<PAGE>
 
   As filed with the Securities and Exchange Commission on December 17, 1997
 
                                                           Registration No. 333-
--------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM S-1
                            REGISTRATION STATEMENT
                       UNDER THE SECURITIES ACT OF 1933
                             (INCLUDING EXHIBITS)

                            SOUTHBANC SHARES, INC.
                 ---------------------------------------------
                   (Exact name of registrant in its charter)

          Delaware                          6035                 applied for
-------------------------------     ---------------------   --------------------
(State or other jurisdiction of      (Primary SIC No.)      (I.R.S. Employer
incorporation or organization)                               Identification No.)

                               907 N. MAIN STREET
                         ANDERSON, SOUTH CAROLINA 29621
                                (864) 225-0241
              --------------------------------------------------
   (Address and telephone number of principal executive offices and place of
                                   business)

                            Paul M. Aguggia, Esquire
                          Victor L. Cangelosi, Esquire
                                BREYER & AGUGGIA
                              1300 I Street, N.W.
                                 Suite 470 East
                            Washington, D.C.  20005
                                (202) 737-7900
                  --------------------------------------------
           (Name, address and telephone number of agent for service)

        APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:

  As soon as practicable after this registration statement becomes effective.

  If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.  [_]

  If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [_]

  If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

<TABLE>
<CAPTION>
=======================================================================================================================
                                         Calculation of Registration Fee
=======================================================================================================================
Title of Each Class of Securities     Proposed Maximum     Proposed Offering     Proposed Maximum     Amount of
Being Registered                      Amount Being         Price(1)              Aggregate Offering   Registration Fee
                                      Registered(1)                              Price(1)
-----------------------------------------------------------------------------------------------------------------------
<S>                                  <C>                  <C>                   <C>                  <C>
Common Stock, $0.01 Par Value          4,302,763           $20.00                $86,055,260          $26,078
 
Participation interests                   59,883               --                   --                   (2)
=======================================================================================================================
</TABLE>

  (1) Estimated solely for purposes of calculating the registration fee. As
  described in the Prospectus, the actual number of shares to be issued and sold
  are subject to adjustment based upon the estimated pro forma market value of
  the registrant and market and financial conditions.
  (2) The securities of the Registrant to be purchased by the Perpetual Bank, A
  Federal Savings Bank 401(k) Plan are included in the amount shown for Common
  Stock. Accordingly, pursuant to Rule 457(h) of the Securities Act of 1933, as
  amended, no separate fee is required for the participation interests. Pursuant
  to such rule, the amount being registered has been calculated on the basis of
  the number of shares of Common Stock that may be purchased with the current
  assets of such Plan.

      The registrant hereby amends this Registration Statement on such date or
  dates as may be necessary to delay its effective date until the registrant
  shall file a further amendment which specifically states that this
  registration statement shall thereafter become effective in accordance with
  Section 8(a) of the Securities Act of 1933 or until the registration statement
  shall become effective on such date as the Commission, acting pursuant to said
  Section 8(a), may determine.
<PAGE>
 
         Cross Reference Sheet showing the location in the Prospectus
                           of the Items of Form S-1

<TABLE>
<S>   <C>                                   <C>
1.    Front of Registration                 Front of Registration Statement;
      Statement and Outside Front           Outside Front Cover Page
      Cover of Prospectus
 
2.    Inside Front and Outside Back         Inside Front Cover Page; Outside Back
      Cover Pages of Prospectus             Cover Page
 
3.    Summary Information and Risk Factors  Prospectus Summary; Risk Factors
 
4.    Use of Proceeds                       Use of Proceeds; Capitalization

5.    Determination of Offering Price       Market for Common Stock; The 
                                            Conversion and Reorganization -- 
                                            Stock Pricing, Exchange Ratio and 
                                            Number of Shares to be Issued

6.    Dilution                              *
 
7.    Selling Security-Holders              *
 
8.    Plan of Distribution                  The Conversion and Reorganization
 
9.    Legal Proceedings                     Business of the Savings Bank -- 
                                            Legal Proceedings
 
10.   Directors, Executive Officers,        Management of the Holding Company; 
      Promoters and Control Persons         Management of the Savings Bank
      
11.   Security Ownership of Certain         * 
      Beneficial Owners and Management
 
12.   Description of Securities             Description of Capital Stock of the 
                                            Holding Company
 
13.   Interest of Named Experts and         Legal and Tax Opinions; Experts
      Counsel
 
14.   Disclosure of Commission Position     Part II -- Item 17
      on Indemnification for Securities
      Act Liabilities
 
15.   Organization Within Last              Business of the Savings Bank
      Five Years
 
16.   Description of Business               Business of the Holding Company;
                                            Business of the Savings Bank
 
17.   Management's Discussion and           Management's Discussion and 
      Analysis or Plan of Operation         Analysis of Financial Condition and 
                                            Results of Operations 
                                            
18.   Description of Property               Business of the Savings Bank -- 
                                            Properties
</TABLE>
<PAGE>
 
<TABLE>
<S>   <C>                                   <C>
19.   Certain Relationships and             Management of the Savings Bank -- 
      Related Transactions                  Transactions with the Savings Bank
 
20.   Market Price for Common Equity        Outside Front Cover Page; Market for
      and Related Stockholder Matters       Common Stock; Dividend Policy
 
21.   Executive Compensation                Management of the Savings Bank -- 
                                            Executive Compensation; and -- 
                                            Benefits

22.   Financial Statements                  Financial Statements; Pro Forma Data
 
23.   Changes in and Disagreements          *
      with Accountants on Accounting
      and Financial Disclosure
</TABLE> 

____________________
*Item is omitted because answer is negative or item inapplicable.
<PAGE>
 
PROSPECTUS SUPPLEMENT

                             SOUTHBANC SHARES, INC.

                     PERPETUAL BANK, A FEDERAL SAVINGS BANK
                                  401(K) PLAN

     This Prospectus Supplement relates to the offer and sale to participants
("Participants") in the Perpetual Bank, A Federal Savings Bank 401(k) Plan
("Plan" or "401(k) Plan") of participation interests and shares of SouthBanc
Shares, Inc. common stock, par value $.01 per share ("Common Stock"), as set
forth herein.

     In connection with the proposed reorganization of Perpetual Bank, A Federal
Savings Bank ("Savings Bank" or "Employer") from the mutual holding company form
of organization to a wholly owned subsidiary of a stock savings and loan holding
company, SouthBanc Shares, Inc. (the "Holding Company") has been formed.  The
reorganization of the Savings Bank as a wholly-owned subsidiary of the Holding
Company, the exchange of shares of Savings Bank common stock ("Savings Bank
Common Stock") by public stockholders of the Savings Bank (the "Public
Stockholders") for Common Stock and the sale of Common Stock to the public (the
"Conversion Offerings") are herein referred to as the "Conversion and
Reorganization."  Applicable provisions of the 401(k) Plan permit the investment
of the Plan assets in Common Stock at the direction of a Plan Participant.  This
Prospectus Supplement relates to the election of a Participant to direct the
purchase of Common Stock in connection with the Conversion and Reorganization.

     The Prospectus, dated _________, 1998, of the Holding Company
("Prospectus"), which is attached to this Prospectus Supplement includes
detailed information with respect to the Conversion and Reorganization, the
Conversion Offerings, the Common Stock and the financial condition, results of
operation and business of the Savings Bank and the Holding Company. This
Prospectus Supplement, which provides detailed information with respect to the
Plan, should be read only in conjunction with the Prospectus. Terms not
otherwise defined in this Prospectus Supplement are defined in the Plan or the
Prospectus.

     A PARTICIPANT'S ELIGIBILITY TO PURCHASE COMMON STOCK IN THE CONVERSION AND
REORGANIZATION THROUGH THE PLAN IS SUBJECT TO THE PARTICIPANT'S GENERAL
ELIGIBILITY TO PURCHASE SHARES OF COMMON STOCK IN THE CONVERSION OFFERINGS AND
THE MAXIMUM AND MINIMUM LIMITATIONS SET FORTH IN THE PLAN OF CONVERSION.  SEE
"THE CONVERSION AND REORGANIZATION" AND "-- LIMITATIONS ON PURCHASES OF SHARES"
IN THE PROSPECTUS.

     FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY EACH
PARTICIPANT, SEE "RISK FACTORS" IN THE PROSPECTUS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("SEC"), THE OFFICE OF THRIFT SUPERVISION ("OTS"), THE
FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC") OR ANY OTHER FEDERAL AGENCY OR
ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC, THE OTS, THE FDIC OR ANY OTHER
AGENCY OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS.  ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

           The date of this Prospectus Supplement is _________, 1998.
<PAGE>
 
     No person has been authorized to give any information or to make any
representations other than those contained in the Prospectus or this Prospectus
Supplement in connection with the offering made hereby, and, if given or made,
such information and representations must not be relied upon as having been
authorized by the Holding Company, the Savings Bank or the Plan.  This
Prospectus Supplement does not constitute an offer to sell or solicitation of an
offer to buy any securities in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction.  Neither the
delivery of this Prospectus Supplement and the Prospectus nor any sale made
hereunder shall under any circumstances create any implication that there has
been no change in the affairs of the Savings Bank or the Plan since the date
hereof, or that the information herein contained or incorporated by reference is
correct as of any time subsequent to the date hereof.  This Prospectus
Supplement should be read only in conjunction with the Prospectus that is
attached herein and should be retained for future reference.
<PAGE>
                                    
 
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                   PAGE
<S>                                                                                <C>
The Offering
     Securities Offered..........................................................   S-1
     Election to Purchase Common Stock in the Conversion and Reorganization......   S-1
     Value of Participation Interests............................................   S-1
     Method of Directing Transfer................................................   S-1
     Time for Directing Transfer.................................................   S-2
     Irrevocability of Transfer Direction........................................   S-2
     Treatment of Savings Bank Common Stock Held in the Plan.....................   S-2
     Direction to Purchase Common Stock After the Conversion and Reorganization..   S-2
     Purchase Price of Common Stock..............................................   S-3
     Nature of a Participant's Interest in the Common Stock......................   S-3
     Voting and Tender Rights of Common Stock....................................   S-3
 
Description of the Plan
     Introduction................................................................   S-3
     Eligibility and Participation...............................................   S-4
     Contributions Under the Plan................................................   S-4
     Limitations on Contributions................................................   S-5
     Investment of Contributions.................................................   S-7
     The Employer Stock Fund.....................................................   S-9
     Benefits Under the Plan.....................................................   S-9
     Withdrawals and Distributions from the Plan.................................   S-9
     Administration of the Plan..................................................  S-10
     Reports to Plan Participants................................................  S-11
     Plan Administrator..........................................................  S-11
     Amendment and Termination...................................................  S-11
     Merger, Consolidation or Transfer...........................................  S-12
     Federal Income Tax Consequences.............................................  S-12
     Restrictions on Resale......................................................  S-15
 
Legal Opinions...................................................................  S-15
 
Investment Form..................................................................  S-16
</TABLE>

                                       i
<PAGE>
 
                                  THE OFFERING

SECURITIES OFFERED

     The securities offered hereby are participation interests in the Plan and
up to ______ shares, at the actual purchase price of $20.00 per share, of Common
Stock which may be acquired by the Plan for the accounts of employees
participating in the Plan.  The Holding Company is the issuer of the Common
Stock.  Only employees and former employees of the Savings Bank and their
beneficiaries may participate in the Plan.  Information with regard to the Plan
is contained in this Prospectus Supplement and information with regard to the
Conversion and Reorganization and the financial condition, results of operation
and business of the Savings Bank and the Holding Company is contained in the
attached Prospectus.  The address of the principal executive office of the
Savings Bank is 907 N. Main Street, Anderson, South Carolina 29621-5526. The
Savings Bank's telephone number is (864) 225-0241.

ELECTION TO PURCHASE COMMON STOCK IN THE CONVERSION AND REORGANIZATION

     In connection with the Savings Bank's Conversion and Reorganization, each
Participant in the 401(k) Plan may direct the trustees of the Plan (the
"Trustees") to transfer up to 100% of a Participant's beneficial interest in the
assets of the Plan to the Employer Stock Fund and to use such funds to purchase
Common Stock issued in connection with the Conversion and Reorganization.
Amounts transferred may include salary deferral, Employer matching and profit
sharing contributions.  The Employer Stock Fund consists of investments in the
Common Stock.  Funds not transferred to the Employer Stock Fund may be invested
at the Participant's discretion in the other investment options available under
the Plan.  See "DESCRIPTION OF THE PLAN -- INVESTMENT OF CONTRIBUTIONS" below.
A PARTICIPANT'S ABILITY TO TRANSFER FUNDS TO THE EMPLOYER STOCK FUND IN THE
CONVERSION OFFERINGS IS SUBJECT TO THE PARTICIPANT'S GENERAL ELIGIBILITY TO
PURCHASE SHARES OF COMMON STOCK IN THE CONVERSION OFFERINGS.  FOR GENERAL
INFORMATION AS TO THE ABILITY OF THE PARTICIPANTS TO PURCHASE SHARES IN THE
CONVERSION OFFERINGS, SEE "THE CONVERSION AND REORGANIZATION-- THE SUBSCRIPTION,
DIRECT COMMUNITY AND SYNDICATED COMMUNITY OFFERINGS" IN THE ATTACHED PROSPECTUS.

VALUE OF PARTICIPATION INTERESTS

     The assets of the Plan are valued on an ongoing basis and each Participant
is informed of the value of his or her beneficial interest in the Plan on a
periodic basis.  This value represents the market value of past contributions to
the Plan by the Savings Bank and by the Participants and earnings thereon, less
previous withdrawals, and transfers from other Plans.

METHOD OF DIRECTING TRANSFER

     The last page of this Prospectus Supplement is an investment form to direct
a transfer to the Employer Stock Fund ("Investment Form").  If a Participant
wishes to transfer funds to the Employer Stock Fund to purchase Common Stock
issued in connection with the Conversion 

                                      S-1
<PAGE>
 
Offerings, the Participant should indicate that decision in Part 2 of the
Investment Form. If a Participant does not wish to make such an election, he or
she does not need to take any action.

TIME FOR DIRECTING TRANSFER

     THE DEADLINE FOR SUBMITTING A DIRECTION TO TRANSFER AMOUNTS TO THE EMPLOYER
STOCK FUND IN ORDER TO PURCHASE COMMON STOCK ISSUED IN CONNECTION WITH THE
CONVERSION OFFERINGS IS ___________, 1998.  The Investment Form should be
returned to ___________ at the Savings Bank no later than the close of business
on such date.

IRREVOCABILITY OF TRANSFER DIRECTION

     A Participant's direction to transfer amounts credited to such
Participant's account in the Plan to the Employer Stock Fund in order to
purchase shares of Common Stock in connection with the Conversion Offerings
shall be irrevocable. Participants, however, will be able to direct the sale of
Common Stock, as explained below.

TREATMENT OF SAVINGS BANK COMMON STOCK HELD IN THE PLAN

     Shares of Savings Bank Common Stock held in the Employer Stock Fund prior
to the consummation of the Conversion and Reorganization will treated in the
same manner as shares held by other Public Stockholders.  Such shares will be
exchanged for shares of Common Stock pursuant to the Exchange Ratio.
Application of the Exchange Ratio will result in the holders of the outstanding
Savings Bank Common Stock owning, in the aggregate, approximately the same
percentage of the Common Stock to be outstanding upon the completion of the
Conversion and Reorganization as the percentage of Savings Bank Common Stock
owned by them, in the aggregate, immediately prior to the consummation of the
Conversion.  FOR ADDITIONAL INFORMATION REGARDING THE TREATMENT OF SAVINGS BANK
COMMON STOCK, SEE "THE CONVERSION AND REORGANIZATION" IN THE PROSPECTUS.

DIRECTION TO PURCHASE COMMON STOCK AFTER THE CONVERSION AND REORGANIZATION

     After the Conversion and Reorganization, a Participant will be able to
direct that a certain percentage of such Participant's interests in the trust
assets ("Trust") be transferred to the Employer Stock Fund and invested in
Common Stock or to the other investment funds available under the Plan.
Alternatively, a Participant may direct that a certain percentage of such
Participant's interest in the Employer Stock Fund be transferred from the
Employer Stock Fund to other investment funds available under the Plan.
Participants will be permitted to direct that future contributions made to the
Plan by or on their behalf be invested in Common Stock.  Following the initial
election, the allocation of a Participant's interest in the Employer Stock Fund
may be changed by the Participant on a periodic basis in accordance with rules
established by the Employer.  Special restrictions may apply to transfers
directed by those Participants who are executive officers, directors and
principal stockholders of the Holding Company who are 

                                      S-2
<PAGE>
 
subject to the provisions of Section 16(b) of the Securities and Exchange Act of
1934, as amended ("Exchange Act").

PURCHASE PRICE OF COMMON STOCK

     The funds transferred to the Employer Stock Fund for the purchase of Common
Stock in connection with the Conversion will be used by the Trustees to purchase
shares of Common Stock.  The price paid for such shares of Common Stock will be
the same price as is paid by all other persons who purchase shares of Common
Stock in the Conversion Offerings.

NATURE OF A PARTICIPANT'S INTEREST IN THE COMMON STOCK

     The Holding Company Stock purchased for an account of a Participant will be
held in the Employer Stock Fund.  Any earnings, losses or expenses with respect
to the Common Stock, including dividends and appreciation or depreciation in
value, will be credited or debited to the account and will not be credited to or
borne by any other accounts.

VOTING AND TENDER RIGHTS OF COMMON STOCK

     The Trustees generally will exercise voting and tender rights attributable
to all Common Stock held by the Trust as directed by Participants with an
interest in the Employer Stock Fund.  With respect to each matter as to which
holders of Common Stock have the right to vote, each Participant will be
allocated a number of voting instruction rights reflecting such Participant's
proportionate interest in the Employer Stock Fund.  The percentage of shares of
Common Stock held in the Employer Stock Fund that are voted in the affirmative
or negative on each matter shall be the same percentage of the total number of
voting instruction rights that are exercised in either the affirmative or
negative, respectively.

                            DESCRIPTION OF THE PLAN

INTRODUCTION

     The Savings Bank adopted the Plan effective _____________ as an amendment
and restatement of the Savings Bank's prior retirement plan.  The Plan is a cash
or deferred arrangement established in accordance with the requirement under
Section 401(a) and Section 401(k) of the Internal Revenue Code of 1986, as
amended ("Code").

     The Savings Bank intends that the Plan, in operation, will comply with the
requirements under Section 401(a) and Section 401(k) of the Code.  The Savings
Bank will adopt any amendments to the Plan that may be necessary to ensure the
qualified status of the Plan under the Code and applicable Treasury Regulations.
The Savings Bank has received a determination from the Internal Revenue Service
("IRS") that the Plan is qualified under Section 401(a) of the Code and that it
satisfies the requirements for a qualified cash or deferred arrangement under
Section 401(k) of the Code.

                                      S-3
<PAGE>
 
     EMPLOYEE RETIREMENT INCOME SECURITY ACT.  The Plan is an "individual
account plan" other than a "money purchase pension plan" within the meaning of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA").  As
such, the Plan is subject to all of the provisions of Title I (Protection of
Employee Benefit Rights) and Title II (Amendments to the Internal Revenue Code
Relating to Retirement Plans) of ERISA, except the funding requirements
contained in Part 3 of Title I of ERISA, which by their terms do not apply to an
individual account plan (other than a money purchase pension plan).  The Plan is
not subject to Title IV (Plan Termination Insurance) of ERISA.  Neither the
funding requirements contained in Title IV of ERISA nor the plan termination
insurance provisions contained in Title IV will be extended to Participants or
beneficiaries under the Plan.

     APPLICABLE FEDERAL LAW REQUIRES THE PLAN TO IMPOSE SUBSTANTIAL RESTRICTIONS
ON THE RIGHT OF A PLAN PARTICIPANT TO WITHDRAW AMOUNTS HELD FOR HIS OR HER
BENEFIT UNDER THE PLAN PRIOR TO THE PARTICIPANT'S TERMINATION OF EMPLOYMENT WITH
THE SAVINGS BANK.  A SUBSTANTIAL FEDERAL TAX PENALTY MAY ALSO BE IMPOSED ON
WITHDRAWALS MADE PRIOR TO THE PARTICIPANT'S ATTAINMENT OF AGE 59 1/2, UNLESS A
PARTICIPANT RETIRES AS PERMITTED UNDER THIS PLAN REGARDLESS OF WHETHER SUCH A
WITHDRAWAL OCCURS DURING HIS OR HER EMPLOYMENT WITH THE SAVINGS BANK OR AFTER
TERMINATION OF EMPLOYMENT.

     REFERENCE TO FULL TEXT OF PLAN.  THE FOLLOWING STATEMENTS ARE SUMMARIES OF
THE MATERIAL PROVISIONS OF THE PLAN.  THEY ARE NOT COMPLETE AND ARE QUALIFIED IN
THEIR ENTIRETY BY THE FULL TEXT OF THE PLAN, WHICH IS FILED AS AN EXHIBIT TO THE
REGISTRATION STATEMENT FILED WITH THE SEC.  COPIES OF THE PLAN ARE AVAILABLE TO
ALL EMPLOYEES BY FILING A REQUEST WITH THE PLAN ADMINISTRATOR.  EACH EMPLOYEE IS
URGED TO READ CAREFULLY THE FULL TEXT OF THE PLAN.

ELIGIBILITY AND PARTICIPATION

     Any employee of the Savings Bank is eligible to participate and will become
a Participant in the Plan following completion of 1,000 hours of service with
the Savings Bank within a consecutive 12 month period of employment and the
attainment of age 21.  The Plan fiscal year is the period October 1 to September
30 ("Plan Year").  Directors who are not employees of the Savings Bank are not
eligible to participate in the Plan.

     During 1997, approximately __ employees participated in the Plan.

CONTRIBUTIONS UNDER THE PLAN

     PARTICIPANT CONTRIBUTIONS.  Each Participant in the Plan is permitted to
elect to reduce such Participant's Compensation (as defined below) pursuant to a
salary reduction agreement and have that amount contributed to the Plan on such
Participant's behalf.  Such amounts are credited to the Participant's deferral
contributions account.  For purposes of the Plan, "Compensation" 

                                      S-4
<PAGE>
 
means a Participant's total amount of earnings reportable W-2 wages for federal
income tax withholding purposes plus a Participant's elective deferrals pursuant
to a salary reduction agreement under the Plan or any elective deferrals to a
Section 125 plan. Due to recent statutory changes, the annual Compensation of
each Participant taken into account under the Plan is limited to $160,000 (as
adjusted under applicable Code provisions). A Participant may elect to modify
the amount contributed to the Plan under the participant's salary reduction
agreement during the Plan Year. Deferral contributions are generally transferred
by the Savings Bank to the Trustees of the Plan on a periodic basis.

     EMPLOYER CONTRIBUTIONS.  The Savings Bank currently matches __% of a
Participant's monthly deferral contributions to a maximum of __% of
Compensation.  However, the rate of matching contributions is discretionary and
subject to change on an annual basis.  In addition, the Employer may make a
discretionary contribution in proportion to a Participant's Compensation.

LIMITATIONS ON CONTRIBUTIONS

     LIMITATIONS ON ANNUAL ADDITIONS AND BENEFITS.  Pursuant to the requirements
of the Code, the Plan provides that the amount of contributions allocated to
each Participant's Account during any Plan Year may not exceed the lesser of 25%
of the Participant's "Section 415 Compensation" for the Plan Year or $30,000 (as
adjusted periodically under applicable Code provisions).  A Participant's
"Section 415 Compensation" is a Participant's Compensation, excluding any amount
contributed to the Plan under a salary reduction agreement or any employer
contribution to the Plan or to any other plan or deferred compensation or any
distributions from a plan of deferred compensation.  In addition, annual
additions are limited to the extent necessary to prevent the limitations for the
combined plans of the Savings Bank from being exceeded.  To the extent that
these limitations would be exceeded by reason of excess annual additions to the
Plan with respect to a Participant, the excess must be reallocated to the
remaining Participants who are eligible for an allocation of Employer
contributions for the Plan Year.

     LIMITATION ON 401(K) PLAN CONTRIBUTIONS.  The annual amount of deferred
compensation of a Participant (when aggregated with any elective deferrals of
the Participant under any other employer plan, a simplified employee pension
plan or a tax-deferred annuity) may not exceed $10,000 (as adjusted periodically
under applicable Code provisions).  Contributions in excess of this limitation
("excess deferrals") will be included in the Participant's gross federal income
tax purposes in the year they are made.  In addition, any such excess deferral
will again be subject to federal income tax when distributed by the Plan to the
Participant, unless the excess deferral (together with any income allocable
thereto) is distributed to the Participant not later than the first April 15th
following the close of the taxable year in which the excess deferral is made.
Any income on the excess deferral that is distributed not later than such date
shall be treated, for federal income tax purposes, as earned and received by the
Participant in the taxable year in which the excess deferral is made.

     LIMITATION ON PLAN CONTRIBUTIONS FOR HIGHLY COMPENSATED EMPLOYEES. Sections
401(k) and 401(m) of the Code limit the amount of deferred compensation
contributed to the Plan

                                      S-5
<PAGE>
 
in any Plan Year on behalf of Highly Compensated Employees (defined below) in
relation to the amount of deferred compensation contributed by or on behalf of
all other employees eligible to participate in the Plan. Specifically, the
actual deferral percentage for a Plan Year (i.e., the average of the ratios,
                                            ----
calculated separately for each eligible employee in each group, by dividing the
amount of salary reduction contributions credited to the salary reduction
contribution account of such eligible employee by such employee's compensation
for the Plan Year) of the Highly Compensated Employees may not exceed the
greater of (a) 125% of the actual deferred percentage of all other eligible
employees, or (b) the lesser of (i) 200% of the actual deferred percentage of
all other eligible employees, or (ii) the actual deferral percentage of all
other eligible employees plus two percentage points. In addition, the actual
contribution percentage for a Plan Year (i.e., the average of the ratios
                                         ----
calculated separately for each eligible employee in each group, by dividing the
amount of employer contributions credited to the Matching contributions account
of such eligible employee by each eligible employee's compensation for the Plan
Year) of the Highly Compensated Employees may not exceed the greater of (a) 125%
of the actual contribution percentage of all other eligible employees, or (b)
the lesser of (i) 200% of the actual contributions percentage of all other
eligible employees, or (ii) the actual contribution percentage of all other
eligible employees plus two percentage points.

     In general, a Highly Compensated Employee includes any employee who, during
the Plan Year or the preceding Plan Year, (1) was at any time a 5% owner (i.e.,
                                                                          ---- 
owns directly or indirectly more than 5% of the stock of the Employer, or stock
possessing more than 5% of the total combines voting power of all stock of the
Employer) or, (2) during the preceding Plan Year, received Section 415
Compensation in excess of $80,000 (as adjusted periodically under applicable
Code provisions) and, if elected by the Savings Bank, was in the top paid group
of employees for such Plan Year.

     In order to prevent disqualification of the Plan, any amounts contributed
by Highly Compensated Employees that exceed the average deferral limitation in
any Plan Year ("excess contributions"), together with any income allocable
thereto, must be distributed to such Highly Compensated Employees before the
close of the following Plan Year.  However, the Savings Bank will be subject to
a 10% excise tax on any excess contributions unless such excess contributions,
together with any income allocable thereto, either are recharacterized or are
distributed before the close of the first 2 1/2 months following the Plan Year
to which such excess contributions relate.  In addition, in order to avoid
disqualification of the Plan, any contributions by Highly Compensated Employees
that exceed the average contribution limitation in any Plan Year ("excess
aggregate contributions") together with any income allocable thereto, must be
distributed to such Highly Compensated Employees before the close of the
following Plan Year.  However, the 10% excise tax will be imposed on the Savings
Bank with respect to any excess aggregate contributions, unless such amounts,
plus any income allocable thereto, are distributed within 2 1/2 months following
the close of the Plan Year in which they arose.

     TOP-HEAVY PLAN REQUIREMENTS.  If, for any Plan Year, the Plan is a Top-
Heavy Plan (as defined below), then (i) the Savings Bank may be required to make
certain minimum contributions to the Plan on behalf of non-key employees (as
defined below), and (ii) certain 

                                      S-6
<PAGE>
 
additional restrictions would apply with respect to the combination of annual
additions to the Plan and projected annual benefits under any defined plan
maintained by the Savings Bank.

     In general, the Plan will be regarded as a "Top-Heavy Plan" for any Plan
Year, if as of the last day of the preceding Plan Year, the aggregate balance of
the accounts of all Participants who are key Employees exceeds 60% of the
aggregate balance of the Accounts of the Participants.  "Key Employees"
generally include any employee, who at any time during the Plan Year or any
other the four preceding Plan Years, if (1) an officer of the Savings Bank
having annual compensation in excess of $60,000 who is in an administrative or
policy-making capacity, (2) one of the ten employees having annual compensation
in excess of $30,000 and owing, directly or indirectly, the largest interest in
the employer, (3) a 5% owner of the employer (i.e., owns directly or indirectly
                                              ----                             
more than 5% of the stock of the employer, or stock possessing more than 5% of
the total combined voting power of all stock of the employer), or (4) a 1% of
owner of the employer having compensation in excess of $150,000.

INVESTMENT OF CONTRIBUTIONS

     All amounts credited to Participant's Accounts under the Plan are held in
the Trust which is administered by the Trustees.  The Trustees are appointed by
the Savings Bank's Board of Directors.  The Plan provides that a Participant may
direct the Trustees to invest all or a portion of his or her Accounts in various
managed investment portfolios, as described below.  A Participant may
periodically elect to change his or her investment directions with respect to
both past contributions and for more additions to the Participant's accounts
invested in these investment alternatives.

     Under the Plan, the Accounts of Participant held in the Trust will be
invested by the Trustees at the direction of the Participant in the following
investment funds:

Investment Fund A -

Investment Fund B -

Investment Fund C -

Investment Fund D -

Investment Fund E -

Investment Fund F -

Investment Fund G -

Investment Fund H -

                                      S-7
<PAGE>
 
Investment Fund I -

     A Participant may also invest all or a portion of his or her Accounts in
the portfolios described above and in Fund J, described below:

Investment Fund J -

     A Participant may elect to have both prior contributions and additions to
the Participant's Account invested either in the Employer Stock Fund or in any
of the other investment funds listed above.  Any amounts credited to a
Participant's Accounts for which investment directions are not given will be
invested in _________________.

     The net gain (or loss) in the Accounts from investments (including interest
payments, dividends, realized and unrealized gains and losses on securities, and
expenses paid from the Trust) are determined monthly on a quarterly basis.  For
purposes of such allocation, all assets of the Trust are valued at their fair
market value.

THE EMPLOYER STOCK FUND

     The Employer Stock Fund consists of investments in Common Stock.  In
connection with the Conversion Offerings, pursuant to the attached Investment
Form, Participants will be able to change their investments at a time other than
the normal election intervals.  Any cash dividends paid on Common Stock held in
the Employer Stock Fund will be credited to a cash dividend subaccount for each
Participant investing in the Employer Stock Fund.  To the extent practicable,
all amounts held in the Employer Stock Fund (except the amounts credited to cash
dividend subaccounts) will be used to purchase shares of Common Stock.  It is
expected that all purchases will be made at prevailing market prices.  Pending
investment in Common Stock, assets held in the Employer Stock Fund will be
placed in bank deposits and other short-term investments.

     When Common Stock is purchased or sold, the cost or net proceeds are
charged or credited to the Accounts of Participants affected by the purchase or
sale.  A Participant's Account will be adjusted to reflect changes in the value
of shares of Common Stock resulting from stock dividends, stock splits and
similar changes.

     To the extent dividends are not paid on Common Stock held in the Employer
Stock Fund, the return on any investment in the Employer Stock Fund will consist
only of the market value appreciation of the Common Stock subsequent to its
purchase.

     INVESTMENTS IN THE EMPLOYER STOCK FUND MAY INVOLVE CERTAIN RISK FACTORS
ASSOCIATED WITH INVESTMENTS IN COMMON STOCK OF THE HOLDING COMPANY.  FOR A
DISCUSSION OF THESE RISK FACTORS, SEE "RISK FACTORS" IN THE PROSPECTUS.

                                      S-8
<PAGE>
 
BENEFITS UNDER THE PLAN

     VESTING.  A Participant has at all times a fully vested, nonforfeitable
interest in all of his or her deferred contributions and the earnings thereon
under the Plan.  A Participant is at all times 100% vested in his or her
matching contributions account.  Employer discretionary contribuions are fully
vested after five years of service.

WITHDRAWALS AND DISTRIBUTIONS FROM THE PLAN

     APPLICABLE FEDERAL LAW REQUIRES THE PLAN TO IMPOSE SUBSTANTIAL RESTRICTIONS
ON THE RIGHT OF A PLAN PARTICIPANT TO WITHDRAW AMOUNTS HELD FOR HIS OR HER
BENEFIT UNDER THE PLAN PRIOR TO THE PARTICIPANT'S ATTAINMENT OF AGE 59 1/2
UNLESS A PARTICIPANT RETIRES AS PERMITTED UNDER THE PLAN REGARDLESS OF WHETHER
SUCH A WITHDRAWAL OCCURS DURING HIS OR HER EMPLOYMENT WITH THE ASSOCIATION.

     DISTRIBUTION UPON RETIREMENT, DEATH, DISABILITY OR TERMINATION OF
EMPLOYMENT. The distribution of benefits under the 401(k) Plan to a Participant
who retires may be made in the form of a lump-sum payment, installment payments
or an annuity payable over a specified period. Distributions generally commence
as soon as practicable following the Participant's termination of employment. At
the request of the Participant, the distribution may include an in-kind
distribution of Common Stock of the Holding Company credited to the
Participant's Account. Benefits payments ordinarily must begin not later than 60
days following the end of the Plan Year in which occurs later of the
Participant's: (i) termination of employment; (ii) attainment of age 65; or
(iii) tenth anniversary of commencement of participation in the Plan; but in no
event later than April 1 following the calendar year in which the Participant
attains age 70 1/2 (if the Participant is retired). However, if the vested
portion of the Participant's Account balances exceeds $3,500, no distribution
will be made from the Plan prior to the Participant's attaining age 65 unless
the Participant consents to an earlier distribution. Special rules may apply to
the distribution of Common Stock of the Holding Company to those Participants
who are executive officers, directors and principal shareholders of the Holding
Company who are subject to the provisions of Section 16(b) of the Exchange Act.

     DISTRIBUTION UPON DEATH. A Participant who dies prior to the benefit
commencement date for retirement, disability or termination of employment, and
who has a surviving spouse, shall have his or her benefits paid to the surviving
spouse in a lump sum, or if the payment of his or her benefits had commenced
before his or her death, in accordance with the distribution method in effect at
his or her death. With respect to an unmarried Participant, and in the case of a
married Participant with spousal consent to the designation of another
beneficiary, payment of benefits to the beneficiary, payments of benefits to the
beneficiary of a deceased Participant shall be made in the form of a lump sum
payment in cash or in Common Stock, or if the payment of his or her benefit had
commenced before his or her death, in accordance with the distribution method if
effect at death.

                                      S-9
<PAGE>
 
     NONALIENATION OF BENEFITS.  Except with respect to federal income tax
withholding and as provided with respect to a qualified domestic relations order
(as defined in the Code), benefits payable under the Plan shall not be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution, or levy of any kind, either
voluntary or involuntary, and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, charge or otherwise dispose of any rights to
benefits payable under the Plan shall be void.

ADMINISTRATION OF THE PLAN

     TRUSTEES.  The Trustees with respect to Plan assets are currently
__________________________________.

     Pursuant to the terms of the Plan, the Trustees receive and hold
contributions to the Plan in trust and have exclusive authority and discretion
to manage and control the assets of the Plan pursuant to the terms of the Plan
and to manage, invest and reinvest the Trust and income therefrom.  The Trustees
have the authority to invest and reinvest the Trust and may sell or otherwise
dispose of Trust investments at any time and may hold trust funds uninvested.
The Trustees have authority to invest the assets of the Trust in "any type of
property, investment or security" as defined under ERISA.

     The Trustees have full power to vote any corporate securities in the Trust
in person or by proxy; provided, however, that the Participants will direct the
Trustees as to voting and tendering of all Common Stock held in the Employer
Stock Fund.

     The Trustees receive no compensation for their services.  The expenses of
the Trustees are paid out of the Trust except to the extent such expenses and
compensation are paid by the Association.

     The Trustees must render at least annual reports to the Association and to
the Participants in such form and containing such information that the Trustees
deem necessary.

REPORTS TO PLAN PARTICIPANTS

     The administrator will furnish to each Participant a statement at least
semiannually showing (i) the balance in the Participant's Account as of the end
of that period, (ii) the amount of contributions allocated to such Participant's
Account for that period, and (iii) the adjustments to such Participant's Account
to reflect earnings or losses (if any).

PLAN ADMINISTRATOR

     The Savings Bank currently serves as the Plan Administrator.  The Plan
Administrator is responsible for the administration of the Plan, interpretation
of the provisions of the Plan, prescribing procedures for filing applications
for benefits, preparation and distribution of 

                                     S-10
<PAGE>
 
information explaining the Plan, maintenance of plan records, books of account
and all other data necessary for the proper administration of the Plan, and
preparation and filing of all returns and reports relating to the Plan which are
required to be filed with the U.S. Department of Labor and the IRS, and for all
disclosures required to be made to Participants, beneficiaries and others under
Sections 104 and 105 of ERISA.

AMENDMENT AND TERMINATION

     The Savings Bank may terminate the Plan at any time.  If the Plan is
terminated in whole or in part, then regardless of other provisions in the Plan,
each employee who ceases to be a Participant shall have a fully vested interest
in his or her Account.  The Savings Bank reserves the right to make, from time
to time, any amendment or amendments to the Plan which do not cause any part of
the Trust to be used for, or diverted to, any purpose other than the exclusive
benefit of the Participants or their beneficiaries.

MERGER, CONSOLIDATION OR TRANSFER

     In the event of the merger or consolidation of the Plan with another plan,
or the transfer of the Trust to another plan, the Plan requires that each
Participant (if either the Plan or the other plan then terminated) receive a
benefit immediately after the merger, consolidation or transfer which is equal
to or greater than the benefit he or she would have been entitled to receive
immediately before the merger, consolidation or transfer (if the Plan had then
terminated).

FEDERAL INCOME TAX CONSEQUENCES

     THE FOLLOWING IS ONLY A BRIEF SUMMARY OF CERTAIN FEDERAL INCOME TAX ASPECTS
OF THE PLAN WHICH ARE OF GENERAL APPLICATION UNDER THE CODE AND IS NOT INTENDED
TO BE A COMPLETE OR DEFINITIVE DESCRIPTION OF THE FEDERAL INCOME TAX
CONSEQUENCES OF PARTICIPATING IN OR RECEIVING DISTRIBUTIONS FROM THE PLAN.  THE
SUMMARY IS NECESSARILY GENERAL IN NATURE AND DOES NOT PURPORT TO BE COMPLETE.
MOREOVER, STATUTORY PROVISIONS ARE SUBJECT TO CHANGE, AS ARE THEIR
INTERPRETATIONS, AND THEIR APPLICATION MAY VARY IN INDIVIDUAL CIRCUMSTANCES.
FINALLY, THE CONSEQUENCES UNDER APPLICABLE STATE AND LOCAL INCOME TAX LAWS MAY
NOT BE THE SAME AS UNDER THE FEDERAL INCOME TAX LAWS.

PARTICIPANTS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO ANY
DISTRIBUTION FROM THE PLAN AND TRANSACTIONS INVOLVING THE PLAN.

     The Plan has received a determination from the IRS that it is qualified
under Section 401(a) and 401(k) of the Code, and that the related Trust is
exempt from tax under Section 501(a) of the Code.  A plan that is "qualified"
under these sections of the Code is afforded special tax treatment which include
the following: (1) the sponsoring employer is allowed an immediate tax deduction
for the amount contributed to the Plan of each year; (2) Participants pay no
current income tax on amounts contributed by the employer on their behalf; and
(3) earnings 

                                     S-11
<PAGE>
 
of the Plan are tax-exempt thereby permitting the tax-free accumulation of
income and gains on investments. The Plan will be administered to comply in
operation with the requirements of the Code as of the applicable effective date
of any change in the law. The Savings Bank expects to timely adopt any
amendments to the Plan that may be necessary to maintain the qualified status of
the Plan under the Code. Following such an amendment, the Plan will be submitted
to the IRS for a determination that the Plan, as amended, continues to qualify
under Sections 401(a) and 501(a) of the Code and that it continues to satisfy
the requirements for a qualified cash or deferred arrangement under Section
401(k) of the Code.

     Assuming that the Plan is administered in accordance with the requirements
of the Code, participation in the Plan under existing federal income tax laws
will have the following effects:

     (a) Amounts contributed to a Participant's 401(k) account and the
investment earnings are actually distributed or withdrawn from the Plan.
Special tax treatment may apply to the taxable portion of any distribution that
includes Common Stock or qualified as a "Lump Sum Distribution" (as described
below).

     (b) Income earned on assets held by the Trust will not be taxable to the
Trust.

     LUMP SUM DISTRIBUTION.  A distribution from the Plan to a Participant or
the beneficiary of a Participant will qualify as a "Lump Sum Distribution" if it
is made: (i) within a single taxable year of the Participant or beneficiary;
(ii) on account of the Participant's death or separation from service, or after
the Participant attains age 59 1/2; and (iii) consists of the balance to the
credits of the Participant under the Plan and all other profit sharing plans, if
any, maintained by the Savings Bank.  The portion of any Lump Sum Distribution
that is required to be included in the Participant's or beneficiary's taxable
income for federal income tax purposes ("total taxable amount") consists of the
entire amount of such Lump Sum Distribution less the amount of after-tax
contributions, if any, made by the Participant to any other profit sharing plans
maintained by the Savings Bank which is included in such distribution.

     AVERAGING RULES.  The portion of the total taxable amount of a Lump Sum
Distribution ("ordinary income portion") will be taxable generally as ordinary
income for federal income tax purposes.  However, for distributions occurring
prior to January 1, 2000, a Participant who has completed at least five years of
participation in the Plan before the taxable year in which the distribution is
made, or a beneficiary who receives a Lump Sum Distribution on account of the
Participant's death (regardless of the period of the Participant's participation
in the Plan or any other profit sharing plan maintained by the Employer), may
elect to have the ordinary income portion of such Lump Sum Distribution taxed
according to a special averaging rule ("five-year averaging").  The election of
the special averaging rules may apply only to one Lump Sum Distribution received
by the Participant or beneficiary, provided such amount is received on or after
the Participant turns 59 1/2 and the recipient elects to have any other Lump Sum
Distribution from a qualified plan received in the same taxable year taxed under
the special averaging rule.  The special five-year averaging rule has been
repealed for distributions occurring after December 31, 1999.  Under a special
grandfather rule, individuals who turned 50 by 1986 may elect to have 

                                     S-12
<PAGE>
 
their Lump Sum Distribution taxed under either the five-year averaging rule (if
available) or the prior law ten-year averaging rule. Such individuals also may
elect to have that portion of the Lump Sum Distribution attributable to the
Participant's pre-1974 participation in the Plan taxed at a flat 20% rate as
gain from the sale of a capital asset.

     COMMON STOCK INCLUDED IN LUMP SUM DISTRIBUTION.  If a Lump Sum Distribution
includes Common Stock, the distribution generally will be taxed in the manner
described above, except that the total taxable amount will be reduced by the
amount of any net unrealized appreciation with respect to such Common Stock,
i.e., the excess of the value of such Common Stock at the time of the
----                                                                 
distribution over its cost to the Plan.  The tax basis of such Common Stock to
the Participant or beneficiary for purposes of computing gain or loss on its
subsequent sale will be the value of the Common Stock at the time of
distribution less the amount of net unrealized appreciation.  Any gain on a
subsequent sale or other taxable disposition of such Common Stock, to the extent
of the amount of net unrealized appreciation at the time of distribution, will
be considered long-term capital gain regardless of the holding period of such
Common Stock.  Any gain on a subsequent sale or other taxable disposition of the
Common Stock in excess of the amount of net unrealized appreciation at the time
of distribution will be considered either short-term capital gain or long-term
capital gain depending upon the length of the holding period of the Common
Stock.  The recipient of a distribution may elect to include the amount of any
net unrealized appreciation in the total taxable amount of such distribution to
the extent allowed by the regulations by the IRS.

     DISTRIBUTIONS:  ROLLOVERS AND DIRECT TRANSFERS TO ANOTHER QUALIFIED PLAN OR
TO AN IRA. Pursuant to a change in the law, effective January 1, 1993, virtually
all distributions from the Plan may be rolled over to another qualified Plan or
to an individual retirement account ("IRA") without regard to whether the
distribution is a Lump Sum Distribution or Partial Distribution. Effective
January 1, 1993, Participants have the right to elect to have the Trustees
transfer all or any portion of an "eligible rollover distribution" directly to
another plan qualified under Section 401(a) of the Code or to an IRA. If the
Participant does not elect to have an "eligible rollover distribution"
transferred directly to another qualified plan of to an IRA, the distribution
will be subject to a mandatory federal withholding tax equal to 20% of the
taxable distribution. An "eligible rollover distribution" means any amount
distributed from the Plan except: (1) a distribution that is (a) one of a series
of substantially equal periodic payments made (not less frequently than
annually) over the Participant's life of the joint life of the Participant and
the Participant's designated beneficiary, or (b) for a specified period of ten
years or more; (2) any amount that is required to be distributed under the
minimum distribution rules; and (3) any other distributions excepted under
applicable federal law. The tax law change described above did not modify the
special tax treatment of Lump Sum Distributions, that are not rolled over or
transferred, i.e., forward averaging, capital gains tax treatment and the
             ----                                                        
nonrecognition of net unrealized appreciation, discussed earlier.

     ADDITIONAL TAX ON EARLY DISTRIBUTIONS.  A Participant who receives a
distribution from the Plan prior to attaining age 59 1/2 will be subject to an
additional income tax equal to 10% of the taxable amount of the distribution.
The 10% additional income tax will not apply, however, 

                                     S-13
<PAGE>
 
to the extent the distribution is rolled over into an IRA or another qualified
plan or the distribution is (i) made to a beneficiary (or to the estate of a
Participant) on or after the death of the Participant, (ii) attributable to the
Participant's being disabled within the meaning of Section 72(m)(7) of the Code,
(iii) part of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of the
Participant or the joint lives (or joint life expectancies) of the Participant
and his or her beneficiary, (iv) made to the Participant after separation from
service on account of early retirement under the Plan after attainment of age
55, (v) made to pay medical expenses to the extent deductible for federal income
tax purposes, (vi) pursuant to a qualified domestic relations order, or (vii)
made to effect the distribution of excess contributions or excess deferrals.

     THE FOREGOING IS ONLY A BRIEF SUMMARY OF CERTAIN FEDERAL INCOME TAX ASPECTS
OF THE PLAN WHICH ARE OF GENERAL APPLICATION UNDER THE CODE AND IS NOT INTENDED
TO BE A COMPLETE OR DEFINITIVE DESCRIPTION OF THE FEDERAL INCOME TAX
CONSEQUENCES OF PARTICIPATING IN OR RECEIVING DISTRIBUTIONS FROM THE PLAN.
ACCORDINGLY, EACH PARTICIPANT IS URGED TO CONSULT A TAX ADVISOR CONCERNING THE
FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF PARTICIPATING IN AND RECEIVING
DISTRIBUTIONS FROM THE PLAN.

RESTRICTIONS ON RESALE

     Any person receiving shares of the Common Stock under the Plan who is an
"affiliate" of the Savings Bank or the Holding Company as the term "affiliate"
is used in Rules 144 and 405 under the Securities Act of 1933, as amended
("Securities Act") (e.g., directors, officers and substantial shareholders of
the Savings Bank) may reoffer or resell such shares only pursuant to a
registration statement filed under the Securities Act (the Holding Company and
the Savings Bank having no obligation to file such registration statement) or,
assuming the availability thereof, pursuant to Rule 144 or some other exemption
from the registration requirements of the Securities Act.  Any person who may be
an "affiliate" of the Savings Bank or the Holding Company may wish to consult
with counsel before transferring any Common Stock owned by him or her.  In
addition, Participants are advised to consult with counsel as to the
applicability of the reporting and short-swing profit liability rules of Section
16 of the Exchange Act which may affect the purchase and sale of the Common
Stock where acquired or sold under the Plan or otherwise.

                                LEGAL OPINIONS

     The validity of the issuance of the Common Stock will be passed upon by
Breyer & Aguggia, Washington, D.C., which firm is acting as special counsel for
the Holding Company in connection with the Savings Bank's Conversion and
Reorganization from the mutual holding company form of organization to a wholly-
owned subsidiary of the Holding Company.

                                     S-14
<PAGE>
 
CONCERNING THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF PARTICIPATING IN AND
RECEIVING DISTRIBUTIONS FROM THE PLAN.

RESTRICTIONS ON RESALE

     Any person receiving shares of the Common Stock under the Plan who is an
"affiliate" of the Savings Bank or the Holding Company as the term "affiliate"
is used in Rules 144 and 405 under the Securities Act of 1933, as amended
("Securities Act") (e.g., directors, officers and substantial shareholders of
the Savings Bank) may reoffer or resell such shares only pursuant to a
registration statement filed under the Securities Act (the Holding Company and
the Savings Bank having no obligation to file such registration statement) or,
assuming the availability thereof, pursuant to Rule 144 or some other exemption
from the registration requirements of the Securities Act.  Any person who may be
an "affiliate" of the Savings Bank or the Holding Company may wish to consult
with counsel before transferring any Common Stock owned by him or her.  In
addition, Participants are advised to consult with counsel as to the
applicability of the reporting and short-swing profit liability rules of Section
16 of the Exchange Act which may affect the purchase and sale of the Common
Stock where acquired or sold under the Plan or otherwise.

                                LEGAL OPINIONS

     The validity of the issuance of the Common Stock will be passed upon by
Breyer & Aguggia, Washington, D.C., which firm is acting as special counsel for
the Holding Company in connection with the Savings Bank's Conversion and
Reorganization from the mutual holding company form of organization to a wholly-
owned subsidiary of the Holding Company.

                                     S-15
<PAGE>
 
                                Investment Form
                             (Employer Stock Fund)

                    PERPETUAL BANK, A FEDERAL SAVINGS BANK
                                  401(K) PLAN


Name of Participant:_____________________

Social Security Number:__________________


     1.  Instructions. In connection with the proposed reorganization of
Perpetual Bank, A Federal Savings Bank ("Savings Bank") from the mutual holding
form of organization to a wholly-owned subsidiary of a savings and loan holding
company ("Conversion and Reorganization"), participants in the Perpetual Bank, A
Federal Savings Bank Employees' Savings and Profit Sharing Plan ("Plan") may
elect to direct the investment of up to 100% of their account balances into the
Employer Stock Fund ("Employer Stock Fund"). Amounts transferred at the
direction of Participants into the Employer Stock Fund will be used to purchase
shares of the common stock of SouthBanc Shares, Inc. ("Common Stock"), the
proposed holding company for the Savings Bank. A PARTICIPANT'S ELIGIBILITY TO
PURCHASE SHARES OF COMMON STOCK IS SUBJECT TO THE PARTICIPANT'S GENERAL
ELIGIBILITY TO PURCHASE SHARES OF COMMON STOCK IN THE CONVERSION OFFERINGS AND
THE MAXIMUM AND MINIMUM LIMITATIONS SET FORTH IN THE PLAN OF CONVERSION. SEE THE
PROSPECTUS FOR ADDITIONAL INFORMATION.

     You may use this form to direct a transfer of funds credited to your
account to the Employer Stock Fund, to purchase Common Stock in the Conversion
Offerings. To direct such a transfer to the Employer Stock Fund, you should
complete this form and return it to ________________ at the Savings Bank, NO
LATER THAN THE CLOSE OF BUSINESS ON _________________, 1998. The Savings Bank
will keep a copy of this form and return a copy to you. (If you need assistance
in completing this form, please contact ________________.)

     2.   Transfer Direction. I hereby direct the Plan Administrator to transfer
$__________ (in increments of $10) to the Employer Stock Fund to be applied to
the purchase of Common Stock in the Conversion Offerings. Please transfer this
amount from the following investments as indicated:

________________________________________________________________________________

     3.   Effectiveness of Direction. I understand that this Investment Form
shall be subject to all of the terms and conditions of the Plan and the terms
and conditions of the Conversion and Reorganization. I acknowledge that I have
received a copy of the Prospectus and the Prospectus Supplement.

_____________________________                     _____________________________
          Signature                                           Date

                             *    *    *    *    *

     4.   Acknowledgement of Receipt. This Investment Form was received by the
Plan Administrator and will become effective on the date noted below.

_____________________________                     _____________________________
       Plan Administrator                                     Date

                                     S-16
<PAGE>
 
                                     [LOGO]
PROSPECTUS                     SOUTHBANC SHARES, INC.
     (PROPOSED HOLDING COMPANY FOR PERPETUAL BANK, A FEDERAL SAVINGS BANK)
                     UP TO 3,741,533 SHARES OF COMMON STOCK
                        $20.00 PURCHASE PRICE PER SHARE

     SouthBanc Shares, Inc.  ("Holding Company"), a Delaware corporation, is
offering up to 3,740,640 shares (which may be increased to 4,301,736 shares
under circumstances described in footnote 4 of the table below) of its common
stock, par value $.01 per share ("Common Stock"), in connection with (i) the
Exchange Offering, described below, to effect the reorganization of Perpetual
Bank, A Federal Savings Bank ("Savings Bank") as a wholly-owned subsidiary of
the Holding Company and (ii) the Conversion Offerings, described below, to
effect the conversion of SouthBanc Shares, M.H.C. ("MHC") from a mutual holding
company to a stock holding company.  The Holding Company, Savings Bank and MHC
are collectively referred to herein as the "Primary Parties."  The transactions
contemplated by the Exchange Offering and the Conversion Offerings, which are
collectively referred to herein as the "Conversion and Reorganization," are
undertaken pursuant to an Amended Plan of Conversion and Agreement and Plan of
Reorganization ("Plan of Conversion") adopted by the Boards of Directors of the
Primary Parties.

     THE EXCHANGE OFFERING.  Pursuant to the Plan of Conversion, each share of
common stock, par value $1.00 per share, of the Savings Bank ("Savings Bank
Common Stock") held by the MHC (800,000 shares, or 53.02% of the outstanding
shares, as of the date of this Prospectus) will be canceled and each share of
Savings Bank Common Stock held by the Savings Bank's public stockholders
("Public Savings Bank Shares" and "Public Stockholders," respectively) (708,873
shares, or 46.98% of the outstanding shares, as of the date of this Prospectus)
will be exchanged for shares of Common Stock ("Exchange Shares") pursuant to a
ratio ("Exchange Ratio") that will result in the Public Stockholders' aggregate
ownership of approximately 46.98% of the outstanding shares of Common Stock
before giving effect to any (i) payment of cash in lieu of issuing fractional
Exchange Shares and (ii) Conversion Shares (as defined below) purchased by the
Public Stockholders in the Conversion Offerings, described below.  As discussed
under "Independent Valuation" below, the final Exchange Ratio will be based on
the Public Stockholders' ownership interest and not on the market value of the
Public Savings Bank Shares.

        FOR INFORMATION ON HOW TO SUBSCRIBE FOR SHARES OF COMMON STOCK,
              CALL THE STOCK INFORMATION CENTER AT (864) ___-____.

      FOR A DISCUSSION OF CERTAIN RISKS THAT SHOULD BE CONSIDERED BY EACH
         PROSPECTIVE INVESTOR, SEE "RISK FACTORS" BEGINNING ON PAGE 1.

   THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR ACCOUNTS AND WILL NOT BE
   INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE SAVINGS
      ASSOCIATION INSURANCE FUND ("SAIF") OR ANY OTHER GOVERNMENT AGENCY.

  THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("SEC"), THE OFFICE OF THRIFT SUPERVISION ("OTS"), THE FDIC
                                  OR ANY OTHER
  FEDERAL AGENCY OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC, THE OTS,
     THE FDIC OR ANY OTHER AGENCY OR ANY STATE SECURITIES COMMISSION PASSED
             UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
             REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

                      (cover continued on following page)

                       SANDLER, O'NEILL & PARTNERS, L.P.


              The date of this Prospectus is _____________, 1998.
<PAGE>
 
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
                                                               Estimated Underwriting
                                                Purchase           Commissions and         Estimated Net
                                                Price(1)      Other Fees and Expenses(2)     Proceeds
                                             --------------   --------------------------   -------------
<S>                                          <C>              <C>                          <C>
Minimum Price Per Share...................   $20.00                      $0.68                $19.32
--------------------------------------------------------------------------------------------------------
Midpoint Price Per Share..................   $20.00                      $0.62                $19.38
--------------------------------------------------------------------------------------------------------
Maximum Price Per Share...................   $20.00                      $0.58                $19.42
--------------------------------------------------------------------------------------------------------
Maximum Price Per Share, as adjusted(3)...   $20.00                      $0.54                $19.46
--------------------------------------------------------------------------------------------------------
Minimum Total(4)..........................   $29,325,000                 $  990,000      $28,335,000
--------------------------------------------------------------------------------------------------------
Midpoint Total(5).........................   $34,500,000                 $1,070,000      $33,430,000
--------------------------------------------------------------------------------------------------------
Maximum Total(6)..........................   $39,675,000                 $1,150,000      $38,525,000
--------------------------------------------------------------------------------------------------------
Maximum Total, as adjusted(3)(7)..........   $45,626,250                 $1,240,000      $44,386,250
--------------------------------------------------------------------------------------------------------
</TABLE>
     (1)  Determined in accordance with an independent appraisal prepared by RP
          Financial, LC., Arlington, Virginia ("RP Financial"). See "Independent
          Valuation" on the cover page of this Prospectus and "THE CONVERSION
          AND REORGANIZATION --Stock Pricing, Exchange Ratio and Number of
          Shares to be Issued."

     (2)  Consists of estimated expenses of the Primary Parties arising from the
          Conversion and Reorganization, including fees payable to Sandler,
          O'Neill & Partners, L.P. ("Sandler O'Neill") in connection with the
          Conversion Offerings. Such fees may be deemed underwriting fees and
          Sandler O'Neill may be deemed an underwriter. The Primary Parties have
          agreed to indemnify Sandler O'Neill against certain liabilities,
          including liabilities that might arise under the Securities Act of
          1933, as amended ("Securities Act"). See "USE OF PROCEEDS" and "THE
          CONVERSION AND REORGANIZATION --Plan of Distribution and Selling
          Commissions."
     (3)  Gives effect to an increase in the number of shares that could be sold
          in the Conversion Offerings resulting from an increase in the pro
          forma market value of the MHC and the Savings Bank, as converted, up
          to 15% above the maximum of the Estimated Valuation Range, without the
          resolicitation of subscribers or any right of cancellation. See "THE
          CONVERSION AND REORGANIZATION -- Stock Pricing, Exchange Ratio and
          Number of Shares to be Issued."
     (4)  Assumes the issuance of 1,466,250 Conversion Shares at $20.00 per
          share.
     (5)  Assumes the issuance of 1,725,000 Conversion Shares at $20.00 per
          share.
     (6)  Assumes the issuance of 1,983,750 Conversion Shares at $20.00 per
          share.
     (7)  Assumes the issuance of 2,281,312 Conversion Shares at $20.00 per
          share.

     THE CONVERSION OFFERINGS.  Pursuant to the Plan of Conversion,
nontransferable rights to subscribe ("Subscription Rights") for up to 1,983,750
shares (which may be increased to 2,281,312 shares under circumstances described
in footnote 4 of the table appearing on the cover page of this Prospectus) of
Common Stock ("Conversion Shares") have been granted, in order of priority, to
(i) depositors with $50.00 or more on deposit at the Savings Bank as of the
close of business on June 30, 1996 ("Eligible Account Holders"), (ii) depositors
with $50.00 or more on deposit at the Savings Bank as of the close of business
on December 31, 1997 ("Supplemental Eligible Account Holders"), and (iii)
depositors of the Savings Bank (other than Eligible Account Holders and
Supplemental Eligible Account Holders) as of the close of business on
____________, 1998 ("Voting Record Date"), and borrowers of the Savings Bank
with loans outstanding as of the close of business on October 26, 1993 which
continue to be outstanding as of the close of business on the Voting Record Date
("Other Members"), subject to the priorities and purchase limitations set forth
in the Plan of Conversion ("Subscription Offering").  SUBSCRIPTION RIGHTS ARE
NONTRANSFERABLE.  PERSONS SELLING OR OTHERWISE TRANSFERRING THEIR RIGHTS TO
SUBSCRIBE FOR COMMON STOCK IN THE SUBSCRIPTION OFFERING OR SUBSCRIBING FOR
COMMON STOCK ON BEHALF OF ANOTHER PERSON WILL BE SUBJECT TO FORFEITURE OF SUCH
RIGHTS AND POSSIBLE FURTHER SANCTIONS AND PENALTIES IMPOSED BY THE OTS OR OTHER
AGENCY OF THE U.S. GOVERNMENT.  Concurrently, but subject to the prior rights of
Subscription Rights holders, the Holding Company is offering the Conversion
Shares for sale to members of the general public through a direct community
offering ("Direct Community Offering") with preference given first to Public
Stockholders as of the close of business on the Voting Record Date (who are not
Eligible Account Holders, Supplemental Eligible Account Holders or Other
Members) and then to natural persons and trusts of natural persons who are
permanent residents of Anderson or Oconee Counties of South Carolina ("Local
Community").  It is anticipated that any Conversion Shares not
<PAGE>
 
subscribed for in the Subscription Offering or purchased in the Direct Community
Offering will be offered to eligible members of the general public on a best
efforts basis by a selling group of broker-dealers managed by Sandler O'Neill in
a syndicated community offering ("Syndicated Community Offering").  The
Subscription Offering, Direct Community Offering and the Syndicated Community
Offering are referred to collectively as the "Conversion Offerings."

     THE SUBSCRIPTION OFFERING WILL EXPIRE AT NOON, EASTERN TIME, ON
____________, 1998 ("EXPIRATION DATE"), UNLESS EXTENDED BY THE PRIMARY PARTIES
FOR UP TO ___ DAYS TO _________, 1998.  SUCH EXTENSION MAY BE GRANTED WITHOUT
ADDITIONAL NOTICE TO SUBSCRIBERS.  The Direct Community Offering is also
expected to terminate at Noon, Eastern Time, on ____________, 1998 or at a date
thereafter, however, in no event later than ________ __, 1998.  The Holding
Company must receive a properly completed and signed stock order form ("Order
Form") and certification, along with full payment (or appropriate instructions
authorizing a withdrawal from a deposit account at the Savings Bank) of $20.00
per share ("Purchase Price") for all Conversion Shares subscribed for or
ordered.  Funds so received will be placed in a segregated account created for
this purpose at the Savings Bank, and interest will be paid at the Savings
Bank's passbook rate from the date payment is received until the Conversion and
Reorganization is consummated or terminated; these funds will be otherwise
unavailable to the depositor until such time.  Payments authorized by
withdrawals from deposit accounts will continue to earn interest at their
contractual rate until the Conversion and Reorganization is consummated or
terminated.  ONCE TENDERED, ORDERS CANNOT BE REVOKED OR MODIFIED WITHOUT THE
CONSENT OF THE PRIMARY PARTIES.  The Primary Parties are not obligated to accept
orders submitted on photocopied or telecopied Order Forms.  If the Conversion
and Reorganization is not consummated within 45 days after the last day of the
Subscription Offering and Direct Community Offering (which date will be no later
than ___________, 1998) and the OTS consents to an extension of time to
consummate the Conversion and Reorganization, subscribers will be notified in
writing of the time period within which the subscriber must notify the Primary
Parties of their intention to increase, decrease or rescind their orders.  Such
extensions may not go beyond ____________, 2000.

     The Primary Parties have engaged Sandler O'Neill to consult with and advise
them in the sale of the Conversion Shares in the Conversion Offerings.  In
addition, in the event the Conversion Shares are not fully subscribed for in the
Subscription Offering and Direct Community Offering, Sandler O'Neill will manage
the Syndicated Community Offering.  Neither Sandler O'Neill nor any other
registered broker-dealer is obligated to take or purchase any Conversion Shares
in the Conversion Offerings.  The Primary Parties reserve the right, in their
absolute discretion, to accept or reject, in whole or in part, any or all orders
in the Direct Community Offering or Syndicated Community Offerings either at the
time of receipt of an order or as soon as practicable following the termination
of the Conversion Offering.  If an order is rejected in part, the purchaser does
not have the right to cancel the remainder of the order.  See "THE CONVERSION
AND REORGANIZATION -- Plan of Distribution and Selling Commissions."

     INDEPENDENT VALUATION.  OTS regulations require that the offering of
Conversion Shares in the Conversion Offerings be based on an independent
valuation of the pro forma market value of the Savings Bank and the MHC, as
converted.  OTS policy requires that the independent valuation be multiplied by
approximately 46.98%, which represents the MHC's percentage ownership interest
in the Savings Bank.  Accordingly, RP Financial's independent appraisal as of
December 5, 1997 states that the aggregate pro forma market value of the Savings
Bank and the MHC, as converted, ranged from $55.3 million to $74.8 million, with
a midpoint of $65.1 million ("Estimated Valuation Range").

     The Primary Parties' Boards of Directors determined that the Conversion
Shares would be sold at the Purchase Price ($20.00 per share), resulting in a
range of 1,466,250 to 1,983,750 shares of Conversion Shares, with a midpoint of
1,725,000 Conversion Shares.  Upon consummation of the Conversion and
Reorganization, the Conversion Shares and the Exchange Shares will represent
approximately 53.02% and 46.98%, respectively, of the total outstanding shares
of Common Stock.  Based upon the Estimated Valuation Range, the Exchange Ratio
is expected to range from 1.83281 to 2.47969, resulting in a range of 1,299,231
Exchange Shares to 1,757,783 Exchange Shares to be issued in the Exchange
Offering.  The 3,741,533 shares of Common Stock offered hereby include up to
1,983,750 Conversion Shares (subject to adjustment up to 2,281,312 shares as
described herein) and up to 1,757,783 Exchange Shares (subject to adjustment up
to 2,021,451 shares as described herein).  The Estimated
<PAGE>
 
Valuation Range may be increased or decreased to reflect changes in the
financial condition or results of operations of the Savings Bank or changes in
market conditions or general financial, economic or regulatory conditions prior
to completion of the Conversion and Reorganization, and under certain
circumstances specified herein subscribers will be resolicited and given the
right to modify or cancel their orders.  See "THE CONVERSION AND REORGANIZATION
-- Stock Pricing, Exchange Ratio and Number of Shares to be Issued."

     PURCHASE LIMITATIONS ON CONVERSION SHARES.  The Plan of Conversion provides
for the following purchase limitations: (i) no person may purchase in either the
Subscription Offering, Direct Community Offering or Syndicated Community
Offering more than 50,000 Conversion Shares, (ii) no person, together with
associates of or persons acting in concert with such person, may purchase in
either the Subscription Offering, Direct Community Offering or Syndicated
Community Offering more than 50,000 Conversion Shares, (iii) the maximum number
of Conversion Shares which may be subscribed for or purchased in all categories
in the Conversion Offerings by any person, when combined with any Exchange
Shares received, shall not exceed 50,000 shares of Common Stock to be issued in
the Conversion and Reorganization, and (iv) the maximum number of Conversion
Shares which may be subscribed for or purchased in all categories in the
Conversion Offerings by any person, together with any associate or any group of
persons acting in concert, when combined with any Exchange Shares received,
shall not exceed 50,000 shares of Common Stock to be issued in the Conversion
and Reorganization.  The minimum order is 25 Conversion Shares.  BECAUSE OTS
POLICY REQUIRES THAT THE MAXIMUM PURCHASE LIMITATION INCLUDES EXCHANGE SHARES TO
BE ISSUED TO PUBLIC STOCKHOLDERS IN EXCHANGE FOR THEIR PUBLIC SAVINGS BANK
SHARES, CERTAIN PUBLIC STOCKHOLDERS MAY BE LIMITED IN THEIR ABILITY TO PURCHASE
CONVERSION SHARES, OR EVEN PREVENTED FROM PURCHASING CONVERSION SHARES.  See
"THE CONVERSION AND REORGANIZATION -- The Subscription, Direct Community and
Syndicated Community Offerings," "-- Procedure for Purchasing Conversion Shares
in the Subscription and Direct Community Offerings" and "-- Limitations on
Purchases of Conversion Shares."

     MARKET FOR THE COMMON STOCK.  The Holding Company has received preliminary
approval to list the Common Stock on the Nasdaq National Market under the symbol
"PERT."  Prior to the Conversion and Reorganization, the Public Savings Bank
Shares have been listed on the Nasdaq SmallCap Market under the same trading
symbol.  There can be no assurance that an active and liquid trading market for
the Common Stock will develop or, if developed, will be maintained.  See "RISK
FACTORS -- Absence of Prior Market for the Common Stock" and "MARKET FOR COMMON
STOCK."
<PAGE>
 
                     PERPETUAL BANK, A FEDERAL SAVINGS BANK
                            ANDERSON, SOUTH CAROLINA



                                     [Map]



THE CONVERSION AND REORGANIZATION IS CONTINGENT UPON APPROVAL OF THE PLAN OF
CONVERSION BY AT LEAST A MAJORITY OF THE MHC'S ELIGIBLE VOTING MEMBERS, BY THE
HOLDERS OF TWO-THIRDS OF THE OUTSTANDING SHARES OF SAVINGS BANK COMMON STOCK AND
BY THE HOLDERS OF A MAJORITY OF THE PUBLIC SAVINGS BANK SHARES PRESENT IN PERSON
OR BY PROXY, THE SALE OF AT LEAST 1,466,250 CONVERSION SHARES PURSUANT TO THE
PLAN OF CONVERSION, AND THE RECEIPT OF ALL APPLICABLE REGULATORY APPROVALS.
<PAGE>
 
     THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR ACCOUNTS AND WILL NOT BE
     INSURED OR GUARANTEED BY THE FDIC, THE SAIF OR ANY OTHER GOVERNMENT AGENCY.

                              PROSPECTUS SUMMARY

     The information set forth below should be read in conjunction with and is
qualified in its entirety by the more detailed information and Consolidated
Financial Statements (including the Notes thereto) presented elsewhere in this
Prospectus.  The purchase of Common Stock is subject to certain risks.  See
"RISK FACTORS."

SOUTHBANC SHARES, INC.

     The Holding Company was organized on November 6, 1997 under Delaware law at
the direction of the Savings Bank to acquire the Savings Bank as a wholly-owned
subsidiary upon consummation of the Conversion and Reorganization.  The Holding
Company has only engaged in organizational activities to date.  The Holding
Company has received conditional OTS approval to become a savings and loan
holding company through the acquisition of 100% of the issued and outstanding
capital stock of the Savings Bank, which, along with 50% of the net proceeds of
the Conversion Offerings (see table under "PRO FORMA DATA") as permitted by the
OTS to be retained by it, and a note receivable evidencing a loan to the Savings
Bank's Employee Stock Ownership Plan ("ESOP"), will be the only significant
assets of the Holding Company.  Funds retained by the Holding Company will be
used for general business activities.  See "USE OF PROCEEDS."  Upon consummation
of the Conversion and Reorganization, the Holding Company will be classified as
a unitary savings and loan holding company subject to OTS regulation.  See
"REGULATION -- Savings and Loan Holding Company Regulations."  The main office
of the Holding Company is located at 907 N. Main Street, Anderson, South
Carolina 29621, and its telephone number is (864) 225-0241.

SOUTHBANC SHARES, M.H.C.

     The MHC is the federally-chartered mutual holding company of the Savings
Bank.  The MHC was formed in October 1993 as a result of the reorganization of
the Savings Bank into a federally chartered mutual holding company ("MHC
Reorganization").  The members of the MHC consist of depositors of the Savings
Bank and those current borrowers of the Savings Bank who had loans outstanding
as of the consummation date of the MHC Reorganization (October 26, 1993).  The
MHC's sole business activity is holding the 800,000 shares of Savings Bank
Common Stock, which represents 53.02% of the outstanding shares as of the date
of this Prospectus.  The MHC's main office is located at 907 N. Main Street,
Anderson, South Carolina 29621, and its telephone number is (864) 225-0241.  As
part of the Conversion and Reorganization, the MHC will convert to a federally-
chartered interim stock savings bank and simultaneously merge with and into the
Savings Bank, with the Savings Bank as the surviving entity.

PERPETUAL BANK, A FEDERAL SAVINGS BANK

     The Savings Bank is a federally chartered stock savings bank headquartered
in Anderson, South Carolina.  The Savings Bank was originally chartered in 1906
and operated as a mutual institution without stockholders until October 1993, at
which time it reorganized into the mutual holding company structure.  The
Savings Bank's deposits are insured by the FDIC up to applicable legal limits
under the SAIF.  The Savings Bank, a member of the Federal Home Loan Bank
("FHLB") system, is regulated by the OTS and the FDIC.  At September 30, 1997,
the Savings Bank had total assets of $257.0 million, total deposits of $201.0
million, and total stockholders' equity of $30.8 million, on a consolidated
basis.

     On October 26, 1993, the MHC Reorganization was consummated and the Savings
Bank completed its initial stock offering by issuing 1,500,000 shares of Savings
Bank Common Stock at $10.00 per share, 1,385,000 shares
<PAGE>
 
(92.3%) of which were sold to the MHC.  The remaining 115,000 shares (7.7%) were
issued to members of the MHC, including officers, directors and employees of the
Savings Bank.

     In September 1996, the Savings Bank completed an additional offering of
Savings Bank Common Stock through the issuance of 585,000 shares at a price of
$19.25 to then existing members of the MHC ("Additional Offering").  In
connection with the closing of the Additional Offering, 585,000 shares of
Savings Bank Common Stock held by the MHC were canceled.  Accordingly, upon
consummation of the Additional Offering on September 30, 1996, there were
1,504,601 shares of Savings Bank Common Stock issued and outstanding, of which
800,000 (53.2%) were held by the MHC and 704,601 shares (46.8%) were held by the
Public Stockholders.

     The Savings Bank considers Anderson and Oconee Counties in the northwestern
corner of South Carolina as its primary market area because a substantial
portion of its loan portfolio is secured by properties located in those
counties.  See "RISK FACTORS -- Certain Lending Risks -- Geographic
Concentration of Credit and Investment Risk."  The Savings Bank faces strong
competition within its primary market area.  See "RISK FACTORS --Competition."
The Savings Bank also invests in loans secured by properties located outside of
its primary market area (predominately in Hilton Head Island, South Carolina,
and in the greater Greenville, South Carolina, area) as a result of loan
purchases from other lenders, including a mortgage banking company in which a
service corporation subsidiary of the Savings Bank has a one-third equity
interest.  See "BUSINESS OF THE SAVINGS BANK --Lending Activities" and "--
Subsidiary Activities."

     The Savings Bank is primarily engaged in the business of attracting
deposits from the general public and using those funds, along with FHLB
advances, to originate and purchase one- to- four family mortgage loans.  The
Savings Bank originates and purchases commercial real estate and construction
loans, as well as consumer loans and, to a lesser extent, commercial business
loans and multi-family real estate loans.  See "BUSINESS OF THE SAVINGS BANK --
Lending Activities."  Such latter type loans, which totalled $71.7 million, or
40.1%, of net loans receivable at September 30, 1997, are inherently riskier
than one- to- four-family mortgage loans.  See "RISK FACTORS -- Certain Lending
Risks."  As a complement to its lending activities, the Savings Bank services
mortgage loans and invests in mortgage servicing rights.  See "BUSINESS OF THE
SAVINGS BANK -- Lending Activities -- Loan Purchases and, Sales and Servicing."

     In addition to its lending activities, the Savings Bank, through a service
corporation subsidiary, develops residential and commercial properties located
in its primary market area.  See "BUSINESS OF THE SAVINGS BANK -- Subsidiary
Activities."  The Savings Bank also invests in short- and intermediate-term
mortgage-backed securities, including collateralized mortgage obligations
("CMOs").  See "BUSINESS OF THE SAVINGS BANK -- Investment Activities."

     The Savings Bank's principal office is located at 907 North Main Street,
Anderson, South Carolina 29621, and the telephone number at that office is (864)
225-0241.  The Savings Bank also operates five branch offices.  See "BUSINESS OF
THE SAVINGS BANK -- Properties."

THE CONVERSION AND REORGANIZATION

     PURPOSES OF THE CONVERSION AND REORGANIZATION.  The Boards of Directors of
the Primary Parties believe that the Conversion and Reorganization is in the
best interests of the MHC and its members, the Savings Bank and its
stockholders, and the communities served by the MHC and the Savings Bank.  In
their decision to pursue the Conversion and Reorganization, the Boards of
Directors considered the various regulatory uncertainties associated with the
mutual holding company structure, including the MHC's future ability to waive
any dividends from the Savings Bank and the uncertain future of the federal
thrift charter.  In addition, the Boards of Directors considered the various
advantages of the stock holding company form of organization, including: (i) the
Holding Company's ability to repurchase shares of its common stock without
adverse tax consequences, unlike the Savings Bank; (ii) the Holding Company's
greater flexibility under current law and regulations relative to the MHC to
acquire other financial institutions and diversify its operations; (iii) the
larger capital base of the Holding Company relative to the

                                     (ii)
<PAGE>
 
Savings Bank that will result from the Conversion Offering; and (iv) the
potential increased liquidity in the Common Stock relative to the Public Savings
Bank Shares because of the larger number of shares of Common Stock to be
outstanding upon consummation of the Conversion and Reorganization.  Currently,
the Boards of Directors of the Primary Parties have no specific plans,
arrangements or understandings, written or oral, regarding any stock
repurchases, acquisitions or diversification of operations.  See "THE CONVERSION
AND REORGANIZATION -- Purposes of Conversion and Reorganization."

     DESCRIPTION OF THE CONVERSION AND REORGANIZATION.  The Conversion and
Reorganization are being undertaken pursuant to the Plan of Conversion that was
adopted by the Boards of Directors of the Savings Bank and the MHC on September
22, 1997, and subsequently amended on December 22, 1997.  Under the Plan of
Conversion, (i) the MHC will convert to an interim federal stock savings bank
("Interim A") and simultaneously merge with and into the Savings Bank, pursuant
to which the MHC will cease to exist and the outstanding shares of Savings Bank
Common Stock held by the MHC (800,000 shares, or 53.02% of the outstanding
Savings Bank Common Stock as of the date of this Prospectus) will be canceled,
and (ii) an interim federal stock savings bank ("Interim B") will be formed as a
wholly-owned subsidiary of the Holding Company and will merge with and into the
Savings Bank, resulting in the Savings Bank becoming a wholly-owned subsidiary
of the Holding Company and the outstanding Public Savings Bank Shares (708,873
shares, or 46.98% of the outstanding Savings Bank Common Stock as of the date of
this Prospectus) will be converted into the Exchange Shares pursuant to the
Exchange Ratio.  The Exchange Ratio will result in the holders of the
outstanding Public Savings Bank Shares owning in the aggregate approximately the
same percentage of the Common Stock to be outstanding upon the completion of the
Conversion and Reorganization (i.e., the Conversion Shares and the Exchange
                               ----                                        
Shares) as the percentage of Savings Bank Common Stock owned by them in the
aggregate immediately before the consummation of the Conversion and
Reorganization, before giving effect to any (i) payment of cash in lieu of
issuing fractional Exchange Shares and (ii) Conversion Shares purchased by the
Stockholders in the Conversion Offerings.

     The following diagram outlines the pre-Conversion and Reorganization
organizational structure of the Primary Parties' and their ownership interests:

                 -------------------  ------------------- 
                           MHC               Public      
                                           Stockholders    
                  -------------------  --------------------

                          53.02%           46.98%

                             ------------------- 
                               Savings Bank     
                                    
                             ------------------- 

                                 100%
                           
                             --------------------
                                Holding Company  

                             --------------------
 
                                 100%
                           
                             --------------------
                                Interim B    
                               (in formation)                       
                             --------------------

                                     (iii)
<PAGE>
 
     The following diagram reflects the post-Conversion and Reorganization
organizational structure of the Holding Company and the Savings Bank and their
ownership interests.  The ownership interests presented assumes no fractional
Exchange Shares are issued, and does not give effect to purchases of any
Conversion Shares by the Public Stockholders or the exercise of outstanding
stock options.

          -------------------     -------------------
             Purchasers of           Former Public   
           Conversion Shares         Stockholders     
          -------------------     -------------------
  
                      53.02%           46.98%
    
                      -------------------  
                        Holding Company    
                                           
                      -------------------  
                                           
                                 100%      
                                           
                      -------------------  
                         Savings Bank      
                                    
                      -------------------

     REQUIRED APPROVALS.  The OTS has approved the Plan of Conversion subject to
(i) the approval of the holders of at least a majority of the total number of
votes eligible to be cast by the members of the MHC as of the close of business
on the Voting Record Date (___________, 1998) at a special meeting of members
called for the purpose of submitting the Plan of Conversion for approval
("Members' Special Meeting"), (ii) the approval of the holders of at least two-
thirds of the outstanding shares of Savings Bank Common Stock (including those
shares held by the MHC) as of the close of business on the Voting Record Date at
a meeting of stockholders called for the purpose of considering the Plan
("Stockholders' Meeting"), and (iii) the approval of the holders of at least a
majority of the Public Savings Bank Shares as of the close of business on the
Voting Record Date present in person or by proxy at the Stockholders' Meeting.
The MHC intends to vote its shares of Savings Bank Common Stock, which amounts
to 53.02% of the outstanding shares, in favor of the Plan of Conversion at the
Stockholders' Meeting.  In addition, as of September 30, 1997, directors and
executive officers of the Primary Parties as a group (13 persons) beneficially
owned 90,711, or 6.01%, of the outstanding shares of Savings Bank Common Stock,
which they intend to vote in favor of the Plan of Conversion at the
Stockholders' Meeting.

THE CONVERSION OFFERINGS

     The Conversion Offerings, which consist of the Subscription Offering, the
Direct Community Offering and the Syndicated Community Offering (if any), are
being undertaken pursuant to the Plan of Conversion.  The Holding Company is
offering up to 1,983,750 Conversion Shares in the Conversion Offerings.
Conversion Shares are first being offered in the Subscription Offering through
the exercise of Subscription Rights issued, in order of priority, to (i)
Eligible Account Holders; (ii) Supplemental Eligible Account Holders; and (iii)
Other Members.  In light of the anticipated additional compensation expense to
the Savings Bank that would result with the purchase of Conversion Shares, the
ESOP will not subscribe for Conversion Shares.  The Subscription Offering will
expire at Noon, Eastern Time, on ____________, 1998, unless extended.

     Subject to the prior rights of holders of Subscription Rights, Conversion
Shares not subscribed for in the Subscription Offering are being offered in the
Direct Community Offering to members of the general public with preference given
first to Public Stockholders as of the close of business on the Voting Record
Date (who are not Eligible Account Holders, Supplemental Eligible Account
Holders or Other Members) and then to natural persons and trusts of natural
persons who are permanent residents of the Local Community.  It is anticipated
that shares not subscribed for in the Subscription Offering and Direct Community
Offering may be offered to certain members of

                                     (iv)
<PAGE>
 
the general public in the Syndicated Community Offering.  The Primary Parties
reserve the absolute right to reject or accept any orders in the Direct
Community Offering or the Syndicated Community Offering (if any), in whole or in
part, either at the time of receipt of an order or as soon as practicable
following the Expiration Date.  The closing with respect to all shares sold in
the Conversion Offerings will occur simultaneously, and all Conversion Shares
will be sold at a uniform price of $20.00 per share.

     The Primary Parties have retained Sandler O'Neill as their consultant and
advisor and to assist in soliciting subscriptions in the Conversion Offerings on
a best efforts basis.  See "THE CONVERSION AND REORGANIZATION -- The
Subscription, Direct Community and Syndicated Community Offerings."

