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[LOGO]
PALFED, INC.
April 15, 1997
Dear Fellow Shareholder:
We are sure that by now you are weary of hearing from PALFED and our
dissident shareholders concerning their ill-advised resolution to sell your
Company. However, we feel that it is very important that you have some
additional facts to make an informed decision on this very important vote.
Since we last communicated, PALFED announced a 21% increase in earnings
for the first quarter of 1997. Additionally, Institutional Shareholder
Services, Inc., an independent shareholder advisory firm, has advised
PALFED's institutional shareholders to vote against Mid-Atlantic's proposal
stating that "long-term shareholders would suffer if the Company were put in
play." These are two very good reasons to support PALFED's Board of Directors
and vote AGAINST the Resolution. We are convinced, and our investment
advisors confirm, that there is considerable upside in the value of our stock.
I will state it one more time: Shareholder value is our number one
priority and we would entertain any legitimate offer to sell the Company at a
substantial premium.
We must get away from the myth in this country that the only way to
maximize value of a bank is to sell it. Your Board, Management, and staff
have done a remarkable job of saving your Company from failure. We are proud
of our accomplishments and do not intend to cave in to Mid-Atlantic's
manipulative tactics.
If you have voted in favor of the Company's position and voted AGAINST
Mid-Atlantic, you need not vote again and we thank you. You will not be
disappointed. If you have voted for the proposal, we hope you will reconsider
and vote the enclosed proxy AGAINST Mid-Atlantic and mail it in the envelope
provided. If you have not voted, please exercise that right and vote AGAINST
Mid-Atlantic and return the proxy in the envelope provided. THE PROXY WITH
THE LATEST DATE IS THE ONE THAT COUNTS, so if you wish to change your vote or
are voting for the first time, please do so.
Thank you for your consideration and support of South Carolina's Bank.
John C. Troutman
President and CEO
Enclosures
PO Box 1116
Aiken, SC 29802-1116
803/642-1400
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[LOGO]
FOR MORE INFORMATION CALL:
PALFED, INC.
107 Chesterfield Street S.
Aiken, South Carolina 29801
John C. Troutman
President and CEO
(803) 642-1433
April 8, 1997
FOR IMMEDIATE RELEASE
INSTITUTIONAL SHAREHOLDER SERVICES RECOMMENDS
AGAINST MID-ATLANTIC'S PROPOSAL TO SELL PALFED
AIKEN, South Carolina, April 8, 1997 -- John C. Troutman, President and CEO
of PALFED, Inc. ("PALFED" or the "Company") announced today that
Institutional Shareholder Services, Inc. ("ISS"), an independent shareholder
advisory firm, has advised PALFED's institutional shareholders which
subscribe to their service to support PALFED management and vote against a
shareholder proposal sponsored by Mid-Atlantic Investors ("Mid-Atlantic").
Mr. Troutman said, "We are very pleased to receive the support of ISS, whose
evaluation of PALFED's performance and the issues raised by Mid-Atlantic's
proposal provide the independent advice that even Mid-Atlantic surely cannot
ignore." Mr. Troutman noted that ISS reviews shareholder proposals on a
case-by-case basis, taking into account company performance and other
fundamental issues, including a strategic plan of action to enhance
shareholder value.
The ISS report noted that PALFED "has acquired new banking offices and
achieved technological upgrades at a reasonable cost, and that long-term
shareholders would suffer if the Company were put in play." The report also
noted that shareholder returns at PALFED have increased over five years and
have outperformed the NASDAQ Financial Stock Index by 25.5% and the S&P 500
Index by 15.2%.
ISS, based in Bethesda, Maryland, is a leading independent advisor to several
hundred institutional investors and provides voting recommendations for proxy
contests, corporate governance proposals and other shareholder related issues.
PALFED, INC. is a South Carolina corporation whose principal subsidiary,
Palmetto Federal Savings Bank of South Carolina, operates twenty-two banking
and seven mortgage lending offices in South Carolina and one mortgage lending
office in Georgia. PALFED's common stock is traded in the Nasdaq National
Market System under the symbol "PALM".
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[LETTERHEAD]
FOR MORE INFORMATION CALL:
PALFED, INC.
107 Chesterfield Street S.
Aiken, South Carolina 29801
Darrell R. Rains
Executive Vice President and CFO
(803) 642-1328
April 10, 1997
FOR IMMEDIATE RELEASE
PALFED, INC. ANNOUNCES 21% INCREASE IN FIRST QUARTER EARNINGS
AIKEN, South Carolina, April 10, 1997 -- PALFED, INC. (NASDAQ:PALM) ("PALFED")
announced net earnings of $1,350,000 ($0.25 per common share) for the first
quarter of 1997 compared to net earnings of $1,092,000 ($0.21 per common share)
in the first quarter of 1996, a 21.0% increase over the prior year.
