified by law) any amendment,
6
<PAGE>
change or repeal of this Article VII, or any other amendment of these Articles
of Incorporation which will have the effect of modifying or permitting
circumvention of this Article VII, shall require the affirmative vote of the
holders of at least seventy-five percent (75%) of the then outstanding Voting
Shares of the Corporation, voting separately as a class; provided, however, that
this restriction shall not apply to, and such seventy-five percent (75%) vote
shall not be required for, any such amendment, change or repeal recommended to
shareholders of the Corporation by the affirmative vote of at least (a) seventy-
five percent (75%) of the Whole Board of Directors, and (b) if at such time
there shall be a Related Person, at least seventy-five percent (75%) of the
Continuing Board of Directors, and in either such event such amendment, change
or repeal so recommended shall require only the vote, if any, required under the
applicable provisions of the NCBCA.
ARTICLE VIII
Section 8.1. Board of Directors. The number of directors of the
----------- ------------------
Corporation shall not be less than five (5) nor more than fifteen (15), with the
exact number to be fixed from time to time as provided in the Corporation's
Bylaws.
In the first election of directors, and in all elections thereafter, that
the total number of directors as fixed pursuant to the Corporation's Bylaws is
nine (9) or more, the directors shall be divided into three (3) classes, as
nearly equal as possible in number as may be, to serve in the first instance for
terms of one, two and three years, respectively, from the date such class of
directors takes office or until their earlier death, resignation, retirement,
removal or disqualification or until their successors shall be elected and shall
qualify, and thereafter the successors in each class of directors shall be
elected for terms of three (3) years or until their
7
<PAGE>
earlier death, resignation, retirement, removal, or disqualification or until
their successors shall be elected and shall qualify. In the event of any
increase or decrease in the number of directors at a time that the directors are
so classified, the additional or eliminated directorships shall be classified or
chosen so that all classes of directors shall remain or become as nearly equal
as possible in number. At all times that the number of directors, as fixed
pursuant to the Corporation's Bylaws, is less than nine (9), each director shall
be elected to a term ending as of the next succeeding annual meeting of
shareholders or until his or her earlier death, resignation, retirement, removal
or disqualification or until his or her successor shall be elected and shall
qualify.
Section 8.2. Initial Board of Directors. The number of directors
----------- --------------------------
constituting the initial Board of Directors of the Corporation shall be seven
(7) and the names of the persons who are to serve as directors of the
Corporation until the first meeting of shareholders or until their successors
are elected and qualify are:
Preston E. Burns
John J. Crawford
Kenneth W. Huntley
Emmett S. Patterson
John R. Potter
H. Patrick Taylor, Jr.
Eugene M. Ward
This the _____ day of February, 1998.
By:
----------------------------------------
Eugene M. Ward
Incorporator
8
<PAGE>
Exhibit (3)(ii)
BYLAWS
OF
ANSON BANCORP, INC.
ARTICLE I
OFFICES
-------
Section 1. Principal Office. The principal office of the corporation
----------------
shall be located at such place as the Board of Directors may fix from time to
time.
Section 2. Registered Office. The registered office of the corporation
-----------------
required by law to be maintained in the State of North Carolina may be, but need
not be, identical with the principal office.
Section 3. Other Offices. The corporation may have offices at such other
-------------
places, either within or without the State of North Carolina, as the Board of
Directors may designate or as the affairs of the corporation may require from
time to time.
ARTICLE II
MEETINGS OF SHAREHOLDERS
------------------------
Section 1. Place of Meetings. All meetings of shareholders shall be held
-----------------
at the principal office of the corporation, or at such other place, either
within or without the State of North Carolina, as shall in each case be (i)
fixed by the Chief Executive Officer, the President, the Chairman of the Board,
or the Board of Directors and designated in the notice of the meeting or (ii)
agreed upon by a majority of the shareholders entitled to vote at the meeting.
Section 2. Annual Meetings. The annual meeting of shareholders shall be
---------------
held during the first five (5) calendar months following the end of the
corporation's fiscal year, on any day (except Saturday, Sunday, or a legal
holiday) during that period as shall be determined by the Board of Directors,
for the purpose of electing directors of the corporation and for the transaction
of such other business as may be properly brought before the meeting.
Section 3. Substitute Annual Meeting. If the annual meeting shall not be
-------------------------
held within the time designated by these Bylaws, a substitute annual meeting may
be called in accordance with the provisions of Section 4 of this Article II. A
meeting so called shall be designated and treated for all purposes as the annual
meeting.
<PAGE>
Section 4. Special Meetings. Special meetings of the shareholders may be
----------------
called at any time by the Chief Executive Officer, the President, the Chairman
of the Board of Directors or the Board of Directors.
Section 5. Notice of Meetings. Written notice stating the date, time, and
------------------
place of the meeting shall be given not less than ten (10) nor more than sixty
(60) days before the date of any shareholders' meeting, either by personal
delivery, or by mail by or at the direction of the Chief Executive Officer, the
President, the Chairman of the Board of Directors or the Board of Directors, to
each shareholder entitled to vote at such meeting, provided that such notice
must be given to all shareholders with respect to any meeting at which a merger
or share exchange is to be considered and in such other instances as required by
law. If mailed, such notice shall be deemed to be effective when deposited in
the United States mail, correctly addressed to the shareholder at the
shareholder's address as it appears on the current record of shareholders of the
corporation, with postage thereon prepaid.
In the case of a special meeting, the notice of meeting shall include a
description of the purpose or purposes for which the meeting is called; but, in
the case of an annual or substitute annual meeting, the notice of meeting need
not include a description of the purpose or purposes for which the meeting is
called unless such a description is required by the provisions of the North
Carolina Business Corporation Act.
When a meeting is adjourned to a different date, time or place, notice need
not be given of the new date, time or place if the new date, time or place is
announced at the meeting before adjournment and if a new record date is not
fixed for the adjourned meeting. If a new record date is fixed for the
adjourned meeting (which must be done if the new date is more than 120 days
after the date of the original meeting), notice of the adjourned meeting must be
given as provided in this Section 5 to persons who are shareholders as of the
new record date.
Section 6. Waiver of Notice. Any shareholder may waive notice of any
----------------
meeting before or after the meeting. The waiver must be in writing, signed by
the shareholder, and delivered to the corporation for inclusion in the minutes
or filing with the corporate records. A shareholder's attendance, in person or
by proxy, at a meeting (i) waives objection to lack of notice or defective
notice of the meeting, unless the shareholder or his proxy at the beginning of
the meeting objects to holding the meeting or transacting business at the
meeting, and (ii) waives objection to consideration of a particular matter at
the meeting that is not within the purpose or purposes described in the meeting
notice, unless the shareholder or his proxy objects to considering the matter
before it is voted upon.
Section 7. Shareholders' List. Before each meeting of shareholders, the
------------------
Secretary of the corporation shall prepare an alphabetical list of the
shareholders entitled to notice of such meeting. The list shall be arranged by
voting group (and within each voting group by class or series of shares) and
show the address of and number of shares held by each shareholder. The list
shall be kept on file at the principal office of the corporation, or at a place
identified in the
2
<PAGE>
meeting notice in the city where the meeting will be held, for the period
beginning two (2) business days after notice of the meeting is given and
continuing through the meeting, and shall be available for inspection by any
shareholder, his agent or attorney, at any time during regular business hours.
The list shall also be available at the meeting and shall be subject to
inspection by any shareholder, his agent or attorney, at any time during the
meeting or any adjournment thereof.
Section 8. Fixing Record Date. The Board of Directors may fix a future
------------------
date as the record date for one (1) or more voting groups in order to determine
the shareholders entitled to notice of a shareholders' meeting, to demand a
special meeting, to vote, or to take any other action. Such record date may not
be more than seventy (70) days before the meeting or action requiring a
determination of shareholders. A determination of shareholders entitled to
notice of or to vote at a shareholders' meeting is effective for any adjournment
of the meeting unless the Board of Directors fixes a new record date for the
adjourned meeting, which it must do if the meeting is adjourned to a date more
than 120 days after the date fixed for the original meeting.
If no record date is fixed by the Board of Directors for the determination
of shareholders entitled to notice of or to vote at a meeting of shareholders,
the close of business on the day before the first notice of the meeting is
delivered to shareholders shall be the record date for such determination of
shareholders.
Section 9. Voting Groups. All shares of one (1) or more classes or series
-------------
that, under the Articles of Incorporation or the North Carolina Business
Corporation Act, are entitled to vote and be counted together collectively on a
matter at a meeting of shareholders constitute a voting group. All shares
entitled by the Articles of Incorporation or the North Carolina Business
Corporation Act to vote generally on a matter are for that purpose a single
voting group. Classes or series of shares shall not be entitled to vote
separately by voting group unless expressly authorized by the Articles of
Incorporation or specifically required by law.
Section 10. Quorum. Shares entitled to vote as a separate voting group
------
may take action on a matter at the meeting only if a quorum of those shares
exists. A majority of the votes entitled to be cast on the matter by the voting
group constitutes a quorum of that voting group for action on that matter.
Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
In the absence of a quorum at the opening of any meeting of shareholders,
such meeting may be adjourned from time to time by the vote of a majority of the
votes cast on the motion to adjourn; and, subject to the provisions of Section 5
of this Article II, at any adjourned meeting any business may be transacted that
might have been transacted at the original meeting if a quorum exists with
respect to the matter proposed.
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Section 11. Proxies. Shares may be voted either in person or by one (1)
-------
or more proxies authorized by a written appointment of proxy signed by the
shareholder or by his duly authorized attorney in fact. An appointment of proxy
is valid for eleven (11) months from the date of its execution, unless a
different period is expressly provided in the appointment form.
Section 12. Voting of Shares. Subject to the provisions of the Articles
----------------
of Incorporation, each outstanding share shall be entitled to one (1) vote on
each matter voted on at a meeting of shareholders.
Except in the election of directors as governed by the provisions of
Section 4 of Article III, if a quorum exists, action on a matter by a voting
group is approved if the votes cast within the voting group favoring the action
exceed the votes cast opposing the action, unless a greater vote is required by
law or the Articles of Incorporation or these Bylaws.
Absent special circumstances, shares of the corporation are not entitled to
vote if they are owned, directly or indirectly, by a second corporation in which
the corporation owns, directly or indirectly, a majority of the shares entitled
to vote for directors of the second corporation; provided that this provision
does not limit the power of the corporation or such second corporation to vote
shares held by it in a fiduciary capacity.
ARTICLE III
BOARD OF DIRECTORS
------------------
Section 1. General Powers. All corporate powers shall be exercised by or
--------------
under the authority of, and the business and affairs of the corporation shall be
managed under the direction of, the Board of Directors.
Section 2. Number and Qualification. The number of directors of the
------------------------
Corporation shall not be less than five (5) nor more than fifteen (15), with the
exact number to be fixed from time to time by the Board of Directors.
Section 3. Nominations. At any meeting of shareholders at which directors
-----------
are to be elected, nominations for election to the Board of Directors may be
made by the Board of Directors or, subject to the conditions described below, by
any holder of shares entitled to be voted at that meeting in the election of
directors. To be eligible for consideration at the meeting of shareholders, all
nominations, other than those made by the Board of Directors, shall be in
writing and must be delivered to Secretary of the corporation not less than
thirty (30) days nor more than fifty (50) days prior to the meeting at which
such nominations will be made; provided, however, that if less than twenty-one
(21) days' notice of the meeting is given to shareholders, such nominations must
be delivered to the Secretary of the corporation not later than the close of
business on the seventh day following the day on which the notice of meeting was
mailed.
4
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Section 4. Election. Except as provided in Section 7 of this Article III,
--------
the directors shall be elected at the annual meeting of shareholders. Those
persons who receive the highest number of votes at a meeting at which a quorum
is present shall be deemed to have been elected.
Section 5. Terms of Directors. Each initial director shall hold office
------------------
until the earliest of the first shareholders' meeting at which directors are
elected, or until such director's death, resignation, or removal.
At all times that the number of directors is less than nine (9), each
director shall be elected to a term ending as of the next succeeding annual
meeting of shareholders or until his or her earlier death, resignation,
retirement, removal or disqualification or until his or her successor shall be
elected and shall qualify.
In the first election of directors that the total number of directors is
nine (9) or more, the directors shall be divided into three (3) classes, as
nearly equal as possible in number as may be, to serve in the first instance for
terms of one (1), two (2) and three (3) years, respectively, from the date such
class of directors takes office or until their earlier death, resignation,
retirement, removal or disqualification or until their successors shall be
elected and shall qualify, and thereafter the successors in each class of
directors shall be elected for terms of three (3) years or until their earlier
death, resignation, retirement, removal, or disqualification or until their
successors shall be elected and shall qualify. In the event of any increase or
decrease in the number of directors at a time that the directors are so
classified, the additional or eliminated directorships shall be classified or
chosen so that all classes of directors shall remain or become as nearly equal
as possible in number.
Notwithstanding the provisions of this Section 5, a decrease in the number
of directors does not shorten an incumbent director's term. Despite the
expiration of a director's term, such director shall continue to serve until a
successor shall be elected and qualified or until there is a decrease in the
number of directors.
Section 6. Removal. Any director may be removed from office at any time,
-------
with or without cause, by a vote of the shareholders if the number of votes cast
to remove such director exceeds the number of votes cast not to remove him. If
a director is elected by a voting group of shareholders, only the shareholders
of that voting group may participate in the vote to remove him. A director may
not be removed by the shareholders at a meeting unless the notice of that
meeting states that the purpose, or one (1) of the purposes, of the meeting is
removal of the director. If any directors are so removed, new directors may be
elected at the same meeting.
Section 7. Vacancies. Any vacancy occurring in the Board of Directors,
---------
including without limitation a vacancy resulting from an increase in the number
of directors or from the failure by the shareholders to elect the full
authorized number of directors, may be filled by the shareholders or by the
Board of Directors, whichever group shall act first. If the directors
5
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remaining in office do not constitute a quorum, the directors may fill the
vacancy by the affirmative vote of a majority of the remaining directors or by
the sole remaining director. If the vacant office was held by a director elected
by voting group, only the remaining director or directors elected by that voting
group or the holders of shares of that voting group are entitled to fill the
vacancy.
Section 8. Chairman of the Board of Directors. There may be a Chairman of
----------------------------------
the Board of Directors elected by the directors from their number at any meeting
of the Board of Directors. The Chairman shall serve in such position at the
pleasure of the Board of Directors and shall preside at all meetings of the
Board of Directors and shareholders, serve as a member of the Executive
Committee, and perform such other duties as may be directed by the Board of
Directors.
In the absence of the Chairman, the President shall preside at meetings of
directors or shareholders.
Section 9. Compensation. The Board of Directors may provide for the
------------
compensation of directors for their services as such and for the payment or
reimbursement of any or all expenses incurred by them in connection with such
services.
ARTICLE IV
MEETINGS AND COMMITTEES OF DIRECTORS
------------------------------------
Section 1. Regular Meetings. A regular meeting of the Board of Directors
----------------
shall be held immediately after, and at the same place as, the annual meeting of
shareholders. In addition, the Board of Directors may provide, by resolution,
the time and place, either within or without the State of North Carolina, for
the holding of additional regular meetings.
Section 2. Special Meetings. Special meetings of the Board of Directors
----------------
may be called by or at the request of the Chairman of the Board or the President
if such officer is also a director, or by any three (3) or more directors. Such
a meeting may be held either within or without the State of North Carolina, as
fixed by the person or persons calling the meeting.
Section 3. Notice of Meetings. Regular meetings of the Board of Directors
------------------
may be held without notice. The person or persons calling a special meeting of
the Board of Directors shall, at least two (2) days before the meeting, give or
cause to be given notice thereof by any usual means of communication. Such
notice need not specify the purpose for which the meeting is called. Any duly
convened regular or special meeting may be adjourned by the directors to a later
time without further notice.
Section 4. Waiver of Notice. Any director may waive notice of any meeting
----------------
before or after the meeting. The waiver must be in writing, signed by the
director entitled to the notice,
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and be delivered to the corporation for inclusion in the minutes or for filing
with the corporate records. A director's attendance at or participation in a
meeting waives any required notice of such meeting unless the director at the
beginning of the meeting, or promptly upon arrival, objects to holding the
meeting or to transacting business at the meeting and does not thereafter vote
for or assent to action taken at the meeting.
Section 5. Quorum. Unless the Articles of Incorporation or these Bylaws
------
provide otherwise, a majority of the number of directors fixed by or pursuant to
these Bylaws shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, or if no number is so fixed, a majority of
the number of directors in office immediately before the meeting begins shall
constitute a quorum.
Section 6. Manner of Acting. Except as otherwise provided in the Articles
----------------
of Incorporation or these Bylaws, including Section 9 of this Article IV, the
affirmative vote of a majority of the directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors.
Section 7. Presumption of Assent. A director who is present at a meeting
---------------------
of the Board of Directors or a committee of the Board of Directors when
corporate action is taken is deemed to have assented to the action taken unless
(i) he objects at the beginning of the meeting, or promptly upon his arrival, to
holding it or to transacting business at the meeting, or (ii) his dissent or
abstention from the action taken is entered in the minutes of the meeting, or
(iii) he files written notice of his dissent or abstention with the presiding
officer of the meeting before its adjournment or with the corporation
immediately after the adjournment of the meeting. Such right of dissent or
abstention is not available to a director who votes in favor of the action
taken.
Section 8. Action Without Meeting. Action required or permitted to be
----------------------
taken at a meeting of the Board of Directors may be taken without a meeting if
the action is taken by all members of the Board of Directors. The action must
be evidenced by one (1) or more written consents signed by each director before
or after such action, describing the action taken, and included in the minutes
or filed with the corporate records.
Section 9. Committees of the Board of Directors. The Board of Directors
------------------------------------
may create such committees of the Board of Directors as it shall consider
appropriate, including without limitation those committees specifically provided
for in these Bylaws. The creation of a committee of the Board of Directors and
appointment of members to it must by approved by the greater of (i) a majority
of the number of directors in office when the action is taken or (ii) the number
of directors required to take action pursuant to Section 6 of this Article IV.
Each committee of the Board of Directors must have two (2) or more members and,
to the extent authorized by law, shall have such duties and authority as may be
described in these Bylaws or otherwise specified by the Board of Directors.
Each committee member shall serve at the pleasure of the Board of Directors.
The provisions in these Bylaws governing meetings, actions without meeting and
other requirements of the Board of Directors shall also apply to any
7
<PAGE>
committees of the Board of Directors established pursuant to these Bylaws.
Section 10. Executive Committee. There may be a standing committee of the
-------------------
Board of Directors to be known as the Executive Committee and consisting of not
fewer than three (3) directors, one (1) of whom shall be the Chairman of the
Board of Directors and one (1) of whom shall be the President of the
corporation, if such officer is also a director. Except as limited by Section 9
of this Article IV or otherwise limited by law, the Executive Committee is
empowered to act for and on behalf of the Board of Directors in any and all
matters in the interim between meetings of the Board of Directors. Within the
powers conferred upon it, action by the Executive Committee shall be as binding
upon the corporation as if performed by the full Board of Directors. Such
actions shall be reported to the Board of Directors for review at its next
meeting following such action. The committee shall meet as often as it
considers necessary or advisable.
Section 11. Audit Committee. There may be a standing committee of the
---------------
Board of Directors to be known as the Audit Committee and consisting of not
fewer than three (3) directors. The Audit Committee shall supervise examination
of the assets and the liabilities and the internal audit program of the
corporation and its subsidiaries, cause outside audits to be performed on the
financial statements of the corporation, and shall make periodic reports to the
Board of Directors.
ARTICLE V
OFFICERS
--------
Section 1. Officers of the Corporation. The officers of the corporation
---------------------------
shall consist of a President, a Secretary, a Treasurer, and such Vice Presidents
or other officers (including assistant officers) as may from time to time be
appointed by or under the authority of the Board of Directors. Any two (2) or
more offices may be held by the same person, but no officer may act in more than
one (1) capacity where action of two (2) or more officers is required.
Section 2. Appointment and Term. The officers of the corporation shall be
--------------------
appointed by the Board of Directors or by a duly appointed officer authorized by
the Board of Directors to appoint one (1) or more officers. Each officer shall
hold office until his death, resignation, retirement, removal, disqualification,
or his successor shall have been appointed.
Section 3. Compensation of Officers. The compensation of all officers of
------------------------
the corporation shall be fixed by or under the authority of the Board of
Directors, and no officer shall serve the corporation in any other capacity and
receive compensation therefor unless such additional compensation shall be duly
authorized. The appointment of an officer does not itself create contract
rights.
Section 4. Removal. Any officer may be removed by the Board of Directors
-------
at any time
8
<PAGE>
with or without cause; but such removal shall not itself affect the officer's
contract rights, if any, with the corporation except to the extent, if any,
specified in any such contract.
Section 5. Resignation. An officer may resign at any time by
-----------
communicating his resignation to the corporation, orally or in writing. A
resignation is effective when communicated unless it specifies in writing a
later effective date. If a resignation is made effective at a later date that
is accepted by the corporation, the Board of Directors may fill the pending
vacancy before the effective date if the Board of Directors provides that the
successor does not take office until the effective date. An officer's
resignation does not affect the corporation's contract rights, if any, with the
officer except to the extent, if any, specified in any such contract.
Section 6. Bonds. The Board of Directors may by resolution require any
-----
officer, agent, or employee of the corporation to give bond to the corporation,
with sufficient sureties, conditioned on the faithful performance of the duties
of his respective office or position, and to comply with such other conditions
as may from time to time be required by the Board of Directors.
Section 7. President. The President shall be the principal executive
---------
officer of the corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the corporation. He shall sign, with the Secretary, an Assistant
Secretary, or any other proper officer of the corporation thereunto authorized
by the Board of Directors, certificates for shares of the corporation, any
deeds, mortgages, bonds, contracts, or other instruments which the Board of
Directors has authorized to be executed, except in cases where the signing and
execution thereof shall be expressly delegated by the Board of Directors or by
these Bylaws to some other officer or agent of the corporation, or shall be
required by law to be otherwise signed or executed, and in general he shall
perform all duties incident to the office of the President and such other duties
as may be prescribed by the Board of Directors from time to time. The President
shall be entitled to attend all regular and special meetings and meetings of
committees of the Board of Directors. If the President of the corporation is
also a director of the corporation, he shall serve as a member of the Executive
Committee.
Section 8. Vice Presidents. In the absence of the President or in the
---------------
event of his death, inability or refusal to act, the Vice Presidents, unless
otherwise determined by the Board of Directors, shall perform the duties of the
President, and when so acting shall have all the powers of and be subject to all
the restrictions upon the President. Any Vice President (or Assistant Vice
President) may sign, with the Secretary, an Assistant Secretary, or any other
proper officer of the corporation thereunto authorized by the Board of
Directors, certificates for shares of the corporation and any other instruments
which may be signed by the President, and shall perform such other duties as
from time to time may be prescribed by the President or Board of Directors.
Section 9. Secretary. The Secretary shall: (i) keep the minutes of the
---------
meetings of
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shareholders, of the Board of Directors, and of all committees of the Board
of Directors, in one or more books provided for that purpose; (ii) see that all
notices are duly given in accordance with the provisions of these Bylaws or as
required by law; (iii) maintain and authenticate the records of the corporation
and be custodian of the seal of the corporation and see that the seal of the
corporation is affixed to all documents the execution of which on behalf of the
corporation under its seal is duly authorized; (iv) sign with the President or a
Vice President, certificates for shares of the corporation, the issuance of
which shall have been authorized by resolution of the Board of Directors; (v)
maintain or cause to be maintained, and have general charge of, the stock
transfer books of the corporation; (vi) prepare or cause to be prepared
shareholder lists prior to each meeting of shareholders as required by law;
(vii) attest the signature or certify the incumbency or signature of any officer
of the corporation; and (viii) in general perform all duties incident to the
office of secretary and such other duties as from time to time may be prescribed
by the President or by the Board of Directors.
Section 10. Treasurer. The Treasurer shall be, and may be designated as
---------
such as, the corporation's Chief Financial Officer, and shall: (i) have charge
and custody of and be responsible for all funds and securities of the
corporation; receive and give receipts for moneys due and payable to the
corporation from any source whatsoever, and deposit all such moneys in the name
of the corporation in such depositories as shall be selected in accordance with
the provisions of Section 4 of Article VI of these Bylaws; (ii) maintain, or
cause to be maintained, appropriate accounting records as required by law; (iii)
prepare, or cause to be prepared, annual financial statements of the corporation
that include a balance sheet as of the end of the fiscal year and income and
cash flow statement for that year, which statements, or a written notice of
their availability, shall be mailed to each shareholder within 120 days after
the end of such fiscal year; and (iv) in general perform all of the duties
incident to the office of treasurer and such other duties as from time to time
may be prescribed by the President or by the Board of Directors.
Section 11. Assistant Officers. In the absence of a duly appointed
------------------
officer of the corporation, or in the event of his death, inability or refusal
to act, any person appointed by the Board of Directors and designated by title
as an assistant to that officer, unless otherwise determined by the Board of
Directors, may perform the duties of, and when so acting shall have all the
powers of and be subject to all the restrictions upon, that officer. Such
assistant officers shall perform such other duties as from time to time may be
prescribed by the President or by the Board of Directors.
ARTICLE VI
CONTRACTS, LOANS, CHECKS, AND DEPOSITS
--------------------------------------
Section 1. Contracts. The Board of Directors may authorize any officer or
---------
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation, and such
authorization may be general or confined to specific instances. Also, the Board
of Directors may limit, condition, restrict or deny such authority to
10
<PAGE>
any officer or officers, or any agent or agents.
Section 2. Loans. No loans shall be contracted on behalf of the
-----
corporation and no evidence of indebtedness shall be issued in its name unless
authorized by the Board of Directors. Such authority may be general or confined
to specific instances.
Section 3. Checks and Drafts. All checks, drafts, or other orders for the
-----------------
payment of money, issued in the name of the corporation, shall be signed by such
officer or officers, agent or agents of the corporation and in such manner as
shall from time to time be determined by the Board of Directors.
Section 4. Deposits. All funds of the corporation not otherwise employed
--------
shall be deposited from time to time to the credit of the corporation in such
depositories as may be selected by or under the authority of the Board of
Directors.
ARTICLE VII
SHARES AND THEIR TRANSFER
-------------------------
Section 1. Certificate For Shares. The Board of Directors may authorize
----------------------
the issuance of some or all of the shares of the corporation's classes or series
without issuing certificates to represent such shares. If shares are
represented by certificates, the certificates shall be in such form as required
by law and as determined by the Board of Directors. Certificates shall be
signed, either manually or in facsimile, by the President or a Vice President,
and by the Secretary or Treasurer or an Assistant Secretary or an Assistant
Treasurer. All certificates for shares shall be consecutively numbered or
otherwise identified and entered into the stock transfer books of the
corporation. When shares are represented by certificates, the corporation shall
issue and deliver, to each shareholder to whom such shares have been issued or
transferred, certificates representing the shares owned by him. When shares are
not represented by certificates, then within a reasonable time after the
issuance or transfer of such shares, the corporation shall send the shareholder
to whom such shares have been issued or transferred a written statement of the
information required by law to be on certificates.
Section 2. Stock Transfer Books. The corporation shall keep or cause to
--------------------
be kept a book or set of books, to be known as the stock transfer books of the
corporation, containing the name of each shareholder of record, together with
such shareholder's address and the number and class or series of shares held by
him. Transfers of shares of the corporation shall be made only on the stock
transfer books of the corporation (i) by the holder of record thereof or by his
legal representative, who shall provide proper evidence of authority to
transfer; (ii) by his attorney authorized to effect such transfer by power of
attorney duly executed and filed with the Secretary; and (iii) on surrender for
cancellation of the certificate for such shares (if the shares are represented
by certificates).
Section 3. Lost Certificates. The Board of Directors may direct a new
-----------------
certificate to be
11
<PAGE>
issued in place of any certificate theretofore issued by the corporation claimed
to have been lost or destroyed, upon receipt of an affidavit of such fact from
the person claiming the certificate to have been lost or destroyed. When
authorizing such issue of a new certificate, the Board of Directors shall
require that the owner of such lost or destroyed certificate, or his legal
representative, give the corporation a bond in such sum and with such surety or
other security as the Board of Directors may direct as indemnity against any
claims that may be made against the corporation with respect to the certificate
claimed to have been lost or destroyed, except where the Board of Directors by
resolution finds that in the judgment of the Board of Directors the
circumstances justify omission of a bond.
Section 4. Distribution or Share Dividend Record Date. The Board of
------------------------------------------
Directors may fix a date as the record date for determining shareholders
entitled to a distribution or share dividend. If no record date is fixed by the
Board of Directors for such determination, it is the date the Board of Directors
authorizes the distribution or share dividend.
Section 5. Holder of Record. Except as otherwise required by law, the
----------------
corporation may treat the person in whose name the shares stand of record on its
books as the absolute owner of the shares and the person exclusively entitled to
receive notification and distributions, to vote, and to otherwise exercise the
rights, powers, and privileges of ownership of such shares.
Section 6. Shares Held by Nominees. The corporation shall recognize the
-----------------------
beneficial owner of shares registered in the name of the nominee as the owner
and shareholder of such shares for certain purposes if the nominee in whose name
such shares are registered files with the Secretary a written certificate in a
form prescribed by the corporation, signed by the nominee, indicating the
following: (i) the name, address, and taxpayer identification number of the
nominee; (ii) the name, address, and taxpayer identification number of the
beneficial owner; (iii) the number and class or series of shares registered in
the name of the nominee as to which the beneficial owner shall be recognized as
the shareholder; and (iv) the purposes for which the beneficial owner shall be
recognized as the shareholder.
The purposes for which the corporation shall recognize the beneficial owner
as the shareholder may include the following: (i) receiving notice of, voting
at, and otherwise participating in shareholders' meetings; (ii) executing
consents with respect to the shares; (iii) exercising dissenters' rights under
the North Carolina Business Corporation Act; (iv) receiving distributions and
share dividends with respect to the shares; (v) exercising inspection rights;
(vi) receiving reports, financial statements, proxy statements, and other
communications from the corporation; (vii) making any demand upon the
corporation required or permitted by law; and (viii) exercising any other rights
or receiving any other benefits of a shareholder with respect to the shares.
The certificate shall be effective ten (10) business days after its receipt
by the corporation and until it is changed by the nominee, unless the
certificate specifies a later effective time or an earlier termination date.
12
<PAGE>
If the certificate affects less than all of the shares registered in the
name of the nominee, the corporation may require the shares affected by the
certificate to be registered separately on the books of the corporation and be
represented by a share certificate that bears a conspicuous legend stating that
there is a nominee certificate in effect with respect to the shares represented
by that share certificate.
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ARTICLE VIII
GENERAL PROVISIONS
------------------
Section 1. Distributions. The Board of Directors may from time to time
-------------
authorize, and the corporation may grant, distributions and share dividends to
its shareholders pursuant to law and subject to the provisions of its Articles
of Incorporation.
Section 2. Seal. The corporate seal of the corporation shall consist of
----
two concentric circles between which is the name of the corporation and in the
center of which is inscribed SEAL; and such seal, as impressed or affixed on the
margin hereof, is hereby adopted as the corporate seal of the corporation.
Section 3. Fiscal Year. The fiscal year of the corporation shall be fixed
-----------
by the Board of Directors.
Section 4. Amendments. Except as otherwise provided in the Articles of
----------
Incorporation or by law, these Bylaws may be amended or repealed and new Bylaws
may be adopted by the Board of Directors.
No Bylaw adopted, amended, or repealed by the shareholders shall be
readopted, amended, or repealed by the Board of Directors, unless the Articles
of Incorporation or a Bylaw adopted by the shareholders authorizes the Board of
Directors to adopt, amend, or repeal that particular Bylaw or the Bylaws
generally.
Section 5. Definitions. Unless the context otherwise requires, terms used
-----------
in these Bylaws shall have the meanings assigned to them in the North Carolina
Business Corporation Act to the extent defined therein.
ARTICLE IX
INDEMNIFICATION
---------------
In addition to any indemnification required or permitted by law, and except
as otherwise provided in these Bylaws, any person who at any time serves or has
served as a director, officer, employee or agent of the Corporation and any such
person who serves or has served at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, or as a trustee or administrator under an employee
benefit plan, shall have a right to be indemnified by the Corporation to the
full extent allowed by applicable law against liability and litigation expense
arising out of such status or activities in such capacity. "Liability and
litigation expense" shall include costs and expenses of litigation (including
reasonable attorneys' fees), judgments, fines and amounts paid in settlement
which are actually and reasonably incurred in connection with or as a
consequence of any
14
<PAGE>
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, including appeals.
Promptly after the final disposition or termination of any matter which
involves liability or litigation expense as described above or at such earlier
time as it sees fit, the Corporation shall determine whether any person
described in this Article IX is entitled to indemnification thereunder. Such
determination shall be limited to the following issues: (i) whether the
persons to be indemnified are persons described in this Article IX, (ii) whether
the liability or litigation expense incurred arose out of the status or
activities of such persons as described in this Article IX, (iii) whether
liability was actually incurred and/or litigation expense was actually and
reasonably incurred, and (iv) whether the indemnification requested is permitted
by applicable law. Such determination shall be made by a majority vote of
directors who were not parties to the action, suit or proceeding (or, in
connection with "threatened" actions, suits or proceedings, who were not
"threatened parties"). If at least two such disinterested directors are not
obtainable, or, even if obtainable, if at least half of the number of
disinterested directors so direct, such determination shall be made by
independent legal counsel in written opinion.
Litigation expense incurred by a person described in this Article IX in
connection with a matter described in this Article IX may be paid by the
Corporation in advance of the final disposition or termination of such matter,
if the Corporation receives an undertaking, dated, in writing and signed by the
person to be indemnified, to repay all such sums unless such person is
ultimately determined to be entitled to be indemnified by the Corporation as
provided in this Article IX. Requests for payments in advance of final
disposition or termination shall be submitted in writing unless this requirement
is waived by the Corporation.
Notwithstanding the foregoing, no advance payment shall be made as to any
payment or portion of a payment for which the determination is made that the
person requesting payment will not be entitled to indemnification. Such
determination may be made only by a majority vote of disinterested directors or
by independent legal counsel as next provided. If there are not at least two
disinterested directors, the notice of all requests for advance payment shall be
delivered for review to independent legal counsel for the Corporation. Such
counsel shall have the authority to disapprove any advance payment or portion of
a payment for which it appears that the person requesting payment will not be
entitled to indemnification.
The Corporation shall not be obligated to indemnify persons described in
this Article IX for any amounts paid in settlement unless the Corporation
consents in writing to the settlement. The Corporation shall not unreasonably
withhold its consent to proposed settlements. The Corporation's consent to a
proposed settlement shall not constitute an agreement by the Corporation that
any person is entitled to indemnification hereunder. The Corporation may waive
the requirement of this section for its written consent as fairness and equity
may require.
A person described in this Article IX may apply to the Corporation in
writing for indemnification or advance expenses. Such applications shall be
addressed to the Secretary or, in
15
<PAGE>
the absence of the Secretary, to any officer of the Corporation. The Corporation
shall respond in writing to such applications as follows: to a request for
indemnity under this Article IX, within ninety days after receipt of the
application; to a request for advance expenses under this Article IX, within
fifteen days after receipt of the application.
If any action is necessary or appropriate to authorize the Corporation to
pay the indemnification required by these Bylaws, the Board of Directors shall
take such action, including (i) making a good faith evaluation of the
indemnification request, (ii) giving notice to, and obtaining approval by, the
shareholders of the Corporation, and (iii) taking any other action.
The right to indemnification or advance expenses provided herein shall be
enforceable in any court of competent jurisdiction. A legal action may be
commenced if a claim for indemnity or advance expenses is denied in whole or in
part, or upon the expiration of the time periods provided above. In any such
action, if the claimant establishes the right to indemnification, he or she
shall also have the right to be indemnified against the litigation expense
(including, without limitation, reasonable attorneys' fees) of such action.
As provided by N.C. Gen. Stat. (S)55-8-57, the Corporation shall have the
power to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or who 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, or as a trustee or administrator under an employee benefit plan,
against any liability asserted against him and incurred by him in any such
capacity or arising out of his status as such, whether or not the Corporation
has the power to indemnify him against such liability.
The right to indemnification provided herein shall not be deemed exclusive
of any other rights to which any persons seeking indemnity may be entitled apart
from the provisions of this bylaw, except there shall be no right to
indemnification as to any liability or litigation expense for which such person
is entitled to receive payment under any insurance policy other than a
directors' and officers' liability insurance policy maintained by the
Corporation. Such right inures to the benefit of the heirs and legal
representatives of any persons entitled to such right. Any person who at any
time after the adoption of this bylaw serves or has served in any status or
capacity described in this Article IX, shall be deemed to be doing or to have
done so in reliance upon, and as consideration for, the right of indemnification
provided herein. Any repeal or modification hereof shall not affect any rights
or obligations then existing. The right provided herein shall not apply as to
persons serving institutions which are hereafter merged into or combined with
the Corporation, except after the effective date of such merger or combination
and only as to status and activities after such date.
If this Article or any portion hereof shall be invalidated on any ground by
any court or agency of competent jurisdiction, then the Corporation shall
nevertheless indemnify each person described in this Article IX to the full
extent permitted by the portion of this Article that is not invalidated and also
to the full extent (not exceeding the benefits described herein) permitted or
required by other applicable law.
16
<PAGE>
March 12, 1998
Board of Directors
Anson Bancorp, Inc.
211 South Greene Street
Wadesboro, North Carolina 28170
Re: Registration Statement on Form SB-2 under the Securities Act of 1933,
as amended
Gentlemen:
As special counsel to Anson Bancorp, Inc. (the "Holding Company"), the
proposed parent holding company of Anson Savings Bank, SSB ("Anson Savings"),
Wadesboro, North Carolina, we are rendering this opinion to you in connection
with the acquisition by the Holding Company of Anson Savings, upon the
conversion of Anson Savings from a North Carolina-chartered mutual savings bank
to a North Carolina-chartered capital stock savings bank (the "Conversion"). As
part of the Conversion, the Holding Company will file with the Securities and
Exchange Commission a Registration Statement on Form SB-2 (the "Registration
Statement") under the Securities Act of 1933, as amended, for the offering and
sale by the Holding Company of its no par common stock, having an estimated
aggregate dollar value represented to us as being between $5,610,000 and
$7,590,000 (the "Shares").
In our capacity as special counsel, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of the Articles of
Incorporation, Bylaws and corporate resolutions of the Holding Company, the Plan
of Holding Company Conversion, the Registration Statement and all exhibits
thereto and the relevant provisions of Chapters 54C and 55 of the North Carolina
General Statutes and the Securities Act of 1933, as amended, and the regulations
promulgated under all the aforesaid statutes, as we have considered necessary as
a basis for the opinions given herein. In addition, we have made reasonable
inquiries of the officers of Anson Savings and the Holding Company as to all
relevant items. In all examinations of documents, we have assumed the
genuineness of all original documents and all signatures and the conformity to
original documents of all copies submitted to us as certified, conformed or
photostatic copies. On the basis of such examination, we are of the opinion
that, when the Holding Company has received full payment for the Shares as
described in the Registration Statement, all requisite corporate action
<PAGE>
Board of Directors
Anson Bancorp, Inc.
March 12, 1998
Page 2
will have been taken with respect to the issuance and sale of the Shares and the
Shares will be validly authorized and issued, fully-paid and nonassessable
shares of common stock of the Holding Company.
This opinion is furnished by us solely for your benefit and for the benefit
of the purchasers of the Shares of the Holding Company in connection with the
Conversion, and may not be quoted or relied upon by, nor copies be delivered to,
any person or entity, or used for any other purpose, without our prior express
written consent.
We hereby consent to the use of this opinion in connection with the
registration of the offering and sale of the Shares with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, and to the
reference to us in the Registration Statement and the Prospectus included
therein.
Very truly yours,
BROOKS, PIERCE, MCLENDON,
HUMPHREY & LEONARD, L.L.P.
By: /s/ Edward C. Winslow III
---------------------------------
Edward C. Winslow III
ECWIII/cnh
<PAGE>
March 12, 1998
(910) 271-3113
Board of Directors
Anson Savings Bank, SSB
211 South Greene Street
Wadesboro, North Carolina 28170
Re: Conversion of Anson Savings Bank, SSB from a North Carolina-chartered
mutual savings bank to a North Carolina-chartered stock savings bank
and its simultaneous acquisition by Anson Bancorp, Inc., a North
Carolina savings bank holding company
Members of the Board:
You have requested our opinions regarding certain income tax consequences
in connection with the proposed conversion of Anson Savings Bank, SSB ("Anson
Mutual") from a North Carolina-chartered mutual savings bank with federally
insured deposit accounts to Anson Savings Bank, Inc., a North Carolina-chartered
stock savings bank with federally insured deposit accounts ("Anson"), and the
simultaneous acquisition of Anson as a wholly-owned subsidiary by Anson Bancorp,
Inc., a savings bank holding company organized under North Carolina law
("Holding Company"). This reorganization and conversion of Anson Mutual and
acquisition of Anson by the Holding Company shall be referred to as the
"Conversion". Terms not otherwise defined in this letter shall have the
meanings assigned to them in the Plan of Conversion adopted by the Board of
Directors of Anson Mutual on December 11, 1997 (the "Plan").
In connection with our opinions, we have reviewed copies of applications
filed by Anson Mutual and the Holding Company with the Administrator, North
Carolina Savings Institutions Division, to effect the Conversion (the
"Applications"), Chapters 54C and 105 of the North Carolina General Statutes,
and applicable federal laws, rules and regulations, including the Internal
Revenue Code of 1986, as amended ("Code"). We have examined the Plan, Anson
Mutual's existing Certificate of Incorporation and Bylaws, the Amended and
Restated Certificate of Incorporation for Anson, the Bylaws for Anson, the
corporate minutes approving the Conversion and related records of Anson Mutual.
We have also examined the Holding Company's Articles of Incorporation, Bylaws,
corporate minutes approving the Conversion and related records. In addition, we
have examined certificates of officials of Anson Mutual, Anson and the Holding
Company, the Registration Statement of the Holding
<PAGE>
Board of Directors
Anson Bancorp, Inc.
March 12, 1998
Page 2
Company on Form SB-2, which the Holding Company intends to file with the
Securities and Exchange Commission on or about March 13, 1998 (the "Registration
Statement") containing a proposed Prospectus (hereinafter referred to as the
"Prospectus") and such other documents as we have deemed necessary or
appropriate for purposes of giving the opinions set forth in this letter. We
have assumed the authenticity of all documents presented to us as originals, the
conformity to the originals of all documents presented to us as copies, and the
genuineness of all signatures of individuals, and we know of no reason such
assumptions are unwarranted for purposes of the opinions expressed herein. We
have assumed that all statements made in the above-described documents are
accurate and complete, and will be accurate and complete at all times from now
through the consummation of the Conversion. We have not independently verified
any factual matter relating to the Conversion in connection with the preparation
of our opinions herein and, accordingly, such opinions do not take into account
any matters not set forth herein which might have been disclosed by independent
verification. We have further assumed that the Conversion will be consummated
pursuant to the terms of the Plan.
In issuing the opinions set forth below, we have also assumed the accuracy
of the following representations of Anson Mutual:
1. The fair market value of the deposit accounts and the interest in the
Liquidation Account received by each Eligible Account Holder and
Supplemental Eligible Account Holder in Anson pursuant to the Conversion
will, in each instance, be equal to the fair market value of the deposit
accounts and the proprietary interest of each such Eligible Account
Holder and Supplemental Eligible Account Holder in Anson Mutual
surrendered in the Conversion. The aggregate fair market value of the
deposit accounts and interests in the Liquidation Account held by
Eligible Account Holders as of the close of business on the Eligibility
Record Date will equal or exceed 99% of the aggregate fair market value
of all deposit accounts in Anson Mutual (including accounts of less than
$50) as of the close of business on that date. The aggregate fair market
value of the deposit accounts and interests in the Liquidation Account
held by Supplemental Eligible Account Holders, officers and directors of
Anson Mutual and their associates as of the close of business on the
Supplemental Eligibility Record Date will equal or exceed 99% of the
aggregate fair market value of all deposit accounts in Anson Mutual
(including accounts of less than $50) as of the close of business on
that date.
2. The Subscription Rights to purchase Conversion Stock received in the
Conversion by each recipient have no fair market value. This assumption
is based upon your representation and the opinion of Ferguson & Company
that such Subscription Rights have no fair market value because they
will be acquired by recipients without cost, are nontransferable and
afford the recipients the right only to purchase Conversion Stock at a
price equal to its estimated fair market value as of the date such
rights are issued, which will be the same price paid by all purchasers
in the Conversion.
<PAGE>
Board of Directors
Anson Bancorp, Inc.
March 12, 1998
Page 3
3. Immediately following the Conversion, the Eligible Account Holders and
Supplemental Eligible Account Holders will own all of the outstanding
interests in the Liquidation Account and will own such interests solely
by reason of their ownership of deposits and proprietary interests in
Anson Mutual on the Eligibility Record Date and Supplemental Eligibility
Record Date, respectively. Pursuant to the Plan, no additional interests
in the Liquidation Account shall be issued following the Conversion.
4. Immediately following the consummation of the Conversion, Anson will
possess the same assets and liabilities as Anson Mutual held immediately
before the Conversion, plus proceeds from the sale of Conversion Stock
less proceeds retained by the Holding Company, less assets used to pay
expenses incurred in the Conversion. Assets of Anson Mutual used to pay
expenses of the Conversion and all distributions (except for regular,
normal interest payments made by Anson Mutual immediately before the
Conversion) in the aggregate will constitute less than 1% of the net
assets of Anson Mutual.
5. Except for Anson Mutual's agreement to sell all of Anson's issued and
outstanding common stock to the Holding Company in the Conversion, at
the time of the Conversion, Anson Mutual will not have outstanding any
warrants, options, convertible securities, or any other type of right
pursuant to which any person could acquire stock in Anson Mutual.
6. Anson has no plan or intention to reacquire any of its common stock
issued to the Holding Company in the Conversion. Anson has no plan or
intention to issue additional shares of its common stock following the
Conversion. The common stock of Anson issued to the Holding Company in
the Conversion will not be callable or subject to a put option.
7. Anson has no plan or intention to sell or otherwise dispose of any of
the assets of Anson Mutual acquired in the Conversion, except for
dispositions made in the ordinary course of business.
8. The liabilities of Anson Mutual assumed by Anson and the liabilities,
if any, to which the transferred assets are subject were incurred by
Anson Mutual in the ordinary course of its business and are associated
with the assets transferred.
9. Following the Conversion, Anson will continue the historic business of
Anson Mutual, will use a significant portion of Anson Mutual's historic
business assets in Anson's business, and will continue to engage in the
same business in substantially the same manner as engaged in by Anson
Mutual before the Conversion.
<PAGE>
Board of Directors
Anson Bancorp, Inc.
March 12, 1998
Page 4
10. Anson Mutual and Anson (treated as one entity for purposes of this
representation) and the Holding Company will each pay their own
expenses attributable to the Conversion.
11. Anson Mutual is not under the jurisdiction of a court as a debtor under
(i) Title 11 of the United States Code, or (ii) a receivership,
foreclosure, or similar proceeding in a federal or state court.
12. None of the compensation received by an employee of Anson Mutual or
Anson who is also an Eligible Account Holder, Supplemental Eligible
Account Holder or Other Member will be separate consideration for, or
allocable to, his or her status as an Eligible Account Holder,
Supplemental Eligible Account Holder or Other Member. None of the
interests in the Liquidation Account of Anson received by an employee
of Anson Mutual or Anson who is an Eligible Account Holder or
Supplemental Eligible Account Holder will be separate consideration
for, or allocable to, any employment agreement or arrangement. All
compensation paid to Eligible Account Holders and Supplemental Eligible
Account Holders who are also employees of Anson Mutual or Anson will be
for services actually rendered and commensurate with amounts paid to
third parties bargaining at arm's-length for similar services.
Officers, directors and other employees may in the future be issued
restricted common stock of the Holding Company for future services
pursuant to the proposed Management Recognition Plan of the Holding
Company described in the Prospectus ("MRP").
13. No Eligible Account Holder or Supplemental Eligible Account Holder will
be excluded from participating in the Liquidation Account.
14. The Holding Company has no plan or intention to redeem or otherwise
acquire any of the Conversion Stock to be issued pursuant to the
Conversion, except as disclosed in the Prospectus regarding possible
purchases to fund the MRP and stock option plans. The Holding Company
has no plan or intention to sell or otherwise dispose of the common
stock of Anson received by it in the Conversion. The Conversion Stock
issued in the Conversion will not be callable or subject to a put
option.
15. At the time of Conversion, the fair market value of the assets of Anson
Mutual on a going-concern basis will equal or exceed the amount of its
liabilities plus the amount of liabilities to which its assets are
subject. Immediately before the Conversion, Anson Mutual will have a
positive net worth.
16. No cash or property will be given to Eligible Account Holders,
Supplemental Eligible Account Holders or any other grantee of
Subscription Rights in lieu of (i) Subscription Rights for Conversion
Stock, or (ii) an interest in the Liquidation Account of Anson.
<PAGE>
Board of Directors
Anson Bancorp, Inc.
March 12, 1998
Page 5
17. There is no plan or intention for Anson to be liquidated or merged with
another corporation following the Conversion.
18. The Conversion described herein is motivated by valid business purposes
and not by tax avoidance purposes.
19. After the Conversion, Anson will continue the corporate existence and
business of Anson Mutual with only the following changes:
(i) An amended and restated Certificate of Incorporation to allow for
the issuance of capital stock of Anson, and
(ii) New corporate Bylaws.
20. There exists no intercorporate indebtedness between Anson Mutual and
Anson (treated as one entity for purposes of this representation) and
the Holding Company, that was issued, acquired, or will be settled at a
discount.
21. In the Conversion, the Holding Company will acquire 100% of the issued
and outstanding common stock of Anson.
22. Neither Anson Mutual and Anson (treated as one entity for purposes of
this representation) nor the Holding Company is an "investment
company," as defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
Based upon the foregoing assumptions, our opinions with respect to the
federal and North Carolina income tax consequences of the Conversion are as
follows (for purposes of the opinions set forth below, Eligible Account Holders
shall include, if applicable pursuant to the Plan, Supplemental Eligible Account
Holders):
1. The Conversion of Anson Mutual from a North Carolina-chartered mutual
savings bank to a North Carolina-chartered stock savings bank will
qualify as a reorganization within the meaning of Section 368(a) of the
Code, and neither Anson Mutual nor Anson will recognize any gain or
loss as a result of such reorganization. Revenue Ruling 80-105, 1980-1
C.B. 78. Anson Mutual in its form as a North Carolina-chartered mutual
savings bank and Anson in its form as a North Carolina-chartered stock
savings bank will each be a "party to a reorganization" within the
meaning of Section 368(b) of the Code.
2. Anson's basis in each of Anson Mutual's assets will be the same as Anson
Mutual's basis immediately prior to the Conversion. Section 362(b) of
the Code.
<PAGE>
Board of Directors
Anson Bancorp, Inc.
March 12, 1998
Page 6
3. No gain or loss will be recognized by the Holding Company upon receipt
of money in exchange for the shares of the Conversion Stock issued
pursuant to the exercise of the Subscription Rights issued therefor.
Section 1032(a) of the Code.
4. No gain or loss will be recognized by Anson upon receipt of money from
the Holding Company in exchange for the shares of its common stock to
be issued to the Holding Company in the Conversion. Section 1032(a) of
the Code.
5. The holding period of the Anson assets after the Conversion will
include the period during which the assets were held by Anson Mutual
prior to the Conversion. Section 1223(2) of the Code.
6. Gain or loss, if any, will be realized by an Eligible Account Holder on
the exchange of such person's deposit account and proprietary interest
in Anson Mutual for (i) a withdrawable deposit account in Anson in the
same dollar amount as such person's deposit account in Anson Mutual
immediately prior to the Conversion, (ii) such person's interest in the
Liquidation Account of Anson, and (iii) Subscription Rights to purchase
the Conversion Stock. Such gain, if any, will be recognized by an
Eligible Account Holder only to the extent of the fair market value of
such person's interest in the Subscription Rights received. Section
1001 of the Code. You have represented to us that the Subscription
Rights to purchase Conversion Stock have no fair market value.
Accordingly, gain recognized by an Eligible Account Holder as a result
of the Conversion is limited to an amount not in excess of the fair
market value of such person's interest in the Subscription Rights
received in the Conversion. Paulsen v. Commissioner, 469 U.S. 131, 139
-----------------------
(1985), quoting Society for Savings v. Bowers, 349 U.S.143, 150 (1955).
-----------------------------
7. The basis of the deposit account in Anson received by an Eligible
Account Holder will be the cost of such deposit account. The cost basis
of such deposit account in Anson (i) will be equal to the fair market
value of such deposit account in Anson and (ii) will be equal to such
person's basis in his or her deposit account in Anson Mutual exchanged
therefor. Section 1012 of the Code.
8. The basis of the interest in the Liquidation Account received by an
Eligible Account Holder will be equal to the cost of such interest. The
cost of the Liquidation Account will be the fair market value of the
proprietary interest in Anson Mutual given for the Liquidation Account.
Section 1012 of the Code. An interest in the Liquidation Account will
be deemed to have no value, or nominal, if any, fair market value.
Paulsen v. Commissioner, 469 U.S. 131, 139 (1985) (quoting Society for
----------------------- -----------
Savings v. Bowers, 349 U.S. 143, 150 (1955)).
-----------------
<PAGE>
Board of Directors
Anson Bancorp, Inc.
March 12, 1998
Page 7
9. The basis of Subscription Rights received by an Eligible Account Holder
will be zero, increased by the gain, if any, recognized on their
receipt. Section 1012 of the Code. Gain is recognized only to the
extent of the fair market value of the Subscription Rights. You have
represented to us that the Subscription Rights to purchase Conversion
Stock have no fair market value. Accordingly, the basis of the
Subscription Rights received by an Eligible Account Holder will be
zero.
10. The basis of the Conversion Stock purchased pursuant to the exercise of
Subscription Rights will be the purchase price thereof. Section 1012 of
the Code.
11. The holding period of the Conversion Stock acquired through the
exercise of Subscription Rights will commence upon the date of such
exercise. Section 1223(6) of the Code.
12. For purposes of Section 381 of the Code, Anson will be treated just as
Anson Mutual would have been treated had there been no reorganization
of Anson Mutual from a North Carolina-chartered mutual savings bank to
a North Carolina-chartered stock savings bank. Accordingly, and with
regard only to the reorganization of Anson Mutual into Anson, the tax
attributes of Anson Mutual enumerated in Section 381(c) of the Code
shall be taken into account by Anson as if there had been no
reorganization. Treasury Regulation (S)1.381(b)(1)(a)(2).
13. For North Carolina income tax purposes, the Conversion will be treated
in a manner identical to the way the Conversion is treated pursuant to
the Code. Sections 105-130.3, 105-130.5, 105-134.5, and 105-134.6 of
the North Carolina General Statutes.
No opinion is expressed with regard to the following:
1. The tax treatment of any aspect of the Conversion that is not
specifically set forth and addressed in the foregoing opinions.
2. The status, including without limitation, the tax treatment, of Anson
Mutual's and Anson's bad-debt reserves before or after the Conversion.
3. For purposes of Section 381 of the Code, the effect upon Anson Mutual
and Anson of the acquisition of all of the common stock of Anson by the
Holding Company in the Conversion.
The opinions herein expressed represent only our best judgments with
respect to the interpretation of published material and are not binding upon the
Internal Revenue Service or the courts. Our opinions are limited to matters of
North Carolina and federal law.
<PAGE>
Board of Directors
Anson Bancorp, Inc.
March 12, 1998
Page 8
The opinions contained herein are rendered solely for your benefit and for
the benefit of purchasers of Conversion Stock and may not be used for any other
purpose whatsoever or relied upon by, published or communicated to any other
party without our prior written consent in each instance. We hereby consent to
the inclusion of this letter as an exhibit to the Applications being filed by
Anson Mutual with the Administrator and as an exhibit to the Registration
Statement.
Sincerely,
BROOKS, PIERCE, McLENDON
HUMPHREY & LEONARD, L.L.P.
By: /s/ Howard L. Williams
-------------------------------------
Howard L. Williams
<PAGE>
[LETTERHEAD OF FERGUSON & COMPANY APPEARS HERE]
March 6, 1998
Board of Directors
Anson Savings Bank, SSB
211 South Greene Street
Wadesboro, North Carolina 28170
Plan of Conversion, Subscription Rights
---------------------------------------
Directors:
Terms used in this letter not otherwise defined herein have the same
meanings for such terms in the Plan of Holding Company Conversion (the "Plan of
Conversion") adopted by the Board of Directors of Anson Savings Bank, SSB,
Wadesboro, North Carolina ("Anson Savings" or "Bank"), under which the Bank will
convert from a mutual savings bank to a stock savings bank and issue all of the
Bank's stock to Anson Bancorp, Inc. (the "Holding Company"). Simultaneously,
the Holding Company will issue shares of common stock (the "Common Stock").
We understand that in accordance with the Plan of Conversion, subscription
rights to purchase shares of Common Stock in the Holding Company are to be
issued to (1) Eligible Account Holders, (2) the Bank's tax qualified employee
stock ownership plan, (3) Supplemental Eligible Account Holders, (4) Other
Members, and (5) employees, officers and directors of Anson Savings. Based
solely upon our observation that the subscription rights will be available to
such parties without cost, will be legally non-transferable and of short
duration, and will afford such parties the right only to purchase shares of
Common Stock at the same price to be paid by members of the general public in
the Community Offering, but without undertaking any independent investigation of
state or federal laws or the position of the Internal Revenue Service with
respect to such issue, in our opinion:
(1) the subscription rights will have no ascertainable market value; and
(2) the price at which the subscription rights are exercisable will not be
more or less than the pro forma market value of the shares upon
issuance.
Changes in the local and national economy, the legislative and regulatory
environment, the stock market, interest rates and other external forces (e.g.,
natural disasters or significant global events) occur from time to time and may
materially affect the value of thrift stocks as a whole or the Holding Company's
value. Accordingly, no assurance can be given that persons who subscribe to
shares of Common Stock in the Conversion will thereafter be able to sell such
shares at the same price paid in the Subscription Offering.
Sincerely,
/s/ Robin L. Fussell
Robin L. Fussell
Principal
<PAGE>
Exhibit (10)(a)
---------------
FERGUSON & COMPANY LETTERHEAD
November 12, 1997
Board of Directors
Anson Savings Bank, SSB
211 South Greene Street
Wadesboro, NC 28170
Dear Directors:
This letter sets forth the agreement between Anson Savings Bank, SSB
("Anson" or "Bank"), Wadesboro, North Carolina, and Ferguson & Company, ("F&C"),
Hurst, Texas, under the terms of which Anson has engaged F&C, in connection with
its conversion from mutual to stock form, to (1) determine the pro forma market
value of the shares of common stock to be issued and sold by Anson or its
holding company; and (2) assist Anson in preparing a business plan to be filed
with the application for approval to convert to stock.
F&C agrees to deliver the written valuation and business plan to Anson at
the above address on or before a mutually agreed upon date and to meet and
consult with the Board of Directors of Anson with regard to both the written
valuation and the business plan. Further, F&C agrees to perform such other
services as are necessary or required in connection with comments from the
applicable regulatory authorities relating to the business plan and appraisal
and the preparation of appraisal updates as requested by Anson or its counsel.
It is understood that the services of F&C under this agreement shall be limited
as herein described.
F&C's fee for the business plan and initial appraisal valuation report and
any required updates shall be $25,000 ($10,000 for the business plan and $15,000
for the appraisal). In addition, Anson shall reimburse F&C for all out-of-
pocket expenses. Payment under this agreement shall be made as follows:
1. Upon execution of this engagement letter -- $7,500;
2. Upon issuance of the business plan -- $7,500;
3. Upon issuance of the appraisal -- $7,500; and
4. Upon completion of the conversion -- $2,500.
5. Out-of-pocket expenses are to be paid monthly.
If, during the course of Anson's conversion, unforeseen events occur so as
to change materially the nature or the work content of the services described in
this contract, the terms of the contract shall be subject to renegotiation.
Such unforeseen events shall include, but not be limited to, major changes in
the conversion regulations, appraisal guidelines or processing
<PAGE>
Board of Directors
November 12, 1997
Page 2
procedures as they relate to conversion appraisals, major changes in Anson's
management or operating policies, execution of a merger agreement with another
institution prior to completion of conversion, and excessive delays or
suspension of processing of conversions by the regulatory authorities such that
completion of Anson's conversion requires the preparation by F&C of a new
appraisal report or business plan, excluding appraisal updates during the course
of the engagement.
To induce F&C to provide the services described above, Anson hereby agrees
as follows:
1. Anson shall supply to F&C such information with respect to its business
and financial condition as F&C reasonably may request in order to make
the aforesaid valuation. Such information made available to F&C shall
include, but not be limited to, annual financial statements, periodic
regulatory filings, material agreements, debt instruments and corporate
books and records.
2. Anson hereby represents and warrants, to the best of its knowledge, that
any information provided to F&C does not and will not, at any time
relevant hereto, contain any misstatement or untrue statement of a
material fact or omit any and all material facts required to be stated
therein or necessary to make the statements therein not false or
misleading in light of the circumstances under which they were made.
3. Anson shall indemnify and hold harmless F&C and any employees of F&C who
act for or on behalf of F&C in connection with the services called for
under this agreement, from and against any and all loss, cost, damage,
claim, liability or expense of any kind, including reasonable attorneys
fees and other expenses incurred in investigating, preparing to defend
and defending any claim or claims (specifically including, but not
limited to, claims under federal and state securities laws) arising out
of any misstatement or untrue statement of a material fact contained in
the information supplied by Anson to F&C or by an omission to state a
material fact in the information so provided which is required to be
stated therein in order to make the statement therein not false or
misleading.
4. F&C shall not be entitled to indemnification pursuant to Paragraph 3
above with regard to any claim arising where, with regard to the basis
for such claim, F&C had knowledge that a statement of a fact material to
the evaluation and contained in the information supplied by Anson was
untrue or had knowledge that a material fact was omitted from the
information so provided and that such material fact was necessary in
order to make the statement made to F&C not false or misleading.
<PAGE>
Board of Directors
November 12, 1997
Page 3
5. F&C additional shall not be entitled to indemnification pursuant to
Paragraph 3 above notwithstanding its lack of actual knowledge of an
intentional misstatement or omission of a material fact in the
information provided if F&C is determined to have been negligent or to
have failed to exercise due diligence in the preparation of its
valuation.
Anson and F&C are not affiliated, and neither Anson nor F&C has an economic
interest in, or held in common with, the other and has not derived a significant
portion of its gross revenue, receipts or net income for any period from
transactions with the other.
In order for F&C to consider this proposal binding, please acknowledge your
consent to the foregoing by executing the enclosed copies of this letter and
returning one copy to us, together with a check payable to Ferguson & Company in
the amount of $7,500. The extra copy is for your conversion counsel.
Yours very truly,
Robin L. Fussell
Principal
Agreed to ($7,500 check enclosed):
Anson Savings Bank, SSB
Wadesboro, North Carolina
By:
--------------------------------
Eugene M. Ward, President
<PAGE>
Exhibit (10)(b)
---------------
ANSON SAVINGS BANK, INC.
EMPLOYMENT AGREEMENT
THIS AGREEMENT entered into as of _________________, 1998, by and between
ANSON SAVINGS BANK, INC. (hereinafter referred to as the "Savings Bank") and
EUGENE M. WARD (hereinafter referred to as the "Officer") and is joined in by
ANSON BANCORP, INC., the parent holding company of the Savings Bank (hereinafter
referred to as the "Holding Company").
WHEREAS, the Officer has heretofore been employed by the Savings Bank as
its President and Chief Executive Officer; and
WHEREAS, the Savings Bank is a state-chartered stock savings bank and the
wholly-owned subsidiary of the Holding Company; and
WHEREAS, the Savings Bank desires to retain the services of the Officer as
the President and Chief Executive Officer of the Savings Bank upon the terms and
conditions set forth herein; and
WHEREAS, the services of the Officer, his experience and knowledge of the
affairs of the Savings Bank, and his reputation and contacts in the industry and
the local community are extremely valuable to the Savings Bank; and
WHEREAS, the Savings Bank wishes to attract and retain such well-qualified
executives and it is in the best interest of the Savings Bank and of the Officer
to secure the continued services of the Officer notwithstanding any change in
control of the Savings Bank or the Holding Company; and
WHEREAS, the Savings Bank considers the establishment and maintenance of a
sound and vital management to be part of its overall corporate strategy and to
be essential to protecting
<PAGE>
and enhancing the best interests of the Holding Company, the Savings Bank and
their stockholders; and
WHEREAS, the parties desire to enter into this Agreement in order to set
forth the terms and conditions of the Officer's employment relationship with the
Savings Bank.
NOW, THEREFORE, for and in consideration of the premises and mutual
promises, covenants and conditions hereinafter set forth and other good and
valuable considerations, the receipt and sufficiency of which hereby are
acknowledged, the parties hereby do agree as follows:
1. Employment. The Savings Bank hereby agrees to employ the Officer and
----------
the Officer hereby agrees to accept employment, upon the terms and conditions
stated herein, as the President and Chief Executive Officer of the Savings Bank.
The Officer shall render such administrative and management services to the
Savings Bank as are customarily performed by persons situated in a similar
executive capacity. The Officer shall promote the business of the Savings Bank
and perform such other duties as shall, from time to time, be reasonably
prescribed by the Board of Directors of the Savings Bank (the "Board").
2. Compensation. The Savings Bank shall pay the Officer during the term
------------
of this Agreement, as compensation for all service rendered by him to the
Savings Bank, a base salary at the rate of $______ per annum, payable in cash
not less frequently than monthly; provided that the rate of such salary shall be
reviewed by the Board not less often than annually. Such rate of salary, or
increased rate of salary, as the case may be, may be further increased, but not
decreased, from time to time in such amounts as the Board, in its discretion,
may decide. In determining salary increases, the Board shall compensate the
Officer for increases in the cost of living and may also provide for performance
or merit increases. Participation in incentive
2
<PAGE>
compensation, deferred compensation, discretionary bonus, profit-sharing,
retirement, stock option and other employee benefit plans that the Savings Bank
or the Holding Company have adopted or may from time to time adopt, and
participation in any fringe benefits, shall not reduce the salary payable to the
Officer under this Section. The Officer will be entitled to such customary
fringe benefits, vacation and sick leave as are consistent with the normal
practices and established policies of the Savings Bank.
3. Annual Bonus. The Board has established a program for awarding an
------------
annual bonus to all employees of the Savings Bank (the "Annual Bonus"). Under
the terms of the Annual Bonus plan, after the "Profits" of the Savings Bank
exceed a certain dollar figure which is determined annually by the Board, an
aggregate amount equal to ten percent of the Profits of the Savings Bank is
divided pro rata among the full-time employees of the Savings Bank based on each
employee's annual base salary, provided that each such Annual Bonus shall not
exceed twenty percent of each such employee's annual salary. The Savings Bank
agrees to pay the Officer his pro rata share of the Annual Bonus on or before
September 5 of each fiscal year provided that the Officer is still an employee
of the Savings Bank as of June 30 of each fiscal year. "Profit" for purposes of
determining the Annual Bonus shall be the profit of the Savings Bank before
income taxes as determined by the Savings Bank's certified public accountant
(the "CPA") and certified by the CPA to the Board of the Savings Bank in the
annual audit report prepared by said CPA and covering the subject fiscal year.
For example, if the Board set the profit goal at $50,000 and the profits of the
Savings Bank were determined to be $60,000, there would be a $6,000 Annual Bonus
to be distributed pro rata among all the employees of the Savings Bank.
3
<PAGE>
4. Participation in Retirement and Employee Benefit Plans; Fringe
--------------------------------------------------------------
Benefits. The Officer shall be entitled to participate in any plan relating to
- --------
deferred compensation, stock awards, stock options, stock ownership plan, stock
purchases, pension, thrift, profit sharing, group life insurance, medical and
dental coverage, disability coverage, education, or other retirement or employee
benefits that the Savings Bank or the Holding Company have adopted, or may, from
time to time adopt, for benefit of their executive employees and for employees
generally, subject to the eligibility rules of such plans.
The Officer shall also be entitled to participate in any other fringe
benefits which are now or may be or become applicable to the Officer or the
Savings Bank's other executive employees, including the payment of reasonable
expenses for attending annual and periodic meetings of trade associations, and
any other benefits which are commensurate with the duties and responsibilities
to be performed by the Officer under this Agreement. The Savings Bank shall
reimburse the Officer for all out-of-pocket reasonable and necessary business
expenses which the Officer may incur in connection with his services on behalf
of the Savings Bank. Additionally, the Officer shall be entitled to such
vacation and sick leave as shall be established under uniform employee policies
promulgated by the Directors.
5. Term. The initial term of employment under this Agreement shall be
----
for the period commencing upon the effective date of this Agreement and ending
three (3) calendar years from the effective date of this Agreement. On each
anniversary of the effective date of this Agreement, the term of this Agreement
shall automatically be extended for an additional one year period beyond the
then effective expiration date unless written notice from the Savings Bank or
the Officer is received 90 days prior to an anniversary date advising the other
party that
4
<PAGE>
this Agreement shall not be further extended; provided that the Directors shall
review the Officer's performance annually and make a specific determination
pursuant to such review to renew this Agreement prior to the 90 day notice
period.
6. Loyalty. The Officer shall devote his full efforts and entire
-------
business time to the performance of his duties and responsibilities under this
Agreement.
The Officer agrees that he will hold in confidence all knowledge or
information of a confidential nature with respect to the respective businesses
of the Holding Company, the Savings Bank or of their subsidiaries, if any,
received by him during the term of this Agreement and will not disclose or make
use of such information, except in the ordinary course of his duties under this
Agreement, without the prior written consent of the Holding Company or the
Savings Bank.
7. Standards. The Officer shall perform his duties and responsibilities
---------
under this Agreement in accordance with such reasonable standards expected of
employees with comparable positions in comparable organizations and as may be
established from time to time by the Board. The Savings Bank will provide the
Officer with the working facilities and staff customary for similar executives
and necessary for him to perform his duties.
8. Termination and Termination Pay.
-------------------------------
(a) The Officer's employment under this Agreement shall be terminated upon
the death of the Officer during the term of this Agreement, in which event, the
Officer's estate shall be entitled to receive the compensation due the Officer
through the last day of the calendar month in which his death shall have
occurred and for a period of one month thereafter. Notwithstanding the
foregoing, in the event of the Officer's death following a change in control
5
<PAGE>
(as defined in Paragraph 10), the Officer's designated beneficiary or the
designated beneficiary's estate shall be entitled to receive the compensation
due the Officer through the last day of the remaining terms of this Agreement.
(b) The Officer's employment under this Agreement may be terminated at any
time by the Officer upon sixty (60) days' written notice to the Board of
Directors. Upon such termination, the Officer shall be entitled to receive
compensation through the effective date of such termination.
(c) In the event the Officer becomes disabled during the term of his
employment under this Agreement and it is determined by the Savings Bank that
the Officer is permanently unable to perform his duties hereunder, the Savings
Bank shall continue to compensate the Officer at the level of compensation
described in Paragraph 2 above, and shall continue to provide the Officer each
of the other benefits set forth or described in this Agreement, for the
remaining term of this Agreement, less any other payments provided under any
disability income plan of the Savings Bank which is applicable to the Officer.
In the event of any disagreement between the Officer and the Savings Bank as to
whether the Officer is physically or mentally incapacitated such as will result
in the termination of the Officer's employment pursuant to this Paragraph 8(c),
the question of such incapacity shall be submitted to an impartial and reputable
physician for determination, selected by mutual agreement of the Officer and the
Savings Bank or, failing such agreement, by two (2) physicians (one (1) of whom
shall be selected by the Savings Bank and the other by the Officer), and such
determination of the question of such incapacity by such physician or physicians
shall be final and binding on the Officer and the Savings Bank. The Savings
Bank shall pay the reasonable fees and expenses of such physician
6
<PAGE>
or physicians in making any determination required under this Paragraph 8(c).
(d) The Board may terminate the Officer's employment at any time, but any
termination by the Board, other than termination for cause, shall not prejudice
the Officer's right to compensation or other benefits under this Agreement for
the remaining period which would have been covered by this Agreement if such
termination had not occurred. The Officer shall have no right to receive
compensation or other benefits for any period after termination for "cause."