BENEFITS OF THE CONVERSION AND REORGANIZATION TO MANAGEMENT

     GENERAL.  The Savings Bank has existing stock benefit plans that were
implemented in connection with the MHC Reorganization and the Additional
Offering.  The Savings Bank's 1993 Stock Option Plan ("1993 Stock Option Plan")
and the ESOP were implemented in connection with the MHC Reorganization.  The
Savings Bank's 1996 Management Development and Recognition Plan ("1996 MRP") and
the Savings Bank's 1996 Stock Option Plan ("1996 Stock Option Plan") were
implemented in connection with the MHC Reorganization.  These plans will be
assumed by the Holding Company upon consummation of the Conversion and
Reorganization.  See "MANAGEMENT OF THE SAVINGS BANK -- Benefits" for a
discussion of these existing plans.  The following discussion relates to new
stock benefit plans that are expected to be implemented in connection with the
Conversion and Reorganization, as well as to employment agreements that will be
entered into with certain executive officers of the Holding Company and the
Savings Bank.

     MRP. The Holding Company expects to seek stockholder approval of the
SouthBanc Shares, Inc. 1998 Management Recognition Plan ("1998 MRP").  The 1998
MRP will reserve a number of shares equal to 4% of the number of Conversion
Shares issued in the Conversion Offerings.  Under current OTS regulations, the
approval of a majority vote of the Holding Company's outstanding shares of
Common Stock is required prior to the implementation of the 1998 MRP within one
year of the consummation of the Conversion and Reorganization.  If stockholder
approval of the 1998 MRP is obtained, it is expected that awards of restricted
stock of up to 79,350 shares of Common Stock (based on the issuance of
Conversion Shares at the maximum of the Estimated Valuation Range) will be made
to key employees of the Holding Company and the Savings Bank at no cost to the
recipient.  Although no specific award determinations have been made at this
time, the Holding Company and the Savings Bank anticipate that, if stockholder
approval is obtained it would provide awards to key employees.  Under current
OTS regulations, if the 1998 MRP is implemented within one year of the
consummation of the Conversion and Reorganization, (i) no officer or employee
may receive an award covering in excess of 25% of the number of shares reserved
for issuance under the 1998 MRP, (ii) no nonemployee director may receive in
excess of 5% of the number of shares reserved for issuance under the 1998 MRP,
(iii) nonemployee directors, as a group, may not receive in excess of 30% of the
number of shares reserved for issuance under the 1998 MRP, and (iv) all awards
would be subject to vesting at a minimum rate of 20% per year.  See "PRO FORMA
DATA" and "MANAGEMENT OF THE SAVINGS BANK -- Benefits -- Management Recognition
Plan."

     STOCK OPTION PLAN.  The Holding Company expects to seek stockholder
approval of the SouthBanc Shares, Inc. 1998 Stock Option Plan ("1998 Stock
Option Plan").  The 1998 Stock Option Plan will reserve a number of shares equal
to 10% of the number of Conversion Shares issued in the Conversion Offerings.
Under current OTS regulations, the approval of a majority vote of the Holding
Company's outstanding shares of Common Stock is required prior to the
implementation of the 1998 Stock Option Plan within one year of the consummation
of the Conversion and Reorganization.  If stockholder approval of the 1998 Stock
Option Plan is obtained, it is expected that options to acquire up to 198,375
shares of Common Stock of the Holding Company (based on the issuance of
Conversion Shares at the maximum of the Estimated Valuation Range) will be
awarded to key employees and directors of the Holding Company and the Savings
Bank.  The exercise price of such options will be 100% of the fair market value
of the Common Stock on the date the option is granted.  Although no specific
award determinations have been made at this time, the Holding Company and the
Savings Bank anticipate that if stockholder approval is

                                      (v)
<PAGE>
 
obtained it would provide awards to its directors, officers and employees to the
extent permitted by applicable regulations.  Under current OTS regulations, if
the 1998 Stock Option Plan is implemented within one year of the consummation of
the Conversion and Reorganization, (i) no officer or employees may receive an
award of options covering in excess of 25% of the number of shares reserved for
issuance under the 1998 Stock Option Plan, (ii) no nonemployee director may
receive in excess of 5% of the number of shares reserved for issuance under the
1998 Stock Option plan, (iii) nonemployee directors, as a group, may not receive
in excess of 30% of the number of shares reserved for issuance under the 1998
Stock Option Plan, and (iv) all awards would be subject to vesting at a minimum
rate of 20% per year.  Options are valuable only to the extent that they are
exercisable and the market price for the underlying share of Common Stock is in
excess of the exercise price.  An option effectively eliminates the market risk
of holding the underlying securities since no consideration is paid for the
option until it is exercised.  Therefore, the recipient may, within the limits
of the term of the option, wait to exercise the option until the market price
exceeds the exercise price.  See "MANAGEMENT OF THE SAVINGS BANK -- Benefits --
1998 Stock Option Plan."

     EMPLOYMENT AGREEMENTS.  The MHC and the Savings Bank maintain employment
agreements with Robert W. Orr (President and Managing Officer of the Savings
Bank and President and Chief Executive Officer of the Holding Company), Thomas
C. Hall (Senior Vice President and Treasurer of the Savings Bank and Treasurer
and Chief Financial Officer of the Holding Company) and Barry C. Visioli (Senior
Vice President of the Savings Bank and Secretary of the Holding Company) that
were entered into in connection with the MHC Reorganization.  In connection with
the Conversion and Reorganization, the Holding Company and the Savings Bank will
enter into three-year employment agreements with Messrs. Orr, Hall and Visioli,
which have substantially the same terms as and will replace the existing
agreements.  The agreements will provide certain benefits in the event of the
officers' termination of employment following a change in control of the Holding
Company or the Savings Bank.  In the event of a change in control of the Holding
Company or the Savings Bank, as defined in the agreement, each executive officer
will be entitled to a package of cash and/or benefits with a maximum value equal
to 2.99 times their average annual compensation during the five-year period
preceding the change in control.  Assuming a change of control occurred as of
September 30, 1997, the aggregate value of the severance benefits payable to
Messrs. Orr, Hall and Visioli under the agreements would have been approximately
$583,000.  See "MANAGEMENT OF THE SAVINGS BANK -- Executive Compensation --
Employment Agreements."

     For information concerning the possible voting control of officers,
directors and employees following the Conversion and Reorganization, see "RISK
FACTORS -- Anti-takeover Considerations -- Voting Control by Insiders."

PROSPECTUS DELIVERY AND PROCEDURE FOR PURCHASING CONVERSION SHARES

     To ensure that each purchaser receives a prospectus at least 48 hours prior
to the Expiration Date in accordance with Rule 15c2-8 of the Securities Exchange
Act of 1934, as amended ("Exchange Act"), no prospectus will be mailed any later
than five days prior to the Expiration Date or hand delivered later than two
days prior to such date.  Execution of the Order Form will confirm receipt of
the Prospectus in accordance with Rule 15c2-8.  Order Forms will be distributed
only with a prospectus.  The Primary Parties are not obligated to accept for
processing orders not submitted on original Order Forms.  Order Forms
unaccompanied by an executed certification form will not be accepted.  Payment
by check, money order, bank draft, cash or debit authorization to an existing
account at the Savings Bank must accompany the order and certification forms.
No wire transfers will be accepted.  The Savings Bank is prohibited from lending
funds to any person or entity for the purpose of purchasing shares of Common
Stock in the Conversion.  See "THE CONVERSION AND REORGANIZATION -- Procedure
for Purchasing Shares in the Subscription and Direct Community Offerings."

     In order to ensure that Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members are properly identified as to their stock
purchase priorities, depositors as of the close of business on June 30, 1996
("Eligibility Record Date"), December 31, 1997 ("Supplemental Eligibility Record
Date") or the Voting Record Date (_________, 1998) and borrowers with loans
outstanding on October 26, 1993 which continue to be

                                     (vi)
<PAGE>
 
outstanding as of the Voting Record Date must list all deposit and/or loan
accounts on the Order Form, giving all names on each account and the account
numbers.  Failure to list all account numbers may result in the inability of the
Holding Company or the Savings Bank to fill all or part of a subscription order.
In addition, registration of shares in a name or title different from the names
or titles listed on the account may adversely affect such subscriber's purchase
priority.  See "THE CONVERSION AND REORGANIZATION -- Procedure for Purchasing
Shares in the Subscription and Direct Community Offerings."

RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS

     No person may transfer or enter into any agreement or understanding to
transfer the legal or beneficial ownership of the Subscription Rights issued
under the Plan of Conversion or the Conversion Shares to be issued upon their
exercise.  Each person exercising Subscription Rights will be required to
certify that a purchase of Conversion Shares is solely for the purchaser's own
account and that there is no agreement or understanding regarding the sale or
transfer of such shares.  THE PRIMARY PARTIES WILL PURSUE ANY AND ALL LEGAL AND
EQUITABLE REMEDIES IN THE EVENT THEY BECOME AWARE OF THE TRANSFER OF
SUBSCRIPTION RIGHTS AND WILL NOT HONOR ORDERS KNOWN BY THEM TO INVOLVE THE
TRANSFER OF SUCH RIGHTS.

PURCHASE LIMITATIONS

     The Plan of Conversion provides for the following purchase limitations: (i)
no person may purchase in either the Subscription Offering, Direct Community
Offering or Syndicated Community Offering more than 50,000 Conversion Shares;
(ii) no person, together with associates of or persons acting in concert with
such person, may purchase in either the Subscription Offering, Direct Community
Offering or Syndicated Community Offering more than 50,000 Conversion Shares;
(iii) the maximum number of Conversion Shares which may be subscribed for or
purchased in all categories in the Conversion Offerings by any person, when
combined with any Exchange Shares received, shall not exceed 50,000 shares of
Common Stock to be issued in the Conversion and Reorganization; and (iv) the
maximum number of Conversion Shares which may be subscribed for or purchased in
all categories in the Conversion Offerings by any person, together with any
associate or any group of persons acting in concert, when combined with any
Exchange Shares received, shall not exceed 50,000 shares of Common Stock to be
issued in the Conversion and Reorganization.  The minimum order is 25 Conversion
Shares.  At any time during the Conversion Offerings, and without further
approval by the MHC members or the Public Stockholders, the Primary Parties, in
their sole discretion, may increase any of the purchase limitations to up to 5%
of the Conversion Shares issued in the Conversion and Reorganization.  Under
certain circumstances, subscribers may be resolicited in the event of such an
increase and given the opportunity to increase, decrease or rescind their
orders.  If there is an oversubscription in the Conversion Offerings, Conversion
Shares will be allocated as set forth in the Plan of Conversion.  See "THE
CONVERSION AND REORGANIZATION -- The Subscription, Direct Community and
Syndicated Community Offerings," "-- Procedure for Purchasing Shares in the
Subscription and Direct Community Offerings" and "--Limitations on Purchases of
Conversion Shares."  BECAUSE OTS POLICY REQUIRES THAT THE MAXIMUM PURCHASE
LIMITATION SET FORTH IN THE PLAN OF CONVERSION TAKE INTO ACCOUNT THE EXCHANGE
SHARES TO BE ISSUED TO THE PUBLIC STOCKHOLDERS FOR THEIR PUBLIC SAVINGS BANK
SHARES, CERTAIN PUBLIC STOCKHOLDERS MAY BE LIMITED IN THEIR ABILITY TO PURCHASE
CONVERSION SHARES, OR EVEN PREVENTED FROM PURCHASING CONVERSION SHARES.

STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED IN THE CONVERSION AND
REORGANIZATION

     OTS regulations require the aggregate purchase price of the Conversion
Shares be consistent with the independent appraisal of the estimated pro forma
market value of the MHC and the Savings Bank, as converted, which was estimated
by RP Financial to range from $55.3 million to $74.8 million as of December 5,
1997, or from 2,765,481 shares to 3,741,533 shares based on the Purchase Price.
Because the Public Stockholders will continue to hold approximately the same
aggregate percentage ownership interest in the Holding Company as they held in
the Savings Bank before the Conversion and Reorganization, before giving effect
to the payment of cash in lieu of issuing fractional Exchange Shares and any
Conversion Shares purchased by the Public Stockholders in the Conversion
Offerings,  the independent appraisal valuation was multiplied by 46.98% (which
represents the MHC's

                                     (vii)
<PAGE>
 
percentage interest in the Savings Bank to determine the midpoint of the
Estimated Valuation Range, which is $65.1 million, or 3,253,507 shares based on
the Purchase Price).  The full text of the independent appraisal describes the
procedures followed, the assumptions made, limitations on the review undertaken
and matters considered, which included but did not depend on the trading market
for the Savings Bank Common Stock (see "MARKET FOR COMMON STOCK").  The
appraisal will be updated or confirmed at the completion of the Conversion
Offerings.  The maximum of the Estimated Valuation Range may be increased by up
to 15% and the number of Conversion Shares may be increased to 4,302,763 shares
due to material changes in the financial condition or results of operations of
the Savings Bank or changes in market conditions or general financial, economic
or regulatory conditions.  No resolicitation of subscribers will be made and
subscribers will not be permitted to modify or cancel their subscriptions unless
the gross proceeds from the sale of the Conversion Shares are less than the
minimum or more than 15% above the maximum of the current Estimated Valuation
Range.  All Conversion Shares will be sold at the uniform Purchase Price ($20.00
per share), which was established by the Boards of Directors of the Primary
Parties.  Any increase or decrease in the number of shares of Conversion Stock
will result in a corresponding change in the number of Exchange Shares, so that
upon consummation of the Conversion and Reorganization, the Conversion Shares
and the Exchange Shares will represent approximately 53.02% and 46.98%,
respectively, of the total outstanding shares of Common Stock.  See "PRO FORMA
DATA" and "THE CONVERSION AND REORGANIZATION -- Stock Pricing, Exchange Ratio
and Number of Shares to be Issued."  THE APPRAISAL IS NOT INTENDED TO BE AND
SHOULD NOT BE CONSTRUED AS A RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY
OF PURCHASING COMMON STOCK IN THE CONVERSION OFFERINGS NOR CAN ASSURANCE BE
GIVEN THAT PURCHASERS OF THE COMMON STOCK IN THE CONVERSION OFFERINGS WILL BE
ABLE TO SELL SUCH SHARES AFTER CONSUMMATION OF THE CONVERSION AND REORGANIZATION
AT A PRICE THAT IS EQUAL TO OR ABOVE THE PURCHASE PRICE.  Furthermore, the pro
forma stockholders' equity is not intended to represent the fair market value of
the Common Stock and may be greater than amounts that would be available for
distribution to stockholders in the event of liquidation.  A complete copy of
the appraisal is available in the manner set forth under "ADDITIONAL
INFORMATION."

     Based on the 708,873 Public Savings Bank Shares outstanding at the date of
this Prospectus, and assuming a minimum of 1,466,250 and a maximum of 1,983,750
Conversion Shares are issued in the Conversion Offerings, the Exchange Ratio is
expected to range from approximately 1.83281 Exchange Shares to 2.47969 Exchange
Shares for each Public Savings Bank Share issued and outstanding immediately
prior to the consummation of the Conversion and Reorganization.  The final
Exchange Ratio will be affected if any stock options to purchase shares of
Savings Bank Common Stock are exercised after the date of this Prospectus and
before the consummation of the Conversion and Reorganization.  If any stock
options are outstanding immediately before the consummation of the Conversion
and Reorganization, they will be converted into options to purchase shares of
Common Stock, with the number of shares subject to the option and the exercise
price per share to be adjusted based upon the Exchange Ratio so that the
aggregate exercise price remains unchanged.  The duration of the options will
also be unchanged.  As of the date of this Prospectus, there were outstanding
options to purchase 63,100 shares of Savings Bank Common Stock at a weighted-
average exercise price of $24.14 per share.  The Savings Bank has no plans to
grant additional stock options before the consummation of the Conversion and
Reorganization.

<TABLE>
<CAPTION>
                                                               Shares
               Conversion Shares to     Exchange Stock to      of Common
                   Be Issued(1)            Be Issued(1)        Stock to be      Exchange
               ---------------------   --------------------
                 Amount     Percent     Amount     Percent     Outstanding(1)    Ratio(1)
               ----------   --------   ---------   --------    -------------   -----------
<S>            <C>          <C>        <C>         <C>        <C>              <C>
Minimum.....    1,466,250     53.02%   1,299,321     46.98%     2,765,481       1.83281
Midpoint....    1,725,000     53.02    1,528,507     46.98      3,253,507       2.15625
Maximum.....    1,983,750     53.02    1,757,783     46.98      3,741,533       2.47969
15% above
 Maximum....    2,281,312     53.02    2,021,451     46.98      4,302,763       2.85164
</TABLE>

                                    (viii)
<PAGE>
 
-----------------
(1) Assumes that outstanding options to purchase 63,100 shares of Savings Bank
    Common Stock at September 30, 1997 are not exercised before consummation of
    the Conversion and Reorganization.  However, assuming exercise, the
    percentages represented by the Conversion Shares and the Exchange Shares
    would be 50.89% and 49.11%, respectively, and the Exchange Ratio would be
    1.75924, 2.06970, 2.38015, and 2.73717, at the minimum, midpoint, maximum
    and 15% above the maximum of the Estimated Valuation Range, respectively.

    THE VALUE OF THE EXCHANGE SHARES TO BE RECEIVED FOR EACH PUBLIC SAVINGS BANK
SHARE MAY BE LESS THAN THE MARKET VALUE OF THE PUBLIC SAVINGS BANK SHARES AT THE
TIME OF EXCHANGE BASED ON THE FINAL EXCHANGE RATIO AND THE MARKET PRICE AT THE
TIME OF THE EXCHANGE.

DIFFERENCES IN STOCKHOLDER RIGHTS

    The Holding Company is a Delaware corporation subject to the provisions of
the Delaware General Corporation Law ("DGCL"), and the Savings Bank is a
federally-chartered savings bank subject to federal laws and regulations.  Upon
consummation of the Conversion and Reorganization, the Public Stockholders will
become stockholders of the Holding Company and their rights will be governed by
the Holding Company's Certificate of Incorporation and Bylaws and Delaware law,
rather than the Savings Bank's Federal Stock Charter and Bylaws, federal law and
OTS regulations.  The rights of stockholders of the Savings Bank are materially
different in certain respects from the rights of stockholders of the Holding
Company.  See "COMPARISON OF STOCKHOLDERS' RIGHTS" and "DESCRIPTION OF CAPITAL
STOCK OF THE HOLDING COMPANY."

USE OF PROCEEDS

    The net proceeds from the sale of the Conversion Shares are estimated to
range from $29.3 million to $39.7 million, or to $45.6 million if the Estimated
Valuation Range is increased by 15%, depending upon the number of shares sold
and the expenses of the Conversion and Reorganization.  The Holding Company has
received conditional OTS approval to purchase all of the capital stock of the
Savings Bank to be issued in the Conversion and Reorganization in exchange for
50% of the net proceeds of the Conversion Offerings.  This will result in the
Holding Company retaining approximately $14.2 million to $19.3 million of the
net proceeds, or up to $22.2 million if the Estimated Valuation Range is
increased by 15%, and the Savings Bank receiving an equal amount.  See "PRO
FORMA DATA."

    Receipt of 50% of the net proceeds of the sale of the Common Stock will
increase the Savings Bank's capital and will support the expansion of the
Savings Bank's existing business activities.  The Savings Bank will use the
funds contributed to it for general corporate purposes, including, initially,
lending and investment in short-term U.S. Government and agency obligations and
mortgage-backed securities.

    The proceeds retained by the Holding Company initially will be invested
primarily in short-term U.S. Government and agency obligations and mortgage-
backed securities.  Such proceeds will be available for additional contributions
to the Savings Bank in the form of debt or equity, to support future growth and
diversification of activities, as a source of dividends to the stockholders of
the Holding Company and for future repurchases of Common Stock (including
possible repurchases to fund the 1998 MRP), or to provide shares to be issued
upon exercise of stock options) to the extent permitted under Delaware law and
OTS regulations.  The Holding Company also intends to use a portion of the net
proceeds retained by it to refinance the ESOP's third party loan, which had an
outstanding balance of $804,000 at September 30, 1997.  See "PRO FORMA DATA."

    The Holding Company may also consider exploring opportunities to use such
funds to expand operations through acquiring or establishing additional branch
offices and the acquisition of other financial institutions.  In addition, the
Holding Company may consider exploring opportunities to expand into non-
traditional lines of business, such as securities brokerage, insurance agency
and real estate development activities, to the extent permitted by

                                     (ix)
<PAGE>
 
applicable law.  Currently, there are no specific plans, arrangements,
agreements or understandings, written or oral, regarding any such activities.

MARKET FOR COMMON STOCK

    The Holding Company has never issued capital stock to the public and,
consequently, there is no existing market for the Common Stock.  The Holding
Company has received conditional approval to have the Common Stock listed on the
Nasdaq National Market System under the symbol "PERT" (the current symbol for
the Public Savings Bank Shares, which are listed on the Nasdaq SmallCap Market).
Sandler O'Neill has agreed to act as a market maker for the Common Stock
following consummation of the Conversion and Reorganization.  No assurance can
be given that an active and liquid trading market for the Common Stock will
develop or, if developed, will be maintained.  Further, no assurance can be
given that purchasers will be able to sell their shares at or above the Purchase
Price after the Conversion and Reorganization.  See "RISK FACTORS -- Absence of
Prior Market for the Common Stock" and "MARKET FOR COMMON STOCK."

DIVIDEND POLICY

    The Savings Bank's Board of Directors has adopted a policy of paying regular
cash dividends on the Public Savings Bank Shares. The MHC has waived receipt of
all cash dividends paid by the Savings Bank to date.  See "MARKET FOR COMMON
STOCK" for additional information.  The Board of Directors intends to declare
and pay a regular cash dividend for the first calendar quarter of 1998 to
holders of Savings Bank Common Stock.  The MHC does not intend to waive receipt
of this dividend, in order to avoid the expense of obtaining regulatory approval
to waive the dividend.  The record date for determining the holders of Savings
Bank Common Stock entitled to receive the dividend is expected to pre-date the
consummation of the Conversion and Reorganization.  Consequently, dividends, if
any, would not be paid on the Common Stock until after the consummation of the
Conversion and Reorganization, and may not occur before the first full quarter
following the consummation of the Conversion and Reorganization.

    Following consummation of the Conversion and Reorganization, the Holding
Company's Board of Directors intends to declare cash dividends on the Common
Stock at an initial quarterly rate equal to $0.35 per share divided by the final
Exchange Ratio, resulting in intended economic parity with the dividends
currently paid on the Public Savings Bank Shares.  The first dividend on the
Common Stock is expected during the month following the end of the quarter in
which the Conversion and Reorganization is consummated.  Based upon the
Estimated Valuation Range, the Exchange Ratio is expected to be 1.83281,
2.15625, 2.47969 and 2.85164 at the minimum, midpoint, maximum and 15% above the
maximum of the Estimated Valuation Range, respectively, resulting in an initial
quarterly dividend rate of $0.19, $0.16, $0.14 and $0.12 per share,
respectively, following consummation of the Conversion and Reorganization.
Declarations of dividends by the Holding Company's Board of Directors will
depend upon a number of factors, including the amount of the net proceeds from
the Conversion Offerings retained by the Holding Company, investment
opportunities available to the Holding Company or the Savings Bank, capital
requirements, regulatory limitations, the Holding Company's and the Savings
Bank's financial condition and results of operations, tax considerations and
general economic conditions.  Consequently, there can be no assurance that any
dividends will be paid on the Common Stock or that, if paid, such dividends will
not be reduced or eliminated in future periods.  The Savings Bank intends to
continue to pay regular quarterly dividends through either the date of
consummation of the Conversion and Reorganization (on a pro rata basis) or the
end of the fiscal quarter during which the Conversion and Reorganization is
consummated.  See "DIVIDEND POLICY."

OFFICERS' AND DIRECTORS' COMMON STOCK PURCHASES AND BENEFICIAL OWNERSHIP

    At September 30, 1997, officers and directors of the Savings Bank (21
persons) beneficially owned 104,052 shares of Savings Bank Common Stock.  See
"MANAGEMENT OF THE SAVINGS BANK -- Beneficial Ownership of Savings Bank Common
Stock by Directors and Executive Officers."  Such shares of Savings Bank Common
Stock will be exchanged for Exchange Shares based on the final Exchange Ratio.
In addition to receipt of such Exchange

                                      (x)
<PAGE>
 
Shares, officers and directors as a group (21 persons) are expected to subscribe
for an aggregate of approximately 51,925 Conversion Shares, or approximately
3.5% and 2.6% of the shares based on the minimum and the maximum of the
Estimated Valuation Range, respectively.  See "CONVERSION SHARES TO BE PURCHASED
BY MANAGEMENT PURSUANT TO SUBSCRIPTION RIGHTS" for a discussion of the
anticipated number Exchange Shares to be received by directors and officers and
the anticipated number of Conversion Shares to be subscribed for by such
persons.

    Upon consummation of the Conversion and Reorganization, directors, officers
and employees of the Holding Company and the Savings Bank would have voting
control, on a fully diluted basis, of 22.6% and 22.1% of the Common Stock, based
on the issuance of the minimum and maximum of the Estimated Valuation Range,
respectively.  These percentages include the anticipated number of Exchange
Shares to be received and the anticipated number of Conversion Shares to be
purchased by such individuals, as well as allocation to participants' accounts
of all shares of Common Stock that will be held by the ESOP, the exercise of all
options under the 1993, 1996 and 1998 Stock Option Plans, and the funding of the
1996 and 1998 MRPs with Common Stock purchased in the open market.  See "RISK
FACTORS -- Anti-takeover Considerations -- Voting Control by Insiders."

RISK FACTORS

    See "RISK FACTORS" beginning on page 1 for a discussion of certain risks
related to the Conversion and Reorganization that should be considered by all
prospective investors.

                                     (xi)
<PAGE>
 
                  SELECTED CONSOLIDATED FINANCIAL INFORMATION

        The following tables set forth certain information concerning the
     consolidated financial position and results of operations of the Savings
     Bank and its subsidiaries at the dates and for the periods indicated. This
     information is qualified in its entirety by reference to the detailed
     information contained in the Consolidated Financial Statements and Notes
     thereto presented elsewhere in this Prospectus.

<TABLE>
<CAPTION>
 
                                                                           At September 30,
                                                         ----------------------------------------------------
                                                           1997       1996       1995       1994       1993
                                                           ---        ----       ----       ----       ----
                                                                            (In Thousands)
<S>                                                      <C>        <C>        <C>        <C>        <C>
 
SELECTED FINANCIAL CONDITION DATA:
 
Total assets..........................................   $256,993   $209,827   $178,304   $171,533   $168,308
Cash and interest-bearing deposits....................     13,499     13,585      6,630      8,700      5,797
Investment in limited partnership(1)..................      5,004         --         --         --         --
Investment securities available for sale..............     11,326      2,494        800        299         --
Mortgage-backed securities available for sale.........     35,863     43,125     46,344     50,064     12,742
Mortgage-backed securities held for investment........         --         --         --         --     45,935
Loans receivable, net.................................    178,772    140,758    116,539    104,852     97,004
Deposits..............................................    201,002    160,244    148,709    143,380    143,871
Borrowings............................................     15,000     16,000      8,000     10,500      8,500
Stockholders' equity..................................     30,602     29,091     18,232     14,637     13,921
 
                                                                            At September 30,
                                                           --------------------------------------------------
                                                             1997       1996       1995       1994       1993
                                                             ----       ----       ----       ----       ---- 
                                                                                (In Thousands)
 
SELECTED OPERATING DATA:
 
Interest income.......................................   $ 18,396   $ 14,921   $ 13,543   $ 12,075   $ 12,034
Interest expense......................................      9,496      7,425      8,761      5,624      6,184
                                                         --------   --------   --------   --------   --------
 
Net interest income...................................      8,900      7,496      4,782      6,451      5,850
Provision for loan losses.............................        655        349        362        120        364
                                                         --------   --------   --------   --------   --------
Net interest income after provision for loan losses...      8,245      7,147      4,420      6,331      5,486
Other income..........................................      1,855      1,927      3,231      1,565      1,613
General and administrative expenses...................      7,446      6,894      5,540      4,749      4,414
                                                         --------   --------   --------   --------   --------
 
Income before income taxes, change in accounting
 method, and extraordinary item.......................      2,654      2,180      2,111      3,147      2,685
Income taxes..........................................        926        756        194      1,064        947
                                                         --------   --------   --------   --------   --------
Income before change in method of
 accounting for income taxes..........................      1,728      1,424      1,917      2,083      1,738
Cumulative effect of change in method of
 accounting for income taxes..........................         --         --         --        350         --
                                                         --------   --------   --------   --------   --------
Net income............................................   $  1,728   $  1,424   $  1,917   $  2,433   $  1,738
                                                         ========   ========   ========   ========   ========
</TABLE>

                      (footnotes on second following page)

                                     (xii)
<PAGE>
 
<TABLE>
<CAPTION>
                                                            Year Ended September 30,
                                             ------------------------------------------------------------

                                                1997         1996         1995         1994       1993
                                                ----         ----         ----         ----       ---- 
<S>                                          <C>          <C>          <C>          <C>          <C>
 
PER SHARE DATA:
 
Earnings per share(2):
  Before cumulative effect of change in
   accounting for income taxes............   $     1.15   $     0.95   $     1.27   $     1.39      N/A
  Cumulative effect of change in
   accounting for income taxes............   $       --   $       --   $       --   $      .23      N/A
                                             ----------   ----------   ----------   ----------
  Net income..............................   $     1.15   $     0.95   $     1.27   $     1.62      N/A
                                             ==========   ==========   ==========   ==========
Dividends per share(3)....................   $     1.35   $     1.20   $     1.05   $     0.76      N/A
                                             ==========   ==========   ==========   ==========
Weighted average shares outstanding.......    1,505,432    1,504,601    1,504,059    1,502,418      N/A
 
                                                              Year Ended September 30,
                                                 -----------------------------------------------------
                                                   1997         1996         1995         1994     1993
                                                   ----         ----         ----         ----     ----
 
SELECTED OTHER DATA:
 
Number of:
 Real estate loans outstanding............        3,446        2,653        2,846        2,889    3,423
 Deposit accounts.........................       32,361       26,135       21,490       16,676   16,735
 Full-service offices.....................            6            5            5            4        3
</TABLE>
                         (footnotes on following page)


                                    (xiii)
<PAGE>
 
<TABLE>
<CAPTION>
KEY OPERATING RATIOS:
                                                                          At or For the
                                                                      Year Ended September 30,
                                                      ---------------------------------------------------------
                                                       1997      1996          1995           1994       1993
                                                      ----       ----          ----           ----       ----  
<S>                                                   <C>       <C>       <C>              <C>          <C>
Performance Ratios:
 
Return on average assets (net income divided by
 average assets)...................................     0.72%     0.75%            0.92%     1.20%(4)     1.03%
 
Return on average equity (net income divided by
 average equity)...................................     5.78      7.40            11.88     13.84(4)     13.36
 
Average equity to average assets...................    12.54     10.16             7.77      8.61         7.75
 
Interest rate spread (difference between yield
 on interest-earning assets and average cost of
 interest-bearing liabilities for the period)(5)...     3.57      3.85             3.61      3.54         3.26
 
Net interest margin (net interest income as a
 percentage of average interest-earning assets
 for the period)(5)................................     3.96      4.16             2.90      3.86         3.59
 
Dividend payout ratio(3)...........................   117.39    126.32            82.68     46.91          N/A
 
Non-interest expense to average assets.............     3.20      3.72             2.74      2.74         2.63
 
Average interest-earning assets to average
 interest-bearing liabilities......................   109.36    107.69            86.56    109.36       108.66
 
Asset Quality Ratios:
 
Allowance for loan losses to total loans
  at end of period.................................     1.04      1.08             1.08      0.92         0.91
 
Net charge-offs to average outstanding loans
 during the period.................................     0.18      0.07             0.04      0.04         0.06
 
Ratio of non-performing assets to total assets.....     0.20      0.38             0.33      0.73         0.82
 
Capital Ratios:
 
Average equity to average assets...................    12.54     10.16             7.77      8.61         7.75
----------------------------
</TABLE>
(1)  Represents a 20.625% equity investment in a limited partnership that
     invests in mortgage servicing rights.  See "BUSINESS OF THE SAVINGS BANK --
     Lending Activities -- Loan Purchases and, Sales and Servicing" and Note 3
     of Notes to Consolidated Financial Statements.
(2)  The Savings Bank was not a public company before fiscal 1994.
(3)  Takes into account dividends waived by the MHC.  All dividends to the MHC
     have been waived since the first quarter of fiscal 1994.  See Note 18 of
     Notes to Consolidated Financial Statements.  The dividend payout ratio
     based only on dividends actually paid to Public Stockholders was 55.19%,
     22.40%, 6.53% and 3.71% for the years ended September 30, 1997, 1996, 1995
     and 1994, respectively.
(4)  Excludes the effect of the one-time change in method of accounting for
     income taxes in fiscal 1994.  Return on assets and return on average equity
     were 1.40% and 16.16%, respectively.
(5)  Excludes income on mutual funds totalling approximately $1.7 million in
     fiscal 1995, which was reported as gains on sale and included in other
     income.


                                     (xiv)
<PAGE>
 
                                 RISK FACTORS

     Before investing in shares of the Common Stock offered hereby, prospective
investors should carefully consider the matters presented below, in addition to
matters discussed elsewhere in this Prospectus.

CERTAIN LENDING RISKS

     PURCHASED LOAN RISKS.  The Savings Bank actively purchases loans, other
than consumer and commercial business loans.  At September 30, 1997, purchased
loans totalled $25.2 million and consisted of one- to four-family mortgage loans
($19.6 million), construction loans ($4.1 million) and commercial real estate
loans ($1.5 million).  Such loans have been purchased primarily from a mortgage
company located in Hilton Head Island, South Carolina ($7.2 million), and a
mortgage banking company located in Greenville, South Carolina ($17.5 million),
in which a service corporation subsidiary of the Savings Bank has an equity
investment.  See "BUSINESS OF THE SAVINGS BANK -- Subsidiary Activities."  For
the year ended September 30, 1997, the Savings Bank's purchases of one- to four-
family mortgage loans exceeded originations by approximately 25.5%.  See
"BUSINESS OF THE SAVINGS BANK -- Lending Activities -- Loan Purchases and Sales
and Servicing."  The Savings Bank expects that future loans will be purchased
primarily from the Greenville-based mortgage banking company because of
increasing competition in the Hilton Head Island market.

     In addition to the lending risks discussed below, purchased loans have
added risk because they are originated by a third party to borrowers residing,
and secured by properties located, outside of the Savings Bank's primary market
area.  Purchased loans are also more difficult to underwrite and monitor because
of the Savings Bank's unfamiliarity with the economy in which the properties are
located relative to the economy of its primary market area, the higher
probability of lack of personal contact with the borrower, and the distant
location of the collateral, among other things.  Furthermore, loans secured by
properties located in an area whose economy is heavily dependent on tourism,
such as Hilton Head Island, South Carolina, are subject to greater risk because
economic downturns often have a greater adverse impact on tourism.  See
"BUSINESS OF THE SAVINGS BANK -- Lending Activities -- Commercial Real Estate
Lending."

     COMMERCIAL REAL ESTATE LENDING RISKS.  At September 30, 1997, the Savings
Bank's commercial real estate loan portfolio amounted to $27.0 million, or 15.1%
of net loans receivable, compared to $2.6 million, or 2.7% of net loans
receivable, at September 30, 1993.  Commercial real estate lending is inherently
riskier than one- to four-family mortgage lending.  Because payments on loans
secured by commercial properties often depend upon the successful operation and
management of the properties, repayment of such loans may be affected by adverse
conditions in the real estate market or the economy, among other things.  See
"BUSINESS OF THE SAVINGS BANK -- Lending Activities -- Commercial Real Estate
Loans."

     CONSUMER LENDING RISKS.  At September 30, 1997, the Savings Bank's consumer
loan portfolio amounted to $19.2 million, or 10.7% of net loans receivable.
Consumer lending is also inherently riskier than one- to four-family mortgage
lending.  Collateral such as automobiles, boats and other personal property
depreciate rapidly and are often an inadequate repayment source if a borrower
defaults.  In addition,  consumer loan repayments depend on the borrower's
continuing financial stability and are more likely to be adversely affected by
job loss, divorce, illness, personal bankruptcy and other financial hardship.
See "BUSINESS OF THE SAVINGS BANK -- Lending Activities -- Consumer Loans."

     CONSTRUCTION LENDING RISKS.  At September 30, 1997, the Savings Bank's
construction loan portfolio amounted to $17.1 million, or 9.6% of net loans
receivable, of which $6.4 million consisted of speculative construction loans.
Speculative construction loans are so named because there is not a commitment
for permanent financing in place at the time the construction loan is
originated.

     Construction lending is inherently riskier than one- to four-family
mortgage lending.  Construction loans generally have higher loan balances than
one- to four-family mortgage loans.  In addition, the potential for cost

                                       1
<PAGE>
 
overruns because of the inherent difficulties in estimating construction costs
and, therefore, collateral values and the difficulties and costs associated with
monitoring construction progress, among other things, are major contributing
factors to this greater credit risk.  Speculative construction loans have the
added risk that there is not an identified buyer for the completed home when the
loan is originated, with the risk that the builder will have to service the
construction loan debt and finance the other carrying costs of the completed
home for an extended time period until a buyer is identified.  Furthermore, the
demand for construction loans and the ability of construction loan borrowers to
service their debt depends highly on the state of the general economy, including
market interest rate levels, and the state of the economy of the Savings Bank's
primary market area.  A material downturn in economic conditions would be
expected to have a material adverse effect on the credit quality of the
construction loan portfolio.  See "BUSINESS OF THE SAVINGS BANK -- Lending
Activities -- Construction Loans."

     COMMERCIAL BUSINESS LENDING RISKS.  At September 30, 1997, the Savings
Bank's commercial business loan portfolio amounted to $7.2 million, or 4.0% of
net loans receivable.  Subject to market conditions and other factors, the
Savings Bank intends to expand its commercial business lending activities within
its primary market area.  Commercial business lending is inherently riskier than
one- to four-family mortgage lending.  Although commercial business loans are
often collateralized by equipment, inventory, accounts receivable or other
business assets, the liquidation value of these assets in the event of a
borrower default is often an insufficient source of repayment because accounts
receivable may be uncollectible and inventories and equipment may be obsolete or
of limited use, among other things.  See "BUSINESS OF THE SAVINGS BANK --
Lending Activities -- Commercial Business Loans."

     GEOGRAPHIC CONCENTRATION OF CREDIT AND INVESTMENT RISK.  The Savings Bank
has no significant concentration of credit and investment risk other than that a
substantial portion of its loan portfolio is secured by real estate, either as
primary or secondary collateral, located in its primary market area.  In
addition to its lending activities, the Savings Bank, through its investment in
a service corporation subsidiary, engages in commercial and residential property
development in its primary market area.  See "BUSINESS OF THE SAVINGS BANK --
Subsidiary Activities."  This geographic concentration of credit and investment
risk could have a material adverse effect on the Savings Bank's financial
condition and results of operations to the extent there is a material
deterioration in that area's economy and real estate values.  See "BUSINESS OF
THE SAVINGS BANK -- Lending Activities."

INTEREST RATE RISK

     GENERAL.  The financial condition and operations of the Savings Bank, and
of savings institutions in general, are influenced significantly by general
economic conditions, by the related monetary and fiscal policies of the federal
government and by the regulations of the OTS and the FDIC.  Deposit flows and
the cost of funds are influenced by interest rates of competing investments and
general market interest rates.  Lending activities are affected by the demand
for mortgage financing and for consumer and other types of loans, which in turn
is affected by the interest rates at which such financing may be offered and by
other factors affecting the supply of housing and the availability of funds.
The Savings Bank's profitability, like that of most financial institutions,
depends largely on its net interest income, which is the difference between the
interest income received from its interest-earning assets and the interest
expense incurred in connection with its interest-bearing liabilities.  To better
control the impact of changes in interest rates, the Savings Bank has sought to
improve the match between asset and liability maturities or repricing periods
and rates by emphasizing the origination and purchase of adjustable-rate
mortgage ("ARM") loans and shorter term construction, commercial real estate,
commercial business and consumer loans.

     POTENTIAL ADVERSE IMPACT ON RESULTS OF OPERATIONS.  The Savings Bank's
operations would be adversely affected by a material prolonged increase in
market interest rates.  At September 30, 1997, assuming an instantaneous 200
basis point increase in market interest rates, the Savings Bank's net portfolio
value ("NPV") would decrease by approximately $6.7 million or 17%.  See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Interest Rate Sensitivity Analysis of Net Portfolio Value."

                                       2
<PAGE>
 
     POTENTIAL ADVERSE IMPACT ON FINANCIAL CONDITION.  Changes in the level of
interest rates also affect the volume of loans originated or purchased by the
Savings Bank and, thus, the amount of loan and commitment fees, as well as the
market value of the Savings Bank's investment securities and other interest-
earning assets.  Changes in interest rates also can affect the average life of
loans.  Decreases in interest rates may result in increased prepayments of
loans, as borrowers refinance to reduce borrowing costs.  Under these
circumstances, the Savings Bank is subject to reinvestment risk to the extent
that it is not able to reinvest such prepayments at rates which are comparable
to the rates on the maturing loans or securities.  Moreover, volatility in
interest rates also can result in disintermediation, or the flow of funds away
from savings institutions into direct investments, such as U.S. Government and
corporate securities and other investment vehicles which, because of the absence
of federal insurance premiums and reserve requirements, generally pay higher
rates of return than savings institutions.

     At September 30, 1997, out of total one-to four-family mortgage loans of
$110.6 million, the Savings Bank had $45.6 million of ARM loans in its
portfolio, the majority of which reprice every year.  Furthermore, the Savings
Bank's ARM loans contain periodic and lifetime interest rate adjustment limits
which, in a rising interest rate environment, may prevent such loans from
repricing to market interest rates.  While management anticipates that ARM loans
will better offset the adverse effects of an increase in interest rates as
compared to fixed-rate mortgages, the increased mortgage payments required of
ARM borrowers in a rising interest rate environment could potentially cause an
increase in delinquencies and defaults.  The Savings Bank has not historically
had an increase in such delinquencies and defaults on ARM loans, but no
assurance can be given that such delinquencies or defaults would not occur in
the future.  The marketability of the underlying property also may be adversely
affected in a high interest rate environment.  Moreover, the Savings Bank's
ability to originate or purchase ARM loans may be affected by changes in the
level of interest rates and by market acceptance of the terms of such loans.  In
a relatively low interest rate environment, as currently exists, borrowers
generally tend to favor fixed-rate loans over ARM loans to hedge against future
increases in interest rates.

     Changes in the level of interest rates also affect the Savings Bank's
portfolio of mortgage-backed securities and CMOs.  Payments in the Savings
Bank's mortgage-backed securities and CMO portfolios may be affected by
declining and rising interest rate environments.  In a low and falling interest
rate environment, prepayments could be expected to increase in future periods.
The Savings Bank's adjustable-rate instruments would be expected to generate
lower yields as a result of the effect of falling interest rates on the indices
for determining payment of interest.  Additionally, the increased principal
payments received may be subject to reinvestment at lower rates.  Conversely, in
a period of rising interest rates, prepayments would be expected to decrease,
which would make  less principal available for reinvestment at higher rates.  In
a rising interest rate environment, adjustable-rate instruments generally would
generate higher yields to the extent that the indices for determining payment of
interest did not exceed the lifetime interest rate caps.  Such changing interest
rate environment may subject the Savings Bank's mortgage-backed securities and
CMO portfolios to yield and price volatility.

     The Savings Bank has an equity investment in a limited partnership that
invests in mortgage servicing rights.  The value of that investment was $5.0
million at September 30, 1997.  See "BUSINESS OF THE SAVINGS BANK -- Lending
Activities -- Equity Investment in Limited Partnership" for additional
information.  The value of this investment would be adversely affected if the
mortgage servicing rights were prematurely extinguished by the prepayment of the
underlying loans.  A decrease in market interest rates could be expected to
increase the rate of prepayments as borrowers refinance at lower interest rates.
In that event, the Savings Bank may be required to accelerate its amortization
of this investment, or even write-off the full value of the investment in a
given period, which would have a material adverse effect on the Savings Bank.

COMPETITION

     The Savings Bank faces significant competition in its primary market area
(Anderson and Oconee Counties, South Carolina) both in making loans and
attracting deposits.  Both counties have a high density of financial
institutions, many of which are branches of Southeastern region bank holding
companies which have greater financial resources than the Savings Bank, all of
which compete with the Savings Bank in varying degrees.  The Savings Bank

                                       3
<PAGE>
 
competes for loans principally with commercial banks, thrift institutions,
credit unions, mortgage banking companies and insurance companies.
Historically, commercial banks, thrift institutions and credit unions have been
the Savings Bank's most direct competition for deposits.  The Savings Bank also
competes with short-term money market funds and with other financial
institutions, such as brokerage firms and insurance companies, for deposits.
See "BUSINESS OF THE SAVINGS BANK -- Competition."

ESTIMATED VALUATION RANGE BELOW MARKET VALUE

     OTS policy requires that the final Exchange Ratio be determined based on
the number of shares issued in the Conversion Offering in order to maintain the
Public Stockholders' approximate 46.98% ownership interest in the Savings Bank.
THE FINAL EXCHANGE RATIO WILL NOT BE BASED ON THE MARKET VALUE OF THE PUBLIC
SAVINGS BANK SHARES.  Based on the Purchase Price ($20.00 per share) and the
Exchange Ratio, an Exchange Share has an equivalent value of $36.66, $43.13,
$49.59 and $57.03 at the minimum, midpoint, maximum, and maximum, as adjusted,
of the Estimated Valuation Range, respectively.  As of _________ ____, 1998, the
last trade in the Public Savings Bank Shares as reported by the Nasdaq Stock
Market was at $____ per share.  There can be no assurance as to the market price
of a Public Savings Bank Shares at the consummation of the Conversion and
Reorganization.  See "THE CONVERSION AND REORGANIZATION -- Stock Pricing,
Exchange ratio and Number of Shares to be Issued."

RETURN ON EQUITY AFTER CONVERSION AND REORGANIZATION

     Return on equity (net income for a given period divided by average equity
during that period) is a ratio used by many investors to compare the performance
of a particular financial institution to its peers.  The Savings Bank's return
on equity for the year ended September 30, 1997 was, and the Holding Company's
post-Conversion and Reorganization return on equity will be, less than the
average return on equity for publicly traded thrift institutions and their
holding companies.  See "SELECTED CONSOLIDATED FINANCIAL INFORMATION" for
numerical information regarding the Savings Bank's historical return on equity
and "CAPITALIZATION" for a discussion of the Holding Company's estimated pro
forma consolidated capitalization as a result of the Conversion and
Reorganization.  In order for the Holding Company to achieve a return on equity
comparable to the historical levels of the Savings Bank, the Holding Company
either would have to increase net income or reduce stockholders' equity, or
both, commensurate with the increase in equity resulting from the Conversion and
Reorganization.  Reductions in equity could be achieved by, among other things,
the payment of regular or special cash dividends (although no assurances can be
given as to their payment or, if paid, their amount and frequency), the
repurchase of shares of Common Stock subject to applicable regulatory
restrictions, or the acquisition of branch offices, other financial institutions
or related businesses (neither the Holding Company nor the Savings Bank has any
present plans, arrangements, or understandings, written or oral, regarding any
repurchase or acquisitions).  See "DIVIDEND POLICY" and "USE OF PROCEEDS."
Achievement of increased net income levels will depend on several important
factors outside management's control, such as general economic conditions,
including the level of market interest rates, competition and related factors,
among others.  In addition, the expenses associated with the 1996 and 1998 MRPs
(see "-- Expenses Associated with MRP"), along with other post-Conversion and
Reorganization expenses are expected to contribute initially to reduced earnings
levels.  Subject to market conditions, initially the Savings Bank intends to
deploy the net proceeds of the Conversion Offerings to support its lending
activities to increase earnings per share and book value per share, with the
goal of achieving a return on equity comparable to the average for publicly
traded thrift institutions and their holding companies.  This goal will likely
take a number of years to achieve and no assurances can be given that this goal
can be attained.  Consequently, for the foreseeable future, investors should not
expect a return on equity which will meet or exceed the average return on equity
for publicly traded thrift institutions, many of which are not newly converted
institutions and have had time to deploy their conversion capital.

                                       4
<PAGE>
 
EXPENSES ASSOCIATED WITH MRP

     In addition to the expense that the Savings Bank will recognize in
connection with the 1996 MRP as shares awarded to recipients vest, the Savings
Bank will recognize material employee compensation and benefit expenses assuming
the 1998 MRP is implemented.  The actual aggregate amount of these new expenses
cannot be currently predicted because applicable accounting practices require
that they be based on the fair market value of the shares of Common Stock when
the expenses are recognized, which would occur at a future date on which the
shares are acquired.  These expenses have been reflected in the pro forma
financial information under "PRO FORMA DATA" assuming the Purchase Price ($20.00
per share) as fair market value.  Actual expenses, however, will be based on the
fair market value of the Common Stock at the time of recognition, which may be
higher or lower than the Purchase Price.  See "MANAGEMENT OF THE SAVINGS BANK --
Benefits -- Management Recognition Plan."

ANTI-TAKEOVER CONSIDERATIONS

     PROVISIONS IN THE HOLDING COMPANY'S GOVERNING INSTRUMENTS AND DELAWARE AND
FEDERAL LAW.  Certain provisions included in the Holding Company's Certificate
of Incorporation and in the DGCL might discourage potential proxy contests and
other potential takeover attempts, particularly those that have not been
negotiated with the Board of Directors.  As a result, these provisions may
preclude takeover attempts that certain stockholders may deem to be in their
best interest and may tend to perpetuate existing management.  These provisions
include, among other things, a provision limiting voting rights of beneficial
owners of more than 10% of the Common Stock and supermajority voting
requirements for certain business combinations.  In addition, the Certificate of
Incorporation provides for the election of directors to staggered terms of three
years, eliminates cumulative voting for directors, and permits the removal of
directors without cause only upon the vote of holders of 80% of the outstanding
voting shares.  Certain provisions of the Certificate of Incorporation of the
Holding Company cannot be amended by stockholders unless an 80% stockholder vote
is obtained.  The Certificate of Incorporation also contains provisions
regarding the timing and content of stockholder proposals and nominations and
limiting the calling of special meetings.  The existence of these anti-takeover
provisions could result in the Holding Company being less attractive to a
potential acquiror and in stockholders receiving less for their shares than
otherwise might be available in the event of a takeover attempt.  Furthermore,
federal regulations prohibit for three years after consummation of the
Conversion and Reorganization the ownership of more than 10% of the Savings Bank
or the Holding Company without prior OTS approval.  Federal law also requires
OTS approval prior to the acquisition of "control" (as defined in OTS
regulations) of an insured institution.  See "RESTRICTIONS ON ACQUISITION OF THE
HOLDING COMPANY."

     VOTING CONTROL BY INSIDERS.  Management's potential voting control alone,
as well as together with additional stockholder support, might preclude or make
more difficult takeover attempts that certain stockholders may deem to be in
their best interest and might tend to perpetuate existing management.  Upon
consummation of the Conversion and Reorganization, directors, officers and
employees of the Holding Company and the Savings Bank would have voting control,
on a fully diluted basis, of 22.6% and 22.1% of the Common Stock, based on the
issuance of the minimum and maximum of the Estimated Valuation Range,
respectively.  These percentages include the anticipated number of Exchange
Shares to be received and the anticipated number of Conversion Shares to be
purchased by such individuals (see "CONVERSION SHARES TO BE PURCHASED BY
MANAGEMENT PURSUANT TO SUBSCRIPTION RIGHTS"), as well as allocation to
participants' accounts of all shares of Common Stock that will be held by the
ESOP, the exercise of all options under the 1993, 1996 and 1998 Stock Option
Plans, and the funding of the 1996 and 1998 MRPs with Common Stock purchased in
the open market.  See "MANAGEMENT OF THE SAVINGS BANK -- Benefits" for a
discussion of the ESOP, 1993, 1996 and 1998 Stock Option Plans, and the 1996 and
1998 MRPs.

     PROVISIONS OF EMPLOYMENT AGREEMENTS.  The employment agreements of Messrs.
Orr, Hall and Visioli provide for cash severance payments and/or the
continuation of health, life and disability benefits in the event of their
termination of employment following a change in control of the Holding Company
or the Savings Bank.  Assuming a change of control occurred as of September 30,
1997, the aggregate value of the severance benefits available to

                                       5
<PAGE>
 
these executive officers under the agreements would have been approximately
$583,000.  These employment agreements may have the effect of increasing the
costs of acquiring the Holding Company, thereby discouraging future attempts to
take over the Holding Company or the Savings Bank.

     See "MANAGEMENT OF THE SAVINGS BANK -- Benefits," "RESTRICTIONS ON
ACQUISITION OF THE HOLDING COMPANY" and "DESCRIPTION OF CAPITAL STOCK OF THE
HOLDING COMPANY."

POSSIBLE DILUTIVE EFFECT OF BENEFIT PROGRAMS

     The exercise of options under the 1993 and 1996 Stock Option Plans and the
1998 Stock Option Plan (assuming its implementation) will be dilutive to
stockholders.  Furthermore, the implementation of the 1998 MRP will also be
dilutive to stockholders to the extent its is funded with authorized but
unissued shares of Common Stock of the Holding Company.  Assuming the exercise
of all outstanding options under the 1993, 1996 and 1998 Stock Option Plans and
the funding of the 1998 MRP with authorized but unissued shares of Common Stock
of the Holding Company, the voting control of stockholders of the Holding
Company would be diluted by 10.4% at each of the minimum, midpoint, maximum, and
maximum, as adjusted, of the Estimated Valuation Range.  See "MANAGEMENT OF THE
SAVINGS BANK -- Benefits" for a discussion of these stock benefit plans.

ABSENCE OF PRIOR MARKET FOR THE COMMON STOCK

     The Holding Company has never issued capital stock and, consequently, there
is no existing market for the Common Stock.  Prior to the Conversion and
Reorganization, the Public Savings Bank Shares have been listed on the Nasdaq
Smallcap Market under the symbol "PERT."  Although the Holding Company has
received conditional approval to list the Common Stock on the Nasdaq National
Market also under the same symbol, there can be no assurance that an active and
liquid trading market for the Common Stock will develop or, if developed, will
continue.  Furthermore, there can be no assurance that purchasers will be able
to sell their shares at or above the Purchase Price.  See "MARKET FOR COMMON
STOCK."

POSSIBLE INCREASE IN ESTIMATED VALUATION RANGE AND NUMBER OF SHARES ISSUED

     The  Estimated Valuation Range may be increased up to 15% to reflect
material changes in the financial condition or results of operations of the
Savings Bank or changes in market conditions or general financial, economic or
regulatory conditions following the commencement of the Conversion Offerings.
If the Estimated Valuation Range is increased, it is expected that the Holding
Company would increase the Estimated Price Range so that up to 2,281,312
Conversion Shares at the Purchase Price would be issued for an aggregate price
of up to $45.6 million.  This increase in the number of shares would decrease a
subscriber's pro forma net income per share and stockholders' equity per share,
increase the Holding Company's pro forma consolidated stockholders' equity and
net earnings, and increase the Purchase Price as a percentage of pro forma
stockholders' equity per share and net income per share.  See "PRO FORMA DATA."

POSSIBLE ADVERSE INCOME TAX CONSEQUENCES OF THE DISTRIBUTION OF SUBSCRIPTION
RIGHTS

     If the Subscription Rights granted to Eligible Account Holders,
Supplemental Eligible Account Holders and Other Members of the Savings Bank are
deemed to have an ascertainable value, receipt of such rights may be a taxable
event (either as capital gain or ordinary income) to those Eligible Account
Holders, Supplemental Eligible Account Holders or Other Members who receive
and/or exercise the Subscription Rights in an amount equal to such value.
Additionally, the Savings Bank could be required to recognize a gain for tax
purposes on such distribution.  Whether Subscription Rights are considered to
have ascertainable value is an inherently factual determination.  The Savings
Bank has been advised by RP Financial that such rights have no value; however,
RP Financial's conclusion is not binding on the Internal Revenue Service
("IRS").  See "THE CONVERSION AND REORGANIZATION --Effects of Conversion and
Reorganization on Depositors and Borrowers of the Savings Bank -- Tax Effects."

                                       6
<PAGE>
 
                                 USE OF PROCEEDS

     The net proceeds from the sale of the Common Stock offered hereby are
estimated to range from $29.3 million to $39.7 million, or up to $45.6 million
if the Estimated Valuation Range is increased by 15%.  See "PRO FORMA DATA" for
the assumptions used to arrive at such amounts.  The Holding Company has
received conditional OTS approval to purchase all of the capital stock of the
Savings Bank to be issued in the Conversion and Reorganization in exchange for
50% of the net proceeds of the Conversion Offerings.  This will result in the
Holding Company retaining approximately $14.2 million to $19.3 million of net
proceeds, or up to $22.2 million if the Estimated Valuation Range is increased
by 15%, and the Savings Bank receiving an equal amount.  See "PRO FORMA DATA."

     Receipt of 50% of the net proceeds of the sale of the Common Stock will
increase the Savings Bank's capital and will support the expansion of the
Savings Bank's existing business activities.  The Savings Bank will use the
funds contributed to it for general corporate purposes, including, initially,
lending and investment in short-term U.S. Government and agency obligations and
mortgage-backed securities.

     The net proceeds retained by the Holding Company initially will be invested
primarily in short-term U.S. Government and agency obligations and mortgage-
backed securities or in a deposit account either at the Savings Bank or another
financial institution.  Such proceeds will be available for additional
contributions to the Savings Bank in the form of debt or equity, to support
future diversification or acquisition activities, as a source of dividends to
the stockholders of the Holding Company and for future repurchases of Common
Stock to the extent permitted under Delaware law and federal regulations.  The
Holding Company will also use a portion of the net proceeds retained by it to
refinance the ESOP's third party loan, which had an outstanding balance of
$804,000 at September 30, 1997.  See "PRO FORMA DATA."

     The Holding Company will consider exploring opportunities to use such funds
to expand operations through acquiring or establishing additional branch offices
or acquiring other financial institutions.  In addition, the Holding Company may
consider exploring opportunities to expand into non-traditional lines of
business, such as securities brokerage, insurance agency and real estate
development activities, to the extent permitted by applicable law.  Currently,
there are no specific plans, arrangements, agreements or understandings, written
or oral, regarding any diversification activities.

          Following consummation of the Conversion and Reorganization, the
Holding Company's Board of Directors will have the authority to adopt plans for
repurchases of Common Stock, subject to statutory and regulatory requirements.
Since the Holding Company has not yet issued stock, there currently is
insufficient information upon which an intention to repurchase stock could be
based.  The facts and circumstances upon which the Board of Directors may
determine to repurchase stock in the future would include but are not limited
to:  (i) market and economic factors such as the price at which the stock is
trading in the market, the volume of trading, the attractiveness of other
investment alternatives in terms of the rate of return and risk involved in the
investment, the ability to increase the book value and/or earnings per share of
the remaining outstanding shares, and the ability to improve the Holding
Company's return on equity; (ii) the avoidance of dilution to stockholders by
not having to issue additional shares to cover the exercise of stock options or
to fund employee stock benefit plans; and (iii) any other circumstances in which
repurchases would be in the best interests of the Holding Company and its
stockholders.  Any stock repurchases will be subject to a determination by the
Board of Directors that both the Holding Company and the Savings Bank will be
capitalized in excess of all applicable regulatory requirements after any such
repurchases and that capital will be adequate, taking into account, among other
things, the level of nonperforming and classified assets, the Holding Company's
and the Savings Bank's current and projected results of operations and
asset/liability structure, the economic environment and tax and other regulatory
considerations.  For a discussion of the regulatory limitations applicable to
stock repurchases and current OTS policy with respect thereto, see "THE
CONVERSION AND REORGANIZATION -- Restrictions on Repurchase of Stock."

                                       7
<PAGE>
 
                                DIVIDEND POLICY

GENERAL

     The Savings Bank's Board of Directors has adopted a policy of paying
regular cash dividends on the Public Savings Bank Shares. The MHC has waived
receipt of all cash dividends paid by the Savings Bank to date.  See "MARKET FOR
COMMON STOCK" for additional information.  The Board of Directors intends to
declare and pay a regular cash dividend for the first calendar quarter of 1998
to holders of Savings Bank Common Stock.  The MHC does not intend to waive
receipt of this dividend in order to avoid the expense obtaining regulatory
approval to waive the dividend.  The record date for determining the holders of
Savings Bank Common Stock entitled to receipt of the dividend is expected to
pre-date the consummation of the Conversion and Reorganization.  Consequently,
dividends, if any, would not be paid on the Common Stock until after the
consummation of the Conversion and Reorganization, and may not occur before the
first full quarter following the consummation of the Conversion and
Reorganization.

     Upon completion of the Conversion and Reorganization, the Holding Company's
Board of Directors will have the authority to declare dividends on the Common
Stock, subject to statutory and regulatory requirements.  The Board of Directors
of the Holding Company intends to pay cash dividends on the Common Stock at an
initial quarterly rate equal to $0.35 per share divided by the final Exchange
Ratio, resulting in intended economic parity with the dividends currently paid
on the Public Savings Bank Shares.  The first dividend payment on the Common
Stock is expected during the month following the end of the quarter in which the
Conversion and Reorganization is consummated.  Based upon the Estimated
Valuation Range, the Exchange Ratio is expected to be 1.83281, 2.15625, 2.47969
and 2.85164 at the minimum, midpoint, maximum and 15% above the maximum of the
Valuation Price Range, respectively, resulting in an initial quarterly dividend
rate of $0.19, $0.16, $0.14 and $0.12 per share, respectively, commencing with
the first full quarter following consummation of the Conversion and
Reorganization.  In addition, the Board of Directors may determine to pay
periodic special cash dividends in addition to, or in lieu of, regular cash
dividends.  Declarations or payments of any dividends (regular and special) will
be subject to determination by the Board of Directors, which will take into
account the amount of the net proceeds retained by the Holding Company, the
Holding Company's financial condition, results of operations, tax
considerations, capital requirements, industry standards, economic conditions
and other factors, including the regulatory restrictions that affect the payment
of dividends by the Savings Bank to the Holding Company discussed below.  No
assurances can be given that any dividends, either regular or special, will be
declared or, if declared, what the amount of dividends will be or whether such
dividends, if commenced, will continue.

CURRENT RESTRICTIONS

     Dividends from the Holding Company may depend, in part, upon receipt of
dividends from the Savings Bank because the Holding Company initially will have
no source of income other than dividends from the Savings Bank and earnings from
the investment of the net proceeds from the Conversion Offerings retained by the
Holding Company.  OTS regulations require the Savings Bank to give the OTS 30
days' advance notice of any proposed declaration of dividends to the Holding
Company, and the OTS has the authority under its supervisory powers to prohibit
the payment of dividends to the Holding Company.  The OTS imposes certain
limitations on the payment of dividends from the Savings Bank to the Holding
Company which utilize a three-tiered approach that permits various levels of
distributions based primarily upon a savings association's capital level.  The
Savings Bank currently meets the criteria to be designated a Tier 1 association,
as hereinafter defined, and consequently could at its option (after prior notice
to and no objection made by the OTS) distribute up to 100% of its net income
during the calendar year plus 50% of its surplus capital ratio at the beginning
of the calendar year less any distributions previously paid during the year.  In
addition, the Savings Bank may not declare or pay a cash dividend on its capital
stock if the effect thereof would be to reduce the regulatory capital of the
Savings Bank below the amount required for the liquidation account to be
established pursuant to the Savings Bank's Plan of Conversion.  See "REGULATION
-- Federal Regulation of the Savings Bank -- Limitations on Capital
Distributions," "THE CONVERSION AND 

                                       8
<PAGE>
 
REORGANIZATION -- Effects of Conversion and Reorganization on Depositors and
Borrowers of the Savings Bank -- Liquidation Account" and Note 12 of Notes to
the Consolidated Financial Statements included elsewhere herein.

     Under Delaware law, the Holding Company is generally limited to paying
dividends in an amount equal to the excess of its net assets (total assets minus
total liabilities) over its statutory capital or, if no such excess exists, to
its net profits for the current and/or immediately preceding fiscal year.

     The Holding Company has committed to the OTS not to make any tax-free
distributions to stockholders in the form of a return of capital, or take any
preliminary action in contemplation of any such distributions, within the first
year following the consummation of the Conversion.

TAX CONSIDERATIONS

     In addition to the foregoing, retained earnings of the Savings Bank
appropriated to bad debt reserves and deducted for federal income tax purposes
cannot be used by the Savings Bank to pay cash dividends to the Holding Company
without the payment of federal income taxes by the Savings Bank at the then
current income tax rate on the amount deemed distributed, which would include
the amount of any federal income taxes attributable to the distribution.  See
"TAXATION -- Federal Taxation" and Note 11 of Notes to the Consolidated
Financial Statements included elsewhere herein.  The Holding Company does not
contemplate any distribution by the Savings Bank that would result in a
recapture of the Savings Bank's bad debt reserve or create the above-mentioned
federal tax liabilities.

                            MARKET FOR COMMON STOCK

     The Holding Company has never issued capital stock and, consequently, there
is no existing market for the Common Stock.  Although the Holding Company has
received preliminary approval to list the Common Stock on the Nasdaq National
Market System under the symbol "PERT," there can be no assurance that the
Holding Company will meet Nasdaq National Market System listing requirements,
which include a minimum market capitalization, at least three market makers and
a minimum number of record holders.  Sandler O'Neill has agreed to make a market
for the Common Stock following consummation of the Conversion and Reorganization
and will assist the Holding Company in seeking to encourage at least two
additional market makers to establish and maintain a market in the Common Stock.
Making a market involves maintaining bid and ask quotations and being able, as
principal, to effect transactions in reasonable quantities at those quoted
prices, subject to various securities laws and other regulatory requirements.
Based on the level of market making in the Public Savings Bank Shares, the
Holding Company anticipates that prior to the completion of the Conversion and
Reorganization it will be able to obtain the commitment from at least two
additional broker-dealers to act as market maker for the Common Stock.
Additionally, the development of a liquid public market depends on the existence
of willing buyers and sellers, the presence of which is not within the control
of the Holding Company, the Savings Bank or any market maker.  There can be no
assurance that an active and liquid trading market for the Common Stock will
develop or that, if developed, it will continue.  The number of active buyers
and sellers of the Common Stock at any particular time may be limited.  Under
such circumstances, investors in the Common Stock could have difficulty
disposing of their shares on short notice and should not view the Common Stock
as a short-term investment.  Furthermore, there can be no assurance that
purchasers will be able to sell their shares at or above the Purchase Price or
that quotations will be available on the Nasdaq National Market System as
contemplated.

     Since September 30, 1996 (the consummation date of the Additional
Offering), the Public Savings Bank Shares have been listed on the Nasdaq
SmallCap Market under the symbol "PERT."  Before that date, the Public Savings
Bank Shares were unlisted and traded in privately negotiated transactions.  At
September 30, 1997, there were 294 record holders of the Public Savings Bank
Shares (not including holders in nominee or "street name") and four market
makers in the Public Savings Bank Shares as reported by the Nasdaq Stock Market.
The following table sets forth the high and low trading prices, as reported by
Nasdaq, and cash dividends paid for each quarter during the fiscal 1997.  Market
price data for fiscal 1996 is not presented because the Public Savings Bank
Shares traded 

                                       9
<PAGE>
 
in private transactions for which comparable data is unavailable. The Savings
Bank paid a quarterly cash dividend of $0.30 on the outstanding Public Savings
Bank Shares during fiscal 1996.
<TABLE>
<CAPTION>
 
                                                        Cash Dividend
Fiscal 1997                            High     Low       Declared
-----------                           ------   ------   -------------
<S>                                   <C>      <C>      <C>
Quarter Ended December 31, 1996....   $24.25   $20.25           $0.30
Quarter Ended March 31, 1997.......    26.50    22.50            0.35
Quarter Ended June 30, 1997........    29.75    24.00            0.35
Quarter Ended September 30, 1997...    57.00    30.25            0.35
</TABLE>

                                       10
<PAGE>
 
                                 CAPITALIZATION

     The following table presents the historical capitalization of the Savings
Bank at September 30, 1997, and the pro forma consolidated capitalization of the
Holding Company after giving effect to the assumptions set forth under "PRO
FORMA DATA," based on the sale of the number of Conversion Shares at the
minimum, midpoint, maximum and maximum, as adjusted, of the Estimated Valuation
Range.  The Conversion Shares that would be issued at the maximum, as adjusted,
of the Estimated Valuation Range would be subject to receipt of OTS approval of
an updated appraisal confirming such valuation.  A CHANGE IN THE NUMBER OF
CONVERSION SHARES TO BE ISSUED IN THE CONVERSION AND REORGANIZATION WOULD
MATERIALLY AFFECT PRO FORMA CONSOLIDATED CAPITALIZATION.
<TABLE>
<CAPTION>
                                                                 Holding Company Pro Forma Consolidated Capitalization
                                                                                 Based Upon the Sale of
                                            Savings          --------------------------------------------------------------
                                              Bank           1,466,250       1,725,000         1,983,750       2,281,312
                                          Capitalization     Shares at       Shares at          Shares at       Shares at
                                               at              $20.00          $20.00             $20.00          $20.00
                                        September 30, 1997    Per Share(1)    Per Share(1)      Per Share(1)    Per Share(2)
                                        ------------------   ------------     -----------       -----------     -----------
                                                                              (In thousands)
<S>                                          <C>             <C>                <C>             <C>             <C>
Deposits(3)..........................         $201,002        $  201,002         $  201,002      $  201,002      $  201,002
FHLB advances........................           15,000            15,000             15,000          15,000          15,000
ESOP debt(4).........................              804               804                804             804             804
                                              --------        ----------         ----------      ----------      ----------
Total deposits and borrowed funds....         $216,806        $  216,806         $  216,806      $  216,806      $  216,806
                                              ========        ==========         ==========      ==========      ==========

Stockholders' equity:
   Preferred stock:
     250,000 shares, $.01 par
     value per share, authorized;
     none issued or outstanding......               --                --                 --              --              --

   Common Stock:
     7,500,000 shares, $.01 par
     value per share, authorized;
     specified number of shares
     assumed to be issued and
     outstanding(5)..................            1,509                14                 17              20              23

   Additional paid-in capital........           11,652            41,482             46,574          51,665          57,525

   Retained earnings(6)..............           18,382            18,382             18,382          18,382          18,382
   Unrealized loss on securities
    available-for-sale, net of tax...              188               188                188             188             188
   Less:
     Savings Bank Common Stock
      acquired by ESOP in MHC
      Reorganization and
      Additional Offering............             (804)             (804)              (804)           (804)           (804)
     Common Stock to be acquired
      by 1996 MRP(7).................             (325)             (938)              (938)           (938)           (938)
     Common Stock to be acquired
      by 1998 MRP(8).................               --            (1,173)            (1,380)         (1,587)         (1,825)
                                              --------        ----------         ----------      ----------      ----------

Total stockholders' equity...........         $ 30,602        $   57,151         $   62,039      $   66,927      $   72,551
                                              ========        ==========         ==========      ==========      ==========
</TABLE>

                         (footnotes on following page)

                                       11
<PAGE>
 
-----------------------------
(1)     Does not reflect the possible increase in the Estimated Valuation Range
        to reflect material changes in the financial condition or results of
        operations of the Savings Bank or changes in market conditions or
        general financial, economic and regulatory conditions, or the issuance
        of additional shares under the 1998 Stock Option Plan.
(2)     This column represents the pro forma capitalization of the Holding
        Company if the aggregate number of Conversion Shares issued in the
        Conversion and Reorganization is 15% above the maximum of the Estimated
        Valuation Range.  See "PRO FORMA DATA" and Footnote 1 thereto.
(3)     Withdrawals from deposit accounts for the purchase of Conversion Shares
        are not reflected.  Such withdrawals will reduce pro forma deposits by
        the amounts thereof.
(4)     Represents outstanding balance on third party loan used by ESOP to
        acquire shares of Savings Bank Common Stock in the MHC Reorganization
        and the Additional Offering.
(5)     The Savings Bank's authorized capital will consist solely of 1,000
        shares of common stock, par value $1.00 per share, 1,000 shares of which
        will be issued to the Holding Company, and 9,000 shares of preferred
        stock, no par value per share, none of which will be issued in
        connection with the Conversion and Reorganization.
(6)     Retained earnings are substantially restricted by applicable regulatory
        capital requirements.  Additionally, the Savings Bank will be prohibited
        from paying any dividend that would reduce its regulatory capital below
        the amount in the liquidation account, which will be established for the
        benefit of Eligible Account Holders and Supplemental Eligible Account
        Holders at the consummation of the Conversion and Reorganization and
        adjusted downward thereafter as such account holders reduce their
        balances or cease to be depositors.  See "THE CONVERSION AND
        REORGANIZATION -- Effects of Conversion and Reorganization on Depositors
        and Borrowers of the Savings Bank -- Liquidation Account."
(7)     Pro forma consolidated capitalization reflects funding of remaining
        shares authorized for awards under the 1996 MRP through open market
        purchases of Common Stock.
(8)     Assumes the purchase in the open market at the Purchase Price, pursuant
        to the proposed 1998 MRP, of a number of shares equal to 4% of the
        shares of Conversion Shares issued in the Conversion and Reorganization
        at the minimum, midpoint, maximum and 15% above the maximum of the
        Estimated Valuation Range.  The issuance of such additional Conversion
        Shares from authorized but unissued shares of Common Stock would dilute
        the ownership interest of stockholders by 2.08%.  The shares are
        reflected as a reduction of stockholders' equity.  See "RISK FACTORS --
        Possible Dilutive Effect of Benefit Programs," "PRO FORMA DATA" and
        "MANAGEMENT OF THE SAVINGS BANK -- Benefits -- Management Recognition
        Plan."  The 1998 MRP is subject to stockholder approval, which is
        expected to be sought at a meeting to be held no earlier than six months
        following consummation of the Conversion and Reorganization.

                                       12
<PAGE>
 
             HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE

   The following table presents the Savings Bank's historical and pro forma
capital position relative to its capital requirements at September 30, 1997. The
amount of capital infused into the Savings Bank for purposes of the following
table is 50% of the net proceeds of the Conversion Offering. For purposes of the
table below, the cost of the shares acquired by the 1996 MRP (completed
subsequent to September 30, 1997), and expected to be acquired by the 1998 MRP
is deducted from pro forma regulatory capital. For a discussion of the
assumptions underlying the pro forma capital calculations presented below, see
"USE OF PROCEEDS," "CAPITALIZATION" and "PRO FORMA DATA." The definitions of the
terms used in the table are those provided in the OTS capital regulations as
discussed under "REGULATION -- Federal Regulation of the Savings Bank -- Capital
Requirements."
<TABLE>
<CAPTION>
                                                                              PRO FORMA AT SEPTEMBER 30, 1997
                                                     ------------------------------------------------------------------------------
                                                                                                                     15% above
                                                        Minimum of            Midpoint of           Maximum of       Maximum of 
                                                         Estimated             Estimated             Estimated       Estimated 
                                                      Valuation Range       Valuation Range     Valuation  Range    Valuation Range
                                                     -----------------     -----------------   -----------------  ------------------

                                                        1,466,250             1,725,000           1,983,750           2,281,312
                                                     Conversion Shares     Conversion Shares   Conversion Shares  Conversion Shares
                                                      at $20.00 Per         at $20.00 Per        at $20.00 Per      at $20.00 Per
                                September 30, 1997        Share                 Share              Share                Share
                                ------------------  ----------------     -----------------   ------------------  -------------------

                                         Percent             Percent             Percent             Percent              Percent 
                                           of                   of                 of                  of                   of      
                                        Adjusted             Adjusted            Adjusted            Adjusted             Adjusted 
                                          Total                Total               Total               Total                Total  
                                Amount    Assets(1) Amount    Assets(1)  Amount   Assets(1)  Amount   Assets(1)  Amount   Assets(1)
                                ------   --------   ------    --------   ------   --------   ------   --------   ------   --------
                                                                  (Dollars in thousands)
<S>                            <C>        <C>      <C>        <C>      <C>        <C>      <C>        <C>       <C>        <C>   
GAAP capital(2)..............   $30,602    11.91%   $41,811    15.59%   $43,945    16.26%   $46,078    16.91%    $48,533     17.65%
                                                                                                                             
Tangible capital(2)..........    27,321    10.71     38,530    14.47     40,664    15.15     42,797    15.82      45,252     16.58 
Tangible capital requirement.     3,825     1.50      3,994     1.50      4,026     1.50      4,058     1.50       4,094      1.50 
                                -------    -----    -------    -----    -------    -----    -------    -----     -------     ----- 
Excess.......................   $23,496     9.21%   $34,536    12.97%   $36,638    13.65%   $38,739    14.32%    $41,158     15.08%
                                =======    =====    =======    =====    =======    =====    =======    =====     =======     ===== 
                                                                                                                                   
Core capital(2)..............   $27,321    10.71%   $38,530    14.47%   $40,664    15.15%   $42,797    15.82%    $45,252     16.58%
Core capital requirement(3)..     7,651     3.00      7,987     3.00      8,051     3.00      8,115     3.00       8,189      3.00 
                                -------    -----    -------    -----    -------    -----    -------    -----     -------     ----- 
Excess.......................   $19,670     7.71%   $30,543    11.47%   $32,613    12.15%   $34,682    12.82%    $37,063     13.58%
                                =======    =====    =======    =====    =======    =====    =======    =====     =======     ===== 
                                                                                                                                   
Total capital(4).............   $29,067    18.35%   $40,276    25.08%   $42,410    26.33%   $44,543    27.59%    $46,998     29.02%
Risk-based                                                                                                                         
capital requirement..........    12,670     8.00     12,849     8.00     12,883     8.00     12,918     8.00      12,957      8.00 
                                -------    -----    -------    -----    -------    -----    -------    -----     -------     ----- 
Excess.......................   $16,397    10.35%   $27,426    17.08%   $29,527    18.33%   $31,625    19.59%    $34,041     21.02%
                                =======    =====    =======    =====    =======    =====    =======    =====     =======     ===== 
---------------------------
</TABLE>
(1)    Based upon total tangible assets of $255.0 million at September 30, 1997
       and $266.2 million, $268.4 million, $270.5 million and $273.0 million at
       the minimum, midpoint, maximum, and maximum, as adjusted, of the
       Estimated Valuation Range, respectively, for purposes of the tangible
       capital requirement, upon total adjusted assets of $255.0 million at
       September 30, 1997 and $266.2 million, $268.2 million, $270.5 million and
       $273.0 million at the minimum, midpoint, maximum, and maximum, as
       adjusted, of the Estimated Valuation Range, respectively, and upon risk-
       weighted assets of $158.4 million at September 30, 1997 and $160.6
       million, $161.0 million, $161.5 million and $162.0 million at the
       minimum, midpoint, maximum, and maximum, as adjusted, of the Estimated
       Valuation Range, respectively, for purposes of the risk-based capital
       requirement.
(2)    A $2.1 million investment in non-includable subsidiaries, a $1.0 million
       deduction associated with the limited partnership interest discussed
       under "BUSINESS OF THE SAVINGS BANK -- Lending Activities -- Equity
       Investment in Limited Partnership" and an unrealized gain on securities
       available-for-sale, net of taxes, of $188,000 account for the difference
       between generally accepted accounting principals ("GAAP") capital and
       both tangible capital and core capital.
(3)    The current OTS core capital requirement for savings associations is 3%
       of total adjusted assets.  The OTS has proposed core capital requirements
       which would require a core capital ratio of 3% of total adjusted assets
       for thrifts that receive the highest supervisory rating for safety and
       soundness and a core capital ratio of 4% to 5% for all other thrifts.
(4)    Percentage represents total core and supplementary capital divided by
       total risk-weighted assets.  Assumes net proceeds are invested in assets
       that carry a 20% risk-weighting.

                                       13
<PAGE>
 
                                 PRO FORMA DATA

  Under the Plan of Conversion, the Conversion Shares must be sold at a price
equal to the estimated pro forma market value of the MHC and the Savings Bank,
as converted, based upon an independent valuation.  The Estimated Valuation
Range as of December 5, 1997 is from a minimum of $29.3 million to a maximum of
$39.7 million with a midpoint of $34.5 million or, at a price per share of
$20.00, a minimum number of shares of 1,466,250, a maximum number of shares of
1,983,750 and a midpoint number of shares of 1,725,000.  The actual net proceeds
from the sale of the Conversion Shares cannot be determined until the Conversion
and Reorganization is completed.  However, net proceeds set forth on the
following table are based upon the following assumptions: (i) Sandler O'Neill
will receive fees of $428,625, $506,250, $583,875 and $673,145 at the minimum,
midpoint, maximum and 15% above the Estimated Valuation Range, respectively (see
"THE CONVERSION AND REORGANIZATION -- Plan of Distribution and Selling
Commissions); (ii) all of the Conversion Shares will be sold in the Subscription
and Direct Community Offerings; and (iii) Conversion and Reorganization
expenses, excluding the fees paid to Sandler O'Neill, will total approximately
$560,000 at each of the minimum, midpoint, maximum and 15% above the Estimated
Valuation Range.  Actual expenses may vary from this estimate, and the fees paid
will depend upon the percentages and total number of shares sold in the
Subscription, Direct Community and Syndicated Community Offerings and other
factors.

  The pro forma consolidated net income of the Savings Bank for the year ended
September 30, 1997 has been calculated as if the Conversion and Reorganization
had been consummated at the beginning of the period and the estimated net
proceeds received by the Holding Company and the Savings Bank had been invested
at 5.68% at the beginning of the period, which represents the yield on the one-
year U.S. Treasury Bill at September 30, 1997. Although OTS regulations require
the use of the arithmetic average of the average yield on all interest-earning
assets and the average rate paid on all deposits in computing investment returns
on net proceeds, the yield on the one-year U.S. Treasury Bill is used because
management believes it more appropriately reflects a market rate of return.  As
discussed under "USE OF PROCEEDS," the Holding Company expects to retain 50% of
the net proceeds of the Conversion Offerings from which it will refinance the
existing third-party ESOP loan, with an outstanding balance of $804,000 at
September 30, 1997.  The new loan is expected to have a 10-year term and an
interest rate equal to the prime rate as published in The Wall Street Journal on
the closing date of the Conversion and Reorganization (currently 8.50%).  A pro
forma after-tax return of 3.69% is used for both the Holding Company and the
Savings Bank for the period, after giving effect to an incremental combined
federal and state income tax rate of 35.0% for the year ended September 30,
1997.  Historical and pro forma per share amounts have been calculated by
dividing historical and pro forma amounts by the number of shares of Common
Stock indicated in the footnotes to the table.  Per share amounts have been
computed as if the Common Stock had been outstanding at the beginning of the
period or at September 30, 1997, but without any adjustment of per share
historical or pro forma stockholders' equity to reflect the earnings on the
estimated net proceeds.

  The following table summarizes the historical net income and stockholders'
equity of the Savings Bank and the pro forma consolidated net income and
stockholders' equity of the Holding Company for the periods and at the date
indicated, based on the minimum, midpoint and maximum of the Estimated Valuation
Range and based on a 15% increase in the maximum of the Estimated Valuation
Range.  No effect has been given to: (i) the shares to be reserved for issuance
under the 1998 Stock Option Plan, which is expected to be voted upon by
stockholders at a meeting to be held no earlier than six months following
consummation of the Conversion and Reorganization; (ii) withdrawals from deposit
accounts for the purpose of purchasing Conversion Shares in the Conversion
Offerings; (iii) the issuance of shares from authorized but unissued shares to
the 1998 MRP, which is expected to be voted upon by stockholders at a meeting to
be held no earlier than six months following consummation of the Conversion and
Reorganization; or (iv) the establishment of a liquidation account for the
benefit of Eligible Account Holders and Supplemental Eligible Account Holders.
See "MANAGEMENT OF THE SAVINGS BANK -- Benefits -- 1998 Stock Option Plan" and
"THE CONVERSION AND REORGANIZATION -- Stock Pricing, Exchange Ratio and Number
of Shares Issued."