John C. Troutman, PALFED's President and Chief Executive Officer said, "Our
outstanding first quarter is a clear indication that our strategic plan of
growth and expansion is working to enhance shareholder value. We opened our
second full-service banking center on Hilton Head Island on March 24, 1997 and
intend to take advantage of other opportunities as they present themselves. We
have an excellent franchise that will be more and more valuable as other banks
are sold and we strengthen our claim as South Carolina's Bank."
PALFED, INC. is a South Carolina corporation whose principal subsidiary,
Palmetto Federal Savings Bank of South Carolina, operates twenty-two banking and
seven mortgage lending offices in South Carolina and one mortgage lending office
in Georgia. At March 31, 1997 PALFED had $655.7 million in total assets and
deposits of $551.4 million. PALFED'S common stock is traded in the Nasdaq
National Market System under the symbol "PALM".
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PALFED, Inc.
April 10, 1997 Selected Financial Information
(In thousands, except per share data)
<TABLE>
<CAPTION>
For the Three Months Ended
--------------------------
MARCH 31, March 31,
CONDENSED RESULTS OF OPERATIONS 1997 1996
--------- ---------
<S> <C> <C>
Net interest income . . . . . . . . . . . . . . . . . $ 6,034 $ 5,053
Provision for estimated loan losses . . . . . . . . . (337) (339)
Checking transaction fees . . . . . . . . . . . . . . 552 604
Financial services fees . . . . . . . . . . . . . . . 249 235
Profit (loss) on sales of investment and mortgage-
backed securities and loans . . . . . . . . . . . 172 495
Real estate operations . . . . . . . . . . . . . . . (152) (154)
Other noninterest income . . . . . . . . . . . . . . 301 351
Compensation and employee benefits expense . . . . . (2,787) (2,524)
Occupancy and equipment expense . . . . . . . . . . . (800) (753)
Federal insurance premiums and assessments expense . (157) (354)
Professional and outside service fee expense . . . . (345) (282)
Other noninterest expense . . . . . . . . . . . . . . (566) (633)
--------- ---------
Income before provision for income taxes . . . . . . 2,164 1,699
Provision for income tax . . . . . . . . . . . . . . (814) (607)
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Net income . . . . . . . . . . . . . . . . . . . . . $ 1,350 $ 1,092
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Earnings per common and common equivalent shares . . $ 0.25 $ 0.21
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Weighted average common and common equivalent
shares outstanding . . . . . . . . . . . . . . . . 5,320 5,207
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OTHER DATA
Average interest-earning assets . . . . . . . . . . . $621,078 $587,694
Average interest-bearing liabilities . . . . . . . . $601,846 $573,247
Net interest margin . . . . . . . . . . . . . . . . . 3.7% 3.3%
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Net yield . . . . . . . . . . . . . . . . . . . . . . 3.9% 3.4%
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Return on average equity . . . . . . . . . . . . . . 10.3% 8.4%
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Return on average assets . . . . . . . . . . . . . . 0.8% 0.7%
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</TABLE>
<TABLE>
<CAPTION>
MARCH 31, December 31, March 31,
SELECTED BALANCE SHEET DATA 1997 1996 1996
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<S> <C> <C> <C>
Total assets . . . . . . . . . . . . . . . . . . . . . . $655,707 $665,257 $623,553
Loans receivable (including loans held for sale), net . 532,393 524,120 476,119
Investment and mortgage-backed securities . . . . . . . 78,947 82,707 91,440
Deposits . . . . . . . . . . . . . . . . . . . . . . . . 551,437 540,128 505,429
Federal Home Loan Bank advances . . . . . . . . . . . . 47,400 68,400 61,400
Stockholders' equity . . . . . . . . . . . . . . . . . . 53,161 51,823 52,706
Equity per common share . . . . . . . . . . . . . . . . $ 10.07 $ 9.91 $ 10.09
NONPERFORMING ASSETS AND RESTRUCTURED LOANS
Nonaccrual loans . . . . . . . . . . . . . . . . . . . . $ 3,308 $ 3,971 $ 6,249
Foreclosed real estate . . . . . . . . . . . . . . . . . 7,006 7,187 9,112
Restructured loans . . . . . . . . . . . . . . . . . . . 6,211 6,533 10,472
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Total . . . . . . . . . . . . . . . . . . . . . . . . $ 16,525 $ 17,691 $ 25,833
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ASSET QUALITY RATIOS
General valuation allowances as a percentage of
nonperforming assets and restructured loans . . . . . 40.9% 36.2% 27.8%
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Nonperforming assets and restructured
loans to loans receivable, net . . . . . . . . . . . 3.1% 3.4% 5.4%
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Nonperforming assets and restructured
loans to total assets . . . . . . . . . . . . . . . . 2.5% 2.7% 4.1%
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