Termination for "cause" shall include termination because of the Officer's
personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule, regulation (other than traffic violations or similar
offenses) or final cease-and-desist order, or material breach of any provisions
of this Agreement.
9. Additional Regulatory Requirements.
----------------------------------
(a) If the Officer is suspended and/or temporarily prohibited from
participating in the conduct of the Savings Bank's affairs by a notice served
under Section 8(e)(3) or Section 8(g)(1) of the Federal Deposit Insurance Act
(12 U.S.C. 1818(e)(3) and (g)(1)), the Savings Bank's obligations under this
Agreement shall be suspended as of the date of service, unless stayed by
appropriate proceedings. If the charges in the notice are dismissed, the
Savings Bank shall (i) pay the Officer all of the compensation withheld while
its contract obligations were suspended and (ii) reinstate (in whole or in part)
any of its obligations which were suspended.
(b) If the Officer is removed and/or permanently prohibited from
participating in the conduct of the Savings Bank's affairs by an order issued
under Section 8(e)(4) or Section 8(g)(1) of the Federal Deposit Insurance Act
(12 U.S.C. 1818(e)(4) and (g)(1)), all obligations of the
7
<PAGE>
Savings Bank under this Agreement shall terminate as of the effective date of
the order, but vested rights of the contracting parties shall not be affected.
(c) If the Savings Bank is in default as defined in Section 3(x)(1) of the
Federal Deposit Insurance Act (12 U.S.C. (S) 1818(x)(1)), all obligations under
this Agreement shall terminate as of the date of default, but this paragraph
shall not affect any vested rights of the contracting parties.
(d) All obligations under this Agreement shall be terminated, except to
the extent determined that continuation of the Agreement is necessary for the
continued operation of the Savings Bank, (i) by the Federal Deposit Insurance
Corporation (the "Corporation"), at the time the Corporation enters into an
agreement to provide assistance to or on behalf of the Savings Bank under the
authority contained in Section 13(c) of the Federal Deposit Insurance Act (12
U.S.C. (S) 1818(c)); or (ii) by the Administrator of the Savings Institutions
Division of the North Carolina Department of Commerce (the "Administrator"), at
the time the Administrator approves a supervisory merger to resolve problems
related to operation of the Savings Bank or when the Savings Bank is determined
by the Administrator to be in an unsafe or unsound condition. Any rights of the
parties that have already vested, however, shall not be affected by such action.
10. Change in Control.
-----------------
(a) In the event of a "Change in Control" (as defined in Subparagraph (c)
below), the term of employment under this Agreement automatically shall be
extended for a period of three (3) years beginning on the date of the Change in
Control, and the acquiror shall be bound by the terms of this Agreement and
shall be prohibited, during the remainder of such term, from:
(i) Assigning Officer any duties and/or responsibilities that are
8
<PAGE>
inconsistent with his position, duties, responsibilities or status at
the time of the Change in Control or with his reporting
responsibilities or equivalent titles with the Savings Bank in effect
at such time; or
(ii) Adjusting Officer's annual base salary rate other than in
accordance with the provisions of Subparagraph 10(b) of this
Agreement; or
(iii) Reducing in level, scope or coverage or eliminating Officer's
life insurance, medical or hospitalization insurance, disability
insurance, profit sharing plans, stock option plans, stock purchase
plans, deferred compensation plans, management retention plans,
retirement plans, stock ownership plan or similar plans or benefits,
including, without limitation, the provision of the Officer's
automobile and payment of civic and social club dues, being provided
by the Savings Bank or the Holding Company to the Officer as of the
effective date of the Change in Control; or
(iv) Transferring Officer to a location outside of Anson County,
North Carolina, without the Officer's express written consent.
(b) In the event of a Change in Control, in lieu of continuing to receive
the Annual Bonus described in Paragraph 3, the Officer's base salary shall be
adjusted to include an amount equal to the average of the Officer's pro rata
share of the two previous years' Annual Bonus, and such adjusted base salary
shall be increased by not less than six percent (6%) annually beginning at the
date of the Change in Control and continuing each year for the three-year term
thereafter.
(c) For the purposes of this Agreement, the term "Change in Control" shall
mean any of the following events:
(i) a change in control of a nature that would be required to be
reported in response to Item 1 of the Current Report on Form 8-K, as
in effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); or
(ii) such time as any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
9
<PAGE>
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Holding Company or Savings Bank
representing 25 percent or more of the combined voting power of the
outstanding Common Stock of the Holding Company or Common Stock of the
Savings Bank, as applicable; or
(iii) individuals who constitute the Board or board of directors of
the Holding Company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company Board," respectively) cease for any reason
to constitute at least a majority thereof, provided that any person
becoming a director subsequent to the date hereof whose election was
approved by a vote of at least three-quarters of the directors
comprising the Incumbent Board or Incumbent Holding Company Board, as
applicable, or whose nomination for election by the Savings Bank's or
Holding Company's shareholders was approved by the Savings Bank's or
Holding Company's Board of Directors or Nominating Committee, as
applicable, shall be considered as though he or she were a member of
the Incumbent Board or Incumbent Holding Company Board, as applicable;
or
(iv) either the Holding Company or the Savings Bank consolidates or
merges with or into another corporation, association or entity or is
otherwise reorganized, where neither the Holding Company nor the
Savings Bank, respectively, is the surviving corporation in such
transaction; or
(v) all or substantially all of the assets of either the Holding
Company or the Savings Bank are sold or otherwise transferred to or
are acquired by any other entity or group.
Notwithstanding the other provisions of this Paragraph 10, a transaction or
event shall not be considered a Change in Control if, prior to the consummation
or occurrence of such transaction or event, Officer and Savings Bank agree in
writing that the same shall not be treated as a Change in Control for purposes
of this Agreement.
(d) In the event any dispute shall arise between the Officer and the
Savings Bank as to the terms or interpretation of this Agreement, including this
Section 10, whether instituted by
10
<PAGE>
formal legal proceedings or otherwise, including any action taken by the Officer
to enforce the terms of this Section 10 or in defending against any action taken
by the Savings Bank, the Savings Bank shall reimburse the Officer for all costs
and expenses incurred in such proceedings or actions, including attorney's fees,
in the event the Officer prevails in any such action.
11. Successors and Assigns.
----------------------
(a) This Agreement shall inure to the benefit of and be binding upon any
corporate or other successor of the Savings Bank which shall acquire, directly
or indirectly, by conversion, merger, consolidation, purchase or otherwise, all
or substantially all of the assets of the Holding Company or the Savings Bank.
(b) Since the Savings Bank is contracting for the unique and personal
skills of the Officer, the Officer shall be precluded from assigning or
delegating his rights or duties hereunder without first obtaining the written
consent of the Savings Bank.
12. Modification; Waiver; Amendments. No provision of this Agreement may
--------------------------------
be modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing, signed by the Officer and on behalf of the Savings Bank
by such officer as may be specifically designated by the Directors. No waiver
by either party hereto, at any time, of any breach by the other party hereto of,
or compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time. No amendments or
additions to this Agreement shall be binding unless in writing and signed by
both parties, except as herein otherwise provided.
11
<PAGE>
13. Applicable Law. This Agreement shall be governed in all respects
--------------
whether as to validity, construction, capacity, performance or otherwise, by the
laws of North Carolina, except to the extent that federal law shall be deemed to
apply.
14. Severability. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first hereinabove written.
ANSON SAVINGS BANK, INC.
By:
----------------------------------
Chairman of the Board
----------------------------------
Eugene M. Ward
(SEAL)
The foregoing Agreement is consented and agreed to by Anson Bancorp, Inc.,
the parent holding company of Anson Savings Bank, Inc.
ANSON BANCORP, INC.
By:
----------------------------------
Chairman of the Board
13
<PAGE>
SCHEDULE A
ANNUAL BONUS CRITERIA
The amount of the Annual Bonus shall be computed using criteria based on
rate of return on assets and maintenance of asset quality.
1. Rate of Return on Assets ("ROA").
If the ROA of the Savings Bank and the Company on a consolidated basis is:
ROA Annual Bonus
--- ------------
Less than .75% .75% of Net Profit
.75% or greater 1.00% of Net Profit
In computing ROA and Net Profit, unusual or nonrecurring items, such as
gains and losses on the sale of assets and any SAIF assessment, will be
excluded.
2. Maintenance of Asset Quality
If nonperforming assets (loans delinquent more than 90 days plus REO) and
loan chargeoffs are:
Nonperforming Assets
to Total Assets Annual Bonus
-------------------- ------------
Less than 1.00% No change in computation
Less than 2.00% but
more than 1.00% Computed Annual Bonus reduced by 10%
More than 2.00% Computed Annual Bonus reduced by 20%
Loan Chargeoffs Annual Bonus
--------------- ------------
Less than $100,000 No change in computation
Less than $200,000 but
more than $100,000 Computed Annual Bonus reduced by 10%
More than $200,000 Computed Annual Bonus reduced by 20%
For example, if based on a ROA of 1.00% the Annual Bonus was computed to be
$9,000 and the Nonperforming Assets to Total Assets was 1.5% and the Loan
Chargeoffs were $150,000, the Annual Bonus awarded to the officer would be
$7,200, a reduction of $1,800 ($900 for Nonperforming Assets and $900 for Loan
Chargeoffs).
14
<PAGE>
Exhibit (10)(c)
---------------
ANSON SAVINGS BANK, INC.
MANAGEMENT RECOGNITION PLAN
(If Implemented Within One Year of Conversion)
Anson Savings Bank, Inc., a North Carolina chartered savings bank (the
"Bank"), does herein set forth the terms of its Management Recognition Plan (the
"Plan").
1. Purpose of this Plan. The purpose of this Plan is to provide to the
--------------------
directors, officers and employees (the "Participants") of the Bank and of any
corporation or other entity of which the Bank owns, directly or indirectly, not
less than fifty percent (50%) of any class of the equity securities thereof (a
"Subsidiary"), an ownership interest in the Bank's parent holding company, Anson
Bancorp, Inc. (the "Corporation") by making awards (hereinafter referred to as
"Awards" or singularly, "Award") of shares of common stock of the Corporation
(the "Common Stock"). The Board of Directors of the Bank (the "Board") and the
Board of Directors of the Corporation believe that participation in the
ownership of the Corporation will induce Participants to continue to serve the
Bank or any Subsidiary as directors, officers and/or employees and encourage
them to contribute to the future growth and profits of the Bank and the
Corporation. In addition, the existence of this Plan will make it possible for
the Bank and its Subsidiaries to attract capable individuals to serve as
directors or officers of the Bank and its Subsidiaries. The Board believes that
the existence of this Plan will provide incentives to the directors, officers
and employees of the Bank and any Subsidiaries which will contribute materially
to the success of such companies.
2. Administration of this Plan.
---------------------------
(a) This Plan shall be administered by a committee of the Board (the
"Committee") which shall consist of not less than three non-employee members of
the Board who are "disinterested persons" as described in Rule 16b-3(c)(2)(i) of
the Rules and Regulations under the Securities Exchange Act of 1934 (the
"Exchange Act"). In the absence of a duly appointed Committee, the Plan shall
be administered by those members of the Board who are "disinterested persons,"
and by the Board if there are less than three "disinterested persons." The
Committee shall have full power and authority to construe, interpret and
administer this Plan. All actions, decisions, determinations, or
interpretations of the Committee shall be final, conclusive, and binding upon
all parties. Members of the Committee shall serve at the pleasure of the Board.
(b) The Committee shall decide (i) to whom Awards shall be made under
this Plan, except as provided in subparagraph 3(b) and paragraph 5 hereof, (ii)
the number of shares of Common Stock subject to each award except as provided in
subparagraph 3(b) and paragraph 5 hereof, (iii) the number of additional shares,
if any, to be purchased or allocated for the purposes of this Plan, (iv) the
determination of leaves of absence which may be granted to Participants without
constituting a termination of their employment for purposes of the Plan and (v)
such additional terms and conditions for Awards as the Committee shall deem
appropriate, including, without limitation, any determinations as to the
restrictions or conditions on transfer of shares of Common Stock that are
necessary or appropriate to satisfy all applicable securities laws, rules,
regulations, and listing requirements.
(c) The Committee may designate any officers or employees of the Bank
or of any Subsidiary to assist in the administration of this Plan. The
Committee may authorize such individuals to execute documents on its behalf and
may delegate to them such other ministerial and limited discretionary duties as
the Committee may see fit.
<PAGE>
(d) Any unallocated, undistributed or forfeited shares of Common Stock
held under this Plan shall be held by ________________________,
_____________________ and ____________________ (the "Trustees") and any
successor or successors who from time to time may be appointed by the Board.
3. Shares of Common Stock Available Under the Plan.
-----------------------------------------------
(a) The Plan or a trust established to facilitate the implementation
of the Plan (the "MRP Trust") shall acquire a number of shares of Common Stock
of the Corporation equal to four percent (4%) of the shares of Common Stock
issued in connection with the conversion of the Bank from a North Carolina
chartered mutual savings bank to a North Carolina chartered stock savings bank
on _____________, 1998 (the "Conversion"). Such shares of Common Stock may be
purchased by the Plan or the MRP Trust in the open market, or, subject to
approval of the Board of Directors of the Corporation, may be acquired through
the issuance by the Corporation to the Plan or the MRP Trust of authorized but
unissued shares of Common Stock on such terms as may be approved by the
Committee and the Board of Directors of the Corporation. Such shares (the "Plan
Shares") shall be held by the Trustees until they have been allocated and
distributed pursuant to the terms of this Plan.
(b) Upon the purchase of the Plan Shares as provided in subparagraph
(a) above, such Plan Shares shall be allocated as provided in paragraph 5
hereof.
4. Eligibility. The Participants in this Plan to whom Awards may be made
-----------
shall be the following: members of the Board, members of the Board of Directors
of any Subsidiary, and such officers and employees of the Bank and/or of any
Subsidiary as may be designated by the Board. Notwithstanding the foregoing, no
member of the Committee is eligible to receive any grants or any awards of
shares under this Plan during the one-year period prior to serving on the
Committee or during such service, except for Awards of Plan Shares which are
distributed pursuant to the provisions of paragraph 5 hereof.
In addition, (i) no individual participant shall be awarded more than
twenty-five (25) percent of the Plan Shares to be issued pursuant to this Plan,
(ii) no participant who is a non-employee director of the Bank or a Subsidiary
shall be awarded more than five (5) percent of the Plan Shares to be issued
pursuant to this Plan and (iii) all participants who are non-employee directors
of the Bank or a Subsidiary shall be awarded no more than thirty (30) percent of
the Plan Shares to be issued pursuant to this Plan.
5. Award of Plan Shares. Subject to the provisions of paragraph 7
--------------------
hereof, effective after this Plan is approved by a majority of the shareholders
of the Corporation, the Plan Shares shall be awarded and distributed to
Participants listed in, and in the amounts set forth in, Exhibit A. Awards of
Plan Shares under this Plan shall be effective upon execution and delivery of
the Stock Grant Agreement described in paragraph 7.
6. Vesting of Shares.
-----------------
(a) Shares granted under this Plan shall vest and the right of a
Participant to the Plan Shares shall be nonforfeitable in accordance with the
following schedule:
2
<PAGE>
Date When Plan Shares Percentage of Plan
Become Vested Shares Vested
------------------- -------------------
First Anniversary of Award of Plan Shares 20%
Second Anniversary of Award of Plan Shares 20%
Third Anniversary of Award of Plan Shares 20%
Fourth Anniversary of Award of Plan Shares 20%
Fifth Anniversary of Award of Plan Shares 20%
(b) In determining the number of shares vested under the above vesting
schedule, a Participant shall not receive fractional shares. If the product
resulting from multiplying the vested percentage times the allocated shares
results in a fractional share, then a Participant's vested right shall be
rounded down to the nearest whole number of shares.
(c) In the event any Participant shall no longer be either a director
or an employee of the Bank or any Subsidiary for any reason, other than as
provided in subparagraph 6(d)below, and such Participant does not have a 100%
vested interest in his or her shares under the Plan, then any shares which are
not vested, based upon the applicable schedule in subparagraph 6(a) above, shall
be forfeited and, provided this Plan has not terminated pursuant to paragraph 18
below, shall be available again for Awards to Participants as may be determined
by the Committee.
(d) In the event that a Participant shall no longer be an employee or
a director of the Bank or any Subsidiary because of such Participant's
disability or death, prior to the date when all shares allocated to him or her
would be 100% vested in accordance with the schedule in subparagraph 6(a) above,
then, notwithstanding the foregoing schedule in subparagraph 6(a) above, all
shares allocated to such Participant shall immediately become fully vested and
nonforfeitable. For purposes of this Plan, the term "disability" shall be
defined in the same manner as such term is defined in Section 22(e)(3) of the
Internal Revenue Code of 1986, as amended (the "Code").
7. Action Required of Participants.
-------------------------------
(a) If required by the Committee, each Participant receiving an Award
of shares under this Plan shall represent to and agree with the Corporation, the
Bank, the Committee and the Trustees (i) that he is acquiring such shares on his
own behalf as an investment and not with a present intention of distribution or
re-sale and (ii) that there shall be placed upon the certificates representing
such shares a legend setting forth these representations and agreements or a
reference thereto. Such shares shall be transferable thereafter only if the
proposed transfer shall be permissible under this Plan and if, in the opinion of
counsel for the Corporation, such transfer shall at such time be in compliance
with all applicable federal and state securities laws and regulations.
(b) Each Participant receiving an Award of Plan Shares under this Plan
shall deliver to the Bank a Stock Grant Agreement, substantially in the form
attached hereto as Exhibit B, as modified as the Committee deems necessary or
desirable (a "Stock Grant Agreement"), which shall be signed by such
Participant.
3
<PAGE>
8. Restrictions.
------------
(a) Plan Shares subject to an award made under this Plan shall
forthwith, after the Participant makes any representations required by paragraph
7 hereof, be issued in a certificate or certificates for such shares which shall
be prepared in the name of such Participant or any transferee permitted by
paragraph 12(a) (a "Permitted Transferee"). Such Participant or transferee
shall thereupon be a shareholder with respect to all of the shares represented
by such certificate or certificates and shall have all of the rights of a
shareholder with respect to all of such shares, including the right to vote such
shares and to receive all dividends and other distributions with respect thereto
subject to possible forfeiture as set forth in paragraph 6 and subject to the
provisions of paragraph 10 hereof.
(b) Certificates of stock representing shares subject to an Award made
under this Plan shall be imprinted with a legend to the effect that the shares
represented are subject to restrictions on transfer and potential forfeiture in
accordance with the terms of the Stock Grant Agreement and this Plan, and the
transfer agent for Common Stock shall be instructed to that effect with respect
to such shares. In aid of such restrictions, the Participant or Permitted
Transferee shall, immediately upon receipt of the certificate or certificates,
deposit such certificate or certificates together with a stock power or other
instrument of transfer, appropriately endorsed in blank, with the Trustees or
with such other escrow agent as may be designated by the Trustees, with the
expenses of any such escrow arrangement to be borne by the Bank.
(c) In addition, all Plan Shares which are awarded with respect to
Participants who are directors or executive officers of the Bank, without the
written consent of the Administrator of the Savings Institutions Division of the
North Carolina Department of Commerce, may not be sold during a period of one
year following the effective date of the Conversion, except upon death of the
director or executive officer. Certificates of stock representing Plan Shares
awarded with respect to Participants who are directors and executive officers of
the Bank (including those transferred to Permitted Transferees) shall be
imprinted with a legend to that effect, and the transfer agent for such Plan
Shares shall be instructed to that effect with respect to such shares.
(d) In the event that, as the result of a stock split or stock
dividend or combination of shares or any other change or exchange for other
securities by reclassification, reorganization, merger, consolidation,
recapitalization, or otherwise, a Participant or Permitted Transferee shall, as
the owner of the shares subject to an Award made under this Plan and subject to
the restrictions hereunder, be entitled to new or additional or different shares
of Common Stock or other securities, the certificate or certificates for, or
other evidence of, such new or additional or different shares or other
securities, together with a stock power or other instrument of transfer
appropriately endorsed, shall also be imprinted with one or more legends as
provided in subparagraph 8(b) and 8(c) above and deposited by such Participant
or Permitted Transferee with the Trustees, and all provisions of this Plan
relating to vesting, restrictions and lapse of restrictions herein set forth
shall thereupon be applicable to such new or additional or different shares or
other securities to the extent applicable to the shares with respect to which
they were distributed; provided, however, that if a Participant or Permitted
Transferee should receive rights, warrants or fractional interests in respect of
any of such shares then being held under the terms of this Plan, such rights or
warrants may be held, exercised, sold or otherwise disposed of, and such
fractional interests may be settled, by such Participant or Permitted Transferee
free and clear of the restrictions herein set forth.
4
<PAGE>
(e) The restriction to which shares subject to an Award made under
this Plan shall be subject is that if the directorship or employment of the
Participant with respect to whom an Award is made (whichever position resulted
in the Award) should be terminated for any reason during the "restricted period"
(as defined in subparagraph 12(b) hereof), except as otherwise specifically
provided in paragraph 6 hereof, the Participant's or Permitted Transferee's
interest in the shares issued under this Plan shall be forfeited as provided in
the applicable schedule in subparagraph 6(a) hereof.
9. Effect of Award on Status of Participant. The fact that an Award is
----------------------------------------
made to a Participant under this Plan shall not confer on such Participant any
right to continued service on the Board or on the Board of Directors of any
Subsidiary, nor any right to continued employment with the Bank or any
Subsidiary; nor shall it limit the right of the Bank, the Corporation, or any
Subsidiary to remove such Participant from any such boards, or to terminate his
or her employment at any time.
10. Voting Rights; Dividends; Other Distributions. After an Award of Plan
---------------------------------------------
Shares to a Participant or Permitted Transferee, the Participant or Permitted
Transferee shall have the full power to vote all of the Plan Shares held by the
Trustees in his name from time to time and shall be entitled to receive all cash
dividends declared upon any such Plan Shares held by the Trustees in his name
from time to time. All shares of Common Stock or other securities, including
but not limited to stock dividends, issued in respect of such Plan Shares or in
substitution thereof, whether by the Corporation or by another issuer, shall be
held by the Trustees and shall be subject to all terms and conditions of this
Plan and shall be redelivered to a Participant or Permitted Transferee or
delivered as instructed by the Committee under the same circumstances as the
shares with respect to, or in substitution for, which they were issued;
provided, however, that if a Participant or Permitted Transferee should receive
rights, warrants or fractional interests in respect of any of the shares held by
the Trustees in his name, such rights or warrants may be held, exercised, sold
or otherwise disposed of, and such fractional interests may be settled, by such
Participants or Permitted Transferees free and clear of the restrictions herein
set forth.
Notwithstanding the foregoing, if a Participant or Permitted
Transferee hereunder forfeits any Plan Shares pursuant to the terms of this
Plan, the Participant or Permitted Transferee, as applicable, shall, within 30
days after the effective date of such forfeiture, pay the Corporation an amount
equal to the dividends received by such Participant or Permitted Transferee with
respect to such forfeited Plan Shares. In the alternative, at the option of the
Bank or a Subsidiary, the amount to be repaid may be withheld by the Bank or
Subsidiary from the final compensation or fees payable to the Participant.
11. Adjustment Upon Changes in Capitalization; Dissolution or Liquidation.
---------------------------------------------------------------------
In the event of a change in the number or type of shares of Common Stock
outstanding, or in the event shares of Common Stock are decreased, changed into
or exchanged for securities of a different entity, by reason of a
reclassification, recapitalization, reorganization, or other similar capital
adjustment; merger or consolidation of the Corporation; or the sale by the
Corporation of all or a substantial portion of its assets, or the occurrence of
any other event which could affect the implementation of this Plan and the
realization of its objectives, the number or kind of shares subject to Awards
which have occurred, or could occur, under this Plan shall be proportionately
and equitably adjusted by the Committee.
5
<PAGE>
12. Non-Transferability.
-------------------
(a) Any shares subject to an Award made under this Plan shall not be
sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of
during the "restricted period." Nothing herein shall preclude a Participant from
making a gift of any such shares to a spouse, child, stepchild, grandchild,
parent or sibling, or legal dependent of such Participant, to a trust of which
the beneficiary or beneficiaries of the trust shall be either a person
designated herein or such Participant, or to a civic or charitable organization
designated by the Participant; provided, however, that any such shares so given
by a Participant shall remain subject to the restrictions, obligations and
conditions set forth in this Plan, including, but not limited to, the escrow
provisions set forth in paragraph 8(b). In addition, such shares may be
tendered in response to a tender offer for or a request or invitation to tenders
of greater than fifty percent (50%) of the outstanding Common Stock and may be
surrendered in a merger, consolidation or share exchange involving the
Corporation; provided, however, in each case, that except as otherwise provided
herein, the securities or other consideration received in exchange therefor
shall thereafter be subject to the restrictions and conditions set forth in this
Plan, including, but not limited to, the escrow provisions set forth in
paragraph 8(b) hereof.
(b) The term "restricted period" with respect to shares subject to an
Award made under this Plan shall be the period commencing on the date of making
such Award of such shares to a Participant and ending on the date on which such
shares are no longer subject to forfeiture as provided in paragraph 6 hereof.
The date of making an Award shall be the date of execution by a Participant of a
Stock Grant Agreement in the form referred to in subparagraph 7(b) hereof.
13. Impact of Award on Other Benefits of Participant. The value of any
------------------------------------------------
Award, either on the date of the Award or at the time such shares become vested,
shall not be includable as compensation or earnings for purposes of any other
benefit plan offered by the Bank, the Corporation or any Subsidiary.
14. Corporate Action. The making of an Award under this Plan shall not
----------------
affect in any way the right or power of the Corporation or its shareholders or
the Bank or its shareholders or any Subsidiary or its shareholders to make or
authorize any adjustment, recapitalization, reorganization, or other change in
the Corporation's, the Bank's or any Subsidiary's capital structure or its
business, or any merger or consolidation of the Corporation, the Bank or any
Subsidiary, or the issuance of any bonds, debentures, preferred or other capital
stock or rights with respect thereto, or the dissolution or liquidation of the
Corporation, the Bank or any Subsidiary, or any sale or transfer of all or any
part of the Corporation's, the Bank's or any Subsidiary's assets or business.
15. Tax Withholding. The Bank, the Corporation or any Subsidiary shall
---------------
have the right to deduct or otherwise effect a withholding of any amount
required by federal or state laws to be withheld with respect to the making of
an Award or the sale of shares acquired under this Plan in order for the Bank,
the Corporation or any Subsidiary to obtain a tax deduction otherwise available
as a consequence of such Award or sale, as the case may be.
16. Exculpation and Indemnification. In connection with this Plan, no
-------------------------------
member of the Board, no member of the Board of Directors of the Corporation, no
member of the Committee and no Trustee shall be personally liable for any act or
omission to act in his capacity as a member of the Board, the Board of Directors
of the Corporation or the Committee or as a Trustee, nor for any mistake in
judgment
6
<PAGE>
made in good faith, unless arising out of, or resulting from, such person's own
bad faith, willful misconduct, or criminal acts. To the extent permitted by
applicable law and regulation, the Bank shall indemnify, defend and hold
harmless the members of the Board, the members of the Board of Directors of the
Corporation and the Committee and each Trustee and each other officer or
employee of the Bank, the Corporation or of any Subsidiary to whom any duty or
power relating to the administration or interpretation of this Plan may be
assigned or delegated, from and against any and all liabilities (including any
amount paid in settlement of a claim with the approval of the Board) and any
costs or expenses (including counsel fees) incurred by such persons arising out
of, or as a result of, any act or omission to act in connection with the
performance of such person's duties, responsibilities, and obligations under
this Plan, other than such liabilities, costs, and expenses as may arise out of,
or result from, the bad faith, willful misconduct, or criminal acts of such
persons.
17. Amendment and Modification of this Plan. The Board may at any time,
---------------------------------------
and from time to time, amend or modify this Plan (including the form of Stock
Grant Agreement) in any respect; provided, however, any amendment or
modification of this Plan shall not in any manner affect any Award of shares
theretofore made to a Participant under this Plan without the consent of such
Participant or any permitted transferee of such Participant and further provided
that no amendment shall be made to paragraph 5 of the Plan more than once every
six months other than to comport with changes in the Code, Employee Retirement
Income Security Act or the rules thereunder.
18. Termination and Expiration of this Plan. This Plan may be abandoned,
---------------------------------------
suspended, or terminated, in whole or in part, at any time by the Board;
provided, however, that abandonment, suspension, or termination of this Plan
shall not affect any Award theretofore made under this Plan; and provided
further, that in no event shall this Plan be terminated at the time of or
following any merger or consolidation of the Corporation or the Bank, unless and
until the surviving entity shall have made provision for an equivalent benefit
for all the then current participants in the Plan. Unless sooner terminated,
this Plan shall terminate at the close of business on the day that is the tenth
(10th) anniversary of the date of approval of the Plan by a majority of the
shareholders of the Corporation; and no Award of shares may be made under this
Plan thereafter. Such termination shall not effect any Award of shares
theretofore made. In the event that the Board terminates this Plan in whole,
any shares held by the Trustees pursuant to paragraph 2(d) which have not been
allocated to eligible Participants, together with any other assets held by the
Trustees in their capacities as such, shall revert to the Bank.
19. Effective Date. This Plan has been adopted by the Board to be
--------------
effective as of the date of approval of the Plan by a majority of the
shareholders of the Corporation as required by the regulations of the Federal
Deposit Insurance Corporation.
20. Captions and Headings; Gender and Number. Captions and paragraph
----------------------------------------
headings used herein are for convenience only, do not modify or affect the
meaning of any provision herein, are not a part hereof, and shall not serve as a
basis for interpretation or construction of this Plan. As used herein, the
masculine gender shall include the feminine and neuter, and the singular number
shall include the plural, and vice versa, whenever such meanings are
appropriate.
21. Expenses of Administration of Plan. All costs and expenses incurred
----------------------------------
in the operation and administration of this Plan shall be borne by the Bank or
by a Subsidiary.
22. Governing Law. Without regard to the principles of conflicts of laws,
-------------
the laws of the
7
<PAGE>
State of North Carolina shall govern and control the validity, interpretation,
performance, and enforcement of this Plan.
23. Inspection of Plan. A copy of this Plan, and any amendments thereto,
------------------
shall be maintained by the Secretary of the Bank and shall be shown to any
proper person making inquiry about it.
8
<PAGE>
EXHIBIT A
Percentage of Total
Name Plan Shares/1/
---- -------------------
- ----------------------------
/1/Total Plan Shares shall be equal to four percent (4%) of the number of
shares of Common Stock issued by the Corporation in connection with the
Conversion.
<PAGE>
EXHIBIT B
STATE OF NORTH CAROLINA
COUNTY OF ANSON
STOCK GRANT AGREEMENT
THIS STOCK GRANT AGREEMENT (the "Agreement") is made and entered into as of
the ____ of ___________________, _______ (the "Effective Date"), by and among
Anson Savings Bank, Inc. (the "Bank"), a North Carolina corporation,
_______________________ (the "Participant") and ______________________,
___________________ and ____________________ (the "Trustees").
WHEREAS, a Management Recognition Plan (the "Plan") was adopted by the
Board of Directors of the Bank (the "Bank") and approved by the Board of
Directors and by a majority of the shareholders of Anson Bancorp, Inc., the
holding company of the Bank (the "Corporation").
WHEREAS, it has been determined that it is desirable and in the best
interest of the Bank to make an award (the "Award") of certain shares of the
Common Stock of the Corporation, under the Plan, to the Participant, subject to
certain restrictions as specified below; and
WHEREAS, capitalized terms not otherwise defined herein shall have the same
meaning given to such terms in the Plan.
NOW, THEREFORE, the Parties agree as follows:
1. Date of Award. The date of making the Award under this Agreement is
-------------
the _____ day of _________________, ______. This Award has been made in
recognition of the Participant's status and service as a ____________________ of
_____________________________________________. The Participant is ____ or _____
is not a director or executive officer of the Bank.
2. Receipt by Participant. The Participant acknowledges receipt of
----------------------
________________________________ (__________) shares of Common Stock (the
"Restricted Stock"), and agrees to the execution of stock powers or such other
transfer authorizations as the Committee shall request, in blank, covering the
Restricted Stock to be held by the Trustees until the Restricted Stock becomes
vested and nonforfeitable pursuant to the Plan and this Agreement.
3. Investment Representation and Transfer Restrictions.
---------------------------------------------------
(a) Investment Representation. Participant makes and agrees to the
-------------------------
investment representation, if any, attached hereto as Annex A, and the Committee
may cause a legend to be placed on any certificate representing any of the
shares of Restricted Stock to make appropriate reference to such representation.
(b) Securities Law and Regulations. The Participant agrees that the
-------------------------------
Restricted Stock shall be subject to such stop-transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations,
and other requirements of the Securities and Exchange Commission, any stock
exchange or interdealer quotation system upon which the Common Stock is then
listed and any
1
<PAGE>
other applicable federal or state securities laws, rules or regulations, and the
Committee may cause a legend or legends to be placed on any certificate
representing any of the shares of Restricted Stock to make appropriate reference
to such restrictions.
(c) Other Transfer Restrictions. If paragraph 1 above states that
---------------------------
Participant is a director or an executive officer of the Bank and if less than
one year has passed since the consummation of the Conversion (defined below),
the Participant agrees with the Bank that each certificate representing any of
the Restricted Stock may bear a legend, substantially in the form attached as
Annex B hereto, to the effect that, during the one year period following the
effective date of the conversion of the Bank from a North Carolina chartered
mutual savings bank to a North Carolina chartered stock savings bank (the
"Conversion"), the Restricted Stock represented thereby may not be sold without
the written consent of the Administrator of the Savings Institutions Division,
North Carolina Department of Commerce, except upon the death of the Participant.
4. Receipt by the Trustees. The Trustees acknowledge receipt from the
-----------------------
Participant of the Restricted Stock, registered in the name of the Participant,
and acknowledge receipt of stock powers executed in blank by the Participant
covering all of the Restricted Stock. The Restricted Stock shall be held by the
Trustees and distributed or transferred in accordance with the Plan and as set
forth herein.
5. Vesting and Delivery of Restricted Stock by the Trustees.
--------------------------------------------------------
(a) Periodic Vesting. Restricted Stock shall vest and become
----------------
nonforfeitable in accordance with the Plan.
(b) Delivery of Restricted Stock to the Participant. After (i) the
-----------------------------------------------
date on which shares of Restricted Stock have become vested as provided in the
Plan, the Committee shall instruct the Trustees to deliver to the Participant,
the Participant's designee, such other person as shall have been designated as
Participant's beneficiary in accordance with this Agreement, or any other
permitted recipient pursuant to the Plan, as applicable, certificates
representing the shares of Restricted Stock which have become vested and
nonforfeitable, as the Committee shall determine, free from any restrictions
imposed by this Agreement other than such restrictions and conditions as may be
deemed necessary by the Committee pursuant to paragraph 3 above.
(c) Delivery of Forfeited Restricted Stock. If the Restricted Shares,
--------------------------------------
or any of them, are forfeited pursuant to the Plan, the Board shall instruct the
Trustees concerning the disposition of such forfeited shares. Thereafter such
forfeited shares shall cease to be subject to this Agreement.
6. Repayment of Dividends. If the Participant hereunder forfeits any
----------------------
shares of Restricted Stock pursuant to the Plan, the Participant shall, within
30 days after the effective date of such forfeiture, pay the Corporation an
amount equal to the dividends received by the Participant with respect to
forfeited shares of Restricted Stock as set forth in the Plan. In the
alternative, at the option of the Bank or a Subsidiary, the amount to be repaid
may be withheld by the Bank or Subsidiary from the final compensation or fees
payable to the Participant. Each acceptance by a Participant of dividends with
respect to Restricted Shares still subject to forfeiture shall constitute a
reaffirmation of the agreements set forth in this paragraph 6.
7. Designation of Beneficiary. The Participant hereby designates the
--------------------------
person(s) described on Annex C as the beneficiary or beneficiaries who shall be
entitled to receive the Restricted Stock, if
2
<PAGE>
any, distributable to the Participant upon his death. The Participant may, from
time to time, revoke or change his beneficiary designation without the consent
of any prior beneficiary, if any, by filing a new designation with the
Committee. The last such designation received by the Committee shall be
controlling; provided, however, that no designation, or change or revocation
thereof, shall be effective unless received by the Committee prior to the
Participant's death, and in no event shall it be effective as of a date prior to
such receipt.
If no such beneficiary designation is in effect at the time of the
Participant's death, or if no designated beneficiary survives the Participant,
or if such designation conflicts with law, the Participant's estate shall be
deemed to have been designated his beneficiary and shall receive the Restricted
Stock, if any, distributable to the Participant upon his death. If the
Committee is in doubt as to the right of any person to receive such
distribution, the Committee may direct the Trustees to retain the Restricted
Stock, without liability for any interest in respect thereof, until the rights
thereto are determined, or the Committee may direct the transfer of such
Restricted Stock into any court of appropriate jurisdiction and such transfer
shall be deemed a complete discharge of the obligations of the Bank, the
Corporation, the Committee and Trustees hereunder.
8. Effect of Award on Status of Participant. The fact that an Award has
----------------------------------------
been made to the Participant under this Plan shall not confer on the Participant
any right to continued service on the Board, on the board of directors of the
Corporation or on the board of directors of any Subsidiary, nor to continued
employment with the Bank, the Corporation or any Subsidiary; nor shall it limit
the right of the Bank, the Corporation or of any Subsidiary to remove the
Participant from any such boards, or to terminate his employment at any time
without prior notice.
9. Impact of Award on Other Benefits of Participant. The value of the
------------------------------------------------
Restricted Stock on the date of the Award or at the time the Restricted Stock
becomes vested, shall not be includable as compensation or earnings for purposes
of any other benefit plan offered by the Bank, the Corporation or any
Subsidiary.
10. Tax Withholding. All Restricted Stock distributed pursuant to this
---------------
Agreement shall be subject to applicable federal, state and local withholding
for taxes. The Participant expressly acknowledges and agrees to such
withholding without regard to whether the Restricted Stock may then be sold or
otherwise transferred by the Participant.
11. Notices. Any notices or other communications required or permitted to
-------
be given under this Agreement shall be in writing and shall be deemed to have
been sufficiently given if delivered personally or three business days after
deposit in the United States mail as Certified Mail, return receipt requested,
properly addressed and postage prepaid, if to the Bank, the Committee or the
Trustees at the Bank's principal office address at Post Office Box 117, 347
North Main Street, Wadesboro, North Carolina 28115; and, if to the Participant,
at his last address appearing on the books of the Bank. The Bank and the
Participant may change their address or addresses by giving written notice of
such change as provided herein. Any notice or other communication hereunder
shall be deemed to have been given on the date actually delivered or as of the
third (3rd) business day following the date mailed as set forth above, as the
case may be.
12. Construction Controlled by Plan. The Plan, a copy of which is
-------------------------------
attached hereto as Annex D, is incorporated herein by reference. The Award of
Restricted Shares shall be subject to the terms and conditions of the Plan, and
the Participant hereby assumes and agrees to comply with all of the
3
<PAGE>
obligations imposed upon the Participant in the Plan. This Agreement shall be
construed so as to be consistent with the Plan; and the provisions of the Plan
shall be deemed to be controlling in the event that any provision hereof should
appear to be inconsistent therewith.
13. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such a manner as to be valid and enforceable under
applicable law, but if any provision of this Agreement is determined to be
unenforceable, invalid or illegal, the validity of any other provision or part
thereof shall not be affected thereby and this Agreement shall continue to be
binding on the parties hereto as if such unenforceable, invalid or illegal
provision or part thereof had not been included herein.
14. Governing Law. Without regard to the principles of conflicts of laws,
-------------
the laws of the State of North Carolina shall govern and control the validity,
interpretation, performance, and enforcement of this Agreement.
15. Modification of Agreement; Waiver. This Agreement may be modified,
---------------------------------
amended, suspended or terminated, and any terms, representations or conditions
may be waived, but only by a written instrument signed by each of the parties
hereto or their successors in interest. No waiver hereunder shall constitute a
waiver with respect to any subsequent occurrence or other transaction hereunder
or of any other provision hereof.
16. Binding Effect. This Agreement shall be binding upon and shall inure
--------------
to the benefit of the parties hereto, and their respective heirs, legatees,
personal representatives, executors, and administrators, successors and assigns.
17. Entire Agreement. This Agreement and the Plan constitute and embody
----------------
the entire understanding and agreement of the parties hereto and, except as
otherwise provided hereunder, there are no other agreements or understandings,
written or oral, in effect between the parties hereto relating to the matters
addressed herein.
18. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when executed and delivered shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
19. Substitution of Trustee. In the event any new trustee is substituted
-----------------------
for any Trustee pursuant to the Plan, such substitute trustee shall also be
substituted as a Trustee hereunder.
4
<PAGE>
IN WITNESS WHEREOF, the Bank has caused this instrument to be executed in
its corporate name by its President, or one of its Vice Presidents, and attested
by its Secretary or one of its Assistant Secretaries, and its corporate seal to
be hereto affixed, all by, authority of its Board of Directors first duly given;
and each individual party hereto has hereunto set his hand and adopted as his
seal the typewritten word "SEAL" appearing beside his name, all done this the
day and year first above written.
ANSON SAVINGS BANK, INC.
By:
-----------------------------------
President
-------------------
ATTEST:
- ---------------------------------
Secretary
- --------------
[Corporate Seal]
PARTICIPANT
--------------------------------------
(SEAL)
--------------------------------------
(SEAL)
TRUSTEE
--------------------------------------
(SEAL)
TRUSTEE
--------------------------------------
(SEAL)
TRUSTEE
5
<PAGE>
ANNEX A
Investment Representation
-------------------------
<PAGE>
ANNEX B
Form of Legend
--------------
The shares represented by this certificate are subject to restrictions on
transfer and, for a period ending ______________, 1999, may not be sold without
the written permission of the Administrator of the Savings Institutions
Division, North Carolina Department of Commerce, except in the event of the
death of the holder thereof.
<PAGE>
ANNEX C
Management Recognition Plan
---------------------------
Beneficiary Designation Form
----------------------------
As Beneficiary to receive any shares of stock distributable on my behalf
pursuant to the Anson Savings Bank, Inc. Management Recognition Plan, I hereby
designate the following:
Name Address Relationship
Primary Beneficiary:
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
Contingent Beneficiary:
(if any)
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
If more than one primary beneficiary is named, shares will be paid in equal
shares to surviving primary beneficiaries. Should the contingent beneficiaries
be eligible to receive the benefits (i.e., all primary beneficiaries are
deceased), such benefits will be paid in equal shares to such surviving
contingent beneficiaries.
Name of Spouse if not given above:
----------------------------------------------
- ------------------------- --------------------------------------------------
Witness Participant
--------------------------------------------------
Date
<PAGE>
ANNEX D
Management Recognition Plan
---------------------------
<PAGE>
Exhibit (10)(d)
ANSON BANCORP, INC.
STOCK OPTION PLAN
(If Implemented Within One Year of Conversion)
THIS IS THE ANSON BANCORP, INC. STOCK OPTION PLAN ("Plan") of Anson
Bancorp, Inc. (the "Corporation"), a North Carolina corporation, with its
principal office in Wadesboro, Anson County, North Carolina, adopted by the
Board of Directors of the Corporation and effective upon the approval of the
Plan by a majority of the shareholders of the Corporation and the receipt of all
necessary regulatory approvals, or as soon as practicable thereafter, under
which options may be granted from time to time to eligible directors and
employees of the Corporation, Anson Savings Bank, Inc. (the "Bank") and of any
corporation or other entity of which either the Corporation or the Bank owns,
directly or indirectly, not less than fifty percent (50%) of any class of equity
securities (a "Subsidiary"), to purchase shares of common stock of the
Corporation ("Common Stock"), subject to the provisions set forth as follows:
1. PURPOSE. The purpose of this Plan is to aid the Corporation, the Bank
-------
and any Subsidiary in attracting and retaining capable directors and employees
and to provide a long range incentive for directors and employees to remain in
the management of the Corporation, the Bank or any Subsidiary, to perform at
increasing levels of effectiveness and to acquire a permanent stake in the
Corporation with the interest and outlook of an owner. These objectives will be
promoted through the granting of options to acquire shares of Common Stock
pursuant to the terms of this Plan.
2. ADMINISTRATION. The Plan shall be administered by the committee (the
--------------
"Committee"), who are three members of the Board of Directors of the Corporation
(the "Board") who are "disinterested persons" as described in Rule 16b-
3(c)(2)(i) of the Rules and Regulations under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Members of the Committee shall serve at
the pleasure of the Board. In the absence at any time of a duly appointed
Committee, this Plan shall be administered by those members of the Board who are
"disinterested persons," and by the Board if there are less than three
"disinterested persons." The Committee may designate any officers or employees
of the Corporation, the Bank or any Subsidiary to assist in the administration
of the Plan and to execute documents on behalf of the Committee and perform such
other ministerial duties as may be delegated to them by the Committee.
Subject to the provisions of the Plan, the determinations or the
interpretation and construction of any provision of the Plan by the Committee
shall be final and conclusive upon all persons affected thereby. By way of
illustration and not of limitation, the Committee shall have the discretion (a)
to construe and interpret the Plan and all options granted hereunder and to
determine the terms and provisions (and amendments thereof) of the options
granted under the Plan (which need not be identical); (b) to define the terms
used in the Plan and in the options granted hereunder; (c) to prescribe, amend
and rescind the rules and regulations relating to the Plan; (d) to determine the
individuals to whom and the time or times at which such options shall be granted
(except for the options described in paragraph 5), the number of shares to be
subject to each option (except for the options described in paragraph 5), the
option price, and the determination of leaves of absence which may be granted to
participants without constituting a termination of their employment for the
purposes of the Plan; and (e) to make all other determinations necessary or
advisable for the administration of the Plan.
<PAGE>
It shall be in the discretion of the Committee to grant options which
qualify as "incentive stock options" (as that term is defined in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code")) or which do not
qualify as incentive stock options and which will be given tax treatment as
"nonqualified stock options" (herein referred to collectively as "options;"
however, whenever reference is specifically made only to "incentive stock
options" or "nonqualified stock options," such reference shall be deemed to be
made to the exclusion of the other). Any options granted which fail to satisfy
the requirements for incentive stock options shall become nonqualified stock
options.
3. STOCK AVAILABLE FOR OPTIONS. The stock to be subject to options under
---------------------------
the Plan shall be authorized but unissued shares of Common Stock or, in the
discretion of the Committee, issued shares of Common Stock which have been
reacquired by the Corporation. The total number of shares of Common Stock for
which options may be granted under the Plan is the number of shares equal to ten
percent (10%) of the total number of shares of Common Stock issued by the
Corporation in connection with the conversion of the Bank from a North Carolina
mutual savings bank to a North Carolina stock savings bank on _______, 1998 (the
"Conversion"). Such number of shares is subject to any capital adjustments as
provided in Section 14. In the event that an option granted under the Plan is
forfeited, expires or is terminated unexercised as to any shares covered
thereby, such shares thereafter shall be available for the granting of options
under the Plan; however, if the forfeiture, expiration or termination date of an
option is beyond the term of existence of the Plan as described in Section 19,
then any shares covered by forfeited, unexercised or terminated options shall
not reactivate the existence of the Plan and therefore may not be available for
additional grants under the Plan. The Corporation, during the terms of the
Plan, will reserve and keep available a number of shares of Common Stock
sufficient to satisfy the requirements of the Plan. In the discretion of the
Committee and the Board, the shares of Common Stock necessary to be delivered to
satisfy exercised options may be from authorized and unissued shares of Common
Stock or may be purchased in the open market.
4. ELIGIBILITY. Options shall be granted only to individuals who meet
-----------
all of the following eligibility requirements:
(a) Such individual must be an employee or a member of the Board of
Directors of the Corporation, the Bank or a Subsidiary. For this purpose,
an individual shall be considered to be an "employee" only if there exists
between the Corporation, the Bank or a Subsidiary and the individual the
legal and bona fide relationship of employer and employee. In determining
whether such relationship exists, the regulations of the United States
Treasury Department relating to the determination of such relationship for
the purpose of collection of income tax at the source of wages shall be
applied.
(b) Such individual must have such knowledge and experience in
financial and business matters that he or she is capable of evaluating the
merits and risks of the investment involved in the exercise of the options.
(c) Such individual, being otherwise eligible under this Section 4,
shall have been selected by the Committee as a person to whom an option
shall be granted under the Plan or shall have been designated in accordance
with paragraph 5 hereof.
In determining the directors and employees to whom options shall be granted
and the number
2
<PAGE>
of shares to be covered by each option, the Committee shall take into account
the nature of the services rendered by respective directors and employees, their
present and potential contributions to the success of the Corporation, the Bank
and any Subsidiary and such other factors as the Committee shall deem relevant.
A director or employee who has been granted an option under the Plan may be
granted an additional option or options under the Plan if the Committee shall so
determine.
If, pursuant to the terms of the Plan, it is necessary that the percentage
of stock ownership of any individual be determined, stock ownership in the
Corporation or of a related corporation which is owned (directly or indirectly)
by or for such individual's brothers and sisters (whether by the whole or half
blood), spouse, ancestors, and lineal descendants or by or for any corporation,
partnership, estate or trust of which such director or employee is a
shareholder, partner or beneficiary shall be considered as owned by such
director or employee.
5. INITIAL GRANTS. Subject to the provisions of this Plan, options shall
--------------
be awarded to the directors and employees as set forth on Exhibit A. Such
options shall be deemed granted as of the date the Plan is approved by a
majority of the Corporation's shareholders and by all necessary regulatory
authorities, or as soon as practicable thereafter, subject to execution by the
optionee of a Stock Option Grant and Agreement (the "Option Agreement") in the
form attached hereto as Exhibit B as modified by the Committee to the extent it
deems such modification to be necessary or desirable. Such options shall be
granted with the intention that they will be nonqualified or incentive stock
options as denominated in the Option Agreement. Any option granted with the
intention that it will be an incentive stock option but which fails to satisfy a
requirement for incentive stock options shall continue to be valid and shall be
treated as a nonqualified stock option.
6. OPTION PRICE.
------------
(a) The option price of each option granted under the Plan shall be
not less than one hundred percent (100%) of the market value of the stock
on the date of grant of the option. In the case of incentive stock options
granted to a shareholder who owns stock possessing more than 10 percent
(10%) of the total combined voting power of all classes of stock of the
Corporation, the Bank or a Subsidiary (a "ten percent shareholder"), the
option price of each option granted under the Plan shall not be less than
one hundred and ten percent (110%) of the market value of the stock on the
date of grant of the option. If the Common Stock is listed on a national
securities exchange (including the Nasdaq National Market System) on the
date in question, then the market value per share shall be not less than
the average of the highest and lowest selling price on such exchange on
such date, or if there were no sales on such date, then the market price
per share shall be equal to the average between the bid and asked price on
such date. If the Common Stock is traded otherwise than on a national
securities exchange on the date in question, then the market price per
share shall be equal to the average between the bid and asked price on such
date, or, if there is no bid and asked price on such date, then on the next
prior business day on which there was a bid and asked price. If no such
bid and asked price is available, then the market value per share shall be
its fair market value as determined by the Committee, in its sole and
absolute discretion. The Committee shall maintain a written record of its
method of determining such value.
(b) The option price shall be payable to the Corporation either (i)
in cash or by check, bank draft or money order payable to the order of the
Corporation, or (ii) at the
3
<PAGE>
discretion of the Committee, through the delivery of shares of the Common
Stock of the Corporation owned by the optionee with a market value
(determined in a manner consistent with (i) above) equal to the option
price, or (iii) at the discretion of the Committee by a combination of (i)
and (ii) above. No shares shall be delivered until full payment has been
made. The Committee may not approve a reduction of such purchase price in
any such option, or the cancellation of any such options and the regranting
thereof to the same optionee at a lower purchase price, at a time when the
market value of the shares is lower than it was when such option was
granted.
7. EXPIRATION OF OPTIONS. The Committee shall determine the expiration
---------------------
date or dates of each option, but such expiration date shall be not later than
ten (10) years after the date such option is granted. In the event an incentive
stock option is granted to a ten percent shareholder, the expiration date or
dates of each option shall be not later than five (5) years after the date such
option is granted. The Committee, in its discretion, may extend the expiration
date or dates of an option after such date was originally set; however, such
expiration date may not exceed the maximum expiration date described in this
Section 7.
8. TERMS AND CONDITIONS OF OPTIONS.
-------------------------------
(a) All options must be granted within ten (10) years of the
Effective Date of this Plan as defined in Section 18.
(b) The Committee may grant options which are intended to be
incentive stock options and nonqualified stock options, either separately
or jointly, to an eligible employee.
(c) The grant of options shall be evidenced by a written instrument
(an Option Agreement) containing terms and conditions established by the
Committee consistent with the provisions of this Plan.
(d) Not less than 100 shares may be purchased at any one time unless
the number purchased is the total number at that time purchasable under the
Plan.
(e) The recipient of an option shall have no rights as a shareholder
with respect to any shares covered by his option until payment in full by
him for the shares being purchased. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is
prior to the date such stock is fully paid for, except as provided in
Section 14.
(f) The aggregate fair market value of the stock (determined as of
the time the option is granted) with respect to which incentive stock
options are exercisable for the first time by any participant during any
calendar year (under all benefit plans of the Corporation, the Bank or any
Subsidiary, if applicable) shall not exceed $100,000; provided, however,
that such $100,000 limit of this subsection (f) shall not apply to the
grant of nonqualified stock options. The Committee may grant options which
are exercisable in excess of the foregoing limitations, in which case
options granted which are exercisable in excess of such limitation shall be
nonqualified stock options.
4
<PAGE>
(g) All stock obtained pursuant to an option which qualifies as an
incentive stock option shall be held in escrow for a period which ends on
the later of (i) two (2) years from the date of the granting of the option
or (ii) one (1) year after the transfer of the stock pursuant to the
exercise of the option. The stock shall be held by the Corporation or its
designee. The employee who has exercised the option shall during such
holding period have all rights of a shareholder, including but not limited
to the rights to vote, receive dividends and sell the stock. The sole
purpose of the escrow is to inform the Corporation of a disqualifying
disposition of the stock within the meaning of Section 422 of the Code, and
it shall be administered solely for that purpose.
9. EXERCISE OF OPTIONS.
-------------------
(a) An optionee receiving options by virtue of his position as a
director must remain continuously a member of the Board of Directors of the
Corporation, the Board of Directors of the Bank or the Board of Directors
of one or more of the Subsidiaries from the date of the grant until the
exercise of the option except as provided in Sections 10, 11 and 12 of this
Plan. An optionee receiving options by virtue of his position as an
employee must at all times be employed by the Corporation, the Bank or a
Subsidiary from the date of grant until the exercise of the options granted
except as provided in Sections 10, 11 and 12. All options granted under
the Plan shall be exercisable in annual installments in accordance with the
following schedule:
twenty percent (20%) of the shares beginning 1 year after the date of
the grant of the options;
twenty percent (20%) of the shares beginning 2 years after the date of
the grant of the options;
twenty percent (20%) of the shares beginning 3 years after the date of
the grant of the options;
twenty percent (20%) of the shares beginning 4 years after the date of
the grant of the options; and
twenty percent (20%) of the shares beginning 5 years after the date of
the grant of the options.
Notwithstanding the foregoing, options shall become exercisable with
respect to all of the shares subject thereto upon the optionee's death or
upon the optionee's disability within the meaning of Section 22(e)(3) of
the Code.
The right to exercise options in annual installments shall be cumulative
and any vested installments may be exercised, in whole or in part, at the
election of the optionee. The exercise of any option must be evidenced by
written notice to the Corporation that the optionee intends to exercise his
option.
In no event shall an option be deemed granted by the Corporation or
exercisable by a
5
<PAGE>
recipient prior to the mutual execution by the Corporation and the
recipient of an Option Agreement which comports with the requirements of
Section 5 and Section 8(c).
(b) The inability of the Corporation or Bank to obtain approval from
any regulatory body or authority deemed by counsel to be necessary to the
lawful issuance and sale of any shares of Common Stock hereunder shall
relieve the Corporation and the Bank of any liability in respect of the
non-issuance or sale of such shares. As a condition to the exercise of an
option, the Corporation may require the person exercising the Option to
make such representations and warranties as may be necessary to assure the
availability of an exemption from the registration requirements of federal
or state securities laws.
(c) The Committee shall have the discretionary authority to impose in
the Option Agreements such restrictions on shares of Common Stock as it may
deem appropriate or desirable, including but not limited to the authority
to impose a right of first refusal or to establish repurchase rights or
both of these restrictions.
10. TERMINATION OF DIRECTORSHIP OR EMPLOYMENT - EXCEPT BY DISABILITY OR
-------------------------------------------------------------------
DEATH. If any optionee receiving the grant of an option by virtue of his
- -----
position as a director ceases to be a director of at least one of the
Corporation, the Bank or any Subsidiary or if any optionee receiving the grant
of an option by virtue of his position as an employee ceases to be an employee
of at least one of the Corporation, the Bank and any Subsidiary for any reason
other than death or disability (as defined in paragraph 11), he may, (i) at any
time within three (3) months after his date of termination, but not later than
the date of expiration of the option, exercise any option designated in the
Option Agreement as an incentive stock option and (ii) at any time prior to the
date of expiration of the option, exercise any option designated in the Option
Agreement as a nonqualified stock option. However, in either such event the
optionee may exercise any option only to the extent it was vested and he or she
was entitled to exercise the option on the date of termination. Any options or
portions of options of terminated directors or employees not so exercised shall
terminate and be forfeited.
11. TERMINATION OF DIRECTORSHIP OR EMPLOYMENT - DISABILITY. If any
------------------------------------------------------
optionee receiving the grant of an option by virtue of his position as a
director ceases to be a director of at least one of the Corporation, the Bank or
any Subsidiary or if any employee receiving the grant of an option by virtue of
his position as an employee ceases to be employed by at least one of the
Corporation, the Bank and any Subsidiary due to his becoming disabled within the
meaning of Section 22(e)(3) of the Code, he may, (i) at any time within 12
months after his date of termination, but not later than the date of expiration
of the option, exercise any option designated in the Option Agreement as an
incentive stock option with respect to all shares subject thereto and (ii) at
any time prior to the date of expiration of the option, exercise any option
designated in the Option Agreement as a nonqualified stock option with respect
to all shares subject thereto. Any portions of options of terminated directors
or employees not so exercised shall terminate.
12. TERMINATION OF DIRECTORSHIP OR EMPLOYMENT - DEATH. If an optionee
-------------------------------------------------
receiving the grant of an option by virtue of his position as a director dies
while a director of the Corporation, the Bank or any Subsidiary or if any
employee receiving the grant of an option by virtue of his position as an
employee dies while in the employment of the Corporation, the Bank or a
Subsidiary, the person or persons to whom the option is transferred by will or
by the laws of descent
6
<PAGE>
and distribution may exercise the option at any time until the term of the
option has expired, with respect to all shares subject thereto, to the same
extent and upon the same terms and conditions the optionee would have been
entitled to do so had he lived. Any options or portions of options of deceased
directors or employees not so exercised shall terminate.
13. RESTRICTIONS ON TRANSFER. An option granted under this Plan may not
------------------------
be transferred except by will or the laws of descent and distribution and,
during the lifetime of the optionee to whom it was granted, may be exercised
only by such optionee.
14. CAPITAL ADJUSTMENTS AFFECTING COMMON STOCK.
------------------------------------------
(a) If the outstanding shares of Common Stock of the Corporation are
increased, decreased, changed into or exchanged for a different number or
kind of shares or other securities of the Corporation or another entity as
a result of a recapitalization, reclassification, stock dividend, stock
split, amendment to the Corporation's Articles of Incorporation, reverse
stock split, merger or consolidation, an appropriate adjustment shall be
made in the number and/or kind of securities allocated to the options
previously and subsequently granted under the Plan, without change in the
aggregate purchase price applicable to the unexercised portion of the
outstanding options but with a corresponding adjustment in the price for
each share or other unit of any security covered by the options.
(b) To the extent that the foregoing adjustments relate to particular
stock or securities of the Corporation subject to option under this Plan,
such adjustments shall be made by the Committee, whose determination in
that respect shall be final and conclusive.
(c) The grant of an option pursuant to this Plan shall not affect in
any way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge or to consolidate or to dissolve, liquidate or sell,
or transfer all or any part of its business or assets.
(d) No fractional shares of stock shall be issued under the Plan for
any such adjustment.
(e) Any adjustment made pursuant to this Section 14, shall be made in
such manner as not to constitute a modification of any outstanding
incentive stock options within the meaning of Section 424(h) of the Code.
15. INVESTMENT PURPOSE. At the discretion of the Committee, any Option
------------------
Agreement may provide that the optionee shall, by accepting the option,
represent and agree, for himself and his transferees by will or the laws of
descent and distribution, that all shares of stock purchased upon the exercise
of the option will be acquired for investment and not for resale or
distribution, and that upon each exercise of any portion of an option, the
person entitled to exercise the same shall furnish evidence of such facts which
is satisfactory to the Corporation. Certificates for shares of stock acquired
under the Plan may be issued bearing such restrictive legends as the Corporation
and its counsel may deem necessary to ensure that the optionee is not an
"underwriter" within the meaning of the regulations of the Securities Exchange
Commission.
7
<PAGE>
16. APPLICATION OF FUNDS. The proceeds received by the Corporation from
--------------------
the sale of Common Stock pursuant to options will be used for general corporate
purposes.
17. NO OBLIGATION TO EXERCISE OPTION. The granting of an option shall
--------------------------------
impose no obligation upon the optionee to exercise such option.
18. EFFECTIVE DATE OF PLAN. The Plan will become effective upon the
----------------------
approval of the Plan by a majority of the shareholders of the Corporation as
required by regulations of the FDIC and the receipt of all necessary regulatory
approvals.
19. TERM OF PLAN. Options may be granted pursuant to this Plan from time
------------
to time within ten (10) years from the effective date of the Plan.
20. TIME OF GRANTING OF OPTIONS. Nothing contained in the Plan or in any
---------------------------
resolution adopted or to be adopted by the Committee or the shareholders of the
Corporation and no action taken by the Committee shall constitute the granting
of any option hereunder. The granting of an option pursuant to the Plan shall
take place only when an Option Agreement shall have been duly executed and
delivered by and on behalf of the Corporation at the direction of the Committee.
21. WITHHOLDING TAXES. Whenever the Corporation proposes or is required
-----------------
to issue or transfer shares of stock under the Plan, the Corporation shall have
the right to require the optionee to remit to the Corporation an amount
sufficient to satisfy any federal, state and/or local withholding tax
requirements prior to the issuance of any certificate or certificates for such
shares. Alternatively, the Corporation may issue or transfer such shares of
stock net of the number of shares sufficient to satisfy the withholding tax
requirements. For withholding tax purposes, the shares of stock shall be valued
on the date the withholding obligation is incurred.
22. TERMINATION AND AMENDMENT. The Board may at any time alter, suspend,
-------------------------
terminate or discontinue the Plan, but may not, without the consent of the
holder of an option previously granted, make any alteration which would deprive
the optionee of his rights with respect thereto; provided, however, that
-------- -------
shareholder approval of certain amendments may be necessary if it is desirable
for the Plan to continue to satisfy the requirements of Rule 16b-3 of the
Securities Exchange Commission; and provided further, that in no event shall
-------- -------
this Plan be terminated at the time of or following any merger or consolidation
of the Corporation or the Bank, unless and until the surviving entity shall have
made provision for an equivalent benefit for all the then current option
holders. Notwithstanding anything herein to the contrary, the Board may not
amend Section 5 hereof or any other provisions of this Plan described in Rule
16b-3(c)(2)(ii)(A) of the regulations promulgated pursuant to the Exchange Act
more than once every six months, other than to comport with changes in the Code,
the Employee Retirement Income Security Act, or the rules thereunder.
23. CAPTIONS AND HEADINGS; GENDER AND NUMBER. Captions and paragraph
----------------------------------------
headings used herein are for convenience only, do not modify or affect the
meaning of any provision herein, are not a part, and shall not serve as a basis
for interpretation or construction of, this Plan. As used herein, the masculine
gender shall include the feminine and neuter, and the singular number shall
include the plural, and vice versa, whenever such meanings are appropriate.
24. EXCULPATION AND INDEMNIFICATION. In connection with this Plan, no
-------------------------------
8
<PAGE>
member of the Board, no member of the Board of Directors of the Bank, and no
member of the Board of Directors of any Subsidiary, and no member of the
Committee shall be personally liable for any act or omission to act, nor for any
mistake in judgment made in good faith, unless arising out of, or resulting
from, such person's own bad faith, willful misconduct or criminal acts. To the
extent permitted by applicable law and regulation, the Corporation shall
indemnify, defend and hold harmless the members of the Board, the members of the
Board of Directors of the Bank and the members of the Board of Directors of any
Subsidiary, and members of the Committee, and each other officer or employee of
the Bank, the Corporation or of any Subsidiary to whom any power or duty
relating to the administration or interpretation of this Plan may be assigned or
delegated, from and against any and all liabilities (including any amount paid
in settlement of a claim with the approval of the Board), and any costs or
expenses (including counsel fees) incurred by such persons arising out of or as
a result of, any act or omission to act, in connection with the performance of
such person's duties, responsibilities and obligations under this Plan, other
than such liabilities, costs, and expenses as may arise out of, or result from
the bad faith, willful misconduct or criminal acts of such persons.
25. GOVERNING LAW. Without regard to the principles of conflicts of laws,
-------------
the laws of the State of North Carolina shall govern and control the validity,
interpretation, performance, and enforcement of this Plan.
26. INSPECTION OF PLAN. A copy of this Plan, and any amendments thereto,
------------------
shall be maintained by the Secretary of the Corporation and shall be shown to
any proper person making inquiry about it.
27. OTHER PROVISIONS. The Option Agreements authorized under this Plan
----------------
shall contain such other provisions not inconsistent with the foregoing,
including, without limitation, increased restrictions upon the exercise of
options, as the Committee may deem advisable.
9
<PAGE>
EXHIBIT A
---------
Percentage of Total
Shares Subject to Option
Optionee Under Plan
- -------- ------------------------
<PAGE>
EXHIBIT B
---------
ANSON BANCORP, INC.
STOCK OPTION PLAN
STOCK OPTION GRANT AND AGREEMENT
THIS STOCK OPTION GRANT AND AGREEMENT ("Agreement"), being made according
to and subject to the terms and conditions of the ANSON BANCORP, INC. STOCK
OPTION PLAN ("Plan"), a copy of which is attached hereto as Annex A and is
hereby incorporated by reference and made a part of this Agreement, is herein
executed and effective the _______ day of _______________, _____, between Anson
Bancorp, Inc. (the "Corporation") and ____________________ ("Optionee"):
1. Grant. As of the above date, the Corporation hereby grants: (i) an
-----
incentive stock option (as that term is defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code")) to purchase ________ shares of
Common Stock of the Corporation to the Optionee at the price stated in this
Agreement; and/or (ii) a nonqualified stock option to purchase __________ shares
of Common Stock of the Corporation to the Optionee at the price stated in this
Agreement.
The option(s) granted under this section and as described in this Agreement
is (are) in all respects subject to and conditioned by the terms, definitions,
and provisions of this Agreement and of the Plan. Capitalized terms in this
Agreement which are not otherwise defined but which are defined in the Plan
shall have the same meaning given to those terms in the Plan.
2. Price. The option price is $_____________ for each share.
-----
3. Exercise of Option. The option(s) granted under this Agreement shall
------------------
be exercisable pursuant to the terms and conditions of the Plan and as set forth
below:
(a) Right to Exercise: There are no other terms and conditions
-----------------
imposed on the Optionee's right to exercise his options other than those
imposed in the Plan, except as stated below:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(b) Annual Installments: Subject to the terms and conditions of the
-------------------
Plan, the incentive stock options can be exercised in annual installments
as follows:
__________________ shares beginning on ______________, 19__
__________________ shares beginning on ______________, 19__
__________________ shares beginning on ______________, 19__
__________________ shares beginning on ______________, 19__
__________________ shares beginning on ______________, 19__
<PAGE>
The nonqualified options can be exercised in annual installments as
follows:
__________________ shares beginning on ______________, 19__
__________________ shares beginning on ______________, 19__
__________________ shares beginning on ______________, 19__
__________________ shares beginning on ______________, 19__
__________________ shares beginning on ______________, 19__
The right to exercise the option(s) in annual installments shall be
cumulative. In addition, the option(s) shall be exercisable upon
disability and death as set forth in the Plan.
(c) Method of Exercise: The options under this Agreement shall be
------------------
exercisable by a written notice to the Secretary of the Corporation which
shall include the following:
(1) State the election to exercise the option, the number of
shares in respect of which it is being exercised, the person in whose
name the stock certificate or certificates for such shares of Common
Stock is to be registered, his or her address, and social security
number;
(2) Contain any such representation and agreements as to
Optionee's investment intent with respect to such shares of Common
Stock as may be required by the Corporation;
(3) Be signed by the person entitled to exercise the option and,
if the option is being exercised by any person or persons other than
the Optionee, be accompanied by proof, satisfactory to the
Corporation, of the right of such person or persons to exercise the
option in accordance with the Plan; and
(4) Be accompanied by payment of the purchase price of any
shares with respect to which the option is being exercised which
payment shall be in form acceptable to the Committee pursuant to
Section 6(b) of the Plan.
(d) Representations and Warranties: In order to exercise an option,
------------------------------
the person exercising the option must make the representations and
warranties to the Corporation as may be required by any applicable law or
regulation, or as may otherwise be required pursuant to the Plan.
(e) Approvals. In order for an option to be exercised, all filings
---------
and approvals required by applicable law and regulations or pursuant to the
Plan must have been made and obtained.
4. Non-transferability of Option. This option may not be transferred in
-----------------------------
any manner otherwise than by will or the laws of descent and distribution and
may be exercised during the life of the Optionee only by him or her.
5. Investment Purpose. This option may not be exercised if the issuance
------------------
of shares upon such exercise would constitute a violation of any applicable
federal or state securities law or other law
2
<PAGE>
or valid regulation.
6. Expiration of Option. This option shall expire on _____________,
--------------------
_________.
7. Escrow. All stock purchased pursuant to an incentive stock option
------
shall be held in escrow for a period which ends on the later of (i) two (2)
years from the date of the granting of the option or (ii) one (1) year after the
transfer of the stock pursuant to the exercise of the option. The stock shall
be held by the Corporation or its designee. The optionee who has exercised the
option shall have all rights of a stockholder, including, but not limited to,
the rights to vote, receive dividends and sell the stock. The sole purpose of
the escrow is to inform the Corporation of a disqualifying disposition of the
stock within the meaning of Section 422 of the Code, and it shall be
administered solely for this purpose.
8. Resolution of Disputes. Any dispute or disagreement which should
----------------------
arise under, or as a result of, or in any way relate to, the interpretation,
construction, or application of this Agreement will be determined by the
Committee designated in Section 2 of the Plan. Any determination made by such
Committee shall be final, binding, and conclusive for all purposes.
9. Construction Controlled by Plan. The options evidenced hereby shall
-------------------------------
be subject to all of the requirements, conditions and provisions of the Plan.
This Agreement shall be construed so as to be consistent with the Plan; and the
provisions of the Plan shall be deemed to be controlling in the event that any
provision should appear to be inconsistent therewith.
10. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such a manner as to be valid and enforceable under
applicable law, but if any provision of this Agreement is determined to be
unenforceable, invalid or illegal, the validity of any other provision or part
thereof shall not be affected thereby and this Agreement shall continue to be
binding on the parties hereto as if such unenforceable, invalid or illegal
provision or part thereof had not been included herein.
11. Modification of Agreement; Waiver. This Agreement may be modified,
---------------------------------
amended, suspended or terminated, and any terms, representations or conditions
may be waived, but only by a written instrument signed by each of the parties
hereto and only subject to the limitations set forth in the Plan. No waiver
hereunder shall constitute a waiver with respect to any subsequent occurrence or
other transaction hereunder or of any other provision.
12. Captions and Headings; Gender and Number. Captions and paragraph
----------------------------------------
headings used herein are for convenience only, do not modify or affect the
meaning of any provision herein, are not a part, and shall not serve as a basis
for interpretation or construction, of this Agreement. As used herein, the
masculine gender shall include the feminine and neuter, and the singular number
shall include the plural, and vice versa, whenever such meanings are
appropriate.
13. Governing Law; Venue and Jurisdiction. Without regard to the
-------------------------------------
principles of conflicts of laws, the laws of the State of North Carolina shall
govern and control the validity, interpretation, performance, and enforcement of
this Agreement.