  THE FOLLOWING PRO FORMA INFORMATION MAY NOT BE REPRESENTATIVE OF THE FINANCIAL
EFFECTS OF THE CONVERSION AND REORGANIZATION AT THE DATE ON WHICH THE CONVERSION
AND REORGANIZATION ACTUALLY OCCURS AND SHOULD NOT BE TAKEN AS INDICATIVE OF
FUTURE RESULTS OF OPERATIONS.  STOCKHOLDERS' EQUITY REPRESENTS THE DIFFERENCE
BETWEEN THE STATED AMOUNTS OF CONSOLIDATED ASSETS AND LIABILITIES OF THE HOLDING
COMPANY COMPUTED ACCORDING TO GAAP.  STOCKHOLDERS' EQUITY HAS NOT BEEN INCREASED
OR DECREASED TO REFLECT THE DIFFERENCE BETWEEN THE CARRYING VALUE OF LOANS AND
OTHER ASSETS AND MARKET VALUE.  STOCKHOLDERS' EQUITY IS NOT INTENDED TO
REPRESENT FAIR MARKET VALUE NOR DOES IT REPRESENT AMOUNTS THAT WOULD BE
AVAILABLE FOR DISTRIBUTION TO STOCKHOLDERS IN THE EVENT OF LIQUIDATION.

                                       14
<PAGE>
 
<TABLE>
<CAPTION>
                                                                         At or For the Year Ended September 30, 1997
                                                        ---------------------------------------------------------------------------
                                                        Minimum of          Midpoint of            Maximum of        15% Above
                                                        Estimated            Estimated              Estimated        Maximum of
                                                        Valuation            Valuation              Valuation        Estimated
                                                          Range                 Range                  Range     Valuation Range(1)
                                                        ---------             ---------              ---------   ----------------- 
                                                        1,466,250              1,725,000             1,983,750          2,281,312
                                                         Shares                 Shares                 Shares            Shares
                                                        at $20.00             at $20.00              at $20.00          at $20.00
                                                        Per Share             Per Share              Per Share          Per Share
                                                        ---------             ---------              ---------          --------- 
                                                                      (In Thousands, Except Per Share Amounts)
<S>                                                    <C>                    <C>                   <C>                <C>  
Gross proceeds.......................................   $   29,325             $   34,500            $   39,675         $   45,626
Less: estimated expenses.............................          990                  1,070                 1,150              1,240
                                                        ----------             ----------            ----------         ----------
Estimated net proceeds...............................       28,335                 33,430                38,525             44,386
Less: Common Stock to be acquired by
         1998 MRP....................................       (1,173)                (1,380)               (1,587)            (1,825)
Add:   Assets consolidated from MHC(10)..............           --                     --                    --                 --
                                                        ----------             ----------            ----------         ----------
     Net investable proceeds.........................   $   27,162             $   32,050            $   36,938         $   42,561
                                                        ==========             ==========            ==========         ==========
 
Consolidated net income:
 Historical..........................................        1,728                  1,728                 1,728              1,728
 Pro forma income on net proceeds(2).................        1,003                  1,183                 1,364              1,571
 Pro forma 1996 MRP adjustments(3)...................          (84)                   (84)                  (84)               (84)
 Pro forma 1998 MRP adjustments(4)...................         (152)                  (179)                 (206)              (237)
                                                        ----------             ----------            ----------         ----------
   Pro forma net income..............................   $    2,496             $    2,649            $    2,803         $    2,979
                                                        ==========             ==========            ==========         ==========
 
Consolidated net income per share(5)(6):
 Historical..........................................   $     0.64             $     0.55            $     0.47         $     0.41
 Pro forma income on net proceeds....................         0.38                   0.38                  0.37               0.38
 Pro forma 1996 MRP adjustments(3)...................        (0.03)                 (0.03)                (0.02)             (0.02)
 Pro forma 1998 MRP adjustments(4)...................        (0.06)                 (0.06)                (0.06)             (0.06)
                                                        ----------             ----------            ----------         ----------
   Pro forma net income per share....................   $     0.93             $     0.84            $     0.76         $     0.71
                                                        ==========             ==========            ==========         ==========
 
Consolidated stockholders' equity (book value):
 Historical(10)......................................   $   31,731             $   31,731            $   31,731         $   31,731
 Estimated net proceeds..............................       28,335                 33,430                38,525             44,386
 Less:  Common Stock to be acquired by
           ESOP......................................         (804)                  (804)                 (804)              (804)
        Common Stock acquired by
           1996 MRP..................................         (938)                  (938)                 (938)              (938)
        Common Stock to be acquired by
          1998 MRP(4)................................       (1,173)                (1,380)               (1,587)            (1,825)
                                                        ----------             ----------            ----------         ----------
   Pro forma stockholders' equity(7).................   $   57,151             $   62,039            $   67,927         $   72,550
                                                        ==========             ==========            ==========         ==========
 
Consolidated stockholders' equity per share(6)(8):
 Historical(4)(10)...................................   $    11.48             $     9.76            $     8.48         $     7.38
 Estimated net proceeds..............................        10.24                  10.27                 10.29              10.32
 Less:  Common Stock acquired by
           ESOP......................................        (0.29)                 (0.25)                (0.21)             (0.19)
        Common Stock acquired by
           1996 MRP(3)...............................        (0.34)                 (0.29)                (0.25)             (0.22)
        Common Stock to be acquired by
          1998 MRP(3)................................        (0.42)                 (0.42)                (0.42)             (0.42)
                                                        ----------             ----------            ----------         ----------
   Pro forma stockholders' equity per share(9).......   $    20.67             $    19.07            $    17.89         $    16.87
                                                        ==========             ==========            ==========         ==========
 
Purchase Price as a percentage of pro forma
 stockholders' equity per share......................        96.76%                104.88%               111.79%            118.55%
                                                        ==========             ==========            ==========         ==========
 
Purchase Price as a multiple of pro forma
 net income per share................................       21.51x                 23.81x                26.18x             28.17x
                                                        ==========             ==========            ==========         ==========
</TABLE>
                         (footnotes on following page)

                                       15
<PAGE>
 
------------------------------
(1)     Gives effect to the sale of an additional 297,562 Conversion Shares in
        the Conversion and Reorganization, which may be issued to cover an
        increase in the pro forma market value of the MHC and the Savings Bank,
        as converted, without the resolicitation of subscribers or any right of
        cancellation.  The issuance of such additional shares will be
        conditioned on a determination by RP Financial that such issuance is
        compatible with its determination of the estimated pro forma market
        value of the MHC and the Savings Bank, as converted.  See "THE
        CONVERSION AND REORGANIZATION -- Stock Pricing, Exchange Ratio and
        Number of Shares to be Issued."
(2)     No effect has been given to withdrawals from savings accounts for the
        purpose of purchasing Conversion Shares.  Since funds on deposit at the
        Savings Bank may be withdrawn to purchase shares of Common Stock (which
        will reduce deposits by the amount of such purchases), the net amount of
        funds available to the Savings Bank for investment following receipt of
        the net proceeds of the Conversion Offerings will be reduced by the
        amount of such withdrawals.
(3)     In calculating the pro forma effect of the 1996 MRP, the table reflects
        the effect of completed open market purchases of all remaining 1996 MRP
        shares subsequent to September 30, 1997.  Pro forma net income
        adjustments reflect additional expenses required for a full-year
        amortization above the actual expense (equal to $79,000 on a pre-tax
        basis) recorded for the year ended September 30, 1997.  Pro forma
        stockholders' equity adjustments take into account 1996 MRP stock
        purchases as of September 30, 1997 and open market purchases of all
        remaining shares completed subsequent to September 30, 1997.  As all
        shares for the 1996 MRP have, subsequent to September 30, 1997, have
        been purchased in open market transactions, no assumptions have been
        made for the effects of issuing authorized but unissued shares.  The
        total additional estimated pre-tax 1996 MRP expenses not already
        reflected in net income was equal to $129,000 at each of the minimum,
        midpoint, maximum and 15% above the maximum of the Estimated Valuation
        Range for the year ended September 30, 1997.  No effect has been given
        to the shares reserved for issuance under the 1996 Stock Option Plan.
        See footnote 4 for an analysis of the combined effects of the 1996 and
        1998 Stock Option Plans.
(4)     In calculating the pro forma effect of the 1998 MRP, it is assumed that
        the required stockholder approval has been received, that the shares
        were acquired by the 1998 MRP at the beginning of the period presented
        in open market purchases at the Purchase Price, that 20% of the amount
        contributed was an amortized expense during such period, and that the
        combined federal and state income tax rate is 35.0%.  The issuance of
        authorized but unissued shares of the Common Stock instead of open
        market purchases would dilute the voting interests of existing
        stockholders by approximately 2.08% and pro forma net income per share
        would be $0.92, $0.83, $0.77 and $0.71 at the minimum, midpoint, maximum
        and 15% above the maximum of the Estimated Valuation Range for the year
        ended September 30, 1997, respectively, and pro forma stockholders'
        equity per share would be $20.66, $19.09, $17.94 and $16.93 at the
        minimum, midpoint, maximum and 15% above the maximum of the Estimated
        Valuation Range at September 30, 1997, respectively.  Shares issued
        under the 1998 MRP vest 20% per year and, for purposes of this table,
        compensation expense is recognized on a straight-line basis over each
        vesting period.  In the event the fair market value per share is greater
        than $20.00 per share on the date shares are awarded under the 1998 MRP,
        total 1998 MRP expense would increase.  See "RISK FACTORS -- Expenses
        Associated with MRP."  The total estimated 1998 MRP expense was
        multiplied by 20% (the total percent of shares for which expense is
        recognized in the first year) resulting in pre-tax 1998 MRP expense of
        $235,000, $276,000, $317,000 and $365,000 at the minimum, midpoint,
        maximum and 15% above the maximum of the Estimated Valuation Range for
        the year ended September 30, 1997, respectively.  No effect has been
        given to the shares reserved for issuance under the 1996 Stock Option
        Plan (previously approved by stockholders) or the proposed 1998 Stock
        Option Plan.  Under the 1996 Stock Option Plan, 58,500 shares were
        reserved for issuance and options have been granted thereunder at an
        exercise price of $25.25 per share. If stockholders approve the 1998
        Stock Option Plan following the Conversion and Reorganization, the
        Holding Company will have reserved for issuance under the 1998 Stock
        Option Plan authorized but unissued shares of Common Stock representing
        an amount of shares equal to 10% of the Conversion Shares sold in the
        Conversion Offerings.  If all of the options were to be exercised
        utilizing these authorized but unissued shares rather than treasury
        shares which could be acquired (for both the 1996 and 1998 Stock Option
        Plans), the voting interests of existing stockholders would be diluted
        by approximately 8.25%.  Assuming stockholder approval of the 1998 Stock
        Option Plan, and that all options under the 1996 and 1998 Stock Option
        Plans were exercised at 

                                       16
<PAGE>
 
        September 30, 1997 at an exercise price of $25.25 (to be adjusted
        pursuant to the final Exchange Ratio) and $20.00 per share,
        respectively, pro forma net earnings per share would be $0.90, $0.81,
        $0.75 and $0.70, respectively, for the year ended September 30, 1997,
        and pro forma stockholders' equity per share would be $20.38, $18.87,
        $17.76 and $16.79, respectively, for the year ended September 30, 1997
        at the minimum, midpoint, maximum and 15% above the maximum of the
        Estimated Valuation Range. See "MANAGEMENT OF THE SAVINGS BANK --
        Benefits -- 1998 Stock Option Plan" and "-- Benefits --Management
        Recognition Plan" and "RISK FACTORS -- Possible Dilutive Effect of
        Benefit Programs."
(5)     Per share amounts are based upon shares outstanding of 2,695,343,
        3,170,992, 3,646,640 and 4,193,637 at the minimum, midpoint, maximum and
        15% above the maximum of the Estimated Valuation Range for the year
        ended September 30, 1997, respectively, which includes the Conversion
        Shares sold in the Conversion and Reorganization, less the number of
        shares assumed to be held by the ESOP not committed to be released
        within the first year following the Conversion and Reorganization.
(6)     Historical per share amounts have been computed as if the Conversion
        Shares expected to be issued in the Conversion and Reorganization had
        been outstanding at the beginning of the period or on the date shown,
        but without any adjustment of historical net income or historical
        retained earnings to reflect the investment of the estimated net
        proceeds of the sale of shares in the Conversion and Reorganization, the
        ongoing ESOP expense, or the proposed 1998 MRP expense described above.
(7)     "Book value" represents the difference between the stated amounts of the
        Savings Bank's assets and liabilities.  The amounts shown do not reflect
        the liquidation account which will be established for the benefit of
        Eligible Account Holders and Supplemental Eligible Account Holders in
        the Conversion and Reorganization, or the federal income tax
        consequences of the restoration to income of the Savings Bank's special
        bad debt reserves for income tax purposes which would be required in the
        unlikely event of liquidation.  See "THE CONVERSION AND REORGANIZATION -
        - Effects of Conversion and Reorganization to Stock Form on Depositors
        and Borrowers of the Savings Bank" and "TAXATION."  The amounts shown
        for book value do not represent fair market values or amounts
        distributable to stockholders in the unlikely event of liquidation.
(8)     Per share amounts are based upon shares outstanding of 2,764,821,
        3,252,731, 3,740,640 and 4,301,736 at the minimum, midpoint, maximum and
        15% above the maximum of the Estimated Valuation Range, respectively.
(9)     Does not represent possible future price appreciation or depreciation of
        the Common Stock.
(10)    Assets of the MHC (other than investment in the Savings Bank) consist
        solely of $47,000 of cash on deposit at the Savings Bank, which amount
        is eliminated in consolidation.

                                       17
<PAGE>
 
                       CONVERSION SHARES TO BE PURCHASED
                 BY MANAGEMENT PURSUANT TO SUBSCRIPTION RIGHTS

  The following table sets forth, for each director and executive officer of the
Savings Bank (and their associates) and for all of the directors and executive
officers as a group, (i) Exchange Shares to be held upon consummation of the
Conversion and Reorganization based upon their beneficial ownership of Public
Savings Bank Shares as of September 30, 1997, (ii) proposed purchases of
Conversion Shares, assuming shares available to satisfy their subscriptions, and
(iii) total shares of Common Stock to be held upon consummation of the
Conversion and Reorganization, in each case assuming that 1,725,000 Conversion
Shares are sold at the midpoint of the Estimated Valuation Range.  No individual
has entered into a binding agreement with respect to such intended purchases,
and, therefore, actual purchases could be more or less than indicated below.
Directors and executive officers and their associates may not purchase in excess
of 31% of the shares sold in the Conversion and Reorganization.  Directors,
officers and employees will pay the Purchase Price ($20.00 per share) for each
share for which they subscribe.
<TABLE>
<CAPTION>
                                                        
                                              Number of      Proposed Purchase of      Total Common Stock
                                              Exchange        Conversion Shares            to be Held
                                              Shares to     ----------------------   -----------------------
                                               be Held                    Number      Number     Percentage
                                               (1)(2)         Amount     of Shares   of Shares   of Total
                                              -------       ----------   ---------   ---------   ----------
<S>                                           <C>          <C>              <C>       <C>             <C> 
Harold A. Pickens, Jr.                         22,657       $  100,000       5,000      27,657          *     
 Chairman of the Board                                                                                        
                                                                                                              
Robert W. Orr                                  31,533           40,000       2,000      33,533        1.0%    
  President and Managing Officer                                                                              
                                                                                                              
Martha S. Clamp                                13,485          100,000       5,000      18,485          *     
 Director                                                                                                     
                                                                                                              
Jack F. McIntosh                               12,253          100,000       5,000      17,253          *     
 Director                                                                                                     
                                                                                                              
Charles W. Fant, Jr.                               --               --          --          --         --     
 Director                                                                                                     
                                                                                                              
Cordes G. Seabrook, Jr.                        19,082          100,000       5,000      24,082          *     
 Director                                                                                                     
                                                                                                              
Jim Gray Watson                                 6,891          100,000       5,000      11,891          *     
 Director                                                                                                     
                                                                                                              
Richard R. Ballenger                            4,801           20,000       1,000       5,801          *     
 Director                                                                                                     
                                                                                                              
F. Stevon Kay                                  15,419          100,000       5,000      20,419          *     
 Director                                                                                                     
                                                                                                              
Thomas C. Hall                                 25,167           10,000         500      25,667          *     
 Treasurer and Chief Financial Officer                                                                        
                                                                                                              
Barry C. Visioli                               22,442           27,500       1,375      23,817          *     
 Senior Vice President                                                                                        
                                                                                                              
All officers and directors                    214,443        1,038,500      51,925     266,368        8.2     
as a group (21 persons)
</TABLE>
----------------------
(1)       Excludes shares which may be received upon the exercise of outstanding
          stock options granted under the 1993 Stock Option Plan (which are
          immediately exercisable) and the 1996 Stock Option Plan (which are
          subject to pro rata vesting over a five year period beginning April 8,
          1998).  Based upon the Exchange Ratio of 2.15625 Exchange Shares for
          each Public Savings Bank Share at the midpoint of the Estimated
          Valuation Range, the following persons named in the table would have
          options to purchase Common Stock as follows:  Mr. Pickens, 4,730
          shares; Mr. Orr, 22,101 shares; Ms. Clamp, 4,730 shares; Mr. McIntosh,
          4,730 shares; Mr. Fant, 4,730 shares; Mr. Seabrook, 4,730 shares; Mr.
          Watson, 4,730 shares; Mr. Ballenger, 4,728 shares; Mr. Kay, 4,728
          shares; Mr. Hall, 27,060; Mr. Visioli, 27,060 and all directors and
          executive officers as a group, 133,859 shares.
(2)       Excludes stock options that may be granted under the 1998 Stock Option
          Plan and awards that may be granted under 1998 MRP if such plans are
          approved by stockholders at an annual or special meeting at least six
          months following the Conversion and Reorganization.  See "MANAGEMENT
          OF THE SAVINGS BANK -- Benefits."
(*)       Less than 1%.

                                       18
<PAGE>
 
             PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARY
                     CONSOLIDATED STATEMENTS OF OPERATIONS

     The following Consolidated Statements of Operations of Perpetual Bank, A
Federal Savings Bank and Subsidiary for the fiscal years ended September 30,
1997, 1996 and 1995 have been audited by KPMG Peat Marwick LLP, Greenville,
South Carolina, independent auditors, whose report thereon appears elsewhere in
this Prospectus.  These statements should be read in conjunction with the
Consolidated Financial Statements and related Notes included elsewhere herein.
<TABLE>
<CAPTION>
                                                             1997           1996          1995
                                                         ------------   ------------   ----------
<S>                                                      <C>            <C>            <C>
Interest income:
 Loans................................................   $14,406,160    $11,510,222   $ 9,828,507
 Mortgage-backed securities...........................     3,302,541      3,071,524     3,418,355
 Other investment.....................................       687,736        339,222       296,164
                                                         -----------    -----------   ----------- 
   Total interest income..............................    18,396,437     14,920,968    13,543,026
                                                         -----------    -----------   ----------- 
 Interest expense:
  Interest on deposits:
   Transaction accounts...............................       547,795        467,395       361,486
   Passbook accounts..................................       590,738        622,008       742,786
   Certificate accounts...............................     6,979,888      5,679,186     4,904,477
                                                         -----------    -----------   ----------- 
   Total interest on deposits.........................     8,118,421      6,768,589     6,008,749
 Interest on borrowings...............................     1,377,960        656,203     2,752,221
                                                         -----------    -----------   ----------- 
   Total interest expense.............................     9,496,381      7,424,792     8,760,970
                                                         -----------    -----------   ----------- 
 
Net interest income...................................     8,900,056      7,496,176     4,782,056
Provision for loan losses.............................       655,000        349,250       362,000
                                                         -----------    -----------   ----------- 
Net interest income after provision for loan losses...     8,245,056      7,146,926     4,420,056
                                                         -----------    -----------   ----------- 
 
Other income:
 Loan and deposit account service charges.............     1,526,208      1,268,722       770,212
 Gain (loss) on sale of securities, net...............      (307,534)        53,963     1,777,471
 Gain on sale of real estate, net.....................        19,894         79,034        47,544
 Gain on sale of loans, net...........................        12,509        (23,328)       66,785
 Gain (loss) on sale of fixed assets, net.............      (191,894)        23,724           150
 Other................................................       795,773        548,945       568,607
                                                         -----------    -----------   ----------- 
   Total other income.................................     1,854,956      1,927,336     3,230,769
                                                         -----------    -----------   ----------- 
 
General and administrative expenses:
 Salaries and employee benefits.......................     3,926,888      3,056,726     2,801,915
 Occupancy............................................       486,776        386,796       343,762
 Furniture and equipment expense......................       746,182        542,481       464,250
 FDIC insurance premiums..............................       151,903      1,292,262       330,444
 Advertising..........................................       351,694        390,721       475,007
 Data processing......................................       299,951        237,980       204,463
 Office supplies......................................       386,525        332,794       269,302
 Other................................................     1,095,927        654,304       650,902
                                                         -----------    -----------   ----------- 
   Total general and administrative...................     7,445,846      6,894,064     5,540,045
                                                         -----------    -----------   ----------- 
 
Income before income taxes............................     2,654,166      2,180,198     2,110,780
Income taxes..........................................       925,803        755,811       193,742
                                                         -----------    -----------   ----------- 
Net income............................................   $ 1,728,363    $ 1,424,387   $ 1,917,038
                                                         ===========    ===========   ===========
Earnings per share:
Net income............................................         $1.15          $0.95         $1.27
 
Weighted average shares outstanding...................     1,505,432      1,504,601     1,504,059
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.

                                       19
<PAGE>
 
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS

GENERAL

          For much of its existence, the Savings Bank's investment powers were
limited primarily to fixed-rate mortgage loans, share loans and investment
securities funded by a limited range of deposit products.  Since 1989, however,
when applicable law and regulations permitted savings associations to expand the
scope of their operations, the Savings Bank has gradually refocused operations
to become a retail, community-oriented institution by, among other things, (i)
diversifying its balance sheet by placing increasing emphasis on construction,
commercial real estate, commercial business and consumer lending and (ii)
increasing core deposits through the marketing of checking accounts.  The goal
of these strategies is to diversify and maximize the Savings Bank's earnings
stream, while attempting to minimize interest rate risk.  See "RISK FACTORS --
Certain lending Risks" and "-- Interest Rate Risk."

          The Savings Bank's current business plan is focused on a continuation
of its retail community banking strategy.  Key aspects of the business plan
include: (i) continued balance sheet diversification by pursuing commercial real
estate lending, consumer lending and commercial business lending in its primary
market area; (ii) building its retail customer base by increasing consumer
checking accounts and expanding its retail branch network in Anderson, South
Carolina, and surrounding communities; (iii) preserving asset quality by
emphasizing residential mortgage lending in its primary market area, as well as
purchasing loans from selected South Carolina lenders; (iv) maintaining a
substantial portfolio of mortgage-backed securities and investment grade CMOs to
limit credit risk exposure and to earn a spread on excess investable funds; and
(v) offering non-deposit investment products though a wholly-owned service
corporation (see "BUSINESS OF THE SAVINGS BANK -- Subsidiary Activities").

          The Savings Bank has taken traditional steps to implement its retail
community banking strategy.  The Savings Bank opened a branch office in Seneca,
South Carolina, in December 1996 and a new branch office in Anderson, South
Carolina, in October 1997.  Also, during 1996, the Savings Bank established a
customer call center at the main office as a vehicle to cross-sell the Savings
Bank's products and services to its customers.  The opening of the Seneca branch
office and the establishment of the customer call center resulted in increased
general and administrative expenses in recent periods.  The opening of the new
Anderson branch office is expected to increase general and administrative
expenses in future periods; however, management is unable to quantify accurately
the magnitude of such increases.  Furthermore, the Savings Bank has actively
marketed checking accounts through a free checking program, which has led to an
increase in checking account balances and an increase in service charges and fee
income, but has also led to an increase in general and administrative expenses
relating to marketing and promotion of such accounts.  See "BUSINESS OF THE
SAVINGS BANK -- Deposit Activities and Other Sources of Funds."

          The Savings Bank has also used non-traditional vehicles to implement
its retail community banking strategy.  The Savings Bank has an equity
investment, through a service corporation, in a regional mortgage company, from
which the Savings Bank currently purchases one- to four-family mortgage loans
and commercial real estate loans secured by properties located in South
Carolina.  See "BUSINESS OF THE SAVINGS BANK -- Subsidiary Activities."  In
addition, the Savings Bank has an equity investment in a limited partnership
that invests in mortgage servicing rights.  See "BUSINESS OF THE SAVINGS BANK --
Lending Activities --  Equity Investment in Limited Partnership" and "RISK
FACTORS -- Certain Lending Risks -- Purchased Loans and Interest Rate Risk."

     Upon consummation of the Conversion and Reorganization, the Holding Company
will be a unitary savings and loan holding company.  Under current law, a
unitary saving and loan holding company is not subject to any activity
restrictions.  See "REGULATION -- Savings and Loan Holding Company Regulations."
The Holding Company may consider exploring opportunities to expand into non-
traditional lines of business, such as securities brokerage, insurance agency
and real estate development activities, to the extent permitted by applicable
law.

                                       20
<PAGE>
 
AVERAGE BALANCE SHEET

     The following table sets forth, for the periods indicated, information
regarding average balances of assets and liabilities as well as the total dollar
amounts of interest income from average interest-earning assets and interest
expense on average interest-bearing liabilities, resultant yields, interest rate
spread, ratio of interest-earning assets to interest-bearing liabilities and net
interest margin.  Average balances for a period have been calculated using the
monthly average balances during such period.

<TABLE>
<CAPTION>

                                                                   Years Ended September 30,
                                    -------------------------------------------------------------------------------
                                                      1997                                       1996
                                     ------------------------------              ----------------------------------
                                               Interest                                          Interest
                                    Average       and      Yield/                     Average       and      Yield/
                                    Balance    Dividends    Cost                       Balance    Dividends    Cost
                                    --------   ---------   -------                   --------   ---------   -------
                                                                                     (Dollars in Thousands)
<S>                                 <C>          <C>         <C>                     <C>          <C>         <C>
Interest-earning assets(1):
 Mortgage loans..................   $118,030     $ 9,790     8.29%                   $ 91,535     $ 7,984     8.72%
 Commercial real estate loans....     23,098       2,102     9.10                       14,045       1,338     9.52
 Commercial other................      6,114         592     9.68                        4,468         395     8.84
 Consumer loans..................     17,755       1,922    10.82                       18,563       1,793     9.66
                                    --------     -------                              --------     -------
  Total loans....................    164,997      14,406     8.73                      128,611      11,510     8.95


Mortgage-backed securities and
 CMOs............................     48,638       3,303     6.79                       44,793       3,072     6.86
Investment securities............      5,271         339     6.43                          896          65     7.25
Interest-bearing deposits........      4,485         251     5.60                        4,593         193     4.20
Other earning assets.............      1,311          97     7.40                        1,102          81     7.35
                                    --------     -------                              --------     -------
   Total interest-earning assets.    224,702      18,396     8.19                      179,995      14,921     8.29

Non-interest-earning assets:
 Mutual funds(3).................         --                                                --
 Office properties and
  equipment, net.................      5,645                                             4,048
 Real estate, net................         56                                                20
 Other non-interest-earning
  assets.........................      8,072                                             5,339
                                    --------                                          --------
   Total assets..................   $238,475                                          $189,402
                                    ========                                          ========

Interest-bearing liabilities:
 Savings.........................     22,923         590     2.57                       23,482         622     2.65
 Negotiable order of withdrawal
  ("NOW") accounts...............     35,196         548     1.56                       28,412         468     1.65
 Certificates of deposit.........    123,407       6,980     5.56                      102,721       5,679     5.53
                                    --------     -------                               -------       -----
   Total deposits................    181,526       8,118     4.47                      154,615       6,769     4.38

 Other interest-bearing
  liabilities....................     23,951       1,378     5.75                       12,531         656     5.24
                                    --------     -------                              --------     -------
   Total interest-bearing
    liabilities..................    205,477       9,496     4.62                      167,146       7,425     4.44
</TABLE>

<TABLE> 
                                                                       Years Ended September 30,
                                    ------------------------------------------------------------------------------------------------

                                                     1995
                                    ------------------------------------
                                                  Interest
                                       Average       and      Yield/
                                       Balance    Dividends    Cost
                                       --------   ---------   -------
                                    
<S>                                    <C>        <C>         <C>
Interest-earning assets(1):         
 Mortgage loans..................      $ 88,153     $ 7,292     8.28%
 Commercial real estate loans....         5,583         524     9.39
 Commercial other................         2,061         219    10.63
 Consumer loans..................        16,697       1,794    10.74
                                       --------     -------
  Total loans....................       112,494       9,829     8.74
                                       --------     -------
                                    
Mortgage-backed securities and      
 CMOs............................        48,263       3,418     7.08
Investment securities............           246           9     3.66
Interest-bearing deposits........         1,682         127     7.55
Other earning assets.............         2,205         160     7.26
                                       --------     -------
   Total interest-earning assets.       164,890      13,543     8.21
                                    
Non-interest-earning assets:        
 Mutual funds(3).................        33,578
 Office properties and              
  equipment, net.................         3,887
 Real estate, net................           382
 Other non-interest-earning         
  assets.........................         4,801
                                       --------
   Total assets..................      $207,538
                                       ========
                                    
Interest-bearing liabilities:       
 Savings.........................        26,885         743     2.76
 Negotiable order of withdrawal     
  ("NOW") accounts...............        20,923         362     1.73
 Certificates of deposit.........        99,653       4,904     4.92
                                       --------     -------
   Total deposits................       147,461       6,009     4.07
                                    
 Other interest-bearing             
  liabilities....................        43,036       2,752     6.39
                                       --------     -------
   Total interest-bearing           
    liabilities..................       190,497       8,761     4.60
</TABLE>

                         (table continued on next page)

                                       21
<PAGE>
 
<TABLE>
<CAPTION>

                                                                             Years Ended September 30,
                                               -------------------------------------------------------------------------------------

                                                      1997                                            1996
                                               ---------------------------             --------------------------------------
                                                        Interest                                    Interest
                                               Average    and      Yield/               Average       and      Yield/
                                               Balance  Dividends    Cost               Balance    Dividends    Cost
                                               ---------------------------             --------------------------------------
                                                                                       (Dollars in Thousands)

<S>                                            <C>       <C>         <C>                <C>        <C>          <C>
Non-interest-bearing liabilities:
 Non-interest-bearing deposits..............       397                                      1,186
 Other liabilities..........................     2,693                                      1,827
                                              --------                                   --------
   Total liabilities........................     3,090                                    170,159
Stockholders' equity........................    29,908                                     19,243
                                              --------                                   --------

   Total liabilities and stockholders'
     equity.................................  $238,475                                   $189,402
                                              ========                                   ========

Net interest income.........................              $  8,900                                    $7,496
                                                          ========                                 =========

Interest rate spread........................                        3.57%                                            3.85%
                                                                    ====                                            ======

Net interest margin.........................                        3.96%                                            4.16%
                                                                    ====                                            ======

Ratio of average interest-earning assets to
  average interest-bearing liabilities......                      109.36%                                          107.69%
                                                                  ======                                           =======
</TABLE>
 

<TABLE> 
<CAPTION> 
                                                                             Years Ended September 30,
                                               -------------------------------------------------------------------------------------

                                                            1995
                                               ----------------------------------
                                                          Interest
                                               Average       and      Yield/
                                               Balance    Dividends    Cost
                                               --------   ---------   -------
                                              
<S>                                             <C>       <C>          <C> 
Non-interest-bearing liabilities:            
 Non-interest-bearing deposits..............  
 Other liabilities..........................  
                                                    909
   Total liabilities........................         --
Stockholders' equity........................   --------
                                                191,406
                                                 16,132
   Total liabilities and stockholders'         --------
     equity.................................  
                                              
                                               $207,538
Net interest income.........................   ========
                                              
                                                            $4,782
Interest rate spread........................              =========
                                              
                                                                       3.61%
Net interest margin.........................                          ======
                                              
                                                                       2.90%
Ratio of average interest-earning assets to                           ======
  average interest-bearing liabilities......  
                                              
                                                                      86.56% 
                                                                      ===== 
</TABLE>
------------------------
(1)  Excludes interest on loans 90 days or more past due.
(2)  Represents mutual funds which do not pay interest or dividends.

                                       22
<PAGE>
 
YIELDS EARNED AND RATES PAID

     The following table sets forth for the periods and at the dates indicated,
the weighted average yields earned on the Savings Bank's assets, the weighted
average interest rates paid on the Savings Bank's liabilities, together with the
net yield on interest-earning assets.

<TABLE>
<CAPTION>

                                                             At                       Year Ended
                                                         September 30,               September 30,
                                                                          ---------------------------
                                                              1997        1997       1996       1995
                                                         --------------   -----      ----       ----
<S>                                                      <C>              <C>        <C>        <C>

Weighted average yield earned on:

Loan portfolio........................................        8.49%       8.73%      8.95%      8.74%
Mortgage-backed securities, CMOs and
 adjustable-rate mortgage ("ARM") mutual fund.........        7.25        6.79       6.86       7.08
Investment securities and interest-earning deposits...        7.03        6.21       4.70       7.05
All interest-earning assets...........................        8.20        8.19       8.29       8.21

Weighted average rate paid on:

Deposits..............................................        4.64        4.47       4.38       4.07
FHLB advances and other borrowings....................        6.24        5.53       5.24       6.39
All interest-bearing liabilities......................        4.75        4.60       4.44       4.60

Interest rate spread (spread between weighted
  average rate on all interest-earning assets
  and all interest-bearing liabilities)...............        3.45        3.57       3.85       3.61

Interest rate margin (net interest income as a
  percentage of average interest-earning assets)......        N/A         3.96       4.16       2.90
</TABLE> 

                                       23
<PAGE>
 
RATE/VOLUME ANALYSIS


     The following table sets forth the effects of changing rates and volumes on
net interest income of the Savings Bank.  Information is provided with respect
to (i) effects on interest income attributable to changes in volume (changes in
volume multiplied by prior rate); (ii) effects on interest income attributable
to changes in rate (changes in rate multiplied by prior volume); (iii) changes
in rate/volume (change in rate multiplied by change in volume); and (iv) the net
change (the sum of the prior columns).

<TABLE>
<CAPTION>
 
                                Years Ended September 30,              Years Ended September 30,              
                                1997 Compared to September 30,         1996 Compared to September 30,         
                                1996 Increase (Decrease) Due to        1995 Increase (Decrease) Due to        
                                ------------------------------------   -------------------------------------  
                                                    Rate/                                  Rate/              
                                Volume     Rate    Volume      Net     Volume     Rate    Volume      Net     
                                -------   ------   -------   -------   -------   ------   -------   --------  
                                                                                (Dollars in Thousands)        
<S>                             <C>       <C>      <C>       <C>       <C>       <C>      <C>       <C>       
                                                                                                              
Interest-earning assets:                                                                                      
 Mortgage loans..............    2,311     (392)     (113)    1,806       280      397        15        692   
 Commercial real estate......      862      (60)      (39)      763       794        8        12        814   
 Commercial other............      146       38        14       198       756      (37)      (43)       176   
 Consumer loans..............      (78)     216        (9)      129       200     (180)      (20)        --   
                                ------    -----     -----    ------   -------    -----     -----    -------   
  Total loans................    3,241     (198)     (147)    2,896     1,530      188       (36)     1,682   
 Mortgage-backed securities                                                                                   
  and                                                                                                         
  CMOs.......................      263      (30)       (2)      231      (246)    (109)        8       (347)  
 Investment securities.......      320       (8)      (38)      274        23        9        25         57   
 Mutual funds................       --       --        --        --        --       --        --         --   
 Interest-earning deposits...       (5)      65        (2)       58       220      (57)      (98)        65   
 Other interest-earning                                                                                       
  assets.....................       16       --        --        16       (80)       2        (1)       (79)  
                                ------    -----     -----    ------   -------    -----     -----    -------   
                                                                                                              
Total net change in income on                                                                                 
  interest-earning assets....    3,800     (143)     (182)    3,475     1,312       89       (23)     1,378   
                                ------    -----     -----    ------   -------    -----     -----    -------   
                                                                                                              
Interest-bearing liabilities:                                                                                 
 Savings accounts............      (15)     (18)       --       (33)      (94)     (31)        4       (121)  
 NOW accounts................      112      (25)       (6)       81       129      (17)       (6)       106   
 Certificates of deposit.....    1,144      131        26     1,301       151      605        19        775   
                                ------    -----     -----    ------   -------    -----     -----    -------   
                                                                                                              
Total deposits...............    1,241       88        20     1,349       186      557        17        760   
                                ------    -----     -----    ------   -------    -----     -----    -------   
                                                                                                              
Other interest-bearing                                                                                        
 liabilities.................      648       37        37       722    (1,951)    (498)      353     (2,096)  
                                ------    -----     -----    ------   -------    -----     -----    -------   
Total net change in expense                                                                                   
 on                                                                                                           
  interest-bearing                                                                                            
   liabilities...............    1,889      125        57     2,071    (1,765)      59       370     (1,336)  
                                ------    -----     -----    ------   -------    -----     -----    -------   
                                                                                                              
Net change in net interest                                                                                    
 income......................   $1,911    $(268)    $(239)   $1,404   $ 3,077    $  30     $(393)   $ 2,714   
                                ======    =====     =====    ======   =======    =====     =====    =======   
</TABLE> 

<TABLE>
<CAPTION>

                                   Years Ended September 30,
                                   1995 Compared to September 30,
                                   1994 Increase (Decrease) Due to
                                  ---------------------------------------
                                                      Rate/
                                  Volume     Rate    Volume      Net
                                  -------   ------ --------    --------
<S>                               <C>       <C>    <C>         <C>
Interest-earning assets:
 Mortgage loans..............        882       97       14        993
 Commercial real estate......        313       19       39        371
 Commercial other............        134        8       19        161
 Consumer loans..............       (375)     330      (65)      (110)
                                  -------   ------ --------    --------
  Total loans................        954      457        7      1,415
 Mortgage-backed securities
  and
  CMOs.......................       (615)     725     (130)       (20)
 Investment securities.......          7       (7)      (4)        (4)
 Mutual funds................        229      (15)    (229)       (15)
 Interest-earning deposits...        (83)     198     (122)        (7)
 Other interest-earning
  assets.....................         50       27       22         99
                                  -------   ------ --------    --------

Total net change in income on
  interest-earning assets....        520    1,439     (491)     1,468


Interest-bearing liabilities:
 Savings accounts............       (173)     (11)       2       (182)
 NOW accounts................        189      (24)     (21)       144
 Certificates of deposit.....        178      784       36        998

                                  -------   ------ --------    --------
Total deposits...............        194      749       17        960
                                  -------   ------ --------    --------

Other interest-bearing
 liabilities.................      1,290      274      613      2,177
                                  -------   ------ --------    --------
Total net change in expense
 on
  interest-bearing
   liabilities...............      1,484    1,023      630      3,137
                                  -------   ------ --------    --------

Net change in net interest
 income......................     $ (964)   $ 416  $(1,121)    $(1,669)
                                  =======   ====== ========    ========
</TABLE>
----------------------
(1)  Excludes interest on loans 90 days or more past due.

                                       24
<PAGE>
 
COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 1997 AND 1996

     Total assets increased 22.5% from $209.8 million at September 30, 1996 to
$257.0 million at September 30, 1997 primarily as a result of an increase in
loans receivable and an increase in investment securities available-for-sale.
These increases were funded primarily by deposit growth, FHLB advances and
repayment of mortgage-backed securities.

     Loans receivable increased 27.0% from $140.8 million at September 30, 1996
to $178.8 million at September 30, 1997.  The increase in loans receivable
resulted from growth in all loan categories, except construction loans which
declined slightly from $19.5 million at September 30, 1997 to $17.1 million at
September 30, 1997.

     In December 1996, the Savings Bank invested in a limited partnership that
invests in mortgage loan servicing rights.  At September 30, 1997, the value of
the limited partnership investment was $5.0 million.  See "BUSINESS OF THE
SAVINGS BANK -- Lending Activities -- Equity Investment in Limited Partnership"
for further information.  The value of this investment would be adversely
impacted in the event of a decrease in market interest rates.  See "RISK FACTORS
-- Interest Rate Risk."

     Investment securities available-for-sale increased from $2.5 million at
September 30, 1996 to $11.3 million at September 30, 1997.  In an effort to
increase the average portfolio yield, the Savings Bank purchased additional
investment securities during the year ended September 30, 1997, including a $4.0
million FHLB bond with a yield of 6.30% at September 30, 1997 and a final
maturity of October 2001.  The Savings Bank also invested $3.1 million to
purchase a $15.0 million FHLB zero coupon bond with a coupon rate of 8.00%,
callable in July 2000, and with a final maturity of July 2017, and $3.0 million
to purchase a second $15.0 million FHLB zero coupon bond with a coupon rate of
8.20%, callable in September 1998, and with a final maturity of July 2017.
Although these long-term zero coupon bonds offer higher yields, an increase in
market interest rates would have a material adverse effect on their value.  The
Savings Bank restructured its mortgage-backed securities portfolio by selling
(i) $19.8 million of fixed-rate CMOs yielding 6.25% and with final maturities
ranging from 2001 through 2005, incurring a loss on sale of $280,000 and (ii)
$3.1 million of fixed-rate mortgage-backed securities yielding 6.32%, incurring
a loss on sale of $28,000.  The Savings Bank purchased $8.0 million of
adjustable rate CMOs with a yield of 7.03% at September 30, 1997 and $10.7
million of fixed-rate mortgage-backed securities with a yield of 7.33% at
September 30, 1997.  See "RISK FACTORS -- Interest Rate Risk."

     Real estate held for development increased from $1.4 million at September
30, 1996 to $2.3 million at September 30, 1997 primarily as a result of the
acquisition of the Meadows Development project.  See "BUSINESS OF THE SAVINGS
BANK -- Subsidiary Activities" for further information regarding the Meadows
Development project.

     Premises and equipment, net, increased from $4.9 million at September 30,
1996 to $6.3 million at September 30, 1997 primarily as a result of the
construction of the Perpetual Square branch office in Anderson, South Carolina
($606,000), and the purchase of new hardware and software for the in-house
computer system ($1.1 million).

     Deposits increased 25.5% from $160.2 million at September 30, 1996 to
$201.0 million at September 30, 1997 primarily as a result of an increase in
one-year certificate of deposits.  The Savings Bank aggressively marketed
special seven-month and 13-month certificates of deposit to attract operating
funds.  Although no assurances can be given, based on management's experience
and familiarity with the customers involved and the Savings Bank's pricing
policy relative to that of its competitors, management believes that a
significant portion of such deposits will remain with the Savings Bank.

     Stockholders' equity increased from $29.1 million at September 30, 1996 to
$30.8 million at September 30, 1997 as a result of retained net income, less
dividends paid on the Public Savings Bank Shares.


                                       25
<PAGE>
 
COMPARISON OF THE YEAR ENDED SEPTEMBER 30, 1997 TO THE YEAR ENDED SEPTEMBER 30,
1996

     NET INCOME.  Net income increased 21.4% from $1.4 million, or $0.95 per
share, in 1996 to $1.7 million, or $1.15 per share, in 1997.  Net income for
1996 was adversely affected by the one-time SAIF recapitalization assessment.
See "-- General and Administrative Expenses" below.  Without this one-time
assessment, 1996 net income would have been $2.0 million, or $1.36 per share.

     NET INTEREST INCOME.  Net interest income increased 18.7% from $7.5 million
in 1996 to $8.9 million in 1997.  Interest income on loans increased 25.2% from
$11.5 million to $14.4 million as the average balance of loans receivable
increased 28.3% from $128.6 million in 1996 to $165.0 in 1997 primarily as a
result of growth in loan originations and purchases. Interest income on
mortgage-backed securities increased 6.5% from $3.1 million in 1966 to $3.3
million in 1997 as the average balance of mortgage-backed securities increased
8.5% from $44.8 million in 1996 to $48.6 million in 1997.  Interest income on
other investments increased 102.9% from $339,000 in 1996 to $688,000 in 1997 as
the average balance of other interest earning assets increased 68.2% from $6.6
million in 1996 to $11.1 million in 1997 primarily as a result of investment
securities purchases.

     INTEREST EXPENSE.  Interest expense on deposits increased 19.1% from $6.8
million in 1996 to $8.1 million in 1997 as the average balance of deposits
increased 17.4% from $154.6 million in  1996 to $181.5 million in 1997 and the
weighted average cost of deposits increased from 4.38% for 1996 to 4.47% for
1997.  The increase in the average balance of deposits and the increase in the
weighted average cost of deposits resulted primarily from the promotion of
short-term certificates of deposit.  See "-- Comparison of Financial Condition
at September 30, 1997 and 1996" for further discussion.

     Interest expense on borrowings increased 110.1% from $656,000 for fiscal
1996 to $1.4 million for fiscal 1997 as the average borrowings increased from
$12.5 million in 1996 to $24.9 million in 1997 in order to fund loan
originations and purchases.

     PROVISION FOR LOAN LOSSES.  Provisions for loan losses are charges to
earnings to bring the total allowance for loan losses to a level considered
adequate by management to provide for management's best estimate of inherent
loan losses.  In determining the adequacy of the allowance for loan losses,
management evaluates various factors, including the market value of the
underlying collateral, growth and composition of the loan portfolio, the
relationship of the allowance for loan losses to outstanding loans, loss
experience, delinquency trends and economic conditions.  Management evaluates
the carrying value of loans periodically and the allowance for loan losses is
adjusted accordingly.  See "BUSINESS OF THE SAVINGS BANK -- Lending Activities -
- Allowance for Loan Losses" and Note 4 to Notes to Consolidated Financial
Statements.

     The provision for loan losses increased 87.7% from $349,000 in 1996 to
$655,000 in 1997.  Management deemed the increase necessary in light of net
charge-offs of $304,000 and the growth in the loan portfolio during 1997.  At
September 30, 1997,  the allowance for loan losses was 1.04% of total loans and
was deemed adequate by management at that date.

     OTHER INCOME.  Total other income decreased $72,000 from 1996 to 1997.
Loan and deposit account service charges increased $257,000 from $1.3 million in
1996 to $1.5 million in 1997 as a result of an increase in the number of
checking accounts.  Other income increased $271,000 from $525,000 in 1996 to
$796,000 in 1997 primarily as a result of income of $185,000 from the investment
in a limited partnership that invests in mortgage servicing rights (see
"BUSINESS OF THE SAVINGS BANK -- Lending Activities -- Loan Purchases and, Sales
and Servicing") and gains from sale of real estate held for development (see
"BUSINESS OF THE SAVINGS BANK -- Subsidiary Activities").  These increases were
offset by losses on sale of investments of $308,000 in connection with the
restructuring of the investment securities portfolio and the write-off of
$192,000 of computer hardware and software as a result of the upgrading of the
computer system.  See "-- Comparison of Financial

                                       26
<PAGE>
 
Condition at September 30, 1997 and 1996" for information regarding the
restructuring of the investment securities portfolio.

     GENERAL AND ADMINISTRATIVE EXPENSES.  General and administrative expenses
increased $552,000 from $6.9 million in 1996 to $7.4 million in 1997.  Salaries
and employee benefits increased 28.5% from $3.1 million in 1996 to $3.9 million
in 1997 as a result of the opening of the Seneca branch office, staffing a call
center at the main office, and expenses associated with the ESOP and the 1996
MRP.  Occupancy expense increased $100,000, or 25.8%, primarily as a result of
the opening of the Seneca branch office.  Furniture and equipment expense
increased 37.6% from $542,000 in 1996 to $746,000 in 1997 as a result of the
purchase of additional computer equipment and equipping the Seneca branch office
and the call center.  The FDIC insurance premiums decreased $1.1 million from
$1.3 million in 1996 to $152,000 in 1997, due to the one-time SAIF
recapitalization assessment of $946,000 incurred in September 1996.  Prior to
the SAIF recapitalization, the Savings Bank's total annual deposit insurance
premiums amounted to 0.23% of assessable deposits.  Effective January 1, 1997,
the rate decreased to 0.065% of assessable deposits.  See "REGULATION -- Federal
Regulation of Savings Associations -- Federal Deposit Insurance Corporation."
Advertising expense decreased 10.0% from $391,000 in 1996 to $352,000 in 1997 as
a result of the winding down of the free checking advertising campaign that
began in October 1994.  Data processing expense increased 26.1% from $238,000 in
1996 to $300,000 in 1997 primarily as a result of the new Seneca branch office
and the new call center.  Office supplies increased 16.2% from $333,000 in 1996
to $387,000 in 1997 primarily as a result of the opening of the Seneca branch
office.

     Other operating expenses increased 68.2% from $654,000 in 1996 to $1.1
million in 1997 as a result of the opening of the Seneca branch office, sales
training for the call center, increased postage expense and professional fees,
and supplies for the free checking program.

     INCOME TAXES.  Income taxes increased 22.5% from $756,000 in 1996 to
$926,000 in 1997 due to an increase in income before taxes.  The effective tax
rate was 35% for both 1996 and 1997.

COMPARISON OF THE YEAR ENDED SEPTEMBER 30, 1996 TO THE YEAR ENDED SEPTEMBER 30,
1995

     NET INCOME.  Net income decreased from $1.9 million, or $1.27 per share, in
1995 to $1.4 million, or $0.95 per share, in 1996 primarily as a result of the
one-time SAIF recapitalization assessment of $946,000 ($625,000 after tax).
Without this one-time assessment, 1996 net income would have been $2.0 million,
or $1.36 per share.  Net income for 1995 benefitted from a one-time gain of $1.8
million on the sale of mutual funds.

     NET INTEREST INCOME.  Net interest income increased 56.3% from $4.8 million
in 1996 to $7.5 million in 1996 primarily as a result of decreased interest
expense on borrowings used to purchase mutual fund shares in 1995.  The mutual
funds were sold in 1995 at a gain of $1.8 million.  These funds were selected
for their capital appreciation characteristics; no interest income was
recognized on the mutual fund investments in 1995.  Interest income on loans
increased 17.3% from $9.8 million in 1995 to $11.5 in 1996 as the average
balance of loans receivable increased 14.3% from $112.5 million in 1995 to
$128.6 million in 1996.  Interest income on mortgage-backed securities decreased
9.7% from $3.4 million in 1995 to $3.1 million in 1996 as the average balance of
mortgage-backed securities decreased 7.8% from $48.3 million in 1995 to $44.8
million in 1996.

     INTEREST EXPENSE.  Interest expense on deposits increased 13.3% from $6.0
million in 1995 to $6.8 million in 1996 as the average balance of deposits
increased from $147.5 million in 1995 to $154.6 million in 1996 and the weighted
average cost of deposits increased from 4.07% in 1995 to 4.38% in 1996 as a
result of an increase in market interest rates.  Management attributes the
increase in average deposits to normal deposit growth.

     Interest expense on borrowings decreased $2.1 million from $2.8 million in
1995 to $656,000 in 1996 as the average borrowings decreased from $43.0 million
in 1995 to $12.5 million in 1996.  The FHLB advances were used to fund the
mutual fund investment in 1995.


                                       27
<PAGE>
 
     PROVISION FOR LOAN LOSSES.  The provision for loan losses decreased from
$362,000 in 1995 to $349,000 in 1996.  At September 30, 1996, the allowance for
loan losses was 1.08% of total loans and was deemed adequate by management at
that date.

     OTHER INCOME.  Other income decreased $1.3 million from $3.2 million in
1995 to $1.9 million in 1996, primarily as a result of capital gains on the sale
of mutual funds of $1.8 million in 1995 and a 68.8% increase in loan and deposit
account service charges from $770,000 in 1995 to $1.3 million in 1996 as a
result of an increase in the number of deposit accounts.

     GENERAL AND ADMINISTRATIVE EXPENSES.  General and administrative expenses
increased 25.5% from $5.5 million in 1995 to $6.9 million in 1996.  Salaries and
employee benefits increased 9.1% primarily as a result of increases in staff
needed to service the increased number of checking accounts.  Office occupancy
increased 12.5% primarily as a result of general building maintenance costs.
Furniture and equipment expense increased 16.8% from $464,000 in 1995 to
$542,000 in 1996 as a result of an increase in depreciation expense related to
the purchase of check imaging equipment.  FDIC insurance premiums increased
293.9% from $330,000 in 1995 to $1.3 million in 1996 as a result of the one-time
SAIF recapitalization assessment of $946,000.  Advertising expense decreased
17.7% from $475,000 in 1995 to $391,000 in 1996 primarily as a result of the
opening of the Northtowne office in 1995.  Office supplies increased 23.4% from
$269,000 in 1995 to $332,000 in 1996 primarily as a result of the increase in
the number of checking accounts.

     INCOME TAXES.  Income taxes increased from $194,000 (effective tax rate of
9.2%) in 1995 to $756,000 (effective tax rate of 35%) in 1996 due to an increase
in income before taxes.  The lower effective tax rate in 1995 resulted from the
use of capital loss carryforwards to offset $1.8 million in capital gains income
generated by the sale of mutual funds in 1995.

ASSET AND LIABILITY MANAGEMENT

     QUANTITATIVE ASPECTS OF MARKET RISK.  The Savings Bank does not maintain a
trading account for any class of financial instrument nor does it engage in
hedging activities or purchase purchase high-risk derivative instruments.
Furthermore, the Savings Bank is not subject to foreign currency exchange rate
risk or commodity price risk.  For information regarding the sensitivity to
interest rate risk of the Savings Bank's interest-earning assets and interest-
bearing liabilities, see the tables under "BUSINESS OF THE SAVINGS BANK --
Lending Activities -- Loan Maturity," "-- Investment Activities" and "-- Deposit
Activities and Other Sources of Funds -- Time Deposits by Rates and Maturities."

     QUALITATIVE ASPECTS OF MARKET RISK.  The OTS uses a net market value
methodology to measure the interest rate risk exposure of thrift institutions.
This exposure is a measure of the potential decline in the net portfolio value
("NPV") of the institution based upon the effect of an assumed 200 basis point
increase or decrease in interest rates.  NPV is the present value of the
expected net cash flows from the institution's assets, liabilities and off-
balance sheet contracts.  Under OTS regulations, an institution's "normal" level
of interest rate risk in the event of this assumed change in interest rates is a
decrease in the institution's NPV in an amount not exceeding 2% of the present
value of its assets.  This procedure for measuring interest rate risk was
developed by the OTS to replace the "gap" analysis (the difference between
interest-earning assets and interest-bearing liabilities that mature or reprice
within a specific time period).


                                       28
<PAGE>
 
     The following table is provided to the Savings Bank by the OTS and
illustrates the percent change in NPV as of September 30, 1997, based on OTS
assumptions.  No effect has been given to any steps that the Savings Bank may
take to counteract the effect of the interest rate movements presented in the
table.

<TABLE>
<CAPTION> 
                
Basis                                                     NPV as Percent of             
Point ("bp")            Net Portfolio Value            Present Value of Assets      
Change             ------------------------------      ------------------------     
In Rates           Amount   $ Change    % Change       NPV Ratio       Change       
------------       ------   ---------   ---------      -----------   ---------      
<S>                <C>      <C>         <C>            <C>            <C>           
                                                                                    
     400 bp        24,217   $(14,457)        (37)%         9.84%       (479)bp      
     300 bp        28,092    (10,581)        (27)         11.19        (343)        
     200 bp        31,972     (6,702)        (17)         12.50        (213)        
     100 bp        35,469     (3,204)         (8)         13.63        (100)        
       0 bp        38,673                                 14.62                     
    (100 bp)       41,265      2,591           7          15.39          77         
    (200 bp)       43,761      5,087          13          16.10         148         
    (300 bp)       46,961      8,287          21          17.01         239         
    (400 bp)       51,467     12,793          33          18.26         364          
</TABLE>

     As with any method of measuring interest rate risk, certain shortcomings
are inherent in the method of analysis presented in the foregoing table.  For
example, although certain assets and liabilities may have similar maturities or
periods to repricing, they may react in different degrees to changes in market
interest rates.  Also, the interest rates on certain types of assets and
liabilities may fluctuate in advance of changes in market interest rates, while
interest rates on other types may lag behind changes in market rates.
Furthermore, in the event of a change in interest rates, expected rates of
prepayments on loans and early withdrawals from certificates likely could
deviate significantly from those assumed in calculating the table.  Therefore,
the data presented in the table should not be relied upon as necessarily
indicative of actual results.

LIQUIDITY AND CAPITAL RESOURCES

     The Savings Bank's primary sources of funds are deposits, repayment of loan
principal (including mortgage-backed securities ("MBSs" and CMOs) and, to a
lesser extent, sales of mortgage-backed securities available for sale,
maturities of investment securities, and short-term investments and operations.
While scheduled loan repayments and maturing investments are relatively
predictable, deposit flows and early loan repayments are more influenced by
interest rates, general economic conditions, and competition.  The Savings Bank
attempts to price its deposits to meet its asset/liability objectives discussed
above, consistent with local market conditions.  Excess balances are generally
invested in overnight funds.  In addition, the Savings Bank is eligible to
borrow funds from the FHLB of Atlanta.

     Under OTS regulations, a member thrift institution is required to maintain
an average daily balance of liquid assets (cash, certain time deposits and
savings accounts, bankers' acceptances, and specified U.S. Government, state or
federal agency obligations and certain other investments) equal to a monthly
average of not less than a specified percentage of its net withdrawable accounts
plus short-term borrowings.  The current liquidity requirement is 4.0%.
Monetary penalties may be imposed for failure to meet liquidity requirements.
The Savings Bank's liquidity ratio at September 30, 1997 was 5.64%.

     The primary investing activity of the Savings Bank is lending.  During the
years ended September 30, 1997 and 1996, the Savings Bank originated $77.3
million and $68.3 million, respectively, of loans, of which $5.7 million in 1997
and $9.6 million in 1996 were sold to the Federal Home Loan Mortgage Corporation
("FHLMC").  The retained originations were funded by $59.5 million and $27.0
million, respectively, in principal repayments on loans and mortgage-backed
securities.

                                       29
<PAGE>
 
     Liquidity management is both a short-and long-term responsibility of the
Savings Bank's management.  The Savings Bank adjusts its investments in liquid
assets based upon management's assessment of (i) expected loan demand, (ii)
projected loan sales, (iii) expected deposit flows, (iv) yields available on
interest-bearing deposits, and (v) liquidity of its asset/liability management
program.  Excess liquidity is invested generally in interest-bearing overnight
deposits and other short-term government and agency obligations.  If the Savings
Bank requires funds beyond its ability to generate them internally, it has
additional borrowing capacity with the FHLB and collateral eligible for
repurchase agreements.

     The Savings Bank anticipates that it will have sufficient funds available
to meet current loan commitments.  At September 30, 1997, the Savings Bank had
outstanding commitments to originate loans (including commitments to fund
letters of credit) of $27.9 million.  The Savings Bank expects to fund these
commitments with funds received from normal operations.  See Note 17 to
Consolidated Financial Statements.

     Certificates of deposit scheduled to mature in one year or less at
September 30, 1997 totaled $115.7 million.  Although no assurances can be given,
based upon management's experience and familiarity with the customers involved
and the Savings Bank's pricing policy relative to that of its perceived
competitors, management believes that a significant portion of such deposits
will remain with the Savings Bank.

     Since 1980, the Savings Bank has diversified its lending to include home
equity, second mortgage and consumer loans.  This diversification has been
designed to increase earnings and reduce interest rate risk.  The Savings Bank
has also increased the origination of home equity and second mortgage loans
secured by one- to four-family dwellings and intends to reduce the balance of
its MBSs by deploying funds into more profitable whole loans and becoming more
commercial bank-like in lending philosophy and direction.  The Savings Bank will
continue to divest itself of mortgage-backed securities, when opportunities
arise to invest such funds in higher yielding whole loans.  These changes in
lending and investment strategy will reduce the Savings Bank's liquidity in the
future as lower-yielding, more liquid assets are redeployed into higher-yielding
assets.

     The Savings Bank must maintain minimum capital standards as promulgated by
the FDIC and the OTS which are:  (1) a leverage limit requiring all thrift
institutions to maintain core capital in an amount not less than 3% of the
institution's total assets; (2) a tangible capital requirement of not less than
1.5% of total assets; and (3) a risk-based capital requirement of not less than
8% of the institution's total assets, substantially the same as the risk-based
capital requirements for national banks.  The Savings Bank met all regulatory
capital requirements at September 30, 1997 and 1996.  See "HISTORICAL AND PRO
FORMA REGULATORY CAPITAL COMPLIANCE."

                                       30
<PAGE>
 
IMPACT OF ACCOUNTING PRONOUNCEMENTS AND REGULATORY POLICIES

     ACCOUNTING FOR STOCK-BASED COMPENSATION.  Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation,"
establishes financial accounting and reporting standards for stock-based
employee compensation plans.  This statement encourages all entities to adopt a
new method of accounting to measure compensation cost of all employee stock
compensation plans based on the estimated fair value of the award at the date it
is granted.  Companies are, however, allowed to continue to measure compensation
cost for those plans using the intrinsic value based method of accounting, which
generally does not result in compensation expense recognition for most plans.
Companies that elect to remain with the existing accounting method are required
to disclose in a footnote to the financial statements pro forma net income and,
if presented, earnings per share, as if this statement had been adopted.  The
accounting requirements of this statement are effective for transactions entered
into in fiscal years that begin after December 15, 1995; however, companies are
required to disclose information for awards granted in their first fiscal year
beginning after December 15, 1994.  Management of the Savings Bank uses the
intrinsic value method.

     ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND
EXTINGUISHMENT OF LIABILITIES.  SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities," provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishment of liabilities.  This statement applies prospectively
to transactions occurring after December 31, 1996, and establishes new standards
that focus on control whereas, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the liabilities it
has incurred, derecognizes financial assets when control has been surrendered,
and derecognizes liabilities when extinguished.  The adoption of SFAS No. 125
did not have a material impact on the Savings Bank's results of operations or
financial position.

     DEFERRAL OF THE EFFECTIVE DATE OF CERTAIN PROVISIONS OF SFAS NO. 125.  In
December 1996, the Financial Accounting Standards Board ("FASB") issued SFAS No.
127, "Deferral of the Effective Date of Certain Provisions of FASB Statement No.
125."  SFAS No. 127 defers for one year the effective date of portions of SFAS
No. 125 that address secured borrowings and collateral for all transactions.
Additionally, SFAS No. 127 defers for one year the effective date of transfers
of financial assets that are part of repurchase agreements, securities lending
and similar transactions.

     EARNINGS PER SHARE.  In February 1997, the FASB issued SFAS No. 128,
"Earnings Per Share."  SFAS 128 applies to entities with publicly traded common
stock or potential common stock and is effective for financial statements for
periods ending after December 15, 1997, including interim periods.  SFAS 128
simplifies the standards for computing earnings per share ("EPS") previously
found in Accounting Principles Board ("APB") Opinion 15, "Earnings Per Share."
It replaces the presentation of primary EPS with a presentation of basic EPS.
It also requires dual presentation of basic and diluted EPS on the face of the
income statement for all companies with complex capital structures and requires
a reconciliation of the numerator and denominator of the basic EPS computation
to the numerator and denominator of the diluted EPS computation.  The Savings
Bank's present computation of diluted EPS under APB Opinion 15 is applied
against a materiality test of 3%.  For financial statements issued by the
Savings Bank after December 15, 1997, the materiality test will no longer apply
and the Savings Bank will report basic and diluted EPS for each period presented
as well as the further reconciliations required by SFAS 128.  Although earlier
application is not permitted, SFAS 128 will require restatement of all prior-
period EPS data presented.

     DISCLOSURE OF INFORMATION ABOUT CAPITAL STRUCTURE.  In February 1997, the
FASB also issued SFAS No. 129, "Disclosure of Information about Capital
Structure."  The purpose of SFAS 129 is to consolidate existing disclosure
requirements for ease of retrieval.  SFAS 129 contains no change in disclosure
requirements for companies, such as the Savings Bank that were subject to the
previously existing requirements.  It applies to all entities and is effective
for financial statement issued for periods ending after December 15, 1997.

                                       31
<PAGE>
 
     REPORTING COMPREHENSIVE INCOME.  In June 1997, the FASB issued SFAS No.
130, "Reporting Comprehensive Income."  The purpose of SFAS 130 is to address
concerns over the practice of reporting elements of comprehensive income
directly in equity.  This SFAS requires all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed in equal prominence with the
other financial statements.  This statement is effective for periods beginning
after December 15, 1997.  Comparative financial statements are required to be
reclassified to reflect the provisions of this statement.  The Savings Bank will
adopt the provisions of this SFAS for fiscal year 1998.

     DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION.  In
June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information."  This statement applies to all public
entities.  The provisions of SFAS 131 require certain disclosures regarding
material industry segments within an entity.  SFAS 131 is not expected to have a
material impact on the Savings Bank.

YEAR 2000 CONSIDERATIONS

     Many existing computer programs use only two digits to identify a year in
the date datum field.  These programs were designed and developed without
considering the impact of the upcoming change in the century.  If uncorrected,
many computer applications could fail or create erroneous results by or at the
Year 2000.  The Year 2000 issue affects virtually all companies and
organizations.

     The Savings Bank has an in-house computer system to process customer
records and monetary transactions, post deposit and general ledger entries and
record activity in installment lending, loan servicing and loan originations.
Based on internal testing procedures and conversations with the software
provider, the Savings Bank does not expect that the cost of addressing any Year
2000 issue will be a material event or uncertainty that would cause its reported
financial information not to be necessarily indicative of future operating
results or future financial condition, or that the costs or consequences of
incomplete or untimely resolution of any Year 2000 issue represent a known
material event or uncertainty that is reasonably likely to affect its future
financial results, or cause its reported financial information not to be
necessarily indicative of future operating results or future financial
condition.

EFFECT OF INFLATION AND CHANGING PRICES

     The Consolidated Financial Statements and related financial data presented
herein have been prepared in accordance with GAAP which require the measurement
of financial position and operating results in terms of historical dollars,
without considering the changes in relative purchasing power of money over time
due to inflation.  The primary impact of inflation on operations of the Savings
Bank is reflected in increased operating costs.  Unlike most industrial
companies, virtually all the assets and liabilities of a financial institution
are monetary in nature.  As a result, interest rates generally have a more
significant impact on a financial institution's performance than do general
levels of inflation.  Interest rates do not necessarily move in the same
direction or to the same extent as the prices of goods and services.

                        BUSINESS OF THE HOLDING COMPANY

GENERAL

     The Holding Company was organized as a Delaware business corporation at the
direction of the Savings Bank on November 5, 1997 for the purpose of becoming a
holding company for the Savings Bank upon completion of the Conversion and
Reorganization.  As a result of the Conversion and Reorganization, the Savings
Bank will be a wholly-owned subsidiary of the Holding Company and all of the
issued and outstanding capital stock of the Savings Bank will be owned by the
Holding Company.

                                       32
<PAGE>
 
BUSINESS

     Prior to the Conversion and Reorganization, the Holding Company has not
engaged and will not engage in any significant activities other than of an
organizational nature.  Upon completion of the Conversion and Reorganization,
the Holding Company's primary business activity will be the ownership of the
outstanding capital stock of the Savings Bank.  In the future, the Holding
Company may acquire or organize other operating subsidiaries, although there are
no current plans, arrangements, agreements or understandings, written or oral,
to do so.

     Initially, the Holding Company will neither own nor lease any property but
will instead use the premises, equipment and furniture of the Savings Bank with
the payment of appropriate rental fees, as required by applicable law and
regulations.

     Since the Holding Company will only hold the outstanding capital stock of
the Savings Bank upon consummation of the Conversion and Reorganization, the
competitive conditions applicable to the Holding Company will be the same as
those confronting the Savings Bank.  See "BUSINESS OF THE SAVINGS BANK --
Competition."

                          BUSINESS OF THE SAVINGS BANK

GENERAL

     The Savings Bank operates, and intends to continue to operate, as a
community oriented financial institution and is devoted to serving the needs of
its customers.  The Savings Bank's business consists primarily of attracting
retail deposits from the general public and using those funds to originate real
estate loans.  See "-- Lending Activities."

MARKET AREA

     The Savings Bank considers Anderson and Oconee Counties, South Carolina, as
its primary market area.  Additional loan origination demand is generated from
customers living in contiguous counties.  The Savings Bank also purchases loans
secured by properties in South Carolina located outside its primary market area.

     The Savings Bank's main office and four branch offices are located in the
City of Anderson, the county seat and largest city in Anderson County, South
Carolina.  Anderson County is included in the Greenville/Spartanburg
metropolitan statistical area.  The Cities of Greenville and Spartanburg are
located 30 and 60 miles northeast of Anderson, respectively, and Atlanta,the
closest major city, is 120 miles to the southwest.

     Much of Anderson County is rural and roughly half of the land area is used
for agricultural purposes.  Anderson County has benefitted from the growth of
the Greenville metropolitan area and is experiencing significant residential and
commercial development along Interstate 85, a major transportation route that
crosses through Anderson County.  Major area employers include BMW Manufacturing
Corp., Hoechst Celenese Corporation, Owens Corning and Michelin Tire.  Oconee is
a smaller but rapidly growing county located west of Anderson County.  According
to recent government statistics, the September 1997 unemployment rates for
Anderson and Oconee Counties were both less than the South Carolina and national
averages.

LENDING ACTIVITIES

     GENERAL.  Historically, the Savings Bank's principal lending activity has
been the origination of residential real estate loans for the purpose of
constructing or financing one- to four-family residential properties.  At
September 30, 1997, the Savings Bank's loan portfolio consisted of $118.3
million of one- to four-family residential

                                       33
<PAGE>
 
loans, $17.1 million of construction loans, $19.2 million of consumer loans,
$27.0 million of commercial real estate loans, and $7.2 million of commercial
business loans.  In recent periods, the Savings Bank has increased its
investment in commercial real estate loans, commercial business loans and
construction loans.

                                       34
<PAGE>
 
  LOAN PORTFOLIO ANALYSIS.  The following table sets forth the composition of
the Savings Bank's loan portfolio at the dates indicated.
<TABLE>
<CAPTION>

                                                                At September 30, 
                                -------------------------------------------------------------------------------------
                                       1997                  1996                  1995                  1994         
                                --------------------  -------------------   -------------------   ------------------- 
                                 Amount    Percent     Amount    Percent     Amount    Percent     Amount    Percent  
                                --------   --------   --------   --------   --------   --------   --------   -------- 
                                                                          (Dollars in Thousands)                     
<S>                             <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>      
                                                                                                                     
Mortgage loans:                                                                                                      
One- to four-family(1).......   $118,279     66.16%   $ 91,186     64.78%   $ 81,226     69.70%   $ 77,624     74.03% 
Multi-family.................      1,245      0.70       1,010      0.72         630      0.54          --        --  
Commercial real estate.......     26,976     15.09      17,009     12.08       7,355      6.31       5,158      4.92  
Construction.................     17,145      9.59      19,509     13.86      11,523      9.89       7,159      6.83  
                                --------    ------    --------    ------    --------    ------    --------    ------  
     Total mortgage loans....    163,645     91.54     128,714     91.44     100,734     86.44      89,941     85.78  
                                --------    ------    --------    ------    --------    ------    --------    ------  
                                                                                                                     
Commercial business loans....      7,182      4.02       5,529      3.93       3,657      3.13       1,222      1.17  
                                                                                                                     
Consumer loans:                                                                                                      
 Home equity and second                                                                                              
  mortgage...................      3,405      1.90       5,036      3.58       7,535      6.47      10,071      9.60  
 Lines of credit.............      9,156      5.12       6,713      4.77       6,279      5.39       6,045      5.77  
 Automobile loans............      3,540      1.98       2,677      1.90       1,438      1.23         735      0.70  
 Other.......................      3,072      1.72       2,490      1.77       2,293      1.97       1,837      1.75  
                                --------    ------    --------    ------    --------    ------    --------    ------  
     Total consumer loans....     19,173     10.72      16,916     12.02      17,545     15.06      18,688     17.82  
                                --------    ------    --------    ------    --------    ------    --------    ------  
     Total loans.............    190,000    106.28     151,159    107.39     121,936    104.63     109,851    104.77  
                                                                                                                     
Less:                                                                                                                
Undisbursed proceeds for                                                                                             
 loans in process............      8,985     (5.03)      8,866     (6.30)      4,119     (3.53)      4,037     (3.85) 
Unearned discounts...........        357        --          --        --          --        --          --        --  
Allowance for loan losses....      1,886     (1.05)      1,535     (1.09)      1,278     (1.10)        962     (0.92) 
                                --------    ------    --------    ------    --------    ------    --------    ------  
     Net loans receivable....   $178,772    100.00%   $140,758    100.00%   $116,539    100.00%   $104,852    100.00%  
                                ========    ======    ========    ======    ========    ======    ========    ======  

                                                At September 30, 
--------------------------------------------------------------------------------------------------  
                                        1993
                                 -------------------   
                                  Amount    Percent
                                 --------   --------

<S>                             <C>        <C>

Mortgage loans:               
One- to four-family(1).......   $ 68,461     70.58%
Multi-family.................         --        --
Commercial real estate.......      2,584      2.66
Construction.................      5,112      5.27
                                --------    ------
     Total mortgage loans....     76,157     78.51
                                --------    ------
                              
Commercial business loans....        222      0.23
                              
Consumer loans:               
 Home equity and second       
  mortgage...................     14,956     15.42
 Lines of credit.............      5,915      6.10
 Automobile loans............        942      0.97
 Other.......................      2,168      2.23
                                --------    ------
     Total consumer loans....     23,981     24.72
                                --------    ------
     Total loans.............    100,360    103.46
                              
Less:                         
Undisbursed proceeds for      
 loans in process............      2,471     (2.55)
Unearned discounts...........         --        --
Allowance for loan losses....        884     (0.91)
                                --------    ------
     Net loans receivable....   $ 97,005    100.00%
                                ========    ======
 
-------------------------
</TABLE>
(1)     Includes construction loans converted to permanent loans and
participation loans.

                                       35
<PAGE>
 
     ONE- TO FOUR-FAMILY AND MULTI-FAMILY MORTGAGE LOANS.  The Savings Bank
originates permanent conventional mortgage loans secured by one- to four-family
residential properties with original loan-to-value ratios up to 90% of the
appraised value or the purchase price of the property, whichever is less.  At
September 30, 1997, the Savings Bank had $118.3 million, or 66% of total loans,
in one- to four-family mortgage loans.  The Savings Bank requires hazard
insurance on the property securing the loan.  All one- to four-family mortgage
loans require a title examination or abstract of title.  Title insurance is
required on all fixed-rate mortgage loans so that they may be sold in the
secondary market.  One- to four-family mortgage loans are generally underwritten
to conform to FHLMC guidelines.  Loan to value ratios are limited to 80% but may
be increased to 95%, provided that private mortgage insurance coverage is
obtained for amounts over 80%.

     The Savings Bank offers both fixed-rate mortgages and ARM loans with terms
of 15 to 30 years.  At September 30, 1997, ARM loans totalled $45.6 million, or
38.5% of the one- to four-family loan portfolio.  The Savings Bank offers four
conventional ARM loans:  a one year ARM loan with annual adjustment periods
indexed to the One Year Treasury Bill; a three year ARM loan with annual
adjustment periods indexed to the Three Year Treasury Bill; a five year ARM loan
with annual adjustment periods indexed to the One Year Treasury Bill; and a ten
year ARM loan with annual adjustment periods indexed to the One Year Treasury
Bill.  The one year ARM loan and the three year ARM loan provide that the amount
of any increase or decrease in the interest rate is limited to two percentage
points (upward or downward) per adjustment period and generally contain a 6%
maximum adjustment over the life of the loan.  The five year ARM loan and the
ten year ARM loan provide that the amount of any increase or decrease in the
interest rate is limited to two percentage points (upward or downward) per
adjustment period and generally contain a 5% maximum adjustment over the life of
the loan.  At September 30, 1997, the majority of the ARM loans in the Savings
Bank's portfolio, that were originated by the Savings Bank, were the three year
and five year varieties.  If market interest rates increase, these rate
adjustment limitations may prevent such ARM loans from repricing to market
interest rates, which would have an adverse effect on net interest income.
Borrower demand for ARMs versus fixed-rate mortgage loans is a function of the
level of interest rates, the expectations of changes in the level of interest
rates and the difference between the interest rates and loan fees for fixed-rate
mortgage loans and interest rates and loan fees for ARMs.  Fixed-rate loans are
originated for sale in the secondary market, though loans with terms of 15 years
occasionally are retained in the Savings Bank's portfolio.  The relative amount
of fixed-rate and ARM loans that can be originated at any time is largely
determined by the demand for each in the prevailing competitive environment.

     In recent periods, the Savings Bank has purchased one- to four-family
mortgage loans from a mortgage banking company located in Hilton Head Island,
South Carolina, and a mortgage banking company located in Greenville, South
Carolina.  These purchases account for a substantial portion of the growth in
the one- to four-family loan portfolio in recent periods.  During the year ended
September 30, 1997, the Savings Bank purchased $23.6 million of one- to four-
family mortgage loans.  Substantially all of these purchases were from the
Greenville mortgage company. In future periods, the Savings Bank expects that a
substantial portion of purchased loan volume will come from that company, rather
than the Hilton Head Island mortgage company, because of the increasing
competition in the Hilton Head Island market.

     At September 30, 1997, the Savings Bank had $4.1 million of purchased loans
secured by residential properties on Hilton Head Island, South Carolina, all of
which were one year ARM loans.  These loans were all purchased from the same
mortgage company, located on Hilton Head Island.  Prior to purchase, the Savings
Bank reviews each loan for conformance to the Savings Bank's underwriting
criteria.  At September 30, 1997, the average size of such loans was
approximately $238,000 and the largest loan had an outstanding balance of $1.3
million.  Although all such loans were performing according to their terms at
September 30, 1997, they do possess certain risks due to the average size of
such loans and the location of the properties outside the Savings Bank's primary
market area.  Subject to market conditions, the Savings Bank expects to purchase
additional such loans.

     At September 30, 1997, the Savings Bank had $23.7 million of purchased one-
to four-family mortgage loans secured by residential properties located
primarily in Greenville, South Carolina.  These loans were all

                                       36
<PAGE>
 
purchased from the mortgage company in which a service corporation subsidiary of
the Savings Bank has an equity investment.  See "-- Subsidiary Activities."
Prior to purchase, the Savings Bank reviewes each loan for conformity with the
Savings Bank's underwriting criteria.  At September 30, 1997, the average size
of such loans was approximately $126,000.  Subject to market conditions, the
Savings Bank expects to purchase additional such loans.

     The Savings Bank does not actively solicit multi-family loans but extends
them as an accommodation to existing customers.  At September 30, 1997, multi-
family loans totalled $416,000, or 0.01% of net loans receivable, and consisted
of two loans, the largest of which had an outstanding balance of $240,000.  All
such loans are secured by properties located in the Savings Bank's primary
market area.  At September 30, 1997, all multi-family loans were performing
according to their terms.

     CONSTRUCTION LOANS.  The construction loan portfolio was $17.1 million, or
9.0% of the total loan portfolio at September 30, 1997.  The Savings Bank
intends to continue emphasizing and expanding this type of lending.  Such loans
are primarily combined construction and permanent mortgage loans.  The
construction portion of the loan is for a period of up to 12 months on an
interest only basis and at a maximum loan to value ratio of 95%.  The permanent
mortgage is made for up to 30 years.  Construction-permanent loans are made at
the same fixed- or adjustable-rates of interest that are offered for permanent
residential mortgage loans made by the Savings Bank.  The majority of
construction loans are made against binding sales contracts for the home being
built.  The Savings Bank also originates speculative construction loans to a
small number of residential builders in its primary market area well known to
the Savings Bank.  At September 30, 1997, the Savings Bank had $17.1 million, or
9.59% of total loans, in construction loans, of which $6.4 million were
speculative constructive loans.  During the year ended September 30, 1997, the
Savings Bank purchased speculative construction loans secured by one- to four-
family properties located on Hilton Head Island, South Carolina, in the
aggregate amount of $2.5 million, of which $343,000 was outstanding as of
September 30, 1997.  All of these purchased construction loans were performing
according to their terms at September 30, 1997.

     Construction lending generally is considered to involve a higher degree of
credit risk than long-term financing of residential properties.  The risk of
loss on a construction loan is dependent largely upon the accuracy of the
initial estimate of the property's value at completion of construction or
development and the estimated cost (including interest) of construction.  If the
estimate of construction cost and the marketability of the property upon
completion of the project prove to be inaccurate, the Savings Bank may be
compelled to advance additional funds to complete the development.  If the
borrower is unable to sell the completed project in a timely manner or obtain
adequate proceeds to repay the loan, the loan may become non-performing.
Furthermore, if the estimate of value proves to be inaccurate, the Savings Bank
may be confronted with, at or prior to the maturity of the loan, a project with
a value which is insufficient to assure full repayment.  The ability of the
developer or builder to sell developed lots or completed dwelling units will
depend on, among other things, demand, pricing and availability of comparable
properties, and economic conditions.

     The Savings Bank's underwriting criteria are designed to evaluate and
minimize the risks of each construction loan.  Among other things, the Savings
Bank considers evidence of the availability of permanent financing for the
borrower, the reputation of the borrower, the amount of the borrower's equity in
the project, the independent appraisal and review of cost estimates, the pre-
construction sale and leasing information, and the cash flow projections of the
borrower.  In addition, except for the purchased construction loans on Hilton
Head Island, South Carolina, the majority of the construction loans granted by
the Savings Bank are secured by property in the Savings Bank's primary market
area.  The Savings Bank reviews such purchased construction loans for conformity
with the Savings Bank's underwriting criteria before purchase.

     COMMERCIAL REAL ESTATE LOANS.  The Savings Bank originates and purchases
commercial real estate loans.  Commercial real estate loans totalled $27.0
million, or 15% of the total loan portfolio, at September 30, 1997.  Currently,
the Savings Bank originates commercial real estate loans only to select
borrowers known to the Savings Bank and secured by properties in its primary
market area and generally in amounts between $100,000 and

                                       37
<PAGE>
 
$500,000.  The commercial real estate loan portfolio has increased in recent
periods from $17.0 million, or 12% of the total loan portfolio at September 30,
1996, to $27.0 million, or 15%, at September 30, 1997.  The Savings Bank intends
to continue emphasizing and expanding this type of lending.  At September 30,
1997, the largest commercial real estate loan originated by the Savings Bank had
an outstanding balance of $2.0 million and was secured by multiple units of one-
to- four family dwellings and land located in Anderson.  The loan was performing
according to its terms at that date.  At September 30, 1997, the largest
purchased commercial real estate loan had an outstanding balance of $1.5 million
and was secured by a sub-division development located in Greenville, South
Carolina.  The loan was performing according to its terms at that date.

     Of primary concern in commercial real estate lending is the borrower's
creditworthiness and the feasibility and cash flow potential of the project.
The Savings Bank's income property collateral is not concentrated in any one
industry or area.  Examples of the types of collateral securing the income
property loans include office buildings and residential rental properties.
Loans secured by income properties are generally larger and involve greater
risks than residential mortgage loans because payments on loans secured by
income properties are often dependent on successful operation or management of
the properties.  As a result, repayment of such loans may be subject, to a
greater extent than residential real estate loans, to supply and demand in the
market in the type of property securing the loan and, therefore, may be subject
to adverse conditions in the real estate market or the economy.  If the cash
flow from the project is reduced, the borrowers ability to repay the loan may be
impaired.

     COMMERCIAL BUSINESS LOANS.  At September 30, 1997, the Savings Bank had
$7.2 million of commercial business loans, which represented 4% of total loans.
Commercial business loans generally include equipment loans with terms of up to
five years and lines of credit secured by savings accounts and unsecured line of
credit.  Such loans are generally made in amounts up to $100,000 and carry
adjustable rates of interest.  The Savings Bank generally requires annual
financial statements from its commercial business borrowers and personal
guarantees if the borrower is a corporation.  At September 30, 1997, the largest
outstanding commercial business loan was a $500,000 line of credit with an
outstanding balance of $237,000 that was secured by an assignment of residential
mortgages.  The loan was performing according to its terms at that date.