14. Binding Effect. This Agreement shall be binding upon and shall inure
--------------
to the benefit
3
<PAGE>
of the Corporation, and its successors and assigns, and shall be binding upon
and inure to the benefit of the Optionee, and his or her heirs, legatees,
personal representative, executor, administrator and permitted assigns.
15. Entire Agreement. This Agreement and the Plan constitute and embody
----------------
the entire understanding and agreement of the parties hereto and, except as
otherwise provided hereunder, there are no other agreements or understandings,
written or oral, in effect between the parties hereto relating to the matters
addressed herein.
16. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when executed and delivered shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have set their hands and seals the day and
year first above written.
ATTEST: ANSON BANCORP, INC.
By:
- ------------------------------ --------------------------------------
(Corporate Seal) President
------------------
OPTIONEE:
-----------------------------------------
(SEAL)
4
<PAGE>
Exhibit (10)(e)
---------------
ANSON SAVINGS BANK, INC.
SEVERANCE PLAN
THIS IS THE SEVERANCE PLAN ("PLAN") OF ANSON SAVINGS BANK, INC. (THE
"BANK"), A NORTH CAROLINA-CHARTERED SAVINGS BANK, WITH ITS PRINCIPAL OFFICE IN
WADESBORO, NORTH CAROLINA, ADOPTED BY THE BOARD OF DIRECTORS OF THE BANK, TO BE
EFFECTIVE ON THE DATE SET FORTH ON THE LAST PAGE HEREOF.
1. Purpose. The purpose of this Plan is to aid the Bank in attracting
-------
and retaining capable employees by providing the employees with the severance
benefits set forth herein in the event that there is a change in control of the
Bank. For purposes of this Plan, the term "Employee" means and includes any
person employed by the Bank on a full time basis on the date of consummation or
occurrence of a "Change in Control" (as defined in Subparagraph 2(d) below),
excluding any person employed by the Bank on such date pursuant to a written
employment agreement between any such employee and the Bank.
2. Severance Benefit.
-----------------
(a) In the event (i) the Bank or its successor terminates the employment
of any Employee in connection with, or within twenty-four (24) months
after, a "Change in Control" (as defined in Subparagraph 2(d) below),
other than for "cause" (as defined in Paragraph 3 below) or (ii) an
Employee terminates his employment following a Termination Event
pursuant to Paragraph 2(b) below, the Bank shall pay the Employee a
"Severance Benefit" (as calculated pursuant to Subparagraph 2(c)
below).
(b) An Employee shall have the right to terminate his or her employment
upon the occurrence of any of the following events (the "Termination
Events") within twenty-four (24) months following a Change in Control:
(i) The Employee's annual base salary rate is decreased from the
level existing at the effective time of the Change in Control; or
(ii) The Employee is transferred to a location outside of either Anson
County, North Carolina.
A Termination Event shall be deemed to have occurred on the date such
action or event is implemented or takes effect.
(c) For the purposes of this Plan, the amount of any Employee's "Severance
Benefit" shall be calculated as follows:
(i) If the Employee has been employed with the Bank for less than
twenty (20) years, such Employee's Severance Benefit shall be
equal to the greater of (A) an amount equal to two weeks' salary
at the Employee's existing salary rate at the time of termination
multiplied times the Employee's number of complete years of
service as an employee of the Bank or (B) the amount of one
month's salary at the Employee's existing salary rate at the time
of termination.
<PAGE>
(ii) If the Employee has been employed with the Bank at least twenty
(20) years, such Employee's Severance Benefit shall be equal to
the greater of (A) an amount equal to two weeks' salary of the
Employee's existing salary rate at the time of termination
multiplied times the Employee's number of complete years of
services as an employee of the Bank, or (B) the amount of two
times the annual salary payable to the Employee at his salary
rate existing on the date of such termination.
Such sum shall be payable as provided in Subparagraph 2(f) below.
(d) For the purposes of this Plan, the term "Change in Control" shall mean
any of the following events:
(i) a change in control of a nature that would be required to be
reported in response to Item 1 of the Current Report on Form 8-K
by the Bank or by any parent holding company of the Bank
pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 as in effect on the date hereof (the "Exchange Act"); or
(ii) such time as any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Bank or any
parent holding company of the Bank representing 25 percent or
more of the combined voting power of the outstanding capital
stock of the Bank or any parent holding company of the Bank; or
(iii) individuals who constitute the Board of Directors of the Bank or
any parent holding company of the Bank on the date hereof (each,
an "Incumbent Board") cease for any reason to constitute at
least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election was
approved by a vote of at least three-quarters of the directors
comprising the Incumbent Board or whose nomination for election
by the shareholders of the Bank or any parent holding company of
the Bank was approved by the Board of Directors of the Bank or
any parent holding company of the Bank or any Nominating
Committee of any such Board, as applicable, shall be considered
as though he or she were a member of the Incumbent Board; or
(iv) the Bank or any parent holding company of the Bank consolidates
or merges with or into another corporation, association or
entity or is otherwise reorganized, where the Bank or any parent
holding company of the Bank is not the surviving corporation in
such transaction; or
(v) all or substantially all of the assets of the Bank or any parent
holding company of the Bank are sold or otherwise transferred to
or are acquired by any other entity or group.
Notwithstanding the other provisions of this Paragraph 2(d), neither
(i) the conversion of
2
<PAGE>
the Bank from a mutual savings bank to a stock savings bank
("Conversion") pursuant to the rules and regulations regarding mutual
to stock conversions, (ii) the acquisition of capital stock of the
Bank by a parent holding company formed by the Bank to acquire the
capital stock of the Bank issued in connection with a Conversion (iii)
the sale by such parent holding company of its capital stock to the
members of the Bank and the general public pursuant to the rules and
regulations regarding conversions, or (iv) any other event or
transaction which the Board of Directors of the Bank shall determine
is not a Change in Control for purposes of its Plan prior to the
consummation or occurrence thereof, shall constitute a Change in
Control. In addition, a transaction or event shall not be considered a
Change in Control with respect to any Employee benefitted hereby if,
prior to the consummation or occurrence of such transaction or event,
such Employee and the Bank agree in writing that the same shall not be
treated as a Change in Control for purposes of this Plan.
(d) Amounts payable pursuant to this Paragraph 2 shall be paid, at the
option of the Bank or any successor in one lump sum or in equal
monthly payments over a period not to exceed a number of months equal
to the Employee's years of service with the Bank divided by two.
(e) Following a Termination Event which gives rise to an Employee's rights
hereunder, the Employee shall have six (6) months from the date of
occurrence of the Termination Event to terminate his or her employment
pursuant to this Paragraph 2. Any such termination shall be deemed to
have occurred only upon delivery to the Bank (or to any successor
corporation) of written notice of termination which describes the
Change in Control and Termination Event. If an Employee does not so
terminate his employment within such six-month period, he or she shall
thereafter have no further rights hereunder with respect to that
Termination Event, but shall retain rights, if any, hereunder with
respect to any other Termination Event as to which such six month
period has yet to expire.
3. Termination for "Cause." Termination for "cause" shall include
----------------------
termination because of the Employee's personal dishonesty, willful misconduct,
breach of fiduciary duty involving personal profit, intentional failure to
perform stated duties, or willful violation of any law, rule, regulation (other
than traffic violations or similar offenses) or final cease-and-desist order.
4. Effect on Other Benefits. The benefits payable to or owed to any
------------------------
Employee under this Plan shall not be reduced or otherwise affected by the
Employee's receipt or entitlement to benefits under (i) any agreement between
the Employee and the Bank or any parent holding company of the Bank, or (ii)
any other fringe benefit, compensation, or other employee benefit plan of the
Bank or any parent holding company of the Bank, including, but not limited to,
stock option plan, restricted stock agreements or employee stock ownership plan.
In addition, the benefits payable to or owed to any Employee under any such
fringe benefit, compensation or other employee benefit plan of the Bank or any
parent holding company of the Bank shall not be reduced or otherwise affected by
the Employee's receipt or entitlement to benefits under this Plan.
5. Binding Effect. This Plan shall be binding upon any corporate or
--------------
other successor of the Bank which shall acquire, directly or indirectly, by
merger, consolidation, purchase, or otherwise, all or
3
<PAGE>
substantially all of the assets of the Bank.
6. Modification, Waiver, Amendments. Prior to the consummation or
--------------------------------
occurrence of a Change in Control, as defined herein, this Plan may be
terminated, modified or amended in any manner whatsoever, by resolution adopted
by the Bank's Board of Directors. Prior to the time of the consummation or
occurrence of any Change in Control, no employee shall have any vested rights
pursuant to this Plan. After the consummation or occurrence of a Change in
Control, all Employees shall have vested rights pursuant to this Plan, and this
Plan may not be terminated or modified or amended in a manner to reduce the
benefits payable to any Employee, without the written consent of such Employee.
7. Effect of Plan on Employees. This Plan shall not confer upon any
---------------------------
employee of the Bank the right to continued employment with the Bank or any
successor to the Bank, nor shall it limit the right of the Bank or any successor
of the Bank to terminate the employment of any employee at any time, subject to
the terms hereof.
8. Withholding. The Bank or any successor to the Bank shall have the
-----------
right to deduct or otherwise effect a withholding of any amount required by
federal or state laws to be withheld as a result of any payments required to be
made under this Plan.
9. Governing Law. Without regard to principles of conflicts of laws, the
-------------
laws of the State of North Carolina shall govern and control the validity,
interpretation, performance and enforcement of this Plan.
10. Inspection of Plan. A copy of this Plan, and any amendments thereto,
------------------
shall be maintained by the Secretary of the Bank and shall be shown to any
proper person making inquiry with respect thereto.
11. Waiver. Any Employee shall have the right to waive the receipt of any
------
benefits which would otherwise be payable to such Employee pursuant to this Plan
by executing a writing setting forth the terms of such waiver.
12. Excise Taxes. It is the intent of the parties hereto that all
------------
payments made pursuant to this Plan shall be deductible by the Bank for federal
income tax purposes and not result in the imposition of an excise tax on any
Employee. Notwithstanding anything contained in this Plan to the contrary, any
payments to be made to or for the benefit of any Employee which are deemed to be
"parachute payments," as such term is defined in Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), shall be modified or reduced to
the extent, but only to the extent, reasonably deemed to be necessary by the
Bank to avoid the imposition of excise taxes on the Employee under Section 4999
of the Code or the disallowance of a deduction to the Bank under Section 280G(a)
of the Code.
Dated ____________________, 1998
4
<PAGE>
Exhibit (10)(f)
STATE OF NORTH CAROLINA
COUNTY OF ANSON CAPITAL MAINTENANCE AGREEMENT
This Capital Maintenance Agreement (the "Agreement"), dated as of
____________, 1998, by and between Anson Bancorp, Inc., Wadesboro, North
Carolina, a North Carolina-chartered bank holding company (the "Holding
Company") and Anson Savings Bank, Inc., SSB, a North Carolina-chartered stock
savings bank (the "Savings Bank").
WHEREAS, the Savings Bank has applied to the Administrator, Savings
Institutions Division, North Carolina Department of Commerce (the
"Administrator") for permission to convert from a North Carolina mutual savings
bank to a North Carolina stock owned savings bank (the "Conversion"); and
WHEREAS, as a part of the Conversion, the Holding Company has applied to
the Administrator for permission to acquire all of the capital stock issued by
the Savings Bank in the Conversion (the "Acquisition") and to sell shares of the
Holding Company's common stock to certain persons in a subscription and a
community offering and, if necessary, in a syndicated community offering; and
WHEREAS, the Administrator, the Holding Company and the Savings Bank wish
to protect the interests of the depositors of the Savings Bank and the Savings
Association Insurance Fund; and
WHEREAS, by letter dated _____________, 1997, the Administrator has
approved the Conversion and the Acquisition conditional upon, among other
things, the Holding Company and the Savings Bank entering this Agreement (the
"Approval").
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties agree that, following the
Conversion and Acquisition, the Holding Company and the Savings Bank will
maintain the capital of the Savings Bank at all times in compliance with the
applicable capital requirements of all federal and state regulatory agencies
having supervisory authority over the Savings Bank, including the capital
requirements of the Administrator and the Federal Deposit Insurance Corporation.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by each director of
the Holding Company and the Savings Bank.
DIRECTORS OF ANSON BANCORP, INC. DIRECTORS OF ANSON SAVINGS
BANK, INC., SSB:
- --------------------------------- ----------------------------------
Preston A. Burns Preston A. Burns
- --------------------------------- ----------------------------------
John J. Crawford John J. Crawford
- --------------------------------- ----------------------------------
W. Kenneth Huntley W. Kenneth Huntley
- --------------------------------- ----------------------------------
Emmett S. Patterson Emmett S. Patterson
- --------------------------------- ----------------------------------
John R. Potter John R. Potter
- --------------------------------- ----------------------------------
H. Patrick Taylor, Jr. H. Patrick Taylor, Jr.
- --------------------------------- ----------------------------------
Eugene M. Ward Eugene M. Ward
2
<PAGE>
[LETTERHEAD OF FAULKNER & THOMPSON, P.A.]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the use in this Registration Statement/Prospectus
of Anson Bancorp, Inc. of our report dated August 26, 1997 relating to the
statements of financial condition of Anson Savings Bank, SSB, as of June 30,
1997 and 1996, and the related statements of operations, equity and cash flows
for the years then ended and to the reference to our firm in the Registration
Statement/Prospectus under the caption "Experts".
/s/ Faulkner and Thompson, P.A.
Charlotte, North Carolina
March 9, 1998
<PAGE>
[LETTERHEAD OF FERGUSON & COMPANY APPEARS HERE]
March 12, 1998
Board of Directors
Anson Savings Bank, SSB
211 South Greene Street
Wadesboro, North Carolina 28170
Directors:
We hereby consent to the use of our firm's name in the applications for
conversion of Anson Savings Bank, SSB, Wadesboro, North Carolina, and any
amendments thereto, filed with the Division of Savings Institutions, North
Carolina Department of Commerce (the "Division"), and the FDIC, in the Form SB-2
Registration Statement and any amendments thereto, and in the Acquisition
Application and the Holding Company Application for Anson Bancorp, Inc. as filed
with the Division and the Federal Reserve Board, respectively. We also hereby
consent to the inclusion of, a summary of, and references to our Appraisal
Report and our opinion concerning subscription rights in such filings including
the Prospectus of Anson Bancorp, Inc. and the Proxy Statement of Anson Savings
Bank, SSB.
Sincerely,
/s/ Robin L. Fussell
Robin L. Fussell
Principal
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 JUN-30-1997
<PERIOD-START> JUL-01-1997 JUL-01-1996
<PERIOD-END> DEC-31-1997 JUN-30-1997
<CASH> 172 197
<INT-BEARING-DEPOSITS> 3,289 3,844
<FED-FUNDS-SOLD> 750 600
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 380 318
<INVESTMENTS-CARRYING> 4,374 3,939
<INVESTMENTS-MARKET> 0 0
<LOANS> 11,423 11,523
<ALLOWANCE> 100 100
<TOTAL-ASSETS> 20,723 20,720
<DEPOSITS> 16,656 16,791
<SHORT-TERM> 0 0
<LIABILITIES-OTHER> 208 173
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 3,859 3,756
<TOTAL-LIABILITIES-AND-EQUITY> 20,723 20,720
<INTEREST-LOAN> 475 963
<INTEREST-INVEST> 243 478
<INTEREST-OTHER> 0 0
<INTEREST-TOTAL> 718 1,441
<INTEREST-DEPOSIT> 412 819
<INTEREST-EXPENSE> 0 0
<INTEREST-INCOME-NET> 306 622
<LOAN-LOSSES> 0 5
<SECURITIES-GAINS> 0 0
<EXPENSE-OTHER> 227 548
<INCOME-PRETAX> 79 69
<INCOME-PRE-EXTRAORDINARY> 79 69
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 62 50
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<YIELD-ACTUAL> 3.09 3.15
<LOANS-NON> 0 0
<LOANS-PAST> 312 240
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 43 44
<ALLOWANCE-OPEN> 100 95
<CHARGE-OFFS> 0 0
<RECOVERIES> 0 0
<ALLOWANCE-CLOSE> 100 100
<ALLOWANCE-DOMESTIC> 100 100
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
<PAGE>
Conversion Valuation Report
-------------------------------
Valued as of February 27, 1998
ANSON SAVINGS BANK, SSB
Wadesboro, North Carolina
Prepared By:
Ferguson & Company
Suite 305
860 West Airport Freeway
Hurst, Texas 76054
817/577-9558
<PAGE>
STATEMENT OF APPRAISER'S INDEPENDENCE
Anson Savings Bank, SSB
-----------------------
Wadesboro, North Carolina
-------------------------
We are the appraiser for Anson Savings Bank, SSB ("Anson Savings" or
"Bank") in connection with its mutual to stock conversion. We are submitting
our independent estimate of the pro forma market value of the Bank's stock to be
issued in the conversion. In connection with our appraisal of the Bank's to-be-
issued stock, we have received a fee which was not related to the estimated
final value. The estimated pro forma market value is solely the opinion of our
company and it was not unduly influenced by the Bank, its conversion counsel,
its selling agent, or any other party connected with the conversion. We also
received a fixed fee for assisting the Bank in connection with the preparation
of its business plan to be submitted with the conversion application.
Anson Savings has agreed to indemnify Ferguson & Company under certain
circumstances against liabilities arising out of our services. Specifically, we
are indemnified against liabilities arising from our appraisal, if the Bank
misrepresented or omitted material facts, except to the extent such liabilities
are determined to have arisen because of our negligence, failure to exercise due
diligence, or willful conduct.
Ferguson & Company
Robin L. Fussell
Principal
March 6, 1998
<PAGE>
March 6, 1997
Board of Directors
Anson Savings Bank, SSB
211 South Greene Street
Wadesboro, North Carolina 28170
Dear Directors:
We have completed and hereby provide, as of February 27, 1998, an
independent appraisal of the estimated pro forma market value of Anson Savings
Bank, SSB, Wadesboro, North Carolina ("Anson Savings" or "Bank"), in connection
with the conversion of Anson Savings from the mutual to stock form of
organization ("Conversion"). This appraisal report is furnished pursuant to the
regulatory filing of the Bank's applications for conversion with the Federal
Deposit Insurance Corporation ("FDIC") and the Savings Institutions Division of
the North Carolina Department of Commerce ("Division").
Ferguson & Company ("F&C") is a consulting firm that specializes in
providing financial, economic, and regulatory services to financial
institutions. The background and experience of F&C is presented in Exhibit I. We
believe that, except for the fees we will receive for preparing the appraisal
and assisting with Anson Savings' business plan, we are independent. F&C
personnel are prohibited from owning stock in conversion clients for a period of
at least one year after conversion.
In preparing our appraisal, we have reviewed Anson Savings' Notice of
Intent to Convert to Stock Form and Application to Convert a Mutual Savings Bank
to a Stock Owned Savings Bank, including the Proxy Statement, as filed with the
FDIC and the Division, respectively. We conducted an analysis of Anson Savings
that included discussions with Faulkner and Thompson, P.A., the Bank's
independent auditors, and with Brooks, Pierce, McLendon, Humphrey and Leonard,
LLP, the Bank's conversion counsel. In addition, where appropriate, we
considered information based on other available published sources that we
believe is reliable; however, we cannot guarantee the accuracy or completeness
of such information.
We also reviewed the economy in Anson Savings' primary market area and
compared the Bank's financial condition and operating results with that of
selected publicly traded thrift institutions. We reviewed conditions in the
securities markets in general and in the market for thrifts stocks in
particular.
Our appraisal is based on Anson Savings' representation that the
information contained in the applications for conversion and additional evidence
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 Anson Savings and its auditors, nor did we independently
value the assets or liabilities of the Bank. The valuation considers Anson
Savings only as a going concern and should not be considered an indication of
its liquidation value.
It is our opinion that, as of February 27, 1998, the estimated pro forma
market value of Anson Savings was $6,600,000, or 660,000 shares at $10.00 per
share. The resultant valuation range was $5,610,000 at the minimum (561,000
shares at $10.00 per share) to $7,590,000 at the maximum (759,000
<PAGE>
Board of Directors
March 6, 1998
Page 2
shares at $10.00 per share), based on a range of 15 percent below and above the
midpoint valuation. The supermaximum was $8,728,500 (872,850 shares at $10.00
per share).
Our valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing shares of common
stock in the conversion. Moreover, because such valuation is necessarily based
upon estimates and projections of a number of matters, all of which are subject
to change from time to time, no assurance can be given that persons who purchase
shares of common stock in the conversion will thereafter be able to sell such
shares at prices related to the foregoing estimate of the Bank's pro forma
market value. F&C is not a seller of securities within the meaning of any
federal or state securities laws and any report prepared by F&C shall not be
used as an offer or solicitation with respect to the purchase or sale of any
securities.
Our opinion is based on circumstances as of the date hereof, including
current conditions in the United States securities markets. Events occurring
after the date hereof, including, but not limited to, changes affecting the
United States securities markets and subsequent results of operations of Anson
Savings, could materially affect the assumptions used in preparing this
appraisal.
The valuation reported herein will be updated as provided in the conversion
regulations and guidelines. Any updates will consider, among other things, any
developments or changes in Anson Savings' financial performance and condition,
management policies, and current conditions in the equity markets for thrift
shares. Should any such new developments or changes be material, in our
opinion, to the valuation of the shares, appropriate adjustments will be made to
the estimated pro forma market value. The reasons for any such adjustments will
be explained in detail at the time.
Respectfully,
FERGUSON & COMPANY
Robin L. Fussell
Principal
<PAGE>
FERGUSON & COMPANY
- ------------------
TABLE OF CONTENTS
Anson Savings Bank, SSB
Wadesboro, North Carolina
PAGE
----
INTRODUCTION 1
SECTION I. - FINANCIAL CHARACTERISTICS 2
PAST & PROJECTED ECONOMIC CONDITIONS 2
FINANCIAL CONDITION OF INSTITUTION 2
Balance Sheet Trends 2
Asset/Liability Management 2
Income and Expense Trends 2
Regulatory Capital Requirements 3
Lending 3
Nonperforming Assets 3
Classified Assets 3
Loan Loss Allowance 3
Mortgage-Backed Securities and Investments 3
Savings Deposits 3
Borrowings 4
Subsidiaries 4
Legal Proceedings 4
EARNINGS CAPACITY OF THE INSTITUTION 4
Asset-Size-Efficiency of Asset Utilization 4
Intangible Values 4
Effect of Government Regulations 5
Office Facilities 5
SECTION II - MARKET AREA 1
DEMOGRAPHICS 1
i
<PAGE>
FERGUSON & COMPANY
- ------------------
TABLE OF CONTENTS - CONTINUED
Anson Savings Bank, SSB
Wadesboro, North Carolina
PAGE
----
SECTION III - COMPARISON WITH PUBLICLY TRADED THRIFTS 1
COMPARATIVE DISCUSSION 1
Selection Criteria 1
Profitability 2
Balance Sheet Characteristics 2
Risk Factors 2
Summary of Financial Comparison 3
FUTURE PLANS 3
SECTION IV - CORRELATION OF MARKET VALUE 1
MARKETABILITY & LIQUIDITY OF STOCK TO BE ISSUED 1
Financial Aspects 1
Market Area 2
Management 2
Dividends 2
Liquidity 3
Thrift Equity Market Conditions 3
NORTH CAROLINA ACQUISITIONS 3
EFFECT OF INTEREST RATES ON THRIFT STOCK 4
Adjustments Conclusion 6
Valuation Approach 6
Valuation Conclusion 7
ii
<PAGE>
FERGUSON & COMPANY
- ------------------
TABLE OF CONTENTS - CONTINUED
Anson Savings Bank, SSB
Wadesboro, North Carolina
TABLE
NUMBER TABLE TITLE PAGE
------ ----------- ----
SECTION I - FINANCIAL CHARACTERISTICS
1 Selected Financial Data 6
2 Selected Operating Ratios 7
3 Interest Rate Shock 8
4 Interest Rate Sensitivity Analysis 9
5 Regulatory Capital Compliance 10
6 Loan Portfolio Composition 11
7 Loan Maturities 12
8 Loan Origination, Purchase, and Repayment Activity 13
9 Average Balances, Rates, and Yields 14
10 Rate/Volume Analysis 16
11 Non-Performing Assets 17
12 Analysis of the Allowance for Loan Losses 18
13 Allocation of Allowance for Loan Losses 19
14 Investments 20
15 Investment Maturities 21
16 Deposit Portfolio 22
17 Time Deposit Maturities 23
18 Jumbo CD Maturities 23
19 Offices 24
SECTION II - MARKET AREA
1 Demographic Trends 3
2 Percent Employment by Industry 4
3 Market Area Deposits 5
SECTION III - COMPARISON WITH PUBLICLY
TRADED THRIFTS
1 Comparatives General Characteristics 4
2 Key Financial Indicators 5
3 Pro Forma Comparisons 6
iii
<PAGE>
FERGUSON & COMPANY
- ------------------
TABLE OF CONTENTS - CONTINUED
Anson Savings Bank, SSB
Wadesboro, North Carolina
TABLE
NUMBER TABLE TITLE PAGE
------ ----------- ----
SECTION IV - CORRELATION OF MARKET VALUE
1 Appraisal Earnings Adjustments 2
2 North Carolina Acquisitions 8
3 Recent Conversions 10
4 Recent Pink Sheet Conversions 13
5 Comparison of Pricing Ratios 16
FIGURE
NUMBER LIST OF FIGURES PAGE
------ --------------- ----
SECTION IV - CORRELATION OF MARKET VALUE
1 SNL Index 17
2 Interest Rates 18
EXHIBIT TITLE
-------------
Exhibit I - Ferguson & Company Qualifications
Exhibit II - Selected Region, State, and Comparatives Information
Exhibit III - Anson Savings Bank, SSB BankSource Report
Exhibit IV - Comparative Group TAFS and BankSource Reports
Exhibit V - Selected Publicly Traded Thrifts
Exhibit VI - Comparative Group Selection
Exhibit VII - Pro Forma Calculations
Pro Forma Assumptions
Pro Forma Effect of Conversion Proceeds At the Minimum of the Range
Pro Forma Effect of Conversion Proceeds At the Midpoint of the Range
Pro Forma Effect of Conversion Proceeds At the Maximum of the Range
Pro Forma Effect of Conversion Proceeds At the SuperMax of the Range
Pro Forma Analysis Sheet
iv
<PAGE>
SECTION I
FINANCIAL CHARACTERISTICS
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
INTRODUCTION
Anson Savings Bank, SSB ("Anson Savings" or "Bank") is a state chartered,
federally insured mutual savings bank located in Wadesboro (Anson County), North
Carolina. It was chartered by the State of North Carolina in 1889, and received
its insurance of accounts in 1959. It adopted its current name in 1993, at
which time it switched from a state chartered, OTS supervised thrift to a state
savings bank. In December 1997, the Board of Directors adopted a plan to
convert the Bank from the mutual to stock form of organization. In connection
with the conversion, the Bank will form a parent holding company to be known as
Anson Bancorp, Inc. ("ABI" or the "Holding Company"). ABI will sell stock to
the public and invest part of the proceeds in exchange for all of the shares of
stock issued by Anson Savings.
At December 31, 1997, Anson Savings had total assets of $20.7 million, loans
of $11.3 million, securities and cash and time deposits in other banks of $8.8
million, deposits of $16.7 million, and equity of $3.9 million, or 18.6% of
assets.
The bank has one office, which is located in Wadesboro (Anson County), North
Carolina. North Carolina is in the southeastern portion of the United States.
Anson County is located in the south central section of the State, within 15
miles of the South Carolina border.
Anson Savings is a traditional thrift. It invests primarily in (1) 1-4 family
loans, (2) investment securities (principally government and agency securities),
and (3) temporary cash investments. It is funded principally by savings
deposits and existing net worth. It has not utilized borrowings recently.
The Bank offers a limited variety of real estate loan products, and single
family loans dominate the Bank's loan portfolio. At December 31, 1997, loans on
1-4 family dwellings made up 52.4% of total assets and 92.1% of the loan
portfolio. Consumer loans were 0.7% of the loan portfolio and construction real
estate loans were 3.1% of the loan portfolio. Investment securities and
temporary cash investments made up 42.4% of total assets.
Anson Savings had $312,000 in non-performing assets at December 31, 1997, as
compared to $240,000 at June 30, 1997, and $198,000 at June 30, 1996. The
Bank's non-performing loans are relatively high, but its loss experience is
relatively low, indicating that the Bank has been accommodating to customers
with temporary financial problems.
Savings deposits decreased $0.967 million during the period from June 30,
1996, to December 31, 1997, a compound annual decline rate of 3.8%. Savings
decreased $0.832 million (4.7%) from June 30, 1996, to June 30, 1997, and
decreased $0.135 million (0.8%) from June 30, 1997, to December 31, 1997. Anson
Savings has not relied on borrowings during recent years.
The Bank's capital to assets ratio has increased slightly during the period of
18 months ending December 31, 1997. Equity capital, as a percentage of assets,
has increased from 16.9% at June 30, 1996, to 18.6% at December 31, 1997. The
compound annual asset growth rate was negative 2.3% during the period, while the
compound annual rate of growth for equity was 4.3%.
Anson Savings' profitability, as measured by return on average assets
("ROAA"), has been up and down as compared to its peer group average of banks
filing call reports with the FDIC, consisting of banks with assets under $25
million. For the years ending December 31, 1994, 1995, and 1996, and the nine
months ending September 30, 1997, Anson Savings ranked in the 53rd, 28th, 14th,
and 26th percentile, respectively, in ROAA, based on information derived from
the BankSource database published by Sheshunoff Information Services Inc. (See
Exhibit III, page 2). In return on equity for the same periods, Anson Savings
ranked in the 30th, 18th, 13th, and 19th percentile, respectively.
1
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
I. FINANCIAL CHARACTERISTICS
PAST & PROJECTED ECONOMIC CONDITIONS
Fluctuations in thrift earnings in recent years have occurred within the time
frames as a result of changing temporary trends in interest rates and other
economic factors. However, the year-to-year results have been upward while the
general trends in the thrift industry have been improving as interest rates
declined. Interest rates began a general upward movement during late 1993,
followed by a decline in interest margins and profitability. Rates began a
general decline in mid 1995 and then leveled off on the short end and increased
on the long end. Anson Savings' spread was 2.39% for the year ended June 30,
1996. It decreased to 2.29% for the year ended June 30, 1997, and decreased
further to 2.25% for the period of six months ending December 31, 1997.
The thrift industry generally is better equipped to cope with changing
interest rates than it was in the past, and investors have recognized the
demonstrated ability of the thrift industry to maintain interest margins in
spite of rising interest rates. However, rate increases and the shortening of
the time elapsed between increases during 1994 placed pressure on portfolio
managers to shorten maturities, which negatively impacts the future earnings of
financial institutions. Anson Savings has a higher exposure to interest rate
risk than the thrift industry in general.
FINANCIAL CONDITION OF INSTITUTION
Balance Sheet Trends
As Table I.1 shows, Anson Savings experienced a moderate decline in assets
during the period of one year and six months ending December 31, 1997. Assets
decreased $733 thousand during the period (3.4%). Loans decreased $249
thousand, or 2.2%. Investment securities, cash, and time deposits combined
decreased $328 thousand, or 3.6% during the period. Savings deposits decreased
by $967 thousand, or 5.5%. Equity increased $238 thousand, or 6.6%.
Asset/Liability Management
Managing interest rate risk is a major component of the strategy used in
operating a thrift. Most of a thrift's interest earning assets are long-term,
while most of the interest bearing liabilities have short to intermediate terms
to contractual maturity. To compensate, asset/liability management techniques
include (1) making long term loans with interest rates that adjust to market
periodically, (2) investing in assets with shorter terms to maturity, (3)
lengthening the terms to maturities of savings deposits, and (4) seeking to
employ any combination of the aforementioned techniques artificially through the
use of synthetic hedge instruments. Table I.3 provides rate shock information
at varying levels of interest rate change. Table I.4 provides repricing gap
information. The Bank's cumulative asset/liability repricing imbalance is -
53.0%, -47.5%, and -39.6% at one year, three years, and five years,
respectively. The Bank has exposure to interest rate increases, but its
exposure will be reduced through the equity raised in the conversion.
Anson Savings' basic approach to interest rate risk management has been to
emphasize shorter term fixed rate mortgage loans and increase its level of
liquid assets, which have short to intermediate terms to maturity. Anson
Savings currently is not utilizing synthetic hedge instruments and has not used
borrowings in recent years. Anson Savings' business plan calls for continuing
its current strategies.
Income and Expense Trends
Anson Savings was profitable for the fiscal years ended June 30, 1996 and
1997, and the period of six months ending December 31, 1997. The Bank recorded
a loss for the period of six months ended December 31, 1996. Fluctuations in
income over the period have resulted principally from (1) changes in non-
interest expense, principally the SAIF assessment of approximately $114,000 in
1997; and (2) fluctuating interest rates
Net interest income decreased in the year ended June 30, 1997, resulting from
a combination of lower volumes and spreads. Net interest income declined for
the six months ended December 31, 1997, principally as a result of lower
volumes.
2
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Regulatory Capital Requirements
As Table I.5 demonstrates, Anson Savings meets all regulatory capital
requirements, and meets the regulatory definition of a "Well Capitalized"
institution. Moreover, the additional capital raised in the stock conversion
will add to the existing capital cushion.
Lending
Table I.6 provides an analysis of the Bank's loan portfolio by type of loan
and security. This analysis shows that, at June 30, 1996 and 1997, and at
December 31, 1997, Anson Savings' loan composition was dominated by 1-4 family
dwelling loans. Table I.7 provides information on loan maturities and repricing
opportunities at December 31, 1997. The schedule shows that, at that date,
approximately 82% of the portfolio was scheduled to mature in more than five
years. The table also shows that the Bank has only minor amounts of adjustable
rate loans.
Table I.8 provides information with respect to loan originations. It
indicates annual loan originations of approximately $2.0 million throughout the
period covered.
Table I.9 provides rates, yields, and average balances for each of the two
years ended June 30, 1997, and for the six month periods ended December 31, 1996
and 1997. Interest rates earned on interest-earning assets decreased from 7.41%
in 1996 to 7.14% in 1997, and increased to 7.20% for the six months ended
December 31, 1997. Interest rates paid on interest-bearing liabilities
decreased from 5.02% in 1996 to 4.85% 1997, and increased to 4.96% for the six
months ended December 31, 1997. Anson Savings' spread decreased from 2.39% in
1996 to 2.29% in 1997, and further decreased to 2.24% for the six months ended
December 31, 1997.
Table I.10 provides a rate volume analysis, measuring differences in interest
earning assets and interest costing liabilities and the interest rates thereon
during the years ended June 30, 1996 versus 1997, and during the six month
period ended December 31, 1996 versus 1997. The table shows that the decrease
in net interest income from the year ended June 30, 1996 to 1997 resulted from a
combination of lower volumes and rates, while most of the decrease from December
31, 1996 to 1997 resulted from lower volumes.
Non-performing Assets
As shown in Table I.11, the Bank had $312 thousand in loans that were over 90
days delinquent at December 31, 1997. The Bank continued to accrue interest on
these loans. The Bank had $240 thousand in nonperforming assets at June 30,
1997, and $198 thousand at June 30, 1996.
Classified Assets
Anson Savings had $312 thousand in classified assets at December 31, 1997.
All of the classified assets were classified as substandard. The Bank had a
loan loss allowance of $100,000, or 32.1% of classified assets at December 31,
1997.
Loan Loss Allowance
Table I.12 provides an analysis of Anson Savings' loan loss allowance. It
shows no loans charged off during 1996, 1997, and the six months ended December
31, 1997. Table I.13 shows the allocation of the loan loss allowance among the
various loan categories as of June 30 1996 and 1997, and December 31, 1997.
Mortgage-Backed Securities and Investments
Table I.14 provides a breakdown of investments as of June 30, 1996 and 1997,
and December 31, 1997. Table I.15 provides maturity and yield information for
investments as of December 31, 1997.
Savings Deposits
At December 31, 1997, Anson Savings' deposit portfolio was composed as
follows: Money market accounts-$101 thousand or 0.6%; passbook accounts--$3.585
million or 21.6%; and certificate accounts--$12.908 million or 77.8% (see Table
I.16). Table I.17 provides maturity information on certificates. It shows that
79.0% of all time deposits mature within one year and 96.0% mature within two
years.
3
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Anson Savings is not overly dependent on large certificates of deposit. At
December 31, 1997, the Bank had $1.251 million in certificates that were issued
for $100 thousand or more, or 7.5% of its total deposits (see Table I.18).
Borrowings
Anson Savings has had no borrowings in recent years.
Subsidiaries
Anson Savings has no subsidiary.
Legal Proceedings
From time to time, Anson Savings becomes involved in legal proceedings
principally related to the enforcement of its security interest in real estate
loans. In the opinion of Management of the Bank, no legal proceedings are in
process or pending that would have a material effect on Anson Savings' financial
position, results of operations, or liquidity.
EARNINGS CAPACITY OF THE INSTITUTION
As in any interest sensitive industry, the future earnings capacity of Anson
Savings will be affected by the interest rate environment. Historically, the
thrift industry has performed at less profitable levels in periods of rising
interest rates. This performance is due principally to the general composition
of the assets and the limited repricing opportunities afforded even the
adjustable rate loans. The converse earnings situation (falling rates) does not
afford the same degree of profitability potential for thrifts due to the
tendency of borrowers to refinance both high rate fixed rate loans and
adjustable loans as rates decline.
Anson Savings is no exception to the aforementioned phenomenon. With its
current asset and liability structure, however, it has exposure to rising
interest rates.
The addition of capital through the conversion will encourage Anson Savings to
grow. The business plan projects asset growth over the three year period ending
December 31, 2000 between 3.0% and 4.0% annually. Growth for the first year is
projected at 27.4% because of the conversion. As growth is attained, the
leverage of that new capital should, from a ratio of expenses to total assets
standpoint, reduce the operating expense ratio.
Asset-Size-Efficiency of Asset Utilization
At its current size and in its current asset configuration, Anson Savings is a
moderately efficient operation. With total assets of approximately $20.7 million
at December 31, 1997, Anson Savings has five full time employees. The business
plan projects that operating expense levels as a percentage of average assets
will stay in line with pre-conversion rates.
Intangible Values
Anson Savings' greatest intangible value lies in its loyal deposit base.
Anson Savings has a 108 year history of operations and independence. At June
30, 1996, the Bank had 9.35% of the deposit market in its area (down from 10.73%
at June 30, 1994), and it has the ability to increase market share. Anson
Savings has substantially maintained its market share in recent years without
making any significant efforts.
Anson Savings has no significant intangible values that could be attributed to
unrecognized asset gains on investments and real estate.
4
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Effect of Government Regulations
Anson Savings' business plan calls for a continuation of its current
strategies. Government regulations will have the greatest impact in the area of
cost of compliance and reporting. The conversion will create an additional
layer of regulations and reporting and thereby increase the cost to the Bank.
Office Facilities
Anson Savings' office is a well maintained facility that was built in 1959 and
remodeled in 1981. It has excellent amenities to service the Bank's customer
base. Table I.19 provides information on Anson Savings' office.
5
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.1 - Selected Financial Data
<TABLE>
<CAPTION>
At Compound
December 31, At June 30, Growth
--------------- -----------------------
1997 1997 1996 Rate
---- ---- ---- ----
($000's)
<S> <C> <C> <C> <C>
Selected Financial Condition Data:
- ---------------------------------
Total assets 20,723 20,720 21,456 -2.34%
Loans receivable, net 11,323 11,423 11,572 -1.46%
Investments (including interest earning cash) 8,794 8,700 9,122 -2.47%
Savings deposits 16,656 16,791 17,623 -3.82%
Equity - substantially restricted 3,859 3,756 3,621 4.32%
<CAPTION>
Six Months Ended
December 31, Year Ended June 30,
--------------------------- -------------------------
1997 1996 1997 1996
---- ---- ---- ----
($000's)
<S> <C> <C> <C> <C>
Selected Operations Data:
- ------------------------
Interest income 718 743 1,442 1,559
Interest expense 412 419 819 894
--------------------------- -------------------------
Net interest income 306 324 623 665
Provision for loan losses - 1 5 7
--------------------------- -------------------------
Net interest income after
provision for loan losses 306 323 618 658
--------------------------- -------------------------
Noninterest income 4 1 6 2
--------------------------- -------------------------
Sub-total 310 324 624 660
--------------------------- -------------------------
Noninterest expense 232 348 555 481
--------------------------- -------------------------
Income (loss) before taxes 78 (24) 69 179
Income tax expense (benefit) 17 (4) 19 52
Extraordinary income - - - -
--------------------------- -------------------------
Net income (loss) 61 (20) 50 127
=========================== =========================
</TABLE>
Source: Offering Circular, F&C Calculations 6
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.2 - Selected Financial Ratios
<TABLE>
<CAPTION>
At or for the Six Months At or For the Year
Ended December 31, Ended June 30,
--------------------------------- --------------------------------------
1997 1996 1997 1996
----- ----- ----- ----
<S> <C> <C> <C> <C>
Performance Ratios:
- ------------------
Return on assets (ratio of net earnings
to average total assets) 0.60% -0.14% 0.24% 0.58%
Return on equity (ratio of net earnings
to average equity) 3.24% -0.82% 1.34% 3.57%
Ratio of average interest-earning assets to
average interest-bearing liabilities 120.00% 119.00% 119.00% 118.00%
Ratio of net interest income, after provision
for loan losses, to noninterest expense 131.90% 92.82% 111.35% 136.80%
Net interest rate spread 2.25% 2.37% 2.29% 2.39%
Net yield on average interest-earning assets 3.09% 3.15% 3.15% 3.16%
Quality Ratios:
- --------------
Non-performing assets to total assets
at end of period 1.51% 1.29% 1.16% 0.92%
Allowance for loan losses to non-performing
loans at end of period 32.05% 35.96% 41.67% 47.98%
Allowance for loan losses to total loans, net 0.88% 0.81% 0.88% 0.82%
Capital Ratios:
- --------------
Equity to total assets at end of period 18.62% 17.51% 18.13% 16.88%
Average equity to average assets 18.50% 17.16% 17.81% 16.37%
</TABLE>
Source: Offering Circular, F&C calculations
7
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.3 - Interest Rate Shock
Net Portfolio Value
September 30, 1997
--------------------------------------------------------
Change Estimated
in Rates NPV $ Change % Change
- ---------------------- ------------------- -------- ---------------
($000's)
+400 bp $ 2,479 (1,139) -31%
+300 bp 2,780 (838) -23%
+200 bp 3,081 (537) -15%
+100 bp 3,349 (269) -7%
0 bp 3,618 - -
--100 bp 3,750 132 4%
--200 bp 3,881 263 7%
--300 bp 3,991 373 10%
--400 bp 4,101 483 13%
Source: Report prepared by FHLB of Atlanta
8
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.4 - Interest Rate Sensitivity Analysis
<TABLE>
<CAPTION>
At December 31, 1997
----------------------------------------------------------------------------------
Over Six Over One Over Three
Six Months Months to to Three to Five Over Five
or Less One Year Years Years Years Total
----------------------------------------------------------------------------------
($000's)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
- ------------------------
1-4 family adjustable $ 60 $ - $ - $ - $ - $ 60
1-4 family fixed 194 68 345 1,197 8,727 10,531
Other real estate fixed - 44 - 78 633 755
Deposit loans 77 - - - - 77
Interest-bearing deposits 5,290 - - - - 5,290
Investments 1,630 - 1,000 41 692 3,363
FHLB stock - - - - 143 143
-------------------------------------------------------------------------------
Total interest-earning assets $ 7,251 $ 112 $ 1,345 $ 1,316 $ 10,195 $ 20,219
===============================================================================
Interest-bearing liabilities:
- -----------------------------
Passbook accounts $ 3,585 $ - $ - $ - $ - $ 3,585
Money market deposit accounts 101 - - - - 101
Certificates of deposit 5,833 6,135 940 - - 12,908
-------------------------------------------------------------------------------
$ 9,519 $ 6,135 $ 940 $ - $ - $ 16,594
===============================================================================
Interest-earning assets less
interest-bearing liabilities $ (2,268) $ (6,023) $ 405 $ 1,316 $ 10,195
=================================================================
Cumulative interest-rate sensitivity gap $ (2,268) $ (8,291) $ (7,886) $ (6,570) $ 3,625
=================================================================
Cumulative interest-rate sensitivity gap
as a percentage of interest-earning assets -11.22% -41.01% -39.00% -32.49% 17.93%
=================================================================
Cumulative ratio of interest earning
assets to interest-bearing liabilities 76.17% 47.04% 52.48% 60.41% 121.85%
=================================================================
Cumulative interest rate sensitivity gap
as a percent of total assets -10.94% -40.01% -38.05% -31.70% 17.49%
=================================================================
</TABLE>
Source: Offering circular 9
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.5 - Capital Compliance
December 31, 1997
-------------------------
Amount Percent
($000's) of Assets
---------- -----------
Capital under generally accepted accounting principals 3,859 18.6%
========== ===========
Tier 1 leverage capital 3,615 17.4%
Requirement 829 4.0%
---------- -----------
Excess 2,786 13.4%
========== ===========
Tier 1 risk adjusted capital 3,615 46.5%
Requirement 311 4.0%
---------- -----------
Excess 3,304 42.5%
========== ===========
Total regulatory capital 3,712 47.8%
Requirement 621 8.0%
---------- -----------
Excess 3,091 39.8%
========== ===========
NC savings bank capital 3,712 17.9%
Requirement 1,036 5.0%
---------- -----------
Excess 2,676 12.9%
========== ===========
Source: Offering circular 10
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.6 - Loan Portfolio Composition
<TABLE>
<CAPTION>
At December 31, At June 30,
-------------------------- --------------------------------------------------------
1997 1997 1996
-------------------------- -------------------------- ---------------------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
($000's)
<S> <C> <C> <C> <C> <C> <C>
Mortgage Loans:
1-4 family 10,857 92.1% 10,888 91.8% 11,241 94.6%
Non-residential 483 4.1% 543 4.6% 400 3.4%
Construction 366 3.1% 349 2.9% 199 1.7%
-------------------------- -------------------------- ---------------------------
Total real estate loans 11,706 99.3% 11,780 99.4% 11,840 99.6%
-------------------------- -------------------------- ---------------------------
Other Loans:
Deposit 77 0.7% 75 0.6% 46 0.4%
-------------------------- -------------------------- ---------------------------
Total consumer loans 77 0.7% 75 0.6% 46 0.4%
-------------------------- -------------------------- ---------------------------
Total loans 11,783 100.0% 11,855 100.0% 11,886 100.0%
-------------============= -------------============= -------------==============
Less:
Allowance for losses 100 100 95
Undisbursed construction proceeds 319 288 174
Deferred fees and discounts 41 44 46
------------- ------------- -------------
Loan portfolio, net 11,323 11,423 11,571
============= ============= =============
</TABLE>
Source: Offering Circular 11
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.7 - Loan Maturities
The following table sets forth certain information at December 31, 1997,
regarding the amount of loans maturing in the loan portfolio, based on
contractual terms to maturity. Adjustable rate loans are shown as maturing in
the period in which the rate adjusts.
<TABLE>
<CAPTION>
Under One to Three to Over
One Year Three Years Five Years Five Years Total
--------------- ---------------- ---------------- ---------------- ---------------
($000's)
<S> <C> <C> <C> <C> <C>
Real estate loans
1-4 family adjustable 60 - - - 60
1-4 family fixed rate 262 345 1,197 8,727 10,531
Other 44 - 78 633 755
Consumer deposit loans 77 - - - 77
--------------- --------------- ---------------- ---------------- ---------------
Total 443 345 1,275 9,360 11,423
=============== =============== ================ ================ ===============
</TABLE>
The following table sets forth the dollar amount of all fixed rate loans for
which final payment is not due until after December 31, 1998.
Fixed Rate
Loans
--------------
($000's)
Real estate loans:
1-4 family fixed rate 10,269
Other 711
---------------
Total 10,980
===============
Source: Offering Circular 12
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.8 - Loan Origination, Purchase, and Repayment Activity
<TABLE>
<CAPTION>
Six Months
Ended
December 31, Year Ended June 30,
---------------------- ------------------------------------
1997 1997 1996
---- ---- ----
($000's)
<S> <C> <C> <C>
Originations by type:
- --------------------
Real estate:
1-4 family 839 1,365 1,619
Non-residential - - 67
Construction 171 486 253
Other:
Loans on deposits 22 53 69
------------------ ----------------- ----------------
Total loans originated 1,032 1,904 2,008
------------------ ----------------- ----------------
Purchases - - -
------------------ ----------------- ----------------
Total loans originated and purchases 1,032 1,904 2,008
------------------ ----------------- ----------------
Loan repayments 1,135 2,051 2,342
------------------ ----------------- ----------------
Other changes, net 3 (2) (4)
------------------ ----------------- ----------------
Net increase (decrease) in loans receivable, net (100) (149) (338)
------------------ ----------------- ----------------
Total gross loans receivable at beginning of period 11,423 11,572 11,910
------------------ ----------------- ----------------
Total gross loans receivable at end of period 11,323 11,423 11,572
================== ================= ================
</TABLE>
Source: Offering Circular 13
<PAGE>
FERGUSON & COMPANY Table I.9 - Average Balances, Rates, and Yields
- ------------------
Section I
---------
<TABLE>
<CAPTION>
Six Months Ended December 31,
-----------------------------------------------------------------------------------------
1997 1996
-------------------------------------------- ------------------------------------------
Average Interest Average Interest
Outstanding Earned/ Average Outstanding Earned/ Average
Balance Paid Yield/Rate Balance Paid Yield/Rate
--------------------------------------------- ------------------------------------------
($000's)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
- ------------------------
Other interest-earning assets 5,335 150 5.62% 5,032 137 5.45%
Investments 3,059 93 6.08% 3,686 111 6.02%
Loans 11,558 475 8.22% 11,842 495 8.36%
--------------------------------------------- ------------------------------------------
Total interest-earning assets 19,952 718 7.20% 20,560 743 7.23%
--------------------------------------------- ------------------------------------------
Non-interest earning assets 744 633
-------------- ------------
Total assets 20,696 21,193
============== ============
Interest-bearing liabilities:
- -----------------------------
Deposits 16,567 411 4.96% 17,243 419 4.86%
--------------------------------------------- ------------------------------------------
Total interest-bearing liabilities 16,567 411 4.96% 17,243 419 4.86%
--------------------------------------------- ------------------------------------------
Non-interest bearing liabilities 301 313
-------------- ------------
Total liabilities 16,868 17,556
Equity 3,828 3,637
-------------- ------------
Total liabilities and equity 20,696 21,193
============== ============
Net interest income 307 324
============ =============
Net interest rate spread 2.24% 2.37%
============ ==============
Net average earning assets 3,385 3,317
============== ============
Net interest margin 3.08% 3.15%
============ ==============
Average interest-earning assets to
average interest-bearing liabilities 120.43% 119.24%
============ =============
</TABLE>
Source: Offering Circular 14
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.9 - Average Balances, Rates, and Yields
<TABLE>
<CAPTION>
Year Ended June 30,
-----------------------------------------------------------------------------------------
1997 1996
------------------------------------------- -------------------------------------------
Average Interest Average Interest
Outstanding Earned/ Average Outstanding Earned/ Average
Balance Paid Yield/Rate Balance Paid Yield/Rate
------------------------------------------- -------------------------------------------
($000's)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
- -----------------------
Other interest-earning assets 4,783 263 5.50% 4,218 242 5.74%
Investments 3,635 215 5.91% 4,675 285 6.10%
Loans 11,771 963 8.18% 12,145 1,032 8.50%
------------------------------------------ -----------------------------------------
Total interest-earning assets 20,189 1,441 7.14% 21,038 1,559 7.41%
------------------------------------------ -----------------------------------------
Non-interest earning assets 731 539
-------------- -------------
Total assets 20,920 21,577
============== =============
Interest-bearing liabilities:
- ----------------------------
Deposits 16,899 819 4.85% 17,796 894 5.02%
------------------------------------------ -----------------------------------------
Total interest-bearing liabilities 16,899 819 4.85% 17,796 894 5.02%
------------------------------------------ -----------------------------------------
Non-interest bearing liabilities 296 249
-------------- -------------
Total liabilities 17,195 18,045
Equity 3,725 3,532
-------------- -------------
Total liabilities and equity 20,920 21,577
============== =============
Net interest income 622 665
============= ===========
Net interest rate spread 2.29% 2.39%
=============== ==============
Net average earning assets 3,290 3,242
============== =============
Net interest margin 3.08% 3.16%
=============== ==============
Average interest-earning assets to
average interest-bearing liabilities 119.47% 118.22%
============= ===========
</TABLE>
Source: Offering Circular 15
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.10 - Rate/Volume Analysis
<TABLE>
<CAPTION>
Six Months Ended December 31, Year Ended June 30,
1997 vs. 1996 1997 vs. 1996
--------------------------------------------- ----------------------------------------------
Increase Increase
(Decrease) (Decrease)
Due to Due to
------------------------------ Total ------------------------------- Total
Increase Increase
Volume Rate (Decrease) Volume Rate (Decrease)
------ ---- ---------- ------ ---- ---------
($000's)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Interest bearing deposits 9 4 13 32 (10) 22
Investments (19) 1 (18) (62) (8) (70)
Loans (12) (7) (19) (32) (38) (70)
------------------------------------------ ----------------------------------------------
Total interest-earning assets (22) (2) (24) (62) (56) (118)
========================================== ==============================================
Interest-bearing liabilities:
Deposits (16) 8 (8) (45) (30) (75)
------------------------------------------ ----------------------------------------------
Total interest-bearing liabilities (16) 8 (8) (45) (30) (75)
===========================--------------- ===============================---------------
Increase (decrease) in
net interest income (16) (43)
=============== ===============
</TABLE>
Source: Offering Circular 16
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.11 - Non-Performing Assets
The table below sets forth the amounts and categories of non-performing assets.
Loans are placed on non-accrual status when the collection of principal or
interest becomes doubtful.
<TABLE>
<CAPTION>
December 31, June 30,
----------------- ---------------------------------------
1997 1997 1996
---- ---- ----
($000's)
<S> <C> <C> <C>
Non-accruing loans $ - $ - $ -
Accruing loans delinquent 90 days or more 312 240 198
------------------- ---------------------- ---------------
Total non-performing loans 312 240 198
------------------- ---------------------- ---------------
Foreclosed assets - - -
------------------- ---------------------- ---------------
Total non-performing assets 312 240 198
=================== ====================== ===============
Total non-performing loans as a
percentage of total net loans 2.76% 2.10% 1.71%
=================== ====================== ===============
Total non-performing assets as a
percentage of total assets 1.51% 1.16% 0.92%
=================== ====================== ===============
</TABLE>
Source: Offering Circular 17
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.12 - Analysis of the Allowance for Loan Losses
<TABLE>
<CAPTION>
Six Months
ended
December 31, Year ended June 30,
------------------- ---------------------------------
1997 1997 1996
----- ---- ----
($000's)
<S> <C> <C> <C>
Balance at beginning of period 100 95 88
------------------- --------------- ---------------
Net charge-offs:
Real estate - - -
Other - - -
------------------- --------------- ---------------
- - -
------------------- --------------- ---------------
Additions charged to operations - 5 7
------------------- --------------- ---------------
Balance at end of period 100 100 95
=================== =============== ===============
Allowance for loan losses to net
loans at end of period 0.88% 0.88% 0.82%
=================== =============== ===============
Net loans charged off as a percent of average
loans outstanding 0.00% 0.00% 0.00%
=================== =============== ===============
</TABLE>
Source: Offering Circular 18
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.13 - Allocation of Allowance for Loan Losses
<TABLE>
<CAPTION>
At December 31, At June 30,
-------------------------- -------------------------------------------------------
1997 1997 1996
-------------------------- -------------------------- --------------------------
Percent Percent Percent
of Loans of Loans of Loans
in Each in Each in Each
Amount of Category Amount of Category Amount of Category
Loan Loss to Gross Loan Loss to Gross Loan Loss to Gross
Allowance Loans Allowance Loans Allowance Loans
--------- ----- --------- ----- --------- -----
($000's)
<S> <C> <C> <C> <C> <C> <C>
Real estate:
1-4 family 40 92.1% 40 91.8% 40 94.6%
Non-residential 20 4.1% 20 4.6% 15 3.4%
Construction 20 3.1% 20 2.9% 20 1.7%
Consumer - 0.7%
Unallocated 20 0.0% 20 0.6% 20 0.4%
-------------------------- -------------------------- --------------------------
100 100.0% 100 100.0% 95 100.0%
========================== ========================== ==========================
</TABLE>
Source: Offering Circular 19
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.14 - Investments
<TABLE>
<CAPTION>
December 31, June 30,
----------------------------- ------------------------------------------------
1997 1997 1996
----------------------------- -------------------------- -------------------
Carrying % of Carrying % of Carrying % of
Value Total Value Total Value Total
----- ----- ----- ----- ----- -----
($000's)
<S> <C> <C> <C> <C> <C> <C>
AVAILABLE FOR SALE:
U.S. government and agency
securities 380 100.0% 318 100.0% 194 100.0%
------------ -------------- ------------ ------------- ----------- ----------
Total available for sale 380 100.0% 318 100.0% 194 100.0%
------------ ============== ------------ ============= ----------- ==========
HELD TO MATURITY:
U.S. government and agencies 1,500 67.2% 2,496 75.7% 1,994 68.0%
Mortgage-backed securities 732 32.8% 800 24.3% 940 32.0%
------------ -------------- ------------ ------------- ----------- ----------
Total Held to Maturity 2,232 100.00% 3,296 100.00% 2,934 100.00%
------------ ============== ------------ ============= ----------- ==========
Interest earning deposits in
other banks 6,039 4,944 5,851
FHLB stock 143 143 143
------------ ------------ -----------
Total Investment and
Mortgage-backed securities 8,794 8,701 9,122
============ ============ ===========
</TABLE>
Source: Offering Circular 20
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.15 - Investment Maturities
<TABLE>
<CAPTION>
Less than 1 Year From 1 to 5 Years From 5 to 10 Years Over 10 Years Total
-------------------- ------------------- ------------------- --------------- ---------------------
Average Average Average Average Carrying Weighted
Amount Yield Amount Yield Amount Yield Amount Yield Value Yield
------ ----- ------ ----- ------ ----- ------ ----- ----- -----
($000's)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Securities available
for sale:
- -----------
FHLMC stock 380 0.00% - 0.00% - 0.00% - 0.00% 380 0.00%
Securities held to
maturity:
- -----------
U.S Government and 500 5.70% 1,000 5.64% - 0.00% - 0.00% 1,500 5.66%
agencies
Mortgage-backed - 0.00% 43 7.76% 259 7.00% 430 6.50% 732 6.95%
securities
Other:
- ------
Interest bearing deposits
in other banks 6,039 5.48% - 0.00% - 0.00% - 0.00% 6,039 5.48%
FHLB stock - 0.00% - 0.00% - 0.00% 143 7.25% 143 7.25%
------------------- -------------------- ------------------- ------------------ -------------------
Totals 6,919 5.19% 1,043 5.73% 259 7.00% 573 6.69% 8,794 5.43%
=================== ==================== =================== ================== ===================
</TABLE>
Source: Offering Circular 21
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.16 - Deposit Portfolio
Balance Percent
Interest December 31, of
Category Rate (1) 1997 Deposits
- -------- -------- ---- --------
($000's)
Savings and transactions accounts ------
- ---------------------------------
Passbook accounts 3.25% 3,585 21.6%
Money market accounts 3.05% 101 0.6%
------------ --------
3,686 22.2%
------------ --------
Certificates of deposit with
- ----------------------------
original maturities of:
-----------------------
6 months 5.07% 3,955 23.8%
12 months 5.11% 2,101 12.7%
14 to 36 months 5.67% 6,852 41.3%
---------- ----------- --------
Total certificates of deposit 5.40% 12,908 77.8%
---------- ------------ --------
Total savings deposits 4.92% 16,594 100.0%
========== ============ ========
(1) Indicates weighted average rate at December 31, 1997.
Source: Offering circular 22
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.17 - Time Deposit Maturities
Amount Due During Year Ending December 31,
--------------------------------------------------------
1998 1999 2000 Total Rate
---- ---- ---- ---- ----
($000's)
Certificates of
100,000 or more 1,251 - - 1,251 5.95%
Certificates under
100,000 8,948 2,196 513 11,657 5.34%
--------- --------- --------- ---------- ---------
Total 10,199 2,196 513 12,908 5.40%
========= ========= ========= ========== =========
Percent 79.01% 17.01% 3.97% 100.00%
========= ========= ========= ==========
Source: Offering circular
Table I.18 - Jumbo CD Maturities ($000's)
Maturity Period
- ---------------
Within six months 539
Six through twelve months 712
Over twelve months 0
---------
Total 1,251
=========
Source: Offering circular
23
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.19 - Offices
Net Book Year Owned or
Physical address Value Opened Leased Space
- ---------------- ----- ------ ------ -----
($000's)
Main Office:
211 South Greene Street 211 1959 Owned 5,700 sq. ft.
Wadesboro, NC
Source: Anson Savings Bank
Source: Offering Circular 24
<PAGE>
SECTION II
MARKET AREA
<PAGE>
FERGUSON & COMPANY Section II
- ------------------ ----------
II. MARKET AREA
DEMOGRAPHICS
Anson Savings Bank ("Anson Savings" or "Bank") conducts its operations through
one office located in Wadesboro, Anson County, North Carolina. North Carolina
is in the southeastern region of the United States. Anson County is in the south
central section of North Carolina, within 15 miles of the South Carolina border.
Anson Savings has determined that its principal trade area is Anson County and
parts of the contiguous counties. Table II.1 presents historical and projected
trends for the United States, North Carolina, Anson County, and zip code 28170,
which includes the City of Wadesboro. The information addresses population,
income, employment, and housing trends.
As indicated in Table II.1, population growth rates for North Carolina are
above the United States growth rate. Growth rates for Anson County and zip code
28170 are well below both North Carolina and the United States. Household income
growth for North Carolina, Anson County, and zip code 28170 is projected to be
below that of the United States for the period 1996 to 2001.
In the period from 1990 until 1996, the population of the State of North
Carolina grew 6.94%. During the same period, the Anson County population
increased 3.56%, zip code 28170 increased 3.48%, and the United States
population increased 6.67%. Projections of population growth from 1996 through
2001 indicate that the State of North Carolina will increase 7.52%, while Anson
County is projected to increase by 2.75%, zip code 28170 is projected to
increase 2.29%, and the United States population is projected to increase by
5.09%.
Household income is projected to decrease by 11.94% for Anson County from 1996
to 2001. For the same period, household income is projected to decrease by
5.37% for the State of North Carolina, decrease by 10.72% for zip code 28170,
and decline by 3.88% for the United States. Per capita and household income
levels for the State of North Carolina are below those of the United States, and
per capita and household income levels for Anson County and zip code 28170 are
well below the State of North Carolina.
The 2001 estimate shows that, for Anson County, households with incomes less
than $15,000 are expected to be 31%; those with incomes between $15,000 and
$25,000 are estimated at 20%; those with incomes between $25,000 and $50,000 are
estimated at 34%; those with incomes between $50,000 and $100,000 are estimated
at 13%; and households with incomes in excess of $100,000 are projected to be
1%. The 2001 estimates for North Carolina are 22%, 18%, 36%, 21%, and 4%,
respectively. The 2001 estimate for zip code 28170 is 33%, 21%, 32%, 12%, and
1%, respectively.
The number of households in Anson County is projected to increase by 2.90%
from 1996 to 2001, well below the projection for the State of North Carolina
which calls for an increase of 7.79% and in line with the projected increase for
zip code 28170 at 2.44%. While the household growth rate for North Carolina is
higher than that of the United States (7.79% versus 5.14%), the household growth
rate for Anson County and zip code 28170 are well below the projected growth
rate for the U.S. and North Carolina.
With projections of a slight increase in population and number of households,
combined with projections of a declining household income, the market for
housing units will be flat. Zip code 28170 has approximately 3,900 housing
units, of which 64.83% are owner occupied, and a vacancy rate of 7.55%. Anson
County has approximately 9,300 housing units, of which 69.57% are owner
occupied, and a vacancy rate of 7.82%.
The principal sources of employment in Anson County are manufacturing--34.6%;
trade--22.2%; and services--22.6%.
Analysis of the data presented above presents a picture of limited economic
opportunity, suggesting that Anson Savings' growth opportunities within its
current market area will be limited.
1
<PAGE>
FERGUSON & COMPANY Section II
- ------------------ ----------
Based on information publicly available on deposits as of June 30, 1996 (see
Table II.3), Anson County had $187.5 million in deposits and Anson Savings had
9.35% of the deposit market, down slightly from 10.73% of the market at June 30,
1994. The Bank's recent deposit growth rate has been negative, slightly below
the overall market. Anson Savings' competition consists of 8 commercial bank
offices. Table II.3 shows that from June 30, 1994 to 1996, Anson Savings'
deposits decreased by $0.934 million (6.6%), while the overall market increased
$12.553 million in deposits (7.2%). The Bank's deposits decreased $0.88 million
(5.0%) from June 30, 1996, to December 31, 1997. The Bank's business plan
projects that its deposits will grow at a moderate pace in the future. The Bank
intends to market its services and products more aggressively.
Building permit information was not available. However, projected population
and household income growth rates in Anson Savings' market area portend limited
lending opportunities within the market.
Growth opportunities for Anson Savings can be assessed by reviewing economic
factors in its market area. The salient factors include growth trends, economic
trends, and competition from other financial institutions. We have reviewed
these factors to assess the potential for the market area. In assessing the
growth potential of the Bank, we must also assess the willingness and
flexibility of Management to respond to the competitive factors that exist in
the market area. Our analysis of the economic potential and the potential of
Management affects the valuation of the Bank.
Wadesboro is approximately 40 miles from Charlotte. While Anson County may
present limited economic opportunity, Union County, which is between Anson
County and Charlotte, has a much better economic base. Therefore, if the Bank
reaches a position of limited opportunities within the immediate trade area, it
is fairly simple to expand its trade area by branching or opening loan
production offices. Management is well aware of this, and is prepared to expand
if the economics justify it.
2
<PAGE>
FERGUSON & COMPANY Table II.1 - Demographic Trends Section II
- ------------------ Key Economic Indicators ----------
United States, North Carolina, Anson County, Zip Code 28170
<TABLE>
<CAPTION>
========================================================================================================================
United North Anson Zip Code
Key Economic Indicator States Carolina County 28170
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Population, 2001 Est. 278,802,003 7,865,805 24,977 10,349
1996 - 2001 Percent Change, Est. 5.09 7.52 2.75 2.29
Total Population, 1996 Est. 265,294,885 7,315,856 24,309 10,117
1990 - 96 Percent Change, Est. 6.67 10.37 3.56 3.48
Total Population, 1990 248,709,873 6,628,637 23,474 9,777
- ------------------------------------------------------------------------------------------------------------------------
Household Income, 2001 Est. 33,189 28,922 20,970 19,897
1996 - 2001 Percent Change, Est. (3.88) (5.37) (11.94) (10.72)
Household Income, 1996 Est. 34,530 30,562 23,812 22,286
- ------------------------------------------------------------------------------------------------------------------------
Per Capita Income, 1990 16,738 15,147 10,519 10,431
- ------------------------------------------------------------------------------------------------------------------------
Household Income Distribution-2001 Est. (%)
$15,000 and less 20 22 31 33
$15,000 - $25,000 16 18 20 21
$25,000 - $50,000 34 36 34 32
$50,000 - $100,000 24 21 13 12
$100,000 - $150,000 4 3 1 1
$150,000 and over 2 1 0 0
- ------------------------------------------------------------------------------------------------------------------------
Unemployment rate, 1990 6.24 4.63 3.62 4.67
- ------------------------------------------------------------------------------------------------------------------------
Median Age of Population, 1996 Est. 34.3 34.8 35.7 35.6
Median Age of Population, 1990 32.9 33.1 34.2 34.5
========================================================================================================================
Average Housing Value, 1990 79,098 79,714 46,619 49,364
- ------------------------------------------------------------------------------------------------------------------------
Total Households, 2001 Est. 103,293,062 3,005,720 8,827 3,656
1996 - 2001 Percent Change, Est. 5.14 7.79 2.90 2.44
Total Households, 1996 98,239,161 2,788,382 8,578 3,569
1990 - 96 Percent Change, Est. 6.84 10.78 0.55 (0.42)
Total Households, 1990 91,947,410 2,517,026 8,531 3,584
- ------------------------------------------------------------------------------------------------------------------------
Total Housing Units, 1990 101,641,260 2,818,193 9,255 3,870
% Vacant 10.07 10.69 7.82 7.55
% Occupied 89.93 89.31 92.18 92.45
% By Owner 57.78 60.74 69.57 64.83
% By Renter 32.15 28.57 22.60 27.62
========================================================================================================================
</TABLE>
Source: Scan/US, Inc. 3
<PAGE>
FERGUSON & COMPANY Table II.2 - Percent Employment by Industry Section II
- ------------------ ----------
<TABLE>
<CAPTION>
United North Anson
Industry States Carolina County
========================================= ============== =============== ============
<S> <C> <C> <C>
Construction/Agriculture/Mining 9.5 7.3 7.0
Manufacturing 17.7 23.4 34.6
Transportation/Utilities 7.1 4.6 4.0
Trade 21.2 22.5 22.2
Finance/Insurance 6.9 4.2 1.8
Services 32.7 21.8 22.6
Public Administration 4.8 16.2 7.8
</TABLE>
Source: State of North Carolina ESC. 4
<PAGE>
FERGUSON & COMPANY Table II.3 - Market Area Deposits Section II
- ------------------ ----------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
1996 1995 1994
-------------- -------------- --------------
(in Thousands)
<S> <C> <C> <C>
Union County Deposits
Total Anson Savings Bank $ 17,536 $ 17,683 $ 18,778
-------------- -------------- --------------
Number of Branches 1 1 1
Other Thrifts - - -
-------------- -------------- --------------
Number - - -
Number of branches - - -
Total Thrifts 17,536 17,683 18,778
-------------- -------------- --------------
Number 1 1 1
Number of branches 1 1 1
Total Bank Deposits $ 169,952 $ 164,324 $ 156,157
-------------- -------------- --------------
Number 3 3 3
Number of Branches 8 8 9
Total Credit Union Deposits $ - $ - $ -
-------------- -------------- --------------
Number - - -
Number of Branches - - -
Total Deposits $ 187,488 $ 182,007 $ 174,935
============== ============== ==============
Percent of Deposits Held by
Anson Savings Bank 9.35% 9.72% 10.73%
============== ============== ==============
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Source: BranchSource, a product of Sheshunoff Information Services, Inc.
5
<PAGE>
SECTION III
COMPARISON WITH PUBLICLY
TRADED THRIFTS
<PAGE>
FERGUSON & COMPANY Section III
- ------------------ -----------
III. COMPARISON WITH PUBLICLY TRADED THRIFTS
COMPARATIVE DISCUSSION
This section presents an analysis of Anson Savings relative to a group of
11 publicly traded thrift institutions ("comparative group"). Such analysis is
necessary to determine the adjustments that must be made to the pro forma market
value of Anson Savings' stock. Table III.1 presents a listing of the comparative
group with general information about the group. Table III.2 presents key
financial indicators relative to profitability, balance sheet composition and
strength, and risk factors. Table III.3 presents a pro forma comparison of Anson
Savings to the comparative group. Exhibits III and IV contain selected financial
information on Anson Savings and the comparative group. This information is
derived from quarterly TFR's filed with the OTS and call reports filed with the
FDIC. The selection criteria and comparison with the comparative group are
discussed below.
Selection Criteria
Ideally, the comparative group would consist of thrifts in the same
geographic region with identical local economies, asset size, capital level,
earnings performance, asset quality, etc. However, there are few comparably
sized institutions with stock that is liquid enough to provide timely,
meaningful market values. Therefore, we have selected a group of comparatives
that are either listed on the New York Stock Exchange ("NYSE"), the American
Stock Exchange ("AMEX"), or Nasdaq. We excluded companies that are apparent
takeover targets and companies with unusual characteristics that tend to distort
both mean and median calculations. For example, we have excluded all companies
with losses during the trailing twelve months. We have also excluded mutual
holding companies (see Exhibit VI).
Because of the limited number of similar size thrifts with sufficient
trading volume, we looked for members of the comparative group among thrifts
with assets up to $100 million. The Southeast Region, which includes North
Carolina, had five thrifts that met the size requirements. We found 49 thrifts
that met the asset size requirements in the entire country (we consider 10 to be
the minimum number), and we retained 11 and eliminated 38 for the following
reasons: (a) One was a mutual holding company; (b) Two did not have PE ratios
for the last quarter and six had PE ratios over 35 for the last quarter; (c)
Twenty-nine had tangible equity under 20% of assets; (d) Three had agreed to be
acquired; (e) Four had loans in excess of 90% of assets; and (f) Three had loans
serviced in excess of 40% of assets. After eliminating the thrifts described
above, there were 11 left.
The principal source of data was SNL Securities, Charlottesville, Virginia.
There are approximately 400 publicly traded thrifts listed on NYSE, AMEX, or
Nasdaq. In developing statistics for the entire country, we eliminated certain
institutions that skewed the results, in order to make the data more meaningful:
. We eliminated companies with losses,
. We eliminated indicated acquisition targets,
. We eliminated companies with price/earnings ratios in excess of 35, and
. We eliminated companies that had not reported as a stock institution for
one complete year.
The resulting group of 268 publicly traded thrifts is included in Exhibit V.
The selected group of comparatives has sufficient trading volume to provide
meaningful price data. Four of the comparative group members are located in the
Southeast and the others are located in the Midwest (6) and West (1) Regions.
With total assets of approximately $20.7 million, Anson Savings is well below
the group selected, which has average assets of $63.2 million and median assets
of $60.8 million.
1
<PAGE>
FERGUSON & COMPANY Section III
- ------------------ -----------
Anson Savings' assets after conversion will continue to be much smaller than the
comparative group. Pro forma assets at the midpoint are $26.5 million.
Profitability
Using the comparison of profitability components as a percentage of average
assets, Anson Savings was below the comparative group in net income, 0.64% to
1.33%; net interest income, 2.90% to 4.09%; loss provisions, 0.26% to 0.08%;
noninterest income, 0.04% to 0.10%; efficiency ratio, 71.27% to 53.51%; and core
income, 0.64% to 1.25%. Anson Savings was above the comparative group in loss
provisions, 0.02% to 0.03%; and operating expense, 2.11% to 2.22%. Anson
Savings' operating expense minus other income was 2.07% versus 2.12% for the
comparative group. After conversion, deployment of the proceeds will provide
additional income, and Anson Savings will compare more favorably with the
comparative group in terms of return on average assets, with a return of 1.17%
at the midpoint of the appraisal range. Pro forma return on average equity is
3.26% at the midpoint, versus a mean of 4.11% and median of 3.95% for the
comparative group.
As compared with the comparative group, Anson Savings has a lower level of
loss provisions and operating expense. Anson Savings is below the comparative
group in all other areas of operations shown on Table III.2. Anson Savings has
two serious impediments to earnings relative to the comparative group--1) its
spread; and 2) its ratio of interest earning assets to interest bearing
liabilities. The proceeds from the stock sale will improve most of Anson
Savings' operating ratios. However, it will take some time and asset growth to
leverage the capital. In addition, improving the spread will require growth in
higher yielding loans and lower costing liabilities.
Balance Sheet Characteristics
The general asset composition of Anson Savings is similar to that of the
comparative group. Anson Savings has a higher level of passive investments with
43.27% of its assets invested in cash, investments, and mortgage-backed
securities, versus 32.99% for the comparative group. Anson Savings has a lower
percentage of its assets in loans, at 54.64% versus 65.62% for the comparative
group. Anson Savings' percentage of earning assets to interest costing
liabilities is much lower than that of the group. Anson Savings has 120.79% and
the comparative group averages 145.70%. After conversion, Anson Savings' ratio
will be higher than that of the group of comparatives (155% at the midpoint).
The liability side differs mainly in that Anson Savings has a lower
percentage of borrowings, a higher percentage of deposits, and a lower
percentage of equity. Anson Savings has no borrowings versus 5.02% of assets for
the comparative group and deposits equal to 80.37% of assets versus 64.10% for
the comparative group. Anson Savings' equity is 18.62% of assets versus 29.17%
for the comparative group. Anson Savings' equity ratio after conversion will be
above that of the comparative group. Anson Savings' pro forma equity ratio at
the midpoint is 36.5% (40.9% at the supermaximum).
Risk Factors
Anson Savings has a much higher level of non-performing assets than the
comparative group, at 1.51% of assets versus 0.64% for the comparative group.
However, Anson Savings' loss experience is nominal. Anson Savings' loan loss
allowance is 0.88% of net loans, which is in line with the comparative group at
0.64%. Almost all of Anson Savings' loans are long-term, fixed rate. The Bank's
gap position is aided by its high percentage of its assets in short to
intermediate term liquid assets. Its rate shock table indicates a 15% decline
in net portfolio value at a 200 basis point increase in rates and a 31% decline
in net portfolio value at a 400 basis point rate increase (see Table I.3). It
has a one year negative gap of 40.0%, three year negative gap of 38.0%, and five
year negative gap of 31.7%. The comparative group information indicates a
negative 1.72% one year gap to assets. However, only 3 of the 11 members of the
group
2
<PAGE>
FERGUSON & COMPANY Section III
- ------------------ -----------
reported their gap. Overall, we believe that Anson Savings' interest rate risk
position is below that of the comparative group.
Summary of Financial Comparison
Based on the above discussion of operational, balance sheet, and risk
characteristics of Anson Savings compared with the group, we believe that Anson
Savings' performance is slightly below that of the comparative group. The
conversion proceeds will improve several of Anson Savings' financial aspects,
but, after conversion, the Bank will continue to lag the comparative group in
some financial areas. Expansion of the earnings base is needed to leverage the
capital to achieve a reasonable return on equity.
FUTURE PLANS
Anson Savings' future plans are to be a well capitalized profitable
institution with good asset quality and a commitment to serving the needs of its
trade area. The business plan projects that the Bank will experience moderate
growth, leveraging the capital slowly.
In recent years, Anson Savings has experienced no growth. The Bank's
business plan projects that it will experience growth in loans, savings
deposits, and liquidity. The additional capital raised by the sale of Common
Stock will initially be used to purchase short term investment securities.
Increasing market penetration by increasing the number of services and
products available and expansion into Union County are the most likely methods
to achieve growth.
3
<PAGE>
FERGUSON & COMPANY Section III
- ------------------ -----------
Table III.1 - Comparative General Characteristics
<TABLE>
<CAPTION>
Total Current Current
Number Assets Stock Market
Type of ($000) Price Value
Ticker Short Name City State Thrift (1) Offices MRQ IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CRZY Crazy Woman Creek Bancorp Buffalo WY Trad. 1 60,774 03/29/96 16.500 15.75
FFDF FFD Financial Corp. Dover OH Trad. 1 92,364 04/03/96 18.750 27.09
LXMO Lexington B&L Financial Corp. Lexington MO Trad. 1 58,783 06/06/96 16.500 18.49
MBSP Mitchell Bancorp Inc. Spruce Pine NC Trad. 1 36,103 07/12/96 17.000 15.83
MRKF Market Financial Corp. Mount Healthy OH Trad. 2 56,833 03/27/97 16.750 22.37
PFFC Peoples Financial Corp. Massillon OH Trad. 2 82,464 09/13/96 16.500 23.37
PSFI PS Financial Inc. Chicago IL Trad. 1 85,698 11/27/96 13.938 28.90
RELI Reliance Bancshares Inc. Milwaukee WI Trad. 1 44,544 04/19/96 9.125 23.38
SCBS Southern Community Bancshares Cullman AL Trad. 1 70,893 12/23/96 18.000 20.47
SCCB S. Carolina Community Bancshrs Winnsboro SC Trad. 3 45,092 07/07/94 21.500 12.54
SSB Scotland Bancorp Inc. Laurinburg NC Trad. 2 61,473 04/01/96 10.125 19.38
Maximum 3 92,364 35,516 21.500 28.90
Minimum 1 36,103 34,522 9.125 12.54
Average 1 63,184 35,209 15.881 20.69
Median 1 60,774 35,222 16.500 20.47
(1) Determined type thrift by reference to TAFS, which is derived
from quarterly reports filed with the OTS, and BankSource, which
is derived from quarterly reports filed with the FDIC. TAFS and
BankSource are published by Sheshunoff.
</TABLE>
Source: SNL & F&C calculations 4
<PAGE>
FERGUSON & COMPANY Section III
- ------------------ -----------
Table III.2 - Key Financial Indicators
Anson Comparative
Savings Bank Group
--------------- ---------------
Profitability
(% of average assets)
Net income 0.64 1.33
Net interest income 2.90 4.09
Loss (recovery) provisions 0.02 0.03
Other operating income 0.04 0.10
Operating expense 2.11 2.22
Efficiency ratio 71.27 53.51
Core income (excluding gains
and losses on asset sales) 0.64 1.25
Balance Sheet Factors
(% of assets)
Cash and investments 39.74 26.99
Mortgage-backed securities (including CMO's) 3.53 6.00
Loans 54.64 65.62
Savings deposits 80.37 64.10
Borrowings - 5.02
Equity 18.62 29.17
Tangible equity 18.62 29.17
Risk Factors
(%)
Earning assets/costing liabilities 120.79 145.70
Non-performing assets/assets 1.51 0.64
Loss allowance/non performing assets 32.05 196.64
Loss allowance/loans 0.88 0.64
One year gap/assets (1) (40.01) (1.72)
(1) Only 3 of the 11 in the group reported one year gap.
Source: SNL Securities, F&C calculations,
and Offering Circular
5
<PAGE>
FERGUSON & COMPANY Table III.3-Pro Forma Comparisons Section III
- ------------------ -----------
Anson Savings Bank
As of February 27, 1998
<TABLE>
<CAPTION>
Ticker Name Price Mk Value PE P/Book P/TBook P/Assets Div Yld Assets Eq/A
($) ($Mil) (X) (%) (%) (%) (%) ($000) (%)
Anson Savings Bank
------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Before Conversion N/A N/A N/A N/A N/A N/A N/A 20,723 18.6
Pro Forma Supermaximum 10.000 8.78 23.4 74.8 74.8 30.6 3.00 28,536 40.9
Pro Forma Maximum 10.000 7.59 22.3 71.5 71.5 27.6 3.00 27,472 38.6
Pro Forma Midpoint 10.000 6.60 21.2 68.2 68.2 24.9 3.00 26,546 36.5
Pro Forma Minimum 10.000 5.61 19.8 64.1 64.1 21.9 3.00 25,621 34.2
Comparative Group
-----------------
Averages 15.881 20.69 28.1 120.3 120.3 33.9 2.09 63,184 29.2
Medians 16.500 20.47 28.3 111.6 111.6 29.7 1.98 60,774 24.1
North Carolina Thrifts
----------------------
Averages 23.370 60.38 22.9 137.8 138.1 30.0 2.34 224,264 23.0
Medians 18.063 38.49 23.6 126.9 129.2 28.9 2.35 141,482 22.7
Southeast Region Thrifts
------------------------
Averages 26.750 96.47 23.6 176.5 181.9 23.1 2.02 567,533 14.8
Medians 20.625 60.79 23.9 159.7 159.7 21.4 1.98 228,656 12.9
All Public Thrifts
------------------
Averages 25.861 293.65 21.3 173.6 181.7 19.1 1.68 1,765,084 11.9
Medians 22.250 65.62 20.6 159.7 165.7 17.8 1.63 357,691 10.1
Comparative Group
-----------------
CRZY CrazyWomanCreek-WY 16.500 15.75 20.9 109.7 109.7 25.9 2.42 60,774 23.6
FFDF FFDFinlCorp-OH 18.750 27.09 33.5 121.9 121.9 29.3 1.60 92,364 24.1
LXMO LexingtonB&L-MO 16.500 18.49 23.6 111.6 111.6 29.7 1.82 58,783 26.6
MBSP MitchellBancorp-NC 17.000 15.83 28.3 109.3 109.3 43.8 2.35 36,103 40.1
MRKF MarketFinlCorp-OH 16.750 22.37 NA 110.7 110.7 39.4 1.67 56,833 35.6
PFFC PeoplesFinlCorp-OH 16.500 23.37 33.7 150.3 150.3 28.4 3.03 82,464 18.9
PSFI PSFinancialInc-IL 13.938 28.90 NA 94.4 94.4 35.2 3.44 85,698 37.3
RELI RelianceBcshs-WI 9.125 23.38 45.6 104.8 104.8 52.5 - 44,544 50.1
SCBS SouthernCmnty-AL 18.000 20.47 20.7 145.2 145.2 28.9 1.67 70,893 19.9
SCCB SCCmntyBcshs-SC 21.500 12.54 30.7 134.5 134.5 27.8 2.98 45,092 20.7
SSB ScotlandBancorp-NC 10.125 19.38 15.6 131.0 131.0 31.5 1.98 61,473 24.1
</TABLE>
6
<PAGE>
FERGUSON & COMPANY Table III.3-Pro Forma Comparisons Section III
- ------------------ -----------
Anson Savings Bank
As of February 27, 1998
<TABLE>
<CAPTION>
Ticker Name TEq/A EPS ROAA ROAE
(%) ($) (%) (%)
<C> <S> <C> <C> <C> <C>
Anson Savings Bank
------------------
Before Conversion 18.6 N/A 0.64 3.55
Pro Forma Supermaximum 40.9 0.43 1.31 3.23
Pro Forma Maximum 38.6 0.45 1.24 3.24
Pro Forma Midpoint 36.5 0.47 1.17 3.26
Pro Forma Minimum 34.2 0.50 1.10 3.27
Comparative Group
-----------------
Averages 29.2 0.62 1.25 4.11
Medians 24.1 0.65 1.20 3.95
North Carolina Thrifts
----------------------
Averages 22.9 1.08 1.32 5.72
Medians 22.7 0.69 1.44 5.12
Southeast Region Thrifts
------------------------
Averages 14.7 1.18 1.05 7.99
Medians 12.9 0.89 1.00 7.26
All Public Thrifts
------------------
Averages 11.7 1.31 0.99 9.37
Medians 9.9 1.12 0.94 8.28
Comparative Group
-----------------
CRZY CrazyWomanCreek-WY 23.6 0.79 1.30 5.11
FFDF FFDFinlCorp-OH 24.1 0.56 0.88 3.60
LXMO LexingtonB&L-MO 26.6 0.70 1.23 4.21
MBSP MitchellBancorp-NC 40.1 0.60 1.51 3.62
MRKF MarketFinlCorp-OH 35.6 NA 1.04 3.15
PFFC PeoplesFinlCorp-OH 18.9 0.49 0.78 3.22
PSFI PSFinancialInc-IL 37.3 NA 2.10 5.43
RELI RelianceBcshs-WI 50.1 0.20 1.04 2.11
SCBS SouthernCmnty-AL 19.9 0.87 1.20 5.66
SCCB SCCmntyBcshs-SC 20.7 0.70 1.00 3.95
SSB ScotlandBancorp-NC 24.1 0.65 1.65 5.17
</TABLE>
Note: Stock prices are closing prices or
last trade. Pro forma calculations for
Anson are based on sales at $10 a share
with a minimum of $5,610,000, midpoint
of $6,600,000, maximum of $7,590,000,
and supermaximum of $8,728,500. Sources:
Anson SB's audited and unaudited
financial Statements, SNL Securities,
and F&C calculations.
7
<PAGE>
SECTION IV
CORRELATION OF MARKET
VALUE
<PAGE>
FERGUSON & COMPANY Section IV
- ------------------ ----------
IV. CORRELATION OF MARKET VALUE
MARKETABILITY & LIQUIDITY OF STOCK TO BE ISSUED
Certain factors must be considered to determine whether adjustments are
required in correlating Anson Savings' market value to the comparative group.
Those factors include financial aspects, market area, management, dividends,
liquidity, thrift equity market conditions, and subscription interest.
This section addresses the aforementioned factors and the estimated pro forma
market value of the to-be-issued common shares and compares the resulting market
value of the Bank to the members of its comparative group and the selected group
of publicly held thrifts.
Financial Aspects
Section III includes a discussion regarding a comparison of Anson Savings'
earnings, balance sheet characteristics, and risk factors with its comparative
group. Table III.2 presents a comparison of certain key indicators, and Table
III.3 presents certain key indicators on a pro forma basis after conversion.
As shown in Table III.2, from an earnings viewpoint, Anson Savings is below
its comparative group in core income as a percentage of average assets ( 0.64%
for Anson Savings Versus 1.25% for the group). Anson Savings' core income is
based on appraisal earnings which factors out unusual or nonrecurring items and
the comparative group's core income is computed on the same basis. Anson
Savings' net interest income as a percent of assets is 2.90% versus 4.09% for
the comparatives. The difference is attributable to 1) Anson Savings' lower
ratio of interest-earning assets to interest-bearing liabilities, which is
caused by its lower capital position; and 2) Anson Savings' lower spread.
Exhibit III, page 2 indicates that Anson Savings' net interest margin was in the
19th percentile for calendar year 1994, the 10th percentile for calendar year
1995, and the 6th percentile for calendar year 1996and the nine months ending
September 30, 1997. Generally, this means that Anson Savings' net interest
margin was lower than approximately 80% of the banks in its asset range. The
peer group that Anson Savings is compared to is all banks under $25 million in
assets filing call reports with the FDIC.
Anson Savings' loan loss provisions are nominal, as is the case with its
comparative group, with loss provisions of 0.02% of assets for Anson Savings
versus 0.03% of assets for the comparative group. Anson Savings' other
operating income is .04% of average assets, versus 0.10% for the comparative
group. Anson Savings' lower ratio results from its business mix.
Anson Savings' operating expense ratio, at 2.11% of average assets, is below
that of the comparative group, which is 2.22%. Anson Savings' lower ratio
results from its more traditional business mix.
After Anson Savings completes its stock conversion, its core income as a
percentage of average assets will increase. Table III.3 projects that Anson
Savings' return on assets will be 1.17% at the midpoint, versus a mean of 1.25%
and median of 1.20% for the comparative group.
Anson Savings' pro forma equity to assets ratio at the midpoint is 36.5%,
versus a mean of 29.2% and median of 24.1% for the comparative group. Anson
Savings' pro forma return on equity is 3.26% at the midpoint versus a mean of
4.11% and median of 3.95% for the comparative group.
There were no adjustments to Anson Savings' recorded earnings for appraisal
purposes. Set forth below is a reconciliation of appraisal earnings:
1
<PAGE>
FERGUSON & COMPANY Section IV
- ------------------ ----------
Table IV.1 - Appraisal Earnings Adjustments
Net income, year ended June 30, 1997 $ 50,000
Add back net loss, six months ended December 31, 1996 21,000
----------
Net income, six months ended June 30, 1997 71,000
Plus net income, six months ended December 31, 1997 62,000
----------
Net income, year ended December 31, 1997 133,000
Appraisal earnings adjustments 0
Appraisal earnings, year ended December 31, 1997 $133,000
==========
Anson Savings' asset composition is more passive than the comparative group.
Anson Savings has a lower ratio of loans to assets, higher ratio of investments
and mortgage-backed securities to assets, higher ratio of deposits to assets,
lower ratio of borrowings to assets, and lower ratio of equity to assets. From
the risk factor viewpoint, Anson Savings is slightly below the comparative
group. Anson Savings has a higher level of non performing assets, though it has
a low write off experience. Anson Savings' loan loss allowance is 0.88% of net
loans, compared with the comparative group, which is 0.64%. Its ratio of
interest earning assets to interest bearing liabilities (120.79%) is well below
the comparative group (145.70%). Anson Savings' ratio will exceed the
comparative group after conversion. At the midpoint, Anson Savings' ratio would
be approximately 155%, and at the supermaximum, it would be approximately 168%.
From an interest rate risk factor, Anson Savings probably has more exposure than
the comparative group.
We believe that a slight downward adjustment is necessary relative to
-------------------
financial aspects of Anson Savings.
Market Area
Section II describes Anson Savings' market area.
We believe that no adjustment is required for Anson Savings' market area.
-------------
Management
The President, who functions as CEO, has been with Anson Savings 36 years,
serving as CEO since joining the Bank. The Treasurer has been with the Bank for
34 years, serving as Treasurer since 1972. The Secretary has been with the Bank
for 39 years, serving as Secretary since 1969. Anson Savings has a management
succession plan.
We believe no adjustment is required for Anson Savings' management.
-------------
Dividends
Table III.3 provides dividend information relative to the comparative group
and the thrift industry as a whole. The comparative group is paying a mean
yield on price of 2.09% and a median of 1.98%, while all public thrifts are
paying a mean of 1.68% and median of 1.63%. At the time that this appraisal was
prepared, Management had not decided upon a dividend rate, but seemed to be
considering a rate between 3% and 4%. Anson Savings does intend to commit to a
dividend initially. For purposes of our appraisal, we assumed a dividend rate
of 3%. With the amount of capital that the Bank will have after conversion, it
should not have any problems paying dividends.
We believe that no adjustment is required relative to Anson Savings' intention
-------------
to pay dividends.
2
<PAGE>
FERGUSON & COMPANY Section IV
- ------------------ ----------
Liquidity
The Holding Company has never issued capital stock to the public, and as a
result, no existing market for the Common Stock exists. Although the Holding
Company intends to list its Common Stock over the counter through the OTC
"Electronic Bulletin Board," there can be no assurance that a liquid trading
market will develop.
A public market having the desirable characteristics of depth, liquidity, and
orderliness depends upon the presence, in the market place, of both willing
buyers and sellers of the Common Stock. These characteristics are not within
the control of the Bank or the market.
The peer group includes companies with sufficient trading volume to develop
meaningful pricing characteristics for the stock. The market value of the
comparative group ranges from $12.54 million to $28.90 million, with a mean
value of $20.69 million. The midpoint of Anson Savings' valuation range is $6.6
million at $10 a share, or 660,000 shares.
We believe that a downward adjustment is required relative to the liquidity of
-------------------
Anson Savings' stock.
Thrift Equity Market Conditions
The SNL Thrift Index is summarized in Figure IV.1. As the table demonstrates,
the Thrift Index has performed well since the end of 1990. The Index has grown
as follows: Year ended December 31, 1991--increased 49.0% from 96.6 to 143.9;
Year ended December 31, 1992--increased 39.7% to 201.1; Year ended December 31,
1993--increased 25.6% to 252.5; Year ended December 31, 1994--decreased 3.1% to
244.7; Year ended December 31, 1995--increased 53.9% to 376.5; Year ended
December 31, 1996--increased 28.4% to 483.6; Year ended December 31, 1997--
increased 69.3% to 814.1; and Period ended February 27, 1998--increased 0.6% to
818.7. It is market value weighted with a base value of 100 as of March 31,
1984.
As shown in Figure IV.1, which is a graph of the SNL Thrift Index covering
from December 31, 1990 through February 27, 1998, the market, as depicted by the
index, has experienced fluctuations recently. It dipped in the latter part of
1994, but recovered during the first quarter of 1995. During 1995, the Index
continued a more robust increase and moved from 244.7 at year end 1994 to 376.5
by December 31, 1995, an increase of 53.9%. However, the Index was flat for the
first six months of 1996, but it has picked up since June 30, 1996. It closed
1996 at 483.6, up 28.4% from 1995. It closed 1997 at 814.1, a robust growth of
68.3% for the year. It is up 0.6% (to 818.7) from December 31, 1997 to February
27, 1998, after dropping 5.6% to 768.3 during January 1998.
The increase in the SNL Index, in general, has been parallel with the
increases in other equity markets with some interim fluctuations caused by
changes or anticipated changes in interest rates. Another factor, however, is
also notable. In other markets, increased prices are responding to improved
profits, with price to earnings ratios increasing as earnings potentials are
anticipated. However, the thrift IPO market has been affected by speculation
that the majority of the institutions will become viable consolidation
candidates and sell at some expanded multiple of book value.
NORTH CAROLINA ACQUISITIONS
Table IV.2 provides information relative to acquisitions of financial
institutions in North Carolina announced during 1997. There were four thrift
acquisitions and four bank acquisitions announced during that time frame.
Currently, there are 14 publicly held thrifts in the State of North Carolina.
There are 54 publicly held thrifts in the southeast region of the country. Bank
acquisitions in North Carolina in 1997 averaged 284.9% of book value and 28.3
times earnings. The median price was 292.8% of book value and
3
<PAGE>
FERGUSON & COMPANY Section IV
- ------------------ ----------
28.8 times earnings. Thrifts generally sell at lower price/book multiples than
do banks. Thrifts in North Carolina during that period averaged 175.8% of book
value and 30.2 times earnings.
EFFECT OF INTEREST RATES ON THRIFT STOCK
The current interest rate environment and the anticipated rate environment
will affect the pricing of thrift stocks and all other interest sensitive
stocks. As the economy continues to expand, the fear of inflation can return.
The Federal Reserve, in its resolve to curb inflation, has increased rates in
the past, but has more recently relented and passed several opportunities to
increase rates until March 25, 1997, when the Federal Open Market Committee
("FOMC") increased the discount rate 25 basis points. In some minds, this was
an attempt to head off inflationary trends. According to the FOMC, "This action
was taken in light of persisting strength in demand, which is progressively
increasing the risk of inflationary imbalances developing in the economy that
would eventually undermine the long expansion."/1/ This increase was clearly
telegraphed by Chairman Greenspan who voiced concern about the levels of the
equity markets. Following the March 25 increase, unemployment rates were
announced at the 5.2% level, down from the 5.5% level at the beginning of 1996,
and significantly down from the 6.7% level at the beginning of 1994./2/ The good
news about unemployment gave way to speculation that the March 25th increase was
just the first of at least two or three increases, and the speculation was given
some credence at that time by rises in the Employment Cost index, an increase in
Unit Labor Cost, and an upward trend in the price of crude oil. By April 1,
1997, following the rate increase, the equities markets lost all of the gains
registered since the first of the year. By the end of April 1997, the market
had begun a rebound and has trended upward since then. There have been specific
days of price adjustment, but the overall trend is up. Chairman Greenspan, in
recent public appearances, has not articulated concerns about market levels and
inflation. Since the significant market adjustment that occurred on October 21,
1997, the Federal Reserve has publicized inaction. The market reaction to the
inaction has been mixed--generally regarded as a neutral response.
The thrift equities market is following the market in general. However, the
thrift equities market can continue to be influenced by the speculation that
there will eventually be a buyout, and the fact that thrift IPO stock can be
purchased at significant discounts from book value. These two facts could keep
the thrift equities market from falling as much as the other general markets.
Large mergers are likely to slow. But at the regional level, merger activity is
likely to continue.
What is likely to happen in the short to intermediate term is that rates will
float around current levels, but will be trending downward for the next few
months. By year end, the long bond could be as low as 5.40%. The GDP is likely
to grow at a rate of 2.5% to 3.0%, with most of the growth coming in the first
half of the year. Inflation will moderate at between 1.5% and 2.0% for the
year.
With the Federal Reserve always ready to raise (or lower) rates as economic
conditions warrant, it is likely that before this expansion cycle is over,
interest rates will rise. The supply and demand portion of the equation is
nicely balanced, and a continuation of such equilibrium will probably restrain
rising rates in the near term. It is even possible that in the short-term,
interest rates might ease a bit.
The consumer seems happier now than in the past. Job markets are strong and
the unemployment rate was recently 4.6%--the lowest since November 1973.
Consumer confidence is at a 28 year high. Our continuing economic health has
always been dependent upon meaningful consumer participation, because consumers
(household sector) actually account for 68% of the Gross Domestic Product
("GDP").
In the second quarter of 1997, consumers seemed to rein in their consumption.
This lowering of consumption may be only to catch their economic breath and
repay credit card debt and other personal debt
- ----------------------
/1/ US Financial Data, published by the Research Division of the Federal Reserve
Bank of St. Louis, MO.
/2/ National Economic Trends, the Federal Reserve Bank of St. Louis, MO.
4
<PAGE>
FERGUSON & COMPANY Section IV
- ------------------ ----------
which has accumulated. Manufacturing is still strong, even with the slight drop
in retail sales, home purchases and other big ticket items.
With consumer confidence at a high level, jobs plentiful, inflation seemingly
in check, and the economy healthy and continuing to expand, why shouldn't the
economy continue to roll onward and upward? From an analytical view, there is
one thing on the economic horizon that could negatively impact our economy--the
Pacific Rim countries are in depression. Some of the Pacific Rim countries will
resist or only pay "lip service" to the IMF requirements. These economies have
only one way out of their problems--exports. They will begin to export at very
low prices and this will have a negative impact on the United States corporate
profits. Our corporate profits will be hit from two directions with the Pacific
Rim problems--1) competition from exports as we have discussed coupled with 2)
loss of sales by the United States due to economic inability of the Pacific Rim
customers to buy our products and services.
Thrift net interest margins have remained stable. The equilibrium in the
supply and demand portion of the interest rate market has helped continue the
profitability mode of the industry that started in 1993. Access to mortgage-
backed securities and derivatives has made it possible for many to be profitable
without making loans in significant volumes. With reduced deposit insurance
premiums, perhaps they will become more willing to compete for customer
deposits.
As clearly illustrated, the SNL Thrift Index has performed well over the last
seven years. It moved in tandem with all interest sensitive stocks and
reflected the weakness in the market as investors began to consider the
importance of increases in rates and their impact on the net interest margins of
thrifts. The clear implication is that rising interest rates will have a
negative impact on earnings.
Figure IV.2 graphically displays the rate environment since September 12,
1997. At that time, the yield curve was relatively flat, with only a 105 basis
point ("BP") difference between the one year treasury bill rate and the 30 year
treasury. Since that time, the yield curve has become flatter, with a 52 BP
spread between the one year treasury bill rate and the 30 year treasury rate at
February 27, 1998.
At September 12, 1997, the spread between the 1 year T-Bill and the 5 year T-
Note was 64 BP, and the spread between the 5 year T-Note and the 30 year bond
was 41 BP. On February 27, 1998, the spreads were 18 and 34 BP, respectively.
From September 12, 1997, to February 27, 1998, the Fed Funds rate increased 3
BP and the Prime Rate did not change.
Increased cost of funds will serve to narrow the net interest margins of
thrifts. A thrift's ability to maintain net interest margins through business
cycles is important to investors, unless thrifts can offset the decline in net
interest income by other sources of revenue or reductions in noninterest
expense. The former is difficult and the latter is unlikely.
Anson Savings, with its level of interest rate risk, is vulnerable to rising
rates. However, such risk is mitigated by the Bank's capital level, especially
on a pro forma basis after conversion.
During 1993, conversion stocks often experienced first day 30% or more
increases in value. As Table IV.3 shows, recent price appreciation has become
quite robust, surpassing 1993 levels. Table IV.3 provides information on 13
conversions completed since August 31, 1997 and listed on major exchanges. The
average change in price since conversion is a gain of 63.6% and the median
change is a gain of 66.6%. Within that group, all have increased in value with
a range of a low of 43.1% to a high of 81.3%. The average increase in value at
one day, one week, and one month after conversion has been 54.0%, 56.6%, and
53.3%, respectively. The median increase in value at one day, one week, and one
month after conversion has been 50.6%, 60.0%, and 56.3%, respectively.
5
<PAGE>
FERGUSON & COMPANY Section IV
- ------------------ ----------
Because of the lack of complete earnings information on recent conversions, a
meaningful comparison of the price earnings ratios is difficult to make.
However, there is information, albeit limited, to review the price to book
ratio. The average price-to-book ratio, as of February 27, 1998, is 115.2% and
the median is 115.2%. That compares to the offering price to pro forma book,
where the average was 76.8% and the median was 76.6%.
Table IV.4 provides information on 13 pink sheet conversions completed since
February 28, 1997. The average change in price since conversion is a gain of
50.6% and the median change is a gain of 55.0%. Within that group, all have
increased in value with a range of a low of 26.2% to a high of 75.0%. The
average increase in value at one day, one week, and one month after conversion
has been 37.4%, 37.3%, and 40.9%, respectively. The median increase in value at
one day, one week, and one month after conversion has been 37.5%, 36.9%, and
41.3%, respectively.
Because of the lack of complete earnings information on recent conversions, a
meaningful comparison of the price earnings ratios is difficult to make.
However, there is information to review the price to book ratio. The average
price-to-book ratio, as of February 27, 1998, is 99.0% and the median is 99.0%.
That compares to the offering price to pro forma book, where the average was
71.6% and the median was 72.3%.
We believe a downward adjustment is required for the new issue discount.
-------------------
Adjustments Conclusion
Adjustments Summary
- --------------------------------------------------------------------------------
No Change Upward Down
Financial Aspects X
Market Area X
Management X
Dividends X
Liquidity X
Thrift Equity Market X
Conditions
- --------------------------------------------------------------------------------
Valuation Approach
Typically, investors rely on the price/earnings ratio as the most appropriate
indicator of value. We consider price/earnings to be one of the important
pricing methods in valuing a thrift stock. Price/book is a well recognized
yardstick for measuring the value of financial institution stocks in general.
Another method of viewing thrift values is price/assets, which is more
meaningful in situations where the subject is thinly capitalized. Given the
healthy condition of the thrift industry today, more emphasis is placed on
price/earnings and price/book. Generally, price/earnings and price/book should
be considered in tandem.
Table III.3 presents Anson Savings' pro forma ratios and compares them to the
ratios of its comparative group and the publicly held thrift industry as a
whole. Anson Savings' net income for the twelve months ended December 31, 1997,
was approximately $133,000, with no adjustments required to determine appraisal
earnings of $133,000. The Bank's capital level after conversion will be
sufficient to mitigate its interest rate risk. The Bank projects moderate
growth.
6
<PAGE>
FERGUSON & COMPANY Section IV
- ------------------ ----------
The comparative group traded at an average of 28.1 times earnings at February
27, 1998, and at 120.3% of book value. The comparative group traded at a median
of 28.3 times earnings and a median of 111.6% of book value. At the midpoint of
the valuation range, Anson Savings is priced at 21.2 times earnings and 68.2% of
book value. At the maximum end of the range, Anson Savings is priced at 22.3
times earnings and 71.5% of book value. At the supermaximum, Anson Savings is
priced at 23.4 times earnings and 74.8% of book value.
The midpoint valuation of $6,600,000 represents a discount of 43.3% from the
average and a discount of 38.9% from the median of the comparative group on a
price/book basis. The price/earnings ratio for Anson Savings at the midpoint
represents a discount of 24.6% from the comparative group's mean and a discount
of 25.1% from the median price/earnings ratio.
The maximum valuation of $7,590,000 represents a discount of 40.6% from the
average and 35.9% from the median of the comparative group on a price/book
basis. The price/earnings ratio for Anson Savings at the maximum represents a
discount of 20.6% from the average and a discount of 21.2% from the median of
the comparative group.
As shown in Table IV.3, conversions closing since August 31, 1997, have closed
at an average price to book ratio of 76.8% and median of 76.6%. Anson Savings'
pro forma price to book ratio is 68.2% at the midpoint, 71.5% at the maximum,
and 74.8% at the supermaximum of the range. At the midpoint, Anson Savings is
11.2% below the average and 11.0% below the median. At the maximum of the
range, Anson Savings is 6.9% below the average and 6.7% below the median. At
the supermaximum of the range, Anson Savings' pro forma price to book ratio is
2.6% below the average and 2.3% below the median.
As shown in Table IV.4, pink sheet conversions closing since February 28,
1997, have closed at an average price to book ratio of 71.6% and median of
72.3%. Anson Savings' pro forma price to book ratio is 68.2% at the midpoint,
71.5% at the maximum, and 74.8% at the supermaximum of the range. At the
midpoint, Anson Savings is 4.7% below the average and 5.7% below the median. At
the maximum of the range, Anson Savings is 0.1% below the average and 1.1% below
the median. At the supermaximum of the range, Anson Savings' pro forma price to
book ratio is 4.5% above the average and 3.5% above the median.
Anson Savings' pro forma price to assets ratio and its pro forma equity to
assets ratios are at or above all of the groups used for comparison.
Valuation Conclusion
We believe that as of February 27, 1998, the estimated pro forma market value
of Anson Savings was $6,600,000. The resulting valuation range was $5,610,000
at the minimum to $7,590,000 at the maximum, based on a range of 15% below and
15% above the midpoint valuation. The supermaximum is $8,728,500, based on 1.15
times the maximum. Pro forma comparisons with the comparative group are
presented in Table III.3 based on calculations shown in Exhibit VII.
7
<PAGE>
<TABLE>
<CAPTION>
FERGUSON & COMPANY Table IV.2 - North Carolina Acquisitions Section IV
- ------------------ ----------
Seller: Seller:
1:Total 1:Eqty/
Announce Assets Assets
Buyer ST Seller ST TYPE Date ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
Triangle Bancorp NC Guaranty State Bncp NC B 10/16/97 103,830 10.8
First Charter Corp NC Carolina State Bank NC B 06/30/97 139,014 9.0
Triangle Bancorp NC Bank of Mecklenburg NC B 03/27/97 259,280 7.0
LSB Bancshares NC Old North State Bank NC B 01/21/97 128,497 8.4
Triangle Bancorp NC United Federal Svgs NC T 12/26/97 285,744 7.3
Southern Bancshares NC ESB Bncp NC T 11/21/97 26,502 19.0
FNB Corp. NC Home Savings Bank NC T 06/03/97 53,446 17.7
First Citizens BcShs NC First Savings Fin'l NC T 04/03/97 55,850 16.4
Maximum 285,744 19.0
Minimum 26,502 7.0
Average 131,520 12.0
Median 116,164 9.9
Average-banks 157,655 8.8
Median-banks 133,756 8.7
Average-thrifts 105,386 15.1
Median-thrifts 54,648 17.1
</TABLE>
Source: SNL & F&C calculations
8
<PAGE>
<TABLE>
<CAPTION>
FERGUSON & COMPANY Table IV.2 - North Carolina Acquisitions Section IV
- ------------------ ----------
Ann'd Ann'd Ann'd Ann'd Ann'd Seller: Seller:
Deal Pr/ Deal Deal Pr/ Deal TgBk Prem/ 1:YTD 1:YTD
Assets Pr/Bk 4-Qtr Pr/Deps CoreDeps ROAA ROAE
Seller (%) (%) EPS (x) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
Guaranty State Bncp 34.2 301.5 30.7 39.4 31.8 1.15 10.71
Carolina State Bank 30.4 336.3 35.1 35.3 30.2 0.78 8.46
Bank of Mecklenburg 16.2 217.8 20.6 23.8 19.2 0.82 11.27
Old North State Bank 25.3 284.1 27.0 29.6 24.8 0.98 11.64
United Federal Svgs 25.0 323.3 35.0 28.1 22.3 0.71 9.47
ESB Bncp 24.2 126.9 25.3 30.5 8.3 1.98 10.55
Home Savings Bank 27.1 150.9 NA 34.0 12.3 0.96 5.36
First Savings Fin'l 19.0 102.1 NA 23.4 3.9 (0.99) (5.64)
Maximum 34.2 336.3 35.1 39.4 31.8 1.98 11.64
Minimum 16.2 102.1 20.6 23.4 3.9 (0.99) (5.64)
Average 25.2 230.4 28.9 30.5 19.1 0.80 7.73
Median 25.1 250.9 28.8 30.0 20.7 0.89 10.01
Average-banks 26.5 284.9 28.3 32.0 26.5 0.93 10.52
Median-banks 27.8 292.8 28.8 32.4 27.5 0.90 10.99
Average-thrifts 23.8 175.8 30.2 29.0 11.7 0.67 4.94
Median-thrifts 24.6 138.9 30.2 29.3 10.3 0.84 7.42
</TABLE>
Source: SNL & F&C calculations
9
<PAGE>
FERGUSON & COMPANY TABLE IV.3 - Recent Conversions Section IV
- ------------------ (Completed since August 31, 1997) ----------
<TABLE>
<CAPTION>
Conversion Gross Offering
Assets Proceeds Price
Ticker Short Name State IPO Date ($000) ($000) ($)
<S> <C> <C> <C> <C> <C> <C>
RCBK Richmond County Financial Corp NY 02/18/98 993,370 244,663 10.000
HFBC HopFed Bancorp Inc. KY 02/09/98 202,496 40,336 10.000
TSBK Timberland Bancorp Inc. WA 01/13/98 206,188 66,125 10.000
MYST Mystic Financial Inc. MA 01/09/98 149,653 27,111 10.000
UTBI United Tennessee Bankshares TN 01/05/98 64,189 14,548 10.000
PEDE Great Pee Dee Bancorp SC 12/31/97 60,538 21,821 10.000
UCBC Union Community Bancorp IN 12/29/97 84,291 30,418 10.000
WSBI Warwick Community Bancorp NY 12/23/97 286,545 66,065 10.000
SIB Staten Island Bancorp Inc. NY 12/22/97 2,144,500 515,775 12.000
HCBC High Country Bancorp Inc. CO 12/10/97 76,324 13,225 10.000
FSFF First SecurityFed Financial IL 10/31/97 260,002 64,080 10.000
OTFC Oregon Trail Financial Corp. OR 10/06/97 204,213 46,949 10.000
SHSB SHS Bancorp Inc. PA 10/01/97 81,688 8,200 10.000
Maximum 2,144,500 515,775 12.000
Minimum 60,538 8,200 10.000
Average 370,307 89,178 10.154
Median 202,496 40,336 10.000
</TABLE>
Source: SNL & F&C calculations 10
<PAGE>
FERGUSON & COMPANY Table IV.3 - Recent Conversions Section IV
- ------------------ (Completed since August 31, 1997)
<TABLE>
<CAPTION>
Conversion Pricing Ratios
--------------------------------------------------------------
Price/ Price/ Price/ Price/ Current Current Current
Pro-Forma Pro-Forma Pro-Forma Adjusted Stock Price/ Price/ Tang
Book Value Tang. Book Earnings Assets Price Book Value Book Value
Ticker (%) (%) (x) (%) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
RCBK 79.6 79.6 14.0 19.8 16.656 NA NA
HFBC 75.4 75.4 12.4 16.6 17.313 NA NA
TSBK 81.5 81.5 10.5 24.3 17.625 NA NA
MYST 77.8 77.8 17.5 15.3 17.000 NA NA
UTBI 76.6 76.6 18.4 18.5 14.313 NA NA
PEDE 73.9 73.9 15.9 26.5 15.875 112.2 112.2
UCBC 74.1 74.1 13.5 26.5 14.625 NA NA
WSBI 78.6 78.6 13.7 18.7 16.000 NA NA
SIB 80.6 83.0 14.1 19.4 20.500 NA NA
HCBC 77.7 77.7 30.5 14.8 14.750 NA NA
FSFF 75.2 75.2 14.9 19.8 15.375 NA NA
OTFC 76.6 76.6 18.5 18.7 18.125 118.2 118.2
SHSB 70.7 70.7 13.9 9.1 18.000 NA NA
Maximum 81.5 83.0 30.5 26.5 20.500 118.2 118.2
Minimum 70.7 70.7 10.5 9.1 14.313 112.2 112.2
Average 76.8 77.0 16.0 19.1 16.627 115.2 115.2
Median 76.6 76.6 14.1 18.7 16.656 115.2 115.2
</TABLE>
Source: SNL & F&C calculations 11
<PAGE>
FERGUSON & COMPANY Table IV.3 - Recent Conversions Section IV
- ------------------ (Completed since August 31, 1997) ----------
<TABLE>
<CAPTION>
Post Conversion Price Change
Price One Price One Price One --------------------------------------------------------
Day After Week After Month After One One One To
Conversion Conversion Conversion Day Week Month Date
Ticker ($) ($) ($) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
RCBK 16.313 16.438 NA 63.1 64.4 NA 66.6
HFBC 16.813 16.000 NA 68.1 60.0 NA 73.1
TSBK 14.500 16.000 16.000 45.0 60.0 60.0 76.3
MYST 14.438 15.625 15.000 44.4 56.3 50.0 70.0
UTBI 14.750 13.750 14.250 47.5 37.5 42.5 43.1
PEDE 16.125 15.500 14.875 61.3 55.0 48.8 58.8
UCBC 14.688 14.250 14.250 46.9 42.5 42.5 46.3
WSBI 15.625 17.000 15.625 56.3 70.0 56.3 60.0
SIB 19.063 19.438 19.188 58.9 62.0 59.9 70.8
HCBC 14.438 15.063 14.500 44.4 50.6 45.0 47.5
FSFF 15.063 15.125 16.063 50.6 51.3 60.6 53.8
OTFC 16.750 16.375 16.125 67.5 63.8 61.3 81.3
SHSB 14.750 16.250 16.000 47.5 62.5 60.0 80.0
Maximum 19.063 19.438 19.188 68.1 70.0 61.3 81.3
Minimum 14.438 13.750 14.250 44.4 37.5 42.5 43.1
Average 15.640 15.909 15.625 54.0 56.6 53.3 63.6
Median 15.063 16.000 15.625 50.6 60.0 56.3 66.6
</TABLE>
Source: SNL & F&C calculations 12
<PAGE>
FERGUSON & COMPANY Table IV.4 - Recent Pink Sheet Conversions Section IV
- ------------------ (Completed since February 28, 1997) ----------
<TABLE>
<CAPTION>
Conversion
Assets IPO Proceeds IPO Price
Ticker Short Name State IPO Date ($000) ($000) ($)
<S> <C> <C> <C> <C> <C> <C>
SFSH SFSB Holding Co. PA 02/27/98 37,810 7,260 10.000
WPBC Wyman Park Bancorp MD 01/07/98 62,241 10,117 10.000
DFFN Delaware First Financial Corp. DE 01/05/98 112,545 11,570 10.000
CDLC Coddle Creek Financial Corp. NC 12/31/97 114,162 33,724 50.000
NARK North Arkansas Bancshares Inc. AR 12/19/97 34,379 3,703 10.000
OSFS Ohio State Financial Services OH 09/29/97 33,929 6,332 10.000
CIBC Citizens Bancorp Inc. IN 09/18/97 45,153 10,580 10.000
WSBH WSB Holding Co. PA 08/29/97 33,139 3,306 10.000
SCYT Security Bancorp Inc. TN 06/30/97 44,121 4,364 10.000
SVBC Sistersville Bancorp Inc. WV 06/26/97 26,258 6,614 10.000
SFBK SFB Bancorp Inc. TN 05/30/97 46,579 7,670 10.000
RFFC Rocky Ford Financial Inc. CO 05/22/97 20,388 4,232 10.000
VBAS Vermilion Bancorp Inc. IL 03/26/97 35,459 3,968 10.000
Maximum 114,162 33,724 50.000
Minimum 20,388 3,306 10.000
Average 49,705 8,726 13.077
Median 37,810 6,614 10.000
</TABLE>
Source: SNL & F&C calculations 13
<PAGE>
FERGUSON & COMPANY Section IV
- ------------------ ----------
<TABLE>
<CAPTION>
Table IV.4 - Recent Pink Sheet Conversions
(Completed since February 28, 1997)
Conversion Pricing Ratios
--------------------------------------------------------
Price/ Price/ Price/ Price/ Current Current Current Current
Pro-Forma Pro-Forma Pro-Forma Adjusted Stock Price/ Price/ Tang Price/
Book Value Tang. Book Earnings Assets Price Book Value Book Value Earnings
Ticker (%) (%) (x) (%) ($) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SFSH 76.0 76.0 NA 16.1 12.813 NA NA NA
WPBC 75.0 75.0 28.4 14.0 15.870 NA NA NA
DFFN 73.7 73.7 20.6 9.3 13.120 NA NA NA
CDLC 77.9 77.9 22.3 22.8 79.120 NA NA NA
NARK 72.3 72.3 NA 9.7 12.620 86.6 86.6 NA
OSFS 63.3 63.3 17.0 15.7 17.500 106.3 106.3 NA
CIBC 73.5 73.5 16.1 19.0 15.250 104.7 104.7 19.1
WSBH 71.4 71.4 NA 9.1 15.000 101.3 101.3 75.0
SCYT 72.9 72.9 18.1 9.0 16.375 109.5 109.5 12.4
SVBC 65.4 65.4 26.7 20.1 15.750 95.3 95.3 23.2
SFBK 69.6 69.6 17.7 14.1 15.500 99.0 99.0 14.4
RFFC 68.8 68.8 17.7 17.2 14.500 93.3 93.3 33.0
VBAS 71.4 71.4 NA 10.1 15.625 95.3 95.3 21.7
Maximum 77.9 77.9 28.4 22.8 79.120 109.5 109.5 75.0
Minimum 63.3 63.3 16.1 9.0 12.620 86.6 86.6 12.4
Average 71.6 71.6 20.5 14.3 19.926 99.0 99.0 28.4
Median 72.3 72.3 18.1 14.1 15.500 99.0 99.0 21.7
</TABLE>
Source: SNL & F&C calculations 14
<PAGE>
FERGUSON & COMPANY Table IV.4 - Recent Pink Sheet Conversions Section IV
- ------------------ ----------
(Completed since February 28, 1997)
<TABLE>
<CAPTION>
Post Conversion Price Change
Price One Price One Price One -------------------------------------------------------------
Day After Week After Month After One One One To
Conversion Conversion Conversion Day Week Month Date
Ticker ($) ($) ($) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
SFSH 12.813 NA NA 28.1 NA NA 28.1
WPBC 13.750 13.620 14.620 37.5 36.2 46.2 58.7
DFFN NA 11.960 12.750 NA 19.6 27.5 31.2
CDLC 77.000 77.620 79.370 54.0 55.2 58.7 58.2
NARK 12.500 12.750 13.000 25.0 27.5 30.0 26.2
OSFS 15.500 15.370 14.960 55.0 53.7 49.6 75.0
CIBC 14.000 14.000 15.000 40.0 40.0 50.0 52.5
WSBH 13.500 13.500 13.750 35.0 35.0 37.5 50.0
SCYT 14.500 15.000 15.250 45.0 50.0 52.5 63.8
SVBC 13.750 13.875 14.250 37.5 38.8 42.5 57.5
SFBK 13.813 13.750 14.000 38.1 37.5 40.0 55.0
RFFC 13.000 13.125 13.500 30.0 31.3 35.0 45.0
VBAS 12.375 12.250 12.125 23.8 22.5 21.3 56.3
Maximum 77.000 77.620 79.370 55.0 55.2 58.7 75.0
Minimum 12.375 11.960 12.125 23.8 19.6 21.3 26.2
Average 18.875 18.902 19.381 37.4 37.3 40.9 50.6
Median 13.750 13.685 14.125 37.5 36.9 41.3 55.0
</TABLE>
Source: SNL & F&C calculations 15
<PAGE>
FERGUSON & COMPANY Table IV.5 Section IV
- ------------------ ----------
Comparison of Pricing Ratios
<TABLE>
<CAPTION>
Group Percent Premium
Anson Compared to (Discount) Versus
Savings ------------------------------- -------------------------------
Bank Average Median Average Median
--------------- ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Comparison of PE ratio at
midpoint to:
- --------------------------------------
Comparative group 21.2 28.1 28.3 (24.6) (25.1)
North Carolina thrifts 21.2 22.9 23.6 (7.4) (10.2)
Southeast Region thrifts 21.2 23.6 23.9 (10.2) (11.3)
All public thrifts 21.2 21.3 20.6 (0.5) 2.9
Recent conversions 21.2 16.0 14.1 32.5 50.4
Recent pink sheet conversions 21.2 20.5 18.1 3.4 17.1
Comparison of PE ratio at
maximum to:
- --------------------------------------
Comparative group 22.3 28.1 28.3 (20.6) (21.2)
North Carolina thrifts 22.3 22.9 23.6 (2.6) (5.5)
Southeast Region thrifts 22.3 23.6 23.9 (5.5) (6.7)
All public thrifts 22.3 21.3 20.6 4.7 8.3
Recent conversions 22.3 16.0 14.1 39.4 58.2
Recent pink sheet conversions 22.3 20.5 18.1 8.8 23.2
Comparison of PE ratio at
supermaximum to:
- --------------------------------------
Comparative group 23.4 28.1 28.3 (16.7) (17.3)
North Carolina thrifts 23.4 22.9 23.6 2.2 (0.8)
Southeast Region thrifts 23.4 23.6 23.9 (0.8) (2.1)
All public thrifts 23.4 21.3 20.6 9.9 13.6
Recent conversions 23.4 16.0 14.1 46.3 66.0
Recent pink sheet conversions 23.4 20.5 18.1 14.1 29.3
Comparison of PB ratio at
midpoint to:
- --------------------------------------
Comparative group 68.2 120.3 111.6 (43.3) (38.9)
North Carolina thrifts 68.2 137.8 126.9 (50.5) (46.3)
Southeast Region thrifts 68.2 176.5 159.7 (61.4) (57.3)
All public thrifts 68.2 173.6 159.7 (60.7) (57.3)
Recent conversions 68.2 76.8 76.6 (11.2) (11.0)
Recent pink sheet conversions 68.2 71.6 72.3 (4.7) (5.7)
Comparison of PB ratio at
maximum to:
- --------------------------------------
Comparative group 71.5 120.3 111.6 (40.6) (35.9)
North Carolina thrifts 71.5 137.8 126.9 (48.1) (43.7)
Southeast Region thrifts 71.5 176.5 159.7 (59.5) (55.2)
All public thrifts 71.5 173.6 159.7 (58.8) (55.2)
Recent conversions 71.5 76.8 76.6 (6.9) (6.7)
Recent pink sheet conversions 71.5 71.6 72.3 (0.1) (1.1)
Comparison of PB ratio at
supermaximum to:
- --------------------------------------
Comparative group 74.8 120.3 111.6 (37.8) (33.0)
North Carolina thrifts 74.8 137.8 126.9 (45.7) (41.1)
Southeast Region thrifts 74.8 176.5 159.7 (57.6) (53.2)
All public thrifts 74.8 173.6 159.7 (56.9) (53.2)
Recent conversions 74.8 76.8 76.6 (2.6) (2.3)
Recent pink sheet conversions 74.8 71.6 72.3 4.5 3.5
</TABLE>
Source: SNL & F&C calculations 16
<PAGE>
FERGUSON & COMPANY Figure IV.1 - SNL Index Section IV
- ------------------ ----------------------- ----------
% CHANGE SINCE
---------------------------------------
SNL PREVIOUS
DATE INDEX DATE 12/31/96 12/31/97
---- ----- ---- -------- --------
12/31/90 96.6
12/31/91 143.9 49.0%
12/31/92 201.1 39.7%
12/31/93 252.5 25.6%
12/31/94 244.7 -3.1%
12/31/95 376.5 53.9%
12/31/96 483.6 28.4%
3/31/97 527.7 9.1% 9.1%
6/30/97 624.6 18.4% 29.2%
9/30/97 737.5 18.1% 52.5%
12/31/97 814.1 10.4% 68.3%
1/30/98 768.3 -5.6% 58.9% -5.6%
2/27/98 818.7 6.6% 69.3% 0.6%
SNL INDEX
[LINE GRAPH APPEARS HERE]
Source: SNL & F&C calculations 17
<PAGE>
<TABLE>
<CAPTION>
FERGUSON & COMPANY Figure IV.2 - Interest Rates Section IV
- ------------------ ----------
- ----------------------------------------------------------------------------------------------- ----------------
1 Year 5 Year 10 Year 30 Year 1 to 30
Fed Fds (*) T-bill Treas. Treas. Treas. Yr. Spread
- ----------------------------------------------------------------------------------------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
12-Sep-97 5.48 5.59 6.23 6.34 6.64 1.05
- ----------------------------------------------------------------------------------------------- ----------------
26-Sep-97 5.45 5.46 6.00 6.08 6.36
10-Oct-97 5.46 5.44 5.93 6.04 6.34 0.90
- ----------------------------------------------------------------------------------------------- ----------------
24-Oct-97 5.54 5.52 6.02 6.09 6.38
7-Nov-97 5.60 5.43 5.81 5.92 6.20 0.77
- ----------------------------------------------------------------------------------------------- ----------------
21-Nov-97 5.51 5.46 5.79 5.84 6.06
5-Dec-97 5.58 5.54 5.82 5.86 6.04 0.50
- ----------------------------------------------------------------------------------------------- ----------------
19-Dec-97 5.66 5.49 5.74 5.77 5.96
2-Jan-98 5.45 5.52 5.71 5.75 5.93 0.41
- ----------------------------------------------------------------------------------------------- ----------------
16-Jan-98 5.45 5.17 5.32 5.45 5.74
30-Jan-98 5.53 5.27 5.48 5.63 5.89 0.62
- ----------------------------------------------------------------------------------------------- ----------------
13-Feb-98 5.43 5.27 5.47 5.57 5.89
27-Feb-98 5.51 5.42 5.60 5.63 5.94 0.52
- ----------------------------------------------------------------------------------------------- ----------------
Rates September 12, 1997 through February 27, 1998
</TABLE>
[LINE GRAPH APPEARS HERE]
- ----------------------------------------------------------------- -----------
1 Year 5 Year 10 Year 30 Year 1 to 30
Fed Fds(*) T-bill Treas. Treas. Treas. Yr. Spread
- ----------------------------------------------------------------- -----------
2/27/1998 5.51 5.42 5.60 5.63 5.94 0.52
- ----------------------------------------------------------------- -----------
[LINE GRAPH APPEARS HERE]
Source: Financial Data, Federal Reserve Bank of St. Louis, MO.
18
<PAGE>
EXHIBITS
<PAGE>
EXHIBIT I
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit I - Firm Qualifications
Ferguson & Company (F&C), is a financial, economic, and regulatory
consulting firm providing services to financial institutions. It is located in
Hurst, Texas. Its services to financial institutions include:
. Mergers and acquisition services
. Business plans
. Fairness opinions and conversion appraisals
. Litigation support
. Operational and efficiency consulting
. Human resources evaluation and management
F&C developed several financial institution databases of information
derived from periodic financial reports filed with regulatory authorities by
financial institutions. For example, F&C developed TAFS and BankSource. TAFS
includes thrifts filing TFR's with the OTS and BankSource includes banks and
savings banks filing call reports with the FDIC. Both databases include
information from the periodic reports plus numerous calculations derived from
F&C's analysis. In addition, both databases are interactive, permitting the
user to conduct merger analysis, do peer group comparisons, and a number of
other items. In 1994, F&C sold its electronic publishing segment to Sheshunoff
Information Services Inc., Austin, Texas.
Brief biographical information is presented below on F&C's principals:
WILLIAM C. FERGUSON, MANAGING PARTNER
- -------------------------------------
Mr. Ferguson has approximately 30 years of experience providing various services
to financial institutions. He was a partner in a CPA firm prior to founding F&C
in 1984. Mr. Ferguson is a frequent speaker for financial institution seminars
and he has testified before Congressional Committees several times on his
analysis of the state of the thrift industry. Mr. Ferguson has a B.A. degree
from Austin Peay University and an M.S. degree from the University of Tennessee.
He is a CPA.
CHARLES M. HEBERT, PRINCIPAL
- ----------------------------
Mr. Hebert has over 30 years of experience providing services to and managing
financial institutions. He spent 7 years as a national bank examiner, 14 years
in bank management, 5 years in thrift management, and has spent the last 8 years
on the F&C consulting staff. Mr. Hebert holds a B.S. degree from Louisiana State
University.
ROBIN L. FUSSELL, PRINCIPAL
- ---------------------------
Mr. Fussell has over 25 years of experience providing professional services to
and managing financial institutions. He worked on the audit staff of a "Big
Six" accounting firm for 12 years, served as CFO of a thrift for 3 years, and
has worked in financial institution consulting for the last 14 years. He is a
co-founder of F&C. He holds a B.S. degree from East Carolina University. He is
a CPA.