     Commercial business lending generally involves greater risk than
residential mortgage lending and involves risks that are different from those
associated with residential, commercial and multi-family real estate lending.
Real estate lending is generally considered to be collateral based lending with
loan amounts based on predetermined loan to collateral values and liquidation of
the underlying real estate collateral is viewed as the primary source of
repayment in the event of borrower default.  Although commercial business loans
are often collateralized by equipment, inventory, accounts receivable or other
business assets, the liquidation of collateral in the event of a borrower
default is often not a sufficient source of repayment because accounts
receivable may be uncollectible and inventories and equipment may be obsolete or
of limited use, among other things.  Accordingly, the repayment of a commercial
business loan depends primarily on the creditworthiness of the borrower (and any
guarantors), while liquidation of collateral is a secondary and often
insufficient source of repayment.

     CONSUMER LOANS.  The Savings Bank originates a wide variety of consumer
loans, which are made primarily on a secured basis to existing customers.
Consumer loans include savings account loans, direct automobile loans, direct
boat loans, renewable lines of credit and unsecured loans.  These loans are made
at both fixed- and variable-rates of interest, adjustable annually, and with
varying terms depending on the type of loan.  In addition, the Savings Bank
offers unsecured consumer loans.  Consumer loans totalled $19.2 million at
September 30, 1997, or 11% of the Savings Bank's total loan portfolio.

     At September 30, 1997, the largest components of the consumer loan
portfolio were home equity and second mortgage loans and lines of credit.  At
September 30, 1997, such loans totalled $12.6 million, or 7.0% of the total loan
portfolio.  At September 30, 1997, commitments to extend credit under lines of
credit totalled $10.3 million.

                                       38
<PAGE>
 
     Home equity and second mortgage loans are generally for the improvement of
residential properties.  The majority of these loans are made to existing loan
customers and are secured by a first or second mortgage on residential property.
The Savings Bank actively solicits these types of loans by contacting their
borrowing customers directly.  The loan-to-value ratio on these properties is
typically below 80%, including the first mortgage and home equity or second
mortgage loan.  Home equity and second mortgage loans are typically variable
rate loans with a fixed payment that matures over 15 years.  Rates adjust
monthly; however, the payment remains constant over the loan term and any rate
adjustment is reflected in an increase in the loan term.  The interest rate is
tied to the prime lending rate.

     Lines of credit are generally secured by a second mortgage on residential
property and are generally made to existing customers.  Credit lines are
generally 80% of the appraised value of the collateral property.  Terms range
from five to 15 years and the interest rate is generally tied to the prime
lending rate.

     The Savings Bank views consumer lending as an important component of its
business operations because consumer loans generally have shorter-terms and
higher yields, thus reducing exposure to changes in interest rates.  In
addition, the Savings Bank believes that offering consumer loans helps to expand
and create stronger ties to its customer base.  The Savings Bank intends to
continue emphasizing this type of lending.

     The Savings Bank employs strict underwriting standards for consumer loans.
These procedures include an assessment of the applicant's payment history on
other debts and ability to meet existing obligations and payments on the
proposed loans.  Although the applicant's creditworthiness is a primary
consideration, the underwriting process also includes a comparison of the value
of the security, if any, to the proposed loan amount.  The Savings Bank
underwrites and originates all of its consumer loans internally, which
management believes limits exposure to credit risks relating to loans
underwritten or purchased from brokers or other outside sources.

     Consumer loans entail greater risk than do residential mortgage loans,
particularly in the case of consumer loans which are unsecured or secured by
assets that depreciate rapidly, such as automobiles.  In the latter case,
repossessed collateral for a defaulted consumer loan may not provide an adequate
source of repayment for the outstanding loan and the remaining deficiency often
does not warrant further substantial collection efforts against the borrower.
In addition, consumer loan collections are dependent on the borrower's
continuing financial stability, and thus are more likely to be adversely
affected by job loss, divorce, illness or personal bankruptcy.  Furthermore, the
application of various federal and state laws, including federal and state
bankruptcy and insolvency laws, may limit the amount which can be recovered on
such loans.  Such loans may also give rise to claims and defenses by the
borrower against the Savings Bank as the holder of the loan, and a borrower may
be able to assert claims and defenses which it has against the seller of the
underlying collateral.

LOAN MATURITY

     The following table sets forth certain information at September 30, 1997
regarding the dollar amount of loans maturing in the Savings Bank's portfolio
based on their contractual terms to maturity.  Demand loans, loans having no
stated schedule of repayments and no stated maturity, and overdrafts are
reported as due in one year or less.  Loan balances do not include undisbursed
loan proceeds, unearned discounts, unearned income and allowance for loan
losses.

                                       39
<PAGE>
 
<TABLE>
<CAPTION>
                             Within     One Year         After 3 Years    After 5 Years
                             One Year   Through 3 Years  Through 5 Years  Through 10 Years    Beyond 10 Years         Total
                             --------   ---------------  ---------------  ----------------    ---------------         -----
                                                                           (In Thousands)



<S>                          <C>          <C>               <C>                <C>                  <C>               <C>
Residential mortgage(1)...   $27,466      $35,284           $20,606            $18,913              $8,314            $110,583
Commercial real estate....    13,365        7,884             5,024                568                  91              26,932
Commercial business.......     5,148        1,174               732                128                  --               7,182
Construction..............    16,698          447                --                 --                  --              17,145
Automobile................       203        1,350             1,939                 48                  --               3,540
Savings account loans.....     1,089          144                88                 12                  12               1,345
Other.....................    11,519        2,083                12                674                  --              14,288
                             -------      -------           -------            -------              ------            --------
     Total loans..........   $75,488      $48,366           $28,401            $20,343              $8,417            $181,015
                             =======      =======           =======            =======              ======            ========
------------------------
</TABLE>
(1)  Includes one- to four-family and multi-family loans.

     The following table sets forth the dollar amount of all loans due after
September 30, 1998, which have fixed interest rates and have floating or
adjustable interest rates.
<TABLE>
<CAPTION>
 
                              Fixed          Floating or
                              Rates        Adjustable Rates
                             -------       ----------------
                                   (In Thousands)
<S>                          <C>                <C>
 
Residential mortgage(1)...   $48,357            $34,760
Commercial real estate....    12,101              1,466
Commercial business.......     1,220                814
Construction..............       447                 --
Automobile................     3,337                 --
Savings account loans.....       256                 --
Other.....................       748              2,021
                             -------            -------
     Total................   $66,466            $39,061
                             =======            =======
----------------------
</TABLE>
(1)  Includes one- to four-family and multi-family loans.

     LOAN SOLICITING AND PROCESSING.  Loan originations come from a number of
sources.  The Savings Bank's customary sources of loans are from realtors, walk-
in customers, referrals and existing customers.  A formal business development
program has been implemented where loan officers and sales personnel make
regular sales calls on building contractors and realtors.

     The Savings Banks' Loan Committee approves loan applications up to and
including $500,000.  The Loan Committee is composed of Robert W. Orr, President,
Managing Officer and Director, Barry C. Visioli, Senior Vice President, John
Dawkins, Vice President, and David Peters, Vice President.  Loan applications in
excess of $500,000 must be approved by the full Board of Directors.

     LOAN PURCHASES AND SALES AND SERVICING.  The Savings Bank is an active
purchaser of loans.  In recent periods, the Savings Bank has purchased ARM
loans, construction loans and lot loans secured by properties on Hilton Head
Island, South Carolina.  See "-- Lending Activities -- One- to Four-Family and
Multi-Family Mortgage Loans" and "-- Lending Activities -- Construction Loans."
In addition, the Savings Bank purchases one- to four-family, commercial real
estate and construction loans from a mortgage company in which a service
corporation subsidiary of the Savings Bank has an equity investment.
Furthermore, the Savings Bank purchases periodically participation interests in
permanent real estate loans and construction loans.  Any participation interest
purchased must meet the Savings Bank's own underwriting standards.  The Savings
Bank purchases loans from institutions in the State of South Carolina.

                                       40
<PAGE>
 
     The Savings Bank periodically sells one- to four-family mortgage loans to
the FHLMC in order to comply with the regulations limiting the amount of loans
to one borrower or to reduce the amount of fixed-rate loans in the Savings
Bank's portfolio.  The Savings Bank generally sells all fixed-rate, 30-year
residential mortgage loans.

     The Savings Bank participates in loan servicing activities both directly
and indirectly.  Direct servicing activities arise in connection with loans that
the Savings Bank originates but sells with servicing rights retained.  The
Savings Bank generally receives a fee payable monthly of 1/4% to 3/8% per annum
of the unpaid balance of each loan for which it retains servicing rights.  At
September 30, 1997, the Savings Bank was servicing loans for others aggregating
$62.1 million.  During the year ended September 30, 1997, the Savings Bank
earned servicing fee income of $198,000.

     The Savings Bank participates indirectly in loan servicing activities
through its equity investment, through a service corporation subsidiary, in a
mortgage banking company (see "-- Subsidiary Activities") and through an
investment in a limited partnership.  At September 30, 1997, the mortgage
banking company was servicing 226 loans for others aggregating $28.0 million.

     The following table sets forth total loans originated, purchased, sold and
repaid during the periods indicated.

<TABLE>
<CAPTION>
 
                                      Years Ended September 30,
                                  ---------------------------------
                                    1997        1996        1995
                                  ---------   ---------   ---------
                                       (Dollars in Thousands)
<S>                               <C>         <C>         <C>
 
Total loans at beginning of
 period........................   $151,159    $121,936    $109,851
                                  --------    --------    --------

Loans originated:
 One- to four-family...........     18,783      30,065      16,167
 Multi-family..................        240       1,312         526
 Commercial real estate........     11,912       7,113       5,804
 Construction loans............     10,934      12,816      12,169
 Commercial business...........     10,731       6,302       4,735
 Consumer......................     24,739      10,696      14,984
                                  --------    --------    --------
   Total loans originated......   $ 77,339    $ 68,304      54,385
                                  --------    --------    --------
 
Loans purchased:
 One- to four-family...........     23,581      18,242       6,543
 Commercial real estate(1).....      3,146          --         813
                                  --------    --------    --------
   Total loans purchased.......     26,727      18,242       7,356
                                  --------    --------    --------
 
Loans sold:
 Total whole loans sold........     (5,747)     (9,556)     (9,614)
                                  --------    --------    --------
    Total loans sold...........     (5,747)     (9,556)     (9,614)
 
Mortgage loan principal
 repayments....................    (59,478)    (47,767)    (40,042)
 
Net loan activity..............     38,841      29,223      12,085
                                  --------    --------    --------
 
Total loans at end of period...   $190,000    $151,159    $121,936
                                  ========    ========    ========
----------------------
</TABLE>
(1)  In 1997, includes a $2.3 million purchased loan secured by single-family
     lots located in Greenville, South Carolina.

                                       41
<PAGE>
 
     EQUITY INVESTMENT IN LIMITED PARTNERSHIP.  In December 1996, the Savings
Bank purchased a 20.625% interest in a limited partnership that invests in
mortgage servicing rights.  Through this limited partnership, the Savings Bank
invests in servicing rights tied to a national portfolio of residential mortgage
loans.  For the year ended September 30, 1997, the Savings Bank's return on
investment was approximately 5.89%.  For the year ended September 30, 1997, the
Savings Bank recorded other income of $185,000 on its investment based on the
net income of the limited partnership as audited by independent certified public
accountants.  See Note 3 of Notes to Consolidated Financial Statements.  The
value of the Savings Bank's investment in the limited partnership would be
adversely affected by credit quality deterioration of the underlying mortgage
loans.  The value of the investment would also be adversely affected by an
increase in market interest rates.  See "RISK FACTORS -- Interest Rate Risk."

     LOAN COMMITMENTS.  The Savings Bank issues commitments for fixed- and
adjustable-rate single-family residential mortgage loans conditioned upon the
occurrence of certain events.  Such commitments are made in writing on specified
terms and conditions and are honored for up to 30 days from approval, depending
on the type of transaction. The Savings Bank had outstanding loan commitments
(including commitments to fund letters of credit) of approximately $27.9 million
at September 30, 1997.  See Note 17 of Notes to Consolidated Financial
Statements.

     LOAN ORIGINATION AND OTHER FEES.  The Savings Bank, in most instances,
receives loan origination fees and discount "points."  Loan fees and points are
a percentage of the principal amount of the mortgage loan that are charged to
the borrower for funding the loan.  The Savings Bank usually charges origination
fees of 0.5% to 1.0% on one- to four-family residential real estate loans and
1.0% to 2.0% on long-term commercial real estate loans.  Current accounting
standards require fees received for originating loans to be deferred and
amortized into interest income over the contractual life of the loan.  Deferred
fees associated with loans that are sold are recognized as income at the time of
sale.

     The Savings Bank offsets all loan origination fees and certain related
direct loan origination costs against all fees and costs associated with loan
origination.  The resulting net amount is deferred and amortized over the
contractual life of the related loans as an adjustment to the yield on such
loans, unless prepayments of a large group of similar loans are probable and the
timing and amount of prepayments can be reasonably estimated.  The Savings Bank
offsets commitment fees against related direct costs and the resulting net
amount is recognized over the contractual life of the related loans as an
adjustment of yield if the commitment is exercised.  If the commitment expires
unexercised, the fees collected are recognized as non-interest income upon
expiration of the commitment.

     DELINQUENCIES.  The Savings Bank's collection procedures provide for a
series of contacts with delinquent borrowers.  After a delinquency of 15 days, a
late charge is assessed.  If the delinquency continues, subsequent efforts will
be made to contact the delinquent borrower.  The Savings Bank's collection
procedures provide that when a loan is 30 days overdue, and again on the 45th
day, the borrower will be contacted by mail and payment will be requested.  If a
loan continues in a delinquent status for 90 days or more, the Savings Bank
generally initiates foreclosure proceedings.  In certain instances, however, the
Board may decide to modify the loan or grant a limited moratorium on loan
payments to enable the borrower to reorganize his financial affairs.

                                       42
<PAGE>
 
     The following table sets forth information with respect to the Savings
Bank's non-performing assets for the periods indicated.  During the periods
shown, the Savings Bank had no restructured loans within the meaning of SFAS No.
15.
<TABLE>
<CAPTION>

                                                          At September 30,
                                            ---------------------------------------------
                                             1997      1996     1995     1994      1993
                                            -------   ------   ------   -------   -------
                                                       (Dollars in Thousands)
<S>                                         <C>       <C>      <C>      <C>       <C>
Loans accounted for on a non-
 accrual basis:
Mortgage.................................   $  220    $ 190    $ 348    $  435    $   --
Consumer.................................       --       --      124       163       448
Commercial...............................      183      126       --        --        --
                                            ------    -----    -----    ------    ------
                                               403      316      472       598       448
                                            ------    -----    -----    ------    ------

Accruing loans which are contractually
 past due 90 days or more:
Real estate:
 Residential.............................        6      467       82        60       826
Consumer.................................        8        2        9        17        17
Commercial...............................      465       10       --        --        --
                                            ------    -----    -----    ------    ------
                                               479      479       91        77       843
                                            ------    ------    -----    -----    ------

Total of non-accrual and
 past due 90 days or more................      882      795      563       675     1,291
                                            ------    -----    -----    ------    ------

Real estate owned, net...................      163        3       32       575        87
                                            ------    -----    -----    ------    ------
Total non-performing assets..............   $1,045    $ 798    $ 595    $1,250    $1,378
                                            ======    =====    =====    ======    ======

Total loans delinquent 90 days
  or more to net loans...................     0.49%    0.56%    0.48%     0.64%     1.33%

Total loans delinquent 90 days
  or more to total assets................     0.34%    0.38%    0.32%     0.39%     0.77%

Total non-performing assets to
 total assets............................     0.41%    0.38%    0.33%     0.73%     0.82%
</TABLE>

     The increase in non-performing assets at September 30, 1997 resulted
primarily from an increase in accruing commercial real estate loans
contractually past due 90 days or more.  At September 30, 1997, accruing
commercial real estate loans contractually past due 90 days or more consisted
primarily of one loan with an outstanding balance of $330,000, which was secured
by a commercial property located in the Savings Bank's primary market area.

     The Savings Bank does not accrue interest loans, including impaired loans
under SFAS No. 114, for which management deems the collection of additional
interest to be doubtful.  If interest on these non-accrual loans had been
accrued, interest income of approximately $19,000 would have been recorded for
the year ended September 30, 1997.

     ASSET CLASSIFICATION.  OTS regulations require that each insured
institution review and classify its assets on a regular basis.  In addition, in
connection with examinations of insured institutions, OTS examiners have
authority to identify problem assets and, if appropriate, require them to be
classified.  There are three classifications for problem assets:  substandard,
doubtful and loss.  "Substandard" assets must have one or more defined
weaknesses and are characterized by the distinct possibility that the insured
institution will sustain some loss if the deficiencies

                                       43
<PAGE>
 
are not corrected.  "Doubtful" assets have the weaknesses of substandard assets
with the additional characteristic that the weaknesses make collection or
liquidation in full on the basis of currently existing facts, conditions and
values questionable, and there is a high possibility of loss.  An asset
classified "loss" is considered uncollectible and of such little value that
continuance as an asset of the institution is not warranted.  The regulations
have also created a "special mention" category, described as assets which do not
currently expose an insured institution to a sufficient degree of risk to
warrant classification but do possess credit deficiencies or potential
weaknesses deserving management's close attention.  Assets classified as
substandard or doubtful require the institution to establish general allowances
for loan losses.  If an asset or portion thereof is classified loss, the insured
institution must either establish specific allowances for loan losses in the
amount of 100% of the portion of the asset classified loss or charge-off such
amount.  A portion of general loss allowances established to cover possible
losses related to assets classified substandard or doubtful may be included in
determining an institution's regulatory capital, while specific valuation
allowances for loan losses generally do not qualify as regulatory capital.

     The aggregate amounts of the Savings Bank's classified assets and of the
Savings Bank's general and specific loss allowances and charge-offs for the
period then ended, were as follows:
<TABLE>
<CAPTION>

                                       At or For the Years
                                       Ended September 30,
                              -------------------------------------
                               1997           1996            1995
                              ------          ----            ----
                                         (In Thousands)
<S>                           <C>      <C>                   <C>

Loss.......................   $  140         $  125          $   86
Doubtful...................        8             32              --
Substandard assets.........    1,227            598             575
Special mention............       58             --              --
                              ------         ------          ------
                              $1,433         $  755          $  661
                              ======         ======          ======

General loss allowances....    1,746          1,410           1,192
Specific loss allowances...      140            125              86
Net charge-offs............      304             92              46
</TABLE>

     At September 30, 1997, loss assets consisted of one commercial real estate
loan ($10,000), five one- to four-family mortgage loans ($34,000), one secured
commercial business loan ($9,000), and one unsecured commercial business loan
($87,000); doubtful assets consisted of an unsecured consumer loan; substandard
assets consisted of 18 one- to four-family mortgage loans ($662,000), two
commercial real estate loans ($370,000), two secured commercial business loan
($168,000), four secured consumer loans ($16,000) and seven unsecured consumer
loan ($11,000); and special mention assets consisted of one commercial real
estate loan ($3,000) and a one- to four-family mortgage loan ($55,000).

     REAL ESTATE OWNED.  Real estate acquired by the Savings Bank as a result of
foreclosure or by deed-in-lieu of foreclosure is classified as real estate owned
until it is sold.  When property is acquired it is recorded at the fair value of
the property received.  Subsequently, it is carried at the lower of its new cost
basis or fair value, less estimated selling costs.  The Savings Bank had
$163,000 of real estate owned at September 30, 1997.

     ALLOWANCE FOR LOAN LOSSES.  The Savings Bank's management evaluates the
need to establish allowances against losses on loans each year based on
estimated losses on specific loans when a decline in value has occurred.  Such
evaluation includes a review of all loans for which full collectibility may not
be reasonably assured and considers, among other matters, the estimated market
value of the underlying collateral of problem loans, prior loss experience,
economic conditions and overall portfolio quality.  The provision for loan
losses is charged against earnings in the year it is established.  In recent
periods, the Savings Bank has increased the provision for loan losses in
recognition of the changing composition of the loan portfolio toward an
increased emphasis on commercial real estate loans, construction loans, and
other types of lending that carry a greater degree of credit risk than one- to

                                       44
<PAGE>
 
four-family mortgage lending.  At September 30, 1997, the Savings Bank had an
allowance for loan losses of $1.9 million, or 1.04% of total loans.  Based on
past experience and future expectations, management believes that the allowance
for loan losses is adequate at September 30, 1997.

     While the Savings Bank believes it has established its existing allowance
for loan losses in accordance with GAAP, the allowance is based on estimates
which are subject to change based upon changes in the loan portfolio and
economic conditions, among other things.  Furthermore, there can be no assurance
that the Savings Bank's regulators, in reviewing the Savings Bank's loan
portfolio, will not request that the Savings Bank increase its allowance for
loan losses, thereby negatively affecting the Savings Bank's financial condition
and earnings based upon information available to the regulators at the time of
their examination.

     The following table sets forth an analysis of the Savings Bank's gross
allowance for possible loan losses for the periods indicated.  Where specific
loan loss reserves have been established, any difference between the loss
reserve and the amount of loss realized has been charged or credited to current
income.

<TABLE>
<CAPTION>

                                                     Years Ended September 30,
                                         ----------------------------------------------
                                           1997       1996     1995      1994     1993
                                           ----       ----     ----      ----     ----
                                                                                
<S>                                       <C>         <C>      <C>       <C>      <C>
Allowance at beginning of                                                       
 period......................             $  1,535    $1,278   $   962   $884     $624
                                          --------    ------   -------   ----     ----
                                                                                
Provision for loan losses....                  655       349       362    120      364
Transfers to real estate                                                        
 owned valuation allowance...                   --        --        --     --       50
                                                                                
Recoveries:                                                                     
  Residential mortgage.......                    4         6        --     --       --
  Consumer...................                   24        17         6      6        7
   Total recoveries..........                   28        23         6      6        7
                                          --------    ------   -------   ----     ----
                                                                                
Charge-offs:                                                                    
  Residential mortgage.......                    4        18        --     13        4
  Consumer...................                  100        97        52     35       57
  Commercial.................                  228        --        --     --       --
                                          --------    ------   -------   ----     ----
   Total charge-offs.........                  332       115        52     48       61
                                          --------    ------   -------   ----     ----
   Net charge-offs...........                  304        92        46     42       54
                                          --------    ------   -------   ----     ----
Allowance at end of period...             $  1,886    $1,535   $ 1,278   $962     $884
                                          ========    ======   =======   ====     ====
                                                                                
Ratio of allowance to total                                                     
 loans outstanding at the end                                                   
 of the period...............                 1.04%     1.08%     1.08%  0.92%    0.91%
                                                                                
Ratio of net charge-offs to                                                     
 average loans outstanding                                                
 during the period...........                 0.18%     0.07%     0.04%  0.84%    0.06%
</TABLE>

                                       45
<PAGE>
 
    The following table sets forth the breakdown of the allowance for loan
losses by loan category for the dates indicated.

<TABLE>
<CAPTION>


                                                                             At September 30,
                                ----------------------------------------------------------------------------------------------------
                                           1997                             1996                             1995
                                -----------------------------    ------------------------------    ---------------------------------
                                         As a %      % of                  As a %      % of                 As a %      % of
                                         of Out-     Loans in              of Out-     Loans in             of Out-     Loans in
                                         standing    Category              standing    Category             standing    Category
                                         Loans in    to Total              Loans in    to Total             Loans in    to Total
                                Amount   Category    Loans       Amount    Category    Loans       Amount   Category    Loans
                                ------   --------    --------    ------    --------    --------    ------   --------    --------
                                                                     (Dollars in Thousands)
<S>                             <C>      <C>         <C>         <C>        <C>        <C>          <C>      <C>        <C>    
Real estate -
 mortgage.....................  $  766       0.60%         70    $  726        0.71%         72%   $  573       0.57%         83%
Commercial real estate
 and commercial
 business.....................     737       2.16          19       465        2.06          16       297       8.12           3
Consumer.....................      383       2.00          11       344        2.03          12       408       2.32          14
                                ------                    ---    ------                     ---    ------                    ---
Total allowance for loan
 losses.......................  $1,886       1.04%        100%   $1,535        1.08%        100%   $1,278       1.08%        100%
                                ======                    ===    ======                     ===    ======                    ===
</TABLE>

<TABLE> 
<CAPTION> 
                                                              At September 30,
                                -----------------------------------------------------------------
                                              1994                             1993
                                  -----------------------------    ------------------------------
                                            As a %      % of                 As a %      % of
                                            of Out-     Loans in             of Out-     Loans in
                                            standing    Category             standing    Category
                                            Loans in    to Total             Loans in    to Total
                                   Amount   Category    Loans       Amount   Category    Loans
                                   ------   --------    --------    ------   --------    --------
                                                           (Dollars in Thousands)
<S>                                <C>      <C>         <C>          <C>     <C>         <C>    
  
Real estate -
 mortgage....................      $493       0.48%         51%     $506       0.67%         76%
Commercial real estate
 and commercial
 business....................       100       1.94          10        --         --          --
Consumer.....................       369       1.70          39       378       1.56          24
                                   ----                    ---      ----                    ---
Total allowance for loan
 losses......................      $962       0.92%        100%     $884       0.91%        100%
                                   ====                    ===      ====                    ===
</TABLE>

                                       46
<PAGE>
 
INVESTMENT ACTIVITIES

     The Savings Bank has made significant investments in mortgage-backed
securities, including CMOs.  The Savings Bank had mortgage-backed securities
with an amortized cost of $35.7 million and a market value of $35.9 million at
September 30, 1997, all of which were invested in U.S. Government agency
securities, investment grade securities, and securities guaranteed by the
funding arm of the Resolution Trust Corporation ("RTC").

     In an effort to increase the average portfolio yield, the Savings Bank
restructured its investment securities portfolio during the year ended September
30, 1997 by, in part, investing in callable, U.S. Government agency zero coupon
bonds with maturities exceeding ten years.  See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Comparison of
Financial Condition at September 30, 1997 and 1996" for further discussion.
Although these bonds offer higher yields, an increase in market interest rates
would have a material adverse effect on their value.  See "RISK FACTORS --
Interest Rate Risk."

     At September 30, 1997, the Savings Bank had invested $22.0 million in CMOs
($10.3 million in U.S. Government agency issues and $11.7 million in investment
grade private issues) with an average estimated life varying from six months to
five years and ranging in original principal amount from $2.0 million to $6.0
million.  The weighted average yield to expected maturity on the CMOs at
September 30, 1997 was 7.30%.  At September 30, 1997, CMOs consisted of Federal
National Mortgage Association ("FNMA"), as well as investment grade private
issues.  CMOs may be used as collateral for borrowings and, through repayments,
as a source of liquidity.  Management considers CMOs to be advantageous since
they offer yields above those available for investments of comparable credit
quality and duration and qualify as thrift investments under the qualified
thrift lender ("QTL") test.  See "REGULATION -- Federal Regulation of Savings
Associations -- Qualified Thrift Lender Test."  At September 30, 1997, the CMO
portfolio consisted of various tranches but no residuals.  In recent years, the
Savings Bank has used the proceeds from the paydown of CMOs to invest in one- to
four-family and other types of lending, and expects to continue to do so in the
future, subject to market conditions.

     CMOs are subject to repayment by the mortgagors of the underlying
collateral at any time.  Such prepayment may subject the Savings Bank's CMOs to
yield and price volatility.  To assess this volatility, the OTS requires the
Savings Bank to test annually its CMOs to determine whether they are high-risk
or non-high-risk securities.  The policy established a three-part risk
measurement test for fixed-rate and a one-part test for floating-rate CMOs and
other mortgage derivative securities.  Securities failing any one of the tests
are deemed to be high-risk securities.  The OTS may require an institution to
dispose of one or all of the CMOs failing such tests.  At September 30, 1997,
all of the Savings Bank's CMOs met the criteria established by the policy
designated as non-high-risk securities for continuing classification as suitable
investments.  However, changes in interest rates may cause one or more of the
Savings Bank's CMOs to fail a stress test.  The OTS may then require the Bank to
dispose of the CMOs failing the test.  This may affect the classification of
such securities under SFAS No. 115.

     Changes in the level of interest rates can have an adverse effect on the
mortgage-backed securities and CMO portfolio, thereby exposing the Savings Bank
to repayment risk and reinvestment risk.  See "RISK FACTORS -- Interest Rate
Risk."

     Investment decisions are made by the Savings Bank's Asset/Liability
Committee which consists of Senior Vice President Thomas C. Hall (Chairman),
President Robert W. Orr, Senior Vice President Barry C. Visioli, Vice President
David L. Peters, Vice President Teresa Hix, Vice President Quinnette Morrison
and Assistant Treasurer Brad Jones.  The Savings Bank's investment objectives
are: (i) to provide and maintain liquidity within regulatory guidelines; (ii) to
maintain a balance of high quality, diversified investments to minimize risk;
(iii) to serve as a balance to earnings; and (iv) to maximize returns.

                                       47
<PAGE>
 
     The following table sets forth the composition of the Savings Bank's
investment portfolio at the dates indicated.
<TABLE>
<CAPTION>
 
                                                                  At September 30,
                                ------------------------------------------------------------------------------------
                                           1997                                1996                  1995
                                --------------------------                  -----------   --------------------------
                                 Amortized     Percent of     Amortized     Percent of     Amortized     Percent of
                                  Cost(1)       Portfolio      Cost(1)       Portfolio      Cost(1)       Portfolio
                                ------------   -----------   ------------   -----------   ------------   -----------
                                                               (Dollars in Thousands)
<S>                             <C>            <C>           <C>            <C>           <C>            <C>
 
U.S. agency securities.......     $10,191              22%     $    --              --%     $    --              --%
Certificates of deposit......          --              --          100              --           --              --
U.S. Treasury securities.....         998               2        2,395               5          798               2
Mortgage-backed securities
  and CMOs...................      35,714              76       44,362              95       47,269              98
                                  -------             ---      -------            ----      -------             ---
Total........................     $46,903             100%     $46,857             100%     $48,067             100%
                                  =======             ===      =======            ====      =======             ===
------------------
</TABLE>
(1)  The market value of the Savings Bank's investment portfolio amounted to
     $47.2 million, $45.6 million and $47.1 million at September 30, 1997, 1996,
     and 1995, respectively.

     The following table sets forth the maturities and weighted average yields
of the debt securities in the Savings Bank's investment securities portfolio at
September 30, 1997.
<TABLE>
<CAPTION>
 
                                   Less Than          One to            Five to           Over Ten
                                   One Year         Five Years         Ten Years            Years
                                ---------------   ---------------   ----------------   ----------------
                                Amount   Yield    Amount   Yield    Amount    Yield    Amount    Yield
                                ------   ------   ------   ------   -------   ------   -------   ------
                                                        (Dollars in Thousands)
<S>                             <C>      <C>      <C>      <C>      <C>       <C>      <C>       <C>
 
U.S. agency securities.......   $   --      --%   $4,003    6.26%   $    --      --%   $ 6,188    8.10%
U.S. Treasury securities.....      998    5.64        --      --         --      --         --      --
Mortgage-backed securities
  and CMOs...................      395    6.65     1,455    7.56     11,666    7.55     22,198    7.08
                                ------            ------            -------            -------
Total........................   $1,393    5.93    $5,458    6.61    $11,666    7.55    $28,386    7.30
                                ======            ======            =======            =======
</TABLE>

     The following table sets forth certain information with respect to each
security (other than U.S. Government and agency securities) which had an
aggregate amortized cost in excess of 10% of the Savings Bank's stockholders'
equity at the dates indicated.
<TABLE>
<CAPTION>
 
                                                                          At September 30,
                                                    ------------------------------------------------------------
                                                           1997                 1996                 1995
                                                    ------------------   ------------------   ------------------
                                                    Carrying   Market    Carrying   Market    Carrying   Market
                                                     Value      Value     Value      Value     Value      Value
                                                    --------   -------   --------   -------   --------   -------
                                                                           (In thousands)
<S>                                                 <C>        <C>       <C>        <C>       <C>        <C>
 
RTC mortgage-backed
 securities......................................    $   889   $   888    $ 1,447   $ 1,414    $ 1,479   $ 1,430
CMOs.............................................     21,138    21,211     34,836    33,804     36,743    35,900
                                                     -------   -------    -------   -------    -------   -------
   Total.........................................    $22,027   $22,099    $36,283   $35,218    $38,222   $37,330
                                                     =======   =======    =======   =======    =======   =======
 
</TABLE>

                                       48
<PAGE>
 
 DEPOSIT ACTIVITIES AND OTHER SOURCES OF FUNDS

     GENERAL.  Deposits are the major source of the Savings Bank's funds for
lending and other investment purposes.  In addition to deposits, the Savings
Bank derives funds from loan principal repayments.  Loan repayments are a
relatively stable source of funds while deposit inflows and outflows may be
significantly influenced by general interest rates and money market conditions.
The Savings Bank also has access to advances from the FHLB-Atlanta.  These
advances can be used on a short-term basis to compensate for reductions in the
availability of funds from other sources or they may be used on a longer-term
basis for general business purposes.  The Savings Bank has also on occasion
utilized repurchase agreements.

     DEPOSIT ACCOUNTS.  Local deposits are and traditionally have been the
primary source of the Savings Bank's funds for use in lending and other general
business purposes.  The Savings Bank offers a number of deposit accounts,
including passbook, individual retirement accounts ("IRAs"), money market
deposits and certificate accounts currently ranging in maturity from three
months to five years.  Deposit accounts vary as to terms, with the principal
differences being the minimum balance required, the time period the funds must
remain on deposit and the interest rate.  From time to time, the Savings Bank
offers premiums to attract deposits.  The Savings Bank is a member of an
automated teller machine network, which is available to the Savings Bank's
checking account depositors.

     In recent years, the Savings Bank has offered newly authorized types of
short-term accounts and other savings alternatives that are more responsive to
changes in market rates of interest than passbook accounts and longer maturity
fixed-rate, fixed-term certificates that were the Savings Bank's primary source
of deposits prior to 1978.  There has been some shifting of deposit mix which
has primarily resulted from the progressive elimination of federally imposed
rate ceilings on various types of deposits offered by federally insured
financial institutions such as the Savings Bank.  The deregulation of various
federal controls on insured deposits has allowed the Savings Bank to be more
competitive in obtaining funds and has given it more flexibility to meet the
threat of net deposit outflows.  The Savings Bank reviews the interest rates
offered on various savings accounts periodically so as to remain competitive
with other financial institutions in its market area.

     Since early 1995, the Savings Bank has increased its core deposit base by
aggressively promoting checking accounts.  At September 30, 1997, checking
account balances totalled $37.8 million.

     At September 30, 1997, certificate of deposits scheduled to mature within
one year totalled $115.7 million.  Although no assurances can be given, based on
past experience, the Savings Bank believes that a substantial portion of these
certificates of deposit will be renewed.

     At September 30, 1997, the Savings Bank had no brokered deposits.

                                       49
<PAGE>
 
     The following table sets forth information concerning the Savings Bank's
deposits at September 30, 1997.
<TABLE>
<CAPTION>
 
                                                                                      Percentage
Interest                                                          Minimum              of Total
Rate            Term              Category                         Amount    Balance    Deposits
----            ----              --------                         ------    -------   ---------
                                                                          (In Thousands)
<S>             <C>               <C>                             <C>       <C>        <C>
 
2.28%           None              NOW accounts                     $  100   $ 25,996      12.93%
 --             None              Non-interest-bearing accounts       100     11,812       5.88
2.67            None              Savings accounts                    100     24,360      12.12
 
                                  Certificates of Deposit
                                  -----------------------
 
5.71            Within 6 months   Fixed-term, fixed-rate            1,000     75,002      37.31
5.89            7 - 12 months     Fixed-term, fixed-rate            1,000     40,649      20.22
6.00            13 - 36 months    Fixed-term, fixed-rate            1,000     22,347      11.12
6.06            37 - 120 months   Fixed-term, fixed-rate            1,000        836       0.42
                                                                            --------     ------
                                                                            $201,002     100.00%
                                                                            ========     ======
</TABLE>


     The following table indicates the amount of jumbo certificates of deposit
by time remaining until maturity at September 30, 1997.  Jumbo certificates of
deposit require minimum deposits of $100,000 and have negotiable interest rates.
<TABLE>
<CAPTION>
 
                                     Certificates
Maturity Period                      of Deposits
---------------------------------   --------------
                                    (In Thousands)
<S>                                 <C>
 
Three months or less.............         $ 4,677
Over three through six months....           5,721
Over six through twelve months...           5,061
Over twelve months...............           3,081
                                          -------
     Total.......................         $18,540
                                          =======
</TABLE>

                                       50
<PAGE>
 
DEPOSIT FLOW

     The following table sets forth the balances of deposits in the various
types of accounts offered by the Savings Bank at the dates indicated.
<TABLE>
<CAPTION>
 
                                                                             At September 30,
                                         -----------------------------------------------------------------------------------------
                                                     1997                               1996                          1995
                                         ------------------------------     --------------------------------   -------------------
                                                    Percent                            Percent                            Percent
                                                       of       Increase                  of       Increase                  of
                                          Amount     Total     (Decrease)    Amount     Total     (Decrease)    Amount     Total
                                         --------   --------   ----------   --------   --------   ----------   --------   --------
                                                                          (Dollars in Thousands)
<S>                                      <C>        <C>        <C>          <C>        <C>        <C>          <C>        <C>
 
Non-interest-bearing..................   $ 11,812      5.88%     $ 3,464    $  8,957      5.59%     $ 4,885    $  4,072      2.74%
NOW checking..........................     25,996     12.93        1,703      24,293     15.16        4,401      19,892     13.37
Regular savings accounts..............     24,360     12.12        1,249      23,111     14.42           80      23,031     15.49
 
Fixed-rate certificates which
 mature in the year ending(1)(2):
  Within 1 year.......................    115,651     57.53       31,881      83,770     52.28        2,148      81,622     54.89
  After 1 year, but within 2 years....     16,999      8.46        1,148      15,851      9.89        3,311      12,540      8.43
  After 2 years, but within 5 years...      6,184      3.08        1,922       4,262      2.66       (3,290)      7,552      5.08
                                         --------    ------      -------    --------    ------      -------    --------    ------
 
     Total............................   $201,002    100.00%     $41,367    $160,244    100.00%     $11,535    $148,709    100.00%
                                         ========    ======      =======    ========    ======      =======    ========    ======
-----------------------
</TABLE>
(1)  At September 30, 1997, 1996 and 1995, jumbo certificates amounted to $18.5
     million, $13.7 million and $11.8 million, respectively.
(2)  IRA accounts included in certificate balances are $18.8 million, $15.7
     million and $14.8 million at September 30, 1997, 1996 and 1995,
     respectively.
 
TIME DEPOSITS BY RATES AND MATURITIES
 
          The following table sets forth the time deposits in the Savings Bank
          classified by rates at the dates indicated.

<TABLE> 
 
                                            At September 30,
                                 ---------------------------------
                                   1997          1996        1995
                                   ----          ----        ----
                                             (In Thousands)
 <S>                            <C>          <C>          <C> 
 Below 3.00%..................  $    194      $     --    $    503
 3.00 -  5.00%................     2,012         4,119      18,623
 5.01 -  7.00%................   136,400        99,182      81,903
 7.01 -  9.00%................       228           582         685
                                --------      --------    --------
     Total....................  $138,834      $103,883    $101,714
                                ========      ========    ========
</TABLE>

                                       51
<PAGE>
 
     The following table sets forth the amount and maturities of time deposits
at September 30, 1997.

<TABLE>
<CAPTION>
 
                                                                                    Amount Due
                                               -------------------------------------------------------------------------------------
                                                                                                                          Percent
                                                            One to     Over Two   Over Three    Over Five                 of Total
                                               Less Than      Two      to Three     to Five      to Ten                 Certificate
                                               One Year      Years      Years        Years        Years       Total       Accounts
                                               ---------   ---------   --------   -----------   ---------   ---------   ------------
                                                                              (Dollars in Thousands)
<S>                                            <C>         <C>         <C>        <C>           <C>         <C>         <C>
 
2.50 - 5.00%................................    $  2,206     $    --    $   --        $  --         $ --    $  2,206          1.58%

5.01 - 7.00%................................     113,445      17,017     5,330          506          102     136,400         98.26
7.01 - 9.00%................................          --          --        --          159           69         228          0.16
                                                --------     -------    ------         ----         ----    --------        -------
Total.......................................    $115,651     $17,017    $5,330         $665         $171    $138,834        100.00%
                                                ========     =======    ======         ====         ====    ========        =======
</TABLE> 
 
DEPOSIT ACTIVITY
 
  The following table sets forth the savings activities of the Savings Bank for
the periods indicated.

<TABLE>
<CAPTION>

                                                                  Years Ended September 30,
                                                             ----------------------------------
                                                                1997       1996         1995
                                                                ----       ----         ----
                                                                      (In Thousands)
<S>                                                           <C>        <C>        <C>
Beginning balance...........................                  $160,244    $148,709    $143,380
                                                              --------    --------    --------

Net increase (decrease) before
 interest credited..........................                    32,599       4,724        (496)
Interest credited...........................                     8,159       6,811       5,825

Net increase in savings deposits............                    40,758      11,535       5,329
                                                               -------    --------    --------

Ending balance..............................                  $201,002    $160,244    $148,709
                                                              ========    ========    ========
</TABLE>

     BORROWINGS.  Historically, the Savings Bank has relied on repurchase
agreements as a source of borrowings to finance the purchase of investment
securities.  Funding for lending activities has been provided from deposits and
borrowings from the FHLB-Atlanta.  Under repurchase agreements, the Savings Bank
"sells" securities (generally U.S. Treasury securities and federal agency
obligations and mortgage-backed securities) under an agreement to buy them back
at a specified price at a later date.  Repurchase agreements are subject to
renewal, and are deemed to be borrowings collateralized by the securities sold.
The Savings Bank had no repurchase agreements outstanding at September 30, 1997.

     The Savings Bank has issued retail and commercial repurchase agreements and
would consider issuing them again in the future in an appropriate interest rate
environment.  Under commercial repurchase agreements, the Savings Bank sells the
investment security to broker dealers who may then loan the security to other
parties in the normal course of operations.  Commercial repurchase agreements
generally mature within 90 days from the date of the transaction.

     Advances from the FHLB are typically secured by the Savings Bank's first
mortgage loans.  At September 30, 1997, the Savings Bank was eligible to borrow
up to $55.0 million from the FHLB-Atlanta.  The Savings Bank had FHLB advances
of $15.0 million outstanding at September 30, 1997.  See Note 9 of Notes to
Consolidated Financial Statements.

                                       52
<PAGE>
 
     The FHLB functions as a central reserve bank providing credit for savings
and loan associations and certain other member financial institutions.  As a
member, the Savings Bank is required to own capital stock in the FHLB and is
authorized to apply for advances on the security of such stock and certain of
its mortgage loans and other assets (principally securities which are
obligations of, or guaranteed by, the U.S. Government) provided certain
standards related to creditworthiness have been met.  Advances are made pursuant
to several different programs.  Each credit program has its own interest rate
and range of maturities.  Depending on the program, limitations on the amount of
advances are based either on a fixed percentage of an institution's net worth or
on the FHLB's assessment of the institution's creditworthiness.  Under its
current credit policies, the FHLB generally limits advances to 20% of a member's
assets, and short-term borrowings of less than one year may not exceed 10% of
the institution's assets.  The FHLB determines specific lines of credit for each
member institution.

     The following table sets forth certain information regarding borrowings by
the Savings Bank at the end of and during the periods indicated:
<TABLE>
<CAPTION>
 
                                                                      At September 30,
                                                                 --------------------------
                                                                 1997       1996       1995
                                                                 ----       ----       ----   
<S>                                                              <C>        <C>        <C>
 
Weighted average rate paid on:
  FHLB-Atlanta advances.......................................   6.24%      5.30%       5.77%
 
</TABLE>
 
<TABLE> 
                                                                                               Years Ended September 30,
                                                                                               -------------------------   
                                                                                               1997      1996       1995
                                                                                               ----      ----       ----
                                                                                                  (Dollars in Thousands)
<S>                                                                                          <C>        <C>        <C>  
Maximum amount of borrowings outstanding at any month end:
 Securities sold under agreements to repurchase...............                               $    --    $    --    $ 5,907
 FHLB-Atlanta advances........................................                                15,000     19,000     57,500
 
Approximate average borrowings outstanding with respect to:
 Securities sold under agreements to repurchase...............                                    --         --      1,338
 FHLB-Atlanta advances........................................                                23,951     12,531     39,222
 
Approximate weighted average rate paid on:
 Securities sold under agreements to repurchase...............                                    --         --       5.73%
 FHLB-Atlanta advances........................................                                  5.75%      5.24%      6.22
</TABLE>

COMPETITION

     Anderson and Oconee Counties have a relatively large number of financial
institutions, many of which are branches of large southeast regional financial
institutions, and thus the Savings Bank faces strong competition in the
attraction of savings deposits (its primary source of lendable funds) and in the
origination of loans.  Its most direct competition for savings deposits and
loans has historically come from other thrift institutions, credit unions and
commercial banks located in its market area.  Particularly in times of high
interest rates, the Savings Bank has faced additional significant competition
for investors' funds from short-term money market securities and other corporate
and government securities and mutual funds.  The Savings Bank's competition for
loans comes principally from other thrift institutions, credit unions,
commercial banks, finance companies, mortgage banking companies and mortgage
brokers.

SUBSIDIARY ACTIVITIES

     The Savings Bank had an ownership interest in three service corporations at
September 30, 1997.  Under OTS regulations, the Savings Bank is authorized to
invest up to 3% of its assets in service corporations, with

                                       53
<PAGE>
 
amounts in excess of 2% only if used primarily for community purposes.  At
September 30, 1997, the Savings Bank's net investment of approximately $2.1
million in its service corporations did not exceed this investment authority.

     The Savings Bank has three service corporations: United Service Corporation
of Anderson, Inc. ("United Service"), United Investments Services, Inc. ("United
Investments") and Mortgage First Service Corporation ("Mortgage First").

     United Service is a wholly-owned subsidiary of the Savings Bank.  At
September 30, 1997, United Service had assets of $2.4 million. United Service is
involved in the following residential and commercial real estate development
projects:

     Perpetual Square.   A 33-acre commercial development in Anderson County
purchased in January 1996 for a purchase price of $850,000.  The purchase price
and infrastructure improvement costs (i.e., installation of roads, utilities,
                                      ----                                   
etc.) were financed by a loan from the Savings Bank that had an outstanding
balance of $375,000 at September 30, 1997.  As of September 30, 1997,
approximately eight acres have been sold and the Savings Bank did not have loans
outstanding to any of the purchasers.  In October 1997, the Savings Bank
established a branch office at this location.  See "-- Properties."  At
September 30, 1997, the Savings Bank's net investment in this project was
approximately $566,000.

     The Meadows Development.  A 99-acre residential subdivision consisting of
approximately 108 lots located in Anderson County purchased in October 1996 for
a purchase price of $225,000.  The purchase price and infrastructure improvement
costs were financed by a loan from the Savings Bank that had an outstanding
balance of $1.0 million at September 30, 1997.  The Savings Bank has entered
into a contractual agreement with the local office of a national realtor to
market the subdivision lots, and marketing began in September 1997.  The realtor
has no investment in the project.  As of September 30, 1997, three lots were
sold and the Savings Bank had outstanding loans to purchasers totaling $21,000.
At September 30, 1997, the Savings Bank's net investment in this project was
approximately $1.1 million.

     Ashton Place Subdivision.  A 24-acre multi-family housing development
consisting of 44 lots located in Anderson County purchased in January 1996 for a
purchase price of $164,000.  The purchase price and infrastructure improvement
costs were financed by a loan from the Savings Bank that had an outstanding
balance of $82,000 as of September 30, 1997.  The lots are being developed in
four phases of 11 lots each.  As of September 30, 1997, 29 lots have been sold,
four lots remain unsold in phase III and all 11 lots remain unsold in phase IV.
At September 30, 1997, the Savings Bank had loans outstanding to purchasers
totaling $397,000.  At September 30, 1997, the Savings Bank's net investment in
this project was approximately $271,000.

     North Park.  A 57-acre industrial park located in Anderson County purchased
in June 1996 at a purchase price of $248,000.  The purchase price and
infrastructure improvement costs were financed by a loan from the Savings Bank
that had an outstanding balance of $203,000 as of September 30, 1997.  As of
September 30, 1997, 12 acres had been sold and the Savings Bank had outstanding
loans to purchasers totaling $573,000, all of which were permanent mortgage
loans.  At September 30, 1997, the Savings Bank's net investment in this project
was approximately $389,000.

     United Investments, a wholly-owned subsidiary of United Service, offers
full service brokerage services.  On a consolidated basis United Service and
United Investments had net income of $114,000 for the year ended September 30,
1997.

     Mortgage First is a wholly-owned subsidiary of the Savings Bank.  In August
1996, Mortgage First made a $400,000 equity investment in a start-up regional
mortgage banking company known as "First Trust Mortgage

                                       54
<PAGE>
 
Corporation of the South" ("First Trust"), with offices in Rock Hill, Columbia,
Clemson and Greenville, South Carolina.  During the year ended September 30,
1997, First Trust closed 810 loans totalling $100.6 million.

     The Savings Bank has purchased loans from First Trust in recent periods.
See "-- Lending Activities --Loan Purchases and Sales and Servicing."  All loans
are purchased from First Trust subject to the Savings Bank's underwriting
standards.  The Savings Bank intends to purchase at least $18.0 million of loans
from First Trust monthly.  At September 30, 1997, the Savings Bank's financial
commitment to First Trust and its maximum exposure to share in any losses
incurred by First Trust were limited solely to the amount of its equity
investment through Mortgage First.  The Savings Bank, either directly or through
Mortgage First, may undertake future additional financial commitments that would
increase its loss exposure to First Trust's operations; however, there are no
such agreements, plans or understandings at present.  The Savings Bank recorded
a loss of approximately $100,000 related to First Trust's operations for the
year ended September 30, 1997.  Robert W. Orr and Barry C. Visioli are directors
of First Trust.  See "MANAGEMENT OF THE SAVINGS BANK -- Directors and Executive
Officers and Directors."

PROPERTIES

     The following table sets forth certain information relating to the Savings
Bank's offices as of March 31, 1997.  All offices are owned by the Savings Bank
except as noted in the table.
<TABLE>
<CAPTION>

                                                                                     Lease
                                 Year        Owned or            Square              Expiration
Location                         Opened      Leased              Footage             Date
--------                         ------      ------              -------             ----
<S>                              <C>         <C>                <C>                 <C>

Main Office:

907 N. Main Street               1979        Owned              50,000              --
Anderson, South Carolina

Branch Offices:

104 Whitehall Road               1975        Building owned      2,000              December 31, 2004, with
Anderson, South Carolina                     Land leased                            two renewal options for ten
                                                                                    years each

2821 South Main Street           1976        Building owned      2,500              April 30, 2000, with five
Anderson, South Carolina                     Land leased                            renewal options for five years
                                                                                    each

Windsor Place Winn Dixie(1)      1993        Leased                450              March 1, 1998, with two
SC Highway 81                                                                       renewal options for five
Anderson, South Carolina                                                            years each

Northtowne                       1994        Owned               2,800              --
3898 Liberty Highway
Anderson, South Carolina

1007 By-Pass 123                 1996        Owned               2,900              --
Seneca, South Carolina
</TABLE>
_________________
(1)  In October 1997, this branch office was closed in conjunction with the
     opening of a new 2,700 square foot branch office on SC Highway 81,
     Anderson, South Carolina in the Perpetual Square complex.  The Savings

                                       55
<PAGE>
 
     Bank owns the building and real estate of this new branch office.  See 
     "-- Subsidiary Activities" for additional information regarding Perpetual
     Square.

     The Savings Bank has an in-house computer system to process customer
records and monetary transactions, post deposit and general ledger entries and
record activity in installment lending, loan servicing and loan originations.
See "MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Year 2000 Considerations."

PERSONNEL

     As of September 30, 1997, the Savings Bank had 96 full-time employees and
33 part-time employees.  The employees are not represented by a collective
bargaining unit.  The Savings Bank believes its relationship with its employees
are good.

LEGAL PROCEEDINGS

     Periodically, there have been various claims and lawsuits involving the
Savings Bank, such as claims to enforce liens, condemnation proceedings on
properties in which the Savings Bank holds security interests, claims involving
the making and servicing of real property loans and other issues incident to the
Savings Bank's business.  The Savings Bank is not a party to any pending legal
proceedings that it believes would have a material adverse effect on the
financial condition or operations of the Savings Bank.

                       MANAGEMENT OF THE HOLDING COMPANY

     Directors shall be elected by the stockholders of the Holding Company for
staggered three-year terms, or until their successors are elected and qualified,
at the first annual meeting of stockholders following the consummation of the
Conversion and Reorganization.  The Holding Company's Board of Directors
consists of seven persons, divided into three classes, each of which will
contain approximately one third of the Board.  One class will have a term of
office expiring at the first annual meeting of stockholders; a second class will
have a term of office expiring at the second annual meeting of stockholders; and
a third class will have a term of office expiring at the third annual meeting of
stockholders.

     The executive officers of the Holding Company are elected annually and hold
office until their respective successors have been elected and qualified or
until death, resignation or removal by the Board of Directors. The executive
officers of the Holding Company are:

     Name                     Position
     ----                     --------

     Cordes G. Seabrook, Jr.  Chairman of the Board
     Robert W. Orr            President and Chief Executive Officer
     Thomas C. Hall           Treasurer and Chief Financial Officer
     Barry C. Visioli         Senior Vice President
     Sylvia B. Reed           Corporate Secretary

     Since the formation of the Holding Company, none of the executive officers,
directors or other personnel has received remuneration from the Holding Company.
For information concerning the principal occupations, employment and
compensation of the directors and executive officers of the Holding Company
during the past five years, see "MANAGEMENT OF THE SAVINGS BANK -- Biographical
Information."

                                       56
<PAGE>
 
                         MANAGEMENT OF THE SAVINGS BANK

DIRECTORS AND EXECUTIVE OFFICERS

     The Board of Directors of the Savings Bank is presently composed of nine
members who are elected for terms of three years, approximately one-third of
whom are elected annually in accordance with the Bylaws of the Savings Bank.
The Savings Bank also has two non-voting Directors Emeriti.  The executive
officers of the Savings Bank are elected annually by the Board of Directors and
serve at the Board's discretion.  The following table sets forth information,
with respect to the directors and executive officers of the Savings Bank, all of
whom will continue to serve as directors and executive officers of the Savings
Bank and the Holding Company.

                                   DIRECTORS
<TABLE>
<CAPTION>
                                                                                             Current
                                                                                 Director   Term
Name                               Age (1)   Position                            Since     Expires
----                               ------    --------                            -----     -------
<S>                                <C>       <C>                                 <C>        <C>

Harold A. "Drew" Pickens,          64        Chairman of Board                   1977      1998
 Jr.

Robert W. "Lujack" Orr             49        President, Managing Officer         1989      1998
                                               and a Director

Jack F. McIntosh                   69        Director                            1988      1999

Charles W. Fant, Jr.               71        Director                            1977      1999

Cordes G. Seabrook, Jr.            70        Director                            1976      1999

Richard C. Ballenger               49        Director                            1996      1999

F. Stevon Kay                      46        Director                            1996      1999

Jim Gray Watson                    68        Director                            1976      1998

Martha S. Clamp                    55        Director                            1988      1997

J. Roy Martin, Jr.                 79        Director Emeritus                   1988        --

Wade A. Watson, Jr.                79        Director Emeritus                   1989        --
</TABLE>
                    EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
<TABLE>
<CAPTION>
 
<S>                                <C>       <C>                                 <C>        <C>
Thomas C. Hall                     50        Senior Vice President                 --        --
                                              and Treasurer
 
Barry C. Visioli                   49        Senior Vice President                 --        --
 
Sylvia B. Reed                     57        Corporate Secretary                   --        --
----------------------
</TABLE>
(1)  As of September 30, 1997.

                                       57
<PAGE>
 
BIOGRAPHICAL INFORMATION

     Set forth below is certain information regarding the Directors and
executive officers of the Savings Bank.  Unless otherwise stated, each Director
and executive officer has held his or her current occupation for the last five
years.  There are no family relationships among or between the Directors or
executive officers.

     Harold A. "Drew" Pickens, Jr. is the owner of Harold A. Pickens and Sons,
Inc., with which he has been affiliated since 1956.  Mr. Pickens serves as an
Elder at First Presbyterian Church.

     Robert W. "Lujack" Orr has been employed by the Savings Bank since 1974 and
has held a variety of positions, such as Senior Vice President/Funds Acquisition
and Executive Vice President, prior to assuming his current position as
President and Managing Officer on January 1, 1991.  Mr. Orr is a member of the
Board of the Community Financial Institutions of South Carolina and he is
Secretary of the America's Community Bankers Association.  He is active in
numerous civic organizations, serving as President of the YMCA, on the Board of
Directors of the Chamber of Commerce, on the Board of Visitors of Anderson
College, and as an Elder of Central Presbyterian Church.  Mr. Orr is a director
of First Trust, the mortgage banking company in which a service corporation
subsidiary of the Savings Bank has an equity investment.

     Jack F. McIntosh is a partner in the law firm of McIntosh and Sherard,
Anderson, South Carolina, with which he has been affiliated for 35 years.
McIntosh and Sherard serves as General Counsel for the Savings Bank's wholly-
owned subsidiary, United Service, since 1984.  Mr. McIntosh is also a member of
the Board of the Alzheimer's Association and of Medical University for South
Carolina.

     Charles W. Fant, Jr. is a partner in the architectural firm of Fant & Fant
Architects, Anderson, South Carolina, with which he has been affiliated since
1956.  Mr. Fant is also active in the community, serving as a Trustee of Connie
Maxwell Children's Home and on the Board of Adjustment and Appeals for both the
City of Anderson and Anderson County, South Carolina.

     Cordes G. Seabrook, Jr. is a partner in Value Systems, Gastonia, North
Carolina, an association management company.  In this capacity, Mr. Seabrook is
the organizer and manager of the Textile Purchasing Association.  Mr. Seabrook
is active in several community organizations, serving as a member of the Board
of Anderson Memorial Hospital, Anderson Area Arts Council, SCETV Endowment and
the Tri-County Tech Endowment.  Mr. Seabrook is a minority stockholder and also
serves as a member of the Board of Directors of DS1, Greer, South Carolina, a
company that designs and manufactures security information systems.

     Richard C. Ballenger is the President of City Glass Company and D&B Glass
Company, Inc., with which he has been affiliated since 1972.  He serves as an
Elder at First Presbyterian Church, is a member of the Board of Directors of the
Anderson Rotary Club and is on the Advisory Board of the Salvation Army.

     F. Stevon Kay is the President of Hill Electric Company, Inc., with which
he has been affiliated since 1969.  He is a Board member of the Salvation Army
Boys and Girls Club and the President of the Anderson Youth Association.  He
attends Concord Baptist Church.

     Jim Gray Watson, the Savings Bank's former President and Chief Executive
Officer, was employed by the Savings Bank for 31 years prior to his retirement
in December 1990.  Mr. Watson is also involved in numerous charitable and
community organizations.

     Martha C. Clamp, a certified public accountant, was employed for six years
as a staff accountant for the accounting firm of Cole, Hook & Cleary, CPAs,
Anderson, South Carolina, and has been self-employed as an accountant since
1988.  Ms. Clamp also serves as the Treasurer of the Foothills Sertoma Club, a
member of the

                                       58
<PAGE>
 
Board of the Anderson County Easter Seals and the Anderson College Alumni Board
and as a Panel Allocation member of the United Way.

     J. Roy Martin, Jr. served as a member of the Savings Bank's Board of
Directors from 1970 until 1988.  Since 1988, Mr. Martin has served as a Director
Emeritus of the Savings Bank.

     Wade A. Watson, Jr. served as a member of the Savings Bank's Board of
Directors from 1960 until 1989.  Mr. Watson has served as a Director Emeritus of
the Savings Bank since 1989.  Mr. Watson is the brother of the Savings Bank's
former President and Chief Executive Officer, Jim Gray Watson.

     Thomas C. Hall has been employed by the Savings Bank since 1975 and
currently serves as Senior Vice President, Treasurer and Chief Financial Officer
responsible for areas of accounting, investments, data processing and deposits.
Mr. Hall is a member of the Financial Managers Society, a Board member of the
Foothills United Way, a member of the Institute of Management Accountants, and a
Board member of the University of South Carolina Alumni Association, Anderson
Chapter.

     Barry C. Visioli has been affiliated with the Savings Bank since 1973.  Mr.
Visioli serves as Senior Vice President and is responsible for Lending
Operations.  He is a Council Member of the Salvation Army Boys and Girls Club, a
Board Member of the Family Counseling Agency and serves on the Anderson County
Board of Assessment Appeals.  Mr. Visioli is a director of First Trust, the
mortgage banking company in which a service corporation subsidiary of the
Savings Bank has an equity investment.

     Sylvia B. Reed joined the Savings Bank in 1986 and currently serves as
Corporate Secretary.  Ms. Reed is a member and Treasurer of the Anderson Chapter
of the American Business Women's Association, which furnishes college
scholarships for students.  She is a member of the choir at Taylor Memorial
Church.

BENEFICIAL OWNERSHIP OF SAVINGS BANK COMMON STOCK BY DIRECTORS AND EXECUTIVE
OFFICERS

     The following table sets forth, as of September 30, 1997, certain
information as to the beneficial ownership of Savings Bank Common Stock by: (i)
persons known by the Savings Bank to beneficially own more than 5% of the
outstanding shares of Common Stock, (ii) the directors of the Savings Bank,
(iii) the executive officers of the Savings Bank, and (iv) by all officers and
directors as a group.  For purposes of this table, an individual is considered
to beneficially own shares of Savings Bank Common Stock if he or she has or
shares voting power (which includes the power to vote or direct the voting of
the shares) or investment power (which includes the power to dispose of or
direct the disposition of the shares).  Unless otherwise indicated, all shares
are owned directly by the officers and directors or by the officers and
directors indirectly through a trust, corporation or association, or by the
officers and directors or their spouses as custodians or trustees for the shares
of minor children.  The officers and directors effectively exercise sole voting
and investment power over such shares.  Shares which are subject to stock
options that are exercisable within 60 days of September 30, 1997 are deemed to
be beneficially owned.  For information regarding proposed purchases of
Conversion Shares by the directors and officers and their anticipated ownership
of Common Stock upon consummation of the Conversion and Reorganization, see
"CONVERSION SHARES TO BE PURCHASED BY MANAGEMENT PURSUANT TO SUBSCRIPTION
RIGHTS."

                                       59
<PAGE>
 
<TABLE>
<CAPTION>
                                    Shares Beneficially
                                       Owned at March
Name                                 September 30, 1997
----                            ---------------------------------
                                    Number(1)         Percent
                                    ---------         --------
<S>                           <C>                     <C>

SouthBanc Shares, M.H.C.               800,000          53.02%
Harold A. Pickens, Jr.                  10,508           0.70
Martha S. Clamp                          6,254           0.41
Jack F. McIntosh                         5,683           0.38
Charles W. Fant, Jr.                        --             --
Cordes G. Seabrook, Jr.                  8,850           0.59
Jim Gray Watson                          3,196           0.21
Richard C. Ballenger                     2,227           0.15
F. Stevon Kay                            7,151           0.47
J. Roy Martin, Jr.                          --             --
Wade A. Watson, Jr.                      5,538           0.23
Robert W. Orr                           14,624           0.97
Thomas C. Hall                          13,972(2)        0.93
Barry C. Visioli                        12,708(3)        0.84

All Officers and
Directors as a
Group (21 persons)                     104,052(4)        6.90%
--------------------------
</TABLE>
(1)  In accordance with Rule 13d-3 under the Exchange Act, a person is deemed to
     be the beneficial owner, for purposes of this table, of any shares of
     Common Stock if he or she has voting and/or investment power with respect
     to such security.  The table includes shares owned by spouses, other
     immediate family members in trust, shares held in retirement accounts or
     funds for the benefit of the named individuals, and other forms of
     ownership, over which shares the persons named in the table may possess
     voting and/or investment power.  Shares which are subject to stock options
     that are exercisable within 60 days of September 30, 1997 are deemed to be
     beneficially owned.
(2)  Includes 2,300 shares of Common Stock which may be received upon the
     exercise of stock options that are exercisable within 60 days of September
     30, 1997.
(3)  Includes 2,300 shares of Common Stock which may be received upon the
     exercise of stock options that are exercisable within 60 days of September
     30, 1997.
(4)  Includes 4,600 shares of Common Stock which may be received upon the
     exercise of stock options that are exercisable within 60 days of September
     30, 1997.


MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

     The business of the Savings Bank is conducted through meetings and
activities of its Board of Directors and its committees.  During the fiscal year
ended September 30, 1997, the Board of Directors held 12 regular meetings and no
director attended fewer than 75% of the total meetings of the Board of Directors
of the Savings Bank and committees on which such director served.

     The Executive Committee of the Board of Directors, which consists of
Directors Fant (Chairman), Pickens, Seabrook, Watson and Orr, meets as necessary
in between meetings of the full Board of Directors.  All actions of the
Executive Committee must be ratified by the full Board of Directors.  The
Executive Committee reviews directors' and officers' compensation and makes
recommendations to the full Board of Directors in this regard.  The Executive
Committee also recommends prospective new Board members to the full Board of
Directors and insures

                                       60
<PAGE>
 
that all directors, directors emeriti and officers are acting in compliance with
the Savings Bank's Charter and Bylaws.  The Executive Committee met once during
the fiscal year ended September 30, 1997.

     The Audit Committee of the Savings Bank consists of Directors Pickens
(Chairman), Clamp,  Orr and Watson and Thomas C. Hall, Senior Vice President,
and Doris Hoover, a Savings Bank staff member.  This committee is responsible
for developing and monitoring the Savings Bank's audit program.  The committee
selects the Savings Bank's outside auditor and meets with them to discuss the
results of the annual audit and any related matters.  The members of the
committee also receive and review all the reports and findings and other
information presented to them by the Savings Bank's officers regarding financial
reporting policies and practices.  In addition, the Savings Bank's Internal
Auditor and Compliance Coordinator operate under the direction of the Audit
Committee and report quarterly to the committee.  The committee meets quarterly.
The Audit Committee met four times during the fiscal year ended September 30,
1997.

     The Savings Bank's full Board of Directors serves as a Nominating
Committee.  The Board of Directors met once in its capacity as the nominating
committee during the 1997 fiscal year.

     The Savings Bank also has standing Loan, Pension Plan, Strategic Planning
and Asset/Liability Management Committees.

DIRECTORS' COMPENSATION

     Directors (including Directors Emeriti, but excluding directors who are
full-time employees) receive annual compensation of $10,800, payable $900
monthly, and $100 for each committee meeting attended.  No fees are paid for
attending special meetings of the Board.  The Savings Bank's Chairman of the
Board receives compensation of $12,000 per year.  The Savings Bank paid a total
of $109,000 in directors' and committee fees for the fiscal year ended September
30, 1997.  Director compensation is deducted by $100 for each meeting absence.
Directors also participate in the Savings Bank's stock option programs.

                                       61
<PAGE>
 
EXECUTIVE COMPENSATION

     Summary Compensation Table.  The following information is furnished for the
     --------------------------                                                 
named executive officers.
<TABLE>
<CAPTION>


==================================================================================================================================

                                                    SUMMARY COMPENSATION TABLE
---------------------------------------------------------------------------------------------------------------------------------
                                                                     Long-Term Compensation
                                                                -----------------------------------------------------------------
                    Annual Compensation                                   Awards            Payouts
---------------------------------------------------------------------------------------------------------------------------------
<S>                        <C>     <C>       <C>      <C>          <C>          <C>        <C>             <C>
     Name and                                          Other
     Principal                                         Annual      Restricted                              All Other
     Position                                         Compen-        Stock                   LTIP          Compensa-
     with the                      Salary    Bonus     sation       Awards      Options    Payouts           tion
   Savings Bank            Year    ($)(1)     ($)       ($)         ($)(2)        (#)        ($)            ($)(3)
 ---------------------------------------------------------------------------------------------------------------------------------
 Robert W. Orr,            1997   $95,000    $59,299    $    --      330,525    10,250        --              $14,658
 President and                                            5,750
 Managing Officer          1996    71,350     61,017                      --        --        --               13,085
                                                          5,750
                           1995    69,077     58,889                      --        --        --               12,185





Thomas C. Hall,            1997    80,000     50,616         --      330,525    10,250        --               12,409
Senior Vice
President                  1996    60,902     52,082      2,880           --        --        --               10,904

                           1995    58,962     50,265      2,870           --        --        --               10,218



Barry C. Visioli           1997    70,000     48,552         --      330,525    10,250        --               11,263
Senior Vice
President                  1996    58,418     49,958      2,880           --        --        --               10,483

                           1995    56,557     48,216      2,870           --        --        --                9,844
==================================================================================================================================
---------------------------
</TABLE>
(1)  Includes salary and directors' fees.
(2)  Represents the value of shares of Savings Bank Common Stock awarded under
     the 1996 MRP that vested in equal installment over a five-year period
     beginning on April 7, 1998.  Dividends are paid on such awards if and when
     dividends are declared and paid by the Savings Bank.  At September 30,
     1997, the value of the awards were $330,525 for each of Mr. Orr, Mr. Hall
     and Mr. Visioli (5,850 shares at $56.50 per share).
(3)  Represents employer 401(k) Plan contributions.

                                       62
<PAGE>
 
EMPLOYMENT AGREEMENTS

     The MHC and the Savings Bank currently maintain employment agreements with
Messrs. Orr, Hall and Visioli that were entered into in connection with the MHC
Reorganization.  In connection with the Conversion and Reorganization, the
Holding Company and the Savings Bank (collectively, the "Employers") will enter
into three-year employment agreements ("Employment Agreements") with these same
individuals (individually, the "Executive"), which have substantially the same
terms as and will replace the existing agreements.

     Under the Employment Agreements, the initial salary levels for Messrs. Orr,
Hall and Visioli will be $98,800, $83,200 and $72,800, respectively, which
amounts will be paid by the Savings Bank and may be increased at the discretion
of the Board of Directors.  On each anniversary of the commencement date of the
Employment Agreements, the term of each agreement may be extended for an
additional year at the discretion of the Board.  The agreement is terminable by
the Employers at any time, by the Executive if the Executive is assigned duties
inconsistent with his initial position, duties, responsibilities and status, or
upon the occurrence of certain events specified by federal regulations.  In the
event that an Executive's employment is terminated without cause or upon the
Executive's voluntary termination in certain circumstances, the Savings Bank
would be required to honor the terms of the agreement through the expiration of
the then current term, including payment of current cash compensation and
continuation of employee benefits.

     The Employment Agreements also provide for severance payments and other
benefits in the event of involuntary termination of employment in connection
with any change in control of the Employers.  Severance payments also will be
provided on a similar basis in connection with a voluntary termination of
employment where, subsequent to a change in control, an Executive is assigned
duties inconsistent with his position, duties, responsibilities and status
immediately prior to such change in control.  The term "change in control" is
defined in the agreement as having occurred when, among other things, (a) a
person other than the Holding Company purchases shares of Common Stock pursuant
to a tender or exchange offer for such shares, (b) any person (as such term is
used in Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the
beneficial owner, directly or indirectly, of securities of the Holding Company
representing 25% or more of the combined voting power of the Holding Company's
then outstanding securities, (c) the membership of the Board of Directors
changes as the result of a contested election, or (d) shareholders of the
Holding Company approve a merger, consolidation, sale or disposition of all or
substantially all of the Holding Company's assets, or a plan of partial or
complete liquidation.

     The maximum value of the severance benefits under the Employment Agreements
is 2.99 times the Executive's average annual compensation during the five-year
period preceding the effective date of the change in control (the "base
amount").  The Employment Agreements provide that the value of the maximum
benefit may be distributed, at the Executive's election, (i) in the form of a
lump sum cash payment equal to 2.99 times the Executive's base amount or (ii) a
combination of a cash payment and continued coverage under the Employers'
health, life and disability programs for a 36-month period following the change
in control, the total present value of which does not exceed 2.99 times the
Executive's base amount.  Assuming that a change in control had occurred at
September 30, 1997 and that each Executive elected to receive a lump sum cash
payment, Messrs. Orr, Hall and Visioli would be entitled to payments of
approximately $220,000, $187,000 and $176,000, respectively.  Section 280G of
the Internal Revenue Code of 1986, as amended ("Code"), provides that severance
payments that equal or exceed three times the individual's base amount are
deemed to be "excess parachute payments" if they are contingent upon a change in
control.  Individuals receiving excess parachute payments are subject to a 20%
excise tax on the amount of such excess payments, and the Employers would not be
entitled to deduct the amount of such excess payments.

     The Employment Agreements restrict the Executive's right to compete against
the Employers for a period of one year from the date of termination of the
agreement if an Executive's employment is terminated without cause, except if
such termination occurs after a change in control.

                                       63
<PAGE>
 
     OPTION GRANTS TABLE.  The following table sets forth all grants of options
to the named executive officers for the fiscal year ended September 30, 1997.

<TABLE>
<CAPTION>

============================================================================================
                             OPTION GRANTS IN LAST FISCAL YEAR
--------------------------------------------------------------------------------------------
                                     Individual Grants
--------------------------------------------------------------------------------------------
                                                      Percent of
                                                   Total Options
                                       Number of     Granted to     Exercise
                                        Options    Employees in       Price     Expiration
                Name                    Granted     Fiscal Year     Per Share      Date

 --------------------------------------------------------------------------------------------
<S>                                    <C>         <C>              <C>         <C>

Robert W. Orr                             10,250              26%      $25.25   April 2007
 --------------------------------------------------------------------------------------------
Thomas C. Hall                            10,250              26%      $25.25   April 2007
--------------------------------------------------------------------------------------------
Barry C. Visioli                          10,250              26%      $25.25   April 2007
============================================================================================

</TABLE>
     OPTION EXERCISE/VALUE TABLE.  The following table sets forth all exercises
of options by the named executive officers for the fiscal year ended September
30, 1997.
<TABLE>
<CAPTION>
============================================================================================================= 
                              AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                                     AND FISCAL YEAR END OPTION VALUES
 
-------------------------------------------------------------------------------------------------------------- 
                                                                                                 Value of
                                                                               Number of        Unexercised
                                                     Number of                Unexercised      In-the-Money
                                                      Shares                  Options at        Options at
                                                     Acquired     Dollar    Fiscal Year End   Fiscal Year End
                                                        on        Value      Exercisable/      Exercisable/
      Name                                           Exercise    Realized    Unexercisable     Unexercisable
<S>                                                  <C>         <C>        <C>               <C>
 
Robert W. Orr                                          2,956    $57,642             --/--       $--/$--
--------------------------------------------------------------------------------------------------------------  
Thomas C. Hall                                            --         --          2,300/--      $106,950/$--
-------------------------------------------------------------------------------------------------------------- 
Barry C. Visioli                                          --         --          2,300/--      $106,950/$--
==============================================================================================================
</TABLE>
BENEFITS

     INSURANCE.  Full-time employees are provided, with minimal contribution or
expense to them, with group plan insurance that covers hospitalization,
dependent coverage, long-term disability and life insurance.  This insurance is
available generally and on the same basis to all full-time employees.  Long-term
disability insurance is available after completion of a minimum of one year of
service, while the other benefits are available immediately.

     CAFETERIA PLAN.  The Savings Bank offers full-time employees the ability to
enroll in a cafeteria or flexible benefit plan which allows employees to set
aside a portion of their pre-tax salary to be used for, among other things,

                                       64
<PAGE>
 
medical expenses not covered by insurance and child care expenses.  The decision
to enroll in the Cafeteria Plan and the benefits selected is at each employee's
discretion.

     PROFIT SHARING AND 401(K) PLAN.  The Savings Bank sponsors a tax-qualified
cash or deferred profit sharing plan ("401(k) Plan") for the benefit of its
employees.  Employees become eligible to participate under the 401(k) Plan on
the first day of October following their date of employment.  Benefits under the
401(k) Plan are determined based upon annual employee salary reduction and
employer discretionary contributions to the 401(k) Plan.  Employer discretionary
contributions are allocated to participant accounts as a percentage of total
compensation of such participant to the compensation of all participants.  At
the end of each year the Board of Directors determines whether to make a
discretionary contribution and the amount of the contribution to the 401(k)
Plan, based upon a number of factors, such as the Savings Bank's retained
earnings, profits, regulatory capital and employee performance.  In addition,
the Board of Directors may authorize a discretionary matching contribution not
to exceed 4.5% of each participants compensation for the 401(k) Plan year.  Each
year participants are permitted to contribute voluntarily up to $10,000 (as
indexed for inflation).  However, each participant's salary deferrals and
employee and employer contributions when added to other defined contribution
plan contributions each year cannot exceed the lessor of 25% of compensation or
$30,000 for each 401(k) Plan year.

     Benefits are payable upon termination of employment, retirement, death,
disability or 401(k) Plan termination.  Additionally, under certain financial
hardship circumstances, early withdrawal of salary deferrals may be authorized
by the Savings Bank.  Benefits are normally paid in a lump-sum payment or under
various installment payment or annuity alternatives.  Normal retirement age
under the 401(k) Plan is age 65.  Early retirement age under the 401(k) Plan is
age 55 with at least ten years of service.

     Employer discretionary contributions under the 401(k) Plan are fully vested
upon the completion of five years of service.  Employees are always 100% vested
in their salary deferrals and in the employer matching contributions.  The
Savings Bank's total contribution to the 401(k) Plan for all employees for the
fiscal year ended September 30, 1997 was $219,000.

     Participants in the 401(k) Plan self-direct the investment of plan assets
credited to their account.  The available investment options include mutual
funds and Common Stock.  In connection with the Conversion and Reorganization,
eligible Participants will have the opportunity to direct the investment of
their 401(k) Plan account balance to purchase shares of the Common Stock.  A
participant in the 401(k) Plan who elects to purchase Common Stock in the
Conversion and Reorganization through the 401(k) Plan will receive the same
subscription priority and be subject to the same individual purchase limitations
as if the participant had elected to make such purchase using other funds.  See
"THE CONVERSION AND REORGANIZATION -- Limitations on Purchases of Conversion
Shares."

     EMPLOYEE STOCK OWNERSHIP PLAN.  In connection with the MHC Reorganization,
the Savings Bank established an ESOP for the exclusive benefit of participating
employees.  In order to participate under the ESOP, employees must be 21 years
old and complete one year of service with the Savings Bank.  The ESOP acquired
8,050 shares of Savings Bank Common Stock in the MHC Reorganization with the
proceeds of a loan obtained from a third party lender.  The ESOP debt was
retired on January 24, 1996 and all shares were allocated to the accounts of
participating employees.  In connection with the Additional Offering, the ESOP
acquired 46,800 shares of Savings Bank Common Stock with the proceeds of a loan
obtained from an unrelated third party lender.  The loan is repaid principally
from the Savings Bank's contributions to the ESOP and dividends payable on
Savings Bank Common Stock held by the ESOP over the term of the loan.  In
connection with the Conversion and Reorganization, it is anticipated that the
Holding Company will lend sufficient funds to the ESOP to enable the ESOP to
repay the outstanding principal balance of the loan ($804,000 at September 30,
1997) and accrued interest thereon through the closing date of the Conversion
and Reorganization.  Shares of Common Stock acquired by the ESOP in the
Additional Offering will, to the extent not yet allocated to ESOP participants,
serve as collateral for the Holding Company loan and be held in a suspense
account pending repayment of the loan.  It is anticipated that the interest

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rate on the Holding Company loan will be equal to the prime rate reported in The
Wall Street Journal on the closing date of the Conversion and Reorganization.

     In connection with the Conversion and Reorganization, the shares of Savings
Bank Common Stock held by the ESOP will be converted into Exchange Shares based
on the final Exchange Ratio.  In light of management's evaluation of the
anticipated compensation expense associated with the ESOP, the ESOP does not
intend to purchase any Conversion Shares in the Conversion Offerings.

     Contributions to the ESOP and shares released from the suspense account
will be allocated among participants based on compensation.  Except for
participants who retire, become disabled or die during the Plan year, all other
participants will be required to have completed at least 1,000 hours of service
and be employed on the last day of the Plan year in order to receive an
allocation.  Participant benefits vest over a seven-year period with 20% vested
after three years of service and 100% vested after seven years of service.  All
years of service are counted toward vesting.  Vesting will be accelerated upon
retirement, death, disability or termination of the ESOP.  Forfeitures are
applied to reduce future contributions by the Savings Bank or reallocated to
other participants to reduce future funding costs.  Benefits may be payable upon
retirement, death, disability or separation from service.  Contributions to the
ESOP are not fixed, so benefits payable under the ESOP cannot be estimated.

     Under the ESOP, participating employees may vote shares of Common Stock
allocated to their account.  Shares for which employees do not give instructions
and unallocated shares will be voted by the ESOP Trustee in the same proportion
as determined by the vote of participants with respect to allocated shares.

     The Board of Directors has appointed Directors Fant, Jim Gray Watson, Orr
and McIntosh and Director Emeritus Wade Watson as the committee ("ESOP
Committee") to administer the ESOP and the serve as ESOP trustees.  The Board of
Directors may amend the ESOP in any manner which it deems desirable, except that
the ESOP may not be amended in any way to deprive any participant or beneficiary
of any benefits to which he is entitled with respect to contributions previously
made.

     Although the ESOP will not purchase any Conversion Shares in the Conversion
Offerings, the ESOP may purchase Common Stock in the open market at then
prevailing prices from time to time following the Conversion and Reorganization.
The timing, amount, and manner of such discretionary contributions will be
affected by several factors, including applicable regulatory policies, the
requirements of applicable laws and regulations, market conditions.

     STOCK OPTION PLANS.  In connection with the MHC Reorganization, the Savings
Bank adopted the 1993 Option Plan for the benefit of key employees and
nonemployee directors, pursuant to which 11,504 shares of Savings Bank Common
Stock were reserved for issuance upon the exercise of stock options awarded
thereunder.  In connection with the Additional Offering, the Savings Bank
adopted the 1996 Option Plan for the benefit of key employees and nonemployee
directors, pursuant to which 58,500 shares of Savings Bank Common Stock were
reserved for issuance upon the exercise of stock options awarded thereunder.  As
of September 30, 1997, stock options have been awarded with respect to all
shares reserved under the 1993 Option Plan, and with respect to 58,500 shares
reserved under the 1996 Stock Option Plan, including 10,250 options to each of
Mr. Orr,  Mr. Hall and Mr. Visioli.  The Holding Company will assume the 1993
and 1996 Stock Option Plans in connection with the Conversion and
Reorganization, and appropriate adjustments to the exercise price and the number
of shares subject to stock options outstanding under each plan will be made in
accordance with the final Exchange Ratio.

     The 1998 Option Plan will be designed to attract and retain qualified
management personnel and nonemployee directors, to provide such key employees
and nonemployee directors with a proprietary interest in the Holding Company as
an incentive to contribute to the success of the Holding Company and the Savings
Bank, and to reward officers and key employees for outstanding performance.  The
1998 Option Plan will provide for the grant of incentive stock options ("ISOs")
intended to comply with the requirements of Section 422 of the Code and for

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nonqualified stock options ("NQOs").  Upon receipt of stockholder approval of
the 1998 Option Plan, stock options may be granted to nonemployee directors and
key employees of the Holding Company and its subsidiaries. Unless sooner
terminated, the 1998 Option Plan will continue in effect for a period of ten
years from the date the 1998 Option Plan is approved by stockholders.  Under
current OTS regulations, the approval of a majority vote of the Holding
Company's outstanding shares is required prior to the implementation of the 1998
Option Plan within one year of the consummation of the Conversion and
Reorganization.