1
<PAGE>
EXHIBIT II
<PAGE>
FERGUSON & COMPANY Exhibit II.1 - Selected Publicly Held Southeast Thrifts
- ------------------
<TABLE>
<CAPTION>
Deposit
Insurance
Agency
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date
<S> <C> <C> <C> <C> <C> <C> <C>
BANC BankAtlantic Bancorp Inc. Fort Lauderdale FL SE SAIF NASDAQ 11/29/83
BFSB Bedford Bancshares Inc. Bedford VA SE SAIF NASDAQ 08/22/94
BKUNA BankUnited Financial Corp. Coral Gables FL SE SAIF NASDAQ 12/11/85
CENB Century Bancorp Inc. Thomasville NC SE SAIF NASDAQ 12/23/96
CFCP Coastal Financial Corp. Myrtle Beach SC SE SAIF NASDAQ 09/26/90
CFFC Community Financial Corp. Staunton VA SE SAIF NASDAQ 03/30/88
CFNC Carolina Fincorp Inc. Rockingham NC SE SAIF NASDAQ 11/25/96
CFTP Community Federal Bancorp Tupelo MS SE SAIF NASDAQ 03/26/96
CNIT CENIT Bancorp Inc. Norfolk VA SE SAIF NASDAQ 08/06/92
COOP Cooperative Bankshares Inc. Wilmington NC SE SAIF NASDAQ 08/21/91
EBSI Eagle Bancshares Tucker GA SE SAIF NASDAQ 04/01/86
FFBH First Federal Bancshares of AR Harrison AR SE SAIF NASDAQ 05/03/96
FFCH First Financial Holdings Inc. Charleston SC SE SAIF NASDAQ 11/10/83
FFDB FirstFed Bancorp Inc. Bessemer AL SE SAIF NASDAQ 11/19/91
FFLC FFLC Bancorp Inc. Leesburg FL SE SAIF NASDAQ 01/04/94
FFPB First Palm Beach Bancorp Inc. West Palm Beach FL SE SAIF NASDAQ 09/29/93
FGHC First Georgia Holding Inc. Brunswick GA SE SAIF NASDAQ 02/11/87
FLAG FLAG Financial Corp. LaGrange GA SE SAIF NASDAQ 12/11/86
FLFC First Liberty Financial Corp. Macon GA SE SAIF NASDAQ 12/06/83
FSTC First Citizens Corp. Newnan GA SE SAIF NASDAQ 03/01/86
FTF Texarkana First Financial Corp Texarkana AR SE SAIF AMSE 07/07/95
GSFC Green Street Financial Corp. Fayetteville NC SE SAIF NASDAQ 04/04/96
HARB Harbor Florida Bancorp (MHC) Fort Pierce FL SE SAIF NASDAQ 01/06/94
HBS Haywood Bancshares Inc. Waynesville NC SE BIF AMSE 12/18/87
HFNC HFNC Financial Corp. Charlotte NC SE SAIF NASDAQ 12/29/95
MBSP Mitchell Bancorp Inc. Spruce Pine NC SE SAIF NASDAQ 07/12/96
PDB Piedmont Bancorp Inc. Hillsborough NC SE SAIF AMSE 12/08/95
PFSL Pocahontas FS&LA (MHC) Pocahontas AR SE SAIF NASDAQ 04/05/94
SCBS Southern Community Bancshares Cullman AL SE SAIF NASDAQ 12/23/96
SCCB S. Carolina Community Bancshrs Winnsboro SC SE SAIF NASDAQ 07/07/94
SOPN First Savings Bancorp Inc. Southern Pines NC SE SAIF NASDAQ 01/06/94
SSB Scotland Bancorp Inc. Laurinburg NC SE SAIF AMSE 04/01/96
SSFC South Street Financial Corp. Albemarle NC SE SAIF NASDAQ 10/03/96
SSM Stone Street Bancorp Inc. Mocksville NC SE SAIF AMSE 04/01/96
SZB SouthFirst Bancshares Inc. Sylacauga AL SE SAIF AMSE 02/14/95
TWIN Twin City Bancorp Bristol TN SE SAIF NASDAQ 01/04/95
VABF Virginia Beach Fed. Financial Virginia Beach VA SE SAIF NASDAQ 11/01/80
Maximum
Minimum
Average
Median
</TABLE>
Source: SNL & F&C calculations 1
<PAGE>
FERGUSON & COMPANY Exhibit II.1 - Selected Publicly Held Southeast Thrifts
- ------------------
<TABLE>
<CAPTION>
Tangible
Current Current Price/ Current Current Current Total Equity/ Equity/ Core
Stock Market LTM Price/ Price/ T Price/ Dividend Assets Assets T Assets EPS
Price Value Core EPS Book V Book V Assets Yield ($000) (%) (%) ($)
Ticker ($) ($M) (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BANC 13.500 341.17 26.5 167.9 192.3 11.4 0.98 3,064,480 6.8 6.0 0.51
BFSB 28.500 32.56 20.1 155.9 155.9 23.8 1.97 136,908 14.5 14.5 1.42
BKUNA 14.688 208.70 34.2 160.9 181.1 6.9 - 3,028,776 4.8 4.4 0.43
CENB 93.750 38.19 21.6 123.8 123.8 37.3 2.13 102,281 30.2 30.2 4.34
CFCP 21.750 101.66 20.7 301.7 301.7 18.0 1.66 563,866 6.0 6.0 1.05
CFFC 30.750 39.27 20.5 161.9 161.9 21.4 1.82 183,278 13.2 13.2 1.50
CFNC 17.750 33.82 24.3 126.2 126.2 28.7 1.35 114,660 22.7 22.7 0.73
CFTP 18.688 86.50 29.2 126.9 126.9 37.8 1.71 228,656 26.5 26.5 0.64
CNIT 71.250 112.17 22.1 229.8 250.9 16.8 1.68 701,708 7.0 6.4 3.22
COOP 20.250 60.43 29.4 213.6 213.6 16.4 - 369,121 7.7 7.7 0.69
EBSI 20.500 117.23 18.8 159.7 159.7 12.6 2.93 934,458 7.8 7.8 1.09
FFBH 26.000 127.30 22.6 156.3 156.3 23.3 1.08 547,119 14.9 14.9 1.15
FFCH 52.500 354.93 24.2 307.4 307.4 19.8 1.60 1,793,325 6.4 6.4 2.17
FFDB 24.000 27.72 17.4 160.0 174.3 15.5 2.08 178,792 9.7 9.0 1.38
FFLC 19.375 72.54 21.3 141.0 141.0 18.1 1.86 400,237 12.9 12.9 0.91
FFPB 37.875 191.45 26.7 165.0 168.8 10.5 1.85 1,821,077 6.4 6.2 1.42
FGHC 10.000 30.52 22.2 220.8 238.1 18.4 4.00 166,386 8.3 7.8 0.45
FLAG 20.625 42.01 25.8 193.5 193.5 17.6 1.65 238,463 9.1 9.1 0.80
FLFC 30.125 233.42 23.9 241.2 265.4 18.3 1.46 1,275,398 7.6 7.0 1.26
FSTC 32.000 88.72 17.0 248.8 311.3 25.1 1.00 352,233 10.1 8.2 1.88
FTF 28.250 49.71 16.2 182.0 182.0 27.6 1.98 180,259 15.2 15.2 1.74
GSFC 18.375 78.98 27.0 124.8 124.8 44.0 2.40 179,700 35.2 35.2 0.68
HARB 70.500 352.12 25.6 348.3 359.0 31.1 1.99 1,128,942 8.9 8.7 2.75
HBS 21.875 27.35 14.0 126.2 130.7 17.9 2.74 152,796 14.2 13.8 1.56
HFNC 13.625 234.25 25.7 141.1 141.1 25.7 2.35 910,786 18.2 18.2 0.53
MBSP 17.000 15.83 28.3 109.3 109.3 43.8 2.35 36,103 40.1 40.1 0.60
PDB 10.625 29.23 19.0 138.7 138.7 22.5 3.77 130,167 16.2 16.2 0.56
PFSL 44.188 72.13 31.1 291.5 291.5 18.5 2.04 389,405 6.4 6.4 1.42
SCBS 18.000 20.47 20.7 145.2 145.2 28.9 1.67 70,893 19.9 19.9 0.87
SCCB 21.500 12.54 30.7 134.5 134.5 27.8 2.98 45,092 20.7 20.7 0.70
SOPN 23.625 87.53 18.9 127.6 127.6 29.1 3.73 300,816 22.8 22.8 1.25
SSB 10.125 19.38 15.6 131.0 131.0 31.5 1.98 61,473 24.1 24.1 0.65
SSFC 13.000 60.79 28.3 165.6 165.6 26.6 3.08 228,491 14.9 14.9 0.46
SSM 20.438 38.79 23.0 125.2 125.2 37.0 2.20 104,773 29.6 29.6 0.89
SZB 22.250 21.71 26.5 135.7 135.7 13.1 2.70 165,388 9.7 9.7 0.84
TWIN 14.500 18.45 24.2 133.4 133.4 17.3 2.76 106,932 12.9 12.9 0.60
VABF 18.000 89.65 29.5 206.9 206.9 14.8 1.33 605,486 7.2 7.2 0.61
Maximum 93.750 354.93 34.2 348.3 359.0 44.0 4.00 3,064,480 40.1 40.1 4.34
Minimum 10.000 12.54 14.0 109.3 109.3 6.9 - 36,103 4.8 4.4 0.43
Average 26.750 96.47 23.6 176.5 181.9 23.1 2.02 567,533 14.8 14.7 1.18
Median 20.625 60.79 23.9 159.7 159.7 21.4 1.98 228,656 12.9 12.9 0.89
</TABLE>
Source: SNL & F&C calculations 2
<PAGE>
FERGUSON & COMPANY Exhibit II.1 - Selected Publicly Held Southeast Thrifts
- ------------------
<TABLE>
<CAPTION>
Core Core NPAs/ Price/ Core Core Core
ROAA ROAE Merger Current Assets Core EPS ROAA ROAE
(%) (%) Target? Pricing (%) EPS ($) (%) (%)
Ticker LTM LTM (Y/N) Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BANC 0.53 9.11 N 02/27/98 1.07 33.8 0.10 0.44 7.34
BFSB 1.19 8.34 N 02/27/98 - 21.6 0.33 1.10 7.72
BKUNA 0.37 6.20 N 02/27/98 0.37 52.5 0.07 0.21 3.72
CENB 1.63 5.91 N 02/27/98 0.58 25.2 0.93 1.38 4.56
CFCP 1.04 16.59 N 02/27/98 0.59 21.8 0.25 0.94 15.05
CFFC 1.13 8.22 N 02/27/98 0.56 29.6 0.26 0.74 5.47
CFNC 1.17 5.06 N 02/27/98 0.10 24.7 0.18 1.11 4.88
CFTP 1.33 4.54 N 02/27/98 0.49 31.2 0.15 1.19 4.43
CNIT 0.78 10.96 N 02/27/98 0.45 18.8 0.95 0.91 12.75
COOP 0.60 7.76 N 02/27/98 0.07 29.8 0.17 0.61 7.90
EBSI 0.77 9.06 N 02/27/98 1.18 17.1 0.30 0.81 9.69
FFBH 1.01 6.51 N 02/27/98 0.96 22.4 0.29 0.97 6.49
FFCH 0.86 13.90 N 02/27/98 1.35 23.9 0.55 0.87 13.66
FFDB 0.96 9.89 N 02/27/98 NA 17.7 0.34 0.93 9.63
FFLC 0.95 6.79 N 02/27/98 0.19 19.4 0.25 0.97 7.40
FFPB 0.44 6.61 N 02/27/98 0.52 36.4 0.26 0.30 4.74
FGHC 0.94 11.32 N 02/27/98 1.64 16.7 0.15 1.12 13.49
FLAG 0.72 7.98 N 02/27/98 3.92 25.8 0.20 0.69 7.75
FLFC 0.79 10.53 N 02/27/98 1.00 21.5 0.35 0.87 11.61
FSTC 1.70 17.58 N 02/27/98 1.12 19.5 0.41 1.41 14.00
FTF 1.71 10.91 N 02/27/98 0.07 17.2 0.41 1.58 10.33
GSFC 1.60 4.48 N 02/27/98 0.07 27.0 0.17 1.54 4.37
HARB 1.24 14.73 N 02/27/98 0.51 24.5 0.72 1.28 14.72
HBS 1.37 9.41 N 02/27/98 0.67 8.3 0.66 2.18 15.52
HFNC 0.94 4.61 N 02/27/98 0.79 31.0 0.11 0.82 4.43
MBSP 1.51 3.62 N 02/27/98 1.77 32.7 0.13 1.20 3.02
PDB 1.22 7.26 N 02/27/98 1.13 20.4 0.13 1.13 6.88
PFSL 0.62 9.72 N 02/27/98 0.13 33.5 0.33 0.58 9.16
SCBS 1.20 5.66 N 02/27/98 2.17 20.5 0.22 1.22 6.05
SCCB 1.00 3.95 N 02/27/98 1.53 44.8 0.12 0.62 2.61
SOPN 1.75 7.43 N 02/27/98 0.20 18.5 0.32 1.74 7.61
SSB 1.65 5.17 N 02/27/98 - 28.1 0.09 1.00 4.31
SSFC 0.83 3.32 N 02/27/98 0.16 NM (0.06) (0.40) (1.71)
SSM 1.56 4.57 N 02/27/98 - 25.6 0.20 1.49 4.98
SZB 0.67 5.08 N 02/27/98 NA 23.2 0.24 0.67 5.94
TWIN 0.72 5.59 N 02/27/98 0.08 19.1 0.19 0.90 6.97
VABF 0.49 7.24 N 02/27/98 0.50 26.5 0.17 0.55 7.90
Maximum 1.75 17.58 3.92 52.5 0.95 2.180 15.520
Minimum 0.37 3.32 - 8.3 (0.06) (0.400) (1.710)
Average 1.05 7.99 0.74 25.3 0.29 0.964 7.713
Median 1.00 7.26 0.52 24.2 0.24 0.940 7.340
</TABLE>
Source: SNL & F&C calculations 3
<PAGE>
FERGUSON & COMPANY Exhibit II.2 - Selected Publicly Held North Carolina Thrifts
- ------------------
<TABLE>
<CAPTION>
Deposit
Insurance
Agency
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date
<C> <S> <C> <C> <C> <C> <C> <C>
CENB Century Bancorp Inc. Thomasville NC SE SAIF NASDAQ 12/23/96
CFNC Carolina Fincorp Inc. Rockingham NC SE SAIF NASDAQ 11/25/96
COOP Cooperative Bankshares Inc. Wilmington NC SE SAIF NASDAQ 08/21/91
GSFC Green Street Financial Corp. Fayetteville NC SE SAIF NASDAQ 04/04/96
HBS Haywood Bancshares Inc. Waynesville NC SE BIF AMSE 12/18/87
HFNC HFNC Financial Corp. Charlotte NC SE SAIF NASDAQ 12/29/95
MBSP Mitchell Bancorp Inc. Spruce Pine NC SE SAIF NASDAQ 07/12/96
PDB Piedmont Bancorp Inc. Hillsborough NC SE SAIF AMSE 12/08/95
SOPN First Savings Bancorp Inc. Southern Pines NC SE SAIF NASDAQ 01/06/94
SSB Scotland Bancorp Inc. Laurinburg NC SE SAIF AMSE 04/01/96
SSFC South Street Financial Corp. Albemarle NC SE SAIF NASDAQ 10/03/96
SSM Stone Street Bancorp Inc. Mocksville NC SE SAIF AMSE 04/01/96
Maximum
Minimum
Average
Median
</TABLE>
Source: SNL & F&C calculations 4
<PAGE>
FERGUSON & COMPANY Exhibit II.2 - Selected Publicly Held North Carolina Thrifts
- ------------------
<TABLE>
<CAPTION>
Tangible
Current Current Price/ Current Current Current Total Equity/ Equity/ Core
Stock Market LTM Price/ Price/ T Price/ Dividend Assets Assets T Assets EPS
Price Value Core EPS Book V Book V Assets Yield ($000) (%) (%) ($)
Ticker ($) ($M) (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CENB 93.750 38.19 21.6 123.8 123.8 37.3 2.13 102,281 30.2 30.2 4.34
CFNC 17.750 33.82 24.3 126.2 126.2 28.7 1.35 114,660 22.7 22.7 0.73
COOP 20.250 60.43 29.4 213.6 213.6 16.4 - 369,121 7.7 7.7 0.69
GSFC 18.375 78.98 27.0 124.8 124.8 44.0 2.40 179,700 35.2 35.2 0.68
HBS 21.875 27.35 14.0 126.2 130.7 17.9 2.74 152,796 14.2 13.8 1.56
HFNC 13.625 234.25 25.7 141.1 141.1 25.7 2.35 910,786 18.2 18.2 0.53
MBSP 17.000 15.83 28.3 109.3 109.3 43.8 2.35 36,103 40.1 40.1 0.60
PDB 10.625 29.23 19.0 138.7 138.7 22.5 3.77 130,167 16.2 16.2 0.56
SOPN 23.625 87.53 18.9 127.6 127.6 29.1 3.73 300,816 22.8 22.8 1.25
SSB 10.125 19.38 15.6 131.0 131.0 31.5 1.98 61,473 24.1 24.1 0.65
SSFC 13.000 60.79 28.3 165.6 165.6 26.6 3.08 228,491 14.9 14.9 0.46
SSM 20.438 38.79 23.0 125.2 125.2 37.0 2.20 104,773 29.6 29.6 0.89
Maximum 93.750 234.25 29.4 213.6 213.6 44.0 3.77 910,786 40.1 40.1 4.34
Minimum 10.125 15.83 14.0 109.3 109.3 16.4 - 36,103 7.7 7.7 0.46
Average 23.370 60.38 22.9 137.8 138.1 30.0 2.34 224,264 23.0 22.9 1.08
Median 18.063 38.49 23.6 126.9 129.2 28.9 2.35 141,482 22.7 22.7 0.69
</TABLE>
Source: SNL & F&C calculations 5
<PAGE>
FERGUSON & COMPANY Exhibit II.2 - Selected Publicly Held North Carolina Thrifts
- ------------------
<TABLE>
<CAPTION>
Core Core NPAs/ Price/ Core Core Core
ROAA ROAE Merger Current Assets Core EPS ROAA ROAE
(%) (%) Target? Pricing (%) EPS ($) (%) (%)
Ticker LTM LTM (Y/N) Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CENB 1.63 5.91 N 02/27/98 0.58 25.2 0.93 1.38 4.56
CFNC 1.17 5.06 N 02/27/98 0.10 24.7 0.18 1.11 4.88
COOP 0.60 7.76 N 02/27/98 0.07 29.8 0.17 0.61 7.90
GSFC 1.60 4.48 N 02/27/98 0.07 27.0 0.17 1.54 4.37
HBS 1.37 9.41 N 02/27/98 0.67 8.3 0.66 2.18 15.52
HFNC 0.94 4.61 N 02/27/98 0.79 31.0 0.11 0.82 4.43
MBSP 1.51 3.62 N 02/27/98 1.77 32.7 0.13 1.20 3.02
PDB 1.22 7.26 N 02/27/98 1.13 20.4 0.13 1.13 6.88
SOPN 1.75 7.43 N 02/27/98 0.20 18.5 0.32 1.74 7.61
SSB 1.65 5.17 N 02/27/98 - 28.1 0.09 1.00 4.31
SSFC 0.83 3.32 N 02/27/98 0.16 NM (0.06) (0.40) (1.71)
SSM 1.56 4.57 N 02/27/98 - 25.6 0.20 1.49 4.98
Maximum 1.75 9.41 1.77 32.7 0.93 2.180 15.520
Minimum 0.60 3.32 - 8.3 (0.06) (0.400) (1.710)
Average 1.32 5.72 0.46 24.7 0.25 1.150 5.563
Median 1.44 5.12 0.18 25.6 0.17 1.165 4.720
</TABLE>
Source: SNL & F&C calculations 6
<PAGE>
FERGUSON & COMPANY Exhibit II.3 - Comparatives General Characteristics
- ------------------
<TABLE>
<CAPTION>
Total Current Current
Number Assets Stock Market
of ($000) Price Value
Ticker Short Name City State Offices MRQ IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CRZY Crazy Woman Creek Bancorp Buffalo WY 1 60,774 03/29/96 16.500 15.75
FFDF FFD Financial Corp. Dover OH 1 92,364 04/03/96 18.750 27.09
LXMO Lexington B&L Financial Corp. Lexington MO 1 58,783 06/06/96 16.500 18.49
MBSP Mitchell Bancorp Inc. Spruce Pine NC 1 36,103 07/12/96 17.000 15.83
MRKF Market Financial Corp. Mount Healthy OH 2 56,833 03/27/97 16.750 22.37
PFFC Peoples Financial Corp. Massillon OH 2 82,464 09/13/96 16.500 23.37
PSFI PS Financial Inc. Chicago IL 1 85,698 11/27/96 13.938 28.90
RELI Reliance Bancshares Inc. Milwaukee WI 1 44,544 04/19/96 9.125 23.38
SCBS Southern Community Bancshares Cullman AL 1 70,893 12/23/96 18.000 20.47
SCCB S. Carolina Community Bancshrs Winnsboro SC 3 45,092 07/07/94 21.500 12.54
SSB Scotland Bancorp Inc. Laurinburg NC 2 61,473 04/01/96 10.125 19.38
Maximum 3 92,364 35,516 21.500 28.90
Minimum 1 36,103 34,522 9.125 12.54
Average 1 63,184 35,209 15.881 20.69
Median 1 60,774 35,222 16.500 20.47
</TABLE>
Source: SNL & F&C calculations 7
<PAGE>
FERGUSON & COMPANY Exhibit II.4 - Comparatives Balance Sheet Characteristics
- ------------------
<TABLE>
<CAPTION>
Total Mortgage- Investment &
Total Cash and Backed Net Foreclosed
Assets Investments Securities Loans Real Estate
($000) ($000) ($000) ($000) ($000)
Short Name MRQ MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C>
Crazy Woman Creek Bancorp 60,774 31,039 7,656 28,739 -
FFD Financial Corp. 92,364 26,451 14,109 64,197 -
Lexington B&L Financial Corp. 58,783 11,563 1,669 45,873 -
Mitchell Bancorp Inc. 36,103 6,626 - 28,991 91
Market Financial Corp. 56,833 27,223 1,239 28,883 -
Peoples Financial Corp. 82,464 21,254 11,997 59,530 -
PS Financial Inc. 85,698 49,012 9,255 35,444 -
Reliance Bancshares Inc. 44,544 16,645 476 27,456 -
Southern Community Bancshares 70,893 23,909 NA 45,757 -
S. Carolina Community Bancshrs 45,092 8,284 42 35,684 101
Scotland Bancorp Inc. 61,473 15,706 383 44,492 -
Maximum 92,364 49,012 14,109 64,197 101
Minimum 36,103 6,626 - 27,456 -
Average 63,184 21,610 4,683 40,459 17
Median 60,774 21,254 1,454 35,684 -
</TABLE>
<TABLE>
<CAPTION>
Loan
Servicing Total Other Total
Rights Intangibles Assets Deposits
($000) ($000) ($000) ($000)
Short Name MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C>
Crazy Woman Creek Bancorp - - 996 30,508
FFD Financial Corp. - - 1,716 58,769
Lexington B&L Financial Corp. - - 1,347 42,694
Mitchell Bancorp Inc. - - 395 20,411
Market Financial Corp. - - 727 35,600
Peoples Financial Corp. - - 1,680 65,551
PS Financial Inc. - - 1,242 41,315
Reliance Bancshares Inc. - - 443 17,675
Southern Community Bancshares - - 1,227 56,521
S. Carolina Community Bancshrs - - 1,023 35,242
Scotland Bancorp Inc. - - 1,275 45,636
Maximum - - 1,716 65,551
Minimum - - 395 17,675
Average - - 1,097 40,902
Median - - 1,227 41,315
</TABLE>
Source: SNL & F&C calculations 8
<PAGE>
FERGUSON & COMPANY Exhibit II.4-Comparatives Balance Sheet Characteristics
- ------------------
<TABLE>
<CAPTION>
Total Subordinated Other Total Preferred
Borrowings Debt Liabilities Liabilities Equity
($000) ($000) ($000) ($000) ($000)
Short Name MRQ MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C>
Crazy Woman Creek Bancorp 15,450 - 451 46,409 -
FFD Financial Corp. 10,031 - 1,339 70,139 -
Lexington B&L Financial Corp. - - 437 43,131 -
Mitchell Bancorp Inc. - - 1,204 21,615 -
Market Financial Corp. - - 1,023 36,623 -
Peoples Financial Corp. - - 1,365 66,916 -
PS Financial Inc. 8,500 - 3,898 53,713 -
Reliance Bancshares Inc. 4,000 - 557 22,232 -
Southern Community Bancshares - - 273 56,794 -
S. Carolina Community Bancshrs - - 524 35,766 -
Scotland Bancorp Inc. - - 1,042 46,678 -
Maximum 15,450 - 3,898 70,139 -
Minimum - - 273 21,615 -
Average 3,453 - 1,101 45,456 -
Median - - 1,023 46,409 -
<CAPTION>
Regulatory Regulatory
Common Total Tangible Core
Equity Equity Capital Capital
($000) ($000) ($000) ($000)
Short Name MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C>
Crazy Woman Creek Bancorp 14,365 14,365 11,008 11,008
FFD Financial Corp. 22,225 22,225 14,000 14,000
Lexington B&L Financial Corp. 15,652 15,652 12,036 12,036
Mitchell Bancorp Inc. 14,488 14,488 NA 10,585
Market Financial Corp. 20,210 20,210 13,162 13,162
Peoples Financial Corp. 15,548 15,548 13,308 13,308
PS Financial Inc. 31,985 31,985 31,985 31,985
Reliance Bancshares Inc. 22,312 22,312 NA NA
Southern Community Bancshares 14,099 14,099 NA NA
S. Carolina Community Bancshrs 9,326 9,326 8,193 8,193
Scotland Bancorp Inc. 14,795 14,795 12,762 12,762
Maximum 31,985 31,985 31,985 31,985
Minimum 9,326 9,326 8,193 8,193
Average 17,728 17,728 14,557 14,115
Median 15,548 15,548 12,962 12,762
</TABLE>
Source: SNL & F&C calculations
9
<PAGE>
FERGUSON & COMPANY Exhibit II.4 - Comparatives Balance Sheet Characteristics
- ------------------
<TABLE>
<CAPTION>
Regulatory
Total Tangible Core Risk-Based
Capital Capital/ Capital/ Capital/
($000) Tangible Adj Tangible Risk-Weightd
Short Name MRQ Assets (%) Assets (%) Assets (%)
<S> <C> <C> <C> <C>
Crazy Woman Creek Bancorp 11,274 20.5 20.5 52.2
FFD Financial Corp. 14,200 16.1 16.1 35.2
Lexington B&L Financial Corp. 12,242 22.8 22.8 46.4
Mitchell Bancorp Inc. 10,773 NA NA NA
Market Financial Corp. 13,212 NA NA NA
Peoples Financial Corp. 13,456 20.2 20.2 51.3
PS Financial Inc. 32,171 NA NA NA
Reliance Bancshares Inc. NA NA NA NA
Southern Community Bancshares NA 8.9 8.9 18.1
S. Carolina Community Bancshrs 8,465 24.6 24.6 53.1
Scotland Bancorp Inc. 13,017 NA NA NA
Maximum 32,171 24.6 24.6 53.1
Minimum 8,465 8.9 8.9 18.1
Average 14,312 18.9 18.9 42.7
Median 13,017 20.3 20.3 48.8
<CAPTION>
Loan Loss Publicly
NPAs/ Reserves/ Reserves/ Reported
Assets Assets NPLs Book Value
(%) (%) (%) ($)
Short Name MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C>
Crazy Woman Creek Bancorp 0.18 0.44 237.50 15.04
FFD Financial Corp. 0.05 0.29 642.86 15.38
Lexington B&L Financial Corp. 0.67 0.38 56.09 14.79
Mitchell Bancorp Inc. 1.77 0.52 34.31 15.56
Market Financial Corp. - 0.09 NM 15.13
Peoples Financial Corp. 0.04 0.18 NM 10.98
PS Financial Inc. 0.68 0.22 31.79 14.76
Reliance Bancshares Inc. - 0.35 NM 8.71
Southern Community Bancshares 2.17 1.14 52.44 12.40
S. Carolina Community Bancshrs 1.53 0.65 49.66 15.99
Scotland Bancorp Inc. - 0.41 NM 7.73
Maximum 2.17 1.14 642.86 15.99
Minimum - 0.09 31.79 7.73
Average 0.64 0.42 157.81 13.32
Median 0.18 0.38 52.44 14.79
</TABLE>
Source: SNL & F&C calculations 10
<PAGE>
FERGUSON & COMPANY Exhibit II.4-Comparatives Balance Sheet Characteristics
- ------------------
<TABLE>
<CAPTION>
Tangible Earn Assets/ Full-Time Loans Cash & Invest
Publicly Rep Int Bearing Equivalent Serviced MBS/ (Sans MBS)/
Book Value Liabilities Employees For Others Assets Assets
($) (%) (Actual) ($000) (%) (%)
Short Name MRQ MRQ MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C>
Crazy Woman Creek Bancorp 15.04 130.96 10 76 12.60 38.48
FFD Financial Corp. 15.38 132.36 24 - 15.28 13.36
Lexington B&L Financial Corp. 14.79 136.62 10 - 2.84 16.83
Mitchell Bancorp Inc. 15.56 175.36 6 - - 18.35
Market Financial Corp. 15.13 157.39 9 - 2.18 45.72
Peoples Financial Corp. 10.98 123.00 19 - 14.55 11.23
PS Financial Inc. 14.76 168.46 15 - 10.80 46.39
Reliance Bancshares Inc. 8.71 191.63 NA - 1.07 36.30
Southern Community Bancshares 12.40 125.17 NA NA NA NA
S. Carolina Community Bancshrs 15.99 130.32 NA NA 0.09 18.28
Scotland Bancorp Inc. 7.73 131.42 13 - 0.62 24.93
Maximum 15.99 191.63 24 76 15.28 46.39
Minimum 7.73 123.00 6 - - 11.23
Average 13.32 145.70 13 8 6.00 26.99
Median 14.79 132.36 12 - 2.51 21.64
</TABLE>
Source: SNL & F&C calculations 11
<PAGE>
FERGUSON & COMPANY Exhibit II.5-Comparatives Operations
- ------------------
<TABLE>
<CAPTION>
Net Income ROAA ROAE
Average Before Before Core Before Core
Assets Net Income Extra Items ROAA Extra ROAA ROAE Extra ROAE
($000) ($000) ($000) (%) (%) (%) (%) (%) (%)
Short Name LTM LTM LTM LTM LTM LTM LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Crazy Woman Creek Bancorp 55,868 719 719 1.29 1.29 1.30 5.05 5.05 5.11
FFD Financial Corp. 87,692 1,607 1,607 1.83 1.83 0.88 7.49 7.49 3.60
Lexington B&L Financial Corp. 60,398 746 746 1.24 1.24 1.23 4.22 4.22 4.21
Mitchell Bancorp Inc. 34,620 523 523 1.51 1.51 1.51 3.62 3.62 3.62
Market Financial Corp. 55,081 575 575 1.04 1.04 1.04 3.15 3.15 3.15
Peoples Financial Corp. 86,378 684 684 0.79 0.79 0.78 3.27 3.27 3.22
PS Financial Inc. 76,791 1,557 1,557 2.03 2.03 2.10 5.26 5.26 5.43
Reliance Bancshares Inc. 46,524 499 499 1.07 1.07 1.04 2.18 2.18 2.11
Southern Community Bancshares 70,721 848 848 1.20 1.20 1.20 5.66 5.66 5.66
S. Carolina Community Bancshrs 46,034 462 462 1.00 1.00 1.00 3.95 3.95 3.95
Scotland Bancorp Inc. 66,893 1,113 1,113 1.66 1.66 1.65 5.21 5.21 5.17
Maximum 87,692 1,607 1,607 2.03 2.03 2.10 7.49 7.49 5.66
Minimum 34,620 462 462 0.79 0.79 0.78 2.18 2.18 2.11
Average 62,455 848 848 1.33 1.33 1.25 4.46 4.46 4.11
Median 60,398 719 719 1.24 1.24 1.20 4.22 4.22 3.95
</TABLE>
Source: SNL & F&C calculations 12
<PAGE>
FERGUSON & COMPANY Exhibit II.5-Comparatives Operations
- ------------------
<TABLE>
<CAPTION>
Loan Total Total Net Loan Common Dividend Interest
Loss Noninterest Noninterest Chargeoffs/ LTM EPS Dividends Payout Income/
Provision Income Expense Avg Loans After Extra Per Share Ratio Avg Assets
($000) ($000) ($000) (%) ($) ($) (%) (%)
Short Name LTM LTM LTM LTM LTM LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Crazy Woman Creek Bancorp - 78 963 0.07 0.78 0.40 51.28 7.35
FFD Financial Corp. 125 61 1,711 - 1.19 0.28 23.11 6.98
Lexington B&L Financial Corp. 29 79 1,217 0.02 0.70 0.15 21.43 7.61
Mitchell Bancorp Inc. 24 5 834 - 0.60 0.40 66.67 7.71
Market Financial Corp. - 6 1,145 - NA NA NA 6.72
Peoples Financial Corp. 12 29 2,093 0.11 0.49 5.45 NM 7.19
PS Financial Inc. - 76 1,189 - NA NA NA 7.42
Reliance Bancshares Inc. 22 22 1,446 - 0.21 - - 7.39
Southern Community Bancshares - 172 1,612 (0.03) 0.86 0.30 34.88 7.30
S. Carolina Community Bancshrs - 116 1,232 - 0.70 0.62 88.57 7.68
Scotland Bancorp Inc. 24 74 1,509 - 0.65 6.28 965.38 7.56
Maximum 125 172 2,093 0.11 1.19 6.28 965.38 7.71
Minimum - 5 834 (0.03) 0.21 - - 6.72
Average 21 65 1,359 0.02 0.69 1.54 156.42 7.36
Median 12 74 1,232 - 0.70 0.40 43.08 7.39
</TABLE>
Source: SNL & F&C calculations 13
<PAGE>
FERGUSON & COMPANY Exhibit II.5-Comparatives Operations
- ------------------
<TABLE>
<CAPTION>
Interest Net Interest Gain on Real Noninterest G&A Noninterest
Expense/ Income/ Sale/ Estate Income/ Expense/ Expense/
Avg Assets Avg Assets Avg Assets Expense Avg Assets Avg Assets Avg Assets
(%) (%) (%) ($000) (%) (%) (%)
Short Name LTM LTM LTM LTM LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C>
Crazy Woman Creek Bancorp 3.83 3.53 (0.03) - 0.14 1.72 1.72
FFD Financial Corp. 3.68 3.31 1.46 - 0.07 1.95 1.95
Lexington B&L Financial Corp. 3.80 3.81 0.01 - 0.13 2.01 2.01
Mitchell Bancorp Inc. 2.76 4.95 - (2) 0.01 2.41 2.41
Market Financial Corp. 3.07 3.65 - - 0.01 2.08 2.08
Peoples Financial Corp. 3.58 3.61 0.02 - 0.03 2.42 2.42
PS Financial Inc. 2.52 4.90 (0.05) - 0.10 1.55 1.55
Reliance Bancshares Inc. 2.59 4.80 (0.01) - 0.05 3.11 3.11
Southern Community Bancshares 3.39 3.91 - - 0.24 2.28 2.28
S. Carolina Community Bancshrs 3.62 4.06 - 6 0.25 2.66 2.68
Scotland Bancorp Inc. 3.06 4.50 0.36 - 0.11 2.26 2.26
Maximum 3.83 4.95 1.46 6 0.25 3.11 3.11
Minimum 2.52 3.31 (0.05) (2) 0.01 1.55 1.55
Average 3.26 4.09 0.16 0 0.10 2.22 2.22
Median 3.39 3.91 - - 0.10 2.26 2.26
</TABLE>
Source: SNL & F&C calculations 14
<PAGE>
FERGUSON & COMPANY Exhibit II.5 - Comparatives Operations
- ------------------
<TABLE>
<CAPTION>
Net Oper Total Amortization Extra and
Expenses/ Nonrecurring of Tax After Tax Efficiency Preferred
Avg Assets Expense Intangibles Provision Items Ratio Dividends
(%) ($000) ($000) ($000) ($000) (%) ($000)
Short Name LTM LTM LTM LTM LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C>
Crazy Woman Creek Bancorp 1.58 - - 352 - 47.02 -
FFD Financial Corp. 1.88 - - 803 - 57.77 -
Lexington B&L Financial Corp. 1.88 - - 390 - 51.18 -
Mitchell Bancorp Inc. 2.40 - - 336 - 48.69 -
Market Financial Corp. 2.07 - - 297 - 56.77 -
Peoples Financial Corp. 2.39 - - 376 - 66.44 -
PS Financial Inc. 1.45 40 - 1,014 - 30.97 -
Reliance Bancshares Inc. 3.06 - - 307 - 64.15 -
Southern Community Bancshares 2.04 - - 474 - 54.94 -
S. Carolina Community Bancshrs 2.41 - - 290 - 61.79 -
Scotland Bancorp Inc. 2.15 230 - 449 - 48.91 -
Maximum 3.06 230 - 1,014 - 66.44 -
Minimum 1.45 - - 290 - 30.97 -
Average 2.12 25 - 463 - 53.51 -
Median 2.07 - - 376 - 54.94 -
</TABLE>
Source: SNL & F&C calculations 15
<PAGE>
FERGUSON & COMPANY Exhibit II.5 - Comparatives Operations
- ------------------
<TABLE>
<CAPTION>
Yield on Cost of Interest Loan Loss
Int Earning Int Bearing Effective Yield Provision/
Assets Liabilities Tax Rate Spread Avg Assets
(%) (%) (%) (%) (%)
Short Name LTM LTM LTM LTM LTM
<S> <C> <C> <C> <C> <C>
Crazy Woman Creek Bancorp 7.47 5.23 32.87 2.24 -
FFD Financial Corp. 7.08 4.95 33.32 2.13 0.14
Lexington B&L Financial Corp. 7.86 5.46 34.33 2.40 0.05
Mitchell Bancorp Inc. 7.95 5.16 39.12 2.79 0.07
Market Financial Corp. 6.80 4.70 34.06 2.10 -
Peoples Financial Corp. 7.38 4.82 35.47 2.56 0.01
PS Financial Inc. 7.87 4.36 39.44 3.51 -
Reliance Bancshares Inc. 7.73 5.25 38.09 2.48 0.05
Southern Community Bancshares 7.41 4.33 35.85 3.08 -
S. Carolina Community Bancshrs 7.83 4.92 38.56 2.91 -
Scotland Bancorp Inc. 7.69 4.61 28.75 3.08 0.04
Maximum 7.95 5.46 39.44 3.51 0.14
Minimum 6.80 4.33 28.75 2.10 -
Average 7.55 4.89 35.44 2.66 0.03
Median 7.69 4.92 35.47 2.56 0.01
</TABLE>
Source: SNL & F&C calculations 16
<PAGE>
FERGUSON & COMPANY Exhibit II.6 - Comparatives Pricing Charateristics
- ------------------
<TABLE>
<CAPTION>
Current Current Price/
Stock Market LTM
Abbreviated Price Value Core EPS
Ticker Name City State ($) ($M) (x)
<S> <C> <C> <C> <C> <C> <C>
CRZY CrazyWomanCreek-WY Buffalo WY 16.500 15.75 20.9
FFDF FFDFinlCorp-OH Dover OH 18.750 27.09 33.5
LXMO LexingtonB&L-MO Lexington MO 16.500 18.49 23.6
MBSP MitchellBancorp-NC Spruce Pine NC 17.000 15.83 28.3
MRKF MarketFinlCorp-OH Mount Healthy OH 16.750 22.37 NA
PFFC PeoplesFinlCorp-OH Massillon OH 16.500 23.37 33.7
PSFI PSFinancialInc-IL Chicago IL 13.938 28.90 NA
RELI RelianceBcshs-WI Milwaukee WI 9.125 23.38 45.6
SCBS SouthernCmnty-AL Cullman AL 18.000 20.47 20.7
SCCB SCCmntyBcshs-SC Winnsboro SC 21.500 12.54 30.7
SSB ScotlandBancorp-NC Laurinburg NC 10.125 19.38 15.6
Maximum 21.500 28.90 45.6
Minimum 9.125 12.54 15.6
Average 15.881 20.69 28.1
Median 16.500 20.47 28.3
</TABLE>
Source: SNL & F&C calculations 17
<PAGE>
FERGUSON & COMPANY Exhibit II.6-Comparatives Pricing Characteristics
- ------------------
<TABLE>
<CAPTION>
Tangible
Current Current Current Total Equity/ Equity/
Price/ Price/ T Price/ Dividend Assets Assets T Assets
Book V Book V Assets Yield ($000) (%) (%)
Ticker (%) (%) (%) (%) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C>
CRZY 109.7 109.7 25.9 2.42 60,774 23.6 23.6
FFDF 121.9 121.9 29.3 1.60 92,364 24.1 24.1
LXMO 111.6 111.6 29.7 1.82 58,783 26.6 26.6
MBSP 109.3 109.3 43.8 2.35 36,103 40.1 40.1
MRKF 110.7 110.7 39.4 1.67 56,833 35.6 35.6
PFFC 150.3 150.3 28.4 3.03 82,464 18.9 18.9
PSFI 94.4 94.4 35.2 3.44 85,698 37.3 37.3
RELI 104.8 104.8 52.5 - 44,544 50.1 50.1
SCBS 145.2 145.2 28.9 1.67 70,893 19.9 19.9
SCCB 134.5 134.5 27.8 2.98 45,092 20.7 20.7
SSB 131.0 131.0 31.5 1.98 61,473 24.1 24.1
Maximum 150.3 150.3 52.5 3.44 92,364 50.1 50.1
Minimum 94.4 94.4 25.9 - 36,103 18.9 18.9
Average 120.3 120.3 33.9 2.09 63,184 29.2 29.2
Median 111.6 111.6 29.7 1.98 60,774 24.1 24.1
</TABLE>
Source: SNL & F&C calculations
18
<PAGE>
FERGUSON & COMPANY Exhibit II.6-Comparatives Pricing Characteristics
- ------------------
<TABLE>
<CAPTION>
ROACE
Core Core Core Before NPAs/ Price/
EPS ROAA ROAE Extra Merger Current Assets Core
($) (%) (%) (%) Target? Pricing (%) EPS
Ticker LTM LTM LTM LTM (Y/N) Date MRQ (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CRZY 0.79 1.30 5.11 5.05 N 02/27/98 0.18 19.6
FFDF 0.56 0.88 3.60 7.49 N 02/27/98 0.05 39.1
LXMO 0.70 1.23 4.21 4.22 N 02/27/98 0.67 24.3
MBSP 0.60 1.51 3.62 3.62 N 02/27/98 1.77 32.7
MRKF NA 1.04 3.15 3.15 N 02/27/98 - 34.9
PFFC 0.49 0.78 3.22 3.27 N 02/27/98 0.04 45.8
PSFI NA 2.10 5.43 5.26 N 02/27/98 0.68 18.3
RELI 0.20 1.04 2.11 2.18 N 02/27/98 - 45.6
SCBS 0.87 1.20 5.66 5.66 N 02/27/98 2.17 20.5
SCCB 0.70 1.00 3.95 3.95 N 02/27/98 1.53 44.8
SSB 0.65 1.65 5.17 5.21 N 02/27/98 - 28.1
Maximum 0.87 2.10 5.66 7.49 2.17 45.8
Minimum 0.20 0.78 2.11 2.18 - 18.3
Average 0.62 1.25 4.11 4.46 0.64 32.2
Median 0.65 1.20 3.95 4.22 0.18 32.7
</TABLE>
Source: SNL & F&C calculations
19
<PAGE>
FERGUSON & COMPANY Exhibit II.6-Comparatives Pricing Characteristics
- ------------------
Core Core Core
EPS ROAA ROAE
($) (%) (%)
Ticker MRQ MRQ MRQ
CRZY 0.21 1.27 5.36
FFDF 0.12 0.73 3.00
LXMO 0.17 1.09 3.97
MBSP 0.13 1.20 3.02
MRKF 0.12 1.04 2.93
PFFC 0.09 0.59 3.16
PSFI 0.19 1.98 5.24
RELI 0.05 1.10 2.24
SCBS 0.22 1.22 6.05
SCCB 0.12 0.62 2.61
SSB 0.09 1.00 4.31
Maximum 0.22 1.98 6.05
Minimum 0.05 0.59 2.24
Average 0.14 1.08 3.81
Median 0.12 1.09 3.16
Source: SNL & F&C calculations
20
<PAGE>
FERGUSON & COMPANY Exhibit II.7-Comparatives Risk Characteristics
- ------------------
<TABLE>
<CAPTION>
NPAs + Loans Net Loan
NPAs/ 90+ Pst Due/ NPAs/ Reserves/ Reserves/ Chargeoffs/
Assets Assets Equity Loans NPAs Avg Loans
(%) (%) (%) (%) (%) (%)
Short Name MRQ MRQ MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C>
Crazy Woman Creek Bancorp 0.18 0.18 0.78 0.92 237.50 0.50
FFD Financial Corp. 0.05 0.05 0.19 0.42 642.86 0.00
Lexington B&L Financial Corp. 0.67 0.67 2.52 0.48 56.09 0.07
Mitchell Bancorp Inc. 1.77 1.77 4.41 0.64 29.42 0.00
Market Financial Corp. 0.00 0.34 0.00 0.18 NM 0.00
Peoples Financial Corp. 0.04 0.04 0.20 0.25 480.65 (0.01)
PS Financial Inc. 0.68 0.68 1.83 0.52 31.79 0.00
Reliance Bancshares Inc. 0.00 0.00 0.00 0.57 NM 0.00
Southern Community Bancshares 2.17 2.34 10.90 1.73 52.44 0.00
S. Carolina Community Bancshrs 1.53 1.53 7.41 0.81 42.40 0.00
Scotland Bancorp Inc. 0.00 0.00 0.00 0.57 NM 0.00
Maximum 2.17 2.34 10.90 1.73 642.86 0.50
Minimum 0.00 0.00 0.00 0.18 29.42 (0.01)
Average 0.64 0.69 2.57 0.64 196.64 0.05
Median 0.18 0.34 0.78 0.57 54.27 0.00
</TABLE>
Source: SNL & F&C calculations
21
<PAGE>
FERGUSON & COMPANY Exhibit II.7 - Comparatives Risk Characteristics
- ------------------
<TABLE>
<CAPTION>
Intangible One Year Earn Assets/
Loans/ Assets/ Cum Gap/ Net Int Bearing
Assets Equity Assets Loans Liabilities
(%) (%) (%) ($000) (%)
Short Name MRQ MRQ MRY MRQ MRQ
<S> <C> <C> <C> <C> <C>
Crazy Woman Creek Bancorp 47.73 0.00 NA 28,739 130.96
FFD Financial Corp. 69.80 0.00 NA 64,197 132.36
Lexington B&L Financial Corp. 78.41 0.00 NA 45,873 136.62
Mitchell Bancorp Inc. 80.82 0.00 (20.88) 28,991 175.36
Market Financial Corp. 50.91 0.00 NA 28,883 157.39
Peoples Financial Corp. 72.37 0.00 NA 59,530 123.00
PS Financial Inc. 41.58 0.00 1.51 35,444 168.46
Reliance Bancshares Inc. 61.99 0.00 14.21 27,456 191.63
Southern Community Bancshares 65.68 0.00 NA 45,757 125.17
S. Carolina Community Bancshrs 79.79 0.00 NA 35,684 130.32
Scotland Bancorp Inc. 72.79 0.00 NA 44,492 131.42
Maximum 80.82 0.00 14.21 64,197 191.63
Minimum 41.58 0.00 (20.88) 27,456 123.00
Average 65.62 0.00 (1.72) 40,459 145.70
Median 69.80 0.00 1.51 35,684 132.36
</TABLE>
Source: SNL & F&C calculations 22
<PAGE>
EXHIBIT III
<PAGE>
FERGUSON & COMPANY Exhibit III
- ------------------
ANSON SVGS BK, SSB
WADESBORO, NC
FINANCIAL HIGHLIGHTS
1994 1995 1996 YTD 9/97
($000'S)
BALANCE SHEET:
Total Assets 21,823 21,775 20,706 20,624
% Change in Assets (2.21) (0.22) (4.91) (0.40)
Securities-Book Value 5,384 4,344 3,284 2,727
Securities-Fair Value 5,291 4,366 3,286 2,735
Total Loans & Leases 12,426 12,365 11,825 11,515
Total Deposits 18,253 17,938 16,814 16,549
Loan/Deposit Ratio 68.08 68.93 70.33 69.58
Provision for Loan Losses 12 7 3 5
CAPITAL:
Equity Capital 3,325 3,516 3,629 3,787
Total Qualifying Capital(Est) 3,363 3,529 3,565 3,682
Equity Capital/Average Assets 15.07 16.13 16.97 18.33
Tot Qual Cap/Rk Bsd Asts(Est) 40.19 40.35 44.28 47.22
Tier 1 Cap/Rsk Bsed Asts(Est) 39.17 39.30 43.10 45.93
T1 Cap/Avg Assets(Lev Est) 16.04 15.86 16.51 17.31
Dividends Declared/Net Income -- -- -- --
PROFITABILITY:
Net Income(Loss) 222 159 33 112
Return on Average Assets 1.01 0.73 0.15 0.72
Return on Average Equity Cap 6.96 4.65 0.92 4.02
Net Interest Margin 3.88 3.38 3.34 3.26
Net Int Income/Avg Assets 3.82 3.32 3.10 3.01
Noninterest Income/Avg Assets 0.01 0.04 -- 0.06
Noninterest Exp/Avg Assets 2.26 2.32 2.85 2.17
ASSET QUALITY:
NPL+Frcl RE/Lns+Frcl RE 2.06 2.25 2.27 2.15
NPA's/Equity + LLR 7.51 7.71 7.20 6.35
LLR/Nonperf & Restrcd Lns 33.20 33.09 35.45 40.49
Foreclosed RE/Total Assets -- -- -- --
90+ Day Del Loans/Total Loans 2.06 2.25 2.27 2.15
Loan Loss Reserves/Total Lns 0.68 0.74 0.80 0.87
Net Charge-Offs/Average Loans -- -- -- --
Dom Risk R/E Lns/Tot Dom Lns 3.03 5.37 5.87 8.83
LIQUIDITY:
Brokered Dep/Total Dom Deps -- -- -- --
$100M+ Time Dep/Total Dom Dep 3.50 6.13 7.61 8.14
Int Earn Assets/Int Bear Liab 116.95 118.05 119.99 121.31
Pledged Sec/Total Sec -- -- -- --
Fair Value Sec/Amort Cost Sec 100.25 104.85 107.99 113.20
Source: BankSource, published by Sheshunoff
2
<PAGE>
FERGUSON & COMPANY Exhibit III
- ------------------
ANSON SVGS BK, SSB
WADESBORO, NC
SELECTED PEER GROUP RATIOS & RANKINGS
1994 1995 1996 YTD 9/97
Peer Group Category 1 1 1 1
CAPITAL:
Equity Capital/Average Assets 15.07 16.13 16.97 18.33
Peer Group Percentile 88 86 88 83
Primary Capital/Adj Avg Assets 15.39 16.48 17.33 18.72
Peer Group Percentile 86 85 85 82
Tangible Capital/Tangible Asset 15.24 16.15 17.53 18.36
Peer Group Percentile 89 87 87 84
Tot Qual Cap/Risk Based Assets 40.19 40.35 44.28 47.22
Peer Group Percentile -- -- -- --
LIQUIDITY:
Liquid Assets/Short-term Liab 222,875 -- -- --
Peer Group Percentile 100 2 2 3
PROFITABILITY:
Return on Average Assets 1.01 0.73 0.15 0.72
Peer Group Percentile 53 28 14 26
Return on Average Equity Cap 6.96 4.65 0.92 4.02
Peer Group Percentile 30 18 13 19
Net Interest Margin 3.88 3.38 3.34 3.26
Peer Group Percentile 19 10 6 6
Noninterest Income/Avg Assets 0.01 0.04 -- 0.06
Peer Group Percentile 1 3 5 4
Noninterest Expense/Avg Assets 2.26 2.32 2.85 2.17
Peer Group Percentile 93 91 68 90
Int Earn Assets/Int Bear Liab 116.95 118.05 119.99 121.31
Peer Group Percentile 33 33 40 46
ASSET QUALITY:
Nonaccrual Loans/Total Loans -- -- -- --
Peer Group Percentile 100 100 100 100
Foreclosed RE/Total Assets -- -- -- --
Peer Group Percentile 100 100 100 100
Forcl RE/Loans+Forcl RE -- -- -- --
Peer Group Percentile 100 100 100 100
NPL+Frcl RE/Lns+Frcl RE 2.06 2.25 2.27 2.15
Peer Group Percentile 30 26 26 25
Nonaccrual Loans/Loan Loss Res -- -- -- --
Peer Group Percentile 100 100 100 100
LLR/Nonperf & Restrcd Lns 33.20 33.09 35.45 40.49
Peer Group Percentile 6 7 9 12
Loan Loss Reserves/Total Loans 0.68 0.74 0.80 0.87
Peer Group Percentile 5 8 12 18
Net Charge-Offs/Average Loans -- -- -- --
Peer Group Percentile 70 75 79 76
Earnings Coverage/Net Charge-Offs -- -- -- --
Peer Group Percentile 71 75 80 77
ANSON SVGS BK, SSB
WADESBORO, NC
FINANCIAL HIGHLIGHTS
12/31/96 3/31/97 6/30/97 9/30/97
Source: BankSource, published by Sheshunoff
3
<PAGE>
FERGUSON & COMPANY Exhibit III
- ------------------
<TABLE>
<CAPTION>
($000'S)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 20,706 20,558 20,768 20,624
% Change in Assets (2.87) (0.71) 1.02 (0.69)
Securities-Book Value 3,284 3,248 3,758 2,727
Securities-Fair Value 3,286 3,235 3,758 2,735
Total Loans & Leases 11,825 11,786 11,524 11,515
Total Deposits 16,814 16,619 16,726 16,549
Loan/Deposit Ratio 70.33 70.92 68.90 69.58
Provision for Loan Losses -- 2 3 --
CAPITAL:
Equity Capital 3,629 3,668 3,757 3,787
Total Qualifying Capital(Est) 3,565 3,608 3,653 3,682
Equity Capital/Average Assets 17.27 17.78 18.18 18.30
Tot Qual Cap/Rk Bsd Asts(Est) 44.28 45.72 46.87 47.22
Tier 1 Cap/Rsk Bsed Asts(Est) 43.10 44.49 45.59 45.93
T1 Cap/Avg Assets(Lev Est) 16.51 17.02 17.20 17.31
Dividends Declared/Net Income -- -- -- --
PROFITABILITY:
Net Income(Loss) 49 37 46 29
Return on Average Assets 0.93 0.72 0.89 0.56
Return on Average Equity Cap 5.45 4.06 4.96 3.08
Net Interest Margin 3.33 3.33 3.31 3.14
Net Int Income/Avg Assets 3.08 3.06 3.04 2.94
Noninterest Income/Avg Assets (0.02) -- 0.10 0.08
Noninterest Exp/Avg Assets 2.19 2.21 2.09 2.20
ASSET QUALITY:
NPL+Frcl RE/Lns+Frcl RE 2.27 2.17 2.08 2.15
NPA's/Equity + LLR 7.20 6.80 6.22 6.35
LLR/Nonperf & Restrcd Lns 35.45 37.89 41.67 40.49
Foreclosed RE/Total Assets -- -- -- --
90+ Day Del Loans/Total Loans 2.27 2.17 2.08 2.15
Loan Loss Reserves/Total Lns 0.80 0.82 0.87 0.87
Net Charge-Offs/Average Loans -- -- -- --
Dom Risk R/E Lns/Tot Dom Lns 5.87 7.51 7.75 8.83
LIQUIDITY:
Brokered Dep/Total Dom Deps -- -- -- --
$100M+ Time Dep/Total Dom Dep 7.61 7.74 8.35 8.14
Int Earn Assets/Int Bear Liab 119.99 119.11 120.93 121.31
Pledged Sec/Total Sec -- -- -- --
Fair Value Sec/Amort Cost Sec 107.99 107.48 108.96 113.20
</TABLE>
4
<PAGE>
FERGUSON & COMPANY Exhibit III
- ------------------
ANSON SVGS BK, SSB
WADESBORO, NC
SELECTED PEER GROUP RATIOS & RANKINGS
12/31/96 3/31/97 6/30/97 9/30/97
Peer Group Category 1 1 1 1
CAPITAL:
Equity Capital/Average Assets 17.27 17.78 18.18 18.30
Peer Group Percentile 86 86 85 83
Primary Capital/Adj Avg Assets 17.64 18.16 18.58 18.69
Peer Group Percentile 85 85 84 83
Tangible Capital/Tangible Asset 17.53 17.84 18.09 18.36
Peer Group Percentile 87 86 85 84
Tot Qual Cap/Risk Based Assets 44.28 45.72 46.87 47.22
Peer Group Percentile -- -- -- --
LIQUIDITY:
Liquid Assets/Short-term Liab -- -- -- --
Peer Group Percentile 2 2 3 3
PROFITABILITY:
Return on Average Assets 0.93 0.72 0.89 0.56
Peer Group Percentile 61 28 34 22
Return on Average Equity Cap 5.45 4.06 4.96 3.08
Peer Group Percentile 44 19 22 19
Net Interest Margin 3.33 3.33 3.31 3.14
Peer Group Percentile 7 7 7 5
Noninterest Income/Avg Assets (0.02) -- 0.10 0.08
Peer Group Percentile 1 3 6 5
Noninterest Expense/Avg Assets 2.19 2.21 2.09 2.20
Peer Group Percentile 95 87 91 90
Int Earn Assets/Int Bear Liab 119.99 119.11 120.93 121.31
Peer Group Percentile 40 39 47 46
ASSET QUALITY:
Nonaccrual Loans/Total Loans -- -- -- --
Peer Group Percentile 100 100 100 100
Foreclosed RE/Total Assets -- -- -- --
Peer Group Percentile 100 100 100 100
Forcl RE/Loans+Forcl RE -- -- -- --
Peer Group Percentile 100 100 100 100
NPL+Frcl RE/Lns+Frcl RE 2.27 2.17 2.08 2.15
Peer Group Percentile 26 29 28 25
Nonaccrual Loans/Loan Loss Res -- -- -- --
Peer Group Percentile 100 100 100 100
LLR/Nonperf & Restrcd Lns 35.45 37.89 41.67 40.49
Peer Group Percentile 9 12 12 12
Loan Loss Reserves/Total Loans 0.80 0.82 0.87 0.87
Peer Group Percentile 12 13 17 18
Net Charge-Offs/Average Loans -- -- -- --
Peer Group Percentile 79 73 76 77
Earnings Coverage/Net Charge-Offs -- -- -- --
Peer Group Percentile 82 73 76 78
Source: BankSource, published by Sheshunoff
5
<PAGE>
EXHIBIT IV
<PAGE>
FERGUSON & COMPANY Exhibit IV
- ------------------
BUFFALO FEDERAL SAVINGS BANK
BUFFALO, WY
TICKER CRZY
- -----------
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
1994 1995 1996 YTD 9/97
($000'S)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 35,836 38,217 52,595 59,293
% Change in Assets 8.54 6.64 37.62 12.74
Total Loans 23,177 23,907 26,822 28,852
Deposits 29,114 29,028 29,146 29,589
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 5,513 5,982 10,747 10,832
Tangible Capital 5,513 5,961 10,743 10,794
Core Capital 5,513 5,961 10,743 10,794
Risk-Based Capital 5,607 6,185 11,007 11,096
Equity Capital/Total Assets 15.38 15.65 20.43 18.27
Core Capital/Risk Based Assets 32.02 33.42 50.76 44.33
Core Capital/Adj Tang Assets 15.38 15.61 20.43 18.22
Tangible Cap/Tangible Assets 15.38 15.61 20.43 18.22
Risk-Based Cap/Risk-Wt Assets 32.56 34.67 52.00 45.57
PROFITABILITY:
Net Income(Loss) 465 395 281 465
Ret on Avg Assets Bef Ext Item 1.35 1.07 0.56 1.15
Return on Average Equity 8.73 6.87 2.83 5.86
Net Interest Income/Avg Assets 3.93 3.29 3.08 3.20
Noninterest Income/Avg Assets 0.56 0.54 0.24 0.22
Noninterest Expense/Avg Assets 2.41 2.27 2.44 1.73
Yield/Cost Spread 3.52 2.70 2.23 2.34
LIQUIDITY:
Int Earn Assets/Int Bear Liab 116.28 116.44 123.70 119.39
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.01 0.33 0.33 0.77
Nonaccrual Loans/Gross Loans 0.01 0.33 0.33 0.78
Nonaccrual Lns/Ln Loss Reserve 1.40 28.57 31.47 74.50
Repos Assets/Tot Assets - - - -
Net Chrg-Off/Av Adj Lns (0.09) (0.10) (0.03) (0.08)
Nonmtg 1-4 Constr&Conv Lns/TA 8.83 6.73 4.37 4.93
</TABLE>
Source: TAFS, published by Sheshunoff 1
<PAGE>
FERGUSON & COMPANY Exhibit IV
- ------------------
FIRST FSB
DOVER, OH
TICKER FFDF
- -----------
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
1994 1995 1996 YTD 9/97
($000'S)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 55,709 60,635 79,173 81,523
% Change in Assets (1.33) 8.84 30.57 2.97
Total Loans 40,368 44,509 51,388 58,874
Deposits 47,911 51,985 54,450 57,296
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 7,383 8,006 13,217 13,472
Tangible Capital 6,979 7,441 12,271 13,417
Core Capital 6,979 7,441 12,271 13,417
Risk-Based Capital 7,062 7,572 12,402 13,672
Equity Capital/Total Assets 13.25 13.20 16.69 16.53
Core Capital/Risk Based Assets 24.34 24.35 33.41 33.73
Core Capital/Adj Tang Assets 12.62 12.39 15.78 16.47
Tangible Cap/Tangible Assets 12.62 12.39 15.78 16.47
Risk-Based Cap/Risk-Wt Assets 24.63 24.78 33.76 34.37
PROFITABILITY:
Net Income(Loss) 476 512 463 1,221
Ret on Avg Assets Bef Ext Item 0.85 0.88 0.62 2.04
Return on Average Equity 6.86 6.65 4.09 12.35
Net Interest Income/Avg Assets 3.11 3.11 2.81 2.93
Noninterest Income/Avg Assets 0.12 0.13 0.19 2.34
Noninterest Expense/Avg Assets 1.86 1.91 2.07 1.87
Yield/Cost Spread 2.84 2.67 2.29 2.28
LIQUIDITY:
Int Earn Assets/Int Bear Liab 113.02 113.42 118.89 117.62
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.48 0.21 0.09 -
Nonaccrual Loans/Gross Loans 0.47 0.21 0.09 -
Nonaccrual Lns/Ln Loss Reserve 196.94 64.38 32.88 -
Repos Assets/Tot Assets - - - -
Net Chrg-Off/Av Adj Lns 0.01 0.00 - 0.00
Nonmtg 1-4 Constr&Conv Lns/TA 7.54 5.48 3.04 2.98
</TABLE>
Source: TAFS, published by Sheshunoff 2
<PAGE>
FERGUSON & COMPANY Exhibit IV
- ------------------
B&L BANK
LEXINGTON, MO
TICKER LXMO
FINANCIAL HIGHLIGHTS
1994 1995 1996 YTD 9/97
($000'S)
BALANCE SHEET:
Total Assets 46,467 50,525 59,569 58,601
% Change in Assets (2.21) 8.73 17.90 (1.63)
Total Loans 40,094 41,115 45,593 46,097
Deposits 39,373 42,864 45,457 45,161
Broker Originated Deposits -- -- -- --
CAPITAL:
Equity Capital 6,671 7,339 13,810 12,065
Tangible Capital 6,671 7,315 13,805 12,036
Core Capital 6,671 7,315 13,805 12,036
Risk-Based Capital 6,826 7,426 13,940 12,036
Equity Capital/Total Assets 14.36 14.53 23.18 20.59
Core Capital/Risk Based Assets 27.93 29.05 46.46 39.15
Core Capital/Adj Tang Assets 14.36 14.48 23.18 20.55
Tangible Cap/Tangible Assets 14.36 14.48 23.18 20.55
Risk-Based Cap/Risk-Wt Assets 28.58 29.49 46.92 39.15
PROFITABILITY:
Net Income(Loss) 609 430 426 619
Ret on Avg Assets Bef Ext Item 1.30 0.89 0.76 1.41
Return on Average Equity 9.51 6.14 3.77 6.30
Net Interest Income/Avg Assets 3.57 3.30 2.97 3.54
Noninterest Income/Avg Assets 0.29 0.09 0.23 0.23
Noninterest Expense/Avg Assets 1.79 1.72 2.12 1.67
Yield/Cost Spread 3.20 2.75 2.11 2.55
LIQUIDITY:
Int Earn Assets/Int Bear Liab 114.52 114.11 127.10 122.28
Brokered Deposits/Tot Deposits -- -- -- --
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.91 1.30 1.28 0.89
Nonaccrual Loans/Gross Loans 0.91 1.23 1.28 0.89
Nonaccrual Lns/Ln Loss Reserve 206.18 252.74 292.54 199.03
Repos Assets/Tot Assets -- -- -- --
Net Chrg-Off/Av Adj Lns -- -- -- 0.02
Nonmtg 1-4 Constr&Conv Lns/TA 3.37 2.77 3.00 3.45
<PAGE>
FERGUSON & COMPANY Exhibit IV
- ------------------
MITCHELL SVG BK SSB
SPRUCE PINE, NC
TICKER MBSP
FINANCIAL HIGHLIGHTS
1994 1995 1996 YTD 9/97
($000'S)
BALANCE SHEET:
Total Assets 27,614 28,208 30,316 32,662
% Change in Assets 1.96 2.15 7.47 7.74
Securities-Book Value 459 570 659 761
Securities-Fair Value 459 570 659 761
Total Loans & Leases 22,154 23,065 26,954 28,973
Total Deposits 21,358 21,325 18,373 19,172
Loan/Deposit Ratio 103.73 108.16 146.70 151.12
Provision for Loan Losses 24 24 60 18
CAPITAL:
Equity Capital 6,061 6,110 10,247 10,741
Total Qualifying Capital(Est) 6,046 6,053 10,195 10,645
Equity Capital/Average Assets 22.16 21.89 33.65 35.39
Tot Qual Cap/Rk Bsd Asts(Est) 41.45 39.90 58.23 57.04
Tier 1 Cap/Rsk Bsed Asts(Est) 40.91 39.22 57.30 56.07
T1 Cap/Avg Assets(Lev Est) 21.49 21.38 32.70 33.57
Dividends Declared/Net Income -- (0.00) -- --
PROFITABILITY:
Net Income(Loss) 532 (17) 227 368
Return on Average Assets 1.95 (0.06) 0.75 1.62
Return on Average Equity Cap 9.26 (0.28) 2.97 4.67
Net Interest Margin 4.79 4.22 4.21 5.07
Net Int Income/Avg Assets 4.80 4.22 4.14 5.00
Noninterest Income/Avg Assets 0.15 0.01 -- 0.02
Noninterest Exp/Avg Assets 1.80 4.32 2.87 2.28
ASSET QUALITY:
NPL+Frcl RE/Lns+Frcl RE 1.50 2.86 2.88 2.88
NPA's/Equity + LLR 5.42 10.65 7.49 7.66
LLR/Nonperf & Restrcd Lns 36.87 17.63 23.56 24.40
Foreclosed RE/Total Assets 0.42 0.26 0.28 0.28
90+ Day Del Loans/Total Loans -- -- -- --
Loan Loss Reserves/Total Lns 0.36 0.45 0.61 0.63
Net Charge-Offs/Average Loans 0.04 -- -- --
Dom Risk R/E Lns/Tot Dom Lns 17.85 17.58 18.64 16.13
LIQUIDITY:
Brokered Dep/Total Dom Deps -- -- -- --
$100M+ Time Dep/Total Dom Dep 24.91 24.91 21.71 26.35
Int Earn Assets/Int Bear Liab 128.25 130.32 156.43 155.51
Pledged Sec/Total Sec -- -- -- --
Fair Value Sec/Amort Cost Sec 150.99 187.50 216.78 250.33
<PAGE>
FERGUSON & COMPANY Exhibit IV
- ------------------
MARKET B&SC
MOUNT HEALTHY, OH
TICKER MRKF
- -----------
FINANCIAL HIGHLIGHTS
1994 1995 1996 YTD 9/97
($000'S)
BALANCE SHEET:
Total Assets 44,466 46,015 45,732 56,122
% Change in Assets (5.20) 3.48 (0.62) 22.72
Total Loans 23,479 23,262 23,735 26,618
Deposits 37,226 37,942 37,425 40,560
Broker Originated Deposits -- -- -- --
CAPITAL:
Equity Capital 6,729 7,327 7,649 13,545
Tangible Capital 6,566 6,925 7,137 12,885
Core Capital 6,566 6,925 7,137 12,885
Risk-Based Capital 6,602 6,973 7,187 12,935
Equity Capital/Total Assets 15.13 15.92 16.73 24.13
Core Capital/Risk Based Assets 42.51 45.86 45.59 67.89
Core Capital/Adj Tang Assets 14.77 15.18 15.88 23.38
Tangible Cap/Tangible Assets 14.77 15.18 15.88 23.38
Risk-Based Cap/Risk-Wt Assets 42.75 46.18 45.91 68.15
PROFITABILITY:
Net Income(Loss) 457 430 282 401
Ret on Avg Assets Bef Ext Item 1.00 0.95 0.61 0.98
Return on Average Equity 7.16 6.12 3.77 4.33
Net Interest Income/Avg Assets 3.22 3.35 3.16 3.26
Noninterest Income/Avg Assets 0.07 0.08 0.09 0.08
Noninterest Expense/Avg Assets 1.79 1.97 2.53 1.86
Yield/Cost Spread 2.85 2.83 2.64 2.40
LIQUIDITY:
Int Earn Assets/Int Bear Liab 115.84 117.21 117.58 130.78
Brokered Deposits/Tot Deposits -- -- -- --
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO -- 0.06 1.90 0.72
Nonaccrual Loans/Gross Loans -- -- -- --
Nonaccrual Lns/Ln Loss Reserve -- -- -- --
Repos Assets/Tot Assets -- -- -- --
Net Chrg-Off/Av Adj Lns -- -- -- --
Nonmtg 1-4 Constr&Conv Lns/TA 4.67 4.07 3.40 2.46
Source: TAFS, published by Shehunoff 5
<PAGE>
FERGUSON & COMPANY Exhibit IV
- ------------------
PEOPLES FS&LA
MASSILLON, OH
TICKER PFFC
- ----------- FINANCIAL HIGHLIGHTS
1994 1995 1996 YTD 9/97
($000'S)
BALANCE SHEET:
Total Assets 74,488 78,643 81,994 85,039
% Change in Assets (4.51) 5.58 4.26 3.71
Total Loans 36,649 38,150 46,057 57,206
Deposits 64,910 67,682 64,160 65,660
Broker Originated Deposits -- -- -- --
CAPITAL:
Equity Capital 9,486 10,042 16,281 17,209
Tangible Capital 9,486 9,463 15,486 16,126
Core Capital 9,486 9,463 15,486 16,126
Risk-Based Capital 9,554 9,556 15,682 16,271
Equity Capital/Total Assets 12.73 12.77 19.86 20.24
Core Capital/Risk Based Assets 32.04 30.44 48.02 43.49
Core Capital/Adj Tang Assets 12.73 12.17 19.17 19.34
Tangible Cap/Tangible Assets 12.73 12.17 19.17 19.34
Risk-Based Cap/Risk-Wt Assets 32.27 30.73 48.62 43.88
PROFITABILITY:
Net Income(Loss) 412 439 141 495
Ret on Avg Assets Bef Ext Item 0.54 0.57 0.18 0.80
Return on Average Equity 4.44 4.50 1.12 3.96
Net Interest Income/Avg Assets 2.64 2.82 2.98 3.50
Noninterest Income/Avg Assets 0.14 0.10 0.11 0.13
Noninterest Expense/Avg Assets 2.01 2.08 2.71 2.37
Yield/Cost Spread 2.33 2.43 2.45 2.75
LIQUIDITY:
Int Earn Assets/Int Bear Liab 110.10 111.68 121.28 123.89
Brokered Deposits/Tot Deposits -- -- -- --
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.18 1.78 0.02 0.00
Nonaccrual Loans/Gross Loans -- 1.64 -- 0.00
Nonaccrual Lns/Ln Loss Reserve -- 681.72 -- 1.38
Repos Assets/Tot Assets -- -- -- --
Net Chrg-Off/Av Adj Lns -- (0.02) -- --
Nonmtg 1-4 Constr&Conv Lns/TA 4.85 5.44 4.29 2.57
Source: TAFS, published by Sheshunoff 6
<PAGE>
FERGUSON & COMPANY Exhibit IV
- ------------------
PREFERRED SAVINGS BANK
CHICAGO, IL
TICKER PSFI
- -----------
FINANCIAL HIGHLIGHTS
1994 1995 1996 YTD 9/97
($000'S)
BALANCE SHEET:
Total Assets - - 68,063 79,532
% Change in Assets - - - 16.85
Total Loans - - 36,021 35,574
Deposits - - 42,877 42,036
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital - - 22,722 23,312
Tangible Capital - - 22,102 23,204
Core Capital - - 22,102 23,204
Risk-Based Capital - - 22,288 23,390
Equity Capital/Total Assets - - 33.38 29.31
Core Capital/Risk Based Assets - - 89.74 81.20
Core Capital/Adj Tang Assets - - 32.77 29.22
Tangible Cap/Tangible Assets - - 32.77 29.22
Risk-Based Cap/Risk-Wt Assets - - 90.50 81.85
PROFITABILITY:
Net Income(Loss) - - 458 1,042
Ret on Avg Assets Bef Ext Item - - 1.57 1.93
Return on Average Equity - - 6.21 6.11
Net Interest Income/Avg Assets - - 5.03 4.72
Noninterest Income/Avg Assets - - 0.44 0.13
Noninterest Expense/Avg Assets - - 3.03 1.46
Yield/Cost Spread - - 2.08 3.45
LIQUIDITY:
Int Earn Assets/Int Bear Liab - - 147.48 148.14
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO - - 0.78 0.29
Nonaccrual Loans/Gross Loans - - - -
Nonaccrual Lns/Ln Loss Reserve - - - -
Repos Assets/Tot Assets - - - -
Net Chrg-Off/Av Adj Lns - - 0.07 -
Nonmtg 1-4 Constr&Conv Lns/TA - - 13.10 11.80
Source: TAFS, published by Sheshunoff 7
<PAGE>
FERGUSON & COMPANY Exhibit IV
- ------------------
PREFERRED SVGS BK
CHICAGO, IL
TICKER PSFI
- -----------------
FINANCIAL HIGHLIGHTS
1994 1995 1996 YTD 9/97
($000'S)
BALANCE SHEET:
Total Assets 51,639 53,556 - -
% Change in Assets (4.14) 3.71 - -
Securities-Book Value 11,310 14,300 - -
Securities-Fair Value 11,139 14,300 - -
Total Loans & Leases 33,039 34,693 - -
Total Deposits 40,943 41,528 - -
Loan/Deposit Ratio 80.70 83.54 - -
Provision for Loan Losses 42 - - -
CAPITAL:
Equity Capital 10,525 11,758 - -
Total Qualifying Capital(Est) 10,762 11,837 - -
Equity Capital/Average Assets 19.95 22.35 - -
Tot Qual Cap/Rk Bsd Asts(Est) 51.06 52.85 - -
Tier 1 Cap/Rsk Bsed Asts(Est) 50.41 52.24 - -
T1 Cap/Avg Assets(Lev Est) 20.67 21.71 - -
Dividends Declared/Net Income - - - -
PROFITABILITY:
Net Income(Loss) 736 1,075 - -
Return on Average Assets 1.40 2.04 - -
Return on Average Equity Cap 7.29 9.65 - -
Net Interest Margin 4.70 5.19 - -
Net Int Income/Avg Assets 4.87 5.08 - -
Noninterest Income/Avg Assets 0.06 0.06 - -
Noninterest Exp/Avg Assets 1.59 1.91 - -
ASSET QUALITY:
NPL+Frcl RE/Lns+Frcl RE 0.71 1.51 - -
NPA's/Equity + LLR 2.19 4.40 - -
LLR/Nonperf & Restrcd Lns 58.12 26.00 - -
Foreclosed RE/Total Assets - - - -
90+ Day Del Loans/Total Loans 0.71 1.51 - -
Loan Loss Reserves/Total Lns 0.41 0.39 - -
Net Charge-Offs/Average Loans - - - -
Dom Risk R/E Lns/Tot Dom Lns 26.73 26.40 - -
LIQUIDITY:
Brokered Dep/Total Dom Deps - - - -
$100M+ Time Dep/Total Dom Dep 2.56 2.53 - -
Int Earn Assets/Int Bear Liab 125.82 126.87 - -
Pledged Sec/Total Sec - - - -
Fair Value Sec/Amort Cost Sec 96.96 100.75 - -
Source: BankSource, published by Sheshunoff 8
<PAGE>
FERGUSON & COMPANY Exhibit IV
- ------------------
RELIANCE SVGS BK
MILWAUKEE, WI
TICKER RELI
- -----------
FINANCIAL HIGHLIGHTS
1994 1995 1996 YTD 9/97
($000'S)
BALANCE SHEET:
Total Assets 32,639 32,150 40,442 43,067
% Change in Assets (1.37) (1.50) 25.79 6.49
Securities-Book Value 10,711 8,769 12,786 13,268
Securities-Fair Value 10,691 8,857 12,838 13,311
Total Loans & Leases 20,340 22,235 25,222 27,188
Total Deposits 22,914 21,460 17,932 17,702
Loan/Deposit Ratio 88.77 103.61 140.65 153.59
Provision for Loan Losses 22 22 22 16
CAPITAL:
Equity Capital 9,282 9,969 19,652 20,358
Total Qualifying Capital(Est) 9,399 9,821 19,410 19,999
Equity Capital/Average Assets 28.24 30.77 51.69 48.44
Tot Qual Cap/Rk Bsd Asts(Est) 45.16 45.62 81.73 68.71
Tier 1 Cap/Rsk Bsed Asts(Est) 44.71 45.09 81.16 68.18
T1 Cap/Avg Assets(Lev Est) 27.95 30.19 44.56 46.33
Dividends Declared/Net Income -- -- -- --
PROFITABILITY:
Net Income(Loss) 373 400 497 379
Return on Average Assets 1.13 1.23 1.31 1.20
Return on Average Equity Cap 4.07 4.16 3.16 2.53
Net Interest Margin 4.63 4.26 4.92 5.50
Net Int Income/Avg Assets 4.12 4.21 4.68 5.17
Noninterest Income/Avg Assets 0.04 0.04 0.02 0.02
Noninterest Exp/Avg Assets 2.20 2.15 2.28 3.24
ASSET QUALITY:
NPL+Frcl RE/Lns+Frcl RE -- -- -- 0.45
NPA's/Equity + LLR -- -- -- 0.60
LLR/Nonperf & Restrcd Lns -- -- -- 124.39
Foreclosed RE/Total Assets -- -- -- --
90+ Day Del Loans/Total Loans -- -- -- 0.45
Loan Loss Reserves/Total Lns 0.46 0.52 0.55 0.56
Net Charge-Offs/Average Loans 0.01 -- -- --
Dom Risk R/E Lns/Tot Dom Lns 34.08 36.80 33.82 28.38
LIQUIDITY:
Brokered Dep/Total Dom Deps -- -- -- --
$100M+ Time Dep/Total Dom Dep 9.10 10.41 7.20 8.01
Int Earn Assets/Int Bear Liab 138.79 144.61 196.95 192.80
Pledged Sec/Total Sec -- -- -- --
Fair Value Sec/Amort Cost Sec 99.45 106.26 105.54 107.12
Source: BankSource, published by Sheshunoff 9
<PAGE>
FERGUSON & COMPANY Exhibit IV
- ------------------
FIRST FS&LA OF CULLMAN
CULLMAN, AL
TICKER SCBS
- -----------
FINANCIAL HIGHLIGHTS
1994 1995 1996 YTD 9/97
($000'S)
BALANCE SHEET:
Total Assets 63,421 62,964 72,213 68,455
% Change in Assets 0.03 (0.72) 14.69 (5.20)
Total Loans 39,409 37,921 39,182 43,292
Deposits 58,314 56,878 60,591 55,918
Broker Originated Deposits -- -- -- --
CAPITAL:
Equity Capital 4,942 5,788 10,439 12,110
Tangible Capital 4,942 5,788 10,439 12,147
Core Capital 4,942 5,788 10,439 12,147
Risk-Based Capital 4,942 5,788 10,868 12,147
Equity Capital/Total Assets 7.79 9.19 14.46 17.69
Core Capital/Risk Based Assets 14.74 17.97 30.45 32.76
Core Capital/Adj Tang Assets 7.79 9.19 14.46 17.73
Tangible Cap/Tangible Assets 7.79 9.19 14.46 17.73
Risk-Based Cap/Risk-Wt Assets 14.74 17.97 31.70 32.76
PROFITABILITY:
Net Income(Loss) 478 762 198 689
Ret on Avg Assets Bef Ext Item 0.75 1.21 0.31 1.35
Return on Average Equity 9.88 14.20 3.10 8.20
Net Interest Income/Avg Assets 3.11 3.17 3.13 3.59
Noninterest Income/Avg Assets 0.55 0.82 0.66 0.70
Noninterest Expense/Avg Assets 2.68 2.50 2.94 2.37
Yield/Cost Spread 3.02 2.97 2.83 3.05
LIQUIDITY:
Int Earn Assets/Int Bear Liab 105.66 108.40 114.95 117.79
Brokered Deposits/Tot Deposits -- -- -- --
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 5.94 5.34 4.15 3.87
Nonaccrual Loans/Gross Loans 0.16 0.11 0.04 0.51
Nonaccrual Lns/Ln Loss Reserve 9.92 6.75 2.27 31.22
Repos Assets/Tot Assets -- -- -- --
Net Chrg-Off/Av Adj Lns 0.19 0.03 0.05 (0.11)
Nonmtg 1-4 Constr&Conv Lns/TA 20.77 20.63 16.94 17.74
Source: TAFS, published by Sheshunoff 10
<PAGE>
FERGUSON & COMPANY Exhibit IV
- ------------------
COMMUNITY FS&LA
WINNSBORO, SC
TICKER SCCB
- -----------
FINANCIAL HIGHLIGHTS
1994 1995 1996 YTD 9/97
($000'S)
BALANCE SHEET:
Total Assets 40,840 41,118 44,931 44,889
% Change in Assets 2.50 0.68 9.27 (0.09)
Total Loans 33,294 33,022 35,960 36,330
Deposits 30,376 30,378 33,719 33,389
Broker Originated Deposits -- -- -- --
CAPITAL:
Equity Capital 9,424 9,906 10,412 10,641
Tangible Capital 9,424 9,906 10,412 10,641
Core Capital 9,424 9,906 10,412 10,641
Risk-Based Capital 9,659 10,139 10,644 10,873
Equity Capital/Total Assets 23.08 24.09 23.17 23.71
Core Capital/Risk Based Assets 50.30 52.30 49.25 48.71
Core Capital/Adj Tang Assets 23.08 24.09 23.17 23.71
Tangible Cap/Tangible Assets 23.08 24.09 23.17 23.71
Risk-Based Cap/Risk-Wt Assets 51.55 53.53 50.34 49.77
PROFITABILITY:
Net Income(Loss) 848 585 417 399
Ret on Avg Assets Bef Ext Item 2.10 1.43 0.99 1.18
Return on Average Equity 11.17 6.05 4.11 5.06
Net Interest Income/Avg Assets 4.58 4.10 3.80 3.94
Noninterest Income/Avg Assets 0.32 0.18 0.22 0.39
Noninterest Expense/Avg Assets 1.42 1.98 2.50 2.38
Yield/Cost Spread 4.08 3.16 2.77 3.06
LIQUIDITY:
Int Earn Assets/Int Bear Liab 127.21 128.04 126.78 126.65
Brokered Deposits/Tot Deposits -- -- -- --
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 2.96 1.78 2.03 2.39
Nonaccrual Loans/Gross Loans 1.32 1.35 1.61 1.08
Nonaccrual Lns/Ln Loss Reserve 154.76 154.95 202.39 134.93
Repos Assets/Tot Assets -- -- -- --
Net Chrg-Off/Av Adj Lns -- -- -- --
Nonmtg 1-4 Constr&Conv Lns/TA 5.59 5.45 5.98 5.75
Source: TAFS, published by Sheshunoff
11
<PAGE>
FERGUSON & COMPANY Exhibit IV
- ------------------
SCOTLAND SVGS BK
LAURINBURG, NC
TICKER SSB
- ----------
FINANCIAL HIGHLIGHTS
1994 1995 1996 YTD 9/97
($000'S)
BALANCE SHEET:
Total Assets 57,740 58,049 60,714 63,826
% Change in Assets 4.30 0.54 4.59 5.13
Securities-Book Value 14,250 11,806 11,018 9,979
Securities-Fair Value 14,086 11,912 11,081 10,037
Total Loans & Leases 37,296 42,003 46,305 46,712
Total Deposits 49,124 48,346 42,432 44,028
Loan/Deposit Ratio 75.92 86.88 109.13 106.10
Provision for Loan Losses 25 12 24 18
CAPITAL:
Equity Capital 7,921 8,860 17,136 18,705
Total Qualifying Capital(Est) 7,897 8,609 16,834 18,380
Equity Capital/Average Assets 14.01 15.30 26.95 30.02
Tot Qual Cap/Rk Bsd Asts(Est) 30.02 30.65 57.41 54.81
Tier 1 Cap/Rsk Bsed Asts(Est) 29.25 29.89 56.62 54.06
T1 Cap/Avg Assets(Lev Est) 13.05 14.11 27.12 28.57
Dividends Declared/Net Income -- -- 30.14 36.99
PROFITABILITY:
Net Income(Loss) 577 700 647 665
Return on Average Assets 1.02 1.21 1.02 1.42
Return on Average Equity Cap 7.69 8.34 4.08 4.95
Net Interest Margin 3.89 3.82 4.30 4.66
Net Int Income/Avg Assets 3.82 3.73 4.11 4.41
Noninterest Income/Avg Assets 0.27 0.11 0.09 0.08
Noninterest Exp/Avg Assets 2.44 1.96 2.58 2.84
ASSET QUALITY:
NPL+Frcl RE/Lns+Frcl RE -- -- 0.07 0.06
NPA's/Equity + LLR -- -- 0.18 0.16
LLR/Nonperf & Restrcd Lns -- -- 745.16 830.00
Foreclosed RE/Total Assets -- -- -- --
90+ Day Del Loans/Total Loans -- -- 0.07 0.06
Loan Loss Reserves/Total Lns 0.54 0.51 0.50 0.53
Net Charge-Offs/Average Loans -- -- 0.02 --
Dom Risk R/E Lns/Tot Dom Lns 7.58 6.59 6.50 5.52
LIQUIDITY:
Brokered Dep/Total Dom Deps -- -- -- --
$100M+ Time Dep/Total Dom Dep 7.36 8.60 6.66 6.15
Int Earn Assets/Int Bear Liab 115.85 118.12 142.09 142.82
Pledged Sec/Total Sec 2.55 6.02 5.95 6.95
Fair Value Sec/Amort Cost Sec 101.29 107.31 108.53 109.79
Source: BankSource, published by Sheshunoff
12
<PAGE>
EXHIBIT V
<PAGE>
<TABLE>
<CAPTION>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thirfts
- ------------------
Deposit Current Current
Insurance Stock Market
Agency Price Value
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AABC Access Anytime Bancorp Inc. Clovis NM SW SAIF NASDAQ 08/08/86 10.875 12.97
ABBK Abington Bancorp Inc. Abington MA NE BIF NASDAQ 06/10/86 21.000 76.38
ABCL Alliance Bancorp Inc. Hinsdale IL MW SAIF NASDAQ 07/07/92 27.500 220.61
ABCW Anchor BanCorp Wisconsin Madison WI MW SAIF NASDAQ 07/16/92 43.000 389.23
AFED AFSALA Bancorp Inc. Amsterdam NY MA SAIF NASDAQ 10/01/96 19.625 27.05
AHM H.F. Ahmanson & Co. Irwindale CA WE SAIF NYSE 10/25/72 62.438 6,796.38
ALBC Albion Banc Corp. Albion NY MA SAIF NASDAQ 07/26/93 10.750 8.06
ALBK ALBANK Financial Corp. Albany NY MA SAIF NASDAQ 04/01/92 48.625 627.60
AMFC AMB Financial Corp. Munster IN MW SAIF NASDAQ 04/01/96 17.125 16.51
ANA Acadiana Bancshares Inc. Lafayette LA SW SAIF AMSE 07/16/96 22.125 58.78
ANDB Andover Bancorp Inc. Andover MA NE BIF NASDAQ 05/08/86 39.875 206.08
ANE Alliance Bncp of New England Vernon CT NE BIF AMSE 12/19/86 19.875 32.52
ASBI Ameriana Bancorp New Castle IN MW SAIF NASDAQ 03/02/87 20.500 66.24
ASBP ASB Financial Corp. Portsmouth OH MW SAIF NASDAQ 05/11/95 13.750 22.49
ASFC Astoria Financial Corp. Lake Success NY MA SAIF NASDAQ 11/18/93 55.875 1,463.80
BANC BankAtlantic Bancorp Inc. Fort Lauderdale FL SE SAIF NASDAQ 11/29/83 13.500 341.17
BDJI First Federal Bancorp. Bemidji MN MW SAIF NASDAQ 04/04/95 20.750 20.71
BFD BostonFed Bancorp Inc. Burlington MA NE SAIF AMSE 10/24/95 22.125 122.14
BFSB Bedford Bancshares Inc. Bedford VA SE SAIF NASDAQ 08/22/94 28.500 32.56
BKC American Bank of Connecticut Waterbury CT NE BIF AMSE 12/01/81 50.250 116.63
BKCT Bancorp Connecticut Inc. Southington CT NE BIF NASDAQ 07/03/86 18.500 94.20
BKUNA BankUnited Financial Corp. Coral Gables FL SE SAIF NASDAQ 12/11/85 14.688 208.70
BNKU Bank United Corp. Houston TX SW SAIF NASDAQ 08/09/96 47.125 1,488.94
BPLS Bank Plus Corp. Los Angeles CA WE SAIF NASDAQ NA 14.750 285.67
BVCC Bay View Capital Corp. San Mateo CA WE SAIF NASDAQ 05/09/86 34.750 700.12
BYFC Broadway Financial Corp. Los Angeles CA WE SAIF NASDAQ 01/09/96 12.750 11.01
CAFI Camco Financial Corp. Cambridge OH MW SAIF NASDAQ NA 25.375 81.63
CASB Cascade Financial Corp. Everett WA WE SAIF NASDAQ 09/16/92 15.500 52.62
CASH First Midwest Financial Inc. Storm Lake IA MW SAIF NASDAQ 09/20/93 22.875 61.58
CATB Catskill Financial Corp. Catskill NY MA BIF NASDAQ 04/18/96 18.375 85.08
CBCI Calumet Bancorp Inc. Dolton IL MW SAIF NASDAQ 02/20/92 37.500 117.81
CBES CBES Bancorp Inc. Excelsior Springs MO MW SAIF NASDAQ 09/30/96 25.500 25.83
CBSA Coastal Bancorp Inc. Houston TX SW SAIF NASDAQ NA 31.313 156.84
CEBK Central Co-operative Bank Somerville MA NE BIF NASDAQ 10/24/86 32.000 62.88
CENB Century Bancorp Inc. Thomasville NC SE SAIF NASDAQ 12/23/96 93.750 38.19
CFB Commercial Federal Corp. Omaha NE MW SAIF NYSE 12/31/84 35.375 1,332.09
CFCP Coastal Financial Corp. Myrtle Beach SC SE SAIF NASDAQ 09/26/90 21.750 101.66
CFFC Community Financial Corp. Staunton VA SE SAIF NASDAQ 03/30/88 30.750 39.27
CFNC Carolina Fincorp Inc. Rockingham NC SE SAIF NASDAQ 11/25/96 17.750 33.82
CFSB CFSB Bancorp Inc. Lansing MI MW SAIF NASDAQ 06/22/90 29.500 224.42
CFTP Community Federal Bancorp Tupelo MS SE SAIF NASDAQ 03/26/96 18.688 86.50
CIBI Community Investors Bancorp Bucyrus OH MW SAIF NASDAQ 02/07/95 17.250 15.57
CKFB CKF Bancorp Inc. Danville KY MW SAIF NASDAQ 01/04/95 19.500 16.91
CLAS Classic Bancshares Inc. Ashland KY MW SAIF NASDAQ 12/29/95 18.875 24.54
CMRN Cameron Financial Corp Cameron MO MW SAIF NASDAQ 04/03/95 20.000 51.29
CMSB Commonwealth Bancorp Inc. Norristown PA MA SAIF NASDAQ 06/17/96 20.375 331.04
CNIT CENIT Bancorp Inc. Norfolk VA SE SAIF NASDAQ 08/06/92 71.250 112.17
COFI Charter One Financial Cleveland OH MW SAIF NASDAQ 01/22/88 60.594 3,868.86
COOP Cooperative Bankshares Inc. Wilmington NC SE SAIF NASDAQ 08/21/91 20.250 60.43
CRZY Crazy Woman Creek Bancorp Buffalo WY WE SAIF NASDAQ 03/29/96 16.500 15.75
CVAL Chester Valley Bancorp Inc. Downingtown PA MA SAIF NASDAQ 03/27/87 31.750 69.14
DCBI Delphos Citizens Bancorp Inc. Delphos OH MW SAIF NASDAQ 11/21/96 24.250 47.18
DIBK Dime Financial Corp. Wallingford CT NE BIF NASDAQ 07/09/86 31.250 161.38
DIME Dime Community Bancorp Inc. Brooklyn NY MA BIF NASDAQ 06/26/96 25.125 312.51
DME Dime Bancorp Inc. New York NY MA BIF NYSE 08/19/86 30.500 3,548.92
DNFC D & N Financial Corp. Hancock MI MW SAIF NASDAQ 02/13/85 26.250 238.85
DSL Downey Financial Corp. Newport Beach CA WE SAIF NYSE 01/01/71 29.250 782.61
EBSI Eagle Bancshares Tucker GA SE SAIF NASDAQ 04/01/86 20.500 117.23
EFBI Enterprise Federal Bancorp West Chester OH MW SAIF NASDAQ 10/17/94 33.375 66.28
EMLD Emerald Financial Corp. Strongsville OH MW SAIF NASDAQ NA 22.125 112.23
EQSB Equitable Federal Savings Bank Wheaton MD MA SAIF NASDAQ 09/10/93 30.500 37.11
ESBK Elmira Savings Bank (The) Elmira NY MA BIF NASDAQ 03/01/85 28.875 21.42
ETFS East Texas Financial Services Tyler TX SW SAIF NASDAQ 01/10/95 21.750 22.32
FBBC First Bell Bancorp Inc. Pittsburgh PA MA SAIF NASDAQ 06/29/95 18.750 122.07
FBCI Fidelity Bancorp Inc. Chicago IL MW SAIF NASDAQ 12/15/93 24.500 68.96
</TABLE>
Source: SNL & F&C calculations
2
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
- ------------------
<TABLE>
<CAPTION>
Deposit Current Current
Insurance Stock Market
Agency Price Value
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FBCV 1ST Bancorp Vincennes IN MW SAIF NASDAQ 04/07/87 25.125 27.38
FBER 1st Bergen Bancorp Wood-Ridge NJ MA SAIF NASDAQ 04/01/96 19.750 56.57
FBHC Fort Bend Holding Corp. Rosenberg TX SW SAIF NASDAQ 06/30/93 20.875 34.96
FBSI First Bancshares Inc. Mountain Grove MO MW SAIF NASDAQ 12/22/93 17.000 37.16
FCBF FCB Financial Corp. Oshkosh WI MW SAIF NASDAQ 09/24/93 31.250 120.70
FCME First Coastal Corp. Westbrook ME NE BIF NASDAQ NA 14.625 19.88
FDEF First Defiance Financial Defiance OH MW SAIF NASDAQ 10/02/95 15.250 130.05
FED FirstFed Financial Corp. Santa Monica CA WE SAIF NYSE 12/16/83 40.375 427.48
FESX First Essex Bancorp Inc. Andover MA NE BIF NASDAQ 08/04/87 23.625 178.05
FFBA First Colorado Bancorp Inc. Lakewood CO SW SAIF NASDAQ 01/02/96 25.250 424.41
FFBH First Federal Bancshares of AR Harrison AR SE SAIF NASDAQ 05/03/96 26.000 127.30
FFBI First Financial Bancorp Inc. Belvidere IL MW SAIF NASDAQ 10/04/93 23.250 9.65
FFBZ First Federal Bancorp Inc. Zanesville OH MW SAIF NASDAQ 07/13/92 23.000 36.23
FFCH First Financial Holdings Inc. Charleston SC SE SAIF NASDAQ 11/10/83 52.500 354.93
FFDB FirstFed Bancorp Inc. Bessemer AL SE SAIF NASDAQ 11/19/91 24.000 27.72
FFDF FFD Financial Corp. Dover OH MW SAIF NASDAQ 04/03/96 18.750 27.09
FFED Fidelity Federal Bancorp Evansville IN MW SAIF NASDAQ 08/31/87 9.750 30.50
FFES First Federal of East Hartford East Hartford CT NE SAIF NASDAQ 06/23/87 38.500 104.17
FFFD North Central Bancshares Inc. Fort Dodge IA MW SAIF NASDAQ 03/21/96 21.000 68.60
FFHH FSF Financial Corp. Hutchinson MN MW SAIF NASDAQ 10/07/94 20.125 61.29
FFHS First Franklin Corp. Cincinnati OH MW SAIF NASDAQ 01/26/88 27.000 32.18
FFIC Flushing Financial Corp. Flushing NY MA BIF NASDAQ 11/21/95 25.500 200.55
FFKY First Federal Financial Corp. Elizabethtown KY MW SAIF NASDAQ 07/15/87 22.000 91.16
FFLC FFLC Bancorp Inc. Leesburg FL SE SAIF NASDAQ 01/04/94 19.375 72.54
FFOH Fidelity Financial of Ohio Cincinnati OH MW SAIF NASDAQ 03/04/96 18.000 100.67
FFPB First Palm Beach Bancorp Inc. West Palm Beach FL SE SAIF NASDAQ 09/29/93 37.875 191.45
FFSL First Independence Corp. Independence KS MW SAIF NASDAQ 10/08/93 14.750 14.07
FFSX First Fed SB of Siouxland(MHC) Sioux City IA MW SAIF NASDAQ 07/13/92 31.125 88.22
FFWC FFW Corp. Wabash IN MW SAIF NASDAQ 04/05/93 18.500 26.82
FFWD Wood Bancorp Inc. Bowling Green OH MW SAIF NASDAQ 08/31/93 22.000 58.32
FFYF FFY Financial Corp. Youngstown OH MW SAIF NASDAQ 06/28/93 34.250 139.40
FGHC First Georgia Holding Inc. Brunswick GA SE SAIF NASDAQ 02/11/87 10.000 30.52
FIBC Financial Bancorp Inc. Long Island City NY MA SAIF NASDAQ 08/17/94 26.000 44.45
FISB First Indiana Corp. Indianapolis IN MW SAIF NASDAQ 08/02/83 29.250 370.54
FKFS First Keystone Financial Media PA MA SAIF NASDAQ 01/26/95 17.500 42.22
FKKY Frankfort First Bancorp Inc. Frankfort KY MW SAIF NASDAQ 07/10/95 16.250 26.31
FLAG FLAG Financial Corp. LaGrange GA SE SAIF NASDAQ 12/11/86 20.625 42.01
FLFC First Liberty Financial Corp. Macon GA SE SAIF NASDAQ 12/06/83 30.125 233.42
FLGS Flagstar Bancorp Inc. Bloomfield Hills MI MW SAIF NASDAQ NA 22.625 309.28
FLKY First Lancaster Bancshares Lancaster KY MW SAIF NASDAQ 07/01/96 15.125 14.39
FMCO FMS Financial Corp. Burlington NJ MA SAIF NASDAQ 12/14/88 35.000 83.57
FMSB First Mutual Savings Bank Bellevue WA WE BIF NASDAQ 12/17/85 18.375 75.80
FNGB First Northern Capital Corp. Green Bay WI MW SAIF NASDAQ 12/29/83 13.000 114.99
FSBI Fidelity Bancorp Inc. Pittsburgh PA MA SAIF NASDAQ 06/24/88 28.875 45.09
FSTC First Citizens Corp. Newnan GA SE SAIF NASDAQ 03/01/86 32.000 88.72
FTF Texarkana First Financial Corp Texarkana AR SE SAIF AMSE 07/07/95 28.250 49.71
FTFC First Federal Capital Corp. La Crosse WI MW SAIF NASDAQ 11/02/89 31.875 292.95
FTSB Fort Thomas Financial Corp. Fort Thomas KY MW SAIF NASDAQ 06/28/95 15.500 22.85
FWWB First SB of Washington Bancorp Walla Walla WA WE SAIF NASDAQ 11/01/95 25.500 255.28
GAF GA Financial Inc. Pittsburgh PA MA SAIF AMSE 03/26/96 19.625 151.46
GDW Golden West Financial Oakland CA WE SAIF NYSE 05/29/59 89.250 5,093.36
GFCO Glenway Financial Corp. Cincinnati OH MW SAIF NASDAQ 11/30/90 20.500 46.79
GPT GreenPoint Financial Corp. New York NY MA BIF NYSE 01/28/94 74.250 3,142.26
GSBC Great Southern Bancorp Inc. Springfield MO MW SAIF NASDAQ 12/14/89 25.500 205.22
GSFC Green Street Financial Corp. Fayetteville NC SE SAIF NASDAQ 04/04/96 18.375 78.98
GUPB GFSB Bancorp Inc. Gallup NM SW SAIF NASDAQ 06/30/95 20.375 16.31
HALL Hallmark Capital Corp. West Allis WI MW SAIF NASDAQ 01/03/94 16.000 46.94
HARB Harbor Florida Bancorp (MHC) Fort Pierce FL SE SAIF NASDAQ 01/06/94 70.500 352.12
HARL Harleysville Savings Bank Harleysville PA MA SAIF NASDAQ 08/04/87 30.000 50.01
HAVN Haven Bancorp Inc. Woodhaven NY MA SAIF NASDAQ 09/23/93 24.500 215.23
HBBI Home Building Bancorp Washington IN MW SAIF NASDAQ 02/08/95 22.625 7.05
HBFW Home Bancorp Fort Wayne IN MW SAIF NASDAQ 03/30/95 32.750 78.12
HBNK Highland Bancorp Inc. Burbank CA WE SAIF NASDAQ NA 35.750 82.88
HBS Haywood Bancshares Inc. Waynesville NC SE BIF AMSE 12/18/87 21.875 27.35
HFFB Harrodsburg First Fin Bancorp Harrodsburg KY MW SAIF NASDAQ 10/04/95 16.688 31.12
</TABLE>
Source: SNL & F&C calculations 3
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
- ------------------
<TABLE>
<CAPTION>
Deposit Current Current
Insurance Stock Market
Agency Price Value
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HFFC HF Financial Corp. Sioux Falls SD MW SAIF NASDAQ 04/08/92 29.000 86.34
HFNC HFNC Financial Corp. Charlotte NC SE SAIF NASDAQ 12/29/95 13.625 234.25
HFSA Hardin Bancorp Inc. Hardin MO MW SAIF NASDAQ 09/29/95 18.750 15.44
HHFC Harvest Home Financial Corp. Cheviot OH MW SAIF NASDAQ 10/10/94 15.000 13.37
HIFS Hingham Instit. for Savings Hingham MA NE BIF NASDAQ 12/20/88 33.000 43.02
HMNF HMN Financial Inc. Spring Valley MN MW SAIF NASDAQ 06/30/94 29.000 120.19
HOMF Home Federal Bancorp Seymour IN MW SAIF NASDAQ 01/23/88 31.500 161.28
HPBC Home Port Bancorp Inc. Nantucket MA NE BIF NASDAQ 08/25/88 26.500 48.81
HRBF Harbor Federal Bancorp Inc. Baltimore MD MA SAIF NASDAQ 08/12/94 24.000 40.64
HRZB Horizon Financial Corp. Bellingham WA WE BIF NASDAQ 08/01/86 17.875 133.24
HTHR Hawthorne Financial Corp. El Segundo CA WE SAIF NASDAQ NA 19.750 60.99
HWEN Home Financial Bancorp Spencer IN MW SAIF NASDAQ 07/02/96 9.000 8.36
HZFS Horizon Financial Svcs Corp. Oskaloosa IA MW SAIF NASDAQ 06/30/94 14.500 12.37
IBSF IBS Financial Corp. Cherry Hill NJ MA SAIF NASDAQ 10/13/94 17.750 194.26
INBI Industrial Bancorp Inc. Bellevue OH MW SAIF NASDAQ 08/01/95 18.500 94.40
IPSW Ipswich Savings Bank Ipswich MA NE BIF NASDAQ 05/26/93 14.250 33.99
ITLA ITLA Capital Corp. La Jolla CA WE BIF NASDAQ 10/24/95 20.188 158.91
IWBK InterWest Bancorp Inc. Oak Harbor WA WE SAIF NASDAQ NA 41.500 333.54
JSB JSB Financial Inc. Lynbrook NY MA BIF NYSE 06/27/90 53.813 533.82
JSBA Jefferson Savings Bancorp Ballwin MO MW SAIF NASDAQ 04/08/93 27.000 270.40
JXVL Jacksonville Bancorp Inc. Jacksonville TX SW SAIF NASDAQ 04/01/96 20.500 50.09
KFBI Klamath First Bancorp Klamath Falls OR WE SAIF NASDAQ 10/05/95 22.500 224.87
KNK Kankakee Bancorp Inc. Kankakee IL MW SAIF AMSE 01/06/93 33.875 46.46
KSBK KSB Bancorp Inc. Kingfield ME NE BIF NASDAQ 06/24/93 19.250 23.85
KYF Kentucky First Bancorp Inc. Cynthiana KY MW SAIF AMSE 08/29/95 13.875 17.39
LARK Landmark Bancshares Inc. Dodge City KS MW SAIF NASDAQ 03/28/94 22.000 37.15
LARL Laurel Capital Group Inc. Allison Park PA MA SAIF NASDAQ 02/20/87 22.000 47.85
LFBI Little Falls Bancorp Inc. Little Falls NJ MA SAIF NASDAQ 01/05/96 20.000 52.16
LFCO Life Financial Corp. Riverside CA WE SAIF NASDAQ NA 16.000 104.73
LFED Leeds Federal Bankshares (MHC) Baltimore MD MA SAIF NASDAQ 05/02/94 21.625 112.06
LISB Long Island Bancorp Inc. Melville NY MA SAIF NASDAQ 04/18/94 60.188 1,446.23
LOGN Logansport Financial Corp. Logansport IN MW SAIF NASDAQ 06/14/95 16.250 20.49
LONF London Financial Corp. London OH MW SAIF NASDAQ 04/01/96 14.875 7.59
LSBI LSB Financial Corp. Lafayette IN MW BIF NASDAQ 02/03/95 28.250 25.89
LSBX Lawrence Savings Bank North Andover MA NE BIF NASDAQ 05/02/86 16.875 72.36
LVSB Lakeview Financial Paterson NJ MA SAIF NASDAQ 12/22/93 25.875 107.75
LXMO Lexington B&L Financial Corp. Lexington MO MW SAIF NASDAQ 06/06/96 16.500 18.49
MAFB MAF Bancorp Inc. Clarendon Hills IL MW SAIF NASDAQ 01/12/90 37.250 559.23
MARN Marion Capital Holdings Marion IN MW SAIF NASDAQ 03/18/93 27.000 48.10
MASB MASSBANK Corp. Reading MA NE BIF NASDAQ 05/28/86 49.375 176.31
MBB MSB Bancorp, Inc. Goshen NY MA BIF AMSE NA 34.875 99.19
MBLF MBLA Financial Corp. Macon MO MW SAIF NASDAQ 06/24/93 28.125 35.27
MBSP Mitchell Bancorp Inc. Spruce Pine NC SE SAIF NASDAQ 07/12/96 17.000 15.83
MCBN Mid-Coast Bancorp Inc. Waldoboro ME NE SAIF NASDAQ 11/02/89 38.250 9.06
MDBK Medford Bancorp Inc. Medford MA NE BIF NASDAQ 03/18/86 43.875 199.24
MECH MECH Financial Inc. Hartford CT NE BIF NASDAQ 06/26/96 26.625 140.93
METF Metropolitan Financial Corp. Mayfield Heights OH MW SAIF NASDAQ NA 16.813 118.55
MFBC MFB Corp. Mishawaka IN MW SAIF NASDAQ 03/25/94 27.000 43.92
MFFC Milton Federal Financial Corp. West Milton OH MW SAIF NASDAQ 10/07/94 15.875 35.99
MFLR Mayflower Co-operative Bank Middleboro MA NE BIF NASDAQ 12/23/87 26.875 24.17
MIFC Mid-Iowa Financial Corp. Newton IA MW SAIF NASDAQ 10/14/92 12.625 21.59
MIVI Mississippi View Holding Co. Little Falls MN MW SAIF NASDAQ 03/24/95 18.375 13.60
MSBF MSB Financial Inc. Marshall MI MW SAIF NASDAQ 02/06/95 17.250 21.25
MWBI Midwest Bancshares Inc. Burlington IA MW SAIF NASDAQ 11/12/92 17.000 17.35
MWBX MetroWest Bank Framingham MA NE BIF NASDAQ 10/10/86 7.906 111.54
NASB North American Savings Bank Grandview MO MW SAIF NASDAQ 09/27/85 66.500 148.94
NBN Northeast Bancorp Auburn ME NE BIF AMSE 08/19/87 18.063 40.15
NEIB Northeast Indiana Bancorp Huntington IN MW SAIF NASDAQ 06/28/95 22.250 38.19
NHTB New Hampshire Thrift Bncshrs Newport NH NE SAIF NASDAQ 05/22/86 19.750 41.24
NMSB NewMil Bancorp Inc. New Milford CT NE BIF NASDAQ 02/01/86 13.375 51.88
NSLB NS&L Bancorp Inc. Neosho MO MW SAIF NASDAQ 06/08/95 17.375 12.26
NWEQ Northwest Equity Corp. Amery WI MW SAIF NASDAQ 10/11/94 22.250 18.66
OCFC Ocean Financial Corp. Toms River NJ MA SAIF NASDAQ 07/03/96 35.250 282.52
OFCP Ottawa Financial Corp. Holland MI MW SAIF NASDAQ 08/19/94 29.500 156.74
OHSL OHSL Financial Corp. Cincinnati OH MW SAIF NASDAQ 02/10/93 36.750 45.61
</TABLE>
Source: SNL & F&C calculations 4
<PAGE>
<TABLE>
<CAPTION>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
- ------------------
Deposit Current Current
Insurance Stock Market
Agency Price Value
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($) ($M)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
PBCI Pamrapo Bancorp Inc. Bayonne NJ MA SAIF NASDAQ 11/14/89 26.750 76.05
PBKB People's Bancshares Inc. New Bedford MA NE BIF NASDAQ 10/30/86 22.375 73.58
PCBC Perry County Financial Corp. Perryville MO MW SAIF NASDAQ 02/13/95 23.875 19.77
PDB Piedmont Bancorp Inc. Hillsborough NC SE SAIF AMSE 12/08/95 10.625 29.23
PEEK Peekskill Financial Corp. Peekskill NY MA SAIF NASDAQ 12/29/95 17.000 53.16
PERM Permanent Bancorp Inc. Evansville IN MW SAIF NASDAQ 04/04/94 29.500 62.17
PFDC Peoples Bancorp Auburn IN MW SAIF NASDAQ 07/07/87 22.250 75.24
PFED Park Bancorp Inc. Chicago IL MW SAIF NASDAQ 08/12/96 18.750 43.74
PFFB PFF Bancorp Inc. Pomona CA WE SAIF NASDAQ 03/29/96 19.375 347.89
PFFC Peoples Financial Corp. Massillon OH MW SAIF NASDAQ 09/13/96 16.500 23.37
PFNC Progress Financial Corp. Blue Bell PA MA SAIF NASDAQ 07/18/83 16.875 68.58
PFSB PennFed Financial Services Inc West Orange NJ MA SAIF NASDAQ 07/15/94 18.625 179.66
PFSL Pocahontas FS&LA (MHC) Pocahontas AR SE SAIF NASDAQ 04/05/94 44.188 72.13
PHBK Peoples Heritage Finl Group Portland ME NE BIF NASDAQ 12/04/86 46.563 1,291.53
PHFC Pittsburgh Home Financial Corp Pittsburgh PA MA SAIF NASDAQ 04/01/96 17.750 34.96
PRBC Prestige Bancorp Inc. Pleasant Hills PA MA SAIF NASDAQ 06/27/96 19.125 17.50
PTRS Potters Financial Corp. East Liverpool OH MW SAIF NASDAQ 12/31/93 19.000 18.33
PULS Pulse Bancorp South River NJ MA SAIF NASDAQ 09/18/86 26.250 81.17
PVFC PVF Capital Corp. Bedford Heights OH MW SAIF NASDAQ 12/30/92 23.000 61.16
PVSA Parkvale Financial Corp. Monroeville PA MA SAIF NASDAQ 07/16/87 31.750 162.83
PWBC PennFirst Bancorp Inc. Ellwood City PA MA SAIF NASDAQ 06/13/90 19.125 101.57
PWBK Pennwood Bancorp Inc. Pittsburgh PA MA SAIF NASDAQ 07/15/96 22.000 12.11
QCBC Quaker City Bancorp Inc. Whittier CA WE SAIF NASDAQ 12/30/93 20.000 93.16
QCFB QCF Bancorp Inc. Virginia MN MW SAIF NASDAQ 04/03/95 27.250 37.65
QCSB Queens County Bancorp Inc. Flushing NY MA BIF NASDAQ 11/23/93 39.750 592.78
RARB Raritan Bancorp Inc. Bridgewater NJ MA BIF NASDAQ 03/01/87 26.500 62.86
RELY Reliance Bancorp Inc. Garden City NY MA SAIF NASDAQ 03/31/94 35.500 342.01
ROSE TR Financial Corp. Garden City NY MA BIF NASDAQ 06/29/93 32.969 580.19
SCBS Southern Community Bancshares Cullman AL SE SAIF NASDAQ 12/23/96 18.000 20.47
SCCB S. Carolina Community Bancshrs Winnsboro SC SE SAIF NASDAQ 07/07/94 21.500 12.54
SFED SFS Bancorp Inc. Schenectady NY MA SAIF NASDAQ 06/30/95 21.500 25.98
SFFC StateFed Financial Corp. Des Moines IA MW SAIF NASDAQ 01/05/94 14.250 22.22
SFIN Statewide Financial Corp. Jersey City NJ MA SAIF NASDAQ 10/02/95 22.750 102.58
SFSL Security First Corp. Mayfield Heights OH MW SAIF NASDAQ 01/22/88 22.000 165.62
SISB SIS Bancorp Inc. Springfield MA NE BIF NASDAQ 02/08/95 37.625 261.41
SKAN Skaneateles Bancorp Inc. Skaneateles NY MA BIF NASDAQ 06/02/86 19.125 27.48
SMBC Southern Missouri Bancorp Inc. Poplar Bluff MO MW SAIF NASDAQ 04/13/94 22.250 35.52
SOBI Sobieski Bancorp Inc. South Bend IN MW SAIF NASDAQ 03/31/95 20.500 16.07
SOPN First Savings Bancorp Inc. Southern Pines NC SE SAIF NASDAQ 01/06/94 23.625 87.53
SPBC St. Paul Bancorp Inc. Chicago IL MW SAIF NASDAQ 05/18/87 26.500 906.42
SSB Scotland Bancorp Inc. Laurinburg NC SE SAIF AMSE 04/01/96 10.125 19.38
SSFC South Street Financial Corp. Albemarle NC SE SAIF NASDAQ 10/03/96 13.000 60.79
SSM Stone Street Bancorp Inc. Mocksville NC SE SAIF AMSE 04/01/96 20.438 38.79
STFR St. Francis Capital Corp. Brookfield WI MW SAIF NASDAQ 06/21/93 43.500 228.43
STSA Sterling Financial Corp. Spokane WA WE SAIF NASDAQ NA 24.125 182.62
SVRN Sovereign Bancorp Inc. Wyomissing PA MA SAIF NASDAQ 08/12/86 19.375 1,810.48
SZB SouthFirst Bancshares Inc. Sylacauga AL SE SAIF AMSE 02/14/95 22.250 21.71
THR Three Rivers Financial Corp. Three Rivers MI MW SAIF AMSE 08/24/95 23.500 19.38
THRD TF Financial Corp. Newtown PA MA SAIF NASDAQ 07/13/94 26.000 82.87
TPNZ Tappan Zee Financial Inc. Tarrytown NY MA SAIF NASDAQ 10/05/95 18.750 27.71
TRIC Tri-County Bancorp Inc. Torrington WY WE SAIF NASDAQ 09/30/93 14.000 16.34
TSH Teche Holding Co. Franklin LA SW SAIF AMSE 04/19/95 21.125 72.62
TWIN Twin City Bancorp Bristol TN SE SAIF NASDAQ 01/04/95 14.500 18.45
UBMT United Financial Corp. Great Falls MT WE SAIF NASDAQ 09/23/86 27.000 33.03
VABF Virginia Beach Fed. Financial Virginia Beach VA SE SAIF NASDAQ 11/01/80 18.000 89.65
WAMU Washington Mutual Inc. Seattle WA WE BIF NASDAQ 03/11/83 67.125 ########
WBST Webster Financial Corp. Waterbury CT NE SAIF NASDAQ 12/12/86 64.250 877.22
WCBI Westco Bancorp Westchester IL MW SAIF NASDAQ 06/26/92 29.000 71.47
WCFB Webster City Federal SB (MHC) Webster City IA MW SAIF NASDAQ 08/15/94 20.500 43.24
WEFC Wells Financial Corp. Wells MN MW SAIF NASDAQ 04/11/95 18.875 36.98
WEHO Westwood Homestead Fin. Corp. Cincinnati OH MW SAIF NASDAQ 09/30/96 14.750 41.94
WFI Winton Financial Corp. Cincinnati OH MW SAIF AMSE 08/04/88 26.875 53.94
WFSL Washington Federal Inc. Seattle WA WE SAIF NASDAQ 11/17/82 27.625 1,444.40
WHGB WHG Bancshares Corp. Lutherville MD MA SAIF NASDAQ 04/01/96 18.500 25.70
WOFC Western Ohio Financial Corp. Springfield OH MW SAIF NASDAQ 07/29/94 26.750 64.99
</TABLE>
Source: SNL & F&C calculations 5
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
- ------------------
<TABLE>
<CAPTION>
Deposit Current Current
Insurance Stock Market
Agency Price Value
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WRNB Warren Bancorp Inc. Peabody MA NE BIF NASDAQ 07/09/86 23.000 87.54
WSB Washington Savings Bank, FSB Bowie MD MA SAIF AMSE NA 8.750 38.46
WSFS WSFS Financial Corp. Wilmington DE MA BIF NASDAQ 11/26/86 20.750 258.54
WSTR WesterFed Financial Corp. Missoula MT WE SAIF NASDAQ 01/10/94 26.000 145.13
WVFC WVS Financial Corp. Pittsburgh PA MA SAIF NASDAQ 11/29/93 38.000 68.71
WYNE Wayne Bancorp Inc. Wayne NJ MA SAIF NASDAQ 06/27/96 24.500 49.34
YFCB Yonkers Financial Corp. Yonkers NY MA SAIF NASDAQ 04/18/96 18.688 56.45
YFED York Financial Corp. York PA MA SAIF NASDAQ 02/01/84 25.500 225.72
Maximum 93.750 ########
Minimum 7.906 7.05
Average 25.861 293.65
Median 22.250 65.62
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
- ------------------
Tangible
Price/ Current Current Current Total Equity/ Equity/ Core Core Core
LTM Price/ Price/ T Price/ Dividend Assets Assets T Assets EPS ROAA ROAE Merger Current
Core EPS Book V Book V Assets Yield ($000) (%) (%) ($) (%) (%) Target? Pricing
Ticker (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM LTM (Y/N) Date
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AABC 9.7 144.8 144.8 12.5 - 105,639 8.7 8.7 1.12 1.34 20.89 N 02/27/98
ABBK 21.7 210.2 231.0 14.4 0.95 531,986 6.8 6.3 0.97 0.77 11.15 N 02/27/98
ABCL 19.8 168.5 170.5 16.2 1.60 1,363,825 9.6 9.5 1.39 0.85 9.25 N 02/27/98
ABCW 22.5 301.8 306.7 20.1 0.74 1,941,180 6.7 6.5 1.91 0.96 14.70 N 02/27/98
AFED 21.1 120.0 120.0 16.9 1.43 160,408 12.5 12.5 0.93 0.79 5.91 N 02/27/98
AHM 19.8 303.5 355.6 12.5 1.41 46,678,752 5.1 4.6 3.16 0.77 15.24 N 02/27/98
ALBC 25.0 133.0 133.0 11.4 0.99 70,810 8.6 8.6 0.43 0.49 5.46 N 02/27/98
ALBK 15.5 174.5 224.7 15.4 1.48 4,083,097 8.8 7.0 3.14 1.18 12.92 N 02/27/98
AMFC 24.1 111.7 111.7 16.5 1.64 100,003 14.8 14.8 0.71 0.71 4.39 N 02/27/98
ANA 21.3 128.6 128.6 21.8 1.99 274,018 17.0 17.0 1.04 0.95 5.44 N 02/27/98
ANDB 16.3 192.5 192.5 15.6 1.91 1,322,745 8.1 8.1 2.44 1.04 12.97 N 02/27/98
ANE 23.4 173.0 177.9 13.2 1.01 247,129 7.6 7.4 0.85 0.59 8.48 N 02/27/98
ASBI 20.1 150.4 150.5 16.9 3.12 393,028 11.2 11.2 1.02 0.83 7.60 N 02/27/98
ASBP 21.5 129.8 129.8 20.1 2.91 113,176 15.5 15.5 0.64 0.92 5.87 N 02/27/98
ASFC 19.7 172.4 247.7 13.9 1.43 10,528,393 8.5 6.2 2.83 0.77 9.55 N 02/27/98
BANC 26.5 167.9 192.3 11.4 0.98 3,064,480 6.8 6.0 0.51 0.53 9.11 N 02/27/98
BDJI 24.1 171.4 171.4 17.4 - 118,838 10.2 10.2 0.86 0.66 6.05 N 02/27/98
BFD 19.9 140.7 146.0 12.5 1.27 974,680 8.4 8.1 1.11 0.67 7.37 N 02/27/98
BFSB 20.1 155.9 155.9 23.8 1.97 136,908 14.5 14.5 1.42 1.19 8.34 N 02/27/98
BKC 17.1 202.5 209.4 18.3 3.03 639,013 9.0 8.8 2.94 1.15 13.74 N 02/27/98
BKCT 19.3 200.7 200.7 21.3 2.81 443,025 10.6 10.6 0.96 1.24 12.02 N 02/27/98
BKUNA 34.2 160.9 181.1 6.9 - 3,028,776 4.8 4.4 0.43 0.37 6.20 N 02/27/98
BNKU 21.6 243.0 249.3 11.9 1.36 12,523,459 4.9 4.8 2.18 0.61 11.99 N 02/27/98
BPLS 20.2 157.6 173.1 6.9 - 4,167,806 4.4 4.0 0.73 0.38 7.06 N 02/27/98
BVCC 24.0 241.7 291.0 12.9 1.15 3,246,476 5.4 4.5 1.45 0.61 10.00 N 02/27/98
BYFC 29.7 86.3 86.3 8.5 1.57 124,740 10.6 10.6 0.43 0.31 2.75 N 02/27/98
CAFI 18.3 166.7 179.7 15.7 2.13 520,582 9.4 8.8 1.39 0.94 9.78 N 02/27/98
CASB 21.0 179.6 179.6 12.5 - 422,530 6.9 6.9 0.74 0.64 9.80 N 02/27/98
CASH 18.8 139.6 156.5 15.1 2.10 407,592 10.8 9.8 1.22 0.90 7.97 N 02/27/98
CATB 21.6 118.7 118.7 28.9 1.74 294,656 24.3 24.3 0.85 1.34 5.19 N 02/27/98
CBCI 16.3 144.3 144.3 24.2 - 486,626 16.8 16.8 2.30 1.62 10.26 N 02/27/98
CBES 24.8 149.3 149.3 23.5 1.57 111,127 15.8 15.8 1.03 0.97 5.52 N 02/27/98
CBSA 14.0 151.5 178.2 5.4 1.53 2,911,410 3.6 3.1 2.24 0.40 11.61 N 02/27/98
CEBK 24.4 174.4 192.9 17.1 1.00 367,096 9.8 9.0 1.31 0.75 7.43 N 02/27/98
CENB 21.6 123.8 123.8 37.3 2.13 102,281 30.2 30.2 4.34 1.63 5.91 N 02/27/98
CFB 17.3 251.6 279.0 16.0 0.62 7,189,342 6.4 5.8 2.04 0.95 15.76 N 02/27/98
CFCP 20.7 301.7 301.7 18.0 1.66 563,866 6.0 6.0 1.05 1.04 16.59 N 02/27/98
CFFC 20.5 161.9 161.9 21.4 1.82 183,278 13.2 13.2 1.50 1.13 8.22 N 02/27/98
CFNC 24.3 126.2 126.2 28.7 1.35 114,660 22.7 22.7 0.73 1.17 5.06 N 02/27/98
CFSB 23.6 332.2 332.2 26.3 1.63 852,888 7.9 7.9 1.25 1.18 15.27 N 02/27/98
CFTP 29.2 126.9 126.9 37.8 1.71 228,656 26.5 26.5 0.64 1.33 4.54 N 02/27/98
CIBI 16.3 140.1 140.1 16.2 1.86 95,876 11.6 11.6 1.06 0.97 8.33 N 02/27/98
CKFB 20.1 113.8 113.8 26.9 2.56 62,865 21.9 21.9 0.97 1.37 5.84 N 02/27/98
CLAS 27.0 122.7 143.9 18.5 1.48 132,793 15.1 13.1 0.70 0.64 4.31 N 02/27/98
CMRN 20.8 113.3 113.3 24.3 1.40 211,253 21.4 21.4 0.96 1.16 5.26 N 02/27/98
CMSB 29.1 154.1 195.2 14.6 1.37 2,268,595 9.5 7.6 0.70 0.50 5.17 N 02/27/98
CNIT 22.1 229.8 250.9 16.8 1.68 701,708 7.0 6.4 3.22 0.78 10.96 N 02/27/98
COFI 19.1 281.1 300.9 19.6 1.65 19,760,265 7.0 6.5 3.18 1.10 15.66 N 02/27/98
COOP 29.4 213.6 213.6 16.4 - 369,121 7.7 7.7 0.69 0.60 7.76 N 02/27/98
CRZY 20.9 109.7 109.7 25.9 2.42 60,774 23.6 23.6 0.79 1.30 5.11 N 02/27/98
CVAL 23.4 239.8 239.8 21.1 1.39 325,643 8.8 8.8 1.36 0.95 11.04 N 02/27/98
DCBI 25.0 163.5 163.5 43.8 0.99 107,747 26.8 26.8 0.97 1.70 6.10 N 02/27/98
DIBK 10.0 203.6 209.0 16.8 1.54 958,503 8.3 8.1 3.14 1.92 24.02 N 02/27/98
DIME 28.2 167.8 194.2 21.0 1.27 1,488,074 12.5 11.0 0.89 0.86 5.86 N 02/27/98
DME 27.2 269.9 329.0 16.2 0.53 21,848,000 6.0 5.0 1.12 0.60 11.05 N 02/27/98
DNFC 19.2 243.5 245.8 13.2 0.69 1,815,315 5.4 5.4 1.37 0.79 14.13 N 02/27/98
DSL 17.9 181.9 NA 13.4 1.09 5,835,825 7.4 NA 1.63 0.76 10.64 N 02/27/98
EBSI 18.8 159.7 159.7 12.6 2.93 934,458 7.8 7.8 1.09 0.77 9.06 N 02/27/98
EFBI 33.4 204.6 204.8 22.0 3.00 301,261 10.8 10.8 1.00 0.75 6.28 N 02/27/98
EMLD 19.8 231.4 234.6 18.6 1.27 603,965 8.0 7.9 1.12 0.98 12.77 N 02/27/98
EQSB 17.1 221.5 221.5 11.5 - 321,687 5.2 5.2 1.78 0.74 14.65 N 02/27/98
ESBK 27.5 143.9 147.8 9.4 2.22 228,268 6.4 6.2 1.05 0.34 5.40 N 02/27/98
ETFS 31.1 106.4 106.4 18.6 0.92 120,093 17.5 17.5 0.70 0.59 3.23 N 02/27/98
FBBC 15.6 167.3 167.3 18.1 2.13 675,684 10.8 10.8 1.20 1.06 10.03 N 02/27/98
FBCI 22.7 134.5 134.7 14.1 1.63 489,673 10.5 10.5 1.08 0.61 5.92 N 02/27/98
</TABLE>
Source: SNL & F&C calculations 7
<PAGE>
<TABLE>
<CAPTION>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thifts
- ------------------
Tangible
Price/ Current Current Current Total Equity/ Equity/ Core Core Core
LTM Price/ Price/ T Price/ Dividend Assets Assets T Assets EPS ROAA ROAE Merger Current
Core EPS Book V Book V Assets Yield ($000) (%) (%) ($) (%) (%) Target? Pricing
Ticker (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM LTM (Y/N) Date
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FBCV 21.3 119.2 121.3 10.7 1.06 255,927 9.0 8.8 1.18 0.49 5.85 N 02/27/98
FBER 27.1 145.5 145.5 19.9 1.01 284,739 13.7 13.7 0.73 0.77 4.94 N 02/27/98
FBHC 30.3 170.0 181.4 11.5 1.92 302,728 6.8 6.4 0.69 0.47 7.53 N 02/27/98
FBSI 20.5 159.8 159.8 23.0 0.59 161,527 14.4 14.4 0.83 1.12 8.06 N 02/27/98
FCBF 21.9 164.7 164.7 23.2 2.56 519,911 14.1 14.1 1.43 1.15 7.69 N 02/27/98
FCME 3.4 137.2 137.2 13.4 - 148,571 9.8 9.8 4.31 3.97 44.97 N 02/27/98
FDEF 25.4 121.7 121.7 22.4 2.36 579,698 18.4 18.4 0.60 0.94 4.57 N 02/27/98
FED 19.1 191.9 193.6 10.3 - 4,160,115 5.4 5.3 2.11 0.55 11.05 N 02/27/98
FESX 21.1 195.6 222.5 14.9 2.37 1,197,459 7.6 6.8 1.12 0.73 10.03 N 02/27/98
FFBA 21.8 202.8 207.0 27.3 2.06 1,555,274 13.5 13.2 1.16 1.24 9.43 N 02/27/98
FFBH 22.6 156.3 156.3 23.3 1.08 547,119 14.9 14.9 1.15 1.01 6.51 N 02/27/98
FFBI 25.6 128.5 128.5 11.5 - 84,242 8.9 8.9 0.91 0.42 5.18 N 02/27/98
FFBZ 21.9 251.6 251.9 17.4 1.22 208,840 7.6 7.6 1.05 0.92 12.01 N 02/27/98
FFCH 24.2 307.4 307.4 19.8 1.60 1,793,325 6.4 6.4 2.17 0.86 13.90 N 02/27/98
FFDB 17.4 160.0 174.3 15.5 2.08 178,792 9.7 9.0 1.38 0.96 9.89 N 02/27/98
FFDF 33.5 121.9 121.9 29.3 1.60 92,364 24.1 24.1 0.56 0.88 3.60 N 02/27/98
FFED 16.0 194.2 194.2 14.1 4.10 215,821 7.3 7.3 0.61 0.68 11.84 N 02/27/98
FFES 17.3 155.5 155.5 10.6 1.77 982,747 6.8 6.8 2.23 0.63 9.71 N 02/27/98
FFFD 18.1 136.1 136.1 30.9 1.52 221,954 22.7 22.7 1.16 1.78 7.61 N 02/27/98
FFHH 18.3 123.2 123.2 15.1 2.48 402,850 10.9 10.9 1.10 0.82 7.15 N 02/27/98
FFHS 22.3 154.4 155.3 13.9 1.48 231,189 9.0 9.0 1.21 0.65 7.31 N 02/27/98
FFIC 22.6 147.0 153.0 18.4 1.26 1,088,476 12.5 12.1 1.13 0.88 6.08 N 02/27/98
FFKY 15.1 171.7 181.7 23.5 2.55 388,329 13.7 13.0 1.46 1.61 11.79 N 02/27/98
FFLC 21.3 141.0 141.0 18.1 1.86 400,237 12.9 12.9 0.91 0.95 6.79 N 02/27/98
FFOH 21.2 156.7 177.7 18.8 1.56 535,100 12.0 10.7 0.85 0.90 6.93 N 02/27/98
FFPB 26.7 165.0 168.8 10.5 1.85 1,821,077 6.4 6.2 1.42 0.44 6.61 N 02/27/98
FFSL 20.5 123.9 123.9 12.4 2.03 113,669 10.0 10.0 0.72 0.65 6.26 N 02/27/98
FFSX 27.1 217.1 218.7 19.2 1.54 458,940 8.9 8.8 1.15 0.71 8.40 N 02/27/98
FFWC 14.9 145.8 159.9 14.0 1.95 191,298 9.6 8.8 1.24 1.01 10.28 N 02/27/98
FFWD 29.0 273.6 273.6 35.0 1.55 166,546 12.8 12.8 0.76 1.29 10.30 N 02/27/98
FFYF 17.8 166.8 166.8 22.7 2.34 614,749 13.6 13.6 1.93 1.27 9.23 N 02/27/98
FGHC 22.2 220.8 238.1 18.4 4.00 166,386 8.3 7.8 0.45 0.94 11.32 N 02/27/98
FIBC 15.5 161.5 162.2 14.4 1.92 308,248 8.9 8.9 1.68 0.99 10.50 N 02/27/98
FISB 26.6 242.1 245.0 23.0 1.64 1,613,405 9.5 9.4 1.10 0.95 9.87 N 02/27/98
FKFS 16.5 168.6 168.6 11.2 1.14 378,527 6.6 6.6 1.06 0.73 10.47 N 02/27/98
FKKY 27.1 116.7 116.7 19.8 4.92 132,809 17.0 17.0 0.60 0.72 3.42 N 02/27/98
FLAG 25.8 193.5 193.5 17.6 1.65 238,463 9.1 9.1 0.80 0.72 7.98 N 02/27/98
FLFC 23.9 241.2 265.4 18.3 1.46 1,275,398 7.6 7.0 1.26 0.79 10.53 N 02/27/98
FLGS 12.9 254.5 264.9 15.2 1.06 2,033,260 6.0 5.8 1.75 1.43 22.94 N 02/27/98
FLKY 27.5 103.5 103.5 30.5 3.31 47,184 29.5 29.5 0.55 1.24 3.64 N 02/27/98
FMCO 15.4 221.5 224.8 14.4 0.80 581,660 6.5 6.4 2.27 1.02 15.74 N 02/27/98
FMSB 17.5 247.3 247.3 17.0 1.09 445,762 6.9 6.9 1.05 1.03 15.27 N 02/27/98
FNGB 20.6 155.7 155.7 17.2 2.77 667,696 11.1 11.1 0.63 0.90 7.98 N 02/27/98
FSBI 17.2 167.8 167.8 11.5 1.25 393,076 6.8 6.8 1.68 0.76 11.16 N 02/27/98
FSTC 17.0 248.8 311.3 25.1 1.00 352,233 10.1 8.2 1.88 1.70 17.58 N 02/27/98
FTF 16.2 182.0 182.0 27.6 1.98 180,259 15.2 15.2 1.74 1.71 10.91 N 02/27/98
FTFC 22.8 267.9 283.1 19.0 1.51 1,544,294 7.1 6.7 1.40 0.89 13.57 N 02/27/98
FTSB 18.9 144.7 144.7 22.9 1.61 99,873 15.8 15.8 0.82 1.23 7.53 N 02/27/98
FWWB 20.4 158.2 170.8 22.8 1.41 1,136,693 13.4 12.5 1.25 1.15 8.00 N 02/27/98
GAF 18.0 130.4 131.6 19.3 2.45 783,948 14.8 14.7 1.09 1.08 6.80 N 02/27/98
GDW 14.8 188.8 188.8 12.9 0.56 39,590,271 6.8 6.8 6.04 0.90 13.93 N 02/27/98
GFCO 19.7 165.2 166.9 15.4 1.95 304,621 9.3 9.2 1.04 0.83 8.78 N 02/27/98
GPT 20.6 218.4 400.5 24.0 1.72 13,083,518 9.7 5.5 3.60 1.08 10.64 N 02/27/98
GSBC 16.9 313.7 316.4 27.4 1.73 750,458 8.7 8.7 1.51 1.75 20.23 N 02/27/98
GSFC 27.0 124.8 124.8 44.0 2.40 179,700 35.2 35.2 0.68 1.60 4.48 N 02/27/98
GUPB 18.7 113.8 113.8 14.2 1.96 114,745 12.5 12.5 1.09 0.89 6.09 N 02/27/98
HALL 17.2 148.8 148.8 11.4 - 413,511 7.6 7.6 0.93 0.65 9.09 N 02/27/98
HARB 25.6 348.3 359.0 31.1 1.99 1,128,942 8.9 8.7 2.75 1.24 14.73 N 02/27/98
HARL 14.9 210.8 210.8 14.4 1.47 347,882 6.8 6.8 2.01 1.02 15.66 N 02/27/98
HAVN 19.6 190.7 191.3 10.9 1.22 1,974,890 5.7 5.7 1.25 0.63 10.51 N 02/27/98
HBBI 20.8 109.8 109.8 16.6 1.33 42,430 14.1 14.1 1.09 0.72 5.48 N 02/27/98
HBFW 27.1 183.7 183.7 22.3 0.61 350,038 12.2 12.2 1.21 0.86 6.48 N 02/27/98
HBNK 17.9 199.7 199.7 15.1 - 549,638 7.6 7.6 2.00 0.93 12.51 N 02/27/98
HBS 14.0 126.2 130.7 17.9 2.74 152,796 14.2 13.8 1.56 1.37 9.41 N 02/27/98
HFFB 21.1 105.3 105.3 30.4 2.40 108,908 26.7 26.7 0.79 1.36 5.06 N 02/27/98
</TABLE>
Source: SNL & F&C calculations
8
<PAGE>
FEGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
- -----------------
<TABLE>
<CAPTION>
Tangible
Price/ Current Current Current Total Equity/ Equity/ Core Core Core
LTM Price/ Price/ T Price/ Dividend Assets Assets T Assets EPS ROAA ROAE Merger Current
Core EPS Book V Book V Assets Yield ($000) (%) (%) ($) (%) (%) Target? Pricing
Ticker (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM LTM (Y/N) Date
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HFFC 15.8 155.1 155.1 14.9 1.45 580,668 9.6 9.6 1.84 1.00 10.68 N 02/27/98
HFNC 25.7 141.1 141.1 25.7 2.35 910,786 18.2 18.2 0.53 0.94 4.61 N 02/27/98
HFSA 20.4 118.0 118.0 13.4 2.56 115,434 11.3 11.3 0.92 0.69 5.56 N 02/27/98
HHFC 22.7 129.1 129.1 14.4 2.93 93,141 11.1 11.1 0.66 0.67 5.68 N 02/27/98
HIFS 16.5 201.2 201.2 19.3 1.46 222,584 9.6 9.6 2.00 1.26 13.00 N 02/27/98
HMNF 25.7 142.3 153.3 17.4 - 691,232 12.2 11.5 1.13 0.78 5.43 N 02/27/98
HOMF 20.2 258.0 265.4 22.7 1.27 709,412 8.8 8.6 1.56 1.22 14.31 N 02/27/98
HPBC 15.1 222.3 222.3 23.4 3.02 208,815 10.5 10.5 1.75 1.64 15.43 N 02/27/98
HRBF 25.3 139.4 139.4 17.4 2.00 233,572 12.5 12.5 0.95 0.72 5.55 N 02/27/98
HRZB 16.3 157.1 157.1 25.0 2.46 532,767 15.9 15.9 1.10 1.55 9.90 N 02/27/98
HTHR 15.8 141.0 141.0 6.8 - 891,163 6.2 6.2 1.25 1.04 18.87 N 02/27/98
HWEN 31.0 113.2 113.2 19.2 1.11 43,504 17.0 17.0 0.29 0.60 3.36 N 02/27/98
HZFS 21.6 137.1 137.1 13.9 1.24 88,769 10.2 10.2 0.67 0.68 6.70 N 02/27/98
IBSF 32.9 150.4 150.4 26.7 2.25 728,181 17.7 17.7 0.54 0.79 4.36 N 02/27/98
INBI 18.0 155.1 155.1 25.9 3.03 364,023 16.7 16.7 1.03 1.48 8.38 N 02/27/98
IPSW 19.8 287.3 287.3 15.0 1.12 227,244 5.2 5.2 0.72 0.97 16.95 N 02/27/98
ITLA 12.9 160.0 NA 15.6 - 1,015,909 9.8 NA 1.57 1.37 13.26 N 02/27/98
IWBK 19.0 250.0 254.3 16.8 1.74 1,982,317 6.7 6.6 2.18 0.95 14.38 N 02/27/98
JSB 21.1 149.9 149.9 34.8 2.97 1,531,068 23.2 23.2 2.55 1.72 7.67 N 02/27/98
JSBA 25.7 219.7 280.1 21.5 1.04 1,257,753 9.0 7.2 1.05 0.76 9.32 N 02/27/98
JXVL 15.1 145.5 145.5 21.3 2.44 235,405 14.6 14.6 1.36 1.49 9.90 N 02/27/98
KFBI 24.2 141.3 154.6 23.1 1.42 975,207 15.1 14.0 0.93 1.07 6.11 N 02/27/98
KNK 17.3 122.9 130.3 13.5 1.42 343,409 11.0 10.5 1.96 0.86 7.88 N 02/27/98
KSBK 15.3 206.3 216.1 15.6 0.52 152,752 7.6 7.3 1.26 1.05 14.06 N 02/27/98
KYF 18.0 122.6 122.6 20.9 3.60 86,307 17.0 17.0 0.77 1.11 6.70 N 02/27/98
LARK 17.5 112.9 112.9 15.9 1.82 233,640 14.1 14.1 1.26 0.98 6.94 N 02/27/98
LARL 17.3 212.2 212.2 22.4 1.58 213,379 10.6 10.6 1.27 1.40 13.48 N 02/27/98
LFBI 33.3 137.7 149.3 16.1 1.00 324,425 11.7 10.9 0.60 0.51 3.93 N 02/27/98
LFCO 6.2 191.2 191.2 25.6 - 409,357 13.4 13.4 2.60 3.77 32.59 N 02/27/98
LFED 32.8 231.3 231.3 38.5 2.59 291,408 16.6 16.6 0.66 1.21 7.36 N 02/27/98
LISB 33.6 259.5 261.9 23.8 1.00 6,072,524 9.2 9.1 1.79 0.71 7.82 N 02/27/98
LOGN 16.4 123.9 123.9 23.8 2.46 86,115 19.2 19.2 0.99 1.53 7.81 N 02/27/98
LONF 18.6 145.4 145.4 20.0 1.61 37,916 13.8 13.8 0.80 1.00 5.21 N 02/27/98
LSBI 17.8 136.9 136.9 12.5 1.42 206,584 8.6 8.6 1.59 0.72 8.16 N 02/27/98
LSBX 9.4 192.4 192.4 20.1 - 359,855 10.5 10.5 1.80 2.29 25.38 N 02/27/98
LVSB 29.4 194.7 230.2 20.8 0.48 517,974 10.7 9.2 0.88 0.89 8.44 N 02/27/98
LXMO 23.6 111.6 111.6 29.7 1.82 58,783 26.6 26.6 0.70 1.23 4.21 N 02/27/98
MAFB 15.9 212.3 240.9 16.2 0.75 3,457,664 7.6 6.8 2.35 1.13 14.48 N 02/27/98
MARN 17.8 120.6 123.3 25.1 3.26 191,854 20.8 20.4 1.52 1.58 7.09 N 02/27/98
MASB 19.3 169.9 172.4 19.1 2.03 925,403 11.2 11.1 2.56 1.03 9.73 N 02/27/98
MBB 31.1 155.7 292.1 12.8 1.72 773,991 9.8 6.2 1.12 0.54 6.17 N 02/27/98
MBLF 20.8 126.0 126.0 16.0 1.42 223,558 12.7 12.7 1.35 0.82 6.41 N 02/27/98
MBSP 28.3 109.3 109.3 43.8 2.35 36,103 40.1 40.1 0.60 1.51 3.62 N 02/27/98
MCBN 20.8 173.6 173.6 14.5 1.36 62,632 8.3 8.3 1.84 0.71 8.34 N 02/27/98
MDBK 19.1 196.3 208.6 17.6 1.82 1,135,572 8.9 8.5 2.30 1.01 11.38 N 02/27/98
MECH 10.8 159.2 159.2 15.8 - 892,371 9.9 9.9 2.46 1.57 15.80 N 02/27/98
METF 21.8 323.3 351.7 12.8 - 924,985 4.0 3.7 0.77 0.65 16.43 N 02/27/98
MFBC 22.9 131.0 131.0 16.6 1.26 264,097 12.7 12.7 1.18 0.82 5.99 N 02/27/98
MFFC 28.4 130.0 130.0 16.5 3.78 218,826 11.8 11.8 0.56 0.62 4.67 N 02/27/98
MFLR 19.1 187.8 190.7 18.3 2.98 131,908 9.8 9.6 1.41 1.00 10.40 N 02/27/98
MIFC 15.8 170.4 170.6 16.0 0.63 135,345 9.4 9.4 0.80 1.10 11.83 N 02/27/98
MIVI 19.6 109.1 109.1 19.8 1.74 68,619 18.2 18.2 0.94 1.06 6.27 N 02/27/98
MSBF 20.5 163.4 163.4 27.5 1.74 77,444 16.9 16.9 0.84 1.40 8.16 N 02/27/98
MWBI 16.8 162.5 162.5 11.8 1.41 147,724 7.2 7.2 1.01 0.77 11.14 N 02/27/98
MWBX 14.9 249.4 249.4 18.3 1.52 608,941 7.4 7.4 0.53 1.32 17.83 N 02/27/98
NASB 15.2 239.0 246.1 20.3 1.50 734,091 8.5 8.3 4.39 1.36 17.29 N 02/27/98
NBN 28.7 189.9 215.0 13.2 1.17 265,442 7.7 7.0 0.63 0.61 7.89 N 02/27/98
NEIB 18.4 143.5 143.5 20.6 1.53 190,319 14.4 14.4 1.21 1.20 7.78 N 02/27/98
NHTB 25.3 164.0 191.0 12.8 3.04 319,338 7.8 6.8 0.78 0.59 7.89 N 02/27/98
NMSB 20.3 156.6 156.6 14.6 2.39 355,526 9.3 9.3 0.66 0.87 8.55 N 02/27/98
NSLB 27.2 104.6 105.4 20.7 2.88 59,817 19.8 19.7 0.64 0.74 3.63 N 02/27/98
NWEQ 17.1 150.1 150.1 18.7 2.70 99,558 11.6 11.6 1.30 1.02 8.78 N 02/27/98
OCFC 21.5 127.6 127.6 19.4 2.27 1,489,220 15.2 15.2 1.64 1.00 5.71 N 02/27/98
OFCP 23.2 205.3 252.4 17.7 1.36 885,817 8.6 7.1 1.27 0.83 9.47 N 02/27/98
OHSL 23.6 170.1 170.1 19.1 2.40 238,905 10.9 10.9 1.56 0.84 7.55 N 02/27/98
</TABLE>
Source: SNL & F&C calculations 9
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
- ------------------
<TABLE>
<CAPTION>
Tangible
Price/ Current Current Current Total Equity/ Equity/ Core Core Core
LTM Price/ Price/ T Price/ Dividend Assets Assets T Assets EPS ROAA ROAE Merger Current
Core EPS Book V Book V Assets Yield ($000) (%) (%) ($) (%) (%) Target? Pricing
Ticker (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM LTM (Y/N) Date
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PBCI 16.1 156.7 157.7 20.2 4.19 376,714 12.9 12.8 1.66 1.31 9.87 N 02/27/98
PBKB 32.0 244.3 254.0 9.7 2.15 762,910 4.0 3.8 0.70 0.40 7.94 N 02/27/98
PCBC 20.6 120.8 120.8 23.3 1.68 85,030 19.2 19.2 1.16 1.08 5.72 N 02/27/98
PDB 19.0 138.7 138.7 22.5 3.77 130,167 16.2 16.2 0.56 1.22 7.26 N 02/27/98
PEEK 25.4 114.3 114.3 28.9 2.12 184,215 25.2 25.2 0.67 1.09 4.23 N 02/27/98
PERM 24.6 142.7 144.4 14.8 1.49 419,819 10.0 9.9 1.20 0.61 6.49 N 02/27/98
PFDC 17.8 167.9 167.9 25.6 1.98 294,291 15.3 15.3 1.25 1.49 9.78 N 02/27/98
PFED 28.9 113.3 113.3 24.7 - 176,957 21.8 21.8 0.65 0.85 3.75 N 02/27/98
PFFB 25.2 129.6 130.9 12.6 - 2,765,855 9.7 9.6 0.77 0.52 5.02 N 02/27/98
PFFC 33.7 150.3 150.3 28.4 3.03 82,464 18.9 18.9 0.49 0.78 3.22 N 02/27/98
PFNC 24.5 273.1 325.1 13.9 0.71 493,406 5.1 4.3 0.69 0.70 13.37 N 02/27/98
PFSB 16.6 161.7 188.7 12.2 0.75 1,475,509 7.0 6.0 1.12 0.81 10.98 N 02/27/98
PFSL 31.1 291.5 291.5 18.5 2.04 389,405 6.4 6.4 1.42 0.62 9.72 N 02/27/98
PHBK 18.3 271.8 361.8 19.0 1.89 6,795,337 7.0 5.4 2.54 1.25 16.13 N 02/27/98
PHFC 17.9 141.8 143.5 11.7 1.35 299,669 8.2 8.1 0.99 0.71 6.51 N 02/27/98
PRBC 21.3 112.0 112.0 12.2 1.05 143,263 10.9 10.9 0.90 0.57 5.03 N 02/27/98
PTRS 16.5 169.5 169.5 14.9 1.05 122,716 8.8 8.8 1.15 0.96 10.72 N 02/27/98
PULS 14.8 183.4 183.4 15.0 3.05 539,322 8.2 8.2 1.77 1.08 13.56 N 02/27/98
PVFC 13.3 212.0 212.0 15.4 - 396,214 7.3 7.3 1.73 1.29 18.16 N 02/27/98
PVSA 15.7 201.1 202.2 15.9 1.64 1,019,143 7.9 7.9 2.02 1.07 14.71 N 02/27/98
PWBC 18.4 147.6 166.0 12.4 1.88 822,350 8.4 7.5 1.04 0.66 8.61 N 02/27/98
PWBK 25.6 131.3 131.3 25.7 1.64 47,211 18.0 18.0 0.86 0.98 5.28 N 02/27/98
QCBC 16.1 127.2 127.2 11.0 - 852,154 8.6 8.6 1.24 0.70 8.08 N 02/27/98
QCFB 13.4 140.4 140.4 24.7 - 152,668 17.6 17.6 2.04 1.62 9.27 N 02/27/98
QCSB 28.2 299.8 299.8 39.0 2.01 1,541,049 11.2 11.2 1.41 1.55 11.55 N 02/27/98
RARB 17.4 203.7 206.6 15.4 2.26 408,308 7.6 7.5 1.52 1.01 12.93 N 02/27/98
RELY 19.1 178.2 261.6 15.3 1.80 2,243,100 8.6 6.0 1.86 0.85 10.31 N 02/27/98
ROSE 18.8 226.8 226.8 15.1 2.06 3,843,056 6.3 6.3 1.75 0.87 14.16 N 02/27/98
SCBS 20.7 145.2 145.2 28.9 1.67 70,893 19.9 19.9 0.87 1.20 5.66 N 02/27/98
SCCB 30.7 134.5 134.5 27.8 2.98 45,092 20.7 20.7 0.70 1.00 3.95 N 02/27/98
SFED 23.9 121.3 121.3 14.9 1.49 174,428 12.3 12.3 0.90 0.61 4.87 N 02/27/98
SFFC 19.8 141.9 141.9 25.1 1.40 88,608 17.7 17.7 0.72 1.27 7.21 N 02/27/98
SFIN 17.9 158.7 158.9 14.9 1.93 703,112 9.4 9.4 1.27 0.81 8.46 N 02/27/98
SFSL 20.6 262.5 266.7 24.6 1.46 677,876 9.4 9.2 1.07 1.37 14.78 N 02/27/98
SISB 17.9 207.1 207.1 15.1 1.70 1,733,618 7.2 7.2 2.10 0.87 12.13 N 02/27/98
SKAN 17.6 155.5 159.8 10.7 1.46 256,101 6.9 6.7 1.09 0.66 9.47 N 02/27/98
SMBC 24.2 136.0 136.0 22.0 2.25 163,297 16.2 16.2 0.92 0.90 5.61 N 02/27/98
SOBI 31.1 115.5 115.5 17.9 1.56 87,553 14.4 14.4 0.66 0.61 3.95 N 02/27/98
SOPN 18.9 127.6 127.6 29.1 3.73 300,816 22.8 22.8 1.25 1.75 7.43 N 02/27/98
SPBC 18.8 216.9 217.4 19.9 1.51 4,557,336 9.2 9.2 1.41 1.09 12.25 N 02/27/98
SSB 15.6 131.0 131.0 31.5 1.98 61,473 24.1 24.1 0.65 1.65 5.17 N 02/27/98
SSFC 28.3 165.6 165.6 26.6 3.08 228,491 14.9 14.9 0.46 0.83 3.32 N 02/27/98
SSM 23.0 125.2 125.2 37.0 2.20 104,773 29.6 29.6 0.89 1.56 4.57 N 02/27/98
STFR 19.4 175.9 197.3 14.3 1.29 1,597,648 8.3 7.4 2.24 0.75 9.18 N 02/27/98
STSA 21.2 177.5 192.1 9.7 - 1,876,250 5.5 5.1 1.14 0.51 9.51 N 02/27/98
SVRN 21.3 254.6 306.6 12.6 0.41 14,336,283 5.4 4.7 0.91 0.69 12.55 N 02/27/98
SZB 26.5 135.7 135.7 13.1 2.70 165,388 9.7 9.7 0.84 0.67 5.08 N 02/27/98
THR 23.3 147.6 148.1 19.9 1.87 97,487 13.5 13.4 1.01 0.84 6.12 N 02/27/98
THRD 24.5 149.8 179.4 13.9 1.85 597,047 8.4 7.1 1.06 0.66 6.28 N 02/27/98
TPNZ 26.8 128.8 128.8 21.9 1.49 126,470 17.0 17.0 0.70 0.80 4.65 N 02/27/98
TRIC 18.2 118.2 118.2 18.2 2.86 89,999 15.4 15.4 0.77 1.05 6.89 N 02/27/98
TSH 18.4 131.3 131.3 17.8 2.37 408,591 13.5 13.5 1.15 0.94 6.97 N 02/27/98
TWIN 24.2 133.4 133.4 17.3 2.76 106,932 12.9 12.9 0.60 0.72 5.59 N 02/27/98
UBMT 22.1 133.4 133.4 32.0 3.70 103,082 24.0 24.0 1.22 1.40 6.04 N 02/27/98
VABF 29.5 206.9 206.9 14.8 1.33 605,486 7.2 7.2 0.61 0.49 7.24 N 02/27/98
WAMU 21.3 322.7 346.5 17.8 1.73 97,068,825 5.5 5.1 3.15 0.87 15.29 N 02/27/98
WBST 18.2 229.6 263.2 12.5 1.25 7,019,621 5.4 4.8 3.53 0.77 14.06 N 02/27/98
WCBI 17.8 147.1 147.1 22.6 2.35 315,944 15.4 15.4 1.63 1.41 9.14 N 02/27/98
WCFB 31.5 194.9 194.9 45.6 3.90 94,482 23.4 23.4 0.65 1.42 6.09 N 02/27/98
WEFC 16.7 124.8 124.8 18.4 2.54 201,436 14.7 14.7 1.13 1.06 7.48 N 02/27/98
WEHO 28.4 139.2 139.2 31.2 2.44 134,259 22.5 22.5 0.52 1.04 3.51 N 02/27/98
WFI 18.7 221.0 225.1 16.3 1.86 329,897 7.4 7.3 1.44 0.91 12.63 N 02/27/98
WFSL 13.7 196.1 212.7 25.3 3.16 5,713,308 12.9 12.0 2.02 1.87 15.35 N 02/27/98
WHGB 33.0 129.0 129.0 25.4 1.73 101,331 19.7 19.7 0.56 0.77 3.66 N 02/27/98
WOFC 33.4 114.3 122.5 15.9 3.74 397,425 13.9 13.1 0.80 0.43 3.16 N 02/27/98
</TABLE>
Source: SNL & F&C calculations 10
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
- ------------------
<TABLE>
<CAPTION>
Tangible
Price/ Current Current Current Total Equity/ Equity/ Core Core Core
LTM Price/ Price/ T Price/ Dividend Assets Assets T Assets EPS ROAA ROAE Merger Current
Core EPS Book V Book V Assets Yield ($000) (%) (%) ($) (%) (%) Target? Pricing
Ticker (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM LTM (Y/N) Date
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WRNB 15.8 218.6 218.6 23.6 2.26 370,993 10.8 10.8 1.46 1.61 15.53 N 02/27/98
WSB 29.2 170.6 170.6 14.5 1.14 264,904 8.5 8.5 0.30 0.52 6.25 N 02/27/98
WSFS 16.3 298.1 299.9 17.1 - 1,515,217 5.7 5.7 1.27 1.10 20.00 N 02/27/98
WSTR 20.0 134.7 165.7 14.0 1.85 1,035,096 10.4 8.6 1.30 0.76 6.94 N 02/27/98
WVFC 17.9 214.1 214.1 22.8 3.16 292,022 10.7 10.7 2.12 1.31 11.03 N 02/27/98
WYNE 22.7 148.6 148.6 18.5 0.82 267,285 12.4 12.4 1.08 0.86 6.01 N 02/27/98
YFCB 17.5 125.7 125.7 17.0 1.50 331,802 13.5 13.5 1.07 1.04 7.00 N 02/27/98
YFED 25.0 215.4 215.4 19.1 2.04 1,182,276 8.9 8.9 1.02 0.80 9.36 N 02/27/98
Maximum 34.2 348.3 400.5 45.6 4.92 97,068,825 40.1 40.1 6.04 3.97 44.97
Minimum 3.4 86.3 86.3 5.4 - 36,103 3.6 3.1 0.29 0.31 2.75
Average 21.3 173.6 181.7 19.1 1.68 1,765,084 11.9 11.7 1.31 0.99 9.37
Median 20.6 159.7 165.7 17.8 1.63 357,691 10.1 9.9 1.12 0.94 8.28
</TABLE>
Source: SNL & F&C calculations 11
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
- ------------------
NPAs/ Price/ Core Core Core
Assets Core EPS ROAA ROAE
(%) EPS ($) (%) (%)
Ticker MRQ (x) MRQ MRQ MRQ
AABC 1.58 2.6 1.05 4.90 60.86
ABBK 0.17 22.8 0.23 0.71 10.20
ABCL 0.27 22.2 0.31 0.79 8.16
ABCW 0.97 20.7 0.52 1.03 15.64
AFED 0.30 20.4 0.24 0.78 6.19
AHM 1.73 17.9 0.87 0.83 16.27
ALBC 0.12 22.4 0.12 0.53 6.17
ALBK 0.70 11.1 1.10 1.55 17.41
AMFC NA 26.8 0.16 0.57 3.95
ANA 0.50 20.5 0.27 0.96 5.57
ANDB 0.62 15.8 0.63 1.03 12.95
ANE 1.56 38.2 0.13 0.37 5.12
ASBI 0.49 18.3 0.28 0.92 8.34
ASBP NA 21.5 0.16 0.89 5.73
ASFC 0.52 20.5 0.68 0.75 8.66
BANC 1.07 33.8 0.10 0.44 7.34
BDJI 0.03 20.0 0.26 0.75 7.17
BFD 0.18 21.3 0.26 0.61 7.06
BFSB - 21.6 0.33 1.10 7.72
BKC 2.11 18.2 0.69 1.05 12.47
BKCT 0.91 19.3 0.24 1.20 11.38
BKUNA 0.37 52.5 0.07 0.21 3.72
BNKU 0.68 19.0 0.62 0.66 13.15
BPLS 1.66 14.8 0.25 0.46 10.94
BVCC 0.51 24.8 0.35 0.58 10.33
BYFC 1.62 159.4 0.02 0.09 0.88
CAFI 0.29 24.4 0.26 0.66 6.90
CASB 0.35 20.4 0.19 0.65 9.49
CASH 0.74 17.3 0.33 0.90 8.36
CATB 0.35 20.9 0.22 1.31 5.30
CBCI 1.64 12.3 0.76 2.16 13.24
CBES 0.54 39.8 0.16 0.56 3.42
CBSA 0.71 14.5 0.54 0.38 10.86
CEBK 0.42 23.5 0.34 0.73 7.40
CENB 0.58 25.2 0.93 1.38 4.56
CFB 0.84 17.0 0.52 0.94 15.15
CFCP 0.59 21.8 0.25 0.94 15.05
CFFC 0.56 29.6 0.26 0.74 5.47
CFNC 0.10 24.7 0.18 1.11 4.88
CFSB 0.10 23.1 0.32 1.18 15.09
CFTP 0.49 31.2 0.15 1.19 4.43
CIBI 0.65 17.3 0.25 0.89 7.64
CKFB 0.10 18.8 0.26 1.39 6.13
CLAS 0.34 20.5 0.23 0.83 5.55
CMRN 0.38 22.7 0.22 0.99 4.64
CMSB 0.42 30.0 0.17 0.45 4.88
CNIT 0.45 18.8 0.95 0.91 12.75
COFI 0.30 19.9 0.76 0.96 13.56
COOP 0.07 29.8 0.17 0.61 7.90
CRZY 0.18 19.6 0.21 1.27 5.36
CVAL 0.55 22.1 0.36 0.96 11.03
DCBI 0.35 27.6 0.22 1.48 5.56
DIBK 0.29 9.4 0.83 1.88 23.11
DIME 0.53 27.3 0.23 0.78 6.08
DME 1.06 34.7 0.22 0.49 8.31
DNFC 0.29 19.3 0.34 0.70 13.21
DSL 0.89 14.1 0.52 0.94 12.99
EBSI 1.18 17.1 0.30 0.81 9.69
EFBI - 34.8 0.24 0.70 6.28
EMLD NA 20.5 0.27 0.97 12.19
EQSB 0.38 17.7 0.43 0.70 13.55
ESBK 0.63 30.1 0.24 0.30 4.80
ETFS 0.33 38.8 0.14 0.44 2.48
FBBC 0.09 15.1 0.31 1.08 10.01
FBCI NA 18.0 0.34 0.78 7.54
Source: SNL & F&C calculations 12
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
- ------------------
NPAs/ Price/ Core Core Core
Assets Core EPS ROAA ROAE
(%) EPS ($) (%) (%)
Ticker MRQ (x) MRQ MRQ MRQ
FBCV 1.23 19.0 0.33 0.55 6.29
FBER 0.84 27.4 0.18 0.69 4.94
FBHC 0.47 37.3 0.14 0.37 5.83
FBSI 0.04 18.5 0.23 1.23 8.80
FCBF 0.26 18.6 0.42 1.22 8.75
FCME 1.59 19.2 0.19 0.70 7.36
FDEF 0.33 34.7 0.11 0.64 3.37
FED 0.96 17.4 0.58 0.60 11.48
FESX 0.54 19.7 0.30 0.79 10.45
FFBA 0.15 20.4 0.31 1.30 9.77
FFBH 0.96 22.4 0.29 0.97 6.49
FFBI 0.32 26.4 0.22 0.43 4.89
FFBZ 0.57 28.8 0.20 0.69 9.02
FFCH 1.35 23.9 0.55 0.87 13.66
FFDB NA 17.7 0.34 0.93 9.63
FFDF 0.05 39.1 0.12 0.73 3.00
FFED 0.30 24.4 0.10 0.58 8.19
FFES 0.25 16.6 0.58 0.65 9.77
FFFD NA 18.1 0.29 1.71 7.49
FFHH 0.22 19.4 0.26 0.74 6.74
FFHS 0.33 22.5 0.30 0.64 7.21
FFIC 0.27 21.3 0.30 0.85 6.37
FFKY 0.07 15.7 0.35 1.51 11.01
FFLC 0.19 19.4 0.25 0.97 7.40
FFOH 0.18 21.4 0.21 0.86 6.84
FFPB 0.52 36.4 0.26 0.30 4.74
FFSL 0.89 20.5 0.18 0.64 6.25
FFSX 0.14 28.8 0.27 0.70 7.82
FFWC 0.31 14.0 0.33 0.99 10.25
FFWD 0.02 30.6 0.18 1.21 9.56
FFYF 0.62 17.5 0.49 1.25 9.14
FGHC 1.64 16.7 0.15 1.12 13.49
FIBC 1.89 15.5 0.42 0.94 10.31
FISB 1.38 26.1 0.28 0.94 9.72
FKFS 1.15 17.5 0.25 0.64 9.65
FKKY - 16.9 0.24 1.14 6.25
FLAG 3.92 25.8 0.20 0.69 7.75
FLFC 1.00 21.5 0.35 0.87 11.61
FLGS 3.04 12.6 0.45 1.41 21.01
FLKY 2.28 31.5 0.12 0.99 3.17
FMCO 1.15 15.4 0.57 0.99 15.00
FMSB - 16.4 0.28 1.06 15.58
FNGB 0.09 19.1 0.17 0.91 8.19
FSBI 0.15 17.6 0.41 0.68 10.02
FSTC 1.12 19.5 0.41 1.41 14.00
FTF 0.07 17.2 0.41 1.58 10.33
FTFC 0.32 23.4 0.34 0.86 12.50
FTSB 2.04 18.5 0.21 1.24 7.75
FWWB 0.19 20.6 0.31 1.06 7.79
GAF 0.22 17.5 0.28 1.01 6.92
GDW 1.07 14.0 1.60 0.94 13.98
GFCO 0.06 19.0 0.27 0.87 9.29
GPT 2.90 19.1 0.97 1.11 11.68
GSBC 1.84 16.4 0.39 1.72 20.10
GSFC 0.07 27.0 0.17 1.54 4.37
GUPB 0.24 17.0 0.30 0.82 6.50
HALL 0.09 16.7 0.24 0.68 9.10
HARB 0.51 24.5 0.72 1.28 14.72
HARL - 15.6 0.48 0.95 14.11
HAVN 0.66 18.0 0.34 0.63 10.79
HBBI 0.67 25.7 0.22 0.61 4.32
HBFW - 30.3 0.27 0.73 5.92
HBNK 1.94 13.0 0.69 1.26 16.43
HBS 0.67 8.3 0.66 2.18 15.52
HFFB - 20.9 0.20 1.32 4.89
Source: SNL & F&C calculations 13
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
- ------------------
NPAs/ Price/ Core Core Core
Assets Core EPS ROAA ROAE
(%) EPS ($) (%) (%)
Ticker MRQ (x) MRQ MRQ MRQ
HFFC 0.33 13.7 0.53 1.09 11.42
HFNC 0.79 31.0 0.11 0.82 4.43
HFSA 0.19 18.8 0.25 0.67 5.91
HHFC 0.03 26.8 0.14 0.51 4.64
HIFS 0.77 16.2 0.51 1.25 12.77
HMNF NA 31.5 0.23 0.60 4.36
HOMF 0.55 20.2 0.39 1.23 14.16
HPBC - 14.7 0.45 1.62 15.37
HRBF 0.53 28.6 0.21 0.64 4.92
HRZB NA 15.4 0.29 1.66 10.24
HTHR 8.06 10.5 0.47 1.46 24.29
HWEN 1.63 37.5 0.06 0.43 2.51
HZFS 0.96 20.1 0.18 0.72 7.12
IBSF 0.11 31.7 0.14 0.84 4.78
INBI 0.23 16.5 0.28 1.53 9.11
IPSW 0.95 18.8 0.19 0.92 17.15
ITLA NA 12.0 0.42 1.41 13.75
IWBK 0.69 21.2 0.49 0.80 12.33
JSB 1.02 21.0 0.64 1.74 7.59
JSBA 0.67 29.4 0.23 0.70 7.92
JXVL 0.70 16.0 0.32 1.33 9.18
KFBI 0.02 25.6 0.22 0.88 5.84
KNK 0.89 17.6 0.48 0.83 7.51
KSBK NA 14.2 0.34 1.07 14.32
KYF 0.04 21.7 0.16 0.94 5.55
LARK 0.15 16.7 0.33 0.97 6.87
LARL 0.42 17.7 0.31 1.37 12.98
LFBI 0.90 27.8 0.18 0.57 4.75
LFCO NA 4.9 0.81 6.33 42.71
LFED 0.03 33.8 0.16 1.14 6.83
LISB 0.89 33.4 0.45 0.69 7.61
LOGN 0.62 13.5 0.30 1.71 8.96
LONF 0.20 15.5 0.24 1.23 7.30
LSBI NA 16.4 0.43 0.76 8.79
LSBX 0.52 5.1 0.83 4.28 44.00
LVSB 1.14 24.9 0.26 1.00 8.70
LXMO 0.67 24.3 0.17 1.09 3.97
MAFB 0.26 16.3 0.57 1.05 13.71
MARN 1.43 24.1 0.28 1.08 5.07
MASB 0.19 19.3 0.64 1.02 9.29
MBB NA 28.1 0.31 0.60 6.81
MBLF 0.48 20.1 0.35 0.83 6.54
MBSP 1.77 32.7 0.13 1.20 3.02
MCBN 0.85 19.5 0.49 0.75 8.84
MDBK 0.16 17.1 0.64 1.08 12.07
MECH 0.58 19.0 0.35 0.86 8.47
METF 0.52 16.8 0.25 0.75 19.14
MFBC - 23.3 0.29 0.76 5.82
MFFC 0.09 30.5 0.13 0.54 4.49
MFLR 0.65 18.2 0.37 1.02 10.56
MIFC 0.21 15.8 0.20 1.07 11.37
MIVI 0.43 19.1 0.24 1.06 6.30
MSBF 0.02 20.5 0.21 1.36 8.16
MWBI 0.73 16.4 0.26 0.76 10.83
MWBX 0.58 15.2 0.13 1.26 17.10
NASB 3.07 13.4 1.24 1.51 18.27
NBN 1.03 22.6 0.20 0.73 9.55
NEIB 0.17 16.9 0.33 1.28 8.66
NHTB 0.87 27.4 0.18 0.52 6.91
NMSB 0.78 16.7 0.20 1.01 9.94
NSLB 0.03 31.0 0.14 0.46 2.31
NWEQ 1.33 15.9 0.35 1.10 9.45
OCFC 0.52 19.6 0.45 0.97 6.37
OFCP 0.27 22.4 0.33 0.86 10.02
OHSL 0.03 27.0 0.34 0.70 6.43
Source: SNL & F&C calculations 14
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
- ------------------
NPAs/ Price/ Core Core Core
Assets Core EPS ROAA ROAE
(%) EPS ($) (%) (%)
Ticker MRQ (x) MRQ MRQ MRQ
PBCI 1.70 17.6 0.38 1.15 8.88
PBKB 0.57 35.0 0.16 0.28 6.89
PCBC 0.01 23.0 0.26 0.95 4.94
PDB 1.13 20.4 0.13 1.13 6.88
PEEK 0.77 26.6 0.16 1.01 3.92
PERM 0.70 23.8 0.31 0.63 6.47
PFDC 0.25 18.5 0.30 1.40 9.21
PFED 0.23 58.6 0.08 0.41 1.84
PFFB 1.38 20.2 0.24 0.61 6.14
PFFC 0.04 45.8 0.09 0.59 3.16
PFNC 0.50 26.4 0.16 0.64 12.09
PFSB 0.55 16.6 0.28 0.76 10.60
PFSL 0.13 33.5 0.33 0.58 9.16
PHBK 0.75 16.4 0.71 1.24 17.38
PHFC 1.68 17.1 0.26 0.67 6.86
PRBC 0.43 29.9 0.16 0.39 3.35
PTRS 0.44 19.0 0.25 0.80 8.90
PULS 0.85 15.6 0.42 1.02 12.69
PVFC 0.96 12.8 0.45 1.26 17.48
PVSA 0.36 15.3 0.52 1.08 14.56
PWBC 0.68 18.4 0.26 0.69 8.33
PWBK 0.74 34.4 0.16 0.70 3.85
QCBC 1.33 15.2 0.33 0.72 8.44
QCFB 0.39 12.0 0.57 1.68 9.90
QCSB 0.53 26.2 0.38 1.46 12.78
RARB 0.23 17.0 0.39 0.97 12.93
RELY 0.54 18.1 0.49 0.87 10.30
ROSE 0.48 17.5 0.47 0.89 14.35
SCBS 2.17 20.5 0.22 1.22 6.05
SCCB 1.53 44.8 0.12 0.62 2.61
SFED 0.82 23.4 0.23 0.56 4.63
SFFC 1.74 19.8 0.18 1.24 7.05
SFIN 0.33 17.2 0.33 0.81 8.62
SFSL 0.43 19.6 0.28 1.36 14.68
SISB 0.44 15.4 0.61 0.93 13.02
SKAN 1.89 18.4 0.26 0.61 8.63
SMBC 0.88 26.5 0.21 0.83 5.09
SOBI 0.26 30.2 0.17 0.59 4.06
SOPN 0.20 18.5 0.32 1.74 7.61
SPBC 0.17 18.4 0.36 1.07 11.87
SSB - 28.1 0.09 1.00 4.31
SSFC 0.16 NM (0.06) (0.40) (1.71)
SSM - 25.6 0.20 1.49 4.98
STFR 0.21 20.9 0.52 0.66 8.30
STSA 0.73 18.3 0.33 0.54 10.11
SVRN 0.63 17.3 0.28 0.80 15.13
SZB NA 23.2 0.24 0.67 5.94
THR 0.95 24.5 0.24 0.78 5.70
THRD 0.29 24.1 0.27 0.61 7.45
TPNZ 1.19 27.6 0.17 0.74 4.35
TRIC - 19.4 0.18 0.98 6.46
TSH 0.38 18.9 0.28 0.90 6.66
TWIN 0.08 19.1 0.19 0.90 6.97
UBMT 0.35 20.5 0.33 1.53 6.52
VABF 0.50 26.5 0.17 0.55 7.90
WAMU NA 18.7 0.90 0.95 17.13
WBST 0.65 16.2 0.99 0.81 14.99
WCBI 0.19 17.7 0.41 1.38 8.94
WCFB 0.07 32.0 0.16 1.38 5.94
WEFC NA 16.9 0.28 1.04 7.22
WEHO - NA NA 0.97 3.60
WFI 0.22 16.8 0.40 0.98 13.41
WFSL 0.60 13.8 0.50 1.88 14.64
WHGB 0.95 38.5 0.12 0.61 3.08
WOFC 0.44 33.4 0.20 0.40 2.89
Source: SNL & F&C calculations 15
<PAGE>
FERGUSON & COMPANY Exhibit V-Selected Publicly Held Thrifts
- ------------------
<TABLE>
<CAPTION>
NPAs/ Price/ Core Core Core
Assets Core EPS ROAA ROAE
(%) EPS ($) (%) (%)
Ticker MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C>
WRNB 0.83 16.4 0.35 1.53 14.19
WSB NA 36.5 0.06 0.39 4.59
WSFS 1.23 17.3 0.30 1.00 17.34
WSTR 0.29 18.1 0.36 0.80 7.53
WVFC 0.20 16.4 0.58 1.44 11.95
WYNE 0.89 24.5 0.25 0.76 5.57
YFCB 0.49 18.0 0.26 0.92 6.63
YFED 1.01 27.7 0.23 0.74 8.44
Maximum 8.06 159.4 1.60 6.330 60.860
Minimum - 2.6 (0.06) (0.400) (1.710)
Average 0.67 22.3 0.33 0.975 9.339
Median 0.50 19.7 0.28 0.900 8.245
</TABLE>
16
<PAGE>
EXHIBIT VI
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit VI - Comparative Group Selections
To search for a comparative group for Anson, we selected all thrifts from the
entire U.S. with assets under $100 million that have sufficient trading volume
to produce meaningful market information.