     A number of authorized shares of Common Stock equal to 10% of the number of
Conversion Shares issued in connection with the Conversion and Reorganization
will be reserved for future issuance under the 1998 Option Plan (198,375 shares
based on the issuance of 1,983,750 Conversion Shares at the maximum of the
Estimated Valuation Range).  Shares acquired upon exercise of options will be
authorized but unissued shares or treasury shares.  In the event of a stock
split, reverse stock split, stock dividend, or similar event, the number of
shares of Common Stock under the 1998 Option Plan, the number of shares to which
any award relates and the exercise price per share under any option may be
adjusted by the Committee (as defined below) to reflect the increase or decrease
in the total number of shares of Common Stock outstanding.

     The 1998 Option Plan will be administered and interpreted by the Board of
Directors.  Subject to applicable OTS regulations,  the Board will determine
which nonemployee directors and key employees will be granted options, whether,
in the case of officers and employees, such options will be ISOs or NQOs, the
number of shares subject to each option, and the exercisability of such options.
All options granted to nonemployee directors will be NQOs.  The per share
exercise price of all options will equal at least 100% of the fair market value
of a share of Common Stock on the date the option is granted.

     It is anticipated that all options granted under the 1998 Option Plan will
be granted subject to a vesting schedule whereby the options become exercisable
over a specified period following the date of grant.  Under OTS regulations, if
the Stock Option plan is implemented within the first year following
consummation of the Conversion and Reorganization the minimum vesting period
will be five years.  All unvested options will be immediately exercisable in the
event of the recipient's death or disability.  Unvested options also will be
exercisable following a change in control (as defined in the 1998 Option Plan)
of the Holding Company or the Savings Bank to the extent authorized or not
prohibited by applicable law or regulations.  OTS regulations currently provide
that, if the 1998 Option Plan is implemented prior to the first anniversary of
the Conversion and Reorganization, vesting may not be accelerated upon a change
in control of the Holding Company or the Savings Bank.

     Each stock option that is awarded to an officer or key employee will remain
exercisable at any time on or after the date it vests through the earlier to
occur of the tenth anniversary of the date of grant or three months after the
date on which the optionee terminates employment (one year in the event of the
optionee's termination by reason of death or disability), unless such period is
extended by the Board.  Each stock option that is awarded to a nonemployee
director will remain exercisable through the earlier to occur of the tenth
anniversary of the date of grant or one year (two years in the event of a
nonemployee director's death or disability) following the termination of a
nonemployee director's service on the Board.  Except as authorized by the Board,
all stock options are nontransferable except by will or the laws of descent or
distribution.

     Under current provisions of the Code, the federal tax treatment of ISOs and
NQOs is different.  With respect to ISOs, an optionee who satisfies certain
holding period requirements will not recognize income at the time the option is
granted or at the time the option is exercised.  If the holding period
requirements are satisfied, the optionee will generally recognize capital gain
or loss upon a subsequent disposition of the shares of Common Stock received
upon the exercise of a stock option.  If the holding period requirements are not
satisfied, the difference between the fair market value of the Common Stock on
the date of grant and the option exercise price, if any, will be taxable to the
optionee at ordinary income tax rates.  A federal income tax deduction generally
will not be available to the Holding Company as a result of the grant or
exercise of an ISO, unless the optionee fails to satisfy the holding period
requirements.  With respect to NQOs, the grant of an NQO generally is not a
taxable event for the optionee and no tax deduction will be available to the
Holding Company.  However, upon the exercise of an NQO, the difference

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<PAGE>
 
between the fair market value of the Common Stock on the date of exercise and
the option exercise price generally will be treated as compensation to the
optionee upon exercise, and the Holding Company will be entitled to a
compensation expense deduction in the amount of income realized by the optionee.

     Although no specific award determinations have been made at this time, the
Holding Company and the Savings Bank anticipate that if stockholder approval is
obtained it would provide awards to its directors and key employees to the
extent and under terms and conditions permitted by applicable regulations.
Under current OTS regulations, if the 1998 Option Plan is implemented within one
year of the consummation of the Conversion and Reorganization, (i) no officer or
employee may receive an award of options covering in excess of 25%, (ii) no
nonemployee director could receive in excess of 5% and (iii) nonemployee
directors, as a group, may not receive in excess of 30% of the number of shares
reserved for issuance under the 1998 Option Plan.

     MANAGEMENT RECOGNITION PLANs.  In connection with the MHC Reorganization,
the Savings Bank adopted the 1993 MRP for the benefit of key employees, pursuant
to which 3,450 shares of Savings Bank Common Stock were reserved for issuance in
the form of restricted stock.  In connection with the Additional Offering, the
Savings Bank adopted the 1996 MRP for the benefit of key employees, pursuant to
which 23,400 shares of Savings Bank Common Stock were reserved for issuance in
the form of restricted stock.  As of September 30, 1997, all shares under the
1993 MRP have been awarded and are fully vested, and such shares will be
converted into Exchange Shares based on the final Exchange Ratio in the same
manner as shares held by other Public Stockholders.  As of September 30, 1997,
awards for 23,400 shares of Savings Bank Common Stock have been awarded under
the 1996 MRP, including 5,850 shares to Mr. Orr, 5,850 shares to Mr. Hall and
5,850 shares to Mr. Visioli, subject to a five-year vesting period.  Such shares
will be converted into Exchange Shares based on the final Exchange Ratio in the
same manner as shares held by other Public Stockholders.  The Holding Company
will assume and continue the 1996 MRP in connection with the Conversion and
Reorganization.

     The Board of Directors believes that continuation of the MRP is important
to the Savings Bank's overall compensation strategy, which emphasizes providing
appropriate incentives to attract and retain capable employees.  Specifically,
the continuation of the MRP will enable the Holding Company to provide
participants with a proprietary interest in the Holding Company as an incentive
to contribute to the success of the Holding Company.  Accordingly, the Holding
Company's Board of Directors intends to adopt the 1998 MRP for officers and
employees of the Holding Company.

     The 1998 MRP will be submitted to stockholders for approval at a meeting to
be held no earlier than six months following consummation of the Conversion and
Reorganization.  The approval of a majority vote of the Holding Company's
stockholders is required prior to implementation of the 1998 MRP within one year
of the consummation of the Conversion and Reorganization.  The 1998 MRP expects
to acquire a number of shares of Common Stock equal to 4% of the Conversion
Shares issued in the Conversion Offerings (79,350 shares based on the issuance
of 1,983,750 Conversion Shares at the maximum of the Estimated Valuation Range).
Such shares will be acquired on the open market, if available, with funds
contributed by the Savings Bank to a trust which the Holding Company may
establish in conjunction with the 1998 MRP ("1998 MRP Trust") or from authorized
but unissued shares or treasury shares of the Holding Company.

     The Board of Directors will administer the 1998 MRP, members of which will
also serve as trustees of the 1998 MRP Trust, if formed.  The trustees will be
responsible for the investment of all funds contributed by the Savings Bank to
the 1998 MRP Trust.

     It is anticipated that shares of Common Stock granted pursuant to the 1998
MRP will be in the form of restricted stock payable ratably over a five-year
period following the date of grant.  During the period of restriction, all
shares will be held in escrow by the Holding Company or by the 1998 MRP Trust.
If a recipient terminates employment for reasons other than death or disability,
the recipient will forfeit all rights to allocated shares that are then subject
to restriction.  In the event of the recipient's death or disability, all
restrictions will expire and all allocated shares will become unrestricted.  In
addition, all allocated shares will become unrestricted in the event of

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a change in control (as defined in the 1998 MRP) of the Holding Company to the
extent authorized or not prohibited by applicable law or regulations.  Current
OTS regulations, however, do not permit accelerated vesting of 1998 MRP awards
in the event of a change in control.  Compensation expense in the amount of the
fair market value of the Common Stock at the date of the grant to the recipient
will be recognized during the years in which the shares vest.

     The Board of Directors may terminate the 1998 MRP at any time and, upon
termination, all unallocated shares of Common Stock will revert to the Savings
Bank.

     A recipient of a 1998 MRP award in the form of restricted stock generally
will not recognize income upon an award of shares of Common Stock, and the
Holding Company will not be entitled to a federal income tax deduction, until
the termination of the restrictions.  Upon such termination, the recipient will
recognize ordinary income in an amount equal to the fair market value of the
Common Stock at the time and the Holding Company will be entitled to a deduction
in the same amount after satisfying federal income tax withholding requirements.
However, the recipient may elect to recognize ordinary income in the year the
restricted stock is granted in an amount equal to the fair market value of the
shares at that time, determined without regard to the restrictions.  In that
event, the Holding Company will be entitled to a deduction in such year and in
the same amount.  Any gain or loss recognized by the recipient upon subsequent
disposition of the stock will be either a capital gain or capital loss.

     Although no specific award determinations have been made, the Savings Bank
anticipates that if stockholder approval is obtained it would provide awards to
its directors, officers and employees to the extent permitted by applicable
regulations.  OTS regulations currently provide that no individual officer or
employee may receive more than 25% of the shares reserved for issuance under any
stock compensation plan and that non-employee directors may not receive more
than 5% of such shares individually or 30% in the aggregate for all non employee
directors.

TRANSACTIONS WITH THE SAVINGS BANK

     Federal regulations require that all loans or extensions of credit by the
Savings Bank to executive officers and directors must generally be made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons (unless
the loan or extension of credit is made under a benefit program generally
available to all other employees and does not give preference to any insider
over any other employee) and must not involve more than the normal risk of
repayment or present other unfavorable features.  The Savings Bank's policy is
not to make any new loans or extensions of credit to the Savings Bank's
executive officers and directors at different rates or terms than those offered
to the general public.  In addition, loans made to a director or executive
officer in an amount that, when aggregated with the amount of all other loans to
such person and his or her related interests, are in excess of the greater of
$25,000, or 5% of the Savings Bank's capital and surplus (up to a maximum of
$500,000) must be approved in advance by a majority of the disinterested members
of the Board of Directors.  See "REGULATION -- Federal Regulation of the Savings
Bank -- Transactions with Affiliates."  The aggregate amount of loans by the
Savings Bank to its executive officers and directors and their associates was
$926,000 at September 30, 1997, or approximately 1.4% of the Holding Company's
pro forma stockholders' equity (based on the issuance of Conversion Shares at
the maximum of the Estimated Valuation Range).

                                   REGULATION

GENERAL

     The Savings Bank is subject to extensive regulation, examination and
supervision by the OTS as its chartering agency, and the FDIC, as the insurer of
its deposits.  The activities of federal savings institutions are governed by
the Home Owners' Loan Act, as amended ("HOLA") and, in certain respects, the
Federal Deposit Insurance Act ("FDIA") and the regulations issued by the OTS and
the FDIC to implement these statutes.  These laws and regulations delineate the
nature and extent of the activities in which federal savings associations may
engage.  Lending activities and other investments must comply with various
statutory and regulatory capital requirements.  In addition, the Savings Bank's
relationship with its depositors and borrowers is also regulated to a

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great extent, especially in such matters as the ownership of deposit accounts
and the form and content of the Savings Bank's mortgage documents.  The Savings
Bank must file reports with the OTS and the FDIC concerning its activities and
financial condition in addition to obtaining regulatory approvals prior to
entering into certain transactions such as mergers with, or acquisitions of,
other financial institutions.  There are periodic examinations by the OTS and
the FDIC to review the Savings Bank's compliance with various regulatory
requirements.  The regulatory structure also gives the regulatory authorities
extensive discretion in connection with their supervisory and enforcement
activities and examination policies, including policies with respect to the
classification of assets and the establishment of adequate loan loss reserves
for regulatory purposes.  Any change in such policies, whether by the OTS, the
FDIC or Congress, could have a material adverse impact on the Holding Company,
the Savings Bank and their operations.  The Holding Company, as a savings and
loan holding company, will also be required to file certain reports with, and
otherwise comply with the rules and regulations of, the OTS and the SEC.

FEDERAL REGULATION OF THE SAVINGS BANK

     OFFICE OF THRIFT SUPERVISION.  The OTS is an office in the Department of
the Treasury subject to the general oversight of the Secretary of the Treasury.
The OTS generally possesses the supervisory and regulatory duties and
responsibilities formerly vested in the Federal Home Loan Bank Board.  Among
other functions, the OTS issues and enforces regulations affecting federally
insured savings associations and regularly examines these institutions.

     FEDERAL HOME LOAN BANK SYSTEM.  The FHLB System, consisting of 12 FHLBs, is
under the jurisdiction of the Federal Housing Finance Board ("FHFB").  The
designated duties of the FHFB are to:  supervise the FHLBs; ensure that the
FHLBs carry out their housing finance mission; ensure that the FHLBs remain
adequately capitalized and able to raise funds in the capital markets; and
ensure that the FHLBs operate in a safe and sound manner.  The Savings Bank, as
a member of the FHLB-Atlanta, is required to acquire and hold shares of capital
stock in the FHLB-Atlanta in an amount equal to the greater of (i) 1.0% of the
aggregate outstanding principal amount of residential mortgage loans, home
purchase contracts and similar obligations at the beginning of each year, or
(ii) 1/20 of its advances (borrowings) from the FHLB-Atlanta.  At September 30,
1997, the Savings Bank complied with this requirement with an investment in
FHLB-Atlanta stock of $1.7 million.  Among other benefits, the FHLB-Atlanta
provides a central credit facility primarily for member institutions.  It is
funded primarily from proceeds derived from the sale of consolidated obligations
of the FHLB System.  It makes advances to members in accordance with policies
and procedures established by the FHFB and the Board of Directors of the FHLB-
Atlanta.

     FEDERAL DEPOSIT INSURANCE CORPORATION.  The FDIC is an independent federal
agency established originally to insure the deposits, up to prescribed statutory
limits, of federally insured banks and to preserve the safety and soundness of
the banking industry.  The FDIC maintains two separate insurance funds: the Bank
Insurance Fund ("BIF") and the SAIF.  As insurer of the Savings Bank's deposits,
the FDIC has examination, supervisory and enforcement authority over all savings
associations.

     The Savings Bank's deposit accounts are insured by the FDIC under the SAIF
to the maximum extent permitted by law.  The Savings Bank pays deposit insurance
premiums to the FDIC based on a risk-based assessment system established by the
FDIC for all SAIF-member institutions.  Under applicable regulations,
institutions are assigned to one of three capital groups that are based solely
on the level of an institution's capital ("well capitalized," "adequately
capitalized" or "undercapitalized"), which are defined in the same manner as the
regulations establishing the prompt corrective action system under the FDIA as
discussed below.  The Savings Bank's assessments expensed for the year ended
September 30, 1997 equaled $152,000.

     Pursuant to the Deposit Insurance Fund ("DIF") Act, which was enacted on
September 30, 1996, the FDIC imposed a special assessment on each depository
institution with SAIF-assessable deposits which resulted in the SAIF achieving
its designated reserve ratio.  In connection therewith, the FDIC reduced the
assessment schedule for SAIF members, effective January 1, 1997, to a range of
0% to 0.27%, with most institutions, including the Savings Bank, paying 0%.
This assessment schedule is the same as that for the BIF, which reached its
designated reserve ratio in

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1995.  In addition, since January 1, 1997, SAIF members are charged an
assessment of 0.065% of SAIF-assessable deposits for the purpose of paying
interest on the obligations issued by the Financing Corporation ("FICO") in the
1980s to help fund the thrift industry cleanup.  BIF-assessable deposits will be
charged an assessment to help pay interest on the FICO bonds at a rate of
approximately .013% until the earlier of December 31, 1999 or the date upon
which the last savings association ceases to exist, after which time the
assessment will be the same for all insured deposits.

     The DIF Act provides for the merger of the BIF and the SAIF into the
Deposit Insurance Fund on January 1, 1999, but only if no insured depository
institution is a savings association on that date.  The DIF Act contemplates the
elimination of federal savings association charter, and would require all
federal savings associations to become national banks or state-chartered
institutions.  It is not known what effect, if any, the adoption of such
legislation would have on the operation of the Savings Bank.

     The FDIC may terminate the deposit insurance of any insured depository
institution if it determines after a hearing that the institution has engaged or
is engaging in unsafe or unsound practices, is in an unsafe or unsound condition
to continue operations, or has violated any applicable law, regulation, order or
any condition imposed by an agreement with the FDIC.  It also may suspend
deposit insurance temporarily during the hearing process for the permanent
termination of insurance, if the institution has no tangible capital.  If
insurance of accounts is terminated, the accounts at the institution at the time
of termination, less subsequent withdrawals, shall continue to be insured for a
period of six months to two years, as determined by the FDIC.  Management is
aware of no existing circumstances that could result in termination of the
deposit insurance of the Savings Bank.

     LIQUIDITY REQUIREMENTS.  Under OTS regulations, each savings institution is
required to maintain an average daily balance of liquid assets (cash, certain
time deposits and savings accounts, bankers' acceptances, and specified U.S.
Government, state or federal agency obligations and certain other investments)
equal to a monthly average of not less than a specified percentage (currently
4.0%) of its net withdrawable accounts plus short-term borrowings.  Monetary
penalties may be imposed for failure to meet liquidity requirements.  At
September 30, 1997, the Savings Bank's liquidity ratio was 5.64%.

     PROMPT CORRECTIVE ACTION.  Each federal banking agency is required to
implement a system of prompt corrective action for institutions that it
regulates.  The federal banking agencies have promulgated substantially similar
regulations to implement this system of prompt corrective action.  Under the
regulations, an institution shall be deemed to be (i) "well capitalized" if it
has a total risk-based capital ratio of 10.0% or more, has a Tier I risk-based
capital ratio of 6.0% or more, has a leverage ratio of 5.0% or more and is not
subject to specified requirements to meet and maintain a specific capital level
for any capital measure; (ii) "adequately capitalized" if it has a total risk-
based capital ratio of 8.0% or more, a Tier I risk-based capital ratio of 4.0%
or more and a leverage ratio of 4.0% or more (3.0% under certain circumstances)
and does not meet the definition of "well capitalized;" (iii) "undercapitalized"
if it has a total risk-based capital ratio that is less than 8.0%, a Tier I
risk-based capital ratio that is less than 4.0% or a leverage ratio that is less
than 4.0% (3.0% under certain circumstances); (iv) "significantly
undercapitalized" if it has a total risk-based capital ratio that is less than
6.0%, a Tier I risk-based capital ratio that is less than 3.0% or a leverage
ratio that is less than 3.0%; and (v) "critically undercapitalized" if it has a
ratio of tangible equity to total assets that is equal to or less than 2.0%.

     A federal banking agency may, after notice and an opportunity for a
hearing, reclassify a well capitalized institution as adequately capitalized and
may require an adequately capitalized institution or an undercapitalized
institution to comply with supervisory actions as if it were in the next lower
category if the institution is in an unsafe or unsound condition or has received
in its most recent examination, and has not corrected, a less than satisfactory
rating for asset quality, management, earnings or liquidity.  The OTS may not,
however, reclassify a significantly undercapitalized institution as critically
undercapitalized.

     An institution generally must file a written capital restoration plan that
meets specified requirements, as well as a performance guaranty by each company
that controls the institution, with the appropriate federal banking agency

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within 45 days of the date that the institution receives notice or is deemed to
have notice that it is undercapitalized, significantly undercapitalized or
critically undercapitalized.  Immediately upon becoming undercapitalized, an
institution shall become subject to various mandatory and discretionary
restrictions on its operations.

     At September 30, 1997, the Savings Bank was categorized as "well
capitalized" under the prompt corrective action regulations of the OTS.

     STANDARDS FOR SAFETY AND SOUNDNESS.  The FDIA requires the federal banking
regulatory agencies to prescribe, by regulation, standards for all insured
depository institutions relating to: (i) internal controls, information systems
and internal audit systems; (ii) loan documentation; (iii) credit underwriting;
(iv) interest rate risk exposure; (v) asset growth; and (vi) compensation, fees
and benefits.  The federal banking agencies recently adopted final regulations
and Interagency Guidelines Prescribing Standards for Safety and Soundness
("Guidelines").  The Guidelines set forth the safety and soundness standards
that the federal banking agencies use to identify and address problems at
insured depository institutions before capital becomes impaired.  If the OTS
determines that the Savings Bank fails to meet any standard prescribed by the
Guidelines, the agency may require the Savings Bank to submit to the agency an
acceptable plan to achieve compliance with the standard.  OTS regulations
establish deadlines for the submission and review of such safety and soundness
compliance plans.

     QUALIFIED THRIFT LENDER TEST.  All savings associations are required to
meet a QTL test to avoid certain restrictions on their operations.  A savings
institution that fails to become or remain a QTL shall either become a national
bank or be subject to the following restrictions on its operations:  (i) the
association may not make any new investment or engage in activities that would
not be permissible for national banks; (ii) the association may not establish
any new branch office where a national bank located in the savings institution's
home state would not be able to establish a branch office; (iii) the association
shall be ineligible to obtain new advances from any FHLB; and (iv) the payment
of dividends by the association shall be subject to the statutory and regulatory
dividend restrictions applicable to national banks.  Also, beginning three years
after the date on which the savings institution ceases to be a QTL, the savings
institution would be prohibited from retaining any investment or engaging in any
activity not permissible for a national bank and would be required to repay any
outstanding advances to any FHLB.  In addition, within one year of the date on
which a savings association controlled by a company ceases to be a QTL, the
company must register as a bank holding company and become subject to the rules
applicable to such companies.  A savings institution may requalify as a QTL if
it thereafter complies with the QTL test.

     Currently, the QTL test requires that either an institution qualify as a
domestic building and loan association under the Code or that 65% of an
institution's "portfolio assets" (as defined) consist of certain housing and
consumer-related assets on a monthly average basis in nine out of every 12
months.  Assets that qualify without limit for inclusion as part of the 65%
requirement are loans made to purchase, refinance, construct, improve or repair
domestic residential housing and manufactured housing; home equity loans;
mortgage-backed securities (where the mortgages are secured by domestic
residential housing or manufactured housing); FHLB stock; direct or indirect
obligations of the FDIC; and loans for educational purposes, loans to small
businesses and loans made through credit cards.  In addition, the following
assets, among others, may be included in meeting the test subject to an overall
limit of 20% of the savings institution's portfolio assets:  50% of residential
mortgage loans originated and sold within 90 days of origination; 100% of
consumer loans; and stock issued by FHLMC or FNMA.  Portfolio assets consist of
total assets minus the sum of (i) goodwill and other intangible assets, (ii)
property used by the savings institution to conduct its business, and (iii)
liquid assets up to 20% of the institution's total assets.  At September 30,
1997, the qualified thrift investments of the Savings Bank were approximately
88.8% of its portfolio assets.

     CAPITAL REQUIREMENTS.  Under OTS regulations a savings association must
satisfy three minimum capital requirements: core capital, tangible capital and
risk-based capital.  Savings associations must meet all of the standards in
order to comply with the capital requirements.  The Holding Company is not
subject to any minimum capital requirements.

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<PAGE>
 
     OTS capital regulations establish a 3% core capital or leverage ratio
(defined as the ratio of core capital to adjusted total assets).  Core capital
is defined to include common stockholders' equity, noncumulative perpetual
preferred stock and any related surplus, and minority interests in equity
accounts of consolidated subsidiaries, less (i) any intangible assets, except
for certain qualifying intangible assets; (ii) certain mortgage servicing
rights; and (iii) equity and debt investments in subsidiaries that are not
"includable subsidiaries," which is defined as subsidiaries engaged solely in
activities not impermissible for a national bank, engaged in activities
impermissible for a national bank but only as an agent for its customers, or
engaged solely in mortgage-banking activities.  In calculating adjusted total
assets, adjustments are made to total assets to give effect to the exclusion of
certain assets from capital and to account appropriately for the investments in
and assets of both includable and nonincludable subsidiaries.  An institution
that fails to meet the core capital requirement would be required to file with
the OTS a capital plan that details the steps they will take to reach
compliance.  In addition, the OTS's prompt corrective action regulation provides
that a savings institution that has a leverage ratio of less than 4% (3% for
institutions receiving the highest CAMEL examination rating) will be deemed to
be "undercapitalized" and may be subject to certain restrictions.  See "--
Federal Regulation of the Savings Bank -- Prompt Corrective Action."

     Savings associations also must maintain "tangible capital" not less than
1.5% of the Savings Bank's adjusted total assets. "Tangible capital" is defined,
generally, as core capital minus any "intangible assets" other than purchased
mortgage servicing rights.  The prompt corrective action standards also
establish, in effect, a 2% tangible capital standard.

     Each savings institution must maintain Tier 1 (core) capital to risk-
weighted assets of at least 4% and total risk-based capital equal to at least 8%
of risk-weighted assets.  Total risk-based capital consists of the sum of core
and supplementary capital, provided that supplementary capital cannot exceed
core capital, as previously defined.  Supplementary capital includes (i)
permanent capital instruments such as cumulative perpetual preferred stock,
perpetual subordinated debt and mandatory convertible subordinated debt, (ii)
maturing capital instruments such as subordinated debt, intermediate-term
preferred stock and mandatory convertible subordinated debt, subject to an
amortization schedule, and (iii) general valuation loan and lease loss
allowances up to 1.25% of risk-weighted assets.

     The risk-based capital regulation assigns each balance sheet asset held by
a savings institution to one of four risk categories based on the amount of
credit risk associated with that particular class of assets.  Assets not
included for purposes of calculating capital are not included in calculating
risk-weighted assets.  The categories range from 0% for cash and securities that
are backed by the full faith and credit of the U.S. Government to 100% for
repossessed assets or assets more than 90 days past due.  Qualifying residential
mortgage loans (including multi-family mortgage loans) are assigned a 50% risk
weight.  Consumer, commercial, home equity and residential construction loans
are assigned a 100% risk weight, as are nonqualifying residential mortgage loans
and that portion of land loans and nonresidential construction loans that do not
exceed an 80% loan-to-value ratio.  The book value of assets in each category is
multiplied by the weighing factor (from 0% to 100%) assigned to that category.
These products are then totalled to arrive at total risk-weighted assets.  Off-
balance sheet items are included in risk-weighted assets by converting them to
an approximate balance sheet "credit equivalent amount" based on a conversion
schedule.  These credit equivalent amounts are then assigned to risk categories
in the same manner as balance sheet assets and included risk-weighted assets.

     The OTS has incorporated an interest rate risk component into its
regulatory capital rule.  Under the rule, savings associations with "above
normal" interest rate risk exposure would be subject to a deduction from total
capital for purposes of calculating their risk-based capital requirements.  A
savings association's interest rate risk is measured by the decline in the net
portfolio value of its assets (i.e., the difference between incoming and
                               ----                                     
outgoing discounted cash flows from assets, liabilities and off-balance sheet
contracts) that would result from a hypothetical 200 basis point increase or
decrease in market interest rates divided by the estimated economic value of the
association's assets, as calculated in accordance with guidelines set forth by
the OTS.  A savings association whose measured interest rate risk exposure
exceeds 2% must deduct an interest rate risk component in calculating its total
capital under the risk-based capital rule.  The interest rate risk component is
an amount equal to one-half of the difference between the institution's measured
interest rate risk and 2%, multiplied by the estimated economic value of the
association's

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<PAGE>
 
assets.  That dollar amount is deducted from an association's total capital in
calculating compliance with its risk-based capital requirement.  Under the rule,
there is a two quarter lag between the reporting date of an institution's
financial data and the effective date for the new capital requirement based on
that data.  A savings association with assets of less than $300 million and
risk-based capital ratios in excess of 12% is not subject to the interest rate
risk component, unless the OTS determines otherwise.  The rule also provides
that the Director of the OTS may waive or defer an association's interest rate
risk component on a case-by-case basis.  Under certain circumstances, a savings
association may request an adjustment to its interest rate risk component if it
believes that the OTS-calculated interest rate risk component overstates its
interest rate risk exposure.  In addition, certain "well-capitalized"
institutions may obtain authorization to use their own interest rate risk model
to calculate their interest rate risk component in lieu of the OTS-calculated
amount.  Presently, the OTS has postponed the date that the component will first
be deducted from an institution's total capital.

     See "HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE" for a table
that sets forth in terms of dollars and percentages the OTS tangible, core and
risk-based capital requirements, the Savings Bank's historical amounts and
percentages at September 30, 1997 and pro forma amounts and percentages based
upon the assumptions stated therein.

     LIMITATIONS ON CAPITAL DISTRIBUTIONS.  OTS regulations impose uniform
limitations on the ability of all savings associations to engage in various
distributions of capital such as dividends, stock repurchases and cash-out
mergers.  In addition, OTS regulations require the Savings Bank to give the OTS
30 days' advance notice of any proposed declaration of dividends, and the OTS
has the authority under its supervisory powers to prohibit the payment of
dividends.  The regulation utilizes a three-tiered approach which permits
various levels of distributions based primarily upon a savings association's
capital level.

     A Tier 1 savings association has capital in excess of its fully phased-in
capital requirement (both before and after the proposed capital distribution).
A Tier 1 savings association may make (without application but upon prior notice
to, and no objection made by, the OTS) capital distributions during a calendar
year up to 100% of its net income to date during the calendar year plus one-half
its surplus capital ratio (i.e., the amount of capital in excess of its fully
                           ----                                              
phased-in requirement) at the beginning of the calendar year or the amount
authorized for a Tier 2 association.  Capital distributions in excess of such
amount require advance notice to the OTS.  A Tier 2 savings association has
capital equal to or in excess of its minimum capital requirement but below its
fully phased-in capital requirement (both before and after the proposed capital
distribution).  Such an association may make (without application) capital
distributions up to an amount equal to 75% of its net income during the previous
four quarters depending on how close the association is to meeting its fully
phased-in capital requirement.  Capital distributions exceeding this amount
require prior OTS approval.  A Tier 3 savings association has capital below the
minimum capital requirement (either before or after the proposed capital
distribution).  A Tier 3 savings association may not make any capital
distributions without prior approval from the OTS.

     The Savings Bank currently meets the criteria to be designated a Tier 1
association and, consequently, could at its option (after prior notice to, and
no objection made by, the OTS) distribute up to 100% of its net income during
the calendar year plus 50% of its surplus capital ratio at the beginning of the
calendar year less any distributions previously paid during the year.

     LOANS TO ONE BORROWER.  Under the HOLA, savings institutions are generally
subject to the national bank limit on loans to one borrower.  Generally, this
limit is 15% of the Savings Bank's unimpaired capital and surplus, plus an
additional 10% of unimpaired capital and surplus, if such loan is secured by
readily-marketable collateral, which is defined to include certain financial
instruments and bullion.  The OTS by regulation has amended the loans to one
borrower rule to permit savings associations meeting certain requirements,
including capital requirements, to extend loans to one borrower in additional
amounts under circumstances limited essentially to loans to develop or complete
residential housing units.  At September 30, 1997, the Savings Bank's largest
aggregate amount of loans to one borrower was $2.0 million, which represented
6.5% of the Savings Bank's unimpaired capital and surplus at September 30, 1997.

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<PAGE>
 
     ACTIVITIES OF SAVINGS BANKS AND THEIR SUBSIDIARIES.  When a savings
association establishes or acquires a subsidiary or elects to conduct any new
activity through a subsidiary that the association controls, the savings
association must notify the FDIC and the OTS 30 days in advance and provide the
information each agency may, by regulation, require.  Savings associations also
must conduct the activities of subsidiaries in accordance with existing
regulations and orders.

     The OTS may determine that the continuation by a savings association of its
ownership control of, or its relationship to, the subsidiary constitutes a
serious risk to the safety, soundness or stability of the association or is
inconsistent with sound banking practices or with the purposes of the FDIA.
Based upon that determination, the FDIC or the OTS has the authority to order
the savings association to divest itself of control of the subsidiary.  The FDIC
also may determine by regulation or order that any specific activity poses a
serious threat to the SAIF.  If so, it may require that no SAIF member engage in
that activity directly.

     TRANSACTIONS WITH AFFILIATES.  Savings associations must comply with
Sections 23A and 23B of the Federal Reserve Act ("Sections 23A and 23B")
relative to transactions with affiliates in the same manner and to the same
extent as if the savings association were a Federal Reserve member bank.   A
savings and loan holding company, its subsidiaries and any other company under
common control are considered affiliates of the subsidiary savings association
under the HOLA.  Generally, Sections 23A and 23B:  (i) limit the extent to which
the insured association or its subsidiaries may engage in certain covered
transactions with an affiliate to an amount equal to 10% of such institution's
capital and surplus and place an aggregate limit on all such transactions with
affiliates to an amount equal to 20% of such capital and surplus, and (ii)
require that all such transactions be on terms substantially the same, or at
least as favorable to the institution or subsidiary, as those provided to a non-
affiliate.  The term "covered transaction" includes the making of loans, the
purchase of assets, the issuance of a guarantee and similar types of
transactions.  Any loan or extension of credit by the Savings Bank to an
affiliate must be secured by collateral in accordance with Section 23A.

     Three additional rules apply to savings associations: (i) a savings
association may not make any loan or other extension of credit to an affiliate
unless that affiliate is engaged only in activities permissible for bank holding
companies; (ii) a savings association may not purchase or invest in securities
issued by an affiliate (other than securities of a subsidiary); and (iii) the
OTS may, for reasons of safety and soundness, impose more stringent restrictions
on savings associations but may not exempt transactions from or otherwise
abridge Section 23A or 23B.  Exemptions from Section 23A or 23B may be granted
only by the Federal Reserve Board, as is currently the case with respect to all
FDIC-insured banks.  The Savings Bank has not been significantly affected by the
rules regarding transactions with affiliates.

     The Savings Bank's authority to extend credit to executive officers,
directors and 10% shareholders, as well as entities controlled by such persons,
is governed by Sections 22(g) and 22(h) of the Federal Reserve Act, and
Regulation O thereunder.  Among other things, these regulations generally
require that such loans be made on terms and conditions substantially the same
as those offered to unaffiliated individuals and not involve more than the
normal risk of repayment.  Generally, Regulation O also places individual and
aggregate limits on the amount of loans the Savings Bank may make to such
persons based, in part, on the Savings Bank's capital position, and requires
certain board approval procedures to be followed.  The OTS regulations, with
certain minor variances, apply Regulation O to savings institutions.

     COMMUNITY REINVESTMENT ACT.  Under the federal Community Reinvestment Act
("CRA"), all federally-insured financial institutions have a continuing and
affirmative obligation consistent with safe and sound operations to help meet
all the credit needs of its delineated community.  The CRA does not establish
specific lending requirements or programs nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to meet all the credit needs of its delineated community.  The CRA
requires the federal banking agencies, in connection with regulatory
examinations, to assess an institution's record of meeting the credit needs of
its delineated community and to take such record into account in evaluating
regulatory applications to establish a new branch office that will accept
deposits, relocate an existing office, or merge or consolidate with, or

                                       75
<PAGE>
 
acquire the assets or assume the liabilities of, a federally regulated financial
institution, among others.  The CRA requires public disclosure of an
institution's CRA rating.  The Savings Bank received an "outstanding" rating as
a result of its latest evaluation.

     REGULATORY AND CRIMINAL ENFORCEMENT PROVISIONS.  The OTS has primary
enforcement responsibility over savings institutions and has the authority to
bring action against all "institution-affiliated parties," including
stockholders, and any attorneys, appraisers and accountants who knowingly or
recklessly participate in wrongful action likely to have an adverse effect on an
insured institution.  Formal enforcement action may range from the issuance of a
capital directive or cease and desist order to removal of officers or directors,
receivership, conservatorship or termination of deposit insurance.  Civil
penalties cover a wide range of violations and can amount to $27,500 per day, or
$1.1 million per day in especially egregious cases.  Under the FDIA, the FDIC
has the authority to recommend to the Director of the OTS that enforcement
action be taken with respect to a particular savings institution.  If action is
not taken by the Director, the FDIC has authority to take such action under
certain circumstances.  Federal law also establishes criminal penalties for
certain violations.

SAVINGS AND LOAN HOLDING COMPANY REGULATIONS

     HOLDING COMPANY ACQUISITIONS.  The HOLA and OTS regulations issued
thereunder generally prohibit a savings and loan holding company, without prior
OTS approval, from acquiring more than 5% of the voting stock of any other
savings association or savings and loan holding company or controlling the
assets thereof.  They also prohibit, among other things, any director or officer
of a savings and loan holding company, or any individual who owns or controls
more than 25% of the voting shares of such holding company, from acquiring
control of any savings association not a subsidiary of such savings and loan
holding company, unless the acquisition is approved by the OTS.

     HOLDING COMPANY ACTIVITIES.  As a unitary savings and loan holding company,
the Holding Company generally is not subject to activity restrictions under the
HOLA.  If the Holding Company acquires control of another savings association as
a separate subsidiary other than in a supervisory acquisition, it would become a
multiple savings and loan holding company.  There generally are more
restrictions on the activities of a multiple savings and loan holding company
than on those of a unitary savings and loan holding company.  The HOLA provides
that, among other things, no multiple savings and loan holding company or
subsidiary thereof which is not an insured association shall commence or
continue for more than two years after becoming a multiple savings and loan
association holding company or subsidiary thereof, any business activity other
than:  (i) furnishing or performing management services for a subsidiary insured
institution, (ii) conducting an insurance agency or escrow business, (iii)
holding, managing, or liquidating assets owned by or acquired from a subsidiary
insured institution, (iv) holding or managing properties used or occupied by a
subsidiary insured institution, (v) acting as trustee under deeds of trust, (vi)
those activities previously directly authorized by regulation as of March 5,
1987 to be engaged in by multiple holding companies or (vii) those activities
authorized by the Federal Reserve Board as permissible for bank holding
companies, unless the OTS by regulation, prohibits or limits such activities for
savings and loan holding companies.  Those activities described in (vii) above
also must be approved by the OTS prior to being engaged in by a multiple savings
and loan holding company.

     QUALIFIED THRIFT LENDER TEST.  The HOLA provides that any savings and loan
holding company that controls a savings association that fails the QTL test, as
explained under "-- Federal Regulation of the Savings Bank -- Qualified Thrift
Lender Test," must, within one year after the date on which the association
ceases to be a QTL, register as and be deemed a bank holding company subject to
all applicable laws and regulations.

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<PAGE>
 
                                 TAXATION

FEDERAL TAXATION

     GENERAL.  Upon consummation of the Conversion and Reorganization, the
Holding Company and the Savings Bank will report their income on a fiscal year
basis using the accrual method of accounting and will be subject to federal
income taxation in the same manner as other corporations with some exceptions,
including particularly the Savings Bank's reserve for bad debts discussed below.
The following discussion of tax matters is intended only as a summary and does
not purport to be a comprehensive description of the tax rules applicable to the
Savings Bank or the Holding Company.  For additional information regarding
income taxes, see Note 11 of Notes to Consolidated Financial Statements.

     BAD DEBT RESERVE.  Historically, savings institutions such as the Savings
Bank which met certain definitional tests primarily related to their assets and
the nature of their business ("qualifying thrift") were permitted to establish a
reserve for bad debts and to make annual additions thereto, which may have been
deducted in arriving at their taxable income.  The Savings Bank's deductions
with respect to "qualifying real property loans," which are generally loans
secured by certain interest in real property, were computed using an amount
based on the Savings Bank's actual loss experience, or a percentage equal to 8%
of the Savings Bank's taxable income, computed with certain modifications and
reduced by the amount of any permitted additions to the non-qualifying reserve.
Due to the Savings Bank's loss experience, the Savings Bank generally recognized
a bad debt deduction equal to 8% of taxable income.

     The provisions repealing the current thrift bad debt rules were passed by
Congress as part of "The Small Business Job Protection Act of 1996."  The new
rules eliminate the 8% of taxable income method for deducting additions to the
tax bad debt reserves for all thrifts for tax years beginning after December 31,
1995.  These rules also require that all institutions recapture all or a portion
of their bad debt reserves added since the base year (last taxable year
beginning before January 1, 1988).  The Savings Bank has previously recorded a
deferred tax liability equal to the bad debt recapture and as such the new rules
will have no effect on the net income or federal income tax expense.  For
taxable years beginning after December 31, 1995, the Savings Bank's bad debt
deduction will be determined under the experience method using a formula based
on actual bad debt experience over a period of years or, if the Savings Bank is
a "large" association (assets in excess of $500 million) on the basis of net
charge-offs during the taxable year.  The new rules allow an institution to
suspend bad debt reserve recapture for the 1996 and 1997 tax years if the
institution's lending activity for those years is equal to or greater than the
institutions average mortgage lending activity for the six taxable years
preceding 1996 adjusted for inflation.  For this purpose, only home purchase or
home improvement loans are included and the institution can elect to have the
tax years with the highest and lowest lending activity removed from the average
calculation.  If an institution is permitted to postpone the reserve recapture,
it must begin its six year recapture no later than the 1998 tax year.  The
unrecaptured base year reserves will not be subject to recapture as long as the
institution continues to carry on the business of banking.  In addition, the
balance of the pre-1988 bad debt reserves continue to be subject to provisions
of present law referred to below that require recapture in the case of certain
excess distributions to shareholders.

     DISTRIBUTIONS.  To the extent that the Savings Bank makes "nondividend
distributions" to the Holding Company, such distributions will be considered to
result in distributions from the balance of its bad debt reserve as of December
31, 1987 (or a lesser amount if the Savings Bank's loan portfolio decreased
since December 31, 1987) and then from the supplemental reserve for losses on
loans ("Excess Distributions"), and an amount based on the Excess Distributions
will be included in the Savings Bank's taxable income.  Nondividend
distributions include distributions in excess of the Savings Bank's current and
accumulated earnings and profits, distributions in redemption of stock and
distributions in partial or complete liquidation.  However, dividends paid out
of the Savings Bank's current or accumulated earnings and profits, as calculated
for federal income tax purposes, will not be considered to result in a
distribution from the Savings Bank's bad debt reserve.  The amount of additional
taxable income created from an Excess Distribution is an amount that, when
reduced by the tax attributable to the income, is equal to the amount of the
distribution.  Thus, if, after the Conversion, the Savings Bank makes a
"nondividend

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<PAGE>
 
distribution," then approximately one and one-half times the Excess Distribution
would be includable in gross income for federal income tax purposes, assuming a
34% corporate income tax rate (exclusive of state and local taxes).  See
"REGULATION" and "DIVIDEND POLICY" for limits on the payment of dividends by the
Savings Bank.  The Savings Bank does not intend to pay dividends that would
result in a recapture of any portion of its tax bad debt reserve.

     CORPORATE ALTERNATIVE MINIMUM TAX.  The Code imposes a tax on alternative
minimum taxable income ("AMTI") at a rate of 20%.  The excess of the tax bad
debt reserve deduction using the percentage of taxable income method over the
deduction that would have been allowable under the experience method is treated
as a preference item for purposes of computing the AMTI.  In addition, only 90%
of AMTI can be offset by net operating loss carryovers.  AMTI is increased by an
amount equal to 75% of the amount by which the Savings Bank's adjusted current
earnings exceeds its AMTI (determined without regard to this preference and
prior to reduction for net operating losses).  For taxable years beginning after
December 31, 1986, and before January 1, 1996, an environmental tax of 0.12% of
the excess of AMTI (with certain modification) over $2.0 million is imposed on
corporations, including the Savings Bank, whether or not an Alternative Minimum
Tax is paid.

     DIVIDENDS-RECEIVED DEDUCTION.  The Holding Company may exclude from its
income 100% of dividends received from the Savings Bank as a member of the same
affiliated group of corporations.  The corporate dividends-received deduction is
generally 70% in the case of dividends received from unaffiliated corporations
with which the Holding Company and the Savings Bank will not file a consolidated
tax return, except that if the Holding Company or the Savings Bank owns more
than 20% of the stock of a corporation distributing a dividend, then 80% of any
dividends received may be deducted.

     AUDITS.  The Savings Bank's federal income tax returns have not been
audited within the last five years.

STATE TAXATION

     SOUTH CAROLINA TAXATION.  South Carolina has adopted the Code, with certain
modifications, as it relates to savings and loan associations, effective for
taxable years beginning after December 31, 1984.  The Savings Bank is subject to
South Carolina income tax at the rate of 6%.  This rate of tax is imposed on
savings and loan associations and savings banks in lieu of the general state
business corporation income tax.

     At September 30, 1997, the Savings Bank had net operating loss
carryforwards for state tax purposes of approximately $62.0 million, which
expire in varying amounts between fiscal years 1998 and 2006.

     The Savings Bank's state income tax returns have not been audited within
the last five years.

     DELAWARE.  As a Delaware holding company not earning income in Delaware,
the Holding Company is exempt from Delaware corporate income tax, but is
required to file an annual report with and pay an annual franchise tax to the
State of Delaware.

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<PAGE>
 
                       THE CONVERSION AND REORGANIZATION

     THE OTS HAS APPROVED THE PLAN OF CONVERSION SUBJECT TO ITS APPROVAL BY THE
MEMBERS OF THE SAVINGS BANK AND THE STOCKHOLDERS OF THE SAVINGS BANK ENTITLED TO
VOTE THEREON AND TO THE SATISFACTION OF CERTAIN OTHER CONDITIONS IMPOSED BY THE
OTS IN ITS APPROVAL.  OTS APPROVAL DOES NOT CONSTITUTE A RECOMMENDATION OR
ENDORSEMENT OF THE PLAN OF CONVERSION.

GENERAL

     On September 22, 1997, the Boards of Directors of the MHC and the Savings
Bank unanimously adopted, and on December 22, 1997, unanimously amended, the
Plan of Conversion, pursuant to which the MHC will convert from a mutual holding
company to a stock holding company and the Savings Bank simultaneously
reorganize as a wholly-owned subsidiary of the Holding Company, a newly formed
Delaware corporation.  THE FOLLOWING DISCUSSION OF ALL MATERIAL ASPECTS OF THE
PLAN OF CONVERSION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE PLAN OF
CONVERSION, WHICH IS ATTACHED AS EXHIBIT A TO BOTH THE MHC'S PROXY STATEMENT AND
THE SAVINGS BANK'S PROXY STATEMENT, AND IS AVAILABLE TO BOTH MEMBERS OF THE MHC
AND STOCKHOLDERS OF THE SAVINGS BANK UPON REQUEST.  The Plan of Conversion is
also filed as an exhibit to the Registration Statement.  See "ADDITIONAL
INFORMATION."  The OTS has approved the Plan of Conversion subject to its
approval by the members of the MHC entitled to vote on the matter at the Special
Meeting of Members called for that purpose to be held on ____________, 1998, its
approval by the stockholders of the Savings Bank entitled to vote on the matter
at the Stockholders' Meeting called for that purpose to be held on ____________,
1998, and its approval by the stockholders of the Savings Bank (excluding the
MHC) entitled to vote on the matter at the Stockholders' Meeting, and subject to
the satisfaction of certain other conditions imposed by the OTS in its approval.

     Pursuant to the Plan of Conversion, (i) the MHC will convert from a
federally-chartered mutual holding company to a federally-chartered interim
stock savings bank (i.e. Interim A) and simultaneously merge with and into the
                    ----                                                      
Savings Bank, pursuant to which the MHC will cease to exist and the shares of
Savings Bank Common Stock held by the MHC will be canceled, and (ii) Interim A
will then merge with and into the Savings Bank.  As a result of the merger of
Interim A with and into the Savings Bank, the Savings Bank will become a wholly
owned subsidiary of the Holding Company and the Public Savings Bank Shares will
be converted into the Exchange Shares pursuant to the Exchange Ratio, which will
result in the holders of such shares owning in the aggregate approximately the
same percentage of the Common Stock to be outstanding upon the completion of the
Conversion and Reorganization (i.e., the Conversion Shares and the Exchange
                               ----                                        
Shares) as the percentage of Savings Bank Common Stock owned by them in the
aggregate immediately prior to consummation of the Conversion and
Reorganization, but before giving effect to (a) the payment of cash in lieu of
issuing fractional Exchange Shares and (b) any shares of Conversion Stock
purchased by the Savings Bank's stockholders in the Conversion Offerings.

     As part of the Conversion and Reorganization, the Holding Company is
offering Conversion Shares in the Subscription Offering to holders of
Subscription Rights in the following order of priority: (i) Eligible Account
Holders (depositors of the Savings Bank with $50.00 or more on deposit as of the
close of business on June 30, 1996); (ii) Supplemental Eligible Account Holders
(depositors of the Savings Bank with $50.00 or more on deposit as of the close
of business on December 31, 1997); and (iii) Other Members (depositors of the
Savings Bank as of the close of business on ___________, 1998 and borrowers of
the Savings Bank with loans outstanding as of the close of business on October
26, 1993, which continue to be outstanding as of the close of business on
__________, 1997).

     Concurrently with the Subscription Offering, any Conversion Shares not
subscribed for in the Subscription Offering may be offered for sale in the
Direct Community Offering to members of the general public, with priority being
given first to Public Stockholders as of the close of business on the Voting
Record Date (who are not Eligible Account Holders, Supplemental Eligible Account
Holders or Other Members) and then to natural persons and trusts of natural
persons residing in the Local Community.  Conversion Shares not sold in the
Subscription and Direct Community Offerings may be offered in the Syndicated
Community Offering.  Regulations require that the Direct

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<PAGE>
 
Community and Syndicated Community Offerings be completed within 45 days after
completion of the fully extended Subscription Offering unless extended by the
Savings Bank or the Holding Company with the approval of the regulatory
authorities.  If the Syndicated Community Offering is determined not to be
feasible, the Board of Directors of the Savings Bank will consult with the
regulatory authorities to determine an appropriate alternative method for
selling the unsubscribed Conversion Shares.  The Plan of Conversion provides
that the Conversion and Reorganization must be completed within 24 months after
the date of the approval of the Plan of Conversion by the members of the MHC.

     No sales of Common Stock may be completed, either in the Subscription
Offering, Direct Community Offering or Syndicated Community Offerings unless the
Plan of Conversion is approved by the members of the MHC and the stockholders of
the Savings Bank.

     The completion of the Conversion Offerings, however, is subject to market
conditions and other factors beyond the Savings Bank's control.  No assurance
can be given as to the length of time after approval of the Plan of Conversion
at the Special Members Meeting and the Stockholders Meeting that will be
required to complete the Direct Community or Syndicated Community Offerings or
other sale of the Conversion Shares.  If delays are experienced, significant
changes may occur in the estimated pro forma market value of the MHC and the
Savings Bank, as converted, together with corresponding changes in the net
proceeds realized by the Holding Company from the sale of the Conversion Shares.
If the Conversion and Reorganization is terminated, the Savings Bank would be
required to charge all Conversion and Reorganization expenses against current
income.

     Orders for Conversion Shares will not be filled until at least 1,466,250
Conversion Shares have been subscribed for or sold and the OTS approves the
final valuation and the Conversion and Reorganization closes.  If the Conversion
and Reorganization is not completed within 45 days after the last day of the
fully extended Subscription Offering and the OTS consents to an extension of
time to complete the Conversion and Reorganization, subscribers will be given
the right to increase, decrease or rescind their subscriptions.  Unless an
affirmative indication is received from subscribers that they wish to continue
to subscribe for shares, the funds will be returned promptly, together with
accrued interest at the Savings Bank's passbook rate from the date payment is
received until the funds are returned to the subscriber.  If such period is not
extended, or, in any event, if the Conversion and Reorganization is not
completed, all withdrawal authorizations will be terminated and all funds held
will be promptly returned together with accrued interest at the Savings Bank's
passbook rate from the date payment is received until the Conversion and
Reorganization is terminated.

PURPOSES OF CONVERSION AND REORGANIZATION

     The MHC, as a federally chartered mutual holding company, does not have
stockholders and has no authority to issue capital stock.  As a result of the
Conversion and Reorganization, the Holding Company will be structured in the
form used by holding companies of commercial banks, most business entities and a
growing number of savings institutions.  The holding company form of
organization will provide the Holding Company with the ability to diversify the
Holding Company's and the Savings Bank's business activities through acquisition
of or mergers with both stock savings institutions and commercial banks, as well
as other companies.  Although there are no current arrangements, understandings
or agreements regarding any such opportunities, the Holding Company will be in a
position after the Conversion and Reorganization, subject to regulatory
limitations and the Holding Company's financial position, to take advantage of
any such opportunities that may arise.

     In their decision to pursue the Conversion and Reorganization, the Board of
Directors of the MHC and the Savings Bank considered various regulatory
uncertainties associated with the mutual holding company structure including the
ability to waive dividends in the future as well as the general uncertainty
regarding a possible elimination of the federal savings association charter.

     The Conversion and Reorganization will be important to the future growth
and performance of the holding company organization by providing a larger
capital base to support the operations of the Savings Bank and Holding

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Company and by enhancing their future access to capital markets, their ability
to diversify into other financial services related activities, and their ability
to provide services to the public.  Since the MHC's ownership interest in the
Savings Bank is 53.03% as of the date of this Prospectus, the Savings Bank
currently does not have the ability to raise additional capital through the sale
of additional shares of Savings Bank Common Stock because OTS regulations
require that the MHC hold a majority of the outstanding shares of Savings Bank
Common Stock.

     The Conversion and Reorganization also will result in an increase in the
number of shares of Common Stock to be outstanding as compared to the number of
outstanding shares of Public Savings Bank Shares which will increase the
likelihood of the development of an active and liquid trading market for the
Common Stock.  See "MARKET FOR COMMON STOCK."  In addition, the Conversion and
Reorganization permit the Holding Company to engage in stock repurchases without
adverse federal income tax consequences, unlike the Savings Bank.  Currently,
the Holding Company has no plans or intentions to engage in any stock
repurchases.

     An additional benefit of the Conversion and Reorganization will be an
increase in the accumulated earnings and profits of the Savings Bank for federal
income tax purposes.  When the Savings Bank (as a mutual institution)
transferred substantially all of its assets and liabilities to its stock savings
bank successor in the MHC Reorganization, its accumulated earnings and profits
tax attribute was not able to be transferred to the Savings Bank because no tax-
free reorganization was involved.  Accordingly, this tax attribute was retained
by the Savings Bank when it converted its charter to that of the MHC, even
though the underlying retained earnings were transferred to the Savings Bank.
The Conversion and Reorganization has been structured to re-unite the
accumulated earnings and profits tax attribute retained by the MHC in the MHC
Reorganization with the retained earnings of the Savings Bank by merging the MHC
with and into the Savings Bank in a tax-free reorganization.  This transaction
will increase the Savings Bank's ability to pay dividends to the Holding Company
in the future.  See "DIVIDEND POLICY."

     If the Savings Bank had undertaken a standard conversion involving the
formation of a stock holding company in 1993, applicable OTS regulations would
have required a greater amount of common stock to be sold than the amount of net
proceeds raised in the MHC Reorganization.  Management believed that it was
advisable to profitably invest the $946,000 of net proceeds raised in the MHC
Reorganization and the $10.7 million of net proceeds raised in the Additional
Offering prior to raising the larger amount of capital that would have been
raised in a standard conversion.  A standard conversion in 1993 also would have
immediately eliminated all aspects of the mutual form of organization.

     In light of the foregoing, the Boards of Directors of the Primary Parties
believe that the Conversion and Reorganization is in the best interests of the
MHC and the Savings Bank, their respective members and stockholders, and the
communities served by the Savings Bank.

EFFECTS OF CONVERSION AND REORGANIZATION ON DEPOSITORS AND BORROWERS OF THE
SAVINGS BANK

     GENERAL.  Prior to the Conversion and Reorganization, each depositor in the
Savings Bank has both a deposit account in the institution and a pro rata
ownership interest in the net worth of the MHC based upon the balance in his or
her account, which interest may only be realized in the event of a liquidation
of the MHC.  However, this ownership interest is tied to the depositor's account
and has no tangible market value separate from such deposit account.  A
depositor who reduces or closes his or her account receives a portion or all of
the balance in the account but nothing for his or her ownership interest in the
net worth of the MHC, which is lost to the extent that the balance in the
account is reduced.

     Consequently, the depositors of the Savings Bank normally have no way to
realize the value of their ownership interest in the MHC, which has realizable
value only in the unlikely event that the MHC is liquidated.  In such event, the
depositors of record at that time, as owners, would share pro rata in any
residual surplus and reserves of the MHC after other claims are paid.

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<PAGE>
 
     Upon consummation of the Conversion and Reorganization, permanent
nonwithdrawable capital stock will be created to represent the ownership of the
net worth of the Holding Company.  The Common Stock is separate and apart from
deposit accounts and cannot be and is not insured by the FDIC or any other
governmental agency.  Certificates are issued to evidence ownership of the
permanent stock.  The stock certificates are transferable, and therefore the
stock may be sold or traded if a purchaser is available with no effect on any
deposit and/or loan account(s) the seller may hold in the Savings Bank.

     CONTINUITY.  The Conversion and Reorganization will not interrupt the
Savings Bank's normal business of accepting deposits and making loans.  The
Savings Bank will continue to be subject to regulation by the OTS and the FDIC.
After the Conversion and Reorganization, the Savings Bank will continue to
provide services for depositors and borrowers under current policies by its
present management and staff.

     The directors and officers of the Savings Bank at the time of the
Conversion and Reorganization will continue to serve as directors and officers
of the Savings Bank after the Conversion and Reorganization.  The directors and
officers of the Holding Company consist of individuals currently serving as
directors and officers of the MHC and the Savings Bank, and they generally will
retain their positions in the Holding Company after the Conversion and
Reorganization.

     EFFECT ON PUBLIC SAVINGS BANK SHARES.  Under the Plan of Conversion, upon
consummation of the Conversion and Reorganization, the Public Savings Bank
Shares shall be converted into Exchange Shares based upon the Exchange Ratio
without any further action on the part of the holder thereof.  Upon surrender of
the Public Savings Bank Shares, Common Stock will be issued in exchange for such
shares.  See "-- Delivery and Exchange of Stock Certificates."

     Upon consummation of the Conversion and Reorganization, the Public
Stockholders will become stockholders of the Holding Company.  For a description
of certain changes in the rights of stockholders as a result of the Conversion
and Reorganization, see "COMPARISON OF STOCKHOLDERS' RIGHTS."

     VOTING RIGHTS.  Presently, depositors and borrowers of the Savings Bank are
members of, and have voting rights in, the MHC as to all matters requiring
membership action.  Upon completion of the Conversion and Reorganization, the
MHC will cease to exist and all voting rights in the Savings Bank will be vested
in the Holding Company as the sole stockholder of the Savings Bank.  Exclusive
voting rights with respect to the Holding Company will be vested in the holders
of Common Stock.  Depositors and borrowers of the Savings Bank will not have
voting rights in the Holding Company after the Conversion and Reorganization,
except to the extent that they become stockholders of the Holding Company.

     SAVINGS ACCOUNTS AND LOANS.  The Savings Bank's savings accounts, account
balances and existing FDIC insurance coverage of savings accounts will not be
affected by the Conversion and Reorganization.  Furthermore, the Conversion and
Reorganization will not affect the loan accounts, loan balances or obligations
of borrowers under their individual contractual arrangements with the Savings
Bank.

     TAX EFFECTS.  The Savings Bank has received an opinion from Breyer &
Aguggia, Washington, D.C., that the Conversion and Reorganization will
constitute a nontaxable reorganization under Section 368(a)(1)(A) of the Code.
Among other things, the opinion provides that: (i) the conversion of the MHC
from a mutual holding company to a federally-chartered interim stock savings
bank (i.e., Interim A) and its simultaneous merger with and into the Savings
      ----                                                                  
Bank, with the Savings Bank as the surviving entity will qualify as a
reorganization within the meaning of Section 368(a)(1)(A) of the Code, (ii) no
gain or loss will be recognized by the Savings Bank upon the receipt of the
assets of the MHC in such merger, (iii) the merger of Interim B with and into
the Savings Bank, with the Savings Bank as the surviving entity, will qualify as
a reorganization within the meaning of Section 368(a)(1)(A) of the Code, (iv) no
gain or loss will be recognized by Interim B upon the transfer of its assets to
the Savings Bank, (v) no gain or loss will be recognized by the Savings Bank
upon the receipt of the assets of Interim B, (vi) no gain or loss will be
recognized by the Holding Company upon the receipt of Savings Bank Common Stock
solely in

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exchange for Common Stock, (vii) no gain or loss will be recognized by the
Public Stockholders upon the receipt of Exchange Shares in exchange for their
Public Savings Bank Shares, (viii) the basis of the Exchange Shares to be
received by the Public Stockholders will be the same as the basis of the Public
Savings Bank Shares surrendered in exchange therefor, before giving effect to
any payment of cash in lieu of fractional Exchange Shares, (ix) the holding
period of the Exchange Shares to be received by the Public Stockholders will
include the holding period of the Public Savings Bank Shares, provided that the
Public Savings Bank Shares were held as a capital asset on the date of the
exchange, (x) no gain or loss will be recognized by the Holding Company upon the
sale of shares of Conversion Shares in the Conversion Offerings, (xi) the
Eligible Account Holders, Supplemental Eligible Account Holders and Other
Members will recognize gain, if any, upon the issuance to them of withdrawable
savings accounts in the Savings Bank following the Conversion and
Reorganization, interests in the liquidation account and  nontransferable
subscription rights to purchase Conversion Stock, but only to the extent of the
value, if any, of the subscription rights, and (xii) the tax basis to the
holders of Conversion Shares purchased in the Conversion Offerings will be the
amount paid therefor, and the holding period for the Conversion Shares will
begin on the date of consummation of the Conversion Offerings, if purchased
through the exercise of Subscription Rights, and on the day after the date of
purchase, if purchased in the Community Offering or the Syndicated Community
Offering.  Unlike a private letter ruling issued by the IRS, an opinion of
counsel is not binding on the IRS and the IRS could disagree with the
conclusions reached therein.  In the event of such disagreement, no assurance
can be given that the conclusions reached in an opinion of counsel would be
sustained by a court if contested by the IRS.

     Based upon past rulings issued by the IRS, the opinion provides that the
receipt of Subscription Rights by Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members under the Plan of Conversion will be
taxable to the extent, if any, that the Subscription Rights are deemed to have a
fair market value.  RP Financial, a financial consulting firm retained by the
Savings Bank, whose findings are not binding on the IRS, has issued a letter
indicating that the Subscription Rights do not have any value, based on the fact
that such rights are acquired by the recipients without cost, are
nontransferable and of short duration and afford the recipients the right only
to purchase shares of the Common Stock at a price equal to its estimated fair
market value, which will be the same price paid by purchasers in the Direct
Community Offering for unsubscribed shares of Common Stock.  If the Subscription
Rights are deemed to have a fair market value, the receipt of such rights may
only be taxable to those Eligible Account Holders, Supplemental Eligible Account
Holders and Other Members who exercise their Subscription Rights.  The Savings
Bank could also recognize a gain on the distribution of such Subscription
Rights.  Eligible Account Holders, Supplemental Eligible Account Holders and
Other Members are encouraged to consult with their own tax advisors as to the
tax consequences in the event the Subscription Rights are deemed to have a fair
market value.

     The Savings Bank has also received an opinion from Evans, Carter, Kunes &
Bennett, P.A., Charleston, South Carolina, that, assuming the Conversion and
Reorganization does not result in any federal income tax liability to the
Savings Bank, its account holders, or the Holding Company, implementation of the
Plan of Conversion will not result in any South Carolina tax liability to such
entities or persons.

     The opinions of Breyer & Aguggia and Evans, Carter, Kunes & Bennett, P.A.
and the letter from RP Financial are filed as exhibits to the Registration
Statement.  See "ADDITIONAL INFORMATION."

     PROSPECTIVE INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS
REGARDING THE TAX CONSEQUENCES OF THE CONVERSION AND REORGANIZATION PARTICULAR
TO THEM.

     LIQUIDATION ACCOUNT.  In the unlikely event of a complete liquidation of
the MHC, each depositor of the Savings Bank would receive his or her pro rata
share of any assets of the MHC remaining after payment of claims of all
creditors.  Each depositor's pro rata share of such remaining assets would be in
the same proportion as the value of his or her deposit account was to the total
value of all deposit accounts in the Savings Bank at the time of liquidation.
After the Conversion and Reorganization, each depositor, in the event of a
complete liquidation of the Savings Bank, would have a claim as a creditor of
the same general priority as the claims of all other general

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creditors of the Savings Bank.  However, except as described below, his or her
claim would be solely in the amount of the balance in his or her deposit account
plus accrued interest.  Each stockholder would not have an interest in the value
or assets of the Savings Bank or the Holding Company above that amount.

     The Plan of Conversion provides for the establishment, upon the completion
of the Conversion and Reorganization, of a special "liquidation account" for the
benefit of Eligible Account Holders and Supplemental Eligible Account Holders in
an amount equal to the amount of any dividends waived by the MHC plus the
greater of (i) the Savings Bank's retained earnings of $12.9 million at March
31, 1993, the date of the latest statement of financial condition contained in
the final offering circular utilized in the MHC Reorganization, or (ii) 53.02%
of the Savings Bank's total stockholders' equity as reflected in its latest
statement of financial condition contained in the final Prospectus utilized in
the Conversion Offerings.  As of the date of this Prospectus, the initial
balance of the liquidation account would be $____ million.  Each Eligible
Account Holder and Supplemental Eligible Account Holder, if he or she were to
continue to maintain his or her deposit account at the Savings Bank, would be
entitled, upon a complete liquidation of the Savings Bank after the Conversion
and Reorganization to an interest in the liquidation account prior to any
payment to the Holding Company as the sole stockholder of the Savings Bank.
Each Eligible Account Holder and Supplemental Eligible Account Holder would have
an initial interest in such liquidation account for each deposit account,
including passbook accounts, transaction accounts such as checking accounts,
money market deposit accounts and certificates of deposit, held in the Savings
Bank at the close of business on June 30, 1996 or December 31, 1997, as the case
may be.  Each Eligible Account Holder and Supplemental Eligible Account Holder
will have a pro rata interest in the total liquidation account for each of his
or her deposit accounts based on the proportion that the balance of each such
deposit account on the Eligibility Record Date (June 30, 1996) or the
Supplemental Eligibility Record Date (December 31, 1997), as the case may be,
bore to the balance of all deposit accounts in the Savings Bank on such date.

     If, however, on any September 30 annual closing date of the Savings Bank,
commencing September 30, 1998, the amount in any deposit account is less than
the amount in such deposit account on June 30, 1996 or December 31, 1997, as the
case may be, or any other annual closing date, then the interest in the
liquidation account relating to such deposit account would be reduced by the
proportion of any such reduction, and such interest will cease to exist if such
deposit account is closed.  In addition, no interest in the liquidation account
would ever be increased despite any subsequent increase in the related deposit
account.  Any assets remaining after the above liquidation rights of Eligible
Account Holders and Supplemental Eligible Account Holders are satisfied would be
distributed to the Holding Company as the sole stockholder of the Savings Bank.

THE SUBSCRIPTION, DIRECT COMMUNITY AND SYNDICATED COMMUNITY OFFERINGS

     SUBSCRIPTION OFFERING.  In accordance with the Plan of Conversion,
nontransferable Subscription Rights to purchase the Conversion Shares have been
issued to persons and entities entitled to purchase the Conversion Shares in the
Subscription Offering.  The amount of Conversion Shares which these parties may
purchase will be subject to the availability of the Conversion Shares for
purchase under the categories set forth in the Plan of Conversion.  Subscription
priorities have been established for the allocation of stock to the extent that
the Conversion Shares are available.  These priorities are as follows:

     Category 1:  Eligible Account Holders.  Each depositor with $50.00 or more
on deposit at the Savings Bank as of the close of business on June 30, 1996 will
receive nontransferable Subscription Rights to subscribe for up to 50,000
Conversion Shares, one-tenth of one percent of the total offering of Conversion
Shares or 15 times the product (rounded down to the next whole number) obtained
by multiplying the total number of Conversion Shares to be issued by a fraction
of which the numerator is the amount of qualifying deposit of the Eligible
Account Holder and the denominator is the total amount of qualifying deposits of
all Eligible Account Holders.  If the exercise of Subscription Rights in this
category results in an oversubscription, Conversion Shares will be allocated
among subscribing Eligible Account Holders so as to permit each Eligible Account
Holder, to the extent possible, to purchase a number of shares sufficient to
make such person's total allocation equal 100 shares or the number of

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shares actually subscribed for, whichever is less.  Thereafter, unallocated
shares will be allocated among subscribing Eligible Account Holders
proportionately, based on the amount of their respective qualifying deposits as
compared to total qualifying deposits of all Eligible Account Holders.
Subscription Rights received by officers and directors in this category based on
their increased deposits in the Savings Bank in the one year period preceding
June 30, 1996 are subordinated to the Subscription Rights of other Eligible
Account Holders.

     Category 2:  Supplemental Eligible Account Holders.  Each depositor with
$50.00 or more on deposit as of the close of business on December 31, 1997 will
receive nontransferable Subscription Rights to subscribe for up to the greater
of 50,000 Conversion Shares, one-tenth of one percent of the total offering of
Common Stock or 15 times the product (rounded down to the next whole number)
obtained by multiplying the total number of Conversion Shares to be issued by a
fraction of which the numerator is the amount of qualifying deposits of the
Supplemental Eligible Account Holder and the denominator is the total amount of
qualifying deposits of all Supplemental Eligible Account Holders.  If the
exercise of Subscription Rights in this category results in an oversubscription,
Conversion Shares will be allocated among subscribing Supplemental Eligible
Account Holders so as to permit each Supplemental Eligible Account Holder, to
the extent possible, to purchase a number of shares sufficient to make his total
allocation equal 100 shares or the number of shares actually subscribed for,
whichever is less.  Thereafter, unallocated shares will be allocated among
subscribing Supplemental Eligible Account Holders proportionately, based on the
amount of their respective qualifying deposits as compared to total qualifying
deposits of all Supplemental Eligible Account Holders.

     Category 3:  Other Members.  Each depositor of the Savings Bank as of the
close of business on the Voting Record Date (___________, 1998) and each
borrower with a loan outstanding as of the close of business on October 26,
1993, which continues to be outstanding as of the close of business on the
Voting Record Date, will receive nontransferable Subscription Rights to purchase
up 50,000 Conversion Shares to the extent shares are available following
subscriptions by Eligible Account Holders and Supplemental Eligible Account
Holders.  In the event of an oversubscription in this category, the available
shares will be allocated proportionately based on the amount of the respective
subscriptions.

     SUBSCRIPTION RIGHTS ARE NONTRANSFERABLE.  PERSONS SELLING OR OTHERWISE
TRANSFERRING THEIR RIGHTS TO SUBSCRIBE FOR COMMON STOCK IN THE SUBSCRIPTION
OFFERING OR SUBSCRIBING FOR COMMON STOCK ON BEHALF OF ANOTHER PERSON WILL BE
SUBJECT TO FORFEITURE OF SUCH RIGHTS AND POSSIBLE FURTHER SANCTIONS AND
PENALTIES IMPOSED BY THE OTS OR ANOTHER AGENCY OF THE U.S. GOVERNMENT.  EACH
PERSON EXERCISING SUBSCRIPTION RIGHTS WILL BE REQUIRED TO CERTIFY THAT HE OR SHE
IS PURCHASING SUCH SHARES SOLELY FOR HIS OR HER OWN ACCOUNT AND THAT HE OR SHE
HAS NO AGREEMENT OR UNDERSTANDING WITH ANY OTHER PERSON FOR THE SALE OR TRANSFER
OF SUCH SHARES.  ONCE TENDERED, SUBSCRIPTION ORDERS CANNOT BE REVOKED WITHOUT
THE CONSENT OF THE SAVINGS BANK AND THE HOLDING COMPANY.

     The Holding Company and the Savings Bank will make reasonable attempts to
provide a Prospectus and related offering materials to holders of Subscription
Rights.  However, the Subscription Offering and all Subscription Rights under
the Plan of Conversion will expire at Noon, Eastern Time, on the Expiration
Date, whether or not the Savings Bank has been able to locate each person
entitled to such Subscription Rights.  ORDERS FOR COMMON STOCK IN THE
SUBSCRIPTION OFFERING RECEIVED IN HAND BY THE SAVINGS BANK AFTER THE EXPIRATION
DATE WILL NOT BE ACCEPTED.  The Subscription Offering may be extended by the
Holding Company and the Savings Bank up to ______, 1998 without the OTS's
approval.  OTS regulations require that the Holding Company complete the sale of
Conversion Shares within 45 days after the close of the Subscription Offering.
If the Direct Community Offering and the Syndicated Community Offerings are not
completed by __________, 1998 (or ___________, 1998, if the Subscription
Offering is fully extended), all funds received will be promptly returned with
interest at the Savings Bank's passbook rate and all withdrawal authorizations
will be canceled or, if regulatory approval of an extension of the time period
has been granted, all subscribers and purchasers will be given the right to
increase, decrease or rescind their orders.  If an extension of time is
obtained, all subscribers will be notified of such extension and of the duration
of any extension that has been granted, and will be given the right to increase,
decrease or rescind their

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<PAGE>
 
orders. If an affirmative response to any resolicitation is not received by the
Holding Company from a subscriber, the subscriber's order will be rescinded and
all funds received will be promptly returned with interest (or withdrawal
authorizations will be canceled).  No single extension can exceed 90 days.

     DIRECT COMMUNITY OFFERING.  Concurrently with the Subscription Offering,
Conversion Shares will be offered by the Holding Company to certain members of
the general public in a Direct Community Offering, with preference given first
to Public Stockholders as of the close of business on the Voting Record Date
(who are not eligible to subscribe for Conversion Shares in the Subscription
Offering) and then to natural persons and trusts of natural persons residing in
the Local Community.  Purchasers in the Direct Community Offering are eligible
to purchase up to 50,000 Conversion Shares.  In the event an insufficient number
of shares are available to fill orders in the Direct Community Offering, the
available shares will be allocated on a pro rata basis determined by the amount
of the respective orders.  The Direct Community Offering will terminate on the
Expiration Date, unless extended by the Holding Company and the Savings Bank,
with approval of the OTS.  Any extensions beyond 45 days after the close of the
fully extended Subscription Offering would require a resolicitation of orders,
wherein subscribers for the maximum numbers of shares of Common Stock would be,
and certain other large Subscribers in the discretion of the Holding Company and
the Savings Bank may be, given the opportunity to continue their orders, in
which case they will need to reconfirm affirmatively their subscriptions prior
to the expiration of the resolicitation offering or their subscription funds
will be promptly refunded with interest at the Savings Bank's passbook rate, or
be permitted to modify or cancel their orders.  THE RIGHT OF ANY PERSON TO
PURCHASE SHARES IN THE DIRECT COMMUNITY OFFERING IS SUBJECT TO THE ABSOLUTE
RIGHT OF THE HOLDING COMPANY AND THE SAVINGS BANK TO ACCEPT OR REJECT SUCH
PURCHASES IN WHOLE OR IN PART.  IF AN ORDER IS REJECTED IN PART, THE PURCHASER
DOES NOT HAVE THE RIGHT TO CANCEL THE REMAINDER OF THE ORDER.  THE HOLDING
COMPANY PRESENTLY INTENDS TO TERMINATE THE DIRECT COMMUNITY OFFERING AS SOON AS
IT HAS RECEIVED ORDERS FOR ALL SHARES AVAILABLE FOR PURCHASE IN THE CONVERSION
AND REORGANIZATION.

     If all of the Common Stock offered in the Subscription Offering is
subscribed for, no Common Stock will be available for purchase in the Direct
Community Offering and all funds submitted pursuant to the Direct Community
Offering will be promptly refunded with interest.

     SYNDICATED COMMUNITY OFFERING.  The Plan of Conversion provides that all
shares of Common Stock not purchased in the Subscription Offering and Direct
Community Offering may be offered for sale to certain members of the general
public in a Syndicated Community Offering through a syndicate of registered
broker-dealers to be managed by Sandler O'Neill acting as agent of the Holding
Company.  THE HOLDING COMPANY AND THE SAVINGS BANK HAVE THE RIGHT TO REJECT
ORDERS, IN WHOLE OR PART, IN THEIR SOLE DISCRETION IN THE SYNDICATED COMMUNITY
OFFERING.  Neither Sandler O'Neill nor any registered broker-dealer shall have
any obligation to take or purchase any shares of the Common Stock in the
Syndicated Community Offering; however, Sandler O'Neill has agreed to use its
best efforts in the sale of shares in the Syndicated Community Offering.

     Conversion Shares sold in the Syndicated Community Offering also will be
sold at the $20.00 Purchase Price.  See "-- Stock Pricing, Exchange Ratio and
Number of Shares to be Issued."  No person will be permitted to subscribe for
more than 50,000 Conversion Shares in the Syndicated Community Offering.  See "-
- Plan of Distribution and Selling Commissions" for a description of the
commission to be paid to the selected dealers and to Sandler O'Neill.

     Sandler O'Neill may enter into agreements with selected dealers to assist
in the sale of shares in the Syndicated Community Offering.  During the
Syndicated Community Offering, selected dealers may only solicit indications of
interest from their customers to place orders with the Holding Company as of a
certain date ("Order Date") for the purchase of shares of Conversion Stock.
When and if Sandler O'Neill and the Holding Company believe that enough
indications of interest and orders have been received in the Subscription
Offering, the Direct Community Offering and the Syndicated Community Offering to
consummate the Conversion and Reorganization, Sandler O'Neill will request, as
of the Order Date, selected dealers to submit orders to purchase shares for
which they have received indications of interest from their customers.  Selected
dealers will send confirmations to such

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<PAGE>
 
customers on the next business day after the Order Date.  Selected dealers may
debit the accounts of their customers on a date which will be three business
days from the Order Date ("Settlement Date").  Customers who authorize selected
dealers to debit their brokerage accounts are required to have the funds for
payment in their account on but not before the Settlement Date.  On the
Settlement Date, selected dealers will remit funds to the account that the
Holding Company established for each selected dealer.  Each customer's funds so
forwarded to the Holding Company, along with all other accounts held in the same
title, will be insured by the FDIC up to the applicable $100,000 legal limit.
After payment has been received by the Holding Company from selected dealers,
funds will earn interest at the Savings Bank's passbook rate until the
completion of the Conversion Offerings.  At the completion of the Conversion and
Reorganization, the funds received in the Conversion Offerings will be used to
purchase the shares of Common Stock ordered.  The shares issued in the
Conversion and Reorganization cannot and will not be insured by the FDIC or any
other government agency.  In the event the Conversion and Reorganization is not
consummated as described above, funds with interest will be returned promptly to
the selected dealers, who, in turn, will promptly credit their customers'
brokerage accounts.

     The Syndicated Community Offering may terminate on or at any time
subsequent to the Expiration Date, but no later than 45 days after the close of
the Subscription Offering, unless extended by the Holding Company and the
Savings Bank, with approval of the OTS.

     In the event the Savings Bank is unable to find purchasers from the general
public for all unsubscribed shares, other purchase arrangements will be made by
the Board of Directors of the Savings Bank, if feasible.  Such other
arrangements will be subject to the approval of the OTS.  The OTS may grant one
or more extensions of the offering period, provided that (i) no single extension
exceeds 90 days, (ii) subscribers are given the right to increase, decrease or
rescind their subscriptions during the extension period, and (iii) the
extensions do not go more than two years beyond the date on which the members
approved the Plan of Conversion.  If the Conversion and Reorganization is not
completed within 45 days after the close of the Subscription Offering, either
all funds received will be returned with interest (and withdrawal authorizations
canceled) or, if the OTS has granted an extension of time, all subscribers will
be given the right to increase, decrease or rescind their subscriptions at any
time prior to 20 days before the end of the extension period.  If an extension
of time is obtained, all subscribers will be notified of such extension and of
their rights to modify their orders.  If an affirmative response to any
resolicitation is not received by the Holding Company from a subscriber, the
subscriber's order will be rescinded and all funds received will be promptly
returned with interest (or withdrawal authorizations will be canceled).

     PERSONS IN NON-QUALIFIED STATES.  The Holding Company and the Savings Bank
will make reasonable efforts to comply with the securities laws of all states in
the United States in which persons entitled to subscribe for stock pursuant to
the Plan of Conversion reside.  However, the Holding Company and the Savings
Bank are not required to offer stock in the Subscription Offering to any person
who resides in a foreign country or resides in a state of the United States with
respect to which (i) a small number of persons otherwise eligible to subscribe
for shares of Common Stock reside in such state or (ii) the Holding Company or
the Savings Bank determines that compliance with the securities laws of such
state would be impracticable for reasons of cost or otherwise, including but not
limited to a request or requirement that the Holding Company and the Savings
Bank or their officers, directors or trustees register as a broker, dealer,
salesman or selling agent, under the securities laws of such state, or a request
or requirement to register or otherwise qualify the Subscription Rights or
Common Stock for sale or submit any filing with respect thereto in such state.
Where the number of persons eligible to subscribe for shares in one state is
small, the Holding Company and the Savings Bank will base their decision as to
whether or not to offer the Common Stock in such state on a number of factors,
including the size of accounts held by account holders in the state, the cost of
reviewing the registration and qualification requirements of the state (and of
actually registering or qualifying the shares) or the need to register the
Holding Company, its officers, directors or employees as brokers, dealers or
salesmen.

                                       87
<PAGE>
 
PLAN OF DISTRIBUTION AND SELLING COMMISSIONS

     The Primary Parties have engaged Sandler O'Neill as a financial and
marketing advisor in connection with the Offering, and Sandler O'Neill has
agreed to use its best efforts to assist the Holding Company with the
solicitation of subscriptions and purchase orders for Conversion Shares in the
Conversion Offerings.  The services to be rendered by Sandler O'Neill include
the following: (i) consulting as to the securities marketing implications of any
aspect of the Plan of Conversion or related corporate documents; (ii) reviewing
with the Board of Directors RP Financial's appraisal of the aggregate pro forma
market value of the MHC and the Savings Bank, as converted; (iii) reviewing all
offering documents, including this Prospectus, stock order forms and related
offering materials; (iv) assisting in the design and implementation of a
marketing strategy for the Conversion Offerings; (v) assisting in obtaining all
requisite regulatory approvals, (vi) assisting management in scheduling and
preparing for meetings with potential investors and broker-dealers; and (vii)
providing such other general advice and assistance as may be requested to
promote the successful completion of the Conversion Offerings.  In addition,
Sandler O'Neill will manage the Syndicated Community Offering, if necessary.
The engagement of Sandler O'Neill and the services performed thereunder,
including any "due diligence" investigation of the operations of the Primary
Parties, should not be construed as an endorsement or recommendation of the
suitability of an investment in the Common Stock or a verification of the
accuracy or completeness of the information contained herein.  Sandler O'Neill
has not prepared any report or opinion constituting a recommendation or advice
to the Primary Parties or to persons who may purchase Conversion Shares
regarding the suitability of an investment in the Common Stock or as to the
prices at which the Common Stock may trade after the consummation of the
Conversion and Reorganization.

     Based upon negotiations between the Primary Parties and Sandler O'Neill,
Sandler O'Neill will receive a fee equal to 1.50% of the aggregate purchase
price of Conversion Shares sold in the Subscription and Community Offerings.  No
fees will be paid to Sandler O'Neill on subscriptions by any director, officer
or employee of the Primary Parties or members of their immediate families.  In
the event that a selected dealers agreement is entered into in connection with a
Syndicated Community Offering, the Primary Parties will pay a fee to such
selected dealers, any sponsoring dealer's fees, and a management fee to Sandler
O'Neill of 1.75% for shares sold by a National Association of Securities
Dealers, Inc. ("NASD") member firm, other than Sandler O'Neill, pursuant to a
selected dealers agreement; provided, however, that any fees payable to Sandler
O'Neill for any Conversion Shares sold by them pursuant to such a selected
dealers agreement shall not exceed 1.75% of the aggregate purchase price of such
shares and that the aggregate fees payable to Sandler O'Neill and selected
dealers shall not exceed 7.0% of the aggregate purchase price of such shares.
Sandler O'Neill will also be reimbursed for its reasonable out-of-pocket
expenses, including legal fees, for these services, in an amount not to exceed
$75,000.  Notwithstanding the foregoing, in the event the Conversion Offerings
are not consummated or Sandler O'Neill ceases, under certain circumstances after
the subscription solicitation activities are commenced, to provide assistance to
the Primary Parties, Sandler O'Neill will be entitled to be reimbursed for its
reasonable out-of-pocket expenses as described above.  The Primary Parties have
agreed to indemnify Sandler O'Neill in connection with certain claims or
liabilities, including certain liabilities under the Securities Act.  Sandler
O'Neill has received advances towards its fees totalling $25,000.  Total
marketing fees to Sandler O'Neill are expected to be $428,625, $506,250,
$583,875 and $673,145 at the minimum, midpoint, maximum, and 15% above the
maximum of the Estimated Valuation Range, respectively.  See "PRO FORMA DATA"
for the assumptions used to arrive at these estimates.

     The management and employees of the Primary Parties may participate in the
Conversion Offerings in clerical capacities, providing administrative support in
effecting sales transactions or answering questions of a mechanical nature
relating to the proper execution of the order form.  Management of the Primary
Parties may answer questions regarding the respective businesses of the Primary
Parties.  Other questions of prospective purchasers, including questions as to
the advisability or nature of the investment, will be directed to registered
representatives.  The management and employees of the Primary Parties have been
instructed not to solicit offers to purchase Conversion Shares or to provide
advice regarding the purchase of Conversion Shares.  None of the Primary
parties' employees or directors who participate in the Conversion Offerings will
receive any special compensation or other remuneration for such activities.

                                       88
<PAGE>
 
     None of the Primary Parties' personnel participating in the Subscription
and Community Offering are registered or licensed as a broker or dealer or an
agent of a broker or dealer.  The Primary Parties' personnel will assist in the
above-described sales activities pursuant to an exemption from registration as a
broker or dealer provided by Rule 3a4-1 ("Rule 3a4-1") promulgated under the
Exchange Act.  Rule 3a4-1 generally provides that an "associated person of an
issuer" of securities shall not be deemed a broker solely by reason of
participation in the sale of securities of such issuer if the associated person
meets certain conditions.  Such conditions include, but are not limited to, that
the associated person participating in the sale of an issuer's securities not be
compensated in connection therewith at the time of participation, that such
person not be associated with a broker or dealer and that such person observe
certain limitations on his participation in the sale of securities.  For
purposes of this exemption, "associated person of an issuer" is defined to
include any person who is a director, officer or employee of the issuer or a
company that controls, is controlled by or is under common control with the
issuer.

PROCEDURE FOR PURCHASING SHARES IN THE SUBSCRIPTION AND DIRECT COMMUNITY
OFFERINGS

     To ensure that each purchaser receives a prospectus at least 48 hours prior
to the Expiration Date in accordance with Rule 15c2-8 under the Exchange Act, no
Prospectus will be mailed any later than five days prior to such date or hand
delivered any later than two days prior to such date.  Execution of the Order
Form will confirm receipt or delivery in accordance with Rule 15c2-8.  Order
Forms will only be distributed with a Prospectus.  The Savings Bank will accept
for processing only orders submitted on original Order Forms.  The Savings Bank
is not obligated to accept orders submitted on photocopied or telecopied Order
Forms.  ORDERS CANNOT AND WILL NOT BE ACCEPTED WITHOUT THE EXECUTION OF THE
CERTIFICATION APPEARING ON THE REVERSE SIDE OF THE ORDER FORM.

     To purchase shares in the Subscription Offering, an executed Order Form
with the required full payment for each share subscribed for, or with
appropriate authorization for withdrawal of full payment from the subscriber's
deposit account with the Savings Bank (which may be given by completing the
appropriate blanks in the Order Form), must be received by the Savings Bank by
Noon, Eastern Time, on the Expiration Date.  Order Forms which are not received
by such time or are executed defectively or are received without full payment
(or without appropriate withdrawal instructions) are not required to be
accepted.  The Holding Company and the Savings Bank have the right to waive or
permit the correction of incomplete or improperly executed Order Forms, but do
not represent that they will do so.  Pursuant to the Plan of Conversion, the
interpretation by the Holding Company and the Savings Bank of the terms and
conditions of the Plan of Conversion and of the Order Form will be final.  In
order to purchase shares in the Direct Community Offering, the Order Form,
accompanied by the required payment for each share subscribed for, must be
received by the Savings Bank prior to the time the Direct Community Offering
terminates, which may be on or at any time subsequent to the Expiration Date.
Once received, an executed Order Form may not be modified, amended or rescinded
without the consent of the Savings Bank unless the Conversion and Reorganization
has not been completed within 45 days after the end of the Subscription
Offering, unless such period has been extended.

     In order to ensure that Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members are properly identified as to their stock
purchase priorities, depositors as of the close of business on the Eligibility
Record Date (June 30, 1996) and/or the Supplemental Eligibility Record Date
(December 31, 1997) and/or the Voting Record Date (___________, 1998) must list
all accounts on the Order Form giving all names in each account, the account
number and the approximate account balance as of such date.

     Full payment for subscriptions may be made (i) in cash if delivered in
person at the Stock Information Center, (ii) by check, bank draft, or money
order, or (iii) by authorization of withdrawal from deposit accounts maintained
with the Savings Bank.  Appropriate means by which such withdrawals may be
authorized are provided on the Order Form.  No wire transfers will be accepted.
Interest will be paid on payments made by cash, check, bank draft or money order
at the Savings Bank's passbook rate from the date payment is received until the
completion or termination of the Conversion and Reorganization.  If payment is
made by authorization of withdrawal from deposit accounts, the funds authorized
to be withdrawn from a deposit account will continue to accrue interest at the
contractual rates until completion or termination of the Conversion and
Reorganization (unless the certificate

                                       89
<PAGE>
 
matures after the date of receipt of the Order Form but prior to closing, in
which case funds will earn interest at the passbook rate from the date of
maturity until consummation of the Conversion and Reorganization), but a hold
will be placed on such funds, thereby making them unavailable to the depositor
until completion or termination of the Conversion and Reorganization.  At the
completion of the Conversion and Reorganization, the funds received in the
Conversion Offerings will be used to purchase the shares of Common Stock
ordered.  THE SHARES OF COMMON STOCK ISSUED IN THE CONVERSION AND REORGANIZATION
CANNOT AND WILL NOT BE INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY.  If
the Conversion and Reorganization is not consummated for any reason, all funds
submitted will be promptly refunded with interest as described above.

     If a subscriber authorizes the Savings Bank to withdraw the amount of the
aggregate Purchase Price from his or her deposit account, the Savings Bank will
do so as of the effective date of Conversion and Reorganization, though the
account must contain the full amount necessary for payment at the time the
subscription order is received.  The Savings Bank will waive any applicable
penalties for early withdrawal from certificate accounts. If the remaining
balance in a certificate account is reduced below the applicable minimum balance
requirement at the time that the funds actually are transferred under the
authorization the certificate will be canceled at the time of the withdrawal,
without penalty, and the remaining balance will earn interest at the Savings
Bank's passbook rate.

     IRAs maintained in the Savings Bank do not permit investment in the Common
Stock.  A depositor interested in using his or her IRA funds to purchase Common
Stock must do so through a self-directed IRA.  Since the Savings Bank does not
offer such accounts, it will allow such a depositor to make a trustee-to-trustee
transfer of the IRA funds to a trustee offering a self-directed IRA program with
the agreement that such funds will be used to purchase Conversion Shares.  There
will be no early withdrawal or IRS interest penalties for such transfers.  The
new trustee would hold the Conversion Shares in a self-directed account in the
same manner as the Savings Bank now holds the depositor's IRA funds.  An annual
administrative fee may be payable to the new trustee.  Depositors interested in
using funds in a Savings Bank IRA to purchase Common Stock should contact the
Stock Information Center so that the necessary forms may be forwarded for
execution and returned prior to the Expiration Date.  In addition, the
provisions of ERISA and IRS regulations require that officers, directors and 10%
shareholders who use self-directed IRA funds to purchase shares of Common Stock
in the Subscription Offering, make such purchases for the exclusive benefit of
IRAs.

STOCK PRICING, EXCHANGE RATIO AND NUMBER OF SHARES TO BE ISSUED

     The Plan of Conversion requires that the purchase price of the Conversion
Shares must be based on the appraised pro forma market value of the Conversion
Shares, as determined on the basis of an independent valuation. The Primary
Parties have retained RP Financial to make such valuation. For its services in
making such appraisal and any expenses incurred in connection therewith, RP
Financial will receive a maximum fee of $30,000 plus out-of-pocket expenses,
together with a fee of no greater than $7,500 plus out-of-pocket expenses for
the preparation of a business plan and other services performed in connection
with the Holding Company's holding company application to the OTS.  The Primary
Parties have agreed to indemnify RP Financial and its employees and affiliates
against certain losses (including any losses in connection with claims under the
federal securities laws) arising out of its services as appraiser, except where
RP Financial's liability results from its negligence or bad faith.

     The appraisal has been prepared by RP Financial in reliance upon the
information contained in this Prospectus, including the Consolidated Financial
Statements.  RP Financial also considered the following factors, among others:
the present and projected operating results and financial condition of the
Primary Parties and the economic and demographic conditions in the Savings
Bank's existing market area; certain historical, financial and other information
relating to the Savings Bank; a comparative evaluation of the operating and
financial statistics of the Savings Bank with those of other similarly situated
publicly-traded companies located in South Carolina and other regions of the
United States; the aggregate size of the offering of the Conversion Shares; the
impact of the Conversion and Reorganization on the Savings Bank's capital and
earnings potential; the proposed dividend policy of the Holding Company and the
Savings Bank; and the trading market for the Savings Bank Common Stock and
securities of comparable companies and general conditions in the market for such
securities.

                                       90
<PAGE>
 
     On the basis of the foregoing, RP Financial has advised the Primary Parties
in its opinion that the estimated pro forma market value of the MHC and the
Savings Bank, as converted, was $65.1 million as of December 5, 1997.  Because
the holders of the Public Savings Bank Shares will continue to hold the same
aggregate percentage ownership interest in the Holding Company as they currently
hold in the Savings Bank (before giving effect to the payment of cash in lieu of
issuing fractional Exchange Shares and any Conversion Shares purchased by the
Savings Bank's stockholder in the Conversion Offerings), the appraisal was
multiplied by 53.02%, which represents the MHC's percentage interest in the
Savings Bank.  The resulting amount represents the midpoint of the valuation
($65.1 million), and the minimum and maximum of the valuation were set at 15%
below and above the midpoint, respectively, resulting in a range of $55.3
million to $74.8 million.  The Boards of Directors of the Primary Parties
determined that the Conversion Shares would be sold at $20.00 per share,
resulting in a range of 1,466,250 to 1,983,750 Conversion Shares being offered.
Upon consummation of the Conversion and Reorganization, the Conversion Shares
and the Exchange Shares will represent approximately 53.02% and 46.98%,
respectively, of the Holding Company's total outstanding shares.  The Boards of
Directors of the Primary Parties reviewed RP Financial's appraisal report,
including the methodology and the assumptions used by RP Financial, and
determined that the Estimated Valuation Range was reasonable and adequate.  The
Boards of Directors of the Primary Parties also established the formula for
determining the Exchange Ratio. Based upon such formula and the Estimated
Valuation Range, the Exchange Ratio ranged from a minimum of 1.83281 to a
maximum of 2.47969 Exchange Shares for each Public Savings Bank Shares, with a
midpoint of 2.15625.  Based upon these Exchange Ratios, the Holding Company
expects to issue between 1,299,231 and 1,757,783 shares of Exchange Shares to
the holders of Public Savings Bank Shares outstanding immediately prior to the
consummation of the Conversion and Reorganization.  The Estimated Valuation
Range and the Exchange Ratio may be amended with the approval of the OTS, if
required, or if necessitated by subsequent developments in the financial
condition of any of the Primary Parties or market conditions generally.  If the
appraisal is updated to below $55.3 million or above $86.1 million (the maximum
of the Estimated Valuation Range, as adjusted by 15%), such appraisal will be
filed with the SEC by post-effective amendment.

     Based upon current market and financial conditions and recent practices and
policies of the OTS, in the event the Holding Company receives orders for
Conversion Shares in excess of $39.7 million (the maximum of the Estimated
Valuation Range) and up to $45.6 million (the maximum of the Estimated Valuation
Range, as adjusted by 15%), the Holding Company may be required by the OTS to
accept all such orders.  No assurances, however, can be made that the Holding
Company will receive orders for Conversion Shares in excess of the maximum of
the Estimated Valuation Range or that, if such orders are received, that all
such orders will be accepted because the Holding Company's final valuation and
number of shares to be issued are subject to the receipt of an updated appraisal
from RP Financial which reflects such an increase in the valuation and the
approval of such increase by the OTS.  There is no obligation or understanding
on the part of management to take and/or pay for any shares of Conversion Shares
to complete the Conversion Offerings.

     RP Financial's valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing such shares.  RP
Financial did not independently verify the Savings Bank's Consolidated Financial
Statements and other information provided by the Savings Bank and the MHC, nor
did RP Financial value independently the assets or liabilities of the Savings
Bank.  The valuation considers the Savings Bank and the MHC as going concerns
and should not be considered as an indication of the liquidation value of the
Savings Bank and the MHC.  Moreover, because such valuation is necessarily based
upon estimates and projections of a number of matters, all of which are subject
to change from time to time, no assurance can be given that persons purchasing
Conversion Shares or receiving Exchange Shares in the Conversion and
Reorganization will thereafter be able to sell such shares at prices at or above
the Purchase Price or in the range of the foregoing valuation of the pro forma
market value thereof.

     No sale of Conversion Shares or issuance of Exchange Shares may be
consummated unless prior to such consummation RP Financial confirms that nothing
of a material nature has occurred which, taking into account all relevant
factors, would cause it to conclude that the Purchase Price is materially
incompatible with the estimate of the pro forma market value of a share of
Common Stock upon consummation of the Conversion and Reorganization.

                                       91
<PAGE>
 
If such is not the case, a new Estimated Valuation Range may be set, a new
Exchange Ratio may be determined based upon the new Estimated Valuation Range, a
new Subscription and Community Offering and/or Syndicated Community Offering or
Public Offering may be held or such other action may be taken as the Primary
Parties shall determine and the OTS may permit or require.

     Depending upon market or financial conditions following the commencement of
the Subscription Offering, the total number of Conversion Shares to be issued in
the Conversion Offerings may be increased or decreased without a resolicitation
of subscribers, provided that the product of the total number of shares times
the Purchase Price is not below the minimum or more than 15% above the maximum
of the Estimated Valuation Range. In the event market or financial conditions
change so as to cause the aggregate Purchase Price of the shares to be below the
minimum of the Estimated Valuation Range or more than 15% above the maximum of
such range, purchasers will be resolicited (i.e., permitted to continue their
                                            ----                             
orders, in which case they will need to affirmatively reconfirm their
subscriptions prior to the expiration of the resolicitation offering or their
subscription funds will be promptly refunded with interest at the Savings Bank's
passbook rate of interest, or be permitted to modify or rescind their
subscriptions).  Any increase or decrease in the number of Conversion Shares
will result in a corresponding change in the number of Exchange Shares, so that
upon consummation of the Conversion and Reorganization, the Conversion Shares
and the Exchange Shares will represent approximately 53.03% and 46.97%,
respectively, of the Holding Company's total outstanding shares of Common Stock
(exclusive of the effects of the exercise of outstanding stock options).

     An increase in the number of Conversion Shares as a result of an increase
in the appraisal of the estimated pro forma market value would decrease both a
subscriber's ownership interest and the Holding Company's pro forma net earnings
and stockholders' equity on a per share basis while increasing pro forma net
earnings and stockholders' equity on an aggregate basis. A decrease in the
number of Conversion Shares would increase both a subscriber's ownership
interest and the Holding Company's pro forma net earnings and stockholders'
equity on a per share basis while decreasing pro forma net earnings and
stockholders' equity on an aggregate basis.  See "RISK FACTORS --Possible
Dilutive Effect of Benefit Programs" and "PRO FORMA DATA."

     The appraisal report of RP Financial has been filed as an exhibit to this
Registration Statement and Application for Conversion of which this Prospectus
is a part and is available for inspection in the manner set forth under
"ADDITIONAL INFORMATION."

LIMITATIONS ON PURCHASES OF CONVERSION SHARES

     The Plan of Conversion provides for certain limitations to be placed upon
the purchase of Common Shares by eligible subscribers and others in the
Conversion and Reorganization.  Each subscriber must subscribe for a minimum of
25 Conversion Shares.  The Plan of Conversion provides for the following
purchase limitations: (i) no person may purchase in either the Subscription
Offering, Direct Community Offering or Syndicated Community Offering more 50,000
Conversion Shares, (ii) no person, together with associates of or persons acting
in concert with such person, may purchase in either the Subscription Offering,
Direct Community Offering or Syndicated Community Offering more than 50,000
Conversion Shares, (iii) the maximum number of shares of Conversion Shares which
may be subscribed for or purchased in all categories in the Conversion and
Reorganization by any person, when combined with any Exchange Shares received,
shall not exceed 50,000 shares of Common Stock to be issued in the Conversion
and Reorganization, and (iv) the maximum number of shares of Conversion Shares
which may be subscribed for or purchased in all categories in the Conversion and
Reorganization by any person, together with any associate or any group of
persons acting in concert, when combined with any Exchange Shares received,
shall not exceed 50,000 shares of Common Stock to be issued in the Conversion
and Reorganization.  For purposes of the Plan of Conversion, the directors are
not deemed to be acting in concert solely by reason of their Board membership.
Pro rata reductions within each Subscription Rights category will be made in
allocating shares to the extent that the maximum purchase limitations are
exceeded.

                                       92
<PAGE>
 
     BECAUSE OTS POLICY REQUIRES THAT THE MAXIMUM PURCHASE LIMITATION INCLUDES
EXCHANGE SHARES TO BE ISSUED TO PUBLIC STOCKHOLDERS IN EXCHANGE FOR THEIR PUBLIC
SAVINGS BANK SHARES, CERTAIN PUBLIC STOCKHOLDERS MAY BE LIMITED IN THEIR ABILITY
TO PURCHASE CONVERSION SHARES, OR EVEN PREVENTED FROM PURCHASING CONVERSION
SHARES.

     The Boards of Directors of the Primary Parties may, in their sole
discretion, increase the maximum purchase limitation set forth above up to 9.99%
of the Conversion Shares sold in the Conversion and Reorganization, provided
that orders for shares which exceed 5% of the Conversion Shares sold in the
Conversion and Reorganization may not exceed, in the aggregate, 10% of the
shares sold in the Conversion and Reorganization.  The Savings Bank and the
Holding Company do not intend to increase the maximum purchase limitation unless
market conditions are such that an increase in the maximum purchase limitation
is necessary to sell a number of shares in excess of the minimum of the
Estimated Valuation Range.  If the Boards of Directors decide to increase the
purchase limitation above, persons who subscribed for the maximum number of
Conversion Shares will be, and other large subscribers in the discretion of the
Holding Company and the Savings Bank may be, given the opportunity to increase
their subscriptions accordingly, subject to the rights and preferences of any
person who has priority Subscription Rights.

     The term "acting in concert" is defined in the Plan of Conversion to mean
(i) knowing participation in a joint activity or interdependent conscious
parallel action towards a common goal whether or not pursuant to an express
agreement; or (ii) a combination or pooling of voting or other interests in the
securities of an issuer for a common purpose pursuant to any contract,
understanding, relationship, agreement or other arrangement, whether written or
otherwise.  In general, a person who acts in concert with another party shall
also be deemed to be acting in concert with any person who is also acting in
concert with that other party.

     The term "associate" of a person is defined in the Plan of Conversion to
mean (i) any corporation or organization (other than the Savings Bank or a
majority-owned subsidiary of the Savings Bank) of which such person is an
officer or partner or is, directly or indirectly, the beneficial owner of 10% or
more of any class of equity securities; (ii) any trust or other estate in which
such person has a substantial beneficial interest or as to which such person
serves as trustee or in a similar fiduciary capacity (excluding tax-qualified
employee plans); and (iii) any relative or spouse of such person, or any
relative of such spouse, who either has the same home as such person or who is a
director or officer of the Savings Bank or any of its parents or subsidiaries.
For example, a corporation of which a person serves as an officer would be an
associate of such person and, therefore, all shares purchased by such
corporation would be included with the number of shares which such person could
purchase individually under the above limitations.

     The term "officer" is defined in the Plan of Conversion to mean an
executive officer of the Savings Bank, including its Chairman of the Board,
President, Executive Vice Presidents, Senior Vice Presidents, Vice Presidents in
charge of principal business functions, Secretary and Treasurer.

     Common Shares purchased pursuant to the Conversion and Reorganization will
be freely transferable, except for shares purchased by directors and officers of
the Savings Bank and the Holding Company and by NASD members.  See "--
Restrictions on Transferability by Directors and Officers and NASD Members."

DELIVERY AND EXCHANGE OF STOCK CERTIFICATES

     CONVERSION STOCK.  Certificates representing Conversion Shares will be
mailed by the Holding Company's transfer agent to the persons entitled thereto
at the addresses of such persons appearing on the Order Form as soon as
practicable following the consummation of the Conversion and Reorganization.
Any undeliverable certificates will be held by the Holding Company until claimed
by persons legally entitled thereto or otherwise disposed according to
applicable law.  Purchasers of Conversion Shares may be unable to sell such
shares until certificates are available and delivered to them.

                                       93
<PAGE>
 
     EXCHANGE SHARES.  After the consummation of the Conversion and
Reorganization, each holder of a certificate(s) theretofore evidencing issued
and outstanding shares of Savings Bank Common Stock (other than the MHC), upon
surrender of the same to an agent, duly appointed by the Holding Company, which
is anticipated to be the transfer agent for the Common Stock ("Exchange Agent"),
shall be entitled to receive in exchange therefor a certificate(s) representing
the number of full Exchange Shares based on the Exchange Ratio.  The Exchange
Agent shall mail a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to such certificate shall
pass, only upon delivery of such certificate to the Exchange Agent) advising
such holder of the terms of the Exchange Offering and the procedure for
surrendering to the Exchange Agent such certificates in exchange for a
certificate(s) evidencing Common Stock.  THE SAVINGS BANK STOCKHOLDERS SHOULD
NOT FORWARD SAVINGS BANK COMMON STOCK CERTIFICATES TO THE SAVINGS BANK OR THE
EXCHANGE AGENT UNTIL THEY HAVE RECEIVED THE TRANSMITTAL LETTER.

     No holder of a certificate theretofore representing shares of Savings Bank
Common Stock shall be entitled to receive any  dividends on the Common Stock
until the certificate representing such shares is surrendered in exchange for
certificates representing shares of Common Stock.  In the event that dividends
are declared and paid by the Holding Company in respect of Common Stock after
the consummation of the Conversion and Reorganization, but before surrender of
certificates representing shares of Savings Bank Common Stock, dividends payable
in respect of shares of Common Stock not then issued shall accrue (without
interest).  Any such dividends shall be paid (without  interest) upon surrender
of the certificates representing such shares of Savings Bank Common Stock.
After the consummation of the Conversion and Reorganization, the Holding Company
shall be entitled to treat certificates representing shares of Savings Bank
Common Stock as evidencing ownership of the number of full shares of Common
Stock into which the shares of Savings Bank Common Stock represented by such
certificates shall have been converted, notwithstanding the failure on the part
of the holder thereof to surrender such certificates.

     The Holding Company shall not be obligated to deliver a certificate(s)
representing shares of Common Stock to which a holder of Savings Bank Common
Stock would otherwise be entitled as a result of the Conversion and
Reorganization until such holder surrenders the certificate(s) representing the
shares of Savings Bank Common Stock for exchange as provided above, or, in
default thereof, an appropriate affidavit of loss and indemnity agreement and/or
a bond as may be required in each case by the Holding Company.  If any
certificate evidencing shares of Common Stock is to be issued in a name other
than that in which the certificate evidencing Savings Bank Common Stock
surrendered in exchange therefor is registered, it shall be a condition of the
issuance thereof that the certificate so surrendered shall be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange pay to the Exchange Agent any transfer or other tax required by reason
of the issuance of a certificate for shares of Common Stock in any name other
than that of the registered holder of the certificate surrendered or otherwise
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable.

RESTRICTIONS ON REPURCHASE OF STOCK

     Pursuant to OTS regulations, OTS-regulated savings associations (and their
holding companies) may not for a period of three years from the date of an
institution's mutual-to-stock conversion repurchase any of its common stock from
any person, except in the event of (i) an offer made to all of its stockholders
to repurchase the common stock on a pro rata basis, approved by the OTS; or (ii)
the repurchase of qualifying shares of a director; or (iii) a purchase in the
open market by a tax-qualified or non-tax-qualified employee stock benefit plan
in an amount reasonable and appropriate to fund the plan.  Furthermore,
repurchases of any common stock are prohibited if the effect thereof would cause
the association's regulatory capital to be reduced below (a) the amount required
for the liquidation account or (b) the regulatory capital requirements imposed
by the OTS.  Repurchases are generally prohibited during the first year
following conversion.  Upon ten days' written notice to the OTS, and if the OTS
does not object, an institution may make open market repurchases of its
outstanding common stock during years two and three following the conversion,
provided that certain regulatory conditions are met and that the repurchase
would not adversely affect the financial condition of the association.  Any
repurchases of common stock by the Holding Company would be subject to these
regulatory restrictions unless the OTS would provide otherwise.

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<PAGE>
 
RESTRICTIONS ON TRANSFERABILITY BY DIRECTORS AND OFFICERS AND NASD MEMBERS

     Shares of Common Stock purchased in the Conversion Offerings by directors
and officers of the Holding Company may not be sold for a period of one year
following consummation of the Conversion and Reorganization, except in the event
of the death of the stockholder or in any exchange of the Common Stock in
connection with a merger or acquisition of the Holding Company.  Shares of
Common Stock received by directors or officers through the ESOP or the MRP or
upon exercise of options issued pursuant to the Stock Option Plan or purchased
subsequent to the Conversion and Reorganization are not subject to this
restriction.  Accordingly, shares of Common Stock issued by the Holding Company
to directors and officers shall bear a legend giving appropriate notice of the
restriction and, in addition, the Holding Company will give appropriate
instructions to the transfer agent for the Holding Company's Common Stock with
respect to the restriction on transfers.  Any shares issued to directors and
officers as a stock dividend, stock split or otherwise with respect to
restricted Common Stock shall be subject to the same restrictions.

     Purchases of outstanding shares of Common Stock of the Holding Company by
directors, executive officers (or any person who was an executive officer or
director of the Savings Bank after adoption of the Plan of Conversion and
Reorganization) and their associates during the three-year period following
Conversion and Reorganization may be made only through a broker or dealer
registered with the SEC, except with the prior written approval of the OTS.
This restriction does not apply, however, to negotiated transactions involving
more than 1% of the Holding Company's outstanding Common Stock or to the
purchase of stock pursuant to the Stock Option Plan.

     The Holding Company has filed with the SEC a registration statement under
the Securities Act for the registration of the Common Stock to be issued
pursuant to the Conversion and Reorganization.  The registration under the
Securities Act of shares of the Common Stock to be issued in the Conversion and
Reorganization does not cover the resale of such shares.  Shares of Common Stock
purchased by persons who are not affiliates of the Holding Company may be resold
without registration.  Shares purchased by an affiliate of the Holding Company
will be subject to the resale restrictions of Rule 144 under the Securities Act.
If the Holding Company meets the current public information requirements of Rule
144 under the Securities Act, each affiliate of the Holding Company who complies
with the other conditions of Rule 144 (including those that require the
affiliate's sale to be aggregated with those of certain other persons) would be
able to sell in the public market, without registration, a number of shares not
to exceed, in any three-month period, the greater of (i) 1% of the outstanding
shares of the Holding Company or (ii) the average weekly volume of trading in
such shares during the preceding four calendar weeks.  Provision may be made in
the future by the Holding Company to permit affiliates to have their shares
registered for sale under the Securities Act under certain circumstances.

     Under guidelines of the NASD, members of the NASD and their associates are
subject to certain restrictions on the transfer of securities purchased in
accordance with Subscription Rights and to certain reporting requirements upon
purchase of such securities.

                       COMPARISON OF STOCKHOLDERS' RIGHTS

     GENERAL.  As a result of the Conversion and Reorganization, holders of the
Savings Bank Common Stock will become stockholders of the Holding Company, a
Delaware corporation.  There are certain differences in stockholder rights
arising from distinctions between the Savings Bank's Federal Stock Charter and
Bylaws and the Holding Company's Certificate of Incorporation and Bylaws and
from distinctions between laws with respect to federally chartered savings
institutions and Delaware law.

     The discussion herein is not intended to be a complete statement of the
differences affecting the rights of stockholders, but rather summarizes the
material differences and similarities affecting the rights of stockholders.  The
discussion herein is  qualified in its entirety by reference to the Certificate
of Incorporation and Bylaws of the Holding Company and the DGCL.  See
"ADDITIONAL INFORMATION" for procedures for obtaining a copy of the Holding
Company's Certificate of Incorporation and Bylaws.

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<PAGE>
 
     AUTHORIZED CAPITAL STOCK.  The Holding Company's authorized capital stock
consists of 7,500,000 shares of Common Stock, par value $.01 per share and
250,000 shares of preferred stock, par value $.01 per share ("Preferred Stock").
The Savings Bank's authorized capital stock consists of 4,000,000 shares of
Savings Bank Common Stock and 1,000,000 shares of serial preferred stock, par
value $1.00 per share.  The shares of Common Stock and Preferred Stock were
authorized in an amount greater than that to be issued in the Conversion and
Reorganization to provide the Holding Company's Board of Directors with
flexibility to effect, among other transactions, financings, acquisitions, stock
dividends, stock splits and employee stock options.  However, these additional
authorized shares may also be used by the Board of Directors consistent with its
fiduciary duty to deter future attempts to gain control of the Holding Company.
The Board of Directors also has sole authority to determine the terms of any one
or more series of Preferred Stock, including voting rights, conversion rates,
and liquidation preferences.  As a result of the ability to fix voting rights
for a series of Preferred Stock, the Board has the power, to the extent
consistent with its fiduciary duty, to issue a series of Preferred Stock to
persons friendly to management in order to attempt to block a post tender offer
merger or other transaction by which a third party seeks control, and thereby
assist management to retain its position.  The Holding Company's Board currently
has no plan for the issuance of additional shares, other than the issuance of
additional shares pursuant to stock benefit plans.

     ISSUANCE OF CAPITAL STOCK.  Pursuant to applicable laws and regulations,
the MHC is required to own not less than a majority of the outstanding Savings
Bank Common Stock.  There will be no such restriction applicable to the Holding
Company following consummation of the Conversion and Reorganization.

     The Holding Company's Certificate of Incorporation do not contain
restrictions on the issuance of shares of capital stock to directors, officers
or controlling persons of the Holding Company, whereas the Savings Bank's
Federal Stock Charter restricts such issuance to general public offerings, or if
qualifying shares, to directors, unless the share issuance or the plan under
which they would be issued has been approved by a majority of the total votes
eligible to be cast at a legal stockholders meeting.  Thus, stock-related
compensation plans such as stock option plans could be adopted by the Holding
Company without stockholder approval and shares of Holding Company capital stock
could be issued directly to directors or officers without stockholder approval.
The Bylaws of the NASD, however, generally require corporations with securities
which are quoted on the Nasdaq National Market System to obtain stockholder
approval of most stock compensation plans for directors, officers and key
employees of the corporation.  Moreover, although generally not required,
stockholder approval of stock related compensation plans may be sought in
certain instances in order to qualify such plans for favorable federal income
tax and securities law treatment under current laws and regulations.  The
Holding Company plans to submit the stock compensation plans discussed herein to
its stockholders for approval.

     VOTING RIGHTS.  Neither the Savings Bank's Federal Stock Charter or Bylaws
nor the Holding Company's Certificate of Incorporation or Bylaws currently
provide for cumulative voting in elections of directors.  For additional
information regarding voting rights, see "-- Limitations on Acquisitions of
Voting Stock and Voting Rights" below.

     PAYMENT OF DIVIDENDS.  The ability of the Savings Bank to pay dividends on
its capital stock is restricted by OTS regulations and by federal income tax
considerations related to savings institutions such as the Savings Bank.  See
"REGULATION -- Federal Regulation of the Savings Bank -- Capital Requirements"
and "TAXATION." Although the Holding Company is not subject to these
restrictions as a Delaware corporation, such restrictions will indirectly affect
the Holding Company because dividends from the Savings Bank will be a primary
source of funds of the Holding Company for the payment of dividends to
stockholders of the Holding Company.

     Certain restrictions generally imposed on Delaware corporations may also
have an impact on the Holding Company's ability to pay dividends.  The DGCL
generally provides that the Holding Company is limited to paying dividends in an
amount equal to the excess of its net assets (total assets minus total
liabilities) over its statutory capital or, if no such excess exists, equal to
its net profits for the current year and/or the immediately preceding fiscal
year.

                                       96
<PAGE>
 
     BOARD OF DIRECTORS.  The Savings Bank's Federal Stock Charter and Bylaws
and the Holding Company's Certificate of Incorporation and Bylaws each require
the Board of Directors of the Savings Bank and the Holding Company to be divided
into three classes as nearly equal in number as possible and that the members of
each class shall be elected for a term of three years and until their successors
are elected and qualified, with one class being elected annually.

     Under the Savings Bank's Bylaws, any vacancies in the Board of Directors of
the Savings Bank may be filled by the affirmative vote of a majority of the
remaining directors although less than a quorum of the Board of Directors.
Persons elected by the directors of the Savings Bank to fill vacancies may only
serve until the next annual meeting of stockholders.  Under the Holding
Company's Certificate of Incorporation, any vacancy occurring in the Board of
Directors of the Holding Company, including any vacancy created by reason of an
increase in the number of directors, may be filled by the remaining directors,
and any director so chosen shall hold office for the remainder of the term to
which the director has been elected and until his or her successor is elected
and qualified.

     Under the Savings Bank's Bylaws, any director may be removed for cause by
the holders of a majority of the outstanding voting shares.  The Holding
Company's Certificate of Incorporation provide that any director may be removed
for cause by a majority of the directors of the Holding Company or by the
holders of at least 80% of the outstanding voting shares of the Holding Company.

     LIMITATIONS ON LIABILITY.  The Holding Company's Certificate of
Incorporation provides that the directors of the Holding Company shall not be
personally liable for monetary damages to the Holding Company for certain
breaches of their fiduciary duty as directors, except for liabilities that
involve intentional misconduct or a knowing violation of law by the director,
the authorization or illegal distributions or receipt of an improper personal
benefit from their actions as directors.  This provision might, in certain
instances, discourage or deter shareholders or management from bringing a
lawsuit against directors for a breach of their duties even though such an
action, if successful, might have benefitted the Holding Company.

     Currently, federal law does not permit federally chartered savings
institutions such as the Savings Bank to limit the personal liability of
directors in the manner provided by the DGCL and the laws of many other states.

     INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.  The Savings
Bank's Federal Stock Charter and Bylaws do not contain any provision relating to
indemnification of directors and officers of the Savings Bank.  Under current
OTS regulations, however, the Savings Bank shall indemnify its directors,
officers and employees for any costs incurred in connection with any litigation
involving any such person's activities as a director, officer or employee if
such person obtains a final judgment on the merits in his or her favor.  In
addition, indemnification is permitted in the case of a settlement, a final
judgment against such person or final judgment other than on the merits, if a
majority of disinterested directors determine that such person was acting in
good faith within the scope of his or her employment as he or she could
reasonably have perceived it under the circumstances and for a purpose he or she
could reasonably have believed under the circumstances was in the best interest
of the Savings Bank or its stockholders.  The Savings Bank also is permitted to
pay ongoing expenses incurred by a director, officer or employee if a majority
of disinterested directors concludes that such person may ultimately be entitled
to indemnification.  Before making any indemnification payment, the Savings Bank
is required to notify the OTS of its intention and such payment cannot be made
if the OTS objects thereto.

     The officers, directors, agents and employees of the Holding Company are
indemnified with respect to certain actions pursuant to the Holding Company's
Certificate of Incorporation, which complies with the DGCL regarding
indemnification.  The DGCL allows the Holding Company to indemnify the
aforementioned persons for expenses, settlements, judgments and fines in suits
in which such person has made a party by reason of the fact that he or she is or
was an agent of the Holding Company.  No such indemnification may be given if
the acts or omissions of the person are adjudged to be in violation of law, if
such person is liable to the corporation for an unlawful distribution, or if
such person personally received a benefit to which he or she was not entitled.

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<PAGE>
 
     SPECIAL MEETINGS OF STOCKHOLDERS.  The Holding Company's Certificate of
Incorporation provides that special meetings of the stockholders of the Holding
Company may be called only by the board of directors or an authorized committee
thereof.  The Savings Bank's Federal Stock Charter provides that, until October
26, 1998 (i.e., five years after the consummation of the MHC Reorganization),
          ----                                                               
special meetings of the Savings Bank's stockholders may only be called by the
Board of Directors.  Thereafter, special meetings may be called by the Chairman,
President, a majority of the Board of Directors or the holders of not less than
a majority of the outstanding capital stock of the Savings Bank entitled to vote
at the meeting.

     STOCKHOLDER NOMINATIONS AND PROPOSALS.  The Savings Bank's Bylaws generally
provide that stockholders may submit nominations for election as director at an
annual meeting of stockholders and any new business to be taken up at such a
meeting by filing such in writing with the Savings Bank at least thirty days
before the date of any such meeting.

     The Holding Company's Bylaws generally provide that any stockholder
desiring to make a nomination for the election of directors or a proposal for
new business at a meeting of stockholders must submit written notice to the
Holding Company at least 30 days and not more than 60 days in advance of the
meeting, together with certain information relating to the nomination or new
business.  However, if less than 31 days notice of the meeting is given,
stockholders must submit such written notice no later than the tenth day
following the date on which notice of the meeting is mailed to stockholders.
Failure to comply with these advance notice requirements will preclude such
nominations or new business from being considered at the meeting.  Management
believes that it is in the best interests of the Holding Company and its
stockholders to provide sufficient time to enable management to disclose to
stockholders information about a dissident slate of nominations for directors.
This advance notice requirement may also give management time to solicit its own
proxies in an attempt to defeat any dissident slate of nominations, should
management determine that doing so is in the best interest of stockholders
generally.  Similarly, adequate advance notice of stockholder proposals will
give management time to study such proposals and to determine whether to
recommend to the stockholders that such proposals be adopted.  In certain
instances, such provisions could make it more difficult to oppose management's
nominees or proposals, even if stockholders believe such nominees or proposals
are in their best interests.

     STOCKHOLDER ACTION WITHOUT A MEETING.  The Bylaws of the Savings Bank
provide that any action to be taken or which may be taken at any annual or
special meeting of stockholders may be taken if a consent in writing, setting
forth the actions so taken, is given by the holders of all outstanding shares
entitled to vote.  The Holding Company's Certificate of Incorporation
specifically denies the authority of stockholders to act without a meeting.

     STOCKHOLDER'S RIGHT TO EXAMINE BOOKS AND RECORDS.  A federal regulation
which is applicable to the Savings Bank provides that stockholders may inspect
and copy specified books and records of a federally  chartered savings
institution after proper written notice for a proper purpose.  The DGCL
similarly provides that a stockholder may inspect books and records upon written
demand stating the purpose of the inspection, if such purpose is reasonably
related to such person's interest as a stockholder.

     LIMITATIONS ON ACQUISITIONS OF VOTING STOCK AND VOTING RIGHTS.  The Holding
Company's Certificate of Incorporation provide that no person shall directly or
indirectly offer to acquire or acquire the beneficial ownership of (i) more than
10% of the issued and outstanding shares of any class of an equity security of
the Holding Company, or (ii) any securities convertible into, or exercisable
for, any equity securities of the Holding Company if, assuming conversion or
exercise by such person of all securities of which such person is the beneficial
owner which are convertible into, or exercisable for, such equity securities
(but of no securities convertible into, or exercisable for, such equity
securities of which such person is not the beneficial owner), such person would
be the beneficial owner of more than 10% of any class of an equity security of
the Holding Company.  The term "person" is broadly defined in the Certificate of
Incorporation to prevent circumvention of this restriction.

     The foregoing restrictions do not apply to (i) any offer with a view toward
public resale made exclusively to the Holding Company by underwriters or a
selling group acting on its behalf, (ii) any employee benefit plan

                                       98
<PAGE>
 
established by the Holding Company or the Savings Bank, and (iii) any other
offer or acquisition approved in advance by the affirmative vote of two-thirds
of the Holding Company's Board of Directors.  In the event that shares are
acquired in violation of this restriction, all shares beneficially owned by any
person in excess of 10% shall not be counted as shares entitled to vote and
shall not be voted by any person or counted as voting shares in connection with
any matters submitted to stockholders for a vote.

     Neither the Charter nor the Bylaws of the Savings Bank contains a provision
which restricts voting rights of certain stockholders of the Savings Bank in the
manner set forth above.

     MERGERS, CONSOLIDATIONS AND SALES OF ASSETS.  A federal regulation requires
the approval of two-thirds of the Board of Directors of the Savings Bank and the
holders of two-thirds of the outstanding stock of the Savings Bank entitled to
vote thereon for mergers, consolidations and sales of all or substantially all
of the Savings Bank's assets.  Such regulation permits the Savings Bank to merge
with another corporation without obtaining the approval of its stockholders if:
(i) it does not involve an interim savings institution; (ii) the Savings Bank's
Federal Stock Charter is not changed; (iii) each share of the Savings Bank's
stock outstanding immediately prior to the effective date of the transaction is
to be an identical outstanding share or a treasury share of the Savings Bank
after such effective date; and (iv) either:  (A) no shares of voting stock of
the Savings Bank and no securities convertible into such stock are to be issued
or delivered under the plan of combination or (B) the authorized unissued shares
or the treasury shares of voting stock of the Savings Bank to be issued or
delivered under the plan of combination, plus those initially issuable upon
conversion of any securities to be issued or delivered under such plan, do not
exceed 15% of the total shares of voting stock of the Savings Bank outstanding
immediately prior to the effective date of the transaction.

     The Holding Company's Certificate of Incorporation requires the approval of
the holders of at least 80% of the Holding Company's outstanding shares of
voting stock to approve certain "Business Combinations" (as defined therein)
involving a "Related Person" (as defined therein) except in cases where the
proposed transaction has been approved in advance by a majority of those members
of the Holding Company's Board of Directors who are unaffiliated with the
Related Person and were directors prior to the time when the Related Person
became a Related Person.  The term "Related Person" is defined to include any
individual, corporation, partnership or other entity (other than the Holding
Company or its subsidiary) which owns beneficially or controls, directly or
indirectly, 10% or more of the outstanding shares of voting stock of the Holding
Company or an affiliate of such person or entity.  This provision of the
Certificate of Incorporation applies to any "Business Combination," which is
defined to include:  (i) any merger or consolidation of the Holding Company with
or into any Related Person; (ii) any sale, lease, exchange, mortgage, transfer,
or other disposition of 25% or more of the assets of the Holding Company or
combined assets of the Holding Company and its subsidiaries to a Related Person;
(iii) any merger or consolidation of a Related Person with or into the Holding
Company or a subsidiary of the Holding Company; (iv) any sale, lease, exchange,
transfer, or other disposition of 25% or more of the assets of a Related Person
to the Holding Company or a subsidiary of the Holding Company; (v) the issuance
of any securities of the Holding Company or a subsidiary of the Holding Company
to a Related Person; (vi) the acquisition by the Holding Company or a subsidiary
of the Holding Company of any securities of a Related Person; (vii) any
reclassification of common stock of the Holding Company or any recapitalization
involving the common stock of the Holding Company; or (viii) any agreement or
other arrangement providing for any of the foregoing.

     Under Delaware law, absent this provision, business combinations, including
mergers, consolidations and sales of substantially all of the assets of a
corporation must, subject to certain exceptions, be approved by the vote of the
holders of a majority of the outstanding shares of common stock of the Holding
Company and any other affected class of stock.  One exception under Delaware law
to the majority approval requirement applies to stockholders owning 15% or more
of the common stock of a corporation for a period of less than three years.
Such 15% stockholder, in order to obtain approval of a business combination,
must obtain the approval of two-thirds of the outstanding stock, excluding the
stock owned by such 15% stockholder, or satisfy other requirements under
Delaware law relating to board of director approval of his or her acquisition of
the shares of the Holding Company.  The increased stockholder vote required to
approve a business combination may have the effect of foreclosing

                                       99
<PAGE>
 
mergers and other business combinations which a majority of stockholders deem
desirable and placing the power to prevent such a merger or combination in the
hands of a minority of stockholders.

     The Holding Company's Certificate of Incorporation requires the Holding
Company's Board of Directors to consider certain factors in addition to the
amount of consideration to be paid when evaluating certain business combinations
or a tender or exchange offer.  These additional factors include:  (i) the
social and economic effects of the transaction; (ii) the business and financial
condition and earnings prospects of the acquiring person or entity; and (iii)
the competence, experience, and integrity of the acquiring person or entity and
its management.

     As holder of all of the outstanding Savings Bank Common Stock after
consummation of the Conversion and Reorganization, the Holding Company generally
will be able to authorize a merger, consolidation or other business combination
involving the Savings Bank without the approval of the stockholders of the
Holding Company.

     DISSENTERS' RIGHTS OF APPRAISAL.  OTS regulations generally provide that a
stockholder of a federally chartered savings institution that engages in a
merger, consolidation or sale of all or substantially all of its assets shall
have the right to demand from such institution payment of the fair or appraised
value of his or her stock in the institution, subject to specified procedural
requirements.  This regulation also provides, however, that the stockholders of
a federally chartered savings institution with stock which is listed on a
national securities exchange or quoted on the Nasdaq Stock System are not
entitled to dissenters'  rights in connection with a merger involving such
savings institution if the stockholder is required to accept only "qualified
consideration" for his or her stock, which is defined to include cash, shares of
stock of any institution or corporation which at the effective date of the
merger will be listed on a national securities exchange or quoted on the Nasdaq
National Market System or any combination of such shares of stock and cash.

     Under the DGCL, shareholders of the Holding Company will generally have
dissenter's appraisal rights in connection with (i) a plan of merger to which
the Holding Company is a party; (ii) a plan of share exchange to which the
Holding Company is a party as the corporation whose shares will be acquired;
(iii) certain sales or exchanges of all, or substantially all, of the Holding
Company's property other than in the regular course of business; and (iv)
amendments to the Holding Company's Certificate of Incorporation effecting a
material reverse stock split.

     AMENDMENT OF GOVERNING INSTRUMENTS.  No amendment of the Savings Bank's
Federal Stock Charter may be made unless it is first proposed by the Board of
Directors of the Savings Bank, then preliminarily approved by the OTS, and
thereafter approved by the holders of a majority of the total votes eligible to
be cast at a legal meeting.  The Holding Company's Certificate of Incorporation
may be amended by the vote of the holders of a majority of the outstanding
shares of Holding Company Common Stock, except that the provisions of the
Certificate of Incorporation governing (i) the calling of meeting of
stockholders, (ii) stockholders' nominations and proposals, (iii) authorized
capital stock, (iv) denial of preemptive rights, (v) the number and staggered
terms of directors, (vi) removal of directors, (vii) approval of certain
business combinations, (viii) the evaluation of certain business combinations,
(ix) elimination of directors' liability, (x) indemnification of officers and
directors, and (xi) the manner of amending the Certificate of Incorporation and
Bylaws, each may not be repealed, altered, amended or rescinded except by the
vote of the holders of at least 80% of the outstanding shares of the Holding
Company.  This provision is intended to prevent the holders of a lesser
percentage of the outstanding stock of the Holding Company from circumventing
any of the foregoing provisions by amending the Certificate of Incorporation to
delete or modify one of such provisions.

     The Bylaws of the Savings Bank may be amended by a majority vote of the
full Board of Directors of the Savings Bank or by a majority vote of the votes
cast by the stockholders of the Savings Bank at any legal meeting.  The Holding
Company's Bylaws may only be amended by a majority vote of the Board of
Directors of the Holding Company or by the holders of at least 80% of the
outstanding stock by the Holding Company.

     PURPOSE AND TAKEOVER DEFENSIVE EFFECTS OF THE HOLDING COMPANY'S CERTIFICATE
OF INCORPORATION AND BYLAWS.  The Board of Directors of the Savings Bank
believes that the provisions described above are prudent and

                                      100
<PAGE>
 
will reduce the Holding Company's vulnerability to takeover attempts and certain
other transactions that have not been negotiated with and approved by its Board
of Directors.  These provisions will also assist the Savings Bank in the orderly
deployment of the Conversion and Reorganization proceeds into productive assets
during the initial period after the Conversion and Reorganization.  The Board of
Directors believes these provisions are in the best interest of the Savings Bank
and Holding Company and its stockholders.  In the judgment of the Board of
Directors, the Holding Company's Board will be in the best position to determine
the true value of the Holding Company and to negotiate more effectively for what
may be in the best interests of its stockholders.  Accordingly, the Board of
Directors believes that it is in the best interest of the Holding Company and
its stockholders to encourage potential acquirors to negotiate directly with the
Board of Directors of the Holding Company and that these provisions will
encourage such negotiations and discourage hostile takeover attempts.  It is
also the view of the Board of Directors that these provisions should not
discourage persons from proposing a merger or other transaction at a price
reflective of the true value of the Holding Company and that is in the best
interest of all stockholders.

     Attempts to acquire control of financial institutions and their holding
companies have recently become increasingly common.  Takeover attempts that have
not been negotiated with and approved by the Board of Directors present to
stockholders the risk of a takeover on terms that may be less favorable than
might otherwise be available.  A transaction that is negotiated and approved by
the Board of Directors, on the other hand, can be carefully planned and
undertaken at an opportune time in order to obtain maximum value of the Holding
Company for its stockholders, with due consideration given to matters such as
the management and business of the acquiring corporation and maximum strategic
development of the Holding Company's assets.

     An unsolicited takeover proposal can seriously disrupt the business and
management of a corporation and cause it great expense.  Although a tender offer
or other takeover attempt may be made at a price substantially above the current
market prices, such offers are sometimes made for less than all of the
outstanding shares of a target company.  As a result, stockholders may be
presented with the alternative of partially liquidating their investment at a
time that may be disadvantageous, or retaining their investment in an enterprise
that is under different management and whose objectives may not be similar to
those of the remaining stockholders.  The concentration of control, which could
result from a tender offer or other takeover attempt, could also deprive the
Holding Company's remaining stockholders of benefits of certain protective
provisions of the Exchange Act, if the number of beneficial owners became less
than 300, thereby allowing for deregistration under the Exchange Act.

     Despite the belief of the Savings Bank and the Holding Company as to the
benefits to stockholders of these provisions of the Holding Company's
Certificate of Incorporation and Bylaws, these provisions may also have the
effect of discouraging a future takeover attempt that would not be approved by
the Holding Company's Board, but pursuant to which stockholders may receive a
substantial premium for their shares over then current market prices.  As a
result, stockholders who might desire to participate in such a transaction may
not have any opportunity to do so.  Such provisions will also render the removal
of the Holding Company's Board of Directors and of management more difficult.
The Board of Directors of the Savings Bank and the Holding Company, however,
have concluded that the potential benefits outweigh the possible disadvantages.

     Following the Conversion and Reorganization, pursuant to applicable law
and, if required, following the approval by stockholders, the Holding Company
may adopt additional anti-takeover charter provisions or other devices regarding
the acquisition of its equity securities that would be permitted for a Delaware
business corporation.

          The cumulative effect of the restriction on acquisition of the Holding
Company contained in the Certificate of Incorporation and Bylaws of the Holding
Company and in Federal and Delaware law may be to discourage potential takeover
attempts and perpetuate incumbent management, even though certain stockholders
of the Holding Company may deem a potential acquisition to be in their best
interests, or deem existing management not to be acting in their best interests.

                                      101
<PAGE>
 
               RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY

     The following discussion is a summary of certain provisions of federal law
and regulations and Delaware corporate law relating to stock ownership and
transfers, the Board of Directors and business combinations, all of which may be
deemed to have "anti-takeover" effects.  The description of these provisions is
necessarily general and reference should be made to the actual law and
regulations.

CONVERSION REGULATIONS

     OTS regulations prohibit any person from making an offer, announcing an
intent to make an offer or participating in any other arrangement to purchase
stock or acquiring stock or subscription rights in a converting institution (or
its holding company) from another person prior to completion of its conversion.
Further, without the prior written approval of the OTS, no person may make such
an offer or announcement of an offer to purchase shares or actually acquire
shares in the converting institution (or its holding company) for a period of
three years from the date of the completion of the conversion if, upon the
completion of such offer, announcement or acquisition, that person would become
the beneficial owner of more than 10% of the outstanding stock of the
institution (or its holding company).  The OTS has defined "person" to include
any individual, group acting in concert, corporation, partnership, association,
joint stock company, trust, unincorporated organization or similar company, a
syndicate or any other group formed for the purpose of acquiring, holding or
disposing of securities of an insured institution.  However, offers made
exclusively to an association (or its holding company) or an underwriter or
member of a selling group acting on the converting institution's (or its holding
company's) behalf for resale to the general public are excepted.  The regulation
also provides civil penalties for willful violation or assistance in any such
violation of the regulation by any person connected with the management of the
converting institution (or its holding company) or who controls more than 10% of
the outstanding shares or voting rights of a converting or converted institution
(or its holding company).

     As permitted by OTS regulations, the Savings Bank's Federal Stock Charter
contains a provision whereby the acquisition or offer to acquire ownership of
more than 10% of the issued and outstanding shares of any class of equity
securities of the Savings Bank by any person, either directly or through an
affiliate of such person, will be prohibited for a period of five years
following the date of consummation of the Conversion and Reorganization.  Any
stock in excess of 10% acquired in violation of the Federal Stock Charter
provision will not be counted as outstanding for voting purposes.  Furthermore,
for five years from the consummation date of the MHC Reorganization,
stockholders of the Savings Bank will not be permitted to call a special meeting
of stockholders relating to a change of control of the Savings Bank or a charter
amendment and will not be permitted to cumulate their votes in the election of
directors.

CHANGE OF CONTROL REGULATIONS

     Under the Change in Bank Control Act, no person may acquire control of an
insured federal savings and loan association or its parent holding company
unless the OTS has been given 60 days' prior written notice and has not issued a
notice disapproving the proposed acquisition.  In addition, OTS regulations
provide that no company may acquire control of a savings association without the
prior approval of the OTS.  Any company that acquires such control becomes a
"savings and loan holding company" subject to registration, examination and
regulation by the OTS.

     Control, as defined under federal law, means ownership, control of or
holding irrevocable proxies representing more than 25% of any class of voting
stock, control in any manner of the election of a majority of the savings
association's directors, or a determination by the OTS that the acquiror has the
power to direct, or directly or indirectly to exercise a controlling influence
over, the management or policies of the institution.  Acquisition of more than
10% of any class of a savings association's voting stock, if the acquiror also
is subject to any one of eight "control factors," constitutes a rebuttable
determination of control under the regulations.  Such control factors include
the acquiror being one of the two largest stockholders.  The determination of
control may be rebutted by submission

                                      102
<PAGE>
 
to the OTS, prior to the acquisition of stock or the occurrence of any other
circumstances giving rise to such determination, of a statement setting forth
facts and circumstances which would support a finding that no control
relationship will exist and containing certain undertakings.  The regulations
provide that persons or companies which acquire beneficial ownership exceeding
10% or more of any class of a savings association's stock must file with the OTS
a certification form that the holder is not in control of such institution, is
not subject to a rebuttable determination of control and will take no action
which would result in a determination or rebuttable determination of control
without prior notice to or approval of the OTS, as applicable.  There are also
rebuttable presumptions in the regulations concerning whether a group "acting in
concert" exists, including presumed action in concert among members of an
"immediate family."

     The OTS may prohibit an acquisition of control if it finds, among other
things, that (i) the acquisition would result in a monopoly or substantially
lessen competition, (ii) the financial condition of the acquiring person might
jeopardize the financial stability of the institution, or (iii) the competence,
experience or integrity of the acquiring person indicates that it would not be
in the interest of the depositors or the public to permit the acquisition of
control by such person.

              DESCRIPTION OF CAPITAL STOCK OF THE HOLDING COMPANY

GENERAL

     The Holding Company is authorized to issue 7,500,000 shares of Common Stock
having a par value of $.01 per share and 250,000 shares of preferred stock
having a par value of $.01 per share.  The Holding Company currently expects to
issue up to 3,741,533 shares of Common Stock (subject to adjustment up to
4,302,763 shares) and no shares of preferred stock in the Conversion and
Reorganization.  Each share of the Holding Company's Common Stock will have the
same relative rights as, and will be identical in all respects with, each other
share of Common Stock.  Upon payment of the Purchase Price for the Common Stock,
in accordance with the Plan of Conversion, all such stock will be duly
authorized, fully paid and nonassessable.

     THE COMMON STOCK OF THE HOLDING COMPANY WILL REPRESENT NONWITHDRAWABLE
CAPITAL, WILL NOT BE AN ACCOUNT OF ANY TYPE, AND WILL NOT BE INSURED BY THE FDIC
OR ANY OTHER GOVERNMENT AGENCY.

COMMON STOCK

     DIVIDENDS.  The Holding Company can pay dividends out of statutory surplus
or from certain net profits if, as and when declared by its Board of Directors.
The payment of dividends by the Holding Company is subject to limitations which
are imposed by law and applicable regulation.  See "DIVIDEND POLICY" and
"REGULATION."  The holders of Common Stock of the Holding Company will be
entitled to receive and share equally in such dividends as may be declared by
the Board of Directors of the Holding Company out of funds legally available
therefor.  If the Holding Company issues preferred stock, the holders thereof
may have a priority over the holders of the Common Stock with respect to
dividends.

     STOCK REPURCHASES.  The Plan of Conversion and OTS regulations place
certain limitations on the repurchase of the Holding Company's capital stock.
See "THE CONVERSION AND REORGANIZATION --Restrictions on Repurchase of Stock"
and "USE OF PROCEEDS."

     VOTING RIGHTS.  Upon Conversion and Reorganization, the holders of Common
Stock of the Holding Company will possess exclusive voting rights in the Holding
Company.  They will elect the Holding Company's Board of Directors and act on
such other matters as are required to be presented to them under Federal law or
as are otherwise presented to them by the Board of Directors.  Except as
discussed in "RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY," each holder
of Common Stock will be entitled to one vote per share and will not have any
right to cumulate votes in the election of directors.  If the Holding Company
issues preferred stock, holders of the Holding Company preferred stock may also
possess voting rights.  Certain matters

                                      103
<PAGE>
 
require a vote of 80% of the outstanding shares entitled to vote thereon.  See
"RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY."

     As a federal stock savings bank, corporate powers and control of the
Savings Bank are vested in the Board of Directors, who elect the officers of the
Savings Bank and who fill any vacancies on the Board of Directors as it exists
upon Conversion and Reorganization.  Subsequent to Conversion and
Reorganization, voting rights will be vested exclusively in the owners of the
shares of capital stock of the Savings Bank, all of which will be owned by the
Holding Company, and voted at the direction of the Holding Company's Board of
Directors.  Consequently, the holders of the Common Stock will not have direct
control of the Savings Bank.

     LIQUIDATION.  In the event of any liquidation, dissolution or winding up of
the Savings Bank, the Holding Company, as holder of the Savings Bank's capital
stock would be entitled to receive, after payment or provision for payment of
all debts and liabilities of the Savings Bank (including all deposit accounts
and accrued interest thereon) and after distribution of the balance in the
special liquidation account to Eligible Account Holders and Supplemental
Eligible Account Holders (see "THE CONVERSION AND REORGANIZATION"), all assets
of the Savings Bank available for distribution.  In the event of liquidation,
dissolution or winding up of the Holding Company, the holders of its common
stock would be entitled to receive, after payment or provision for payment of
all its debts and liabilities, all of the assets of the Holding Company
available for distribution.  If Holding Company preferred stock is issued, the
holders thereof may have a priority over the holders of the Common Stock in the
event of liquidation or dissolution.

     PREEMPTIVE RIGHTS.  Holders of the Common Stock of the Holding Company will
not be entitled to preemptive rights with respect to any shares that may be
issued.  The Common Stock is not subject to redemption.

PREFERRED STOCK

     None of the shares of the authorized Holding Company preferred stock will
be issued in the Conversion and Reorganization and there are no plans to issue
the preferred stock.  Such stock may be issued with such designations, powers,
preferences and rights as the Board of Directors may from time to time
determine.  The Board of Directors can, without stockholder approval, issue
preferred stock with voting, dividend, liquidation and conversion rights that
could dilute the voting strength of the holders of the Common Stock and may
assist management in impeding an unfriendly takeover or attempted change in
control.

RESTRICTIONS ON ACQUISITION

     Acquisitions of the Holding Company are restricted by provisions in its
Certificate of Incorporation and Bylaws and by the rules and regulations of
various regulatory agencies.  See "REGULATION" and "RESTRICTIONS ON ACQUISITION
OF THE HOLDING COMPANY."

EFFECT OF RECEIVERSHIP ON THE COMMON STOCK

     In the event of the receivership of the Savings Bank, the FDIC, as
receiver, shall, by operation of law, succeed to, among other things, all the
rights, titles, powers and privileges of the Savings Bank and its stockholder,
the Holding Company.  As provided by the procedures and priorities applicable to
receiverships of savings institutions, the holders of the Common Stock would be
entitled to receive any funds remaining after all depositors, creditors, other
claimants (other than holders of stock ranking junior to or on a parity with the
Common Stock) and administrative expenses are paid.

TRANSFER AGENT AND REGISTRAR

     ChaseMellon Securities is the transfer agent and registrar for shares of
the Common Stock.

                                      104
<PAGE>
 
                           REGISTRATION REQUIREMENTS

     The Holding Company will register the Common Stock with the SEC pursuant to
Section 12(g) of the Exchange Act upon the completion of the Conversion and
Reorganization and will not deregister its Common Stock for a period of at least
three years following the completion of the Conversion and Reorganization.  Upon
such registration, the proxy solicitation and tender offer rules, insider
trading reporting and restrictions, annual and periodic reporting and other
requirements of the Exchange Act will apply.

                             LEGAL AND TAX OPINIONS

     The legality of the Common Stock has been passed upon for the Holding
Company by Breyer & Aguggia, Washington, D.C.  The federal tax consequences of
the Conversion and Reorganization have been opined upon by Breyer & Aguggia and
the South Carolina tax consequences of the Conversion and Reorganization have
been opined upon by Evans, Carter, Kunes & Bennett, P.A., Charleston, South
Carolina.  Breyer & Aguggia and Evans, Carter, Kunes & Bennett, P.A. have
consented to the references herein to their opinions.  Certain legal matters
will be passed upon for Sandler O'Neill by Muldoon, Murphy & Faucette,
Washington, D.C.

                                    EXPERTS

     The consolidated financial statements of the Savings Bank as of September
30, 1997 and 1996 and for each of the years in the three-year period ended
September 30, 1997, have been included herein and in the Registration Statement
in reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants, appearing elsewhere herein, and upon the authority of said
firm as experts in accounting and auditing.

     RP Financial has consented to the publication herein of the summary of its
report to the Savings Bank setting forth its opinion as to the estimated pro
forma market value of the MHC and the Savings Bank, as converted, and its letter
with respect to subscription rights and to the use of its name and statements
with respect to it appearing herein.

                             ADDITIONAL INFORMATION

     The Holding Company has filed with the SEC a Registration Statement on Form
S-1 (File No. 333-_____) under the Securities Act with respect to the Common
Stock offered in the Conversion and Reorganization.  This Prospectus does not
contain all the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
SEC.  Such information may be inspected at the public reference facilities
maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549 and at its regional offices at 500 West Madison Street, Suite 1400,
Chicago, Illinois  60661; and 7 World Trade Center, Suite 1300, New York, New
York  10048.  Copies may be obtained at prescribed rates from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Registration Statement also is available through the SEC's World Wide Web
site on the Internet (http://www.sec.gov).

     The MHC has filed with the OTS an Application for Approval of Conversion,
which includes proxy materials for the Special Members' Meeting and the
Stockholders' Meeting and certain other information.  This Prospectus omits
certain information contained in such Application.  The Application, including
the proxy materials, exhibits and certain other information that are a part
thereof, may be inspected, without charge, at the offices of the OTS, 1700 G
Street, N.W., Washington, D.C. 20552 and at the office of the Regional Director
of the OTS at the OTS Southeast Regional Office, 1475 Peachtree Street, N.E.,
Atlanta, Georgia 30309.

                                      105
<PAGE>
 
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
             PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARY

<TABLE>
<CAPTION>
 
 
                                                            Page
                                                            ----
<S>                                                         <C>
 
 
Independent Auditors' Report.............................    F-1
 
Consolidated Balance Sheets as of
 September 30, 1997 and 1996.............................    F-2
 
Consolidated Statements of Operation for the
 Years Ended September 30, 1997, 1996 and 1995...........     19
 
Consolidated Statements of Stockholders' Equity
 for the Years Ended September 30, 1997, 1996 and 1995...    F-3
 
Consolidated Statements of Cash Flows for the
 Years Ended September 30, 1997, 1996 and 1995...........    F-4
 
Notes to Consolidated Financial Statements...............    F-6
 
</TABLE>
                                *      *      *


     All schedules are omitted as the required information either is not
applicable or is included in the Consolidated Financial Statements or related
Notes.

     Separate financial statements for the MHC have not been included herein
because the MHC has no material assets other than shares of Savings Bank Common
Stock (which will be canceled as part of the Conversion and Reorganization) and
no significant liabilities (contingent or otherwise), revenues or expenses, and
has not engaged in any significant activities to date.

     Separate financial statements for the Holding Company have not been
included herein because the Holding Company, which has engaged in only
organizational activities to date, has no significant assets, liabilities
(contingent or otherwise), revenues or expenses.

                                      106
<PAGE>
 
                     [LETTERHEAD OF KPMG PEAT MARWICK LLP]

                          Independent Auditors' Report
                          ----------------------------


The Board of Directors
Perpetual Bank, A Federal Savings Bank
 and Subsidiaries

We have audited the consolidated balance sheets of Perpetual Bank, A Federal
Savings Bank and subsidiaries as of September 30, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the years in the three-year period ended September 30, 1997.  These
consolidated financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Perpetual Bank, A
Federal Savings Bank and subsidiaries as of September 30, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended September 30, 1997 in conformity with generally accepted
accounting principles.


                                         /s/ KPMG Peat Marwick LLP
                                         KPMG Peat Marwick LLP


Greenville, South Carolina
November 7, 1997

                                      F-1
<PAGE>
 
            PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES
                          Consolidated Balance Sheets
                          September 30, 1997 and 1996
<TABLE>
<CAPTION>
                       Assets                                            1997                   1996
                       ------                                            ----                   ----     
<S>                                                                 <C>                     <C>
Cash and cash equivalents                                             $13,499,332            13,584,568
Investment securities available for sale (amortized cost
  of $11,188,937 in 1997 and $2,494,535 in 1996)                       11,325,700             2,493,888
Federal Home Loan Bank stock, at cost                                   1,650,000               993,700
Mortgage-backed securities available for sale (amortized cost
  of $35,713,975 in 1997 and $44,362,007 in 1996)                      35,862,700            43,124,998
Loans receivable, (net of allowance for loan losses of
  $1,886,243 in 1997 and $1,534,773 in 1996)                          178,772,266           140,757,990
Investment in limited partnership                                       5,003,835                    - 
Real estate acquired in settlement of loans                               162,776                 2,750
Real estate held for development                                        2,284,038             1,406,144
Premises and equipment, net                                             6,294,465             4,852,366
Accrued interest receivable:
  Loans receivable                                                      1,330,255             1,113,386
  Mortgage-backed and other securities                                    238,186               356,827
Other                                                                     569,787             1,140,556
                                                                     ------------           -----------
       Total assets                                                  $256,993,340           209,827,173
                                                                     ============           ===========
 
       Liabilities and Stockholders' Equity
       ------------------------------------                          
Deposits                                                              201,001,858           160,243,623
Advances from the Federal Home Loan Bank ("FHLB")                      15,000,000            16,000,000
Advance payments by borrowers for property taxes and insurance            396,886               404,322
Accrued interest payable                                                1,362,483               747,059
Accrued expenses and other liabilities                                  8,630,370             3,341,375
                                                                     ------------           -----------
       Total liabilities                                              226,391,597           180,736,379
                                                                     ------------           -----------
 
Stockholders' equity:
  Common stock ($1.00 par value; authorized 20,000,000 shares;
     issued and outstanding 1,508,873 shares in 1997 and
     1,504,601 shares in 1996                                           1,508,873             1,504,601
  Additional paid-in capital                                           11,651,917            11,696,679
  Retained earnings, restricted                                        18,381,766            17,607,269
  Unrealized gain (loss) on securities available for sale, net            188,423              (816,855)
  Indirect guarantee of ESOP debt                                        (804,024)             (900,900)
  Deferred compensation for Management Recognition
     Plan ("MRP")                                                        (325,212)                   -  
                                                                     ------------           -----------
       Total stockholders' equity                                      30,601,743            29,090,794
                                                                     ------------           -----------
 
Commitments and contingencies
 
       Total liabilities and stockholders' equity                    $256,993,340           209,827,173
                                                                     ============           ===========
</TABLE>
See accompanying notes to consolidated financial statements.

                                      F-2
<PAGE>
 
            PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES
                Consolidated Statements of Stockholders' Equity
                 Years ended September 30, 1997, 1996 and 1995

<TABLE>
<CAPTION>
                                                                           Unrealized                             
                                                                           Gain (Loss)    Indirect                
                                                                          on Securities  Guarantee        Deferred 
                                               Additional                 Available for      of         Compensation
                                   Common        Paid-in      Retained      Sale, Net       ESOP             for   
                                   Stock         Capital      Earnings      of Taxes        Debt             MRP         Total
                                   -----         -------      --------      --------        ----             ---         -----   

<S>                             <C>            <C>           <C>           <C>           <C>          <C>             <C>
Balance at September 30, 1994    $1,503,943       847,044    14,709,955    (2,320,660)     (80,500)        (23,010)   14,636,772
                                             
 Change in unrealized loss on                
   securities available for                  
    sale, net                             -             -             -     1,711,405            -               -     1,711,405
 Exercise of stock options                   
   (658 shares)                         658         5,922             -             -            -               -         6,580
 Reduction of ESOP debt                   -             -             -             -       73,790               -        73,790
 Earned portion of MRP                    -             -             -             -            -          11,490        11,490
 Dividends on common stock                -             -      (125,089)            -            -               -      (125,089)
 Net income for 1995                      -             -     1,917,038             -            -               -     1,917,038
                                 ----------    ----------    ----------    ----------     --------        --------    ----------
Balance at September 30, 1995     1,504,601       852,966    16,501,904      (609,255)      (6,710)        (11,520)   18,231,986
                                             
 Change in unrealized loss on                
   securities available for                  
    sale, net                             -             -             -      (207,600)           -               -      (207,600)
 Reduction on ESOP debt                   -             -             -             -        6,710           6,710
 Earned portion of MRP                    -             -             -             -            -          11,520        11,520
 Dividends on common stock                -             -      (319,022)            -            -               -      (319,022)
 Sale of common stock (less                  
   offering cost of $417,536)             -    10,843,713             -             -            -               -    10,843,713
 Indirect guaranteed of ESOP                 
  debt                                    -             -             -             -     (900,900)              -      (900,900)
 Net income for 1996                      -             -     1,424,387             -                            -     1,424,387
                                 ----------    ----------    ----------    ----------     --------        --------    ----------
Balance at September 30, 1996     1,504,601    11,696,679    17,607,269      (816,855)    (900,900)              -    29,090,794
                                             
 Change in unrealized loss on                
   securities, net                        -             -             -     1,005,278            -               -     1,005,278
 Exercise of stock options            4,272        38,448             -             -            -               -        42,720
 Reduction of ESOP debt                   -             -             -             -       96,876               -        96,876
 ESOP expense                             -        32,152             -             -            -               -        32,152
 Purchase of common stock                    
   for MRP                                -             -             -             -            -        (404,093)     (404,093)
 Earned portion of MRP                    -             -             -             -            -          78,881        78,881
 Dividends on common stock                -             -      (953,866)            -            -               -      (953,866)
 Offering costs for the sale                 
   of common stock                        -      (115,362)            -             -            -               -      (115,362)
 Net income for 1997                      -             -     1,728,363             -            -               -     1,728,363
                                 ----------    ----------    ----------    ----------     --------        --------    ----------
Balance at September 30, 1997    $1,508,873    11,651,917    18,381,766       188,423     (804,024)       (325,212)   30,601,743
                                 ==========    ==========    ==========    ==========     ========        ========    ==========
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>
 
            PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES
                     Consolidated Statements of Cash Flows
                 Years ended September 30, 1997, 1996 and 1995

<TABLE>
<CAPTION>
                                                                       1997            1996            1995    
                                                                       ----            ----            ----      
Cash flows from operating activities:
<S>                                                               <C>               <C>             <C>             
  Net income                                                      $  1,728,363      1,424,387       1,917,038
  Adjustments to reconcile net income to net                    
     cash provided by operating activities:                     
       Depreciation and amortization                                   703,213        597,306         583,281
       Provision for loan losses                                       655,000        349,250         362,000
       Earnings of investment in                                
          limited partnership                                         (184,960)             -               -
       (Increase) decrease in deferred tax assets                            -              -          27,000
       Gain on sale of mutual funds, net                                     -              -      (1,763,967)
       Gain on sale of investments, net                                307,534        (53,963)        (13,504)
       Gain on sale of real estate                                    ( 19,894)       (79,034)        (47,544)
       Deferred compensation                                           111,033         11,520          11,490
       Loss (gain) on sale of loans, net                               (12,509)        23,328         (66,785)
       Loss (gain) on sale of fixed assets, net                        191,894        (26,096)              -
       Decrease (increase) in accrued interest                  
          receivable and other assets                                  (46,895)      (789,076)       (205,004)
       Increase (decrease) in other liabilities                      5,656,419      1,190,696        (131,300)
                                                                  ------------    -----------    ------------
          Net cash provided by                                  
            operating activities                                     9,089,198      2,648,318         672,705
                                                                  ------------    -----------    ------------
                                                                                                             
Cash flows from investing activities:                           
  Proceeds from sales of investment securities                               -              -       7,625,359
  Proceeds from maturities of investment securities                  2,550,000        800,000         393,242
  Purchase of investment securities                                (11,181,806)    (2,488,144)       (797,625)   
  Purchase of investments in limited partnership                    (4,818,875)             -               -
  Purchase of mutual funds                                                   -              -    (144,640,000)
  Proceeds from sales of mutual funds                                        -              -     146,403,967
  Proceeds from the sales of fixed assets                                    -         91,096               -
  Principal repayments on mortgage-backed                                                                    
     securities                                                      4,412,449      2,967,619       3,501,516
  Proceeds from sales of mortgage-backed                                                                     
     securities                                                     22,570,776      2,922,009               -
  Purchase of mortgage-backed securities                           (18,760,688)             -      (5,055,120)
  Proceeds from redemption of FHLB stock                               650,000      1,804,600       1,110,000
  Purchases of FHLB stock                                           (1,306,300)      (398,300)     (2,424,700)
                                                                                                             
  Increase in loans receivable, net                                (12,676,474)   (18,966,369)    (21,874,020)
  Purchases of loans receivable                                    (31,960,810)   (18,242,510)              -
  Sales of loans receivable                                          5,746,769      9,555,720       9,614,274
  Proceeds from sale of real estate owned                               95,186        120,959         869,086
  Proceeds from sale of real estate held for                                                                 
     development                                                     1,149,353              -               -
  Purchase of premises and equipment                                (2,281,841)    (1,558,569)       (731,153)
  Purchase of real estate held for development                      (2,027,247)    (1,406,144)              -
                                                                  ------------    -----------    ------------
          Net cash used in investing activities                    (47,821,198)   (24,798,033)     (6,005,174)
                                                                  ------------    -----------    ------------ 
</TABLE>

                                      F-4
<PAGE>
 
            PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

               Consolidated Statements of Cash Flows, Continued
<TABLE>
<CAPTION>
 
 
                                                               1997           1996           1995
                                                               ----           ----           ----    
<S>                                                       <C>             <C>            <C>             
 
Cash flows from financing activities:
  Increase in deposit accounts                              40,758,235     10,926,744       5,774,086
  Proceeds from FHLB advances                               68,000,000     61,000,000     216,150,000
  Repayment of FHLB advances                               (69,000,000)   (53,000,000)   (218,650,000)
  Proceeds from sale of common stock, less
     expenses                                                  (72,642)    10,843,714           6,580
  Purchase of stock for MRP                                   (404,093)             -               -
  Repayments of ESOP Loan                                       96,876              -               -
  Dividends paid on common stock                              (705,866)      (319,022)       (125,089)
  (Decrease) increase in advance payments by
     borrowers for  property taxes and insurance                (7,436)      (346,858)        106,605
                                                          ------------    -----------    ------------
          Net cash provided by
            financing activities                            38,665,074     29,104,578       3,262,182
                                                          ------------    -----------    ------------
 
Net increase (decrease) in cash and cash equivalents           (85,236)     6,954,863      (2,070,287)
 
Cash and cash equivalents, beginning of year                13,584,568      6,629,705       8,699,992
                                                          ------------    -----------    ------------
 
Cash and cash equivalents, end of year                    $ 13,499,332     13,584,568       6,629,705
                                                          ============    ===========    ============
 
Supplemental disclosures:
  Cash paid during the year for
     Interest                                             $  9,537,349      7,434,366       8,535,117
                                                          ============    ===========    ============
     Taxes                                                $    641,000        745,840         415,500
                                                          ============    ===========    ============
 
Noncash investing activity:
  Additions to real estate acquired in
     settlement of loans                                  $    233,748         50,859         277,511
                                                          ============    ===========    ============
  Loans receivable exchanged for
     mortgage-backed securities                           $          -      3,061,294               -
                                                          ============    ===========    ============
  Change in unrealized net loss on securities
     available for sale, net of tax                       $  1,005,278       (207,600)     (1,711,405)
                                                          ============    ===========    ============
  Change in Employee Stock Ownership Plan
     debt guaranteed by the Bank                          $    (96,876)       894,190         (73,790)
                                                          ============    ===========    ============
</TABLE>
See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>
 
            PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements


(1)  Organization and Summary of Significant Accounting Policies
     -----------------------------------------------------------

     On May 15, 1992, the Bank's Board of Directors adopted a plan of
     reorganization pursuant to which Perpetual Bank, a Federal Savings Bank
     ("Perpetual" or "Bank") proposed to reorganize from a federally chartered
     mutual savings and loan association into a mutual holding company ("MHC").

     To implement the reorganization, Perpetual incorporated a federally
     chartered capital stock savings bank (New Federal Savings Bank).  In
     exchange for the common shares of the New Federal Savings Bank to be issued
     to the MHC, Perpetual transferred substantially all of its assets and all
     of its liabilities to the New Federal Savings Bank.  The New Federal
     Savings Bank was renamed Perpetual Bank, a Federal Savings Bank and became
     a majority-owned subsidiary of the MHC.

     Perpetual has the power to issue shares of capital stock (including common
     and preferred stock) to persons other than the MHC.  So long as the MHC is
     in existence, the aggregate amount of voting stock that may be issued to
     persons other than the MHC must be less than 50% of the issued and
     outstanding voting stock of Perpetual.  The New Federal Savings Bank may
     issue any amount of non-voting stock to persons other than the MHC.

     On October 26, 1993, Perpetual completed the reorganization and sold
     116,969 shares of common stock at $10 per share.  The remaining 1,385,000
     shares of common stock were transferred to the MHC.

     The costs related to the reorganization and offering were charged against
     the proceeds of the sale of stock.  Capitalized costs related to this
     transaction were approximately $223,443.  These costs were treated as a
     reduction of paid-in capital.

     In September 1996, Perpetual sold 585,000 shares of common stock from its
     authorized but unissued shares.  SouthBanc Shares, MHC presently owns
     53.02% of Perpetual, and the minority ownership is 46.98%.  The 585,000
     shares were sold at a price of $19.25 per share generating proceeds of
     $11,261,249, less offering cost of $532,898, for a net proceed of
     $10,728,351.

     In September 1997, the Board of Directors of Perpetual Bank and the MHC
     adopted a proposed Plan of Conversion to convert the MHC to stock form and
     to reorganize the MHC and Perpetual by forming a new Stock Holding Company
     ("SHC") to become the parent company of Perpetual.  The SHC will exchange
     certain shares of its common stock for the outstanding common stock of
     Perpetual and will issue and offer for sale certain additional shares of
     its common stock.  The additional shares of common stock of the SHC will be
     offered to eligible account holders of Perpetual as of June 30, 1996, who
     will receive nontransferable subscription rights to purchase these shares,
     as well as certain other persons as provided for in the Plan.  The

                                      F-6
<PAGE>
 
            PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(1)  Organization and Summary of Significant Accounting Policies, Continued
     ----------------------------------------------------------------------

     amount and pricing of the proposed stock offering will be based on an
     independent appraisal of Perpetual.

     In connection with the proposed transaction, the MHC will file an
     application with the Office of Thrift Supervision and a registration
     statement with the U.S. Securities and Exchange Commission with respect to
     the reorganization and common stock offering.  After receipt of the
     required regulatory approvals, the Plan of Conversion will be submitted to
     the members of the MHC for approval by at least a majority of the votes
     eligible to be cast at a special meeting and will also be submitted by
     Perpetual's stockholders for approval at a special meeting.  The
     transaction is expected to be completed during the second calendar quarter
     of 1998.

     At the time of the conversion, Perpetual will establish a liquidation
     account in an amount equal to its equity as reflected in the consolidated
     balance sheet used in the final conversion prospectus.  The liquidation
     account will be maintained for the benefit of eligible account holders and
     supplemental eligible account holders who continue to maintain their
     accounts at Perpetual after the conversion.  The liquidation account will
     be reduced annually, to the extent that eligible account holders and
     supplemental eligible account holders have reduced their qualifying
     deposits as of each anniversary date.  Subsequent increases will not
     restore an eligible account holder's or supplemental eligible account
     holder's interest in the liquidation account.  In the event of a complete
     liquidation of Perpetual, each eligible account holder and supplemental
     eligible account holder will be entitled to receive a distribution from the
     liquidation account in an amount proportionate to the current adjusted
     qualifying balances for accounts then held.

     Subsequent to the conversion, Perpetual may not declare or pay cash
     dividends on or repurchase any of its shares of common stock if the effect
     thereof would cause equity to be reduced below applicable regulatory
     capital maintenance requirements or if such declaration and payment would
     otherwise violate regulatory requirement.

     Conversion costs will be deferred and reduce the proceeds from the shares
     sold in the conversion.  If the conversion is not completed, all costs will
     be charged as an expense.

     Consolidation
     -------------
     The accompanying consolidated financial statements include the accounts of
     Perpetual and its wholly owned subsidiaries, United Service Corporation
     ("USC"), which has a wholly owned subsidiary, United Investment Service
     Corporation and primarily engages in real estate development and Mortgage
     First Service Corporation, which holds an equity investment in a mortgage
     banking company (collectively the "Bank"). All significant intercompany
     items and transactions have been eliminated in consolidation.

                                      F-7
<PAGE>
 
            PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(1) Organization and Summary of Significant Accounting Policies, Continued
    ----------------------------------------------------------------------

    Loans Receivable, Net
    ---------------------
    Loans receivable are stated at their unpaid principle balances less the
    allowance for loan losses, and net of deferred loan origination fees and
    discounts.

    The Bank provides for loan losses on the allowance method. Accordingly, all
    loan losses are charged to the related allowance and all recoveries are
    credited to the allowance. Additions to the allowance for loan losses are
    provided by charges to operations based on various factors which, in
    management's judgment, deserve current recognition in estimating possible
    losses. Such factors considered by management include the market value of
    the underlying collateral, growth and composition of the loan portfolios,
    the relationship of the allowance for loan losses to outstanding loans, loss
    experience, delinquency trends and economic conditions. Management evaluates
    the carrying value of loans periodically and the allowance is adjusted
    accordingly. While management uses the best information available to make
    evaluations, future adjustments to the allowance may be necessary if
    economic conditions differ substantially from the assumptions used in making
    evaluations. Allowances for loan losses are subject to periodic evaluation
    by various regulatory authorities and may be subject to adjustment upon
    their examination.