All of these thrifts are listed on either AMEX, NYSE, or Nasdaq.
We found 49 thrifts in the asset size described above. We eliminated 38 and
retained a group of 11. Normally, we consider 10 to 12 to be the desired sample
size.
We eliminated thrifts for the following reasons: 1) Mutual holding company; 2)
No PE for the last quarter or PE ratio for the last quarter greater than 35; 3)
Tangible equity less than 20% of assets; 4) Merger agreement has been executed;
5) Loans over 90% of assets; and 6) Loans serviced greater than 40% of assets.
The group of 49 from which the comparative group was selected is listed on
Exhibit VI.1 and the selected comparative group is listed on Exhibit VI.2. On
Exhibit VI.1, we have blocked the cells that indicate which ones were not
selected and why. Set forth below is a legend for the column summarizing reasons
individual thrifts were not selected.
A Mutual holding company.
B No core EPS for most recent quarter or PR ratio over 35.
C Tangible equity less than 20% of assets.
D Merger agreement has been executed.
E Loans greater than 90% of assets.
F Loans serviced exceeds 40% of assets.
2
<PAGE>
FURGUSON & COMPANY Exhibit VI.1 - Comparative Group Selection
- ------------------
<TABLE>
<CAPTION>
Deposit Current Current Price/
Insurance Stock Market LTM
Agency Price Value Core EPS
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($) ($M) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC Albion Banc Corp. Albion NY MA SAIF NASDAQ 07/26/93 28.00 7.00 21.4
ATSB AmTrust Capital Corp. Peru IN MW SAIF NASDAQ 03/28/95 13.75 7.24 40.4
CIBI Community Investors Bancorp Bucyrus OH MW SAIF NASDAQ 02/07/95 16.38 14.78 15.6
CKFB CKF Bancorp Inc. Danville KY MW SAIF NASDAQ 01/04/95 18.50 16.71 19.7
CNSB CNS Bancorp Inc. Jefferson City MO MW SAIF NASDAQ 06/12/96 21.19 35.03 40.8
CRZY Crazy Woman Creek Bancorp Buffalo WY WE SAIF NASDAQ 03/29/96 15.44 14.74 20.9
CSBF CSB Financial Group Inc. Centralia IL MW SAIF NASDAQ 10/09/95 13.00 12.24 48.2
FCB Falmouth Bancorp Inc. Falmouth MA NE BIF AMSE 03/28/96 20.25 29.46 40.5
FFBI First Financial Bancorp Inc. Belvidere IL MW SAIF NASDAQ 10/04/93 20.25 8.41 22.3
FFDF FFD Financial Corp. Dover OH MW SAIF NASDAQ 04/03/96 18.75 27.09 30.2
FLKY First Lancaster Bancshares Lancaster KY MW SAIF NASDAQ 07/01/96 15.75 14.98 28.6
FTSB Fort Thomas Financial Corp. Fort Thomas KY MW SAIF NASDAQ 06/28/95 15.00 22.43 19.0
GFSB GFS Bancorp Inc. Grinnell IA MW SAIF NASDAQ 01/06/94 16.88 16.68 15.1
GWBC Gateway Bancorp Inc. Catlettsburg KY MW SAIF NASDAQ 01/18/95 19.63 21.23 33.3
HBBI Home Building Bancorp Washington IN MW SAIF NASDAQ 02/08/95 21.25 6.62 18.8
HCFC Home City Financial Corp. Springfield OH MW SAIF NASDAQ 12/30/96 17.38 15.72 NA
HHFC Harvest Home Financial Corp. Cheviot OH MW SAIF NASDAQ 10/10/94 14.75 13.49 27.8
HWEN Home Financial Bancorp Spencer IN MW SAIF NASDAQ 07/02/96 16.44 7.64 25.3
HZFS Horizon Financial Svcs Corp. Oskaloosa IA MW SAIF NASDAQ 06/30/94 11.63 9.89 18.5
INCB Indiana Community Bank SB Lebanon IN MW SAIF NASDAQ 12/15/94 20.50 18.90 39.4
JOAC Joachim Bancorp Inc. De Soto MO MW SAIF NASDAQ 12/28/95 15.00 10.84 39.5
KYF Kentucky First Bancorp Inc. Cynthiana KY MW SAIF AMSE 08/29/95 14.38 18.65 18.2
LOGN Logansport Financial Corp. Logansport IN MW SAIF NASDAQ 06/14/95 15.25 19.22 16.2
LONF London Financial Corporation London OH MW SAIF NASDAQ 04/01/96 15.75 8.11 20.7
LXMO Lexington B&L Financial Corp. Lexington MO MW SAIF NASDAQ 06/06/96 17.13 19.50 22.5
MBSP Mitchell Bancorp Inc. Spruce Pine NC SE SAIF NASDAQ 07/12/96 17.88 16.64 28.8
MCBN Mid-Coast Bancorp Inc. Waldoboro ME NE SAIF NASDAQ 11/02/89 28.75 6.70 15.6
MIVI Mississippi View Holding Co. Little Falls MN MW SAIF NASDAQ 03/24/95 17.50 12.95 18.4
MRKF Market Financial Corp. Mount Healthy OH MW SAIF NASDAQ 03/27/97 15.75 21.04 NA
MSBF MSB Financial Inc. Marshall MI MW SAIF NASDAQ 02/06/95 19.25 23.75 22.4
NSLB NS&L Bancorp Inc. Neosho MO MW SAIF NASDAQ 06/08/95 18.75 13.27 31.3
NWEQ Northwest Equity Corp. Amery WI MW SAIF NASDAQ 10/11/94 19.00 15.94 15.8
OSFS Ohio State Financial Services Bridgeport OH MW SAIF NASDAQ 09/29/97 15.12 9.59 NA
PCBC Perry County Financial Corp. Perryville MO MW SAIF NASDAQ 02/13/95 23.25 19.25 17.2
PFFC Peoples Financial Corp. Massillon OH MW SAIF NASDAQ 09/13/96 14.50 21.25 NA
PSFI PS Financial Inc. Chicago IL MW SAIF NASDAQ 11/27/96 18.00 37.33 NA
PWBK Pennwood Bancorp Inc. Pittsburgh PA MA SAIF NASDAQ 07/15/96 19.06 10.86 20.5
RELI Reliance Bancshares Inc. Milwaukee WI MW SAIF NASDAQ 04/19/96 9.00 22.25 36.0
SCBS Southern Community Bancshares Cullman AL SE SAIF NASDAQ 12/23/96 18.00 20.47 NA
SCCB S. Carolina Community Bancshrs Winnsboro SC SE SAIF NASDAQ 07/07/94 23.00 16.07 29.5
SFFC StateFed Financial Corp. Des Moines IA MW SAIF NASDAQ 01/05/94 13.50 21.03 18.8
SHSB SHS Bancorp Inc. Pittsburgh PA MA SAIF NASDAQ 10/01/97 15.87 13.01 NA
SOBI Sobieski Bancorp Inc. South Bend IN MW SAIF NASDAQ 03/31/95 19.50 15.20 32.0
SSB Scotland Bancorp Inc. Laurinburg NC SE SAIF AMSE 04/01/96 10.25 19.61 13.9
SZB SouthFirst Bancshares Inc. Sylacauga AL SE SAIF AMSE 02/14/95 19.75 16.74 104.0
THR Three Rivers Financial Corp. Three Rivers MI MW SAIF AMSE 08/24/95 20.25 16.68 20.1
TRIC Tri-County Bancorp Inc. Torrington WY WE SAIF NASDAQ 09/30/93 27.50 16.05 17.9
USAB USABancshares, Inc. Philadelphia PA MA BIF NASDAQ NA 8.50 6.23 32.7
WCFB Webster City Federal SB (MHC) Webster City IA MW SAIF NASDAQ 08/15/94 21.25 44.63 32.7
Maximum 28.00 35.03 48.2
Minimum 11.63 6.62 15.1
Average 17.29 15.86 26.8
Median 16.44 14.98 22.4
</TABLE>
Source: SNL & F&C calculations
2
<PAGE>
FERGUSON & COMPANY Exhibit VI.1-Comparative Group Selection
- ------------------
<TABLE>
<CAPTION>
Tangible
Price/ Current Current Current Total Equity/ Equity/
Core Price/ Price/ T Price/ Dividend Assets Assets T Assets
EPS Book V Book V Assets Yield ($000) (%) (%)
Ticker (x) (%) (%) (%) (%) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC 18.9 115.5 115.5 9.9 1.14 70,810 8.6 8.6
ATSB 57.3 95.1 96.0 10.4 1.46 69,685 10.9 10.8
CIBI 14.6 135.4 135.4 15.9 1.95 94,328 11.8 11.8
CKFB 17.8 109.4 109.4 27.9 2.70 59,868 23.7 23.7
CNSB 40.8 147.8 147.8 36.0 1.13 97,411 24.3 24.3
CRZY 18.4 103.8 103.8 24.6 2.59 59,952 23.7 23.7
CSBF 54.2 100.1 106.0 25.1 - 48,844 25.0 24.0
FCB 46.0 131.5 131.5 31.4 0.99 93,915 23.9 23.9
FFBI 23.0 111.9 111.9 10.0 - 84,242 8.9 8.9
FFDF 27.6 126.2 126.2 30.7 1.60 88,220 24.3 24.3
FLKY 32.8 107.7 107.7 31.8 3.18 47,184 29.5 29.5
FTSB 16.3 142.1 142.1 22.9 1.67 97,843 16.1 16.1
GFSB 14.6 153.3 153.3 17.7 1.54 94,496 11.5 11.5
GWBC 61.3 121.5 121.5 33.7 2.04 62,609 27.7 27.7
HBBI 19.7 104.0 104.0 15.9 1.41 41,746 14.1 14.1
HCFC 15.0 114.3 114.3 22.4 2.07 70,110 19.6 19.6
HHFC 19.4 130.4 130.4 15.4 2.98 87,596 11.8 11.8
HWEN 29.4 105.3 105.3 18.5 1.22 41,309 17.6 17.6
HZFS 13.8 113.2 113.2 11.3 1.55 87,784 10.0 10.0
INCB 34.2 165.6 165.6 19.7 1.76 96,089 11.9 11.9
JOAC 41.7 109.8 109.8 30.9 3.33 35,073 28.1 28.1
KYF 17.1 127.3 127.3 21.3 3.48 88,089 16.7 16.7
LOGN 15.9 118.6 118.6 22.4 2.62 85,801 18.9 18.9
LONF 17.9 106.7 106.7 21.2 1.52 38,210 19.9 19.9
LXMO 19.5 116.3 116.3 32.9 1.75 59,236 28.3 28.3
MBSP 29.8 116.4 116.4 48.1 2.24 34,591 41.4 41.4
MCBN 14.4 126.9 126.9 10.9 1.81 61,473 8.6 8.6
MIVI 19.0 107.4 107.4 18.9 0.91 68,546 17.6 17.6
MRKF 26.3 105.8 105.8 37.5 1.78 56,121 35.5 35.5
MSBF 21.9 186.4 186.4 30.8 1.46 77,014 16.5 16.5
NSLB 24.7 113.6 113.6 22.2 2.67 59,711 19.6 19.6
NWEQ 14.8 130.8 130.8 16.4 2.95 96,954 11.7 11.7
OSFS NA 91.8 91.8 24.9 - 38,559 27.1 27.1
PCBC 19.4 123.6 123.6 23.7 1.72 81,105 19.2 19.2
PFFC 25.9 91.9 91.9 25.0 3.45 86,486 27.2 27.2
PSFI 23.7 122.0 122.0 45.5 2.67 85,698 37.3 37.3
PWBK 19.9 124.3 124.3 22.8 1.68 47,645 18.3 18.3
RELI 32.1 98.0 98.0 47.3 - 46,987 48.3 48.3
SCBS 21.4 136.5 136.5 29.1 1.67 70,370 21.3 21.3
SCCB 31.9 132.6 132.6 35.2 2.61 45,619 26.6 26.6
SFFC 22.5 136.9 136.9 24.0 1.48 87,542 17.5 17.5
SHSB NA NA NA NA - 88,460 13.3 13.3
SOBI 27.1 113.0 113.0 18.0 1.64 84,279 14.8 14.8
SSB 10.7 134.7 134.7 30.5 2.93 64,399 22.6 22.6
SZB 32.9 123.0 123.0 17.2 2.53 97,283 14.0 14.0
THR 18.8 128.6 129.1 17.7 1.98 94,216 13.8 13.7
TRIC 16.4 118.9 118.9 18.2 2.91 88,173 15.3 15.3
USAB 14.2 126.3 128.2 9.7 - 64,269 8.4 8.3
WCFB 33.2 202.0 202.0 47.2 3.77 94,481 23.4 23.4
Maximum 61.3 165.6 165.6 36.0 3.48 97,843 29.5 29.5
Minimum 13.8 95.1 96.0 9.9 - 35,073 8.6 8.6
Average 27.5 120.5 120.8 22.4 1.83 72,018 18.7 18.6
Median 19.5 115.5 115.5 22.4 1.67 70,810 18.9 18.9
<CAPTION>
ROAA ROAA ROAE ROAE
Core Core Before Before Before Before
EPS EPS Extra Extra Extra Extra
($) ($) (%) (%) (%) (%)
Ticker LTM MRQ LTM MRQ LTM MRQ
<S> <C> <C> <C> <C> <C> <C>
ALBC 1.31 0.37 0.50 0.53 5.54 6.17
ATSB 0.34 0.06 0.40 0.34 3.86 3.24
CIBI 1.05 0.28 0.97 1.01 8.37 8.53
CKFB 0.94 0.26 1.82 1.49 7.51 6.26
CNSB 0.52 0.13 0.79 0.78 3.20 3.19
CRZY 0.74 0.21 1.28 1.29 4.74 5.33
CSBF 0.27 0.06 0.31 0.43 1.21 1.71
FCB 0.50 0.11 0.83 0.75 3.41 3.09
FFBI 0.91 0.22 (0.04) 0.56 (0.54) 6.40
FFDF 0.62 0.17 1.93 1.02 7.83 4.17
FLKY 0.55 0.12 1.24 0.99 3.64 3.17
FTSB 0.79 0.23 1.22 1.33 7.18 8.25
GFSB 1.12 0.29 1.27 1.28 11.01 11.13
GWBC 0.59 0.08 0.94 0.53 3.60 1.94
HBBI 1.13 0.27 0.75 0.73 5.76 5.35
HCFC NA 0.29 1.23 1.39 6.40 6.94
HHFC 0.53 0.19 0.30 0.80 2.31 6.60
HWEN 0.65 0.14 0.85 0.76 4.60 4.43
HZFS 0.63 0.21 0.81 1.14 7.85 11.52
INCB 0.52 0.15 0.53 0.59 4.30 4.91
JOAC 0.38 0.09 0.79 0.75 2.72 2.68
KYF 0.79 0.21 1.15 1.21 6.64 7.26
LOGN 0.94 0.24 1.42 1.41 7.28 7.39
LONF 0.76 0.22 1.03 1.34 4.96 6.77
LXMO 0.76 0.22 1.02 1.52 3.45 5.43
MBSP 0.62 0.15 1.62 1.44 3.79 3.50
MCBN 1.84 0.50 0.76 0.82 8.73 9.90
MIVI 0.95 0.23 1.07 1.07 6.04 5.86
MRKF NA 0.15 0.99 1.27 3.66 3.61
MSBF 0.86 0.22 1.50 1.54 8.42 9.16
NSLB 0.60 0.19 0.49 0.94 2.39 4.78
NWEQ 1.20 0.32 1.03 1.06 8.75 9.23
OSFS NA NA 0.98 0.88 NA 4.16
PCBC 1.35 0.30 0.93 1.14 4.97 6.10
PFFC NA 0.14 0.59 0.92 2.31 3.39
PSFI NA 0.19 2.03 1.98 5.26 5.25
PWBK 0.93 0.24 0.99 1.06 5.20 5.88
RELI 0.25 0.07 1.32 1.36 2.58 2.72
SCBS NA 0.21 0.55 1.20 NA 5.55
SCCB 0.78 0.18 1.15 1.03 4.37 3.95
SFFC 0.72 0.15 1.28 1.03 7.20 5.86
SHSB NA NA 0.45 0.66 NA NA
SOBI 0.61 0.18 0.62 0.60 3.88 4.00
SSB 0.74 0.24 1.89 2.38 6.39 7.92
SZB 0.19 0.15 (0.03) 0.52 (0.20) 3.73
THR 1.01 0.27 0.90 0.95 6.48 6.98
TRIC 1.54 0.42 1.05 0.96 7.13 6.34
USAB 0.26 0.15 0.53 0.91 4.57 9.65
WCFB 0.65 0.16 1.42 1.38 6.09 5.94
Maximum 1.31 0.37 1.93 1.52 11.01 11.52
Minimum 0.27 0.06 (0.04) 0.34 (0.54) 1.71
Average 0.72 0.19 0.93 0.96 5.07 5.67
Median 0.70 0.21 0.94 0.99 4.74 5.43
</TABLE>
Source: SNL & F&C calculations 3
<PAGE>
FERGUSON & COMPANY Exhibit VI.1 - Comparative Group Selection
- ------------------
<TABLE>
<CAPTION>
Loans Loans
NPAs/ Loans/ Loans/ Deposits/ Borrowings/ Serviced Serviced/
Merger Current Assets Deposits Assets Assets Assets For Others Assets
Target? Pricing (%) (%) (%) (%) (%) ($000) (%)
Ticker (Y/N) Date MRQ MRQ MRQ MRQ MRQ MRQ MRY Reasons Excluded
----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------
ALBC N 12/04/97 0.12 92.7 71.8 77.5 13.1 11,080 15.6 C
- ------------ --------
ATSB N 12/04/97 2.20 103.0 71.5 69.5 18.8 29,025 41.7 B, C, F
- ------------ --------
CIBI N 12/04/97 0.53 107.5 84.4 78.5 9.1 486 0.5 C
- ------------ -------
CKFB N 12/04/97 0.70 129.5 92.3 71.3 3.7 - - E
- ------------ -------
CNSB N 12/04/97 0.50 93.0 69.7 74.9 - 21,852 22.4 B, C, F
- ------------ -----------------
CRZY N 12/04/97 0.38 98.1 48.3 49.2 26.2 77 0.1 Selected
- ------------ -----------------
CSBF N 12/04/97 0.56 75.0 55.7 74.3 - - - B
- ------------
FCB N 12/04/97 0.07 72.8 54.4 74.7 0.8 444 0.5 B
- ------------ --------
FFBI N 12/04/97 0.32 83.4 67.2 80.5 9.7 52,602 62.4 C, F
- ------------ --------
-----------------
FFDF N 12/04/97 NA 103.1 67.0 64.9 9.4 - - Selected
-----------------
- ------------ -------
FLKY N 12/04/97 2.28 190.5 90.7 47.6 21.0 - - E
- ------------ -------
FTSB N 12/04/97 1.91 124.4 91.4 73.4 9.0 - - C, E
- ---------------------- -------
GFSB Y 12/04/97 0.98 130.7 85.4 65.3 21.6 33,665 35.6 C, D
- ----------------------
GWBC Y 12/04/97 0.76 47.9 34.3 71.7 - - - B, D
- ----------------------
HBBI N 12/04/97 0.44 90.9 68.7 75.5 9.6 - - C
- ------------
HCFC N 12/04/97 0.82 116.7 85.9 73.6 6.2 2,632 3.8 C
- ------------
HHFC N 12/04/97 0.11 79.2 51.6 65.2 22.4 350 0.4 C
- ------------
HWEN N 12/04/97 1.70 136.7 85.6 62.6 19.4 - - C
- ------------
HZFS N 12/04/97 0.71 97.5 62.5 64.1 25.2 1,613 1.8 C
- ----------------------
INCB Y 12/04/97 NA 87.8 76.7 87.3 - 770 0.8 C, D
- ----------------------
JOAC N 12/04/97 0.20 100.4 70.4 70.2 - - - B
- ------------
KYF N 12/04/97 0.04 90.8 56.4 62.2 20.2 - - C
- ------------
LOGN N 12/04/97 0.49 99.2 71.4 72.0 6.4 - - C
- ------------
LONF N 12/04/97 NA 99.0 77.6 78.4 0.8 NA NA C
- ------------ -----------------
LXMO N 12/04/97 0.48 107.9 76.7 71.1 - 21,106 35.6 Selected
-----------------
MBSP N 12/04/97 2.25 151.1 83.8 55.4 - - - Selected
- ------------ -----------------
MCBN N 12/04/97 0.55 112.6 81.5 72.4 18.6 7,270 11.8 C
- ------------
MIVI N 12/04/97 NA NA NA 80.5 - - - C
- ------------ -----------------
MRKF N 12/04/97 - 75.2 47.3 62.9 - - - Selected
- ------------ ------- -----------------
MSBF N 12/04/97 0.02 169.0 92.0 54.4 27.6 32,757 42.5 C, E, F
- ------------ ------- --------
NSLB N 12/04/97 0.02 75.6 55.7 73.7 5.0 - - C
- ------------
NWEQ N 12/04/97 1.42 127.3 82.2 64.6 23.1 25,250 26.0 C
- ------------
OSFS N 12/04/97 0.44 89.5 64.0 71.5 - - - B
- ------------
PCBC N 12/04/97 0.03 22.0 16.4 74.8 5.6 - - C
- ------------ -----------------
PFFC N 12/04/97 - 84.6 60.5 71.4 - - - Selected
-----------------
PSFI N 12/04/97 0.68 86.2 41.6 48.2 9.9 - - Selected
- ------------ -----------------
PWBK N 12/04/97 0.94 79.3 60.8 76.7 3.1 149 0.3 C
- ------------ -----------------
RELI N 12/04/97 - 153.6 57.9 37.7 12.9 - - Selected
-----------------
SCBS N 12/04/97 2.16 75.4 59.0 78.2 - - - Selected
-----------------
SCCB N 12/04/97 0.87 109.5 79.4 72.5 - - - Selected
- ------------ -----------------
SFFC N 12/04/97 2.19 130.2 77.8 59.8 21.7 - - C
- ------------
SHSB N 12/04/97 1.42 89.4 65.6 73.5 12.1 476 0.5 B, C
- ------------
SOBI N 12/04/97 0.13 110.7 76.8 69.4 15.4 - - C
-----------------
SSB N 12/04/97 NA 108.3 72.5 67.0 8.5 NA NA Selected
- ------------ -----------------
SZB N 12/04/97 0.53 114.8 73.8 64.3 19.0 - - C
- ------------
THR N 12/04/97 0.87 105.2 68.0 64.6 19.9 12,581 13.4 C
- ------------
TRIC N 12/04/97 - 83.3 44.7 53.7 29.9 163 0.2 C
- ------------
USAB N 12/04/97 0.57 73.8 53.0 71.9 19.0 - - C
- ------------
WCFB N 12/04/97 0.07 76.9 57.8 75.1 0.3 - - A
- ------------
Maximum 2.28 190.5 92.3 87.3 26.2 52,602 62.4
Minimum 0.04 47.9 34.3 47.6 - - -
Average 0.74 102.3 70.7 70.2 10.1 7,321 9.2
Median 0.52 99.0 71.4 71.7 9.1 214 0.3
</TABLE>
Source: SNL & F&C calculations 4
<PAGE>
FERGUSON & COMPANY Exhibit VI.2 - Comparative Group Selected
- ------------------
<TABLE>
<CAPTION>
Deposit Current Current
Insurance Stock Market
Agency Price Value
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CRZY Crazy Woman Creek Bancorp Buffalo WY WE SAIF NASDAQ 03/29/96 15.44 14.74
FFDF FFD Financial Corp. Dover OH MW SAIF NASDAQ 04/03/96 18.75 27.09
LXMO Lexington B&L Financial Corp. Lexington MO MW SAIF NASDAQ 06/06/96 17.13 19.50
MBSP Mitchell Bancorp Inc. Spruce Pine NC SE SAIF NASDAQ 07/12/96 17.88 16.64
MRKF Market Financial Corp. Mount Healthy OH MW SAIF NASDAQ 03/27/97 15.75 21.04
PFFC Peoples Financial Corp. Massillon OH MW SAIF NASDAQ 09/13/96 14.50 21.25
PSFI PS Financial Inc. Chicago IL MW SAIF NASDAQ 11/27/96 18.00 37.33
RELI Reliance Bancshares Inc. Milwaukee WI MW SAIF NASDAQ 04/19/96 9.00 22.25
SCBS Southern Community Bancshares Cullman AL SE SAIF NASDAQ 12/23/96 18.00 20.47
SCCB S. Carolina Community Bancshrs Winnsboro SC SE SAIF NASDAQ 07/07/94 23.00 16.07
SSB Scotland Bancorp Inc. Laurinburg NC SE SAIF AMSE 04/01/96 10.25 19.61
Maximum 18.75 27.09
Minimum 15.44 14.74
Average 17.10 20.44
Median 17.13 19.50
</TABLE>
Source: SNL & F&C calculations 5
<PAGE>
FERGUSON & COMPANY Exhibit VI.2 - Comparative Group Selected
- ------------------
Price/ Price/ Current Current Current Total
LTM Core Price/ Price/ T Price/ Dividend Assets
Core EPS EPS Book V Book V Assets Yield ($000)
Ticker (x) (x) (%) (%) (%) (%) MRQ
CRZY 20.9 18.4 103.8 103.8 24.6 2.59 59,952
FFDF 30.2 27.6 126.2 126.2 30.7 1.60 88,220
LXMO 22.5 19.5 116.3 116.3 32.9 1.75 59,236
MBSP 28.8 29.8 116.4 116.4 48.1 2.24 34,591
MRKF NA 26.3 105.8 105.8 37.5 1.78 56,121
PFFC NA 25.9 91.9 91.9 25.0 3.45 86,486
PSFI NA 23.7 122.0 122.0 45.5 2.67 85,698
RELI 36.0 32.1 98.0 98.0 47.3 - 46,987
SCBS NA 21.4 136.5 136.5 29.1 1.67 70,370
SCCB 29.5 31.9 132.6 132.6 35.2 2.61 45,619
SSB 13.9 10.7 134.7 134.7 30.5 2.93 64,399
Maximum 30.2 27.6 126.2 126.2 32.9 2.59 88,220
Minimum 20.9 18.4 103.8 103.8 24.6 1.60 59,236
Average 24.5 21.8 115.4 115.4 29.4 1.98 69,136
Median 22.5 19.5 116.3 116.3 30.7 1.75 59,952
Tangible ROAA ROAA ROAE ROAE
Equity/ Equity/ Core Core Before Before Before Before
Assets T Assets EPS EPS Extra Extra Extra Extra
(%) (%) ($) ($) (%) (%) (%) (%)
Ticker MRQ MRQ LTM MRQ LTM MRQ LTM MRQ
CRZY 23.7 23.7 0.74 0.21 1.28 1.29 4.74 5.33
FFDF 24.3 24.3 0.62 0.17 1.93 1.02 7.83 4.17
LXMO 28.3 28.3 0.76 0.22 1.02 1.52 3.45 5.43
MBSP 41.4 41.4 0.62 0.15 1.62 1.44 3.79 3.50
MRKF 35.5 35.5 NA 0.15 0.99 1.27 3.66 3.61
PFFC 27.2 27.2 NA 0.14 0.59 0.92 2.31 3.39
PSFI 37.3 37.3 NA 0.19 2.03 1.98 5.26 5.25
RELI 48.3 48.3 0.25 0.07 1.32 1.36 2.58 2.72
SCBS 21.3 21.3 NA 0.21 0.55 1.20 NA 5.55
SCCB 26.6 26.6 0.78 0.18 1.15 1.03 4.37 3.95
SSB 22.6 22.6 0.74 0.24 1.89 2.38 6.39 7.92
Maximum 28.3 28.3 0.76 0.22 1.93 1.52 7.83 5.43
Minimum 23.7 23.7 0.62 0.17 1.02 1.02 3.45 4.17
Average 25.5 25.5 0.71 0.20 1.41 1.28 5.34 4.98
Median 24.3 24.3 0.74 0.21 1.28 1.29 4.74 5.33
Source: SNL & F&C calculations 6
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit VI.2-Comparative Group Selected
<TABLE>
<CAPTION>
Loans Loans
NPAs/ Loans/ Loans/ Deposits/ Borrowings/ Serviced Serviced/
Merger Current Assets Deposits Assets Assets Assets For Others Assets
Target? Pricing (%) (%) (%) (%) (%) ($000) (%)
Ticker (Y/N) Date MRQ MRQ MRQ MRQ MRQ MRQ MRY
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CRZY N 12/04/97 0.38 98.07 48.27 49.22 26.19 77 0.13
FFDF N 12/04/97 NA 103.14 66.97 64.93 9.39 - -
LXMO N 12/04/97 0.48 107.94 76.69 71.05 - 21.106 35.63
MBSP N 12/04/97 2.25 151.12 83.76 55.42 - - -
MRKF N 12/04/97 - 75.22 47.32 62.91 - - -
PFFC N 12/04/97 - 84.64 60.45 71.43 - - -
PSFI N 12/04/97 0.68 86.24 41.58 48.21 9.92 - -
RELI N 12/04/97 - 153.59 57.86 37.67 12.86 - -
SCBS N 12/04/97 2.16 75.43 58.98 78.19 - - -
SCCB N 12/04/97 0.87 109.53 79.44 72.53 - - -
SSB N 12/04/97 NA 108.28 72.54 66.99 8.54 NA NA
Maximum 0.48 107.94 76.69 71.05 26.19 21,106 35.63
Minimum 0.38 98.07 48.27 49.22 - - -
Average 0.43 103.05 63.98 61.73 11.86 7,061 11.92
Median 0.43 103.14 66.97 64.93 9.39 77 0.13
</TABLE>
Source: SNL & F&C calculations 7
<PAGE>
EXHIBIT VII
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit VII
Pro Forma Assumptions
1. Net proceeds from the conversion were invested at the beginning of the period
at 5.55%, which was the approximate rate on the one-year treasury bill on
December 31, 1997. This rate was selected because it is considered more
representative of the rate the Bank is likely to earn.
2. Anson will not have an ESOP.
3. Anson's RP will acquire 4% of the stock through open market purchases at $10
per share and the expense is recognized ratably over five years as the shares
vest.
4. All pro forma income and expense items are adjusted for income taxes at a
combined state and federal rate of 34.0%.
5. In calculating the pro forma adjustments to net worth, the RP is deducted in
accordance with generally accepted accounting principles.
1
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit VII
Pro Forma Effect of Conversion Proceeds
At the Minimum of the Conversion Valuation Range
Valuation Date as of February 27, 1998
Anson Savings Bank
- --------------------------------------------------------------
1. Conversion Proceeds
Pro Forma Market Value $ 5,610,000
Less: Estimated Expenses (488,000)
----------------
Net Conversion Proceeds $ 5,122,000
2. Estimated Additional Income From Conversion Proceeds
Net Conversion Proceeds $ 5,122,000
Less: ESOP Contributions -
RP Contributions (224,400)
----------------
Net Conversion Proceeds after ESOP & RP $ 4,897,600
Estimated Incremental Rate of Return(1) 3.66%
----------------
Estimated Additional Income $ 179,399
Less: ESOP Expense -
RP Expense (29,621)
----------------
$ 149,778
================
3. Pro Forma Calculations
Before Conversion After
Period Conversion Results Conversion
---------------------------------------------------
a. Pro Forma Earnings
Twelve Months Ended
December 31, 1997 $ 133,000 $ 149,778 $ 282,778
b. Pro Forma Net Worth
December 31, 1997 $ 3,859,000 $ 4,897,600 $ 8,756,600
c. Pro Forma Net Assets
December 31, 1997 $ 20,723,000 $ 4,897,600 $ 25,620,600
(1) Assumes Proceeds can be reinvested at 5.55 percent and earnings taxed at a
rate of 34.0 percent.
2
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit VII
Pro Forma Effect of Conversion Proceeds
At the Midpoint of the Conversion Valuation Range
Valuation Date as of February 27, 1998
Anson Savings Bank
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
1. Conversion Proceeds
Pro Forma Market Valuation $ 6,600,000
Less: Estimated Expenses (513,000)
----------------------
Net Conversion Proceeds $ 6,087,000
2. Estimated Additional Income From Conversion Proceeds
Net Conversion Proceeds $ 6,087,000
Less: ESOP Contributions -
RP Contributions (264,000)
----------------------
Net Conversion Proceeds after ESOP & RP $ 5,823,000
Estimated Incremental Rate of Return(1) 3.66%
----------------------
Estimated Additional Income $ 213,296
Less: ESOP Expense -
RP Expense (34,848)
----------------------
$ 178,448
======================
</TABLE>
3. Pro Forma Calculations
<TABLE>
<CAPTION>
Before Conversion After
Period Conversion Results Conversion
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
a. Pro Forma Earnings
Twelve Months Ended
December 31, 1997 $ 133,000 $ 178,448 $ 311,448
b. Pro Forma Net Worth
December 31, 1997 $ 3,859,000 $ 5,823,000 $ 9,682,000
c. Pro Forma Net Assets
December 31, 1997 $ 20,723,000 $ 5,823,000 $ 26,546,000
</TABLE>
(1) Assumes Proceeds can be reinvested at 5.55 percent and earnings taxed at a
rate of 34.0 percent.
3
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit VII
Pro Forma Effect of Conversion Proceeds
At the Maximum of the Conversion Valuation Range
Valuation Date as of February 27, 1998
Anson Savings Bank
- -----------------------------------------------------------------
<TABLE>
<S> <C> <C>
1. Conversion Proceeds
Pro Forma Market Valuation $ 7,590,000
Less: Estimated Expenses (537,000)
----------------------
Net Conversion Proceeds $ 7,053,000
2. Estimated Additional Income From Conversion Proceeds
Net Conversion Proceeds $ 7,053,000
Less: ESOP Contributions -
RP Contributions (303,600)
----------------------
Net Conversion Proceeds after ESOP & RP $ 6,749,400
Estimated Incremental Rate of Return(1) 3.66%
----------------------
Estimated Additional Income $ 247,231
Less: ESOP Expense -
RP Expense (40,075)
----------------------
$ 207,155
======================
</TABLE>
3. Pro Forma Calculations
<TABLE>
<CAPTION>
Before Conversion After
Period Conversion Results Conversion
-------------------------------------------------------------------
<S> <C> <C> <C>
a. Pro Forma Earnings
Twelve Months Ended
December 31, 1997 $ 133,000 $ 207,155 $ 340,155
b. Pro Forma Net Worth
December 31, 1997 $ 3,859,000 $ 6,749,400 $ 10,608,400
c. Pro Forma Net Assets
December 31, 1997 $ 20,723,000 $ 6,749,400 $ 27,472,400
</TABLE>
(1) Assumes Proceeds can be reinvested at 5.55 percent and earnings taxed at a
rate of 34.0 percent.
4
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit VII
Pro Forma Effect of Conversion Proceeds
At the SuperMax of the Conversion Valuation Range
Valuation Date as of February 27, 1998
Anson Savings Bank
- --------------------------------------------------------------------
<TABLE>
<S> <C> <C>
1. Conversion Proceeds
Pro Forma Market Valuation $ 8,728,500
Less: Estimated Expenses $ (566,000)
----------------------
Net Conversion Proceeds $ 8,162,500
2. Estimated Additional Income From Conversion Proceeds
Net Conversion Proceeds $ 8,162,500
Less: ESOP Contributions $ -
RP Contributions $ (349,140)
----------------------
Net Conversion Proceeds after ESOP & RP $ 7,813,360
Estimated Incremental Rate of Return(1) 3.66%
----------------------
Estimated Additional Income $ 286,203
Less: ESOP Expense $ -
RP Expense $ (46,086)
----------------------
$ 240,117
======================
</TABLE>
3. Pro Forma Calculations
<TABLE>
<CAPTION>
Before Conversion After
Period Conversion Results Conversion
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
a. Pro Forma Earnings
Twelve Months Ended
December 31, 1997 $ 133,000 $ 240,117 $ 373,117
b. Pro Forma Net Worth
December 31, 1997 $ 3,859,000 $ 7,813,360 $ 11,672,360
c. Pro Forma Net Assets
December 31, 1997 $ 20,723,000 $ 7,813,360 $ 28,536,360
</TABLE>
(1) Assumes Proceeds can be reinvested at 5.55 percent and earnings taxed at a
rate of 34.0 percent.
5
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit VII
Pro Forma Analysis Sheet
<TABLE>
<CAPTION>
Name of Association: Anson Savings Bank
Date of Market Prices: February 27, 1998 NC Publicly All Publicly
Comparatives Held Thrifts Held Thrifts
------------ ------------ ------------
Symbols Value Mean Median Mean Median Mean Median
---------------------- ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Price-Earnings Ratio P/E
- --------------------
Last Twelve Months N/A
At Minimum of Range 19.8
At Midpoint of Range 21.2 28.1 28.3 22.9 23.6 21.3 20.6
At Maximum of Range 22.3
At Supermax of Range 23.4
Price-Book Ratio P/B
- ----------------
At Minimum of Range 64.1%
At Midpoint of Range 68.2% 120.3 111.6 137.8 126.9 173.6 159.7
At Maximum of Range 71.5%
At Supermax of Range 74.8%
Price-Asset Ratio P/A
- -----------------
At Minimum of Range 21.9%
At Midpoint of Range 24.9% 33.9 29.7 30.0 28.9 19.1 17.8
At Maximum of Range 27.6%
At Supermax of Range 30.6%
Twelve Mo. Earnings Base Y $ 133,000
Period Ended December 31, 1997
Book Value B $ 3,859,000
As of December 31, 1997
Total Assets A $ 20,723,000
As of December 31, 1997
Return on Money (1) R 3.66%
Conversion Expense X $ 513,000
Underwriting Commission C 0.00%
Percentage Underwritten S 0.00%
Estimated Dividend
Dollar Amount DA $ 198,000
Yield DY 0.00%
ESOP Contributions P $ -
RP Contributions I $ 264,000
ESOP Annual Expense E $ -
RP Annual Contributions M $ 34,848
Cost of ESOP Borrowings F 0.00%
</TABLE>
(1) Assumes Proceeds can be reinvested at 5.55 percent and earnings taxed at a
rate of 34.0 percent.
6
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit VII
Pro Forma Analysis Sheet
Calculation of Estimated Value (V) at Midpoint Value
1. V= P/A(A-X-P-I) $ 6,600,000
-------------------------
1-P/A(1-(CxS))
2. V= P/B(B-X-P-I) $ 6,600,000
-------------------------
1-P/B(1-(CxX))
3. V= P/E(Y-R(X+P+I)-(E+M)) $ 6,600,000
---------------------------------
1-P/E(R(1-(CxX))
Value
Estimated Value Per Share Total Shares Date
- -------------------------- ------------- ----------------- --------------------
$6,600,000 $10.00 660,000 February 27, 1998
Range of Value:
- --------------
$6.6 million x 1.15=$7.59 million or 759,000 shares at $10 per share
$6.6 million x 0.85=$5.61 million or 561,000 shares at $10 per share
7
<PAGE>
ANSON SAVINGS BANK, SSB
Post Office Box 249
211 South Greene Street
Wadesboro, North Carolina 28170
(704) 694-2122
--------------------------------------
NOTICE OF SPECIAL MEETING OF MEMBERS
To be Held on ____________, 1998
--------------------------------------
NOTICE IS HEREBY GIVEN, that a special meeting (the "Special Meeting") of
the members of Anson Savings Bank, SSB (the "Bank") will be held at the Bank's
headquarters office at 211 South Greene Street, Wadesboro, North Carolina on
____________, 1998 at ______ __.m., Eastern Time, to consider and vote upon:
1. The Plan of Holding Company Conversion (the "Plan of Conversion")
pursuant to which, among other things, (i) the Bank will convert from
a North Carolina-chartered savings bank organized in mutual form to a
North Carolina-chartered savings bank organized in stock form (the
"Conversion"), and in connection therewith will adopt an amended
Certificate of Incorporation and Bylaws, (ii) the Bank will sell its
capital stock to Anson Bancorp, Inc. (the "Company"), a North Carolina
corporation, and become the wholly-owned subsidiary of the Company,
and (iii) the Company will offer and sell shares of its common stock
in a Subscription Offering and, if necessary, in a Community Offering
and a Syndicated Community Offering, all as more specifically set
forth in the Plan of Conversion; and
2. Such other business as may relate to the purposes set forth in this
Notice of Special Meeting and properly come before the meeting and any
adjournment(s) thereof. Management is not aware of any such other
business.
The Board of Directors has fixed the close of ____________, 1998 as the
record date for the determination of members entitled to notice of and to vote
at the Special Meeting and at any adjournment(s) thereof. Members of the Bank
of record as of the close of business on that date who cease to be members prior
to the date of the Special Meeting will not be entitled to vote at the Special
Meeting. Approval of the Plan of Conversion requires the affirmative vote, cast
in person or by proxy, of a majority of the total outstanding votes entitled to
be cast by voting members at the Special Meeting. A copy of the Plan of
Conversion is attached to this Summary Proxy Statement as Attachment I.
BY ORDER OF THE BOARD OF DIRECTORS
VEDA H. EDWARDS
Secretary
Wadesboro, North Carolina
____________, 1998
<PAGE>
PLEASE COMPLETE, DATE, SIGN AND RETURN THE ACCOMPANYING PROXY CARD(S) IN THE
ENCLOSED POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE, WHETHER OR NOT YOU PLAN TO
ATTEND THE SPECIAL MEETING. THIS WILL ASSURE YOUR REPRESENTATION AT THE SPECIAL
MEETING AND MAY AVOID THE COST OF ADDITIONAL COMMUNICATIONS. THIS WILL NOT
PREVENT YOU FROM VOTING IN PERSON IF YOU ATTEND THE SPECIAL MEETING. YOU MAY
REVOKE YOUR WRITTEN PROXY BY DELIVERING A WRITTEN INSTRUMENT TO SUCH EFFECT TO
THE SECRETARY OF THE BANK AT ANY TIME PRIOR TO OR AT THE SPECIAL MEETING OR BY
DELIVERING TO THE SECRETARY OF THE BANK PRIOR TO THE SPECIAL MEETING A DULY
EXECUTED PROXY BEARING A LATER DATE. PROPERLY COMPLETED PROXIES WILL BE VOTED
IN ACCORDANCE WITH THE INSTRUCTIONS INDICATED THEREON, OR IF NO INSTRUCTIONS ARE
INDICATED, FOR APPROVAL OF THE PLAN OF CONVERSION.
---
YOUR PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE BANK. THE BANK
BOARD OF DIRECTORS RECOMMENDS THAT VOTING MEMBERS VOTE FOR APPROVAL OF THE PLAN
OF CONVERSION. FAILURE TO VOTE IN PERSON OR BY PROXY WILL HAVE THE SAME EFFECT
AS A VOTE AGAINST THE PLAN OF CONVERSION. VOTING IN FAVOR OF THE PLAN OF
-------
CONVERSION WILL NOT OBLIGATE ANY PERSON TO PURCHASE COMMON STOCK, AND VOTING
AGAINST THE PLAN OF CONVERSION OR A FAILURE TO VOTE WILL NOT PRECLUDE ANY SUCH
PURCHASE.
THE ENCLOSED PROXY IS SOLICITED FOR THIS SPECIAL MEETING ONLY, AND ANY
ADJOURNMENT(S) THEREOF, AND WILL NOT BE USED FOR ANY OTHER MEETING. NO
PREVIOUSLY PROVIDED GENERAL PROXIES WILL BE VOTED AT THE SPECIAL MEETING FOR
APPROVAL OF THE PLAN OF CONVERSION.
ii
<PAGE>
ANSON SAVINGS BANK, SSB
-----------------------
SUMMARY PROXY
STATEMENT
-----------------------
SPECIAL MEETING OF MEMBERS TO BE HELD ON ____________, 1998
PURPOSE OF THE SPECIAL MEETING
This Summary Proxy Statement (the "Proxy Statement") is being furnished to
you in connection with the solicitation by the Board of Directors of Anson
Savings Bank, SSB (the "Bank") of proxies to be voted at a special meeting of
members (the "Special Meeting") to be held at the Bank's headquarters office at
211 South Greene Street, Wadesboro, North Carolina on ____________, 1998 at
______ __.m., Eastern Time.
The Special Meeting will be held for the purpose of considering and voting
upon the proposed Plan of Holding Company Conversion approved by the Board of
Directors of the Bank on December 11, 1997 (the "Plan of Conversion"), which
provides for the adoption by the Bank of an amended Certificate of Incorporation
and Bylaws. If the Plan of Conversion is approved by a majority of the total
votes eligible to be cast and if certain other conditions are satisfied, the
Bank will convert from a North Carolina-chartered mutual savings bank to a North
Carolina-chartered stock savings bank, and the Bank will become the wholly-owned
subsidiary of Anson Bancorp, Inc. (the "Company"), a North Carolina corporation
formed by the Bank to own all of the stock of the Bank issued pursuant to the
Plan of Conversion (the "Conversion"). The proposed Plan of Conversion,
including the proposed forms of the Bank's amended Certificate of Incorporation
and Bylaws, is attached to this Proxy Statement as Attachment I. For a
description of the Conversion, see "THE CONVERSION."
This Proxy Statement is dated ____________, 1998, and is first being mailed
to members of the Bank, together with the Prospectus dated ____________, 1998
(the "Prospectus"), on or about ____________, 1998.
The following information is not complete and is qualified in its entirety
by the Plan of Conversion, which is attached to this Proxy Statement, the
information contained in this Proxy Statement and the information and financial
statements and accompanying notes contained in the Prospectus which accompanies
this Proxy Statement.
<PAGE>
Anson Bancorp, Inc.
The Company is a North Carolina corporation recently organized by the Board
of Directors of the Bank to acquire all of the capital stock that the Bank will
issue upon its Conversion from the mutual to stock form of ownership. The
Company has not as yet engaged in any business. Upon completion of the
Conversion, its business will initially consist solely of owning the Bank and
investing the proceeds of the Conversion that are retained by the Company. The
Company has received the approval of the Administrator, Savings Institutions
Division, North Carolina Department of Commerce (the "Administrator"), and the
Board of Governors of the Federal Reserve System (the "Federal Reserve") to
acquire the Bank.
The executive office of the Company is located at 211 South Greene Street,
Wadesboro, North Carolina, and its telephone number is (704) 694-2122.
Anson Savings Bank, SSB
The Bank is a North Carolina-chartered mutual savings bank and has been in
operation since _____. The Bank is a member of the Federal Home Loan Bank
("FHLB") system, and its deposits are federally insured by the Savings
Association Insurance Fund (the "SAIF") of the Federal Deposit Insurance
Corporation (the "FDIC") to the maximum amount permitted by law.
The Bank conducts business through one office in Wadesboro, North Carolina.
The Bank's primary market area consists of Anson County, North Carolina. Based
upon 199___ comparative data, the Bank had approximately ____% and ____% of the
deposits in Anson County. On December 31, 1997, the Bank had total assets of
$20.7 million, net loans of $_____ million, deposits of $16.7 million and equity
of $3.9 million.
The Bank is primarily engaged in the business of attracting deposits from
the general public and using such deposits to make mortgage loans secured by
one-to-four family residential real estate located in the Bank's primary market
area. The Bank also makes nonresidential real estate, construction and deposit
account secured loans. See "BUSINESS OF THE BANK" in the Prospectus. The Bank
has been and intends to continue to be a community-oriented financial
institution offering a variety of financial services to meet the needs of the
communities it serves.
INFORMATION RELATING TO VOTING AT THE SPECIAL MEETING
The Board of Directors of the Bank has fixed the close of business on
____________, 1998 (the "Voting Record Date") as the record date for determining
the members entitled to notice of and to vote at the Special Meeting. The
Bank's depositors (including beneficial owners of Individual Retirement Account
("IRA") accounts) and borrowers are members of the Bank entitled to vote under
its current Certificate of Incorporation and Bylaws.
At the Special Meeting, each deposit account holder entitled to vote may
cast one vote for each $100 or fraction thereof of the aggregate withdrawal
value of any deposit account in the Bank as of the Voting Record Date. Each
borrower member entitled to vote may cast one vote as a borrower in addition to
the number of votes to which such member may be entitled as an owner of a
deposit account. No member, however, may cast more than 1,000 votes. A deposit
account or loan creates a single membership for voting purposes, even though
more than one person has an interest in such deposit account or is obligated on
such loan.
4
<PAGE>
Beneficial owners of IRA accounts at the Bank will be considered voting
members entitled to vote on the Plan of Conversion. The legal owners of other
fiduciary accounts, rather than the beneficial owners, will be treated as the
member entitled to cast the votes for such account, unless the trust agreement
or any other agreement relating to the fiduciary's authority provides otherwise.
Twenty-five members present in person or by proxy at the Special Meeting
will constitute a quorum for the transaction of business. The affirmative vote
of at least a majority of the total outstanding votes of the Bank's' members
eligible to be cast at the Special Meeting is required for approval of the Plan
of Conversion. As of the Voting Record Date, the Bank's records disclose that
there were _________ votes entitled to be cast at the Special Meeting, of which
_________ votes would represent a majority.
Members may vote at the Special Meeting in person or by proxy. Each proxy
solicited hereby, if properly executed, duly returned by the date of the Special
Meeting, and not revoked prior to or at the Special Meeting, will be voted at
the Special Meeting in accordance with the member's instructions indicated
thereon. If no voting instructions are indicated on the proxy card, the proxy
will be voted FOR the Plan of Conversion. If any other matters are properly
---
presented before the Special Meeting, the proxies solicited hereby will be voted
on such matters in accordance with the best judgment of the proxyholders named
therein. Management of the Bank is not aware of any other business to be
presented at the Special Meeting.
Any member giving a proxy may revoke it at any time before it is voted by
delivering to the Secretary of the Bank before or at the Special Meeting either
a written revocation of the proxy or by delivering to the Secretary of the Bank
prior to the Special Meeting a duly executed proxy bearing a later date, or by
attending the Special Meeting and voting in person. Proxies are being solicited
only for use at the Special Meeting and any and all adjournments thereof and
will not be used for any other meeting. No previously provided general proxies
will be voted at the Special Meeting for approval of the Plan of Conversion.
The Board of Directors' solicitation of proxies for the Special Meeting is
being made by means of this Proxy Statement. It may be followed by further
letters and personal calls to members by employees or agents of the Bank. All
costs of this proxy solicitation will be paid by the Bank.
The directors and executive officers of the Bank were entitled to cast
_______ votes as of the Voting Record Date for the Special Meeting.
RECOMMENDATION OF MANAGEMENT
THE BOARD OF DIRECTORS OF THE BANK RECOMMENDS THAT YOU VOTE FOR THE PLAN OF
---
CONVERSION.
FAILURE TO VOTE IN FAVOR OF THE PLAN OF CONVERSION, IN PERSON OR BY PROXY,
WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE PLAN OF CONVERSION. VOTING IN
-------
FAVOR OF THE PLAN OF CONVERSION WILL NOT OBLIGATE ANY PERSON TO SUBSCRIBE FOR
THE PURCHASE OF ANY STOCK, AND VOTING AGAINST THE PLAN OR FAILING TO VOTE WILL
NOT PRECLUDE ANY SUCH PURCHASE.
5
<PAGE>
THE DIRECTORS AND CERTAIN OFFICERS OF THE BANK HAVE A PERSONAL INTEREST IN
THE APPROVAL OF THE CONVERSION TO THE EXTENT THAT THEY WILL RECEIVE CERTAIN
BENEFITS AS A RESULT OF THE CONVERSION. SEE "MANAGEMENT OF THE BANK" IN THE
PROSPECTUS.
THE BOARD OF DIRECTORS OF FIRST SAVINGS HAS ADOPTED AND THE ADMINISTRATOR
HAS APPROVED COMPLETION OF THE TRANSACTIONS DESCRIBED IN THE PLAN OF CONVERSION
SUBJECT TO APPROVAL BY THE MEMBERS OF THE BANK AND TO SATISFACTION OF CERTAIN
OTHER CONDITIONS. APPROVAL BY THE ADMINISTRATOR DOES NOT CONSTITUTE A
RECOMMENDATION OR ENDORSEMENT OF THE PLAN OF CONVERSION BY THE ADMINISTRATOR.
THE CONVERSION
General
The Bank was organized and has operated as a traditional savings and loan
association. It recognizes that the banking and financial services industries
are in the process of fundamental changes, reflecting changes in the local,
national and international economies, technological changes and changes in state
and federal laws. As a result, for several years the Bank has been studying the
environment in which it operates and its strategic options.
As a result of its study of its strategic options, the Bank adopted the
Plan. The Bank believes that converting the bank from the mutual to stock form
and organizing the Company will provide increased flexibility for the Bank and
the Company to react to changes in their operating environment, regardless of
the strategies ultimately chosen.
The existing management of the Bank and the Company believes that it will
be in the best interests of the Bank, the Company and the stockholders of the
Company for the Company to remain an independent financial institution.
Assuming the consummation of the Conversion, the Company and the Bank intend to
pursue the business strategy described in this Prospectus with the goal of
enhancing shareholder value over the long term. Neither the Company nor the
Bank has any existing plan to consider any business combination, and neither
company has any agreement or understanding with respect to any possible business
combination.