    Statement of Financial Accounting Standards ("SFAS") No. 114, "Accounting by
    Creditors for Impairment of a Loan", ("SFAS No. 114") requires that
    creditors value all specifically reviewed loans for which it is probable
    that the creditors will be unable to collect all amounts due according to
    the terms of the loan agreement at either the present value of expected cash
    flows discounted at the loan's effective interest rate, or if more
    practical, the market price or value of the collateral. If the resulting
    value of the impaired loan is less than the recorded balance, the impairment
    must be recognized by creating a valuation allowance for the difference and
    recognizing a corresponding bad debt expense. SFAS No. 118, "Accounting by
    Creditors for Impairment of a Loan - Income Recognition and Disclosures",
    amends SFAS No. 114 to allow a creditor to use existing methods for
    recognizing interest income on an impaired loan and requires additional
    disclosures about how a creditor recognizes interest income related to
    impaired loans. The Savings Bank adopted the provisions of SFAS No. 114 and
    No. 118 effective October 1, 1995. The adoption of these standards required
    no increase to the reserve for loan losses and had no impact on net income.

    Interest income on loans and lease financing is recorded on the accrual
    basis. Accrual of interest on loans (including loans impaired under SFAS No.
    114) is discontinued when management deems that collection of additional
    interest is doubtful. Interest received on nonaccrual loans and impaired
    loans is generally applied against principal or may be reported as interest
    income depending on management's judgment as to the collectibility of
    principal. When borrowers with loans on a nonaccrual status demonstrate
    their ability to repay their loans in accordance with the contractual terms
    of the notes, the loans are returned to accrual status.

                                      F-8
<PAGE>
 
            PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(1) Organization and Summary of Significant Accounting Policies, Continued
    ----------------------------------------------------------------------
 
    The Bank provides an allowance for uncollectible interest based on an
    experience method of anticipated collections. This allowance is netted
    against accrued interest receivable for financial statement reporting
    purposes.

    Loan fees and direct incremental costs of originating loans are deferred and
    amortized over the contractual life of the related loan. The amortization of
    the net fees or costs are recognized as a yield adjustment using the
    interest method.

    Loans Held For Sale
    -------------------
    Loans held for sale are accounted for at the lower of aggregate cost or
    market value.

    Investment and Mortgage-Backed Securities
    ------------------------------------------
    The Bank adopted SFAS No. 115, "Accounting for Certain Investments in Debt
    and Equity Securities", on October 1, 1993. SFAS No. 115 addresses the
    accounting and reporting for investments in equity securities that have
    readily determinable fair values and for all investments in debt securities.
    These investments are classified in three categories and are accounting for
    as follows: (a) debt securities that the Bank has the positive intent and
    ability to hold to maturity are classified as held for investment and
    reported at amortized cost; (b) debt and equity securities that are bought
    and held principally for the purpose of selling them in the near term are
    classified as trading securities and reported at fair value, with unrealized
    gains and losses included in earnings; and (c) debt and equity securities
    not classified as either held for investment securities or trading
    securities are classified as available for sale securities and reported at
    fair value, with unrealized gains and losses excluded from earnings and
    reported as a separate component of stockholders' equity. The Bank has no
    securities classified as held for investment or trading. Upon adoption of
    SFAS No. 115, the net unrealized loss on securities available for sale, net
    of taxes, was reported as a separate component of stockholders' equity. SFAS
    No. 115 will cause fluctuations in stockholders' equity based on changes in
    values of debt and equity securities classified as available for sale.

    Securities classified as available for sale will be considered in the Bank's
    asset/liability management strategies and may be sold in response to changes
    in interest rates, liquidity needs and/or significant prepayment risk. The
    cost of investment securities sold is determined by the "identified
    certificate" method.

    Declines in the fair value of individual securities below their cost that
    are deemed by management to be other than temporary result in write-downs of
    the individual securities to their fair value. The write-downs are included
    in earnings as realized losses.

    At September 30, 1997, the Bank had increased stockholders' equity by
    approximately $188,000 for the unrealized gain, net of income taxes, on
    securities available for sale, and, a

                                      F-9
<PAGE>
 
            PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(1) Organization and Summary of Significant Accounting Policies, Continued
    ----------------------------------------------------------------------
 
    September 30, 1996, the Bank had reduced stockholders' equity by
    approximately $817,000 for the unrealized loss, net of income taxes, on
    securities available for sale.

    Investment In Limited Partnership
    ---------------------------------
    Investment in limited partnership represents an equity investment in a
    limited partnership in which Perpetual owned more than 20 per cent but not
    in excess of 50 per cent of the limited partnership and is accounted for
    under the equity method.

    Real Estate Acquired in Settlement of Loans
    -------------------------------------------
    Real estate acquired in settlement of loans represents real estate acquired
    through foreclosure and is initially recorded at estimated fair value.
    Subsequent to acquisition, real estate acquired in settlement of loans is
    stated at the lower of cost or fair value, less estimated selling costs.
    Costs related to holding these properties are charged to operations. Market
    values of real estate acquired in settlement of loans are reviewed regularly
    and allowances for losses are established when the carrying values of real
    estate acquired in settlement of loans exceeds fair value less costs to
    sell.

    Premises and Equipment
    ----------------------
    Premises and equipment are carried at cost less accumulated depreciation.
    Depreciation is calculated primarily on the straight-line method over the
    estimated useful lives of the respective assets, five to forty years.

    Securities Sold Under Agreements to Repurchase
    ----------------------------------------------
    The Bank enters into sales of securities under agreements to repurchase.
    Fixed-coupon reverse repurchase agreements are treated as financings, with
    the obligation to repurchase securities sold being reflected as a liability
    and the securities underlying the agreements remaining as an asset. The
    securities are delivered by appropriate entry by the Bank's safekeeping
    agent to the counterparties' accounts. The dealers may have sold, loaned or
    otherwise disposed of such securities to other parties in the normal course
    of their operations, and have agreed to resell to the Bank substantially
    identical securities at the maturities of the agreements.

    Income Taxes
    ------------
    The provision for income taxes is based upon income and expense reported for
    financial statement purposes after adjustment for permanent differences such
    as tax-exempt interest income.

    When income and expenses are recognized in different periods for financial
    reporting purposes than for income tax purposes, deferred taxes are provided
    in recognition of these temporary differences. The Bank computes its income
    taxes in accordance with SFAS No. 109

                                      F-10
<PAGE>
 
            PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(1) Organization and Summary of Significant Accounting Policies, Continued
    ----------------------------------------------------------------------

    "Accounting for Income Taxes" which requires the use of the liability method
    to record income taxes. The liability method calculates the effect of tax
    rates expected to be in place when the related temporary differences
    reverse. Subsequent changes in tax rates will require adjustment to these
    deferred tax assets and liabilities.

    Stock Based Compensation
    ------------------------
    In 1996, the Bank adopted the disclosure provisions of SFAS No. 123
    "Accounting for Stock Based Compensation". The statement permits the Bank to
    continue accounting for stock based compensation as set forth in Accounting
    Principles Board ("APB") Opinion 25, "Accounting for Stock Issued to
    Employees", provided the Bank discloses the pro forma effect on net income
    and earnings per share of adopting the full provisions of SFAS No. 123.
    Accordingly, the Bank continues to account for stock based compensation
    under APB Opinion 25 and has provided the required pro forma disclosures.

    Earnings Per Share
    ------------------
    Earnings per share for the year ended September 30, 1997, 1996, and 1995
    were computed based upon the weighted average shares outstanding.

    Risks and Uncertainties
    -----------------------
    In the normal course of its business, the Bank encounters two significant
    types of risk: economic and regulatory. There are three main components of
    economic risk: interest rate risk, credit risk and market risk. The Bank is
    subject to interest rate risk to the degree that its interest-bearing
    liabilities mature or reprice at different speeds, or on different bases,
    than its interest earning assets. Credit risk is the risk of default on the
    Bank's loan portfolio that results from the borrowers' inability or
    unwillingness to make contractually required payments. Market risk reflects
    changes in the value of collateral underlying loans receivable, the
    valuation of real estate held by the Bank, and the valuation of loans held
    for sale.

    The Bank is subject to the regulations of various government agencies. These
    regulations can and do change significantly from period to period. The Bank
    also undergoes periodic examinations by the regulatory agencies, which may
    subject it to further changes with respect to asset valuations, amounts of
    required loss allowances and operating restrictions resulting from the
    regulators' judgments based on information available to them at the time of
    their examination.

                                      F-11
<PAGE>
 
            PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements


(1) Organization and Summary of Significant Accounting Policies, Continued
    ----------------------------------------------------------------------

    In preparing the financial statements, management is required to make
    estimates and assumptions that affect the reported amounts of assets and
    liabilities and disclosures of contingent assets and liabilities as of the
    dates of the balance sheets and revenues and expenses for the periods
    covered. Actual results could differ significantly from those estimates and
    assumptions.

    Reclassification
    ----------------
    Certain reclassifications of accounts reported for previous periods have
    been made in these consolidated financial statements. Such reclassifications
    had no effect on stockholders' equity or the net income as previously
    reported.
 
(2) Cash and Cash Equivalents
    -------------------------

    Cash and cash equivalents consisted of the following at September 30, 1997
    and 1996:
<TABLE>
<CAPTION>
 
                                                   1997        1996
                                                   ----        ----         
<S>                                            <C>           <C>         
 
      Working funds                            $ 2,229,557   1,789,074
      Noninterest-earning demand deposits        1,805,522   2,352,194
      Interest-earning overnight deposits        9,464,253   9,443,300
                                               -----------  ----------
 
                                               $13,499,332  13,584,568
                                               ===========  ==========
</TABLE>

(3) Investment In Limited Partnership
    ---------------------------------

    At September 30, 1997, the Bank's investment in Limited Partnership
    consisted of a 20.625 percent interest in Dovenmuehle Mortgage Company
    Limited Partnership which invests in mortgage servicing rights. The Bank
    invested in Dovenmuehle in December 1996.

                                      F-12
<PAGE>
 
            PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(3) Investment In Limited Partnership, Continued
    --------------------------------------------

    The table below contains the summarized financial information of
    Dovenmuehle.

<TABLE>
<CAPTION>
                                                        Year Ended
Condensed Income Statement                          September 30, 1997
                                                    ------------------  
<S>                                                     <C>
 
Service Fees                                            $ 6,626,798
Other Income                                                416,475
                                                        -----------
     Total Income                                         7,043,273
                                                        -----------
 
Servicing Expense                                         1,558,802
PMSR Amortization                                         3,429,082
Other Expense                                             1,153,408
                                                        -----------
     Total Expense                                        6,141,292
                                                        -----------
 
     Net Income                                         $   901,981
                                                        ===========
 
Condensed Balance Sheet                            At September 30, 1997
                                                   ---------------------
 
Cash                                                    $ 2,049,912
Accounts Receivable                                       1,496,187
Purchased Mortgage Servicing Rights                      48,412,490
Organizational Costs                                        472,827
                                                        -----------
     Total Assets                                       $52,431,416
                                                        ===========
 
Accounts Payable                                          4,405,194
Long Term Debt                                           23,760,000
Shareholders' Equity                                     24,266,222
                                                        -----------
     Total Liabilities and Shareholders'
      Equity                                            $52,431,416
                                                        ===========
</TABLE>

                                      F-13
<PAGE>
 
            PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements


(4)  Investment and Mortgage-Backed Securities Available for Sale
     ------------------------------------------------------------

     The Bank had securities available for sale as follows:

<TABLE>
<CAPTION>
 
                                                    Gross      Gross
                                   Amortized      Unrealized Unrealized     Fair
                                     Cost           Gains      Losses       Value
                                  -----------      -------   ----------   ----------
<S>                               <C>           <C>          <C>          <C>
 
 September 30, 1997
 ------------------
 Investment securities:
  Federal Home Loan Bank
   Indexed Principal
   Reduction Bond                 $ 4,002,933            -        7,773    3,995,160
  FHLB Optional Principal
   Redemption Bond                  6,187,732      144,368            -    6,332,100
  U.S. T-Note                         998,272          168            -      998,440
                                  -----------      -------   ----------   ----------
                                  $11,188,937      144,536        7,773   11,325,700
                                  ===========      =======   ==========   ==========
 
 Mortgage-backed securities:
  FHLMC and FNMA
   fixed rate                      13,117,125      114,313       23,290   13,208,148
  FHLMC five year balloons            131,893            -          315      131,578
  Agency adjustable rate,
   30 year original
   maturity                           438,330            -       14,271      424,059
  Collateralized mortgage
   obligations (CMOs)              22,026,627       73,179          891   22,098,915
                                  -----------      -------   ----------   ----------
 
                                  $35,713,975      187,492       38,767   35,862,700
                                  ===========      =======   ==========   ==========
</TABLE>

                                      F-14
<PAGE>
 
            PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements


(4)  Investment and Mortgage-Backed Securities Available for Sale (Continued)
     ------------------------------------------------------------------------

<TABLE>
<CAPTION>
          September 30, 1996                                                                 
          ------------------                                                                 
          <S>                              <C>           <C>         <C>          <C>        
          Investment securities:                                                             
           Federal Farm Credit Bond         $1,999,533           -        1,033    1,998,500 
           Certificate of deposit              100,000           -            -      100,000 
           FNMA discount note                  395,002         386            -      395,388 
                                           -----------      ------    ---------   ---------- 
                                            $2,494,535         386        1,033    2,493,888 
                                           ===========      ======    =========   ========== 
                                                                                             
          Mortgage-backed securities:                                                        
           FHLMC and FNMA                                                                    
            fixed rate                      $6,411,100      31,646      197,050    6,245,696 
           FHLMC five year balloons          1,134,918           -        2,386    1,132,532 
           Agency adjustable rate,                                                           
            generally 30 year                                                                
            original maturities                532,971           -        3,928      529,043 
           Collateralized mortgage                                                           
            obligations (CMOs)              36,283,018      12,764    1,078,055   35,217,727 
                                           -----------      ------    ---------   ---------- 
                                                                                             
                                           $44,362,007      44,410    1,281,419   43,124,998 
                                           ===========      ======    =========   ==========  
</TABLE>                                                   

     Included in accrued expenses and other liabilities in the accompanying
     consolidated balance sheet at September 30, 1997, was an amount payable for
     the purchase of an investment security totaling $5,177,284 included in
     FHLMC and FNMA Fixed Rate above, which had not settled as of September 30,
     1997.

     The amounts of scheduled maturities of investment and mortgage-backed
     securities at September 30, 1997 were as follows:

<TABLE>
<CAPTION>
                                        Amortized        Fair   
                                           Cost         Value   
                                        ---------       -----   
                                                                
<S>                                    <C>            <C>       
          Less than one year            $ 1,393,377    1,393,231
          One year to five years          5,457,451    5,457,979
          Five years to ten years        11,666,060   11,740,436
          Ten and Over                   28,386,024   28,596,754
                                        -----------   ----------
                                                                
                                        $46,902,912   47,188,400
                                        ===========   ========== 
</TABLE>

                                      F-15
<PAGE>
 
            PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(4)  Investment and Mortgage-Backed Securities Available for Sale (Continued)
     ------------------------------------------------------------------------

     Proceeds from sales of mutual funds and securities available for sale and
     the related gross realized gains and losses were as follows:
<TABLE>
<CAPTION>
                                                                          1997           1996          1995
                                                                          ----           ----          ----
<S>                                                                   <C>              <C>          <C>
 
          Proceeds from sales of mutual funds                         $         -             -  146,403,967
          Proceeds from sales of securities                           $22,872,420     2,922,009    7,625,359
          Gross realized gains                                        $     7,866        56,228    1,843,902
          Gross realized losses                                       $   315,400         2,265       66,431
</TABLE> 
 
(5) Loans Receivable, Net
    ---------------------
 
    Loans receivable at September 30, 1997 and 1996 are summarized as follows:
<TABLE> 
<CAPTION> 
 
                                                                          1997          1996
                                                                          ----          ----
<S>                                                                   <C>             <C> 
          First mortgage loans, substantially all
           one to four family                                         $118,663,177    91,329,530
          Construction                                                  17,145,456    19,508,595
          Commercial real estate                                        26,975,976    17,150,980
          Loan participations purchased                                    859,952       979,951
          Home improvement loans                                         3,405,621     5,035,871
          Commercial loans                                               7,181,746     5,528,527
          Consumer loans                                                14,422,484    10,931,490
          Loans secured by deposits                                      1,345,137       948,337
                                                                      ------------   -----------
                                                                       189,999,549   151,413,281
          Less:                          
           Deferred loan fees, net                                         356,780       254,434
           Allowance for loan losses                                     1,886,243     1,534,773
           Undisbursed loans in process                                  8,984,260     8,866,084
                                                                      ------------   -----------
                                         
                Loans receivable, net                                 $178,772,266   140,757,990
                                                                      ============   ===========
</TABLE>
    Changes in the allowance for loan losses for the years ended September 30,
    1997, 1996, and 1995 are summarized as follows:
<TABLE>
<CAPTION>
 
                                         1997         1996        1995
                                         ----         ----        ----       
<S>                                   <C>          <C>          <C>
 
          Balance, beginning of year  $1,534,773   1,278,423      961,672
          Provision for loan losses      655,000     349,250      362,000
          Charge-offs                   (332,194)   (115,558)     (51,082)
          Recoveries                      28,664      22,658        5,833
                                      ----------   ---------    ---------
                                   
          Balance, end of year        $1,886,243   1,534,773    1,278,423
                                      ==========   =========    =========
</TABLE>

                                      F-16
<PAGE>
 
            PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements


(5)  Loans Receivable, Net, Continued
     --------------------------------

     Loans serviced for others amounted to approximately $62,148,000,
     $73,303,000, and $73,195,000 at September 30, 1997, 1996 and 1995,
     respectively.

     At September 30, 1997 and 1996, the Bank had approximately $479,000 and
     $368,000, respectively, in loans receivable, which were ninety days or more
     delinquent and accruing interest.

     As of September 30, 1997, the Bank had purchased loans in the state of
     South Carolina as follows:

          1 - 4 family residential      $19,600,000
          Real estate development         1,500,000
          Construction                    4,100,000

     Loans Held for Sale at September 30, 1997 and September 30, 1996 were
     $7,102,000 and $1,101,000, respectively.

     At September 30, 1997 and 1996, the Bank had approximately $403,000 and
     $316,000, respectively, in non-accrual loans. The amount of interest income
     that would have been recognized had these loans performed according to
     their contractual terms amounted to approximately $19,000 and $22,000
     during the years ended September 30, 1997 and 1996, respectively.

     At September 30, 1997 and 1996, the carrying value of loans that are
     considered to be impaired under SFAS No. 114 totaled approximately $517,000
     and $795,000, respectively. No impairment allowance has been recorded on
     these impaired loans. The average balance of impaired loans and interest
     income recognized on impaired loans for fiscal 1997 and 1996 were $512,000
     and $68,414, and $687,400 and $28,176, respectively.

     Activity in loans to officers, directors and other related parties for the
     years ended September 30, 1997 and 1996 is summarized as follows:

<TABLE>
<CAPTION>
                                               1997        1996   
                                               ----        ----   
<S>                                         <C>          <C>      
                                                                  
          Balance at beginning of year      $ 975,762     554,464 
          New loans                           143,923     593,508 
          Repayments                         (194,182)   (172,210)
                                            ---------    -------- 
                                                                  
          Balance at end of year            $ 925,503     975,762 
                                            =========    ========  
</TABLE>

                                      F-17
<PAGE>
 
            PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(5)  Loans Receivable, Net, Continued
     --------------------------------

     The Bank primarily grants residential loans to customers in Anderson
     County, South Carolina, and the surrounding communities. The Bank's ability
     to collect these balances depends substantially upon the economic
     conditions and real estate market in the region. The Bank does not have any
     concentrations of loans to any one borrower. The Bank has increased its
     commercial and consumer loan portfolios which may entail greater risk than
     residential mortgage loans.
 
(6)  Real Estate
     -----------

     Real estate is summarized at September 30, 1997 and 1996 as follows:

<TABLE>
<CAPTION>
 
                                                             1997            1996
                                                             ----            ----
<S>                                                          <C>          <C>
 
          Real estate held for development               $ 2,284,038      1,406,144
          Real estate acquired in settlement of loans        162,776          2,750
                                                         -----------     ----------
 
                                                         $ 2,446,814      1,408,894
                                                         ===========     ==========
</TABLE> 
 
(7)  Premises and Equipment
     ----------------------
     Premises and equipment are summarized at September 30, 1997 and 1996 as
     follows:
<TABLE> 
<CAPTION> 
                                                             1997            1996
                                                             ----            ----
<S>                                                          <C>          <C>
 
          Land                                           $   871,242        707,876
          Office and other buildings                       3,643,431      3,289,002
          Furniture, fixtures and equipment                4,543,952      4,003,594
                                                         -----------     ----------
                                                           9,058,625      8,000,472
          Less accumulated depreciation                   (2,764,160)    (3,148,106)
                                                         -----------     ----------
 
                                                         $ 6,294,465      4,852,366
                                                         ===========     ==========
</TABLE>
     Depreciation expense was $647,848, $472,343, and $430,029 for the years
     ended September 30, 1997, 1996 and 1995, respectively.

                                      F-18
<PAGE>
 
            PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(8)  Deposits
     --------
     Deposits outstanding by type of account and range of interest rates at
     September 30, 1997 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
 
                                                                     1997                              1996       
                                                          ----------------------------     ----------------------------
                                                                           Range of                         Range of
                                                                           Interest                         Interest
                                                             Balance         Rates          Balance          Rates
                                                             -------         -----          -------          -----    
<S>                                                   <C>                <C>               <C>            <C>
 
          Non-interest bearing checking accounts          $ 11,811,694              -     $  8,956,602               -
          Interest-bearing checking accounts                25,995,824   1.75% - 4.76%      24,292,692    1.75% - 3.63%
          Passbook accounts                                 24,359,999   1.75% - 3.00%      23,111,051    1.75% - 3.00%
                                                          ------------                    ------------
                                                            62,167,517                      56,360,345
                                                          ------------                    ------------
                                               
          Certificate accounts                             138,834,341   2.50% - 8.00%     103,883,278    3.35% - 5.55%
                                                          ------------                    ------------
                                               
                                                          $201,001,858                    $160,243,623
                                                          ============                    ============
                                               
           Weighted average interest rate                                    4.64%                            4.25%
                                                                             =====                            =====       
</TABLE> 
 
     The amounts of scheduled maturities of certificate accounts at September
     30, 1997 and 1996 were as follows:
 
<TABLE> 
<CAPTION> 
                                                              1997            1996
                                                              ----            ----
<S>                                                       <C>              <C> 
          Maturing within one year                        $115,651,298     83,770,480
          Maturing one through three years                  22,328,414     19,334,013
          Maturing after three years                           854,629        778,785
                                                          ------------    -----------
 
                                                          $138,834,341    103,883,278
                                                          ============    ===========
</TABLE>

     At September 30, 1997 and 1996, the aggregate amounts of time deposits of
     $100,000 or more amounted to approximately $18,540,473 and $13,650,728,
     respectively. Accrued interest payable on deposits was $1,362,480 and
     $747,059 at September 30, 1997 and 1996, respectively, and included in
     accrued expenses and other liabilities in the consolidated balance sheets.

                                      F-19
<PAGE>
 
            PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(9)  Advances from the FHLB
     ----------------------

     Advances from the FHLB at September 30, 1997 and 1996 are summarized as
     follows:
<TABLE>
<CAPTION>
 
     Maturity          September 30, 1997                September 30, 1996
       Date        Interest Rate        Balance      Interest Rate        Balance
       ----        -------------        -------      -------------        -------
<S>                <C>             <C>          <C>              <C>
 
      1997              - %          $         -         5.55%         $ 2,000,000
      1998           6.47             10,000,000         6.38            5,000,000
      1999           5.78              5,000,000         4.64            9,000,000
                                     -----------                       -----------
 
                                     $15,000,000                       $16,000,000
                                     ===========                       ===========
</TABLE>

     During fiscal 1996, the line of credit expired and was replaced by a
     blanket floating lien on qualifying mortgage loan collateral for advances.
     At September 30, 1997, the Bank had $15,000,000 in outstanding FHLB
     advances and, based upon eligible collateral, available credit of
     $40,000,000.

     At September 30, 1997 and 1996, as collateral for its advances, the Bank
     has pledged securities with a carrying value of approximately $3,761,000
     and $18,804,000, respectively. All of the pledged securities are held in
     safekeeping at the FHLB of Atlanta.


(10) Securities Sold Under Agreements to Repurchase
     ----------------------------------------------

     The Bank had no outstanding securities sold under agreements to repurchase
     at September 30, 1997, 1996 and 1995, and the Bank did not enter into
     agreements during fiscal 1997 and 1996. The maximum amount outstanding at
     any month end during fiscal 1995 was $5,907,000. The average amount of
     outstanding agreements for fiscal 1995 was approximately $1,338,000. The
     securities underlying the agreements were under the institution's control.
 

(11) Income Taxes
     ------------

     Income taxes for the years ended September 30, 1997, 1996, and 1995 are
     summarized as follows:

<TABLE>
<CAPTION>
 
                              1997        1996          1995
                              ----        ----          ----   
<S>                         <C>         <C>           <C>
 
      Current federal       $544,803    1,008,811      292,313
      Deferred federal       381,000     (253,000)     (98,571)
                            --------    ---------      -------
 
              Total         $925,803      755,811      193,742
                            ========    =========      =======
</TABLE>

                                      F-20
<PAGE>
 
            PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements


(11) Income Taxes, Continued
     -----------------------

     Income tax expense differs from the amount computed at the federal
     statutory rates of 34% for the years ended September 30, 1997, 1996 and
     1995, as a result of the following:
<TABLE>
<CAPTION>
 
                                                 1997        1996       1995
                                               ---------   --------   ---------
<S>                                            <C>         <C>        <C>
 
      Income taxes at federal rate             $902,416    741,267     717,665
      Differences resulting from:
         State taxes, net of
           federal benefit                       81,000     71,000      67,200
         Change in amount of unrecognized
           tax benefits relating to
           future deductions                          -          -     167,630
         Decrease in beginning of year
           valuation allowance                  (81,000)   (71,000)   (807,000)
         Other                                   23,387     14,544      48,247
                                               --------    -------    --------
                                               $925,803    755,811     193,742
                                               ========    =======    ========
</TABLE>

     At September 30, 1997, the Bank has state net operating loss carryforwards
     of approximately $62 million. These carryforwards expire in various amounts
     beginning in fiscal year 1998 through 2006.

     The tax effects of temporary differences that give rise to significant
     portions of the deferred tax assets and deferred tax liabilities at
     September 30, 1997 and 1996 are presented below:
<TABLE>
<CAPTION>
 
                                                                        1997          1996
                                                                        ----          ----
<S>                                                                 <C>            <C>
      Deferred tax assets:
         Loan loss allowances deferred for tax purposes             $   716,000       583,000
         Deferred fees recognized for tax purposes as received                -        70,000
         Expenses deducted under the economic
           performance rules                                                  -       359,000
         Unrealized losses on securities available for sale                   -       421,000
         State loss carryforwards                                     2,465,000     2,502,000
         Other                                                           89,000       100,000
                                                                    -----------    ----------
              Total gross deferred tax assets                         3,270,000     4,035,000
 
         Less valuation allowances, primarily for tax
           loss carryforwards                                        (2,480,000)   (2,561,000)
                                                                    -----------    ----------
 
              Net deferred tax assets                                   790,000     1,474,000
                                                                    -----------    ----------
</TABLE>

                                      F-21
<PAGE>
 
            PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements


(11) Income Taxes, Continued
     -----------------------
<TABLE> 
<CAPTION> 
                                                                                        1997      1996
                                                                                        ----      ----
<S>                                                                                 <C>        <C> 
      Deferred tax liabilities:
         Depreciation for tax purposes in excess of such
           amount for financial reporting purposes                                  $172,000    99,000
         Tax bad debt reserve in excess of base year                                 307,000   310,000
         Unrealized gain on securities available for sale                             97,000         -
         Loan fee income adjustments for tax purposes                                 36,000         -
         Other                                                                       148,000   136,000
                                                                                    --------   -------
              Total gross deferred tax liabilities                                   760,000   545,000
                                                                                    --------   -------
 
              Net deferred tax asset (included in other assets)                     $ 30,000   929,000
                                                                                    ========   =======
</TABLE>

     A portion of the change in the deferred tax asset relates to unrealized
     losses on securities available for sale. In fiscal 1997, the related
     deferred tax expense of $518,000 has been recorded directly to
     stockholders' equity. The balance of the change in the net deferred tax
     asset results from the current period deferred tax expense of $381,000. In
     fiscal 1996, the deferred taxes related to the unrealized losses on
     securities available for sale of $107,000 has been recorded directly to
     stockholders' equity with the balance of the change in the net deferred tax
     asset resulting from the current period deferred tax benefit of $253,000.

     The realization of net deferred tax assets may be based on utilization of
     carrybacks to prior taxable periods, anticipation of future taxable income
     in certain periods, and the utilization of tax planning strategies.
     Management has determined that it is more likely than not that the net
     deferred tax assets can be supported based upon these criteria except for
     the state loss carryforwards. A valuation allowance for the deferred tax
     asset has been reflected to reduce the potential deferred tax assets,
     primarily for state loss carryforwards, to an amount that more likely than
     not can be realized at September 30, 1997 and 1996.

     Prior to enactment of recent tax legislation (the Small Business Job
     Protection Act of 1996 "SBJPA '96") effective with the year ending
     September 30, 1997, savings and loan associations which met certain
     definitional tests and operating requirements prescribed by the Internal
     Revenue Code were allowed a special bad debt deduction and other special
     tax provisions. If a savings and loan association did not continue to meet
     the federal income tax requirements necessary to meet these definitions,
     the savings and loan may have lost the benefits of these special
     provisions. Taxable income of subsidiaries was generally computed without
     the benefit of these special provisions.

     The special bad debt deduction was based on either specified experience
     formulas (the "Experience Method") or a specified percentage of taxable
     income before such deduction (the "Percentage of Taxable Income Method").
     For the two years ended September 30, 1996 and 1995, the percentage of
     taxable income bad debt deduction was eight percent of adjusted taxable
     income. The deduction was subject to certain limitations based on the
     aggregate loans, saving account balances and retained earnings at year end.
     Gains and losses on sales of repossessed property and provisions for losses
     on loans and foreclosed real estate were generally

                                      F-22
<PAGE>
 
            PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements


(11) Income Taxes, Continued
     -----------------------

     adjustments to the tax bad debt reserve and not includable in the
     computation of taxable income before this deduction.

     As a result of SBJPA '96, the Bank will be required to change its overall
     method of accounting for tax bad debts to the Experience Method beginning
     with the fiscal year ending September 30, 1997. The Bank will be required
     to recapture approximately $808,000 over an eight-year period in connection
     with the change.

     Retained earnings at September 30, 1997 and 1996 includes tax bad debt
     reserves of approximately $5.2 million for which no provision for federal
     income tax has been made. If, in the future, these amounts are used for any
     purpose other than to absorb bad debt losses, they may be subject to
     federal income tax at the then prevailing corporate tax rate.

(12) Capital
     -------

     The Bank's actual capital and ratios, those required by the Bank's primary
     regulator, the Office of Thrift Supervision (OTS), as well as those
     required in order to be considered well capitalized according to the Prompt
     Corrective Action Provisions are presented in the following table. As of
     September 30, 1997, the most recent notification from the OTS categorized
     the Bank as well capitalized under the regulatory framework for prompt
     corrective action. To be categorized as well capitalized, the Bank must
     maintain minimum total risk-based, Tier I risked-based, and Tier I core
     ("leverage") ratios as set forth in the table. There are no conditions or
     events since that notification that management believes have changed the
     institution's category.
<TABLE>
<CAPTION>
 
                                                                                                           To Be Well
                                                                                                       Capitalized Under
                                                                              For Capital Adequacy     Prompt Corrective
                                                                 Actual             Purposes           Action Provisions
                                                                 ------             --------           ----------------- 
 
                                                         Amount     Ratio      Amount         Ratio     Amount     Ratio
                                                         ------     -----      ------         -----     ------     ----- 
                                                                             (Dollars in Thousands)
As of September 30, 1997:
-------------------------
 
<S>                                        <C>                      <C>      <C>          <C>          <C>        <C>
Tangible Capital (To Total Assets)                        $27,321    10.6%        3,825         1.5%          -        -
Core Capital (To Total Assets)                             27,321    10.6         7,651         3.0     $12,811     5.00%
Tier I Capital (To Risk-Based Assets)                      27,321    17.3             -           -       9,503     6.00
Risk-Based Capital (To Risk-Based
     Assets)                                               29,067    18.4        12,670        8.00      15,838    10.00
 
As of September 30, 1996:
-------------------------
Tangible Capital (To Total Assets)                         27,786    13.2         3,166         1.5           -        -
Core Capital (To Total Assets)                             27,786    13.2         6,332         3.0      10,495     5.00
Tier I Capital (To Risk-Based Assets)                      27,786    23.3             -           -       7,155     6.00
Risk-Based Capital (To Risk-Based
     Assets)                                               29,196    24.5         9,548         8.0      11,925    10.00
</TABLE> 

                                      F-23
<PAGE>
 
            PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements


(13) Employee Benefit Plans
     ----------------------

     The Bank has a profit sharing and deferred compensation plan for
     substantially all full-time employees. The plan permits eligible
     participants to contribute a percentage of their salary up to amounts
     permitted by the Internal Revenue Code each year. At the discretion of the
     Board of Directors, the Bank may match a percentage of each participant's
     contribution during the plan year. In addition the Board of Directors may
     from year to year make a discretionary contribution to the plan. The Bank's
     contribution recorded as expense for the years ended September 30, 1997,
     1996 and 1995, was $219,123, $160,525 and $141,879, respectively.


(14) Stock Option Plan
     -----------------

     In October 1993, the Bank's Board of Directors adopted a stock option and
     incentive plan. Pursuant to the plan, an aggregate of 11,504 shares of
     common stock were reserved for issuance by the Bank upon exercise of stock
     options and awards to be granted to directors, officers, and other key
     employees from time to time under the plan. The Bank's management was
     granted incentive stock options, and the Bank's non-officer directors were
     granted non-incentive stock options. These options expire on October 2003.
 
     In April 1997, the stockholders approved a second stock option plan and
     incentive plan. Pursuant to the plan, 58,500 shares of common stock have
     been reserved for issuance by the Bank upon exercise of stock options and
     awards to be granted to directors, officers, and other key employees from
     time to time under the plan. The Bank's management was granted incentive
     stock options, and the Bank's non-officer directors were granted non-
     qualified stock options. These options are priced at $25.25 and expire in
     April 2007.

     The following table summarizes option activity during the years ended
     September 30, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
 
                                           Number of   Price Per
                                             Shares      Share
                                             ------      -----
<S>                                          <C>        <C>    
                                                             
      Outstanding at September 30, 1994       9,530     $10.00
      Granted                                     -          -
      Exercised                                 658      10.00
                                             ------     ------
      Outstanding at September 30, 1995       8,872      10.00
      Granted                                     -          -
      Exercised                                   -          -
                                             ------     ------
      Outstanding at September 30, 1996       8,872      10.00
      Granted                                58,500      25.25
      Exercised                               4,272      10.00
                                             ------     ------
      Outstanding at September 30, 1997      63,100     $24.14
                                             ======     ======
</TABLE>

                                      F-24
<PAGE>
 
            PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(14) Stock Option Plan, Continued
     ----------------------------

     The Bank applies APB Opinion 25 in accounting for the stock-based option
     plans which are described in the preceding paragraph. Accordingly, no
     compensation expense has been recognized for the stock-based option plans.
     Had compensation cost been recognized for the stock-based option plans
     applying the fair-value-based method as prescribed by SFAS 123, the Bank's
     net income and earnings per share would have been reduced to the proforma
     amounts indicated below:
<TABLE>
<CAPTION>
                                     1997        1996
                                     ----        ----    
          Net Income
          ----------
<S>                               <C>          <C>
 
               As Reported        $1,728,303   1,424,387
               Proforma            1,702,803   1,424,387
 
          Earnings Per Share
          ------------------    
 
               As Reported        $     1.15         .95
               Proforma                 1.13         .95
</TABLE>

     The effects of applying SFAS 123 may not be representative of the effects
     on reported net income in future years.

     The fair value of each option granted is estimated on the date of grant
     using the Black-Scholes option-pricing model with the following weighted-
     average assumptions used for grants in 1997:
 
                         Dividend yield            3.25%
                         Expected volatility         38%
                         Risk-free interest rate   6.59%
                         Expected lives            7.5 years

     There were no options granted in 1996.


(15) Management Recognition Plan
     ---------------------------

     The Board of Directors initially adopted a Management Recognition Plan
     ("MRP") during fiscal 1994. Those eligible to receive benefits under the
     MRP included certain officers of the Bank as determined by a committee
     appointed by the Board of Directors of the Bank. During the year ended
     September 30, 1994, 3,450 shares of common stock were granted to management
     under the MRP, vesting over a three year period. Vested shares at September
     30, 1997 and 1996 was 3,450 for both years. All shares are vested at
     September 30, 1997 and 1996. Compensation

                                      F-25
<PAGE>
 
            PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

 
(15) Management Recognition Plan, Continued
     --------------------------------------

     related to vesting of the shares was $0, $11,520, and $11,490 for fiscal
     1997, 1996 and 1995, respectively.

     In April 1997, the stockholders approved a second Management Recognition
     Plan ("1996 MRP") with 23,400 shares of common stock being granted to
     management under the 1996 MRP, vesting over a five-year period. During the
     fiscal year 1997, 11,985 shares were purchased by the Company with 11,415
     shares remaining to be purchased. Compensation expense related to vesting
     of shares was $78,881 for fiscal 1997.


(16) Employee Stock Ownership Plan
     -----------------------------

     The Bank has an Employee Stock Ownership Plan (ESOP) established by the
     Board of Directors during fiscal 1994. The ESOP borrowed $80,500 from a
     federal savings bank and acquired 8,050 shares of the Bank's common stock
     in October 1993. All shares acquired in 1993 have been allocated to
     participants. With the stock offering in September 1996, the ESOP borrowed
     $900,900 from a federal savings bank and acquired 46,800 shares of the
     Bank's common stock. The Bank has presented the outstanding loan amounts as
     an other liability and as a reduction of stockholders' equity in the
     accompanying consolidated balance sheets at September 30, 1997 and 1996.
     Interest on the unpaid principal balance is due quarterly and is based on
     the prime rate. During fiscal 1997 and 1996, the Bank paid interest of
     $72,552 and $3,535, respectively. Compensation recorded under the ESOP was
     $129,028, $10,245 and $74,490 for the fiscal years 1997, 1996 and 1995,
     respectively.


(17) Commitments
     -----------
 
     In conjunction with its lending activities, the Bank enters into various
     commitments to extend credit and issue letters of credit. Loan commitments
     (unfunded loans and unused lines of credit) and letters of credit are
     issued to accommodate the financing needs of the Bank's customers. Loan
     commitments are agreements by the Bank to lend monies at a future date, so
     long as there are no violations of any conditions established in the
     agreement. Letters of credit commit the Bank to make payments on behalf of
     customers when certain specified events occur.

     Financial instruments where the contract amount represents the Bank's
     credit risk at September 30, 1997 and 1996, include loan and letter of
     credit commitments of $27,941,000 and $10,014,175, respectively.

                                      F-26
<PAGE>
 
            PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements


(17) Commitments, Continued
     ----------------------

     These loan and letter of credit commitments are subject to the same credit
     policies and reviews as loans on the balance sheet. Collateral, both the
     amount and nature, is obtained based upon management's assessment of the
     credit risk. Since many of the extensions of credit are expected to expire
     without being drawn, the total commitment amounts do not necessarily
     represent future cash requirements.

     Outstanding commitments on mortgage loans not yet closed amounted to
     approximately $174,000 and $119,000 at September 30, 1997 and 1996,
     respectively. Substantially, all of these commitments were at variable
     interest rates. Such commitments, which are funded subject to certain
     limitations, extend over varying periods of time with the majority being
     funded within thirty days.

     These commitments will be funded with the cash flow generated from normal
     operations, as well as possible utilization of existing credit facilities
     available to the Bank.


(18) Carrying Amounts and Fair Value of Financial Instruments
     --------------------------------------------------------
 
     The Bank's fair value methods, assumptions, carrying amounts and fair value
     of financial instruments at September 30, 1997 and 1996 are summarized
     below:

     For cash and cash equivalents and FHLB stock, the carrying value is a
     reasonable estimate of fair value.
 
     For investment securities available for sale, mortgage-backed securities
     and collateralized mortgage obligations, fair value is based on available
     quoted market prices or quoted market prices for similar securities if a
     quoted market price is not available.

     The fair value of fixed and adjustable rate loans is estimated based upon
     discounted future cash flows using discount rates comparable to rates
     currently offered for such loans. The discounted future cash flows reflect
     estimated maturity dates adjusted for expected prepayments.

     The fair value of time deposits is estimated by discounting the amounts
     payable at the certificate rates currently offered for deposits of similar
     remaining maturities. The fair value of all other deposit account types is
     the amount payable on demand at year-end.

     For FHLB advances, fair value is estimated based on discounting amounts
     payable at the current rates offered to the Bank for debt of the same
     remaining maturities.

                                      F-27
<PAGE>
 
            PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements


(18) Carrying Amounts and Fair Value of Financial Instruments, Continued
     -------------------------------------------------------------------
<TABLE>
<CAPTION>
 
                                          1997                        1996
                                      ------------                 -----------
                                        Carrying     Calculated     Carrying     Calculated
                                         Amount      Fair Value      Amount      Fair Value
                                      ------------   -----------   -----------   -----------
<S>                                     <C>          <C>            <C>           <C>           
Financial assets:
 Cash and cash equivalents            $ 13,499,332    13,499,332    13,584,568    13,584,568
 Investment in Limited Partnership       5,003,835     5,003,835             -             -
 Investment securities available
  for sale                              11,325,700    11,325,700     2,493,888     2,493,888
 Federal Home Loan Bank stock            1,650,000     1,650,000       993,700       993,700
 Mortgage-backed securities and
  collateralized mortgage
  obligations, net                      35,862,700    35,862,700    43,124,998    43,124,998
 Loans receivable, net                 178,772,266   179,094,089   140,757,990   143,404,634
                                      ------------   -----------   -----------   -----------
 
                                      $246,113,833   246,435,656   200,955,144   203,601,788
                                      ============   ===========   ===========   ===========
Financial liabilities:
 Deposits
  Demand deposits                     $ 62,167,517    62,301,280    55,752,124    55,752,124
  Certificate accounts                 138,834,341   139,272,816   103,883,278   103,732,129
 Advances from the FHLB                 15,000,000    15,069,702    16,000,000    15,954,810
                                      ------------   -----------   -----------   -----------
 
                                      $216,001,858   216,643,798   175,635,402   175,439,063
                                      ============   ===========   ===========   ===========
 
</TABLE>

     The Bank had $27.9 million of off-balance sheet financial commitments,
     which are commitments to originate loans and unused consumer lines of
     credit. Since these obligations are based on current market rates, the
     carrying amount is considered to be a reasonable estimate of fair value.
 
     Fair value estimates are made at a specific point in time, based on
     relevant market information and information about the financial instrument.
     These estimates do not reflect any premium or discount that could result
     from offering for sale the Bank's entire holdings of a particular financial
     instrument. Because no active market exists for a significant portion of
     the Bank's financial instruments, fair value estimates are based on
     judgments regarding future expected loss experience, current economic
     conditions, current interest rates and prepayment trends, risk
     characteristics of various financial instruments, and other factors. These
     estimates are subjective in nature and involve uncertainties and matters of
     significant judgment and therefore cannot be determined with precision.
     Changes in any of these assumptions used in calculating fair value would
     also significantly affect the estimates. Further, the fair value estimates
     were calculated as of September 30, 1997 and 1996. Changes in market
     interest rates and prepayment assumptions could significantly change the
     fair value. Therefore, management believes that the foregoing information
     is of limited value and has no basis for determining whether the fair value
     presented would be indicative of the value which could be negotiated during
     an actual sale.

                                      F-28
<PAGE>
 
            PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements


(18) Carrying Amounts and Fair Value of Financial Instruments, Continued
     -------------------------------------------------------------------

     Fair value estimates are based on existing on and off-balance sheet
     financial instruments without attempting to estimate the value of
     anticipated future business and the value of assets and liabilities that
     are not considered financial instruments. For example, the Bank has
     significant assets and liabilities that are not considered financial assets
     or liabilities including deposit franchise value, loan servicing portfolio,
     real estate, deferred tax liabilities, premises and equipment, and
     goodwill. In addition, the tax ramifications related to the realization of
     the unrealized gains and losses can have a significant effect on fair value
     estimates and have not been considered in any of these estimates.


(19) Dividends
     ---------

     During fiscal 1997, the Board of Directors declared cash dividends of $.30
     per share for the first quarter and $.35 per share for the second, third,
     and fourth quarters. For all 1997 dividends, the Bank obtained permission
     from the OTS to waive dividends payable to the MHC.

     During fiscal 1996, the Board of Directors declared cash dividends of $.30
     per share for all four quarters. For fiscal 1996 dividends, the Bank
     obtained permission from the OTS to waive dividends payable to the MHC.

     During fiscal 1995, the Board of Directors declared cash dividends of $.25
     per share for the first three quarters and $.30 per share for the fourth
     quarter. The dividends payable to the MHC were waived by the OTS.

                                      F-29
<PAGE>
 
No dealer, salesman or any other person has been authorized to give any
information or to make any representation other than as contained in this
Prospectus in connection with the offering made hereby, and, if given or made,
such other information or representation must not be relied upon as having been
authorized by the Primary Parties or Sandler O'Neill.  This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby to any person or in any jurisdiction in which such
offer or solicitation is not authorized or in which the person making such offer
or solicitation is not qualified to do so, or to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction.  Neither the
delivery of this Prospectus nor any sale hereunder shall under any circumstances
create any implication that there has been no change in the affairs of the
Primary Parties since any of the dates as of which information is furnished
herein or since the date hereof.

               Table of Contents                                       Page
               -----------------                                       ----

Prospectus Summary...........................................   
Selected Consolidated Financial Information..................
Risk Factors.................................................   
Use of Proceeds..............................................   
Dividend Policy..............................................
Market for Common Stock......................................
Capitalization...............................................   
Historical and Pro Forma Regulatory Capital Compliance.......
Pro Forma Data...............................................   
Conversion Shares to be Purchased by Management..............
Pursuant to Subscription Rights..............................
Perpetual Bank, A Federal Savings Bank and Subsidiary........
Consolidated Statements of Operations........................
Management's Discussion and Analysis of Financial............
Condition and Results of Operations..........................
Business of the Holding Company..............................
Business of the Savings Bank.................................
Management of the Holding Company............................
Management of the Savings Bank...............................
Regulation...................................................
Taxation.....................................................   
The Conversion and Reorganization............................
Comparison of Stockholders' Rights...........................
Restrictions on Acquisition of the Holding Company...........
Description of Capital Stock of the Holding Company..........
Registration Requirements....................................
Legal and Tax Opinions.......................................
Experts......................................................
Additional Information.......................................
Index to Consolidated Financial Statements...................

UNTIL THE LATER OF ____________, 1998, OR 25 DAYS AFTER COMMENCEMENT OF THE
SYNDICATED COMMUNITY OFFERING OF COMMON STOCK, IF ANY, ALL DEALERS EFFECTING
TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.  THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.



                             SOUTHBANC SHARES, INC.

                                     [Logo]

                         (Proposed Holding Company for
                    Perpetual Bank, A Federal Savings Bank)



                           Up to 3,741,533 Shares of
                                  Common Stock


                             ----------------------

                                   Prospectus



                        SANDLER O'NEILL & PARTNERS, L.P.



                             _______________, 1998
<PAGE>
 
                PART II: INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24. Indemnification of Officers and Directors

    Article XVI of the Certificate of Incorporation of SouthBanc Shares, Inc.
requires indemnification of directors, officers and employees to the fullest
extent permitted by Delaware law.

    Section 145 of the Delaware General Corporation Law sets forth circumstances
under which directors, officers, employees and agents may be insured or
indemnified against liability which they may incur in their capacities:

    145 INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS;
INSURANCE.--(a) A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.  The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.

    (b)  A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.

    (c)  To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.

    (d)  Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section.  Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.

                                     II-1
<PAGE>
 
    (e)  Expenses (including attorneys' fees) incurred by an officer or director
in defending any civil, criminal, administrative or investigative action, suit
or proceeding may be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the corporation as
authorized in this section.  Such expenses (including attorneys' fees) incurred
by other employees and agents may be so paid upon such terms and conditions, if
any, as the board of directors deems appropriate.

    (f)  The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.

    (g)  A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
incurred by him any such capacity, or arising out of his status as such, whether
or not the corporation would have the power to indemnify him against such
liability under this section.

    (h)  For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agents, so that any
person who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.

    (i)  For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.

    (j)  The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.

                                     II-2
<PAGE>
 
Item 25.  Other Expenses of Issuance and Distribution(1)

<TABLE>
<S>                                             <C>
  Legal fees and expenses.....................  $  180,000
  Securities Marketing Firm legal fees........      75,000
  EDGAR, printing, copying, postage, mailing..     150,000
  Appraisal/business plan fees and expenses...      40,000
  Accounting fees.............................      40,000
  Securities marketing fees (1)...............     506,250
  Data processing fees and expenses...........      18,000
  SEC filing fee..............................      21,500
  OTS filing fee..............................       8,400
  Blue sky legal fees and expenses............       7,500
  Other.......................................      23,350
                                                ----------
      Total...................................  $1,070,000
                                                ==========
</TABLE> 
 
___________________
     (1) Assumes a total offering of Conversion Shares of $34.5 million
(midpoint of the Estimated Valuation Range), a fee of 1.50% of the aggregate
Purchase Price of the shares of Common Stock sold in the Subscription and Direct
Community Offering and the Syndicated Community Offering, excluding shares
purchased by officers and directors of the Savings Bank and their associates.
See "THE CONVERSION AND REORGANIZATION -- Plan of Distribution and Selling
Commissions."

Item 26.  Recent Sales of Unregistered Securities.

          Not Applicable

Item 27.  Exhibits

          The exhibits filed as part of this Registration Statement are as
 follows:
 
(a)  List of Exhibits

1.1  --   Form of proposed Agency Agreement among SouthBanc Shares, Inc.,
          Perpetual Bank, a Federal Savings Bank, SouthBanc Shares, M.H.C. and
          Sandler O'Neill & Partners, L.P. (a)

1.2  --   Engagement Letter with Perpetual Bank, A Federal Savings Bank and
          Sandler O'Neill & Partners, L.P.

2    --   Plan of Conversion and Agreement and Plan of Reorganization of
          SouthBanc Shares, M.H.C. and Perpetual Bank, A Federal Savings Bank
          (attached as an exhibit to the Special Meeting Proxy Statement and the
          Annual Meeting Proxy Statement included herein as Exhibits 99.5 and
          99.6, respectively)
 
3.1  --   Certificate of Incorporation of SouthBanc Shares, Inc.
 
3.2  --   Bylaws of SouthBanc Shares, Inc.
 
4    --   Form of Certificate for Common Stock
 
5    --   Opinion of Breyer & Aguggia regarding legality of securities
          registered

8.1  --   Form of Federal Tax Opinion of Breyer & Aguggia
 
 
                                     II-3
<PAGE>

8.2    --   State Tax Opinion of Evans, Carter, Kunes & Bennett, P.A. (a)
 
8.3    --   Opinion of RP Financial, LC. as to the value of subscription rights
 
10.1   --   Proposed Form of Employment Agreement for Executive Officers
 
10.2   --   Perpetual Bank, A Federal Savings Bank 401(k) Plan (a)
 
21     --   Subsidiaries of SouthBanc Shares, Inc.
 
23.1   --   Consent of KPMG Peat Marwick LLP
 
23.2   --   Consent of Breyer & Aguggia as to its Federal Tax Opinion (contained
            in opinion included as Exhibit 8.1)
 
23.3   --   Consent of Evans, Carter, Kunes & Bennett, P.A. as to its State 
            Tax Opinion (contained in opinion included as Exhibit 8.2) (a)

23.4   --   Consent of RP Financial, LC.
 
24     --   Power of Attorney (included in signature page)
 
99.1   --   Order and Acknowledgement Form (contained in the marketing materials
            included herein as Exhibit 99.2)
 
99.2   --   Solicitation and Marketing Materials
 
99.3   --   Appraisal Agreement with RP Financial, LC.
 
99.4   --   Appraisal Report of RP Financial, LC. (a)
 
99.5   --   Proxy Statement for Special Meeting of Members of SouthBanc Shares,
            M.H.C.

99.6   --   Proxy Statement for Annual Meeting of Stockholders of Perpetual
            Bank, A Federal Savings Bank

_____________________
(a)  To be filed by amendment.

Item 28.  Undertakings

     The undersigned Registrant hereby undertakes:

     (1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:

         (i)   Include any prospectus required by section 10(a)(3) of the
Securities Act of 1933, as amended ("Securities Act");

         (ii)  Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected 


                                     II-4
<PAGE>

in the form of prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement.

         (iii) Include any additional or changed material information on the
plan of distribution.

     (2) For determining liability under the Securities Act, treat each post-
effective amendment as a new registration statement of the securities offered,
and the offering of the securities at that time shall be the initial bona fide
offering.

     (3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.

     (4) The undersigned registrant hereby undertakes to provide the underwriter
at the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.

     (5) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act, and is therefore, unenforceable.  In the event that a
claim for indemnification against liabilities (other than the payment by the
small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.

                                     II-5
<PAGE>
 
                                  SIGNATURES

     In accordance with the requirements of the Securities Act of 1933, as
amended, the registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-1 and authorized this
Registration Statement to be signed on its behalf by the undersigned, in the
City of Anderson, State of South Carolina, on this 17th day of December 1997.

                              SOUTHBANC SHARES, INC.



                              By: /s/ Robert W. Orr
                                  ---------------------------------------------
                                  Robert W. Orr
                                  President and Chief Executive Officer

                               POWER OF ATTORNEY

          We, the undersigned directors and officers of SouthBanc Shares, Inc.,
do hereby severally constitute and appoint Robert W. Orr, our true and lawful
attorney and agent, to do any and all things and acts in our names in the
capacities indicated below and to execute all instruments for us and in our
names in the capacities indicated below which said Robert W. Orr may deem
necessary or advisable to enable SouthBanc Shares, Inc. to comply with the
Securities Act of 1933, as amended, and any rules, regulations and requirements
of the Securities and Exchange Commission, in connection with the Registration
Statement on Form S-1 relating to the offering of SouthBanc Shares, Inc.'s
Common Stock, including specifically but not limited to, power and authority to
sign for us or any of us in our names in the capacities indicated below the
Registration Statement and any and all amendments (including post-effective
amendments) thereto; and we hereby ratify and confirm all that Robert W. Orr
shall do or cause to be done by virtue hereof.

          Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.

<TABLE> 
<CAPTION> 
Signatures                                    Title                             Date
----------                                    -----                             ----
<S>                                           <C>                               <C>  

/s/ Robert W. Orr                             President, Chief                  December 17, 1997
-----------------------------------------
Executive                                     Officer and Director                          
Robert W. Orr                                 (Principal Executive Officer) 
                             


/s/ Thomas C. Hall                            Treasurer and Chief Financial     December 17, 1997 
-----------------------------------------
Thomas C. Hall                                Officer (Principal Financial 
                                              and Accounting Officer) 
                             

 
/s/ Cordes G. Seabrook, Jr.                   Chairman of the Board             December 17, 1997 
-----------------------------------------
Cordes G. Seabrook, Jr.


/s/ Harold A. Pickens, Jr.                    Director                          December 17, 1997     
-----------------------------------------
Harold A. Pickens, Jr.
</TABLE> 
<PAGE>
 
<TABLE> 
<S>                                           <C>                               <C> 
/s/ Martha S. Clamp                           Director                          December 17, 1997 
-----------------------------------------
Martha S. Clamp


/s/ Jack F. McIntosh                          Director                          December 17, 1997 
-----------------------------------------
Jack F. McIntosh


/s/ Charles W. Fant, Jr.                      Director                          December 17, 1997 
-----------------------------------------
Charles W. Fant, Jr.


/s/ Jim Gray Watson                           Director                          December 17, 1997 
-----------------------------------------
Jim Gray Watson


/s/ Richard C. Ballenger                      Director                          December 17, 1997 
-----------------------------------------
Richard C. Ballenger


/s/ F. Stevon Kay                             Director                          December 17, 1997 
-----------------------------------------
F. Stevon Kay
</TABLE> 
<PAGE>
 
                               INDEX TO EXHIBITS

1.1   --  Form of proposed Agency Agreement among SouthBanc Shares, Inc.,
          Perpetual Bank, A Federal Savings Bank, SouthBanc Shares, M.H.C. and
          Sandler O'Neill & Partners, L.P. (a)

1.2   --  Engagement Letter between Perpetual Bank, A Federal Savings Bank and
          Sandler O'Neill & Partners, L.P.

2     --  Plan of Conversion and Agreement and Plan of Reorganization of
          Perpetual Bank, A Federal Savings Bank and SouthBanc Shares, M.H.C. 
          (attached as an exhibit to the Special Meeting Proxy Statement and the
          Annual Meeting Proxy Statement included herein as Exhibits 99.5 and 
          99.6, respectively)
 
3.1   --  Certificate of Incorporation of SouthBanc Shares, Inc.
 
3.2   --  Bylaws of SouthBanc Shares, Inc.
 
4     --  Form of Certificate for Common Stock
 
5     --  Opinion of Breyer & Aguggia regarding legality of securities
          registered
 
8.1   --  Form of Federal Tax Opinion of Breyer & Aguggia
 
8.2   --  State Tax Opinion of Evans, Carter, Kunes & Bennett, P.A (a)
 
8.3   --  Opinion of RP Financial, LC. as to the value of subscription rights
 
10.1  --  Proposed Form of Employment Agreement For Executive Officers
 
10.2  --  Perpetual Bank, A Federal Savings Bank 401(k) Plan (a)
 
21    --  Subsidiaries of SouthBanc Shares, Inc.
 
23.1  --  Consent of KPMG Peat Marwick LLP

23.2  --  Consent of Breyer & Aguggia as to its Federal Tax Opinion (contained 
          in opinion included as Exhibit 8.1)

23.3  --  Consent of Evans, Carter, Kunes & Bennett, P.A as to its State Tax  
          Opinion (contained in opinion included as Exhibit 8.2) (a)
 
23.4  --  Consent of RP Financial, LC.
 
24    --  Power of Attorney (included in signature page)
 
99.1  --  Order and Acknowledgement Form (contained in the marketing materials
          included herein as Exhibit 99.2)
 
99.2  --  Solicitation and Marketing Materials
 
99.3  --  Appraisal Agreement with RP Financial, LC.
 
99.4  --  Appraisal Report of RP Financial, LC. (a)
 
99.5  --  Proxy Statement for Special Meeting of Members of SouthBanc Shares,
          M.H.C.
 
99.6  --  Proxy Statement for Annual Meeting of Stockholders of Perpetual Bank,
          A Federal Savings Bank
 
_____________________
(a) To be filed by amendment.
[{"type": "S-1", "sequence": "1", "description": "FORM S-1", "secsgml_size_bytes": 755203}]
{"company-data": {"conformed-name": "SOUTHBANC SHARES INC", "cik": "0001051378", "assigned-sic": "", "state-of-incorporation": "DE", "fiscal-year-end": "0930"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-42517", "film-number": "97739983"}, "business-address": {"street1": "907 N MAIN STREET", "city": "ANDERSON", "state": "SC", "zip": "29621", "phone": "8642250241"}, "mail-address": {"street1": "907 N MAIN STREET", "city": "ANDERSON", "state": "SC", "zip": "29621"}}
As filed with the Securities and Exchange Commission on December 17, 1997
 
                                                           Registration No. 333-
--------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM S-1
                            REGISTRATION STATEMENT
                       UNDER THE SECURITIES ACT OF 1933
                             (INCLUDING EXHIBITS)

                            SOUTHBANC SHARES, INC.
                 ---------------------------------------------
                   (Exact name of registrant in its charter)

          Delaware                          6035                 applied for
-------------------------------     ---------------------   --------------------
(State or other jurisdiction of      (Primary SIC No.)      (I.R.S. Employer
incorporation or organization)                               Identification No.)

                               907 N. MAIN STREET
                         ANDERSON, SOUTH CAROLINA 29621
                                (864) 225-0241
              --------------------------------------------------
   (Address and telephone number of principal executive offices and place of
                                   business)

                            Paul M. Aguggia, Esquire
                          Victor L. Cangelosi, Esquire
                                BREYER & AGUGGIA
                              1300 I Street, N.W.
                                 Suite 470 East
                            Washington, D.C.  20005
                                (202) 737-7900
                  --------------------------------------------
           (Name, address and telephone number of agent for service)

        APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:

  As soon as practicable after this registration statement becomes effective.

  If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.  [_]

  If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [_]

  If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
=======================================================================================================================
                                         Calculation of Registration Fee
=======================================================================================================================
Title of Each Class of Securities     Proposed Maximum     Proposed Offering     Proposed Maximum     Amount of
Being Registered                      Amount Being         Price(1)              Aggregate Offering   Registration Fee
                                      Registered(1)                              Price(1)
-----------------------------------------------------------------------------------------------------------------------
Common Stock, $0.01 Par Value          4,302,763           $20.00                $86,055,260          $26,078
 
Participation interests                   59,883               --                   --                   (2)
=======================================================================================================================
(1) Estimated solely for purposes of calculating the registration fee. As
  described in the Prospectus, the actual number of shares to be issued and sold
  are subject to adjustment based upon the estimated pro forma market value of
  the registrant and market and financial conditions.
  (2) The securities of the Registrant to be purchased by the Perpetual Bank, A
  Federal Savings Bank 401(k) Plan are included in the amount shown for Common
  Stock. Accordingly, pursuant to Rule 457(h) of the Securities Act of 1933, as
  amended, no separate fee is required for the participation interests. Pursuant
  to such rule, the amount being registered has been calculated on the basis of
  the number of shares of Common Stock that may be purchased with the current
  assets of such Plan.

      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.
Cross Reference Sheet showing the location in the Prospectus
                           of the Items of Form S-1
1.    Front of Registration                 Front of Registration Statement;
      Statement and Outside Front           Outside Front Cover Page
      Cover of Prospectus
 
2.    Inside Front and Outside Back         Inside Front Cover Page; Outside Back
      Cover Pages of Prospectus             Cover Page
 
3.    Summary Information and Risk Factors  Prospectus Summary; Risk Factors
 
4.    Use of Proceeds                       Use of Proceeds; Capitalization

5.    Determination of Offering Price       Market for Common Stock; The 
                                            Conversion and Reorganization -- 
                                            Stock Pricing, Exchange Ratio and 
                                            Number of Shares to be Issued

6.    Dilution                              *
 
7.    Selling Security-Holders              *
 
8.    Plan of Distribution                  The Conversion and Reorganization
 
9.    Legal Proceedings                     Business of the Savings Bank -- 
                                            Legal Proceedings
 
10.   Directors, Executive Officers,        Management of the Holding Company; 
      Promoters and Control Persons         Management of the Savings Bank
      
11.   Security Ownership of Certain         * 
      Beneficial Owners and Management
 
12.   Description of Securities             Description of Capital Stock of the 
                                            Holding Company
 
13.   Interest of Named Experts and         Legal and Tax Opinions; Experts
      Counsel
 
14.   Disclosure of Commission Position     Part II -- Item 17
      on Indemnification for Securities
      Act Liabilities
 
15.   Organization Within Last              Business of the Savings Bank
      Five Years
 
16.   Description of Business               Business of the Holding Company;
                                            Business of the Savings Bank
 
17.   Management's Discussion and           Management's Discussion and 
      Analysis or Plan of Operation         Analysis of Financial Condition and 
                                            Results of Operations 
                                            
18.   Description of Property               Business of the Savings Bank -- 
                                            Properties
19.   Certain Relationships and             Management of the Savings Bank -- 
      Related Transactions                  Transactions with the Savings Bank
 
20.   Market Price for Common Equity        Outside Front Cover Page; Market for
      and Related Stockholder Matters       Common Stock; Dividend Policy
 
21.   Executive Compensation                Management of the Savings Bank -- 
                                            Executive Compensation; and -- 
                                            Benefits

22.   Financial Statements                  Financial Statements; Pro Forma Data
 
23.   Changes in and Disagreements          *
      with Accountants on Accounting
      and Financial Disclosure
____________________
*Item is omitted because answer is negative or item inapplicable.
PROSPECTUS SUPPLEMENT

                             SOUTHBANC SHARES, INC.

                     PERPETUAL BANK, A FEDERAL SAVINGS BANK
                                  401(K) PLAN

     This Prospectus Supplement relates to the offer and sale to participants
("Participants") in the Perpetual Bank, A Federal Savings Bank 401(k) Plan
("Plan" or "401(k) Plan") of participation interests and shares of SouthBanc
Shares, Inc. common stock, par value $.01 per share ("Common Stock"), as set
forth herein.

     In connection with the proposed reorganization of Perpetual Bank, A Federal
Savings Bank ("Savings Bank" or "Employer") from the mutual holding company form
of organization to a wholly owned subsidiary of a stock savings and loan holding
company, SouthBanc Shares, Inc. (the "Holding Company") has been formed.  The
reorganization of the Savings Bank as a wholly-owned subsidiary of the Holding
Company, the exchange of shares of Savings Bank common stock ("Savings Bank
Common Stock") by public stockholders of the Savings Bank (the "Public
Stockholders") for Common Stock and the sale of Common Stock to the public (the
"Conversion Offerings") are herein referred to as the "Conversion and
Reorganization."  Applicable provisions of the 401(k) Plan permit the investment
of the Plan assets in Common Stock at the direction of a Plan Participant.  This
Prospectus Supplement relates to the election of a Participant to direct the
purchase of Common Stock in connection with the Conversion and Reorganization.

     The Prospectus, dated _________, 1998, of the Holding Company
("Prospectus"), which is attached to this Prospectus Supplement includes
detailed information with respect to the Conversion and Reorganization, the
Conversion Offerings, the Common Stock and the financial condition, results of
operation and business of the Savings Bank and the Holding Company. This
Prospectus Supplement, which provides detailed information with respect to the
Plan, should be read only in conjunction with the Prospectus. Terms not
otherwise defined in this Prospectus Supplement are defined in the Plan or the
Prospectus.

     A PARTICIPANT'S ELIGIBILITY TO PURCHASE COMMON STOCK IN THE CONVERSION AND
REORGANIZATION THROUGH THE PLAN IS SUBJECT TO THE PARTICIPANT'S GENERAL
ELIGIBILITY TO PURCHASE SHARES OF COMMON STOCK IN THE CONVERSION OFFERINGS AND
THE MAXIMUM AND MINIMUM LIMITATIONS SET FORTH IN THE PLAN OF CONVERSION.  SEE
"THE CONVERSION AND REORGANIZATION" AND "-- LIMITATIONS ON PURCHASES OF SHARES"
IN THE PROSPECTUS.

     FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY EACH
PARTICIPANT, SEE "RISK FACTORS" IN THE PROSPECTUS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("SEC"), THE OFFICE OF THRIFT SUPERVISION ("OTS"), THE
FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC") OR ANY OTHER FEDERAL AGENCY OR
ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC, THE OTS, THE FDIC OR ANY OTHER
AGENCY OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS.  ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

           The date of this Prospectus Supplement is _________, 1998.
No person has been authorized to give any information or to make any
representations other than those contained in the Prospectus or this Prospectus
Supplement in connection with the offering made hereby, and, if given or made,
such information and representations must not be relied upon as having been
authorized by the Holding Company, the Savings Bank or the Plan.  This
Prospectus Supplement does not constitute an offer to sell or solicitation of an
offer to buy any securities in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction.  Neither the
delivery of this Prospectus Supplement and the Prospectus nor any sale made
hereunder shall under any circumstances create any implication that there has
been no change in the affairs of the Savings Bank or the Plan since the date
hereof, or that the information herein contained or incorporated by reference is
correct as of any time subsequent to the date hereof.  This Prospectus
Supplement should be read only in conjunction with the Prospectus that is
attached herein and should be retained for future reference.
TABLE OF CONTENTS
PAGE
The Offering
     Securities Offered..........................................................   S-1
     Election to Purchase Common Stock in the Conversion and Reorganization......   S-1
     Value of Participation Interests............................................   S-1
     Method of Directing Transfer................................................   S-1
     Time for Directing Transfer.................................................   S-2
     Irrevocability of Transfer Direction........................................   S-2
     Treatment of Savings Bank Common Stock Held in the Plan.....................   S-2
     Direction to Purchase Common Stock After the Conversion and Reorganization..   S-2
     Purchase Price of Common Stock..............................................   S-3
     Nature of a Participant's Interest in the Common Stock......................   S-3
     Voting and Tender Rights of Common Stock....................................   S-3
 
Description of the Plan
     Introduction................................................................   S-3
     Eligibility and Participation...............................................   S-4
     Contributions Under the Plan................................................   S-4
     Limitations on Contributions................................................   S-5
     Investment of Contributions.................................................   S-7
     The Employer Stock Fund.....................................................   S-9
     Benefits Under the Plan.....................................................   S-9
     Withdrawals and Distributions from the Plan.................................   S-9
     Administration of the Plan..................................................  S-10
     Reports to Plan Participants................................................  S-11
     Plan Administrator..........................................................  S-11
     Amendment and Termination...................................................  S-11
     Merger, Consolidation or Transfer...........................................  S-12
     Federal Income Tax Consequences.............................................  S-12
     Restrictions on Resale......................................................  S-15
 
Legal Opinions...................................................................  S-15
 
Investment Form..................................................................  S-16
i
THE OFFERING

SECURITIES OFFERED

     The securities offered hereby are participation interests in the Plan and
up to ______ shares, at the actual purchase price of $20.00 per share, of Common
Stock which may be acquired by the Plan for the accounts of employees
participating in the Plan.  The Holding Company is the issuer of the Common
Stock.  Only employees and former employees of the Savings Bank and their
beneficiaries may participate in the Plan.  Information with regard to the Plan
is contained in this Prospectus Supplement and information with regard to the
Conversion and Reorganization and the financial condition, results of operation
and business of the Savings Bank and the Holding Company is contained in the
attached Prospectus.  The address of the principal executive office of the
Savings Bank is 907 N. Main Street, Anderson, South Carolina 29621-5526. The
Savings Bank's telephone number is (864) 225-0241.

ELECTION TO PURCHASE COMMON STOCK IN THE CONVERSION AND REORGANIZATION

     In connection with the Savings Bank's Conversion and Reorganization, each
Participant in the 401(k) Plan may direct the trustees of the Plan (the
"Trustees") to transfer up to 100% of a Participant's beneficial interest in the
assets of the Plan to the Employer Stock Fund and to use such funds to purchase
Common Stock issued in connection with the Conversion and Reorganization.
Amounts transferred may include salary deferral, Employer matching and profit
sharing contributions.  The Employer Stock Fund consists of investments in the
Common Stock.  Funds not transferred to the Employer Stock Fund may be invested
at the Participant's discretion in the other investment options available under
the Plan.  See "DESCRIPTION OF THE PLAN -- INVESTMENT OF CONTRIBUTIONS" below.
A PARTICIPANT'S ABILITY TO TRANSFER FUNDS TO THE EMPLOYER STOCK FUND IN THE
CONVERSION OFFERINGS IS SUBJECT TO THE PARTICIPANT'S GENERAL ELIGIBILITY TO
PURCHASE SHARES OF COMMON STOCK IN THE CONVERSION OFFERINGS.  FOR GENERAL
INFORMATION AS TO THE ABILITY OF THE PARTICIPANTS TO PURCHASE SHARES IN THE
CONVERSION OFFERINGS, SEE "THE CONVERSION AND REORGANIZATION-- THE SUBSCRIPTION,
DIRECT COMMUNITY AND SYNDICATED COMMUNITY OFFERINGS" IN THE ATTACHED PROSPECTUS.

VALUE OF PARTICIPATION INTERESTS

     The assets of the Plan are valued on an ongoing basis and each Participant
is informed of the value of his or her beneficial interest in the Plan on a
periodic basis.  This value represents the market value of past contributions to
the Plan by the Savings Bank and by the Participants and earnings thereon, less
previous withdrawals, and transfers from other Plans.

METHOD OF DIRECTING TRANSFER

     The last page of this Prospectus Supplement is an investment form to direct
a transfer to the Employer Stock Fund ("Investment Form").  If a Participant
wishes to transfer funds to the Employer Stock Fund to purchase Common Stock
issued in connection with the Conversion 

                                      S-1
Offerings, the Participant should indicate that decision in Part 2 of the
Investment Form. If a Participant does not wish to make such an election, he or
she does not need to take any action.

TIME FOR DIRECTING TRANSFER

     THE DEADLINE FOR SUBMITTING A DIRECTION TO TRANSFER AMOUNTS TO THE EMPLOYER
STOCK FUND IN ORDER TO PURCHASE COMMON STOCK ISSUED IN CONNECTION WITH THE
CONVERSION OFFERINGS IS ___________, 1998.  The Investment Form should be
returned to ___________ at the Savings Bank no later than the close of business
on such date.

IRREVOCABILITY OF TRANSFER DIRECTION

     A Participant's direction to transfer amounts credited to such
Participant's account in the Plan to the Employer Stock Fund in order to
purchase shares of Common Stock in connection with the Conversion Offerings
shall be irrevocable. Participants, however, will be able to direct the sale of
Common Stock, as explained below.

TREATMENT OF SAVINGS BANK COMMON STOCK HELD IN THE PLAN

     Shares of Savings Bank Common Stock held in the Employer Stock Fund prior
to the consummation of the Conversion and Reorganization will treated in the
same manner as shares held by other Public Stockholders.  Such shares will be
exchanged for shares of Common Stock pursuant to the Exchange Ratio.
Application of the Exchange Ratio will result in the holders of the outstanding
Savings Bank Common Stock owning, in the aggregate, approximately the same
percentage of the Common Stock to be outstanding upon the completion of the
Conversion and Reorganization as the percentage of Savings Bank Common Stock
owned by them, in the aggregate, immediately prior to the consummation of the
Conversion.  FOR ADDITIONAL INFORMATION REGARDING THE TREATMENT OF SAVINGS BANK
COMMON STOCK, SEE "THE CONVERSION AND REORGANIZATION" IN THE PROSPECTUS.

DIRECTION TO PURCHASE COMMON STOCK AFTER THE CONVERSION AND REORGANIZATION

     After the Conversion and Reorganization, a Participant will be able to
direct that a certain percentage of such Participant's interests in the trust
assets ("Trust") be transferred to the Employer Stock Fund and invested in
Common Stock or to the other investment funds available under the Plan.
Alternatively, a Participant may direct that a certain percentage of such
Participant's interest in the Employer Stock Fund be transferred from the
Employer Stock Fund to other investment funds available under the Plan.
Participants will be permitted to direct that future contributions made to the
Plan by or on their behalf be invested in Common Stock.  Following the initial
election, the allocation of a Participant's interest in the Employer Stock Fund
may be changed by the Participant on a periodic basis in accordance with rules
established by the Employer.  Special restrictions may apply to transfers
directed by those Participants who are executive officers, directors and
principal stockholders of the Holding Company who are 

                                      S-2
subject to the provisions of Section 16(b) of the Securities and Exchange Act of
1934, as amended ("Exchange Act").

PURCHASE PRICE OF COMMON STOCK

     The funds transferred to the Employer Stock Fund for the purchase of Common
Stock in connection with the Conversion will be used by the Trustees to purchase
shares of Common Stock.  The price paid for such shares of Common Stock will be
the same price as is paid by all other persons who purchase shares of Common
Stock in the Conversion Offerings.

NATURE OF A PARTICIPANT'S INTEREST IN THE COMMON STOCK

     The Holding Company Stock purchased for an account of a Participant will be
held in the Employer Stock Fund.  Any earnings, losses or expenses with respect
to the Common Stock, including dividends and appreciation or depreciation in
value, will be credited or debited to the account and will not be credited to or
borne by any other accounts.

VOTING AND TENDER RIGHTS OF COMMON STOCK

     The Trustees generally will exercise voting and tender rights attributable
to all Common Stock held by the Trust as directed by Participants with an
interest in the Employer Stock Fund.  With respect to each matter as to which
holders of Common Stock have the right to vote, each Participant will be
allocated a number of voting instruction rights reflecting such Participant's
proportionate interest in the Employer Stock Fund.  The percentage of shares of
Common Stock held in the Employer Stock Fund that are voted in the affirmative
or negative on each matter shall be the same percentage of the total number of
voting instruction rights that are exercised in either the affirmative or
negative, respectively.

                            DESCRIPTION OF THE PLAN

INTRODUCTION

     The Savings Bank adopted the Plan effective _____________ as an amendment
and restatement of the Savings Bank's prior retirement plan.  The Plan is a cash
or deferred arrangement established in accordance with the requirement under
Section 401(a) and Section 401(k) of the Internal Revenue Code of 1986, as
amended ("Code").

     The Savings Bank intends that the Plan, in operation, will comply with the
requirements under Section 401(a) and Section 401(k) of the Code.  The Savings
Bank will adopt any amendments to the Plan that may be necessary to ensure the
qualified status of the Plan under the Code and applicable Treasury Regulations.
The Savings Bank has received a determination from the Internal Revenue Service
("IRS") that the Plan is qualified under Section 401(a) of the Code and that it
satisfies the requirements for a qualified cash or deferred arrangement under
Section 401(k) of the Code.

                                      S-3
EMPLOYEE RETIREMENT INCOME SECURITY ACT.  The Plan is an "individual
account plan" other than a "money purchase pension plan" within the meaning of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA").  As
such, the Plan is subject to all of the provisions of Title I (Protection of
Employee Benefit Rights) and Title II (Amendments to the Internal Revenue Code
Relating to Retirement Plans) of ERISA, except the funding requirements
contained in Part 3 of Title I of ERISA, which by their terms do not apply to an
individual account plan (other than a money purchase pension plan).  The Plan is
not subject to Title IV (Plan Termination Insurance) of ERISA.  Neither the
funding requirements contained in Title IV of ERISA nor the plan termination
insurance provisions contained in Title IV will be extended to Participants or
beneficiaries under the Plan.

     APPLICABLE FEDERAL LAW REQUIRES THE PLAN TO IMPOSE SUBSTANTIAL RESTRICTIONS
ON THE RIGHT OF A PLAN PARTICIPANT TO WITHDRAW AMOUNTS HELD FOR HIS OR HER
BENEFIT UNDER THE PLAN PRIOR TO THE PARTICIPANT'S TERMINATION OF EMPLOYMENT WITH
THE SAVINGS BANK.  A SUBSTANTIAL FEDERAL TAX PENALTY MAY ALSO BE IMPOSED ON
WITHDRAWALS MADE PRIOR TO THE PARTICIPANT'S ATTAINMENT OF AGE 59 1/2, UNLESS A
PARTICIPANT RETIRES AS PERMITTED UNDER THIS PLAN REGARDLESS OF WHETHER SUCH A
WITHDRAWAL OCCURS DURING HIS OR HER EMPLOYMENT WITH THE SAVINGS BANK OR AFTER
TERMINATION OF EMPLOYMENT.

     REFERENCE TO FULL TEXT OF PLAN.  THE FOLLOWING STATEMENTS ARE SUMMARIES OF
THE MATERIAL PROVISIONS OF THE PLAN.  THEY ARE NOT COMPLETE AND ARE QUALIFIED IN
THEIR ENTIRETY BY THE FULL TEXT OF THE PLAN, WHICH IS FILED AS AN EXHIBIT TO THE
REGISTRATION STATEMENT FILED WITH THE SEC.  COPIES OF THE PLAN ARE AVAILABLE TO
ALL EMPLOYEES BY FILING A REQUEST WITH THE PLAN ADMINISTRATOR.  EACH EMPLOYEE IS
URGED TO READ CAREFULLY THE FULL TEXT OF THE PLAN.

ELIGIBILITY AND PARTICIPATION

     Any employee of the Savings Bank is eligible to participate and will become
a Participant in the Plan following completion of 1,000 hours of service with
the Savings Bank within a consecutive 12 month period of employment and the
attainment of age 21.  The Plan fiscal year is the period October 1 to September
30 ("Plan Year").  Directors who are not employees of the Savings Bank are not
eligible to participate in the Plan.

     During 1997, approximately __ employees participated in the Plan.

CONTRIBUTIONS UNDER THE PLAN

     PARTICIPANT CONTRIBUTIONS.  Each Participant in the Plan is permitted to
elect to reduce such Participant's Compensation (as defined below) pursuant to a
salary reduction agreement and have that amount contributed to the Plan on such
Participant's behalf.  Such amounts are credited to the Participant's deferral
contributions account.  For purposes of the Plan, "Compensation" 

                                      S-4
means a Participant's total amount of earnings reportable W-2 wages for federal
income tax withholding purposes plus a Participant's elective deferrals pursuant
to a salary reduction agreement under the Plan or any elective deferrals to a
Section 125 plan. Due to recent statutory changes, the annual Compensation of
each Participant taken into account under the Plan is limited to $160,000 (as
adjusted under applicable Code provisions). A Participant may elect to modify
the amount contributed to the Plan under the participant's salary reduction
agreement during the Plan Year. Deferral contributions are generally transferred
by the Savings Bank to the Trustees of the Plan on a periodic basis.

     EMPLOYER CONTRIBUTIONS.  The Savings Bank currently matches __% of a
Participant's monthly deferral contributions to a maximum of __% of
Compensation.  However, the rate of matching contributions is discretionary and
subject to change on an annual basis.  In addition, the Employer may make a
discretionary contribution in proportion to a Participant's Compensation.

LIMITATIONS ON CONTRIBUTIONS

     LIMITATIONS ON ANNUAL ADDITIONS AND BENEFITS.  Pursuant to the requirements
of the Code, the Plan provides that the amount of contributions allocated to
each Participant's Account during any Plan Year may not exceed the lesser of 25%
of the Participant's "Section 415 Compensation" for the Plan Year or $30,000 (as
adjusted periodically under applicable Code provisions).  A Participant's
"Section 415 Compensation" is a Participant's Compensation, excluding any amount
contributed to the Plan under a salary reduction agreement or any employer
contribution to the Plan or to any other plan or deferred compensation or any
distributions from a plan of deferred compensation.  In addition, annual
additions are limited to the extent necessary to prevent the limitations for the
combined plans of the Savings Bank from being exceeded.  To the extent that
these limitations would be exceeded by reason of excess annual additions to the
Plan with respect to a Participant, the excess must be reallocated to the
remaining Participants who are eligible for an allocation of Employer
contributions for the Plan Year.

     LIMITATION ON 401(K) PLAN CONTRIBUTIONS.  The annual amount of deferred
compensation of a Participant (when aggregated with any elective deferrals of
the Participant under any other employer plan, a simplified employee pension
plan or a tax-deferred annuity) may not exceed $10,000 (as adjusted periodically
under applicable Code provisions).  Contributions in excess of this limitation
("excess deferrals") will be included in the Participant's gross federal income
tax purposes in the year they are made.  In addition, any such excess deferral
will again be subject to federal income tax when distributed by the Plan to the
Participant, unless the excess deferral (together with any income allocable
thereto) is distributed to the Participant not later than the first April 15th
following the close of the taxable year in which the excess deferral is made.
Any income on the excess deferral that is distributed not later than such date
shall be treated, for federal income tax purposes, as earned and received by the
Participant in the taxable year in which the excess deferral is made.