The Board of Director's adoption of the Plan is subject to approval by the
members of the Bank and receipt of required regulatory approvals. Pursuant to
the Plan, the Bank will be converted from a North Carolina-chartered mutual
savings bank to a North Carolina-chartered stock savings bank and will become a
wholly-owned subsidiary of the Company. The Company will issue the Common Stock
to be sold in the Conversion and will use that portion of the net proceeds
thereof which it does not retain to purchase the capital stock of the Bank. By
letter dated ____________, 1998, the Administrator approved the Plan, subject to
approval by the members of the Bank and satisfaction of certain other
conditions. The Special Meeting will be held on ____________, 1998 for the
purpose of considering approval of the Plan.
Consummation of the Conversion is contingent also upon receipt of the
approvals of the Federal Reserve and the Administrator for the Company to
acquire the Bank. Those approvals have been received. The Conversion cannot be
consummated until the expiration of the Bank Merger Act of 1956 waiting period
which began to run upon approval by the Federal Reserve of the Company's
application and expires ____________, 1998. Finally, consummation of the
Conversion is contingent upon receipt
6
<PAGE>
from the FDIC of a final non-objection letter with respect to the transaction.
The FDIC has issued a conditional notification that it does not intend to object
to the Conversion.
The following is a summary of all material provisions of the Plan. It is
qualified in its entirety by the provisions of the Plan, which contains a more
detailed description of the terms of the Conversion. The Plan is attached as
Attachment I to the Bank's Proxy Statement for the Special Meeting which has
been delivered to all members of the Bank. The Plan can also be obtained by
written request from the Bank. See "ADDITIONAL INFORMATION" in the Prospectus.
Purposes of Conversion
The Bank, as a mutual savings bank, now has no stockholders and no
authority to issue capital stock. By converting to the stock form of
organization, the Bank will be structured in the form used by most commercial
banks, other business entities and a substantial number of savings institutions.
Conversion to a North Carolina-chartered capital stock savings bank and the
formation of a Company offers a number of advantages which may be important to
the future and performance of the Bank, including (i) a larger capital base for
the Bank's operations, (ii) an enhanced future access to capital markets and
(iii) an opportunity for depositors of the Bank to become stockholders of the
Company.
After completion of the Conversion, the unissued common and preferred stock
authorized by the Company's Articles of Incorporation will permit the Company,
subject to market conditions, to raise additional equity capital through further
sales of securities. Following the Conversion, the Company will also be able to
use stock-related incentive programs to attract, retain and provide incentives
for qualified directors and executive and other personnel of the Company and the
Bank. See "MANAGEMENT OF THE BANK -- Proposed Management Recognition Plan" and
"-- Proposed Option Plan" in the Prospectus.
Formation of the Company will provide greater flexibility than the Bank
would otherwise have to expand and diversify its business activities through
existing or newly formed subsidiaries, or through acquisitions of, or mergers
with, both mutual and stock institutions, as well as other companies. However,
there are no current plans, arrangements, understandings or agreements regarding
any such business combinations.
Effects of Conversion
General. Each person with a deposit account in the Bank has pro rata
rights, based upon the balance in his or her account, in the net worth of the
Bank upon liquidation. However, this right is tied to the depositor's account
and has no tangible market value separate from such deposit account. Further,
the Bank's depositors can realize value with respect to their interests only in
the unlikely event that the Bank is liquidated and has a positive net worth. In
such an event, the depositors of record at that time, as owners, would share pro
rata in any residual surplus after other claims, including those with respect to
the deposit accounts of depositors, are paid.
Upon the Bank's conversion to stock form, its Certificate of Incorporation
will be amended to authorize the issuance of permanent nonwithdrawable capital
stock to represent the ownership of the Bank, including its net worth. The
capital stock will be separate and apart from deposit accounts and will not be
insured by the FDIC or any other governmental entity. Certificates will be
issued to evidence ownership of the capital stock. All of the outstanding
capital stock of the Bank will be acquired by the Company, which in turn will
issue its Common Stock to purchasers in the Conversion. The stock certificates
issued by the Company will be transferable and, therefore, subject to applicable
law, the stock
7
<PAGE>
could be sold or traded if a purchaser is available with no effect on any
deposit account the seller may hold at the Bank.
Voting Rights. Under the Bank's current Certificate of Incorporation and
Bylaws, deposit account holders and borrowers have voting rights with respect to
certain matters relating to the Bank, including the election of directors.
After the Conversion, (i) neither deposit account holders nor borrowers will
have voting rights with respect to the Bank and will therefore not be able to
elect directors of the Bank or control its affairs; (ii) voting rights with
respect to the Bank will be vested in the Company as the sole stockholder of the
Bank; and (iii) voting rights with respect to the Company will be vested in the
Company's stockholders. Each purchaser of Common Stock will be entitled to vote
on any matters to be considered by the Company's stockholders. For a
description of the voting rights of the holders of Common Stock, see
"DESCRIPTION OF CAPITAL STOCK" in the Prospectus.
Deposit Accounts and Loans. The account balances, interest rates and other
terms of deposit accounts at the Bank and the existing deposit insurance
coverage of such accounts will not be affected by the Conversion (except to the
extent that a depositor directs the Bank to withdraw funds to pay for his or her
Common Stock). Furthermore, the Conversion will not affect any loan account,
the balances, interest rates, maturities or other terms of these accounts, or
the obligations of borrowers under their individual contractual arrangements
with the Bank.
Continuity. The Bank will continue without interruption, during and after
completion of the Conversion, to provide its services to depositors and
borrowers pursuant to existing policies and will maintain its office operated by
the existing management and employees of the Bank.
Liquidation Rights. In the unlikely event of a complete liquidation of the
Bank, either before or after Conversion, account holders would have claims for
the amount of their deposit accounts, including accrued interest, and would
receive the protection of deposit insurance up to applicable limits. In addition
to deposit insurance coverage, depositor liquidation rights before and after
Conversion would be as follows:
Liquidation Rights Prior to the Conversion. Prior to the Conversion, in
the event of a complete liquidation of the Bank, each holder of a deposit
account in the Bank would receive such holder's pro rata share of any assets of
the Bank remaining after payment of claims of all creditors (including the
claims of all depositors to the withdrawal value of their accounts, including
accrued interest). Such holder's pro rata share of such remaining assets, if
any, would be in the same proportion of such assets as the value of such
holder's deposit account was to the total value of all deposit accounts in the
Bank at the time of liquidation.
Liquidation Rights After the Conversion. As required by North Carolina
conversion regulations, the Plan provides that, upon completion of the
Conversion, a memorandum account called a "Liquidation Account" will be
established for the benefit of Eligible Account Holders and Supplemental
Eligible Account Holders. The amount of the Liquidation Account will be equal
to the net worth of the Bank as of the date of its latest statement of financial
condition contained in the final prospectus relating to the sale of shares of
Common Stock in the Conversion. Under applicable regulations, the Bank will not
be permitted to pay dividends on, or repurchase any of, its capital stock if its
net worth would thereby be reduced below the aggregate amount then required for
the Liquidation Account. See "DIVIDEND POLICY" and SUPERVISION AND REGULATION -
- - Regulation of the Bank -- Restrictions on Dividends and Other Capital
Distributions" in the Prospectus. After the Conversion, Eligible Account
Holders and Supplemental Eligible Account Holders will be entitled, in the
event of a liquidation of the Bank, to receive liquidating distributions of any
assets remaining after payment of all creditors' claims (including the claims of
all depositors to the withdrawal values of their deposit accounts, including
8
<PAGE>
accrued interest), before any distributions are made on the Bank's capital
stock, equal to their proportionate interests at that time in the Liquidation
Account.
Each Eligible Account Holder and Supplemental Eligible Account Holder will
have an initial interest ("subaccount balance") in the Liquidation Account for
each deposit account held as of September 30, 1996 (the Eligibility Record Date)
or as of March 31, 1998 (the Supplemental Eligibility Record Date),
respectively. Each initial subaccount balance will be the amount determined by
multiplying the total opening balance in the Liquidation Account by the
Qualifying Deposit (a deposit of at least $50 as of the Eligibility Record Date
or Supplemental Eligibility Record Date, as applicable) of such deposit account
divided by the total of all Qualifying Deposits on that date. If the amount in
the deposit account on any subsequent annual closing date of the Bank is less
than the balance in such deposit account on any other annual closing date or the
balance in such an account on the Eligibility Record Date or Supplemental
Eligibility Record Date, as the case may be, this interest in the Liquidation
Account will be reduced by an amount proportionate to any such reduction, and
will not thereafter be increased despite any subsequent increase in the related
deposit account. An Eligible Account Holder's or Supplemental Eligible Account
Holder's interest in the Liquidation Account will cease to exist if the deposit
account is closed. The Liquidation Account will never increase and will be
correspondingly reduced as the interests in the Liquidation Account are reduced
or cease to exist. In the event of a liquidation, any assets remaining after
the above liquidation rights of Eligible Account Holders and Supplemental
Eligible Account Holders are satisfied would be distributed to the Company, as
sole stockholder of the Bank.
A merger, consolidation, sale of bulk assets or similar combination or
transaction with another FDIC-insured depository institution, whether or not the
Bank is the surviving institution, would not be viewed as a complete liquidation
for purposes of distribution of the Liquidation Account. In any such
transaction, the Liquidation Account would be assumed by the surviving
institution to the full extent authorized by regulations of the Administrator as
then in effect.
Offering of Common Stock
As part of the Conversion, the Company is making the Subscription Offering
of Common Stock in the priorities and to the persons described below under "--
Subscription Offering." In addition, any shares which remain unsubscribed for
in the Subscription Offering will be offered in the Community Offering to
members of the general public, with priority being given to natural persons and
trusts of natural persons residing or located in the Local Community, including
IRAs, Keogh accounts and similar retirement accounts established for the benefit
of natural persons who are residents of the Local Community. See "-- Community
Offering." If necessary, all shares of Common Stock not purchased in the
Subscription Offering and Community Offering, if any, may be offered for sale to
the general public through a syndicate of registered broker-dealers as selected
dealers to be managed by Trident Securities. See "-- Syndicated Community
Offering." The Plan requires that the aggregate dollar amount of the Common
Stock sold equal not less than the minimum nor more than the maximum of the
Estimated Valuation Range which is established in connection with the
Conversion; provided, however, with the consent of the Administrator and the
FDIC the aggregate dollar amount of the Common Stock sold may be increased to as
much as 15% above the maximum of the Estimated Valuation Range, without a
resolicitation of subscribers or any right to cancel subscriptions, in order to
reflect changes in market and financial conditions following commencement of the
Subscription Offering. See "-- Purchase Price of Common Stock and Number of
Shares Offered." If the Syndicated Community Offering is not feasible or
successful and Common Stock having an aggregate value of at least the minimum of
the Estimated Valuation Range is not subscribed for in the Subscription and
Community Offering, the Company will consult with the Administrator to
determine an appropriate alternative method of selling all shares of Common
Stock offered in the Conversion and not subscribed for in the Offering. The
same per share price ($10.00) will be paid by purchasers in the Subscription,
Community and Syndicated Community Offering.
9
<PAGE>
The Subscription Offering will expire at the Expiration Time, which is
12:00 noon, Eastern Time, on ___________________, 1998, unless, with the
approval of the Administrator, the offering period is extended by the Company
and the Bank. The Community Offering, if any, may begin at any time after the
Subscription Offering begins and will terminate at the Expiration Time or at any
time thereafter, but not later than ________________, 1998, unless extended with
the approval of the Administrator. The Syndicated Community Offering, if any,
or other sale of all shares not subscribed for in the Subscription and Community
Offering, will be made as soon as practicable following the Expiration Time.
The sale of the Common Stock must, under the North Carolina conversion
regulations, be completed within 45 days after the Expiration Time unless such
period is extended with the approval of the Administrator. In the event such an
extension is approved, subscribers would be resolicited and would be given the
opportunity to increase (subject to maximum purchase limitations), decrease
(subject to minimum purchase limitations) or rescind their subscriptions. If a
subscriber fails to respond to the resolicitation by the end of the
resolicitation period, the subscription of such subscriber will be canceled,
funds submitted with the subscription will be refunded promptly with interest at
the Bank's passbook savings rate, and holds on accounts from which withdrawals
were designated will be released. Any such solicitation will be by means of an
amended prospectus filed with the SEC. In such event, substantial additional
printing, legal and accounting expenses may be incurred in completing the
Conversion.
The commencement and completion of any required Community or Syndicated
Community Offering will be subject to market conditions and other factors beyond
the Company's control. Accordingly, no assurance can be given that any required
Community or Syndicated Community Offering or other sale of Common Stock will be
commenced at any particular time or as to the length of time that will be
required to complete the sale of all shares of Common Stock offered, and
significant changes may occur in the estimated pro forma market value of the
Common Stock, together with corresponding changes in the offering price, the
number of shares being offered, and the net proceeds realized from the sale of
the Common Stock. The Plan requires that the Conversion be completed within 24
months after the date of approval of the Plan by the Bank's members.
Subscription Offering
In accordance with North Carolina conversion regulations, non-transferable
Subscription Rights have been granted under the Plan to the following persons in
the following order of priority: (i) the Bank's Eligible Account Holders, who
are depositors as of September 30, 1996 who had aggregate deposits at the close
of business on such date of at least $50.00 ("Qualifying Deposits"); (ii) the
Bank's Supplemental Eligible Account Holders, who are depositors as of December
31, 1997 who had Qualifying Deposits on such date; (iii) the Bank's Other
Members, who are depositor and borrower members as of ______________, 1998, the
voting record date for the Special Meeting, who are not Eligible Account Holders
or Supplemental Eligible Account Holders; and (iv) directors, officers and
employees of the Bank who are not Eligible Account Holders, Supplemental
Eligible Account Holders or Other Members, in the priorities and subject to the
limitations described herein. All subscriptions received will be subject to the
availability of Common Stock after satisfaction of subscriptions of all persons
having prior rights in the Subscription Offering, and to the maximum purchase
limitations and other terms and conditions set forth in the Plan and described
below.
In order to ensure proper identification of Subscription Rights, it is the
responsibility of subscribers in the Subscription Offering to provide correct
account verification information on the Order Forms.
Eligible Account Holders. Each Eligible Account Holder has been granted,
without payment therefor, non-transferable Subscription Rights to purchase
Common Stock up to the maximum purchase limitation described in "--Minimum and
Maximum Purchase Limitations." If Eligible Account Holders subscribe for more
shares of Common Stock than are available for purchase, the shares offered will
first
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be allocated among the subscribing Eligible Account Holders so as to enable each
subscribing Eligible Account Holder to the extent possible, to purchase the
number of shares necessary to make his or her total allocation of Common Stock
equal to the lesser of 100 shares of Common Stock or the number of shares
subscribed for by such Eligible Account Holder. Any shares remaining after such
allocation will be allocated among the subscribing Eligible Account Holders
whose subscriptions remain unsatisfied in the proportion that each such Eligible
Account Holder's Qualifying Deposits bears to the total of the Qualifying
Deposits of all such Eligible Account Holders.
Supplemental Eligible Account Holders. To the extent that shares remain
available for purchase after satisfaction of subscriptions of Eligible Account
Holders, each Supplemental Eligible Account Holder has been granted, without
payment therefor, non-transferable Subscription Rights to purchase Common Stock
up to the maximum purchase limitation described in "-- Minimum and Maximum
Purchase Limitations." If Supplemental Eligible Account Holders subscribe for
more shares of Common Stock than are available for purchase, the shares offered
will first be allocated among the subscribing Supplemental Eligible Account
Holders so as to enable each subscribing Supplemental Eligible Account Holder to
the extent possible, to purchase the number of shares necessary to make his or
her total allocation of Common Stock equal to the lesser of 100 shares of Common
Stock or the number of shares subscribed for by such Supplemental Eligible
Account Holder. Any shares remaining after such allocation will be allocated
among the subscribing Supplemental Eligible Account Holders whose subscriptions
remain unsatisfied in the proportion that each such Supplemental Eligible
Account Holder's Qualifying Deposits bears to the total of the Qualifying
Deposits of all such Supplemental Eligible Account Holders.
Other Members. To the extent that shares remain available for purchase
after satisfaction of subscriptions of Eligible Account Holders and Supplemental
Eligible Account Holders, members of the Bank as of ________________, 1998 (the
voting record date for the Special Meeting), other than Eligible Account Holders
and Supplemental Eligible Account Holders (Other Members) have each been
granted, without payment therefor, non-transferable Subscription Rights to
purchase Common Stock up to the maximum purchase limitation described in "--
Minimum and Maximum Purchase Limitations." If Other Members subscribe for more
shares of Common Stock than remain available for purchase by Other Members,
shares will be allocated among the subscribing Other Members in the proportion
that the number of votes eligible to be cast by each Other Member bears to the
total number of votes eligible to be cast at the Special Meeting by all Other
Members whose subscriptions remain unsatisfied.
Employees, Officers, and Directors. To the extent that shares remain
available for purchase after satisfaction of subscriptions of Eligible Account
Holders, Supplemental Eligible Account Holders and Other Members, the Bank's
employees, officers and directors who are not Eligible Account Holders,
Supplemental Eligible Account Holders or Other Members have each been granted,
without payment therefor, non-transferable Subscription Rights to purchase
Common Stock up to the maximum purchase limitation described in "-- Minimum and
Maximum Purchase Limitations." If more shares are subscribed for by such
employees, officers and directors than are available for purchase by them, the
available shares will be allocated among subscribing employees, officers and
directors pro rata on the basis of the amount of their respective subscriptions.
Community Offering
Any shares of Common Stock which remain unsubscribed for in the
Subscription Offering may be offered by the Company to members of the general
public in the Community Offering, which may commence at any time after
commencement of the Subscription Offering, with priority given to natural
persons and trusts of natural persons residing or located in Anson County in
North Carolina (the Local Community), including IRA accounts, Keogh accounts and
similar retirement accounts established for the benefit of natural persons who
are residents of, the Local Community. The Community Offering may
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terminate at the Expiration Time or at any time thereafter, but no later than
________________, 1998, unless further extended with the consent of the
Administrator. The opportunity to subscribe for shares of Common Stock in the
Community Offering is subject to the right of the Bank and the Company, in their
sole discretion, to accept or reject any such orders, in whole or in part,
either at the time of receipt of an order or as soon as practicable following
the termination of the Community Offering. In the event the Bank and the Company
reject any such orders after receipt, subscribers will be promptly notified and
all funds submitted with subscriptions will be returned with interest at the
Bank's passbook savings rate.
In the event that subscriptions by subscribers in the Community Offering
whose orders would otherwise be accepted exceed the shares available for
purchase in the Community Offering, then subscriptions of natural persons and
trusts of natural persons residing in the Local Community, including IRAs, Keogh
accounts and similar retirement accounts established for the benefit of natural
persons who are residents of the Local Community ("First Priority Community
Subscribers") will be filled in full up to applicable purchase limitations (to
the extent such subscriptions are not rejected by the Bank and the Company)
prior to any allocation to other subscribers in the Community Offering.
In the event of an oversubscription by First Priority Community Subscribers
whose orders would otherwise be accepted, shares of Common Stock will be
allocated first to each First Priority Community Subscriber whose order is
accepted in full or in part by the Bank and the Company in the entire amount of
such order up to a number of shares no greater than 7,500 shares, which number
shall be determined by the Board of Directors of the Bank prior to the time the
Conversion is consummated with the intent to provide for a wide distribution of
shares among such subscribers. Any shares remaining after such allocation will
be allocated to each First Priority Community Subscriber whose order is accepted
in full or in part on an equal number of shares basis until all orders are
filled. Such allocation shall also be applied to subscriptions by other
subscribers in the Community Offering, in the event shares are available for
such subscribers but there is an oversubscription by them.
In order to ensure proper allocation of shares in the event of an
oversubscription, it is the responsibility of subscribers in the Community
Offering to provide correct addresses of residence on the Order Forms.
Syndicated Community Offering
The Plan provides that, if necessary, all shares of Common Stock not
purchased in the Subscription and Community Offering, if any, may be offered for
sale to the general public in a Syndicated Community Offering through a
syndicate of registered broker-dealers as selected dealers ("Selected Dealers")
to be formed and managed by Trident Securities acting as agent of the Company in
the sale of the Common Stock. The Company and the Bank have the right to reject
orders, in whole or in part, in their sole discretion in the Syndicated
Community Offering. Neither Trident Securities nor any registered broker-dealer
shall have any obligation to take or purchase any shares of the Common Stock in
the Syndicated Community Offering; however, Trident Securities has agreed to use
its best efforts in the sale of shares in the Syndicated Community Offering.
Common Stock sold in the Syndicated Community Offering will be sold at the
purchase price of $10.00 per share which is the same price as all other shares
being offered in the Conversion.
It is estimated that the Selected Dealers will receive a negotiated
commission based on the amount of Common Stock sold by the Selected Dealer,
payable by the Company. During the Syndicated Community Offering, Selected
Dealers may only solicit indications of interest from their customers to place
orders with the Company as of a certain date (the "Order Date") for the purchase
of shares of Common Stock. When and if Trident Securities and the Company
believe that enough indications and orders have
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<PAGE>
been received in the Offering to consummate the Conversion, Trident Securities
will request, as of the Order Date, Selected Dealers to submit orders to
purchase shares for which they have received indications of interest from their
customers. Selected Dealers will send confirmations of the orders to such
customers on the next business day after the Order Date. Selected Dealers will
debit the accounts of their customers on a date which will be three business
days from the Order Date ("Debit Date"). Customers who authorize Selected
Dealers to debit their brokerage accounts are required to have the funds for
payment in their account on but not before the Debit Date. On the next business
day following the Debit Date, Selected Dealers will remit funds to the account
that the Company established for each Selected Dealer. After payment has been
received by the Company from Selected Dealers, funds will earn interest at the
Bank's passbook savings rate until the consummation of the Conversion. In the
event the Conversion is not consummated as described above, funds with interest
will be returned promptly to the Selected Dealers, who, in turn, will promptly
credit their customers' brokerage accounts.
The Syndicated Community Offering may close at any time after the
Expiration Time at the discretion of the Bank and the Company, but in no case
later than ____________________, 1998.
Fractional Shares
In making allocations in the event of oversubscriptions, all computations
will be rounded down to the nearest whole share; no fractional shares will be
issued. Excess and other amounts sent by subscribers which are not used to
satisfy subscriptions will be refunded with interest at the Bank's passbook
savings rate, and amounts designated for withdrawal from deposit accounts will
be released.
Purchase Price of Common Stock and Number of Shares Offered
The purchase price of shares of Common Stock sold in the Offering will be
$10.00 per share. The purchase price was determined by the Boards of Directors
of the Company and the Bank in consultation with the Bank's financial advisor
and sales agent, Trident Securities. The North Carolina regulations governing
conversions of North Carolina-chartered mutual savings banks to stock form
require that the aggregate purchase price of the shares of Common Stock of the
Company sold in connection with the Conversion be equal to not less than the
minimum, nor more than the maximum, of the Estimated Valuation Range which is
established by an independent appraisal in the Conversion and is described
below; provided, however, that with the consent of the Administrator and the
FDIC the aggregate purchase price of the Common Stock sold may be increased to
up to 15% above the maximum of the Estimated Valuation Range, without a
resolicitation of subscribers or any right to cancel, rescind or change
subscription orders, to reflect changes in market and financial conditions
following commencement of the Subscription Offering.
FDIC rules with respect to appraisals require that the independent
appraisal must include a complete and detailed description of the elements of
the appraisal report, justification for the methodology employed and sufficient
support for the conclusions reached. The appraisal report must include a full
discussion of each peer group member and documented analytical evidence
supporting variances from peer group statistics. The appraisal report must also
include a complete analysis of the converting institution's pro forma earnings,
which should include the institution's full potential once it fully deploys the
capital from the Conversion pursuant to its business plan.
The Bank has retained Ferguson, an independent appraisal firm experienced
in the valuation and appraisal of savings institutions and their holding
companies, to prepare an appraisal of the pro forma market value of the Bank and
the Company and to assist the Bank in preparing a business plan. For its
services in determining such valuation and assisting with the business plan,
Ferguson will receive an aggregate fee of $25,000 and will be reimbursed for its
out-of-pocket expenses.
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Ferguson has informed the Bank that its appraisal has been made in reliance
upon the information contained in this Prospectus, including the financial
statements of the Bank. Ferguson has further informed the Bank that it also
considered the following factors, among others, in making the appraisal: (i) the
present and projected operating results and financial condition of the Company
and the Bank; (ii) the economic and demographic conditions in the Bank's
existing market area; (iii) certain historical, financial and other information
relating to the Bank; (iv) the proposed dividend policy of the Company; (v) a
comparative evaluation of the operating and financial statistics of the Bank
with those of other savings institutions; (vi) the aggregate size of the
offering of the Common Stock; and (vii) the trading market for the securities of
institutions Ferguson believes to be comparable in relevant respects to the
Company and the Bank and general conditions in the markets for such securities.
In addition, Ferguson has advised the Bank that it has considered the effect of
the Conversion on the net worth and earnings potential of the Company and the
Bank.
On the basis of its consideration of the above factors, Ferguson has
advised the Bank that, in its opinion, at February 27, 1998, the Estimated
Valuation Range of the Bank and the Company was from a minimum of $5,610,000 to
a maximum of $7,590,000, with a midpoint of $6,600,000. Based upon such
valuation and a purchase price for shares offered in the Conversion of $10.00
per share, the number of shares to be offered ranges from a minimum of 561,000
shares to a maximum of 759,000 shares, with a midpoint of 660,000 shares.
The Board of Directors of the Bank has reviewed the methodology and
assumptions used by Ferguson in preparing the appraisal and has determined that
the Estimated Valuation Range, as well as the methodology and assumptions used,
were reasonable and appropriate.
Upon completion of the Offering, Ferguson will confirm or update its
valuation of the estimated aggregate pro forma market value of the Bank and the
Company. Based on the confirmed or updated appraisal, a determination will be
made of the total number of shares of Common Stock which shall be offered and
sold in the Conversion.
With the consent of the Administrator and the FDIC, the aggregate price of
the shares sold in the Conversion may be increased by up to 15% above the
maximum of the Estimated Valuation Range, or to $8,728,500 (872,850 shares),
without a resolicitation of subscribers and without any right to cancel, rescind
or change subscription orders, to reflect changes in market and financial
conditions following commencement of the Subscription Offering.
No sale of shares of Common Stock may be consummated unless, after the
expiration of the offering period, Ferguson confirms to the Bank, the Company,
the Administrator and the FDIC, that, to the best of its knowledge, nothing of a
material nature has occurred which, taking into account all relevant factors,
would cause Ferguson to conclude that the aggregate purchase price of the Common
Stock sold in the Conversion is incompatible with its estimate of the aggregate
pro forma market value of the Bank and the Company at the conclusion of the
Offering. If the aggregate pro forma market value of the Bank and the Company
as of such date is within the Estimated Valuation Range (or, with the consent of
the Administrator and FDIC, not more than 15% above the maximum of the Estimated
Valuation Range), then such pro forma market value will determine the number of
shares of Common Stock to be sold in the Conversion. If there has occurred a
change in the aggregate pro forma market value of the Bank and the Company so
that the aggregate pro forma market value is below the minimum of the Estimated
Valuation Range or more than 15% above the maximum of the Estimated Valuation
Range, a resolicitation of subscribers may be made based upon a new Estimated
Valuation Range, the Plan may be terminated or such other actions as the
Administrator and the FDIC may permit may be taken.
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In the event of a resolicitation, subscribers would be given a specified
time period within which to respond to the resolicitation. If a subscriber
fails to respond to the resolicitation by the end of such period, the
subscription of such subscriber will be canceled, funds submitted with the
subscription will be refunded promptly with interest at the Bank's passbook
savings rate, and holds on accounts from which withdrawals were designated will
be released. Any such resolicitation will be by means of an amended prospectus
filed with the SEC. A resolicitation may delay completion of the Conversion.
If the Plan is terminated, all funds will be returned promptly with interest at
the Bank's passbook savings rate from the date payment was deemed received, and
holds on funds authorized for withdrawal from deposit accounts will be released.
See "-- Exercise of Subscription Rights and Purchases in the Community
Offering."
The valuation by Ferguson is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing Common Stock.
Ferguson did not independently verify the financial statements and other
information provided by the Bank, nor did Ferguson value independently the
assets or liabilities of the Bank. The valuation considers the Bank as a going
concern and should not be considered as an indication of the liquidation value
of the Bank or the Company. Moreover, because such valuation is necessarily
based upon estimates and projections of a number of matters, all of which are
subject to change from time to time, no assurance can be given that persons
purchasing such shares in the Conversion will thereafter be able to sell shares
at prices in the range of the foregoing valuation of the pro forma market value
thereof.
A copy of the complete appraisal by Ferguson is on file and available for
inspection at the office of the Savings Institutions Division of the North
Carolina Department of Commerce, Tower Building, Suite 301, 1110 Navaho Drive,
Raleigh, North Carolina 27609. A copy is also available for inspection at the
Stock Information Center, 211 South Greene Street, Wadesboro, North Carolina
28170. A copy of the appraisal has also been filed as an exhibit to the
Registration Statement filed with the SEC with respect to the Common Stock
offered hereby. See "ADDITIONAL INFORMATION" in the Prospectus.
Exercise of Subscription Rights and Purchases in Community Offering
In order for Subscription Rights to be effectively exercised in the
Subscription Offering and in order to purchase in the Subscription Offering, the
original signed Order Forms (including an original signed form of certification)
and the required payment for the aggregate dollar amount of Common Stock desired
or appropriate instructions authorizing withdrawal from one or more the Bank
deposit accounts (other than negotiable order of withdrawal accounts or other
demand deposit accounts), must be received by the Bank by the Expiration Time,
which is 12:00 noon, Eastern Time, on ________________, 1998. Subscription
Rights (i) for which the Bank does not receive original signed Order Forms by
the Expiration Time (unless such time is extended), or (ii) for which Order
Forms are executed defectively or are not accompanied by full payment (or
appropriate withdrawal instructions) for subscribed shares, will expire whether
or not the Bank has been able to locate the persons entitled to such rights. In
order to purchase in the Community Offering, the Order Forms, accompanied by the
required payment for the aggregate dollar amount of Common Stock desired or
appropriate instructions authorizing withdrawal from one or more of the Bank's
deposit accounts (other than negotiable order of withdrawal accounts or other
demand deposit accounts), must be received by the Bank prior to the time the
Community Offering terminates, which could be at any time at or subsequent to
the Expiration Time. No orders will be accepted from persons who do not have
Subscription Rights in the Subscription Offering unless a Community Offering is
commenced.
In the event that an Order Form is not delivered and is returned to the
Bank by the United States Postal Service (or the Bank is unable to locate the
addressee), is not received or is received after the Expiration Time, is
defectively completed or executed, or is not accompanied by full payment for the
shares subscribed for (including instances where a savings account or
certificate balance from which withdrawal is authorized is insufficient to fund
the amount of such required payment), the subscription rights for the
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<PAGE>
person to whom such rights have been granted will lapse as though that person
failed to return the completed Order Form within the time period specified. The
Bank may, but will not be required to, waive any irregularity on any Order Form
or require the submission of corrected Order Forms or the remittance of full
payment for subscribed shares by such date as the Bank specify. The waiver of an
irregularity on an order form in no way obligates the Bank to waive any other
irregularity on that, or any irregularity on any other Order Form. Waivers will
be considered on a case-by-case basis. Photocopies of Order Forms, including
copies sent by facsimile, payments from private third parties, payments made by
wire transfer or electronic transfers of funds will not be accepted. The Bank's
interpretation of the terms and conditions of the Plan and of the acceptability
of the Order Forms will be final. The Bank has the right to investigate any
irregularity on any Order Form.
Executed Order Forms once received by the Bank, may not be modified,
amended or rescinded without the consent of the Bank. The Bank has the right to
extend the subscription period subject to applicable regulations, unless
otherwise ordered by the Administrator, or to waive or permit correction of
incomplete or improperly executed Order Forms, but does not represent that it
will do so.
The amount to be remitted with the Order Forms shall be the aggregate
dollar amount that a subscriber or purchaser desires to invest in the
Subscription and Community Offering. Complete payment must accompany all
completed Order Forms submitted in the Subscription and Community Offering in
order for subscriptions to be valid. See "-- Purchase Price of Common Stock and
Number of Shares Offered" in the Prospectus.
Payment for shares will be permitted to be made by any of the following
means: (i) in cash, if delivered in person to either office of the Bank; (ii) by
check, bank draft, negotiable order of withdrawal or money order, provided that
the foregoing will only be accepted subject to collection and payment; or (iii)
by appropriate authorization of withdrawal from any deposit account in the Bank
(other than a negotiable order of withdrawal account or other demand deposit
account). Order Forms directing that payment for shares be made by
authorization of withdrawal will be accepted only if, at the time the Order
Forms are received, there exists sufficient funds in the account from which
withdrawal is authorized to pay the full purchase price for the number of shares
ordered. In order to ensure proper identification of Subscription Rights and
proper allocations in the event of an oversubscription, it is the responsibility
of subscribers to provide correct account verification information on the Order
Forms. Order Forms submitted by unauthorized purchasers or in amounts exceeding
purchase limitations will not be honored.
For purposes of determining the withdrawal balance of deposit accounts from
which withdrawals have been authorized, such withdrawals will be deemed to have
been made upon receipt of appropriate authorization therefor, but interest will
be paid by the Bank on the amount deemed to have been withdrawn at the
contractual rate of interest paid on such accounts until the date on which the
Conversion is completed or terminated.
Interest will be paid by the Bank on payments for Common Stock made in cash
or by check, bank draft, negotiable order of withdrawal or money order at the
Bank's passbook savings rate. Such interest shall be paid from the date the
order is accepted for processing and payment in good funds is received by the
Bank until consummation or termination of the Conversion. The Bank shall be
entitled to invest all amounts paid on subscriptions for Common Stock for its
own account until completion or termination of the Conversion. The Bank may not
knowingly lend funds or otherwise extend credit to any person to purchase Common
Stock. After amounts submitted for payment are applied to the purchase price
for shares sold, they will no longer earn interest, and they will not be insured
by the FDIC or any other government agency or other entity.
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<PAGE>
The Order Forms contain appropriate means by which authorization of
withdrawals from deposit accounts may be made to pay for subscribed shares.
Once such a withdrawal has been authorized, none of the designated withdrawal
amount may be withdrawn (except by the Bank as payment for Common Stock) until
the Conversion is completed or terminated. Savings accounts will be permitted
to be established for the purpose of making payment for subscribed shares of
Common Stock. Funds authorized for withdrawal will continue to earn interest at
the applicable contract interest rate until completion or termination of the
Conversion or, in the case of an order submitted in the Community Offering,
until it is determined that such order cannot or will not be accepted.
Notwithstanding any regulatory provision regarding penalties for early
withdrawal from certificate accounts, payment for subscribed shares of Common
Stock will be permitted through authorization of withdrawals from such accounts
without the assessment of such penalties. However, if after such withdrawal the
applicable minimum balance requirement ceases to be satisfied, such certificate
account will be canceled and the remaining balance thereof will earn interest at
the Bank's passbook savings rate.
Upon completion or termination of the Conversion, the Bank will return to
subscribers all amounts paid with subscriptions which are not applied to the
purchase price for shares, plus interest at its passbook savings rate from the
date good funds are received until the consummation or termination of the
Conversion, and the Bank will release deposit account withdrawal orders given in
connection with the subscriptions to the extent funds are not withdrawn and
applied toward the purchase of shares.
Delivery of Stock Certificates
Certificates representing Common Stock issued in the Conversion will be
mailed by the Company's transfer agent to persons entitled thereto at the
address of such persons appearing on the Order Forms as soon as practicable
following consummation of the Conversion. Any certificates returned as
undeliverable will be held by the Company until claimed by persons legally
entitled thereto or otherwise disposed of in accordance with applicable law.
Until certificates for Common Stock are available and delivered to subscribers,
subscribers may not be able to sell the shares of Common Stock for which they
have subscribed, even though trading of the Common Stock may have commenced.
Shares sold prior to receipt of a stock certificate are the responsibility of
the purchaser. Allocations of Common Stock will be deemed final only upon
stockholder receipt of the certificate representing the Common Stock.
Persons in Non-Qualified or Foreign Jurisdictions
The Company will make reasonable efforts to comply with the securities laws
of all states of the United States in which Eligible Account Holders,
Supplemental Eligible Account Holders, or Other Members entitled to subscribe
for shares of Common Stock reside. However, no shares of Common Stock or
Subscription Rights under the Plan will be offered or sold in a foreign country,
or in a state in the United States (i) where a small number of persons otherwise
eligible to subscribe for shares under the Plan reside or (ii) if the Company
determines that compliance with the securities laws of such state would be
impracticable for reasons of cost or otherwise, including, but not limited to, a
requirement that the Company, the Bank or any employee or representative thereof
register as a broker, dealer, agent or salesperson or register or otherwise
qualify the Subscription Rights or Common Stock for sale in such state. No
payments will be made in lieu of the granting of Subscription Rights to persons
residing in such jurisdictions.
Marketing Arrangements
The Bank has retained Trident Securities to consult with and advise the
Bank and the Company and to assist the Company, on a best-efforts basis, in the
marketing of shares in the Offering. Trident Securities is a broker-dealer
registered with the SEC and a member of the NASD. Trident Securities is
headquartered in Raleigh, North Carolina, and its telephone number is (919) 781-
8900. Trident Securities
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<PAGE>
will assist the Bank and the Company in the Conversion as follows: (i) it will
act as marketing advisor with respect to the Subscription Offering and will
assist the Company on a best-efforts basis in the marketing of the Common Stock
in the Community Offering and Syndicated Community Offering; (ii) members of its
staff will conduct training sessions to educate directors, officers and
employees of the Bank regarding the Conversion process; and (iii) it will
provide assistance in the establishment and supervision of the Stock Information
Center, including training staff to record and tabulate orders for the purchase
of Common Stock and to respond to customer inquiries.
For rendering its services, the Bank has agreed to pay Trident Securities a
commission equal to 2.5% of the aggregate dollar amount of Common Stock sold in
the Subscription and Community Offering, excluding shares purchased by
directors, executive officers and their "associates" (as defined in the Plan).
The Bank has also agreed to pay to Selected Dealers, if any, negotiated
commissions.
The Bank has agreed to reimburse Trident Securities for its reasonable out-
of-pocket expenses, including but not limited to travel, communications, legal
fees and postage, and to indemnify Trident Securities against certain claims or
liabilities, including certain liabilities under the Securities Act. Trident
has agreed that the Bank is not required to pay its legal fees to the extent
they exceed $27,500 or its other out of pocket expenses to the extent they
exceed $10,000. Total fees and commissions to Trident Securities are expected
to be between $126,855 and $204,788 at the minimum and 15% above the maximum,
respectively, of the Estimated Valuation Range. See "PRO FORMA DATA" in the
Prospectus for the assumptions used to determine these estimates.
Sales of Common Stock will be made primarily through registered
representatives affiliated with Trident Securities or by the broker-dealers
managed by Trident Securities. In addition, subject to applicable law,
executive officers of the Company and the Bank may participate in the
solicitation of offers to purchase Common Stock. Other employees of the Bank
may participate in the Offering in clerical capacities, providing administrative
support in effecting sales transactions and answering questions of a mechanical
nature relating to the proper execution of the Order Forms. Other questions of
prospective purchasers, including questions as to the advisability or nature of
the investment, will be directed to registered representatives. Such other
employees have been instructed not to solicit offers to purchase Common Stock or
provide advice regarding the purchase of Common Stock. A Stock Information
Center will be established in the Bank's office, in an area separate from the
Bank's banking operations. Employees will inform prospective purchasers that
their questions should be directed to the Stock Information Center and will
provide such persons with the telephone number of the Stock Information Center.
Stock orders will be accepted at the Bank's office and will be promptly
forwarded to the Stock Information Center for processing. Sales of Common Stock
by registered representatives will be made from the Stock Information Center.
In addition, the Bank may hire one or more temporary clerical persons to assist
in typing, opening mail, answering the phone, and with other clerical duties.
An employee of the Bank will also be present at the Stock Information Center to
process funds and answer questions regarding payment for stock, including
verification of account numbers in the case of payment by withdrawal
authorization and similar matters. Subject to applicable state law, the Company
will rely on Rule 3a4-1 under the Exchange Act, and sales of Common Stock will
be conducted within the requirements of Rule 3a4-1, so as to permit officers and
current full and part-time the Bank employees to participate in the sale of
Common Stock. No officer, director or employee of the Company or the Bank will
be compensated in connection with his or her participation by the payment of
commissions or other remuneration based either directly or indirectly on the
transactions in the Common Stock.
The engagement of Trident Securities and the work performed by Trident
Securities pursuant to its engagement should not be construed by purchasers of
Common Stock as constituting an endorsement or recommendation relating to such
investment or a verification of the accuracy or completeness of information
contained in this Prospectus.
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Minimum and Maximum Purchase Limitations
Each person subscribing for Common Stock in the Conversion must subscribe
for at least fifty shares of the Common Stock to be offered in the Conversion.
In addition, the maximum number of shares of Common Stock which may be purchased
in the Conversion by (i) any person or entity, (ii) persons or entities
exercising Subscription Rights through a single account or (iii) group of
persons or entities otherwise acting in concert, is 10,000 shares. In addition,
no person or entity, or group of persons or entities acting in concert, together
with any associate (as defined in the Plan), may subscribe for more than 15,000
shares of Common Stock sold in the Conversion. The Board of Directors of the
Bank may in its absolute discretion (i) reduce the above-described 10,000 and
15,000 share maximum purchase limitations to an amount not less than 1% of the
number of shares offered and sold in the Conversion or (ii) increase such 10,000
and 15,000 share maximum purchase limitations to an amount of up to 5% of the
shares of Common Stock offered and sold. Any reduction or increase in the
maximum purchase limitation by the Bank's Board of Directors may occur at any
time prior to consummation of the Conversion, either before or after the Special
Meeting on ________________, 1998. In the event the 10,000 or 15,000 share
maximum purchase limitation is increased, any subscriber or group of subscribers
in the Subscription, Community or Syndicated Community Offering who has
subscribed for the maximum amount which is increased, and certain other large
subscribers in the discretion of the Company, shall be given the opportunity to
increase their subscriptions up to the then applicable maximum purchase
limitation.
The Plan further provides that for purposes of the foregoing limitations
the term "associate" is used to indicate any of the following relationships with
a person:
(i) any relative or spouse of such person, or any relative of such
spouse, who has the same home as such person or who is a director or
officer of the Bank, the Company or any subsidiary of the Bank or of
the Company;
(ii) any corporation or organization (other than the Bank, the Company or
a majority-owned subsidiary of the Bank or the Company) of which the
person is an officer or partner or is, directly or indirectly, the
beneficial owner of 10% or more of any class of equity security; and
(iii) any trust or other estate in which such person has a substantial
beneficial interest or as to which such person serves as a trustee
or in a similar fiduciary capacity, except for any tax-qualified
employee stock benefit plan or any charitable trust which is exempt
from federal taxation pursuant to Section 501(c)(3) of the Code.
For purposes of the foregoing limitations, directors and officers of the
Bank or the Company shall not be deemed to be associates or a group of persons
acting in concert solely as a result of their serving in such capacities.
For purposes of the foregoing limitations, persons will be deemed to be
"acting in concert" if they are (i) knowingly participating in a joint activity
or interdependent conscious parallel action towards a common goal (whether or
not pursuant to an express agreement), with respect to the purchase, ownership,
voting or sale of Common Stock or (ii) engaged in a combination or pooling of
voting or other interests in the securities of the Company for a common purpose
pursuant to any contract, understanding, relationship, agreement or other
arrangement, whether written or otherwise. The Company and the Bank will
presume that certain persons are acting in concert based upon, among other
things, joint account relationships, accounts with the same address registration
and the fact that such persons have filed joint Schedules 13D with the SEC with
respect to other companies.
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<PAGE>
Approval, Interpretation, Amendment and Termination
Under the Plan, the Administrator's approval thereof, and applicable North
Carolina conversion regulations, consummation of the Conversion is subject to
satisfaction of certain conditions, including the following: (i) approval of the
Plan by the affirmative vote of a majority of the votes eligible to be cast by
members of the Bank at the Special Meeting; (ii) sale of shares of Common Stock
for an aggregate purchase price equal to not less than the minimum or more than
the maximum of the Estimated Valuation Range unless the aggregate purchase price
is increased to as much as 15% above the maximum with the consent of the
Administrator and FDIC, and (iii) receipt by the Company and the Bank of
favorable opinions of counsel or other tax advisor as to the federal and state
tax consequences of the Conversion. See "-- Income Tax Consequences."
If all conditions for consummation of the Conversion are not satisfied, no
Common Stock will be issued, the Bank will continue to operate as a North
Carolina-chartered mutual savings bank, all subscription funds will be promptly
returned with interest at the Bank's passbook savings rate, and all deposit
withdrawal authorizations (and holds placed on such accounts) will be canceled.
In such an event, the Company would not acquire control of the Bank.
All interpretations by the Bank and the Company of the Plan and of the
Order Forms and related materials for the Subscription and Community Offering
will be final, subject to the authority of the Administrator. The Bank and the
Company may reject Order Forms that are not properly completed. However, the
Company and the Bank retain the right, but will not be required, to waive
irregularities in submitted Order Forms or to require the submission of
corrected Order Forms or the remittance of full payment for all shares
subscribed for by such dates as they may specify. In addition, the Plan may be
substantively amended by a two-thirds vote of the Bank's Board of Directors at
any time prior to the Special Meeting, and at any time thereafter by a two-
thirds vote of the Bank's Board of Directors with the concurrence of the
Administrator and the FDIC. If the Bank determines upon the advice of counsel
and after consultation with the Administrator that any such amendment is
material, subscribers would be given the opportunity to increase, decrease or
cancel their subscriptions. Also, as required by the regulations of the
Administrator, the Plan provides that the transactions contemplated thereby may
be terminated by a two-thirds vote of the Bank's Board of Directors at any time
prior to the Special Meeting and may be terminated by a two-thirds vote of the
Bank's Board of Directors at any time thereafter but prior to the completion of
the Conversion with the concurrence of the Administrator, notwithstanding
approval of the Plan by the Members at the Special Meeting.
Certain Restrictions on Transfer of Subscription Rights; False or Misleading
Order Forms
The Subscription Rights granted under the Plan are non-transferable.
Subscription Rights may be exercised only by the person to whom they are issued
and only for his or her own account. Persons exercising Subscription Rights are
required to certify that they are purchasing shares for their own accounts
within the purchase limitations set forth in the Plan and that they have no
agreement or understanding for the sale or transfer of such shares.
The Bank reserves the right to make an independent investigation of any
facts or circumstances brought to its attention that indicate or tend to
indicate that one or more persons acting independently or as a group acting in
concert may be attempting to violate or circumvent the regulatory prohibition on
transferability of Subscription Rights. The nature and extent of such
investigation will be at the Bank's sole discretion and the Bank may require a
holder of Subscription Rights to provide certified affidavits and other
documentation to satisfy the Bank that its Plan and North Carolina and federal
conversion regulations regarding nontransferability are not being subverted by
actions of holders of Subscription Rights. In extreme cases the Bank reserves
the right to seek legal advice from the General Counsel for the
20
<PAGE>
Administrator as to compliance with all regulations governing the Conversion,
including the nontransferability of Subscription Rights.
The Plan provides that, if the Bank's Board of Directors determines that a
subscriber (i) has submitted a false or misleading information on his or her
Order Forms or otherwise in connection with the attempted purchase of shares,
(ii) has attempted to purchase shares of Common Stock in violation of provisions
of the Plan or (iii) fails to cooperate with attempts by the Bank or the Company
or their employees or agents to verify information with respect to purchase
rights, the Board of Directors may reject the order of such subscriber.
Income Tax Consequences
The Bank has received an opinion from its special counsel, Brooks, Pierce,
McLendon, Humphrey & Leonard, L.L.P., of Greensboro, North Carolina, to the
effect that for federal income tax purposes: (i) the Conversion will constitute
a tax free reorganization with respect to the Bank and no gain or loss will be
recognized by the Bank either in its mutual or stock form; (ii) no gain or loss
will be recognized by the Bank upon the purchase of the Bank's stock by the
Company or upon the sale by the Company of its Common Stock; (iii) no gain or
loss will be recognized by the Bank's depositors with respect to their deposit
accounts at the Bank as a consequence of the Conversion; (iv) the tax basis of
depositors' deposit accounts at the Bank will not be changed as a result of the
Conversion; (v) assuming the Subscription Rights have no value, no gain or loss
will be recognized by Eligible Account Holders, Supplemental Eligible Account
Holders, Other Members, or directors, officers and employees of the Bank upon
either the issuance to them of the Subscription Rights or the exercise or lapse
thereof; (vi) no gain or loss will be recognized by Eligible Account Holders or
Supplemental Eligible Account Holders upon the distribution to them of interests
in the Liquidation Account; (vii) assuming the Subscription Rights have no
value, the tax basis for Common Stock purchased in the Conversion will be the
amount paid therefor; and (viii) the tax basis of interests in the Liquidation
Account will be zero. The Bank has been further advised by its special counsel,
Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., that the tax effects of
the Conversion under North Carolina tax laws will be consistent with the federal
income tax consequences.
Several of the foregoing legal opinions are premised on the assumption that
the Subscription Rights will have no value. The Bank has been advised by
Ferguson that, in its opinion, the Subscription Rights will not have any
ascertainable value, based on the fact that such rights are acquired by the
recipients without cost, are non-transferable, are of short duration and afford
the recipients the right only to purchase Common Stock at a price equal to its
estimated fair market value as of the date such rights are issued, which will be
the same price paid by all purchasers in the Conversion. The opinion of
Ferguson is not binding on the IRS and if the Subscription Rights were
ultimately determined to have ascertainable value, recipients of Subscription
Rights would have to include in gross income an amount equal to the value of the
Subscription Rights received by them. The basis of the Common Stock purchased
pursuant to Subscription Rights would be increased by the amount of income
realized with respect to the receipt or exercise of the Subscription Rights.
Moreover, recipients of Subscription Rights could then have to report the
transaction to the IRS. Each Eligible Account Holder, Supplemental Eligible
Account Holder, Other Member or other recipient of Subscription Rights is
encouraged to consult with his, her or its own tax advisor as to the tax
consequences in the event the Subscription Rights are deemed to have
ascertainable value.
No legal opinion has been or will be received with respect to any tax
consequences of the Conversion not specifically described above, including the
tax consequences to Eligible Account Holders, Supplemental Eligible Account
Holders, Other Members, other recipients of Subscription Rights or purchasers of
Common Stock under the laws of any other state, local or foreign taxing
jurisdiction to which they may be subject. Special counsel expresses no opinion
regarding the value of the Subscription Rights.
21
<PAGE>
STOCK PURCHASES BY DIRECTORS AND EXECUTIVE OFFICERS
Directors, officers and employees of the Bank will be entitled to subscribe
for shares of Common Stock in the Subscription Offering in their capacities as
such and to the extent they qualify as Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members. Shares purchased by such persons
will be purchased at the same price per share--$10.00--that will be paid by
other purchasers in the Offering. They may also purchase Common Stock in the
Community Offering or in the Syndicated Community Offering, if any, subject to
the maximum purchase limitations applicable to all purchasers of shares in the
Conversion.
The following table sets forth for the named executive officer and each of
the directors of the Bank who intends to purchase Common Stock, and for all
executive officers and directors as a group (including in each case, except as
otherwise noted, all associates of such persons) the aggregate dollar amount of
Common Stock for which such director or executive officer has informed the Bank
he intends to subscribe. The amounts reflected in the table are estimates only
and the actual shares of Common Stock actually subscribed for by the listed
individuals may differ from the amounts reflected in the table. The following
table assumes that sufficient shares will be available to satisfy the
subscriptions of the Bank's executive officers and directors.
<TABLE>
<CAPTION>
Anticipated
Anticipated Number
Amount of Shares As a Percent
to be Paid to be of Shares
Name for Shares Purchased/(1)/ Issued/(2)/
- ---- ----------- -------------- -------------
<S> <C> <C> <C>
Preston A. Burns, Chairman $100,000 10,000 1.52%
John J. Crawford, Director 100,000 10,000 1.52%
W. Kenneth Huntley, Director 50,000 5,000 0.76%
Emmett S. Patterson, Director 10,000 1,000 0.15%
John R. Potter, Director 25,000 2,500 0.38%
H. Patrick Taylor, Jr., Director 150,000 15,000 2.27%
Eugene M. Ward, Director, President 100,000 10,000 1.52%
and Chief Executive Officer
All executive officers and directors $537,000 53,700 8.14%
as a group (9 persons) -------- ------ -----
</TABLE>
- ---------------------
(1) Grants under the proposed MRP and shares subject to option under the Option
Plan, if approved by the stockholders of the Company at a meeting of
stockholders following the Conversion, are not aggregated with shares of
Common Stock purchased by the executive officers and directors listed
above. Under the proposed MRP, if approved by the stockholders of the
Company, a
22
<PAGE>
number of shares equal to 4% of the shares issued in the Conversion are
expected to be issued to directors and certain employees of the Bank. Such
shares could be purchased in the open market at any time following approval
of the MRP by the Company's stockholders or could be issued out of
authorized but unissued shares. Recipients of shares under the MRP will
have voting control over such shares regardless of whether such shares have
vested. See "MANAGEMENT OF THE BANK -- Proposed Management Recognition
Plan" in the Prospectus.
(2) Based upon the issuance of 660,000 shares of Common Stock which is the
number of shares to be issued at the midpoint of the Estimated Valuation
Range. The same individuals would subscribe for 9.57% of the shares issued
based upon the issuance of 561,000 shares of Common Stock which is the
number of shares to be issued at the minimum of the Estimated Valuation
Range.
Without the prior written consent of the Administrator, shares of Common
Stock purchased by directors or executive officers of the Bank in the Conversion
cannot be sold during a period of one year following the Conversion, except upon
death of the director or executive officer. Such restriction also applies to
any shares issued to such person as a stock dividend, stock split or otherwise
with respect to any of such originally restricted stock.
In addition, the North Carolina conversion regulations provide that
directors and executive officers and their associates are prohibited from
purchasing outstanding shares of Common Stock for a period of three years
following the Conversion, except from or through a broker or dealer registered
with the SEC or Secretary of State of North Carolina, unless the prior written
approval of the Administrator is obtained. This provision does not apply to
negotiated transactions involving more than 1% of the Company's outstanding
Common Stock or to purchases of stock made by or held by one or more tax-
qualified or non-tax-qualified employee stock benefit plans of the Bank or the
Company which may be attributable to individual executive officers or directors.
Purchases and sales of Common Stock by officers and directors will also be
subject to the short-swing trading prohibitions contained in Section 16(b) of
the Exchange Act, and the short-swing trading and other rules promulgated
pursuant to the Exchange Act.
BENEFITS TO DIRECTORS AND EMPLOYEES
In connection with the Conversion, certain benefits will be provided to
directors, officers and employees of the Bank.
Employment Agreement. In connection with the Conversion, the Bank expects
to enter into an employment agreement with Eugene M. Ward, President and Chief
Executive Officer. The employment agreement provides for an initial annual
salary of $________. See "MANAGEMENT OF THE BANK --Employment Agreement" in the
Prospectus. Mr. Ward, along with all other employees, is also eligible to
receive bonuses as declared by the Bank's Board of Directors. See "MANAGEMENT
OF THE BANK -- Bonus Compensation" in the Prospectus.
Severance Plan. In connection with the Conversion, the Bank plans to adopt
a Severance Plan for the benefit of its full-time employees, who at the time of
a "change in control" (as defined in the Severance Plan) have not entered into
an employment agreement with the Company or the Bank. The Severance Plan
provides that in the event there is a change in control and (i) the employment
of any eligible employee of the Bank is terminated in connection with, or within
24 months after the change in control, other than for cause, or (ii) an eligible
employee terminates his or her employment following a
23
<PAGE>
decrease in the level of such employee's annual base salary rate or a transfer
of such employee to a location more than 40 miles distant from the employee's
primary work station within 24 months after a change in control, the employee
shall be entitled to a severance benefit equal to the following: (a) employee
has been employed with the Bank less than 20 years, the employee shall receive a
severance benefit equal to the greater of (1) an amount equal to two weeks'
salary at the employee's existing salary rate multiplied times the employee's
years of service or (2) the amount of one month's salary at the employee's
salary rate at the time of termination; or the employee has been employed by the
Bank at least 20 years, the employee shall receive a severance benefit equal to
the greater (1) (1) an amount equal to two weeks' salary at the employee's
existing salary rate multiplied times the employee's years of service or (2) the
amount of two years salary at the employee's salary rate at the time of
termination. See "MANAGEMENT OF THE BANK -- Severance Plan" in the Prospectus.
MRP. Pursuant to the MRP, which is expected to be adopted by the Boards of
Directors of the Company and the Bank, directors and certain employees of the
Bank could receive restricted stock grants of a number of shares of Common Stock
equal to 4% of the shares issued in the Conversion (between 17,340 and 30,360
shares, assuming the issuance of between 561,000 and 759,000 shares). Assuming
that the shares issued pursuant to the MRP had a value of $10.00 per share, such
shares would have a value of between $170,340 and $303,600. Recipients of
restricted stock under the MRP will not have to pay for their restricted shares.
Under applicable regulations, if the proposed MRP is submitted to and
approved by the stockholders of the Company within one year after consummation
of the Conversion, (i) no employee of the Bank (including Mr. Ward) could
receive more than 25% of the shares issued under the MRP, or 7,590 shares,
assuming the issuance of 759,000 shares in the Conversion, (ii) the six non-
employee directors of the Bank could receive restricted stock grants for an
aggregate of not more than 25% of the shares issued under the MRP, or 7,590
shares, assuming the issuance of 759,000 shares in the Conversion and (iii) none
of the six non-employee directors of the Bank could receive individually more
than 5% of the shares issued under the MRP, or 1,518 shares, assuming the
issuance of 759,000 shares in the Conversion. Assuming the MRP shares had a
value of $10.00 per share, 7,590 shares would have a value of $75,900 and 1,518
shares would have a value of $15,180. If the MRP is submitted to and approved
by the Company's stockholders more than one year after consummation of the
Conversion, the regulatory percentage limitations set forth above would not
apply.
The MRP will only be implemented if approved by the stockholders of the
Company at a meeting of stockholders to be held no sooner than six months
following the Conversion. Recipients of restricted stock under the MRP will not
have to pay for their restricted shares. See "MANAGEMENT OF THE BANK" --
Proposed Management Recognition Plan" in the Prospectus.
Stock Options. Pursuant to the Stock Option Plan which is expected to be
adopted by the Boards of Directors of the Company and the Bank, directors and
certain employees of the Bank could receive options to purchase a number of
shares of Common Stock equal to 10% of the shares issued in the Conversion
(between 56,100 and 75,900 shares, assuming the issuance of between 561,000 and
759,000 shares).
Under applicable regulations, if the proposed Stock Option Plan is
submitted to and approved by the stockholders of the Company within one year
after consummation of the Conversion, (i) no employee of the Bank (including Mr.
Ward) could receive more than 25% of the options issued under the Stock Option
Plan, or options to purchase 18,975 shares, assuming the issuance of 759,000
shares in the Conversion, (ii) the six non-employee directors of the Bank could
not receive in the aggregate more than 25% of the options issued under the Stock
Option Plan, or options to purchase 18,975 shares, assuming the issuance of
759,000 shares in the Conversion, and (iii) none of the six non-employee
directors of the
24
<PAGE>
Bank could receive individually more than 5% of the options issued under the
Stock Option Plan, or options to purchase 3,795 shares, assuming the issuance of
759,000 shares in the Conversion. If the Stock Option Plan is submitted to and
approved by the Company's stockholders more than one year after consummation of
the Conversion, the regulatory percentage limitations set forth above would not
apply.
The Stock Option Plan will only be implemented if approved by the
stockholders of the Company at a meeting of stockholders to be held no sooner
than six months following the Conversion. The exercise price of the options
will be the fair market value of the Common Stock at the time the options are
granted (which will be after the Stock Option Plan is approved by the Company's
stockholders), and the options will have terms of ten years or less. Recipients
of options under the Stock Option Plan will not have to pay for the options
issued to them. See "MANAGEMENT OF THE BANK" -- Proposed Option Plan" in the
Prospectus.
USE OF PROCEEDS
Although the actual net proceeds from the sale of the Common Stock cannot
be determined until the Conversion is completed, it is presently estimated that
such net proceeds will be between $5.12 million and $7.05 million, based on the
current Estimated Valuation Range. If the gross proceeds of the shares sold are
increased to 15% above the maximum of the Estimated Valuation Range, it is
estimated that net proceeds will equal $8.16 million. See "PRO FORMA DATA" in
the Prospectus for the assumptions used to arrive at these amounts. The actual
net proceeds may vary materially from the estimated amounts described herein.
The Company expects to retain 50% of the proceeds of the Offering and will use
the balance to purchase the capital stock of the Bank to be issued in the
Conversion.
The Company expects to use the portion of the net proceeds it retains for
working capital and investment purposes. The Company does not expect to have
significant operating expenses and anticipates that initially it will invest the
net proceeds it retains primarily in interest-earning deposits, U.S. government,
federal agency and other marketable securities and mortgage-backed securities.
The types and amounts of such investments will vary from time to time based upon
the interest rate environment, asset/liability mix considerations and other
factors.
Net proceeds paid to the Bank initially will become part of the Bank's
general funds and will be invested primarily in mortgage and other loans, and
investments consisting primarily of interest-earning deposit balances, U.S.
government and federal agency obligations and other marketable securities in
accordance with the Bank's lending and investment policies. The relative
amounts to be invested in each of these types of investments will depend upon
loan demand, rates of return and asset/liability matching considerations at the
time the investments are to be made. Management is not able to predict the
yields which will be produced by the investment of the proceeds of the Offering
because such yields will be significantly influenced by general economic
conditions and the interest rate environment existing at the time the
investments are made. Remaining net proceeds paid to the Bank will be used for
general corporate purposes.
The proceeds of the Offering will result in an increase in the Bank's net
worth and regulatory capital and may enhance the potential for growth through
increased lending and investment activities, branch expansion, ATMs or
otherwise. The net proceeds retained by the Company could be used to support
the future expansion of operations of the Company through the opening of a
branch office in or adjacent to the Bank's primary market area. The Company has
no current plans to open any additional office. Payments for shares of Common
Stock of the Company made through the withdrawal of existing deposit accounts at
the Bank will not result in the receipt of new funds for investment by the Bank.
25
<PAGE>
Upon completion of the Conversion, the Board of Directors will have the
authority to adopt stock repurchase plans, subject to statutory and regulatory
requirements. Based upon facts and circumstances which may arise following the
Conversion, the Board of Directors may determine to repurchase stock in the
future. Such facts and circumstances may include but are not limited to (i)
market and economic factors such as the price at which the Common Stock is
trading, the volume of trading, the attractiveness of other investment
alternatives in terms of the rates of return and risks involved in the
investments, (ii) the ability to increase the book value and earnings per share
of the remaining outstanding shares, and improve the Company's return on equity;
(iii) the reduction of dilution to stockholders caused by having to issue
additional shares to cover the exercise of stock options or to fund employee
stock benefit plans; and (iv) any other circumstances in which repurchases would
be in the best interests of the Company and its stockholders.
Any stock repurchases will be subject to the determination of the Board of
Directors that both the Company and the Bank will be capitalized in excess of
applicable regulatory requirements after any such repurchases and that capital
will be adequate taking into account, among other things, the level of
nonperforming assets and other risks, the Company's and the Bank's current and
projected results of operations and asset/liability structure, the economic
environment and tax and other regulatory considerations. Federal regulations
require that, subject to certain exceptions, the Company must obtain approval of
the Federal Reserve prior to repurchasing Common Stock in excess of 10% of its
net worth during any twelve-month period. See "SUPERVISION AND REGULATION --
Regulation of the Company -- Dividend and Repurchase Limitations" in the
Prospectus.
The Company and the Bank have no present intention to file consolidated tax
returns which will preserve for the Company the ability to use a portion of the
proceeds to make a return of capital in the future. However, the Company has
not made any decision to pay such a return of capital. The Company and the Bank
have agreed to notify the FDIC before making a return of capital during the
first three years following the Conversion. See "DIVIDEND POLICY."
At any time following approval of the MRP by the Company's stockholders, it
is expected that the MRP may acquire a number of shares of Common Stock equal to
4% of the number of shares issued in the Conversion. See "MANAGEMENT OF THE
BANK -- Proposed Management Recognition Plan" in the Prospectus. Such shares
may be acquired in the open market or acquired through the Company's issuance of
authorized but unissued shares. In the event shares are acquired in the open
market, the funds for such purchase may be provided by the Bank from the
proceeds of the Conversion. It is estimated that between 20,400 and 30,360
shares may be acquired by the MRP Trust, assuming the issuance of between
561,000 and 759,000 shares, respectively, in the Conversion. If all such shares
were acquired by the MRP in the open market, and if such shares were acquired at
a price of $10.00 per share, the Bank would contribute between $204,000 and
$276,000, respectively, to the MRP for this purpose.
DIVIDEND POLICY
Upon Conversion, the Board of Directors of the Company will have the
authority to declare semiannual dividends on the Common Stock, subject to
statutory and regulatory requirements. The Company expects to pay annual
dividends on the Common Stock at a rate of $0.30 per share which is equal to 3%
of the offering price for the Common Stock in the Conversion. The payment of
dividends is expected to begin as soon as practicable after completion of the
Conversion. In addition, the Board of Directors may determine from time to time
that it is prudent to pay special nonrecurring cash dividends. Special cash
dividends, if paid, may be in addition to, or in lieu of, regular cash
dividends. The Company's Board of Directors will periodically review its policy
concerning dividends. Declarations of dividends, if any, by the Board of
Directors will depend upon a number of factors, including
26
<PAGE>
investment opportunities available to the Company and the Bank, capital
requirements, regulatory limitations, the Company's and the Bank's results of
operations and financial condition, tax considerations and general economic
conditions. Upon review of such considerations, the Board of Directors of the
Company may authorize dividends to be paid in the future if it deems such
payment appropriate and in compliance with applicable law and regulation. No
assurances can be given that any dividends will in fact be paid on the Common
Stock or, if dividends are paid, that they will not be reduced or discontinued
in the future.
In connection with the Conversion, the Bank has agreed with the FDIC that,
within the first three years after completion of the Conversion, neither the
Company nor the Bank will pay any taxable dividend or make any taxable
distribution in excess of their current and retained earnings. The Company and
the Bank have agreed to notify the FDIC before making a return of capital during
the first three years following the Conversion.
The sources of income to the Company initially will consist of earnings on
the capital retained by the Company and dividends paid by the Bank to the
Company, if any. Consequently, future declarations of cash dividends by the
Company may depend upon dividend payments by the Bank to the Company, which
payments are subject to various restrictions. Under current North Carolina
regulations, the Bank could not declare or pay a cash dividend if the effect
thereof would be to reduce its net worth to an amount which is less than the
minimum required by the FDIC and the Administrator. In addition, for a period
of five years after the consummation of the Conversion, the Bank will be
required, under existing regulations, to obtain the prior written approval of
the Administrator before it can declare and pay a cash dividend on its capital
stock in an amount in excess of one-half of the greater of (i) its net income
for the most recent fiscal year, or (ii) the average of its net income after
dividends for the most recent fiscal year and not more than two of the
immediately preceding fiscal years, if applicable. See "SUPERVISION AND
REGULATION -- Regulation of the Bank -- Restrictions on Dividends and Other
Capital Distributions" in the Prospectus. As a result of this limitation, if
the Bank had been a stock institution at the end of fiscal 1997 and for the two
preceding fiscal years, it could not have paid a dividend in excess of $_______
without the approval of the Administrator.
As a converted institution, the Bank also will be subject to the regulatory
restriction that it will not be permitted to declare or pay a dividend on or
repurchase any of its capital stock if the effect thereof would be to cause its
regulatory capital to be reduced below the amount required for the liquidation
account established in connection with the Conversion. See "THE CONVERSION --
Effects of Conversion -- Liquidation Rights." Also, see "TAXATION -- Federal
Income Taxation" in the Prospectus for a discussion of federal income tax
provisions that may limit the ability of the Bank to pay dividends to the
Company without incurring a recapture tax.
MARKET FOR COMMON STOCK
The Company, as a newly organized company, has never issued capital stock,
and consequently, there is no established market for the Common Stock at this
time. Following the completion of the Offering, it is anticipated that the
Common Stock will be traded on the over-the-counter market with quotations
available through the OTC Electronic Bulletin Board. Trident Securities is
expected to make a market in the Common Stock, by developing and maintaining
historical stock trading records, soliciting potential buyers and sellers of
shares and attempting to match buy and sell orders. In connection with its
market making activities, Trident may buy or sell shares from time to time for
its own account. However, Trident Securities will not be subject to any
obligation with respect to such efforts.
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An active and liquid public trading market for the securities of any
issuer, including the Common Stock, depends upon the presence in the marketplace
of both willing buyers and willing sellers of the securities at any given time.
Due to the size of the Company's offering (660,000 shares at the midpoint of the
Estimated Valuation Range), it is unlikely that a stockholder base large enough
to create an active trading market will develop and be maintained. Further,
even if a market develops, there can be no assurance that the shares of Common
Stock offered in the Conversion can be resold at or above the purchase price
after completion of the Conversion. Purchasers of Common Stock should consider
the potentially illiquid and long-term nature of their investment in the shares
being offered hereby. The aggregate price of the Common Stock is based upon an
independent appraisal of the pro forma market value of the Common Stock.
However, there can be no assurance that an investor will be able to sell the
Common Stock purchased in the Conversion at or above the $10.00 purchase price.
REGISTRATION REQUIREMENTS
The Company will register its Common Stock with the SEC pursuant to Section
12 of the Exchange Act in connection with the Conversion and will not deregister
the Common Stock for a period of three years following the completion of the
Conversion. Upon such registration, the proxy and tender offer rules, insider
trading reporting requirements and restrictions, annual and periodic reporting
and other requirements of the Exchange Act will be applicable to the Company.
LEGAL OPINIONS
The validity of the issuance of the Common Stock in the Conversion has been
passed upon for the Company by its special counsel, Brooks, Pierce, McLendon,
Humphrey & Leonard, L.L.P., Greensboro, North Carolina, which firm has also
rendered its opinion to the Bank concerning certain federal and North Carolina
income tax aspects of the Conversion as described herein under "THE CONVERSION -
- - Income Tax Consequences." Certain legal matters will be passed upon for
Trident Securities by Thacher Proffitt & Wood, Washington, D.C.
EXPERTS
The Financial Statements of the Bank as of June 30, 1997 and 1996 and for
each of the years in the two-year period ended June 30, 1997 have been included
herein in reliance upon the report of Faulkner and Thompson, P.A., independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
Ferguson has consented to being named as an expert herein and to the
summary herein of its appraisal report as to the estimated pro forma market
value of the Bank and the Company and its opinion with respect to Subscription
Rights.
ADDITIONAL INFORMATION AND ORDER FORMS
The Prospectus contains the following: audited consolidated financial
statements of the Bank for the two fiscal years ended June 30, 1997 and 1996;
unaudited consolidated financial statements of the Bank for the six-month
periods ended December 31, 1997 and 1996; capitalization of the Company and the
Bank; Management's Discussion and Analysis of Financial Condition and Results of
Operations; a description of the Bank's lending and savings and investment
activities; information concerning compensation and other benefits of directors
and officers; a description of the Common Stock; anti-
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takeover provisions of the Company and the Bank; and additional information
about the business and financial condition of the Bank. The Prospectus also
contains forms (the "Stock Order Forms") for subscribing or submitting an order
for the Common Stock. A copy of the Prospectus accompanies this Proxy Statement.
Requests for an additional copy of the Prospectus and any questions about the
Conversion or the Special Meeting, including questions about proxy voting
procedures, should be directed to the Bank's Stock Information Center at (704)
694-2122, 211 South Greene Street, Wadesboro, North Carolina 28170.
Copies of the Company's Articles of Incorporation and Bylaws are also
available. Requests for copies of those documents should be directed to the
Bank's Stock Information Center at (704) 694-2122.
The Subscription Offering will commence on ____________, 1998, and end on
_____________, 1998. Stock Order Forms for purchases of Common Stock in the
Subscription Offering must be received by the Bank on or before 12:00 noon,
Eastern Time, on ____________, 1998.
THIS PROXY STATEMENT IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY THE COMMON STOCK. SUCH OFFERS ARE MADE ONLY BY THE PROSPECTUS.
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