     LIMITATION ON PLAN CONTRIBUTIONS FOR HIGHLY COMPENSATED EMPLOYEES. Sections
401(k) and 401(m) of the Code limit the amount of deferred compensation
contributed to the Plan

                                      S-5
in any Plan Year on behalf of Highly Compensated Employees (defined below) in
relation to the amount of deferred compensation contributed by or on behalf of
all other employees eligible to participate in the Plan. Specifically, the
actual deferral percentage for a Plan Year (i.e., the average of the ratios,
                                            ----
calculated separately for each eligible employee in each group, by dividing the
amount of salary reduction contributions credited to the salary reduction
contribution account of such eligible employee by such employee's compensation
for the Plan Year) of the Highly Compensated Employees may not exceed the
greater of (a) 125% of the actual deferred percentage of all other eligible
employees, or (b) the lesser of (i) 200% of the actual deferred percentage of
all other eligible employees, or (ii) the actual deferral percentage of all
other eligible employees plus two percentage points. In addition, the actual
contribution percentage for a Plan Year (i.e., the average of the ratios
                                         ----
calculated separately for each eligible employee in each group, by dividing the
amount of employer contributions credited to the Matching contributions account
of such eligible employee by each eligible employee's compensation for the Plan
Year) of the Highly Compensated Employees may not exceed the greater of (a) 125%
of the actual contribution percentage of all other eligible employees, or (b)
the lesser of (i) 200% of the actual contributions percentage of all other
eligible employees, or (ii) the actual contribution percentage of all other
eligible employees plus two percentage points.

     In general, a Highly Compensated Employee includes any employee who, during
the Plan Year or the preceding Plan Year, (1) was at any time a 5% owner (i.e.,
                                                                          ---- 
owns directly or indirectly more than 5% of the stock of the Employer, or stock
possessing more than 5% of the total combines voting power of all stock of the
Employer) or, (2) during the preceding Plan Year, received Section 415
Compensation in excess of $80,000 (as adjusted periodically under applicable
Code provisions) and, if elected by the Savings Bank, was in the top paid group
of employees for such Plan Year.

     In order to prevent disqualification of the Plan, any amounts contributed
by Highly Compensated Employees that exceed the average deferral limitation in
any Plan Year ("excess contributions"), together with any income allocable
thereto, must be distributed to such Highly Compensated Employees before the
close of the following Plan Year.  However, the Savings Bank will be subject to
a 10% excise tax on any excess contributions unless such excess contributions,
together with any income allocable thereto, either are recharacterized or are
distributed before the close of the first 2 1/2 months following the Plan Year
to which such excess contributions relate.  In addition, in order to avoid
disqualification of the Plan, any contributions by Highly Compensated Employees
that exceed the average contribution limitation in any Plan Year ("excess
aggregate contributions") together with any income allocable thereto, must be
distributed to such Highly Compensated Employees before the close of the
following Plan Year.  However, the 10% excise tax will be imposed on the Savings
Bank with respect to any excess aggregate contributions, unless such amounts,
plus any income allocable thereto, are distributed within 2 1/2 months following
the close of the Plan Year in which they arose.

     TOP-HEAVY PLAN REQUIREMENTS.  If, for any Plan Year, the Plan is a Top-
Heavy Plan (as defined below), then (i) the Savings Bank may be required to make
certain minimum contributions to the Plan on behalf of non-key employees (as
defined below), and (ii) certain 

                                      S-6
additional restrictions would apply with respect to the combination of annual
additions to the Plan and projected annual benefits under any defined plan
maintained by the Savings Bank.

     In general, the Plan will be regarded as a "Top-Heavy Plan" for any Plan
Year, if as of the last day of the preceding Plan Year, the aggregate balance of
the accounts of all Participants who are key Employees exceeds 60% of the
aggregate balance of the Accounts of the Participants.  "Key Employees"
generally include any employee, who at any time during the Plan Year or any
other the four preceding Plan Years, if (1) an officer of the Savings Bank
having annual compensation in excess of $60,000 who is in an administrative or
policy-making capacity, (2) one of the ten employees having annual compensation
in excess of $30,000 and owing, directly or indirectly, the largest interest in
the employer, (3) a 5% owner of the employer (i.e., owns directly or indirectly
                                              ----                             
more than 5% of the stock of the employer, or stock possessing more than 5% of
the total combined voting power of all stock of the employer), or (4) a 1% of
owner of the employer having compensation in excess of $150,000.

INVESTMENT OF CONTRIBUTIONS

     All amounts credited to Participant's Accounts under the Plan are held in
the Trust which is administered by the Trustees.  The Trustees are appointed by
the Savings Bank's Board of Directors.  The Plan provides that a Participant may
direct the Trustees to invest all or a portion of his or her Accounts in various
managed investment portfolios, as described below.  A Participant may
periodically elect to change his or her investment directions with respect to
both past contributions and for more additions to the Participant's accounts
invested in these investment alternatives.

     Under the Plan, the Accounts of Participant held in the Trust will be
invested by the Trustees at the direction of the Participant in the following
investment funds:

Investment Fund A -

Investment Fund B -

Investment Fund C -

Investment Fund D -

Investment Fund E -

Investment Fund F -

Investment Fund G -

Investment Fund H -

                                      S-7
Investment Fund I -

     A Participant may also invest all or a portion of his or her Accounts in
the portfolios described above and in Fund J, described below:

Investment Fund J -

     A Participant may elect to have both prior contributions and additions to
the Participant's Account invested either in the Employer Stock Fund or in any
of the other investment funds listed above.  Any amounts credited to a
Participant's Accounts for which investment directions are not given will be
invested in _________________.

     The net gain (or loss) in the Accounts from investments (including interest
payments, dividends, realized and unrealized gains and losses on securities, and
expenses paid from the Trust) are determined monthly on a quarterly basis.  For
purposes of such allocation, all assets of the Trust are valued at their fair
market value.

THE EMPLOYER STOCK FUND

     The Employer Stock Fund consists of investments in Common Stock.  In
connection with the Conversion Offerings, pursuant to the attached Investment
Form, Participants will be able to change their investments at a time other than
the normal election intervals.  Any cash dividends paid on Common Stock held in
the Employer Stock Fund will be credited to a cash dividend subaccount for each
Participant investing in the Employer Stock Fund.  To the extent practicable,
all amounts held in the Employer Stock Fund (except the amounts credited to cash
dividend subaccounts) will be used to purchase shares of Common Stock.  It is
expected that all purchases will be made at prevailing market prices.  Pending
investment in Common Stock, assets held in the Employer Stock Fund will be
placed in bank deposits and other short-term investments.

     When Common Stock is purchased or sold, the cost or net proceeds are
charged or credited to the Accounts of Participants affected by the purchase or
sale.  A Participant's Account will be adjusted to reflect changes in the value
of shares of Common Stock resulting from stock dividends, stock splits and
similar changes.

     To the extent dividends are not paid on Common Stock held in the Employer
Stock Fund, the return on any investment in the Employer Stock Fund will consist
only of the market value appreciation of the Common Stock subsequent to its
purchase.

     INVESTMENTS IN THE EMPLOYER STOCK FUND MAY INVOLVE CERTAIN RISK FACTORS
ASSOCIATED WITH INVESTMENTS IN COMMON STOCK OF THE HOLDING COMPANY.  FOR A
DISCUSSION OF THESE RISK FACTORS, SEE "RISK FACTORS" IN THE PROSPECTUS.

                                      S-8
BENEFITS UNDER THE PLAN

     VESTING.  A Participant has at all times a fully vested, nonforfeitable
interest in all of his or her deferred contributions and the earnings thereon
under the Plan.  A Participant is at all times 100% vested in his or her
matching contributions account.  Employer discretionary contribuions are fully
vested after five years of service.

WITHDRAWALS AND DISTRIBUTIONS FROM THE PLAN

     APPLICABLE FEDERAL LAW REQUIRES THE PLAN TO IMPOSE SUBSTANTIAL RESTRICTIONS
ON THE RIGHT OF A PLAN PARTICIPANT TO WITHDRAW AMOUNTS HELD FOR HIS OR HER
BENEFIT UNDER THE PLAN PRIOR TO THE PARTICIPANT'S ATTAINMENT OF AGE 59 1/2
UNLESS A PARTICIPANT RETIRES AS PERMITTED UNDER THE PLAN REGARDLESS OF WHETHER
SUCH A WITHDRAWAL OCCURS DURING HIS OR HER EMPLOYMENT WITH THE ASSOCIATION.

     DISTRIBUTION UPON RETIREMENT, DEATH, DISABILITY OR TERMINATION OF
EMPLOYMENT. The distribution of benefits under the 401(k) Plan to a Participant
who retires may be made in the form of a lump-sum payment, installment payments
or an annuity payable over a specified period. Distributions generally commence
as soon as practicable following the Participant's termination of employment. At
the request of the Participant, the distribution may include an in-kind
distribution of Common Stock of the Holding Company credited to the
Participant's Account. Benefits payments ordinarily must begin not later than 60
days following the end of the Plan Year in which occurs later of the
Participant's: (i) termination of employment; (ii) attainment of age 65; or
(iii) tenth anniversary of commencement of participation in the Plan; but in no
event later than April 1 following the calendar year in which the Participant
attains age 70 1/2 (if the Participant is retired). However, if the vested
portion of the Participant's Account balances exceeds $3,500, no distribution
will be made from the Plan prior to the Participant's attaining age 65 unless
the Participant consents to an earlier distribution. Special rules may apply to
the distribution of Common Stock of the Holding Company to those Participants
who are executive officers, directors and principal shareholders of the Holding
Company who are subject to the provisions of Section 16(b) of the Exchange Act.

     DISTRIBUTION UPON DEATH. A Participant who dies prior to the benefit
commencement date for retirement, disability or termination of employment, and
who has a surviving spouse, shall have his or her benefits paid to the surviving
spouse in a lump sum, or if the payment of his or her benefits had commenced
before his or her death, in accordance with the distribution method in effect at
his or her death. With respect to an unmarried Participant, and in the case of a
married Participant with spousal consent to the designation of another
beneficiary, payment of benefits to the beneficiary, payments of benefits to the
beneficiary of a deceased Participant shall be made in the form of a lump sum
payment in cash or in Common Stock, or if the payment of his or her benefit had
commenced before his or her death, in accordance with the distribution method if
effect at death.

                                      S-9
NONALIENATION OF BENEFITS.  Except with respect to federal income tax
withholding and as provided with respect to a qualified domestic relations order
(as defined in the Code), benefits payable under the Plan shall not be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution, or levy of any kind, either
voluntary or involuntary, and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, charge or otherwise dispose of any rights to
benefits payable under the Plan shall be void.

ADMINISTRATION OF THE PLAN

     TRUSTEES.  The Trustees with respect to Plan assets are currently
__________________________________.

     Pursuant to the terms of the Plan, the Trustees receive and hold
contributions to the Plan in trust and have exclusive authority and discretion
to manage and control the assets of the Plan pursuant to the terms of the Plan
and to manage, invest and reinvest the Trust and income therefrom.  The Trustees
have the authority to invest and reinvest the Trust and may sell or otherwise
dispose of Trust investments at any time and may hold trust funds uninvested.
The Trustees have authority to invest the assets of the Trust in "any type of
property, investment or security" as defined under ERISA.

     The Trustees have full power to vote any corporate securities in the Trust
in person or by proxy; provided, however, that the Participants will direct the
Trustees as to voting and tendering of all Common Stock held in the Employer
Stock Fund.

     The Trustees receive no compensation for their services.  The expenses of
the Trustees are paid out of the Trust except to the extent such expenses and
compensation are paid by the Association.

     The Trustees must render at least annual reports to the Association and to
the Participants in such form and containing such information that the Trustees
deem necessary.

REPORTS TO PLAN PARTICIPANTS

     The administrator will furnish to each Participant a statement at least
semiannually showing (i) the balance in the Participant's Account as of the end
of that period, (ii) the amount of contributions allocated to such Participant's
Account for that period, and (iii) the adjustments to such Participant's Account
to reflect earnings or losses (if any).

PLAN ADMINISTRATOR

     The Savings Bank currently serves as the Plan Administrator.  The Plan
Administrator is responsible for the administration of the Plan, interpretation
of the provisions of the Plan, prescribing procedures for filing applications
for benefits, preparation and distribution of 

                                     S-10
information explaining the Plan, maintenance of plan records, books of account
and all other data necessary for the proper administration of the Plan, and
preparation and filing of all returns and reports relating to the Plan which are
required to be filed with the U.S. Department of Labor and the IRS, and for all
disclosures required to be made to Participants, beneficiaries and others under
Sections 104 and 105 of ERISA.

AMENDMENT AND TERMINATION

     The Savings Bank may terminate the Plan at any time.  If the Plan is
terminated in whole or in part, then regardless of other provisions in the Plan,
each employee who ceases to be a Participant shall have a fully vested interest
in his or her Account.  The Savings Bank reserves the right to make, from time
to time, any amendment or amendments to the Plan which do not cause any part of
the Trust to be used for, or diverted to, any purpose other than the exclusive
benefit of the Participants or their beneficiaries.

MERGER, CONSOLIDATION OR TRANSFER

     In the event of the merger or consolidation of the Plan with another plan,
or the transfer of the Trust to another plan, the Plan requires that each
Participant (if either the Plan or the other plan then terminated) receive a
benefit immediately after the merger, consolidation or transfer which is equal
to or greater than the benefit he or she would have been entitled to receive
immediately before the merger, consolidation or transfer (if the Plan had then
terminated).

FEDERAL INCOME TAX CONSEQUENCES

     THE FOLLOWING IS ONLY A BRIEF SUMMARY OF CERTAIN FEDERAL INCOME TAX ASPECTS
OF THE PLAN WHICH ARE OF GENERAL APPLICATION UNDER THE CODE AND IS NOT INTENDED
TO BE A COMPLETE OR DEFINITIVE DESCRIPTION OF THE FEDERAL INCOME TAX
CONSEQUENCES OF PARTICIPATING IN OR RECEIVING DISTRIBUTIONS FROM THE PLAN.  THE
SUMMARY IS NECESSARILY GENERAL IN NATURE AND DOES NOT PURPORT TO BE COMPLETE.
MOREOVER, STATUTORY PROVISIONS ARE SUBJECT TO CHANGE, AS ARE THEIR
INTERPRETATIONS, AND THEIR APPLICATION MAY VARY IN INDIVIDUAL CIRCUMSTANCES.
FINALLY, THE CONSEQUENCES UNDER APPLICABLE STATE AND LOCAL INCOME TAX LAWS MAY
NOT BE THE SAME AS UNDER THE FEDERAL INCOME TAX LAWS.

PARTICIPANTS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO ANY
DISTRIBUTION FROM THE PLAN AND TRANSACTIONS INVOLVING THE PLAN.

     The Plan has received a determination from the IRS that it is qualified
under Section 401(a) and 401(k) of the Code, and that the related Trust is
exempt from tax under Section 501(a) of the Code.  A plan that is "qualified"
under these sections of the Code is afforded special tax treatment which include
the following: (1) the sponsoring employer is allowed an immediate tax deduction
for the amount contributed to the Plan of each year; (2) Participants pay no
current income tax on amounts contributed by the employer on their behalf; and
(3) earnings 

                                     S-11
of the Plan are tax-exempt thereby permitting the tax-free accumulation of
income and gains on investments. The Plan will be administered to comply in
operation with the requirements of the Code as of the applicable effective date
of any change in the law. The Savings Bank expects to timely adopt any
amendments to the Plan that may be necessary to maintain the qualified status of
the Plan under the Code. Following such an amendment, the Plan will be submitted
to the IRS for a determination that the Plan, as amended, continues to qualify
under Sections 401(a) and 501(a) of the Code and that it continues to satisfy
the requirements for a qualified cash or deferred arrangement under Section
401(k) of the Code.

     Assuming that the Plan is administered in accordance with the requirements
of the Code, participation in the Plan under existing federal income tax laws
will have the following effects:

     (a) Amounts contributed to a Participant's 401(k) account and the
investment earnings are actually distributed or withdrawn from the Plan.
Special tax treatment may apply to the taxable portion of any distribution that
includes Common Stock or qualified as a "Lump Sum Distribution" (as described
below).

     (b) Income earned on assets held by the Trust will not be taxable to the
Trust.

     LUMP SUM DISTRIBUTION.  A distribution from the Plan to a Participant or
the beneficiary of a Participant will qualify as a "Lump Sum Distribution" if it
is made: (i) within a single taxable year of the Participant or beneficiary;
(ii) on account of the Participant's death or separation from service, or after
the Participant attains age 59 1/2; and (iii) consists of the balance to the
credits of the Participant under the Plan and all other profit sharing plans, if
any, maintained by the Savings Bank.  The portion of any Lump Sum Distribution
that is required to be included in the Participant's or beneficiary's taxable
income for federal income tax purposes ("total taxable amount") consists of the
entire amount of such Lump Sum Distribution less the amount of after-tax
contributions, if any, made by the Participant to any other profit sharing plans
maintained by the Savings Bank which is included in such distribution.

     AVERAGING RULES.  The portion of the total taxable amount of a Lump Sum
Distribution ("ordinary income portion") will be taxable generally as ordinary
income for federal income tax purposes.  However, for distributions occurring
prior to January 1, 2000, a Participant who has completed at least five years of
participation in the Plan before the taxable year in which the distribution is
made, or a beneficiary who receives a Lump Sum Distribution on account of the
Participant's death (regardless of the period of the Participant's participation
in the Plan or any other profit sharing plan maintained by the Employer), may
elect to have the ordinary income portion of such Lump Sum Distribution taxed
according to a special averaging rule ("five-year averaging").  The election of
the special averaging rules may apply only to one Lump Sum Distribution received
by the Participant or beneficiary, provided such amount is received on or after
the Participant turns 59 1/2 and the recipient elects to have any other Lump Sum
Distribution from a qualified plan received in the same taxable year taxed under
the special averaging rule.  The special five-year averaging rule has been
repealed for distributions occurring after December 31, 1999.  Under a special
grandfather rule, individuals who turned 50 by 1986 may elect to have 

                                     S-12
their Lump Sum Distribution taxed under either the five-year averaging rule (if
available) or the prior law ten-year averaging rule. Such individuals also may
elect to have that portion of the Lump Sum Distribution attributable to the
Participant's pre-1974 participation in the Plan taxed at a flat 20% rate as
gain from the sale of a capital asset.

     COMMON STOCK INCLUDED IN LUMP SUM DISTRIBUTION.  If a Lump Sum Distribution
includes Common Stock, the distribution generally will be taxed in the manner
described above, except that the total taxable amount will be reduced by the
amount of any net unrealized appreciation with respect to such Common Stock,
i.e., the excess of the value of such Common Stock at the time of the
----                                                                 
distribution over its cost to the Plan.  The tax basis of such Common Stock to
the Participant or beneficiary for purposes of computing gain or loss on its
subsequent sale will be the value of the Common Stock at the time of
distribution less the amount of net unrealized appreciation.  Any gain on a
subsequent sale or other taxable disposition of such Common Stock, to the extent
of the amount of net unrealized appreciation at the time of distribution, will
be considered long-term capital gain regardless of the holding period of such
Common Stock.  Any gain on a subsequent sale or other taxable disposition of the
Common Stock in excess of the amount of net unrealized appreciation at the time
of distribution will be considered either short-term capital gain or long-term
capital gain depending upon the length of the holding period of the Common
Stock.  The recipient of a distribution may elect to include the amount of any
net unrealized appreciation in the total taxable amount of such distribution to
the extent allowed by the regulations by the IRS.

     DISTRIBUTIONS:  ROLLOVERS AND DIRECT TRANSFERS TO ANOTHER QUALIFIED PLAN OR
TO AN IRA. Pursuant to a change in the law, effective January 1, 1993, virtually
all distributions from the Plan may be rolled over to another qualified Plan or
to an individual retirement account ("IRA") without regard to whether the
distribution is a Lump Sum Distribution or Partial Distribution. Effective
January 1, 1993, Participants have the right to elect to have the Trustees
transfer all or any portion of an "eligible rollover distribution" directly to
another plan qualified under Section 401(a) of the Code or to an IRA. If the
Participant does not elect to have an "eligible rollover distribution"
transferred directly to another qualified plan of to an IRA, the distribution
will be subject to a mandatory federal withholding tax equal to 20% of the
taxable distribution. An "eligible rollover distribution" means any amount
distributed from the Plan except: (1) a distribution that is (a) one of a series
of substantially equal periodic payments made (not less frequently than
annually) over the Participant's life of the joint life of the Participant and
the Participant's designated beneficiary, or (b) for a specified period of ten
years or more; (2) any amount that is required to be distributed under the
minimum distribution rules; and (3) any other distributions excepted under
applicable federal law. The tax law change described above did not modify the
special tax treatment of Lump Sum Distributions, that are not rolled over or
transferred, i.e., forward averaging, capital gains tax treatment and the
             ----                                                        
nonrecognition of net unrealized appreciation, discussed earlier.

     ADDITIONAL TAX ON EARLY DISTRIBUTIONS.  A Participant who receives a
distribution from the Plan prior to attaining age 59 1/2 will be subject to an
additional income tax equal to 10% of the taxable amount of the distribution.
The 10% additional income tax will not apply, however, 

                                     S-13
to the extent the distribution is rolled over into an IRA or another qualified
plan or the distribution is (i) made to a beneficiary (or to the estate of a
Participant) on or after the death of the Participant, (ii) attributable to the
Participant's being disabled within the meaning of Section 72(m)(7) of the Code,
(iii) part of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of the
Participant or the joint lives (or joint life expectancies) of the Participant
and his or her beneficiary, (iv) made to the Participant after separation from
service on account of early retirement under the Plan after attainment of age
55, (v) made to pay medical expenses to the extent deductible for federal income
tax purposes, (vi) pursuant to a qualified domestic relations order, or (vii)
made to effect the distribution of excess contributions or excess deferrals.

     THE FOREGOING IS ONLY A BRIEF SUMMARY OF CERTAIN FEDERAL INCOME TAX ASPECTS
OF THE PLAN WHICH ARE OF GENERAL APPLICATION UNDER THE CODE AND IS NOT INTENDED
TO BE A COMPLETE OR DEFINITIVE DESCRIPTION OF THE FEDERAL INCOME TAX
CONSEQUENCES OF PARTICIPATING IN OR RECEIVING DISTRIBUTIONS FROM THE PLAN.
ACCORDINGLY, EACH PARTICIPANT IS URGED TO CONSULT A TAX ADVISOR CONCERNING THE
FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF PARTICIPATING IN AND RECEIVING
DISTRIBUTIONS FROM THE PLAN.

RESTRICTIONS ON RESALE

     Any person receiving shares of the Common Stock under the Plan who is an
"affiliate" of the Savings Bank or the Holding Company as the term "affiliate"
is used in Rules 144 and 405 under the Securities Act of 1933, as amended
("Securities Act") (e.g., directors, officers and substantial shareholders of
the Savings Bank) may reoffer or resell such shares only pursuant to a
registration statement filed under the Securities Act (the Holding Company and
the Savings Bank having no obligation to file such registration statement) or,
assuming the availability thereof, pursuant to Rule 144 or some other exemption
from the registration requirements of the Securities Act.  Any person who may be
an "affiliate" of the Savings Bank or the Holding Company may wish to consult
with counsel before transferring any Common Stock owned by him or her.  In
addition, Participants are advised to consult with counsel as to the
applicability of the reporting and short-swing profit liability rules of Section
16 of the Exchange Act which may affect the purchase and sale of the Common
Stock where acquired or sold under the Plan or otherwise.

                                LEGAL OPINIONS

     The validity of the issuance of the Common Stock will be passed upon by
Breyer & Aguggia, Washington, D.C., which firm is acting as special counsel for
the Holding Company in connection with the Savings Bank's Conversion and
Reorganization from the mutual holding company form of organization to a wholly-
owned subsidiary of the Holding Company.

                                     S-14
CONCERNING THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF PARTICIPATING IN AND
RECEIVING DISTRIBUTIONS FROM THE PLAN.

RESTRICTIONS ON RESALE

     Any person receiving shares of the Common Stock under the Plan who is an
"affiliate" of the Savings Bank or the Holding Company as the term "affiliate"
is used in Rules 144 and 405 under the Securities Act of 1933, as amended
("Securities Act") (e.g., directors, officers and substantial shareholders of
the Savings Bank) may reoffer or resell such shares only pursuant to a
registration statement filed under the Securities Act (the Holding Company and
the Savings Bank having no obligation to file such registration statement) or,
assuming the availability thereof, pursuant to Rule 144 or some other exemption
from the registration requirements of the Securities Act.  Any person who may be
an "affiliate" of the Savings Bank or the Holding Company may wish to consult
with counsel before transferring any Common Stock owned by him or her.  In
addition, Participants are advised to consult with counsel as to the
applicability of the reporting and short-swing profit liability rules of Section
16 of the Exchange Act which may affect the purchase and sale of the Common
Stock where acquired or sold under the Plan or otherwise.

                                LEGAL OPINIONS

     The validity of the issuance of the Common Stock will be passed upon by
Breyer & Aguggia, Washington, D.C., which firm is acting as special counsel for
the Holding Company in connection with the Savings Bank's Conversion and
Reorganization from the mutual holding company form of organization to a wholly-
owned subsidiary of the Holding Company.

                                     S-15
Investment Form
                             (Employer Stock Fund)

                    PERPETUAL BANK, A FEDERAL SAVINGS BANK
                                  401(K) PLAN

Name of Participant:_____________________

Social Security Number:__________________

     1.  Instructions. In connection with the proposed reorganization of
Perpetual Bank, A Federal Savings Bank ("Savings Bank") from the mutual holding
form of organization to a wholly-owned subsidiary of a savings and loan holding
company ("Conversion and Reorganization"), participants in the Perpetual Bank, A
Federal Savings Bank Employees' Savings and Profit Sharing Plan ("Plan") may
elect to direct the investment of up to 100% of their account balances into the
Employer Stock Fund ("Employer Stock Fund"). Amounts transferred at the
direction of Participants into the Employer Stock Fund will be used to purchase
shares of the common stock of SouthBanc Shares, Inc. ("Common Stock"), the
proposed holding company for the Savings Bank. A PARTICIPANT'S ELIGIBILITY TO
PURCHASE SHARES OF COMMON STOCK IS SUBJECT TO THE PARTICIPANT'S GENERAL
ELIGIBILITY TO PURCHASE SHARES OF COMMON STOCK IN THE CONVERSION OFFERINGS AND
THE MAXIMUM AND MINIMUM LIMITATIONS SET FORTH IN THE PLAN OF CONVERSION. SEE THE
PROSPECTUS FOR ADDITIONAL INFORMATION.

     You may use this form to direct a transfer of funds credited to your
account to the Employer Stock Fund, to purchase Common Stock in the Conversion
Offerings. To direct such a transfer to the Employer Stock Fund, you should
complete this form and return it to ________________ at the Savings Bank, NO
LATER THAN THE CLOSE OF BUSINESS ON _________________, 1998. The Savings Bank
will keep a copy of this form and return a copy to you. (If you need assistance
in completing this form, please contact ________________.)

     2.   Transfer Direction. I hereby direct the Plan Administrator to transfer
$__________ (in increments of $10) to the Employer Stock Fund to be applied to
the purchase of Common Stock in the Conversion Offerings. Please transfer this
amount from the following investments as indicated:

________________________________________________________________________________

     3.   Effectiveness of Direction. I understand that this Investment Form
shall be subject to all of the terms and conditions of the Plan and the terms
and conditions of the Conversion and Reorganization. I acknowledge that I have
received a copy of the Prospectus and the Prospectus Supplement.

_____________________________                     _____________________________
          Signature                                           Date

                             *    *    *    *    *

     4.   Acknowledgement of Receipt. This Investment Form was received by the
Plan Administrator and will become effective on the date noted below.

_____________________________                     _____________________________
       Plan Administrator                                     Date

                                     S-16
[LOGO]
PROSPECTUS                     SOUTHBANC SHARES, INC.
     (PROPOSED HOLDING COMPANY FOR PERPETUAL BANK, A FEDERAL SAVINGS BANK)
                     UP TO 3,741,533 SHARES OF COMMON STOCK
                        $20.00 PURCHASE PRICE PER SHARE

     SouthBanc Shares, Inc.  ("Holding Company"), a Delaware corporation, is
offering up to 3,740,640 shares (which may be increased to 4,301,736 shares
under circumstances described in footnote 4 of the table below) of its common
stock, par value $.01 per share ("Common Stock"), in connection with (i) the
Exchange Offering, described below, to effect the reorganization of Perpetual
Bank, A Federal Savings Bank ("Savings Bank") as a wholly-owned subsidiary of
the Holding Company and (ii) the Conversion Offerings, described below, to
effect the conversion of SouthBanc Shares, M.H.C. ("MHC") from a mutual holding
company to a stock holding company.  The Holding Company, Savings Bank and MHC
are collectively referred to herein as the "Primary Parties."  The transactions
contemplated by the Exchange Offering and the Conversion Offerings, which are
collectively referred to herein as the "Conversion and Reorganization," are
undertaken pursuant to an Amended Plan of Conversion and Agreement and Plan of
Reorganization ("Plan of Conversion") adopted by the Boards of Directors of the
Primary Parties.

     THE EXCHANGE OFFERING.  Pursuant to the Plan of Conversion, each share of
common stock, par value $1.00 per share, of the Savings Bank ("Savings Bank
Common Stock") held by the MHC (800,000 shares, or 53.02% of the outstanding
shares, as of the date of this Prospectus) will be canceled and each share of
Savings Bank Common Stock held by the Savings Bank's public stockholders
("Public Savings Bank Shares" and "Public Stockholders," respectively) (708,873
shares, or 46.98% of the outstanding shares, as of the date of this Prospectus)
will be exchanged for shares of Common Stock ("Exchange Shares") pursuant to a
ratio ("Exchange Ratio") that will result in the Public Stockholders' aggregate
ownership of approximately 46.98% of the outstanding shares of Common Stock
before giving effect to any (i) payment of cash in lieu of issuing fractional
Exchange Shares and (ii) Conversion Shares (as defined below) purchased by the
Public Stockholders in the Conversion Offerings, described below.  As discussed
under "Independent Valuation" below, the final Exchange Ratio will be based on
the Public Stockholders' ownership interest and not on the market value of the
Public Savings Bank Shares.

        FOR INFORMATION ON HOW TO SUBSCRIBE FOR SHARES OF COMMON STOCK,
              CALL THE STOCK INFORMATION CENTER AT (864) ___-____.

      FOR A DISCUSSION OF CERTAIN RISKS THAT SHOULD BE CONSIDERED BY EACH
         PROSPECTIVE INVESTOR, SEE "RISK FACTORS" BEGINNING ON PAGE 1.

   THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR ACCOUNTS AND WILL NOT BE
   INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE SAVINGS
      ASSOCIATION INSURANCE FUND ("SAIF") OR ANY OTHER GOVERNMENT AGENCY.

  THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("SEC"), THE OFFICE OF THRIFT SUPERVISION ("OTS"), THE FDIC
                                  OR ANY OTHER
  FEDERAL AGENCY OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC, THE OTS,
     THE FDIC OR ANY OTHER AGENCY OR ANY STATE SECURITIES COMMISSION PASSED
             UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
             REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

                      (cover continued on following page)

                       SANDLER, O'NEILL & PARTNERS, L.P.

              The date of this Prospectus is _____________, 1998.
--------------------------------------------------------------------------------------------------------
                                                               Estimated Underwriting
                                                Purchase           Commissions and         Estimated Net
                                                Price(1)      Other Fees and Expenses(2)     Proceeds
                                             --------------   --------------------------   -------------
Minimum Price Per Share...................   $20.00                      $0.68                $19.32
--------------------------------------------------------------------------------------------------------
Midpoint Price Per Share..................   $20.00                      $0.62                $19.38
--------------------------------------------------------------------------------------------------------
Maximum Price Per Share...................   $20.00                      $0.58                $19.42
--------------------------------------------------------------------------------------------------------
Maximum Price Per Share, as adjusted(3)...   $20.00                      $0.54                $19.46
--------------------------------------------------------------------------------------------------------
Minimum Total(4)..........................   $29,325,000                 $  990,000      $28,335,000
--------------------------------------------------------------------------------------------------------
Midpoint Total(5).........................   $34,500,000                 $1,070,000      $33,430,000
--------------------------------------------------------------------------------------------------------
Maximum Total(6)..........................   $39,675,000                 $1,150,000      $38,525,000
--------------------------------------------------------------------------------------------------------
Maximum Total, as adjusted(3)(7)..........   $45,626,250                 $1,240,000      $44,386,250
--------------------------------------------------------------------------------------------------------
(1)  Determined in accordance with an independent appraisal prepared by RP
          Financial, LC., Arlington, Virginia ("RP Financial"). See "Independent
          Valuation" on the cover page of this Prospectus and "THE CONVERSION
          AND REORGANIZATION --Stock Pricing, Exchange Ratio and Number of
          Shares to be Issued."

     (2)  Consists of estimated expenses of the Primary Parties arising from the
          Conversion and Reorganization, including fees payable to Sandler,
          O'Neill & Partners, L.P. ("Sandler O'Neill") in connection with the
          Conversion Offerings. Such fees may be deemed underwriting fees and
          Sandler O'Neill may be deemed an underwriter. The Primary Parties have
          agreed to indemnify Sandler O'Neill against certain liabilities,
          including liabilities that might arise under the Securities Act of
          1933, as amended ("Securities Act"). See "USE OF PROCEEDS" and "THE
          CONVERSION AND REORGANIZATION --Plan of Distribution and Selling
          Commissions."
     (3)  Gives effect to an increase in the number of shares that could be sold
          in the Conversion Offerings resulting from an increase in the pro
          forma market value of the MHC and the Savings Bank, as converted, up
          to 15% above the maximum of the Estimated Valuation Range, without the
          resolicitation of subscribers or any right of cancellation. See "THE
          CONVERSION AND REORGANIZATION -- Stock Pricing, Exchange Ratio and
          Number of Shares to be Issued."
     (4)  Assumes the issuance of 1,466,250 Conversion Shares at $20.00 per
          share.
     (5)  Assumes the issuance of 1,725,000 Conversion Shares at $20.00 per
          share.
     (6)  Assumes the issuance of 1,983,750 Conversion Shares at $20.00 per
          share.
     (7)  Assumes the issuance of 2,281,312 Conversion Shares at $20.00 per
          share.

     THE CONVERSION OFFERINGS.  Pursuant to the Plan of Conversion,
nontransferable rights to subscribe ("Subscription Rights") for up to 1,983,750
shares (which may be increased to 2,281,312 shares under circumstances described
in footnote 4 of the table appearing on the cover page of this Prospectus) of
Common Stock ("Conversion Shares") have been granted, in order of priority, to
(i) depositors with $50.00 or more on deposit at the Savings Bank as of the
close of business on June 30, 1996 ("Eligible Account Holders"), (ii) depositors
with $50.00 or more on deposit at the Savings Bank as of the close of business
on December 31, 1997 ("Supplemental Eligible Account Holders"), and (iii)
depositors of the Savings Bank (other than Eligible Account Holders and
Supplemental Eligible Account Holders) as of the close of business on
____________, 1998 ("Voting Record Date"), and borrowers of the Savings Bank
with loans outstanding as of the close of business on October 26, 1993 which
continue to be outstanding as of the close of business on the Voting Record Date
("Other Members"), subject to the priorities and purchase limitations set forth
in the Plan of Conversion ("Subscription Offering").  SUBSCRIPTION RIGHTS ARE
NONTRANSFERABLE.  PERSONS SELLING OR OTHERWISE TRANSFERRING THEIR RIGHTS TO
SUBSCRIBE FOR COMMON STOCK IN THE SUBSCRIPTION OFFERING OR SUBSCRIBING FOR
COMMON STOCK ON BEHALF OF ANOTHER PERSON WILL BE SUBJECT TO FORFEITURE OF SUCH
RIGHTS AND POSSIBLE FURTHER SANCTIONS AND PENALTIES IMPOSED BY THE OTS OR OTHER
AGENCY OF THE U.S. GOVERNMENT.  Concurrently, but subject to the prior rights of
Subscription Rights holders, the Holding Company is offering the Conversion
Shares for sale to members of the general public through a direct community
offering ("Direct Community Offering") with preference given first to Public
Stockholders as of the close of business on the Voting Record Date (who are not
Eligible Account Holders, Supplemental Eligible Account Holders or Other
Members) and then to natural persons and trusts of natural persons who are
permanent residents of Anderson or Oconee Counties of South Carolina ("Local
Community").  It is anticipated that any Conversion Shares not
subscribed for in the Subscription Offering or purchased in the Direct Community
Offering will be offered to eligible members of the general public on a best
efforts basis by a selling group of broker-dealers managed by Sandler O'Neill in
a syndicated community offering ("Syndicated Community Offering").  The
Subscription Offering, Direct Community Offering and the Syndicated Community
Offering are referred to collectively as the "Conversion Offerings."

     THE SUBSCRIPTION OFFERING WILL EXPIRE AT NOON, EASTERN TIME, ON
____________, 1998 ("EXPIRATION DATE"), UNLESS EXTENDED BY THE PRIMARY PARTIES
FOR UP TO ___ DAYS TO _________, 1998.  SUCH EXTENSION MAY BE GRANTED WITHOUT
ADDITIONAL NOTICE TO SUBSCRIBERS.  The Direct Community Offering is also
expected to terminate at Noon, Eastern Time, on ____________, 1998 or at a date
thereafter, however, in no event later than ________ __, 1998.  The Holding
Company must receive a properly completed and signed stock order form ("Order
Form") and certification, along with full payment (or appropriate instructions
authorizing a withdrawal from a deposit account at the Savings Bank) of $20.00
per share ("Purchase Price") for all Conversion Shares subscribed for or
ordered.  Funds so received will be placed in a segregated account created for
this purpose at the Savings Bank, and interest will be paid at the Savings
Bank's passbook rate from the date payment is received until the Conversion and
Reorganization is consummated or terminated; these funds will be otherwise
unavailable to the depositor until such time.  Payments authorized by
withdrawals from deposit accounts will continue to earn interest at their
contractual rate until the Conversion and Reorganization is consummated or
terminated.  ONCE TENDERED, ORDERS CANNOT BE REVOKED OR MODIFIED WITHOUT THE
CONSENT OF THE PRIMARY PARTIES.  The Primary Parties are not obligated to accept
orders submitted on photocopied or telecopied Order Forms.  If the Conversion
and Reorganization is not consummated within 45 days after the last day of the
Subscription Offering and Direct Community Offering (which date will be no later
than ___________, 1998) and the OTS consents to an extension of time to
consummate the Conversion and Reorganization, subscribers will be notified in
writing of the time period within which the subscriber must notify the Primary
Parties of their intention to increase, decrease or rescind their orders.  Such
extensions may not go beyond ____________, 2000.

     The Primary Parties have engaged Sandler O'Neill to consult with and advise
them in the sale of the Conversion Shares in the Conversion Offerings.  In
addition, in the event the Conversion Shares are not fully subscribed for in the
Subscription Offering and Direct Community Offering, Sandler O'Neill will manage
the Syndicated Community Offering.  Neither Sandler O'Neill nor any other
registered broker-dealer is obligated to take or purchase any Conversion Shares
in the Conversion Offerings.  The Primary Parties reserve the right, in their
absolute discretion, to accept or reject, in whole or in part, any or all orders
in the Direct Community Offering or Syndicated Community Offerings either at the
time of receipt of an order or as soon as practicable following the termination
of the Conversion Offering.  If an order is rejected in part, the purchaser does
not have the right to cancel the remainder of the order.  See "THE CONVERSION
AND REORGANIZATION -- Plan of Distribution and Selling Commissions."

     INDEPENDENT VALUATION.  OTS regulations require that the offering of
Conversion Shares in the Conversion Offerings be based on an independent
valuation of the pro forma market value of the Savings Bank and the MHC, as
converted.  OTS policy requires that the independent valuation be multiplied by
approximately 46.98%, which represents the MHC's percentage ownership interest
in the Savings Bank.  Accordingly, RP Financial's independent appraisal as of
December 5, 1997 states that the aggregate pro forma market value of the Savings
Bank and the MHC, as converted, ranged from $55.3 million to $74.8 million, with
a midpoint of $65.1 million ("Estimated Valuation Range").

     The Primary Parties' Boards of Directors determined that the Conversion
Shares would be sold at the Purchase Price ($20.00 per share), resulting in a
range of 1,466,250 to 1,983,750 shares of Conversion Shares, with a midpoint of
1,725,000 Conversion Shares.  Upon consummation of the Conversion and
Reorganization, the Conversion Shares and the Exchange Shares will represent
approximately 53.02% and 46.98%, respectively, of the total outstanding shares
of Common Stock.  Based upon the Estimated Valuation Range, the Exchange Ratio
is expected to range from 1.83281 to 2.47969, resulting in a range of 1,299,231
Exchange Shares to 1,757,783 Exchange Shares to be issued in the Exchange
Offering.  The 3,741,533 shares of Common Stock offered hereby include up to
1,983,750 Conversion Shares (subject to adjustment up to 2,281,312 shares as
described herein) and up to 1,757,783 Exchange Shares (subject to adjustment up
to 2,021,451 shares as described herein).  The Estimated
Valuation Range may be increased or decreased to reflect changes in the
financial condition or results of operations of the Savings Bank or changes in
market conditions or general financial, economic or regulatory conditions prior
to completion of the Conversion and Reorganization, and under certain
circumstances specified herein subscribers will be resolicited and given the
right to modify or cancel their orders.  See "THE CONVERSION AND REORGANIZATION
-- Stock Pricing, Exchange Ratio and Number of Shares to be Issued."

     PURCHASE LIMITATIONS ON CONVERSION SHARES.  The Plan of Conversion provides
for the following purchase limitations: (i) no person may purchase in either the
Subscription Offering, Direct Community Offering or Syndicated Community
Offering more than 50,000 Conversion Shares, (ii) no person, together with
associates of or persons acting in concert with such person, may purchase in
either the Subscription Offering, Direct Community Offering or Syndicated
Community Offering more than 50,000 Conversion Shares, (iii) the maximum number
of Conversion Shares which may be subscribed for or purchased in all categories
in the Conversion Offerings by any person, when combined with any Exchange
Shares received, shall not exceed 50,000 shares of Common Stock to be issued in
the Conversion and Reorganization, and (iv) the maximum number of Conversion
Shares which may be subscribed for or purchased in all categories in the
Conversion Offerings by any person, together with any associate or any group of
persons acting in concert, when combined with any Exchange Shares received,
shall not exceed 50,000 shares of Common Stock to be issued in the Conversion
and Reorganization.  The minimum order is 25 Conversion Shares.  BECAUSE OTS
POLICY REQUIRES THAT THE MAXIMUM PURCHASE LIMITATION INCLUDES EXCHANGE SHARES TO
BE ISSUED TO PUBLIC STOCKHOLDERS IN EXCHANGE FOR THEIR PUBLIC SAVINGS BANK
SHARES, CERTAIN PUBLIC STOCKHOLDERS MAY BE LIMITED IN THEIR ABILITY TO PURCHASE
CONVERSION SHARES, OR EVEN PREVENTED FROM PURCHASING CONVERSION SHARES.  See
"THE CONVERSION AND REORGANIZATION -- The Subscription, Direct Community and
Syndicated Community Offerings," "-- Procedure for Purchasing Conversion Shares
in the Subscription and Direct Community Offerings" and "-- Limitations on
Purchases of Conversion Shares."

     MARKET FOR THE COMMON STOCK.  The Holding Company has received preliminary
approval to list the Common Stock on the Nasdaq National Market under the symbol
"PERT."  Prior to the Conversion and Reorganization, the Public Savings Bank
Shares have been listed on the Nasdaq SmallCap Market under the same trading
symbol.  There can be no assurance that an active and liquid trading market for
the Common Stock will develop or, if developed, will be maintained.  See "RISK
FACTORS -- Absence of Prior Market for the Common Stock" and "MARKET FOR COMMON
STOCK."
PERPETUAL BANK, A FEDERAL SAVINGS BANK
                            ANDERSON, SOUTH CAROLINA

                                     [Map]

THE CONVERSION AND REORGANIZATION IS CONTINGENT UPON APPROVAL OF THE PLAN OF
CONVERSION BY AT LEAST A MAJORITY OF THE MHC'S ELIGIBLE VOTING MEMBERS, BY THE
HOLDERS OF TWO-THIRDS OF THE OUTSTANDING SHARES OF SAVINGS BANK COMMON STOCK AND
BY THE HOLDERS OF A MAJORITY OF THE PUBLIC SAVINGS BANK SHARES PRESENT IN PERSON
OR BY PROXY, THE SALE OF AT LEAST 1,466,250 CONVERSION SHARES PURSUANT TO THE
PLAN OF CONVERSION, AND THE RECEIPT OF ALL APPLICABLE REGULATORY APPROVALS.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR ACCOUNTS AND WILL NOT BE
     INSURED OR GUARANTEED BY THE FDIC, THE SAIF OR ANY OTHER GOVERNMENT AGENCY.

                              PROSPECTUS SUMMARY

     The information set forth below should be read in conjunction with and is
qualified in its entirety by the more detailed information and Consolidated
Financial Statements (including the Notes thereto) presented elsewhere in this
Prospectus.  The purchase of Common Stock is subject to certain risks.  See
"RISK FACTORS."

SOUTHBANC SHARES, INC.

     The Holding Company was organized on November 6, 1997 under Delaware law at
the direction of the Savings Bank to acquire the Savings Bank as a wholly-owned
subsidiary upon consummation of the Conversion and Reorganization.  The Holding
Company has only engaged in organizational activities to date.  The Holding
Company has received conditional OTS approval to become a savings and loan
holding company through the acquisition of 100% of the issued and outstanding
capital stock of the Savings Bank, which, along with 50% of the net proceeds of
the Conversion Offerings (see table under "PRO FORMA DATA") as permitted by the
OTS to be retained by it, and a note receivable evidencing a loan to the Savings
Bank's Employee Stock Ownership Plan ("ESOP"), will be the only significant
assets of the Holding Company.  Funds retained by the Holding Company will be
used for general business activities.  See "USE OF PROCEEDS."  Upon consummation
of the Conversion and Reorganization, the Holding Company will be classified as
a unitary savings and loan holding company subject to OTS regulation.  See
"REGULATION -- Savings and Loan Holding Company Regulations."  The main office
of the Holding Company is located at 907 N. Main Street, Anderson, South
Carolina 29621, and its telephone number is (864) 225-0241.

SOUTHBANC SHARES, M.H.C.

     The MHC is the federally-chartered mutual holding company of the Savings
Bank.  The MHC was formed in October 1993 as a result of the reorganization of
the Savings Bank into a federally chartered mutual holding company ("MHC
Reorganization").  The members of the MHC consist of depositors of the Savings
Bank and those current borrowers of the Savings Bank who had loans outstanding
as of the consummation date of the MHC Reorganization (October 26, 1993).  The
MHC's sole business activity is holding the 800,000 shares of Savings Bank
Common Stock, which represents 53.02% of the outstanding shares as of the date
of this Prospectus.  The MHC's main office is located at 907 N. Main Street,
Anderson, South Carolina 29621, and its telephone number is (864) 225-0241.  As
part of the Conversion and Reorganization, the MHC will convert to a federally-
chartered interim stock savings bank and simultaneously merge with and into the
Savings Bank, with the Savings Bank as the surviving entity.

PERPETUAL BANK, A FEDERAL SAVINGS BANK

     The Savings Bank is a federally chartered stock savings bank headquartered
in Anderson, South Carolina.  The Savings Bank was originally chartered in 1906
and operated as a mutual institution without stockholders until October 1993, at
which time it reorganized into the mutual holding company structure.  The
Savings Bank's deposits are insured by the FDIC up to applicable legal limits
under the SAIF.  The Savings Bank, a member of the Federal Home Loan Bank
("FHLB") system, is regulated by the OTS and the FDIC.  At September 30, 1997,
the Savings Bank had total assets of $257.0 million, total deposits of $201.0
million, and total stockholders' equity of $30.8 million, on a consolidated
basis.

     On October 26, 1993, the MHC Reorganization was consummated and the Savings
Bank completed its initial stock offering by issuing 1,500,000 shares of Savings
Bank Common Stock at $10.00 per share, 1,385,000 shares
(92.3%) of which were sold to the MHC.  The remaining 115,000 shares (7.7%) were
issued to members of the MHC, including officers, directors and employees of the
Savings Bank.

     In September 1996, the Savings Bank completed an additional offering of
Savings Bank Common Stock through the issuance of 585,000 shares at a price of
$19.25 to then existing members of the MHC ("Additional Offering").  In
connection with the closing of the Additional Offering, 585,000 shares of
Savings Bank Common Stock held by the MHC were canceled.  Accordingly, upon
consummation of the Additional Offering on September 30, 1996, there were
1,504,601 shares of Savings Bank Common Stock issued and outstanding, of which
800,000 (53.2%) were held by the MHC and 704,601 shares (46.8%) were held by the
Public Stockholders.

     The Savings Bank considers Anderson and Oconee Counties in the northwestern
corner of South Carolina as its primary market area because a substantial
portion of its loan portfolio is secured by properties located in those
counties.  See "RISK FACTORS -- Certain Lending Risks -- Geographic
Concentration of Credit and Investment Risk."  The Savings Bank faces strong
competition within its primary market area.  See "RISK FACTORS --Competition."
The Savings Bank also invests in loans secured by properties located outside of
its primary market area (predominately in Hilton Head Island, South Carolina,
and in the greater Greenville, South Carolina, area) as a result of loan
purchases from other lenders, including a mortgage banking company in which a
service corporation subsidiary of the Savings Bank has a one-third equity
interest.  See "BUSINESS OF THE SAVINGS BANK --Lending Activities" and "--
Subsidiary Activities."

     The Savings Bank is primarily engaged in the business of attracting
deposits from the general public and using those funds, along with FHLB
advances, to originate and purchase one- to- four family mortgage loans.  The
Savings Bank originates and purchases commercial real estate and construction
loans, as well as consumer loans and, to a lesser extent, commercial business
loans and multi-family real estate loans.  See "BUSINESS OF THE SAVINGS BANK --
Lending Activities."  Such latter type loans, which totalled $71.7 million, or
40.1%, of net loans receivable at September 30, 1997, are inherently riskier
than one- to- four-family mortgage loans.  See "RISK FACTORS -- Certain Lending
Risks."  As a complement to its lending activities, the Savings Bank services
mortgage loans and invests in mortgage servicing rights.  See "BUSINESS OF THE
SAVINGS BANK -- Lending Activities -- Loan Purchases and, Sales and Servicing."

     In addition to its lending activities, the Savings Bank, through a service
corporation subsidiary, develops residential and commercial properties located
in its primary market area.  See "BUSINESS OF THE SAVINGS BANK -- Subsidiary
Activities."  The Savings Bank also invests in short- and intermediate-term
mortgage-backed securities, including collateralized mortgage obligations
("CMOs").  See "BUSINESS OF THE SAVINGS BANK -- Investment Activities."

     The Savings Bank's principal office is located at 907 North Main Street,
Anderson, South Carolina 29621, and the telephone number at that office is (864)
225-0241.  The Savings Bank also operates five branch offices.  See "BUSINESS OF
THE SAVINGS BANK -- Properties."

THE CONVERSION AND REORGANIZATION

     PURPOSES OF THE CONVERSION AND REORGANIZATION.  The Boards of Directors of
the Primary Parties believe that the Conversion and Reorganization is in the
best interests of the MHC and its members, the Savings Bank and its
stockholders, and the communities served by the MHC and the Savings Bank.  In
their decision to pursue the Conversion and Reorganization, the Boards of
Directors considered the various regulatory uncertainties associated with the
mutual holding company structure, including the MHC's future ability to waive
any dividends from the Savings Bank and the uncertain future of the federal
thrift charter.  In addition, the Boards of Directors considered the various
advantages of the stock holding company form of organization, including: (i) the
Holding Company's ability to repurchase shares of its common stock without
adverse tax consequences, unlike the Savings Bank; (ii) the Holding Company's
greater flexibility under current law and regulations relative to the MHC to
acquire other financial institutions and diversify its operations; (iii) the
larger capital base of the Holding Company relative to the

                                     (ii)
Savings Bank that will result from the Conversion Offering; and (iv) the
potential increased liquidity in the Common Stock relative to the Public Savings
Bank Shares because of the larger number of shares of Common Stock to be
outstanding upon consummation of the Conversion and Reorganization.  Currently,
the Boards of Directors of the Primary Parties have no specific plans,
arrangements or understandings, written or oral, regarding any stock
repurchases, acquisitions or diversification of operations.  See "THE CONVERSION
AND REORGANIZATION -- Purposes of Conversion and Reorganization."

     DESCRIPTION OF THE CONVERSION AND REORGANIZATION.  The Conversion and
Reorganization are being undertaken pursuant to the Plan of Conversion that was
adopted by the Boards of Directors of the Savings Bank and the MHC on September
22, 1997, and subsequently amended on December 22, 1997.  Under the Plan of
Conversion, (i) the MHC will convert to an interim federal stock savings bank
("Interim A") and simultaneously merge with and into the Savings Bank, pursuant
to which the MHC will cease to exist and the outstanding shares of Savings Bank
Common Stock held by the MHC (800,000 shares, or 53.02% of the outstanding
Savings Bank Common Stock as of the date of this Prospectus) will be canceled,
and (ii) an interim federal stock savings bank ("Interim B") will be formed as a
wholly-owned subsidiary of the Holding Company and will merge with and into the
Savings Bank, resulting in the Savings Bank becoming a wholly-owned subsidiary
of the Holding Company and the outstanding Public Savings Bank Shares (708,873
shares, or 46.98% of the outstanding Savings Bank Common Stock as of the date of
this Prospectus) will be converted into the Exchange Shares pursuant to the
Exchange Ratio.  The Exchange Ratio will result in the holders of the
outstanding Public Savings Bank Shares owning in the aggregate approximately the
same percentage of the Common Stock to be outstanding upon the completion of the
Conversion and Reorganization (i.e., the Conversion Shares and the Exchange
                               ----                                        
Shares) as the percentage of Savings Bank Common Stock owned by them in the
aggregate immediately before the consummation of the Conversion and
Reorganization, before giving effect to any (i) payment of cash in lieu of
issuing fractional Exchange Shares and (ii) Conversion Shares purchased by the
Stockholders in the Conversion Offerings.

     The following diagram outlines the pre-Conversion and Reorganization
organizational structure of the Primary Parties' and their ownership interests:

                 -------------------  ------------------- 
                           MHC               Public      
                                           Stockholders    
                  -------------------  --------------------

                          53.02%           46.98%

                             ------------------- 
                               Savings Bank     
                                    
                             ------------------- 

                                 100%
                           
                             --------------------
                                Holding Company  

                             --------------------
 
                                 100%
                           
                             --------------------
                                Interim B    
                               (in formation)                       
                             --------------------

                                     (iii)
The following diagram reflects the post-Conversion and Reorganization
organizational structure of the Holding Company and the Savings Bank and their
ownership interests.  The ownership interests presented assumes no fractional
Exchange Shares are issued, and does not give effect to purchases of any
Conversion Shares by the Public Stockholders or the exercise of outstanding
stock options.

          -------------------     -------------------
             Purchasers of           Former Public   
           Conversion Shares         Stockholders     
          -------------------     -------------------
  
                      53.02%           46.98%
    
                      -------------------  
                        Holding Company    
                                           
                      -------------------  
                                           
                                 100%      
                                           
                      -------------------  
                         Savings Bank      
                                    
                      -------------------

     REQUIRED APPROVALS.  The OTS has approved the Plan of Conversion subject to
(i) the approval of the holders of at least a majority of the total number of
votes eligible to be cast by the members of the MHC as of the close of business
on the Voting Record Date (___________, 1998) at a special meeting of members
called for the purpose of submitting the Plan of Conversion for approval
("Members' Special Meeting"), (ii) the approval of the holders of at least two-
thirds of the outstanding shares of Savings Bank Common Stock (including those
shares held by the MHC) as of the close of business on the Voting Record Date at
a meeting of stockholders called for the purpose of considering the Plan
("Stockholders' Meeting"), and (iii) the approval of the holders of at least a
majority of the Public Savings Bank Shares as of the close of business on the
Voting Record Date present in person or by proxy at the Stockholders' Meeting.
The MHC intends to vote its shares of Savings Bank Common Stock, which amounts
to 53.02% of the outstanding shares, in favor of the Plan of Conversion at the
Stockholders' Meeting.  In addition, as of September 30, 1997, directors and
executive officers of the Primary Parties as a group (13 persons) beneficially
owned 90,711, or 6.01%, of the outstanding shares of Savings Bank Common Stock,
which they intend to vote in favor of the Plan of Conversion at the
Stockholders' Meeting.

THE CONVERSION OFFERINGS

     The Conversion Offerings, which consist of the Subscription Offering, the
Direct Community Offering and the Syndicated Community Offering (if any), are
being undertaken pursuant to the Plan of Conversion.  The Holding Company is
offering up to 1,983,750 Conversion Shares in the Conversion Offerings.
Conversion Shares are first being offered in the Subscription Offering through
the exercise of Subscription Rights issued, in order of priority, to (i)
Eligible Account Holders; (ii) Supplemental Eligible Account Holders; and (iii)
Other Members.  In light of the anticipated additional compensation expense to
the Savings Bank that would result with the purchase of Conversion Shares, the
ESOP will not subscribe for Conversion Shares.  The Subscription Offering will
expire at Noon, Eastern Time, on ____________, 1998, unless extended.

     Subject to the prior rights of holders of Subscription Rights, Conversion
Shares not subscribed for in the Subscription Offering are being offered in the
Direct Community Offering to members of the general public with preference given
first to Public Stockholders as of the close of business on the Voting Record
Date (who are not Eligible Account Holders, Supplemental Eligible Account
Holders or Other Members) and then to natural persons and trusts of natural
persons who are permanent residents of the Local Community.  It is anticipated
that shares not subscribed for in the Subscription Offering and Direct Community
Offering may be offered to certain members of

                                     (iv)
the general public in the Syndicated Community Offering.  The Primary Parties
reserve the absolute right to reject or accept any orders in the Direct
Community Offering or the Syndicated Community Offering (if any), in whole or in
part, either at the time of receipt of an order or as soon as practicable
following the Expiration Date.  The closing with respect to all shares sold in
the Conversion Offerings will occur simultaneously, and all Conversion Shares
will be sold at a uniform price of $20.00 per share.

     The Primary Parties have retained Sandler O'Neill as their consultant and
advisor and to assist in soliciting subscriptions in the Conversion Offerings on
a best efforts basis.  See "THE CONVERSION AND REORGANIZATION -- The
Subscription, Direct Community and Syndicated Community Offerings."

BENEFITS OF THE CONVERSION AND REORGANIZATION TO MANAGEMENT

     GENERAL.  The Savings Bank has existing stock benefit plans that were
implemented in connection with the MHC Reorganization and the Additional
Offering.  The Savings Bank's 1993 Stock Option Plan ("1993 Stock Option Plan")
and the ESOP were implemented in connection with the MHC Reorganization.  The
Savings Bank's 1996 Management Development and Recognition Plan ("1996 MRP") and
the Savings Bank's 1996 Stock Option Plan ("1996 Stock Option Plan") were
implemented in connection with the MHC Reorganization.  These plans will be
assumed by the Holding Company upon consummation of the Conversion and
Reorganization.  See "MANAGEMENT OF THE SAVINGS BANK -- Benefits" for a
discussion of these existing plans.  The following discussion relates to new
stock benefit plans that are expected to be implemented in connection with the
Conversion and Reorganization, as well as to employment agreements that will be
entered into with certain executive officers of the Holding Company and the
Savings Bank.

     MRP. The Holding Company expects to seek stockholder approval of the
SouthBanc Shares, Inc. 1998 Management Recognition Plan ("1998 MRP").  The 1998
MRP will reserve a number of shares equal to 4% of the number of Conversion
Shares issued in the Conversion Offerings.  Under current OTS regulations, the
approval of a majority vote of the Holding Company's outstanding shares of
Common Stock is required prior to the implementation of the 1998 MRP within one
year of the consummation of the Conversion and Reorganization.  If stockholder
approval of the 1998 MRP is obtained, it is expected that awards of restricted
stock of up to 79,350 shares of Common Stock (based on the issuance of
Conversion Shares at the maximum of the Estimated Valuation Range) will be made
to key employees of the Holding Company and the Savings Bank at no cost to the
recipient.  Although no specific award determinations have been made at this
time, the Holding Company and the Savings Bank anticipate that, if stockholder
approval is obtained it would provide awards to key employees.  Under current
OTS regulations, if the 1998 MRP is implemented within one year of the
consummation of the Conversion and Reorganization, (i) no officer or employee
may receive an award covering in excess of 25% of the number of shares reserved
for issuance under the 1998 MRP, (ii) no nonemployee director may receive in
excess of 5% of the number of shares reserved for issuance under the 1998 MRP,
(iii) nonemployee directors, as a group, may not receive in excess of 30% of the
number of shares reserved for issuance under the 1998 MRP, and (iv) all awards
would be subject to vesting at a minimum rate of 20% per year.  See "PRO FORMA
DATA" and "MANAGEMENT OF THE SAVINGS BANK -- Benefits -- Management Recognition
Plan."

     STOCK OPTION PLAN.  The Holding Company expects to seek stockholder
approval of the SouthBanc Shares, Inc. 1998 Stock Option Plan ("1998 Stock
Option Plan").  The 1998 Stock Option Plan will reserve a number of shares equal
to 10% of the number of Conversion Shares issued in the Conversion Offerings.
Under current OTS regulations, the approval of a majority vote of the Holding
Company's outstanding shares of Common Stock is required prior to the
implementation of the 1998 Stock Option Plan within one year of the consummation
of the Conversion and Reorganization.  If stockholder approval of the 1998 Stock
Option Plan is obtained, it is expected that options to acquire up to 198,375
shares of Common Stock of the Holding Company (based on the issuance of
Conversion Shares at the maximum of the Estimated Valuation Range) will be
awarded to key employees and directors of the Holding Company and the Savings
Bank.  The exercise price of such options will be 100% of the fair market value
of the Common Stock on the date the option is granted.  Although no specific
award determinations have been made at this time, the Holding Company and the
Savings Bank anticipate that if stockholder approval is

                                      (v)
obtained it would provide awards to its directors, officers and employees to the
extent permitted by applicable regulations.  Under current OTS regulations, if
the 1998 Stock Option Plan is implemented within one year of the consummation of
the Conversion and Reorganization, (i) no officer or employees may receive an
award of options covering in excess of 25% of the number of shares reserved for
issuance under the 1998 Stock Option Plan, (ii) no nonemployee director may
receive in excess of 5% of the number of shares reserved for issuance under the
1998 Stock Option plan, (iii) nonemployee directors, as a group, may not receive
in excess of 30% of the number of shares reserved for issuance under the 1998
Stock Option Plan, and (iv) all awards would be subject to vesting at a minimum
rate of 20% per year.  Options are valuable only to the extent that they are
exercisable and the market price for the underlying share of Common Stock is in
excess of the exercise price.  An option effectively eliminates the market risk
of holding the underlying securities since no consideration is paid for the
option until it is exercised.  Therefore, the recipient may, within the limits
of the term of the option, wait to exercise the option until the market price
exceeds the exercise price.  See "MANAGEMENT OF THE SAVINGS BANK -- Benefits --
1998 Stock Option Plan."

     EMPLOYMENT AGREEMENTS.  The MHC and the Savings Bank maintain employment
agreements with Robert W. Orr (President and Managing Officer of the Savings
Bank and President and Chief Executive Officer of the Holding Company), Thomas
C. Hall (Senior Vice President and Treasurer of the Savings Bank and Treasurer
and Chief Financial Officer of the Holding Company) and Barry C. Visioli (Senior
Vice President of the Savings Bank and Secretary of the Holding Company) that
were entered into in connection with the MHC Reorganization.  In connection with
the Conversion and Reorganization, the Holding Company and the Savings Bank will
enter into three-year employment agreements with Messrs. Orr, Hall and Visioli,
which have substantially the same terms as and will replace the existing
agreements.  The agreements will provide certain benefits in the event of the
officers' termination of employment following a change in control of the Holding
Company or the Savings Bank.  In the event of a change in control of the Holding
Company or the Savings Bank, as defined in the agreement, each executive officer
will be entitled to a package of cash and/or benefits with a maximum value equal
to 2.99 times their average annual compensation during the five-year period
preceding the change in control.  Assuming a change of control occurred as of
September 30, 1997, the aggregate value of the severance benefits payable to
Messrs. Orr, Hall and Visioli under the agreements would have been approximately
$583,000.  See "MANAGEMENT OF THE SAVINGS BANK -- Executive Compensation --
Employment Agreements."

     For information concerning the possible voting control of officers,
directors and employees following the Conversion and Reorganization, see "RISK
FACTORS -- Anti-takeover Considerations -- Voting Control by Insiders."

PROSPECTUS DELIVERY AND PROCEDURE FOR PURCHASING CONVERSION SHARES

     To ensure that each purchaser receives a prospectus at least 48 hours prior
to the Expiration Date in accordance with Rule 15c2-8 of the Securities Exchange
Act of 1934, as amended ("Exchange Act"), no prospectus will be mailed any later
than five days prior to the Expiration Date or hand delivered later than two
days prior to such date.  Execution of the Order Form will confirm receipt of
the Prospectus in accordance with Rule 15c2-8.  Order Forms will be distributed
only with a prospectus.  The Primary Parties are not obligated to accept for
processing orders not submitted on original Order Forms.  Order Forms
unaccompanied by an executed certification form will not be accepted.  Payment
by check, money order, bank draft, cash or debit authorization to an existing
account at the Savings Bank must accompany the order and certification forms.
No wire transfers will be accepted.  The Savings Bank is prohibited from lending
funds to any person or entity for the purpose of purchasing shares of Common
Stock in the Conversion.  See "THE CONVERSION AND REORGANIZATION -- Procedure
for Purchasing Shares in the Subscription and Direct Community Offerings."

     In order to ensure that Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members are properly identified as to their stock
purchase priorities, depositors as of the close of business on June 30, 1996
("Eligibility Record Date"), December 31, 1997 ("Supplemental Eligibility Record
Date") or the Voting Record Date (_________, 1998) and borrowers with loans
outstanding on October 26, 1993 which continue to be

                                     (vi)
outstanding as of the Voting Record Date must list all deposit and/or loan
accounts on the Order Form, giving all names on each account and the account
numbers.  Failure to list all account numbers may result in the inability of the
Holding Company or the Savings Bank to fill all or part of a subscription order.
In addition, registration of shares in a name or title different from the names
or titles listed on the account may adversely affect such subscriber's purchase
priority.  See "THE CONVERSION AND REORGANIZATION -- Procedure for Purchasing
Shares in the Subscription and Direct Community Offerings."

RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS

     No person may transfer or enter into any agreement or understanding to
transfer the legal or beneficial ownership of the Subscription Rights issued
under the Plan of Conversion or the Conversion Shares to be issued upon their
exercise.  Each person exercising Subscription Rights will be required to
certify that a purchase of Conversion Shares is solely for the purchaser's own
account and that there is no agreement or understanding regarding the sale or
transfer of such shares.  THE PRIMARY PARTIES WILL PURSUE ANY AND ALL LEGAL AND
EQUITABLE REMEDIES IN THE EVENT THEY BECOME AWARE OF THE TRANSFER OF
SUBSCRIPTION RIGHTS AND WILL NOT HONOR ORDERS KNOWN BY THEM TO INVOLVE THE
TRANSFER OF SUCH RIGHTS.

PURCHASE LIMITATIONS

     The Plan of Conversion provides for the following purchase limitations: (i)
no person may purchase in either the Subscription Offering, Direct Community
Offering or Syndicated Community Offering more than 50,000 Conversion Shares;
(ii) no person, together with associates of or persons acting in concert with
such person, may purchase in either the Subscription Offering, Direct Community
Offering or Syndicated Community Offering more than 50,000 Conversion Shares;
(iii) the maximum number of Conversion Shares which may be subscribed for or
purchased in all categories in the Conversion Offerings by any person, when
combined with any Exchange Shares received, shall not exceed 50,000 shares of
Common Stock to be issued in the Conversion and Reorganization; and (iv) the
maximum number of Conversion Shares which may be subscribed for or purchased in
all categories in the Conversion Offerings by any person, together with any
associate or any group of persons acting in concert, when combined with any
Exchange Shares received, shall not exceed 50,000 shares of Common Stock to be
issued in the Conversion and Reorganization.  The minimum order is 25 Conversion
Shares.  At any time during the Conversion Offerings, and without further
approval by the MHC members or the Public Stockholders, the Primary Parties, in
their sole discretion, may increase any of the purchase limitations to up to 5%
of the Conversion Shares issued in the Conversion and Reorganization.  Under
certain circumstances, subscribers may be resolicited in the event of such an
increase and given the opportunity to increase, decrease or rescind their
orders.  If there is an oversubscription in the Conversion Offerings, Conversion
Shares will be allocated as set forth in the Plan of Conversion.  See "THE
CONVERSION AND REORGANIZATION -- The Subscription, Direct Community and
Syndicated Community Offerings," "-- Procedure for Purchasing Shares in the
Subscription and Direct Community Offerings" and "--Limitations on Purchases of
Conversion Shares."  BECAUSE OTS POLICY REQUIRES THAT THE MAXIMUM PURCHASE
LIMITATION SET FORTH IN THE PLAN OF CONVERSION TAKE INTO ACCOUNT THE EXCHANGE
SHARES TO BE ISSUED TO THE PUBLIC STOCKHOLDERS FOR THEIR PUBLIC SAVINGS BANK
SHARES, CERTAIN PUBLIC STOCKHOLDERS MAY BE LIMITED IN THEIR ABILITY TO PURCHASE
CONVERSION SHARES, OR EVEN PREVENTED FROM PURCHASING CONVERSION SHARES.

STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED IN THE CONVERSION AND
REORGANIZATION

     OTS regulations require the aggregate purchase price of the Conversion
Shares be consistent with the independent appraisal of the estimated pro forma
market value of the MHC and the Savings Bank, as converted, which was estimated
by RP Financial to range from $55.3 million to $74.8 million as of December 5,
1997, or from 2,765,481 shares to 3,741,533 shares based on the Purchase Price.
Because the Public Stockholders will continue to hold approximately the same
aggregate percentage ownership interest in the Holding Company as they held in
the Savings Bank before the Conversion and Reorganization, before giving effect
to the payment of cash in lieu of issuing fractional Exchange Shares and any
Conversion Shares purchased by the Public Stockholders in the Conversion
Offerings,  the independent appraisal valuation was multiplied by 46.98% (which
represents the MHC's

                                     (vii)
percentage interest in the Savings Bank to determine the midpoint of the
Estimated Valuation Range, which is $65.1 million, or 3,253,507 shares based on
the Purchase Price).  The full text of the independent appraisal describes the
procedures followed, the assumptions made, limitations on the review undertaken
and matters considered, which included but did not depend on the trading market
for the Savings Bank Common Stock (see "MARKET FOR COMMON STOCK").  The
appraisal will be updated or confirmed at the completion of the Conversion
Offerings.  The maximum of the Estimated Valuation Range may be increased by up
to 15% and the number of Conversion Shares may be increased to 4,302,763 shares
due to material changes in the financial condition or results of operations of
the Savings Bank or changes in market conditions or general financial, economic
or regulatory conditions.  No resolicitation of subscribers will be made and
subscribers will not be permitted to modify or cancel their subscriptions unless
the gross proceeds from the sale of the Conversion Shares are less than the
minimum or more than 15% above the maximum of the current Estimated Valuation
Range.  All Conversion Shares will be sold at the uniform Purchase Price ($20.00
per share), which was established by the Boards of Directors of the Primary
Parties.  Any increase or decrease in the number of shares of Conversion Stock
will result in a corresponding change in the number of Exchange Shares, so that
upon consummation of the Conversion and Reorganization, the Conversion Shares
and the Exchange Shares will represent approximately 53.02% and 46.98%,
respectively, of the total outstanding shares of Common Stock.  See "PRO FORMA
DATA" and "THE CONVERSION AND REORGANIZATION -- Stock Pricing, Exchange Ratio
and Number of Shares to be Issued."  THE APPRAISAL IS NOT INTENDED TO BE AND
SHOULD NOT BE CONSTRUED AS A RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY
OF PURCHASING COMMON STOCK IN THE CONVERSION OFFERINGS NOR CAN ASSURANCE BE
GIVEN THAT PURCHASERS OF THE COMMON STOCK IN THE CONVERSION OFFERINGS WILL BE
ABLE TO SELL SUCH SHARES AFTER CONSUMMATION OF THE CONVERSION AND REORGANIZATION
AT A PRICE THAT IS EQUAL TO OR ABOVE THE PURCHASE PRICE.  Furthermore, the pro
forma stockholders' equity is not intended to represent the fair market value of
the Common Stock and may be greater than amounts that would be available for
distribution to stockholders in the event of liquidation.  A complete copy of
the appraisal is available in the manner set forth under "ADDITIONAL
INFORMATION."

     Based on the 708,873 Public Savings Bank Shares outstanding at the date of
this Prospectus, and assuming a minimum of 1,466,250 and a maximum of 1,983,750
Conversion Shares are issued in the Conversion Offerings, the Exchange Ratio is
expected to range from approximately 1.83281 Exchange Shares to 2.47969 Exchange
Shares for each Public Savings Bank Share issued and outstanding immediately
prior to the consummation of the Conversion and Reorganization.  The final
Exchange Ratio will be affected if any stock options to purchase shares of
Savings Bank Common Stock are exercised after the date of this Prospectus and
before the consummation of the Conversion and Reorganization.  If any stock
options are outstanding immediately before the consummation of the Conversion
and Reorganization, they will be converted into options to purchase shares of
Common Stock, with the number of shares subject to the option and the exercise
price per share to be adjusted based upon the Exchange Ratio so that the
aggregate exercise price remains unchanged.  The duration of the options will
also be unchanged.  As of the date of this Prospectus, there were outstanding
options to purchase 63,100 shares of Savings Bank Common Stock at a weighted-
average exercise price of $24.14 per share.  The Savings Bank has no plans to
grant additional stock options before the consummation of the Conversion and
Reorganization.
Shares
               Conversion Shares to     Exchange Stock to      of Common
                   Be Issued(1)            Be Issued(1)        Stock to be      Exchange
               ---------------------   --------------------
                 Amount     Percent     Amount     Percent     Outstanding(1)    Ratio(1)
               ----------   --------   ---------   --------    -------------   -----------
Minimum.....    1,466,250     53.02%   1,299,321     46.98%     2,765,481       1.83281
Midpoint....    1,725,000     53.02    1,528,507     46.98      3,253,507       2.15625
Maximum.....    1,983,750     53.02    1,757,783     46.98      3,741,533       2.47969
15% above
 Maximum....    2,281,312     53.02    2,021,451     46.98      4,302,763       2.85164
(viii)
-----------------
(1) Assumes that outstanding options to purchase 63,100 shares of Savings Bank
    Common Stock at September 30, 1997 are not exercised before consummation of
    the Conversion and Reorganization.  However, assuming exercise, the
    percentages represented by the Conversion Shares and the Exchange Shares
    would be 50.89% and 49.11%, respectively, and the Exchange Ratio would be
    1.75924, 2.06970, 2.38015, and 2.73717, at the minimum, midpoint, maximum
    and 15% above the maximum of the Estimated Valuation Range, respectively.

    THE VALUE OF THE EXCHANGE SHARES TO BE RECEIVED FOR EACH PUBLIC SAVINGS BANK
SHARE MAY BE LESS THAN THE MARKET VALUE OF THE PUBLIC SAVINGS BANK SHARES AT THE
TIME OF EXCHANGE BASED ON THE FINAL EXCHANGE RATIO AND THE MARKET PRICE AT THE
TIME OF THE EXCHANGE.

DIFFERENCES IN STOCKHOLDER RIGHTS

    The Holding Company is a Delaware corporation subject to the provisions of
the Delaware General Corporation Law ("DGCL"), and the Savings Bank is a
federally-chartered savings bank subject to federal laws and regulations.  Upon
consummation of the Conversion and Reorganization, the Public Stockholders will
become stockholders of the Holding Company and their rights will be governed by
the Holding Company's Certificate of Incorporation and Bylaws and Delaware law,
rather than the Savings Bank's Federal Stock Charter and Bylaws, federal law and
OTS regulations.  The rights of stockholders of the Savings Bank are materially
different in certain respects from the rights of stockholders of the Holding
Company.  See "COMPARISON OF STOCKHOLDERS' RIGHTS" and "DESCRIPTION OF CAPITAL
STOCK OF THE HOLDING COMPANY."

USE OF PROCEEDS

    The net proceeds from the sale of the Conversion Shares are estimated to
range from $29.3 million to $39.7 million, or to $45.6 million if the Estimated
Valuation Range is increased by 15%, depending upon the number of shares sold
and the expenses of the Conversion and Reorganization.  The Holding Company has
received conditional OTS approval to purchase all of the capital stock of the
Savings Bank to be issued in the Conversion and Reorganization in exchange for
50% of the net proceeds of the Conversion Offerings.  This will result in the
Holding Company retaining approximately $14.2 million to $19.3 million of the
net proceeds, or up to $22.2 million if the Estimated Valuation Range is
increased by 15%, and the Savings Bank receiving an equal amount.  See "PRO
FORMA DATA."

    Receipt of 50% of the net proceeds of the sale of the Common Stock will
increase the Savings Bank's capital and will support the expansion of the
Savings Bank's existing business activities.  The Savings Bank will use the
funds contributed to it for general corporate purposes, including, initially,
lending and investment in short-term U.S. Government and agency obligations and
mortgage-backed securities.

    The proceeds retained by the Holding Company initially will be invested
primarily in short-term U.S. Government and agency obligations and mortgage-
backed securities.  Such proceeds will be available for additional contributions
to the Savings Bank in the form of debt or equity, to support future growth and
diversification of activities, as a source of dividends to the stockholders of
the Holding Company and for future repurchases of Common Stock (including
possible repurchases to fund the 1998 MRP), or to provide shares to be issued
upon exercise of stock options) to the extent permitted under Delaware law and
OTS regulations.  The Holding Company also intends to use a portion of the net
proceeds retained by it to refinance the ESOP's third party loan, which had an
outstanding balance of $804,000 at September 30, 1997.  See "PRO FORMA DATA."

    The Holding Company may also consider exploring opportunities to use such
funds to expand operations through acquiring or establishing additional branch
offices and the acquisition of other financial institutions.  In addition, the
Holding Company may consider exploring opportunities to expand into non-
traditional lines of business, such as securities brokerage, insurance agency
and real estate development activities, to the extent permitted by

                                     (ix)
applicable law.  Currently, there are no specific plans, arrangements,
agreements or understandings, written or oral, regarding any such activities.

MARKET FOR COMMON STOCK

    The Holding Company has never issued capital stock to the public and,
consequently, there is no existing market for the Common Stock.  The Holding
Company has received conditional approval to have the Common Stock listed on the
Nasdaq National Market System under the symbol "PERT" (the current symbol for
the Public Savings Bank Shares, which are listed on the Nasdaq SmallCap Market).
Sandler O'Neill has agreed to act as a market maker for the Common Stock
following consummation of the Conversion and Reorganization.  No assurance can
be given that an active and liquid trading market for the Common Stock will
develop or, if developed, will be maintained.  Further, no assurance can be
given that purchasers will be able to sell their shares at or above the Purchase
Price after the Conversion and Reorganization.  See "RISK FACTORS -- Absence of
Prior Market for the Common Stock" and "MARKET FOR COMMON STOCK."

DIVIDEND POLICY

    The Savings Bank's Board of Directors has adopted a policy of paying regular
cash dividends on the Public Savings Bank Shares. The MHC has waived receipt of
all cash dividends paid by the Savings Bank to date.  See "MARKET FOR COMMON
STOCK" for additional information.  The Board of Directors intends to declare
and pay a regular cash dividend for the first calendar quarter of 1998 to
holders of Savings Bank Common Stock.  The MHC does not intend to waive receipt
of this dividend, in order to avoid the expense of obtaining regulatory approval
to waive the dividend.  The record date for determining the holders of Savings
Bank Common Stock entitled to receive the dividend is expected to pre-date the
consummation of the Conversion and Reorganization.  Consequently, dividends, if
any, would not be paid on the Common Stock until after the consummation of the
Conversion and Reorganization, and may not occur before the first full quarter
following the consummation of the Conversion and Reorganization.

    Following consummation of the Conversion and Reorganization, the Holding
Company's Board of Directors intends to declare cash dividends on the Common
Stock at an initial quarterly rate equal to $0.35 per share divided by the final
Exchange Ratio, resulting in intended economic parity with the dividends
currently paid on the Public Savings Bank Shares.  The first dividend on the
Common Stock is expected during the month following the end of the quarter in
which the Conversion and Reorganization is consummated.  Based upon the
Estimated Valuation Range, the Exchange Ratio is expected to be 1.83281,
2.15625, 2.47969 and 2.85164 at the minimum, midpoint, maximum and 15% above the
maximum of the Estimated Valuation Range, respectively, resulting in an initial
quarterly dividend rate of $0.19, $0.16, $0.14 and $0.12 per share,
respectively, following consummation of the Conversion and Reorganization.
Declarations of dividends by the Holding Company's Board of Directors will
depend upon a number of factors, including the amount of the net proceeds from
the Conversion Offerings retained by the Holding Company, investment
opportunities available to the Holding Company or the Savings Bank, capital
requirements, regulatory limitations, the Holding Company's and the Savings
Bank's financial condition and results of operations, tax considerations and
general economic conditions.  Consequently, there can be no assurance that any
dividends will be paid on the Common Stock or that, if paid, such dividends will
not be reduced or eliminated in future periods.  The Savings Bank intends to
continue to pay regular quarterly dividends through either the date of
consummation of the Conversion and Reorganization (on a pro rata basis) or the
end of the fiscal quarter during which the Conversion and Reorganization is
consummated.  See "DIVIDEND POLICY."

OFFICERS' AND DIRECTORS' COMMON STOCK PURCHASES AND BENEFICIAL OWNERSHIP

    At September 30, 1997, officers and directors of the Savings Bank (21
persons) beneficially owned 104,052 shares of Savings Bank Common Stock.  See
"MANAGEMENT OF THE SAVINGS BANK -- Beneficial Ownership of Savings Bank Common
Stock by Directors and Executive Officers."  Such shares of Savings Bank Common
Stock will be exchanged for Exchange Shares based on the final Exchange Ratio.
In addition to receipt of such Exchange

                                      (x)
Shares, officers and directors as a group (21 persons) are expected to subscribe
for an aggregate of approximately 51,925 Conversion Shares, or approximately
3.5% and 2.6% of the shares based on the minimum and the maximum of the
Estimated Valuation Range, respectively.  See "CONVERSION SHARES TO BE PURCHASED
BY MANAGEMENT PURSUANT TO SUBSCRIPTION RIGHTS" for a discussion of the
anticipated number Exchange Shares to be received by directors and officers and
the anticipated number of Conversion Shares to be subscribed for by such
persons.

    Upon consummation of the Conversion and Reorganization, directors, officers
and employees of the Holding Company and the Savings Bank would have voting
control, on a fully diluted basis, of 22.6% and 22.1% of the Common Stock, based
on the issuance of the minimum and maximum of the Estimated Valuation Range,
respectively.  These percentages include the anticipated number of Exchange
Shares to be received and the anticipated number of Conversion Shares to be
purchased by such individuals, as well as allocation to participants' accounts
of all shares of Common Stock that will be held by the ESOP, the exercise of all
options under the 1993, 1996 and 1998 Stock Option Plans, and the funding of the
1996 and 1998 MRPs with Common Stock purchased in the open market.  See "RISK
FACTORS -- Anti-takeover Considerations -- Voting Control by Insiders."

RISK FACTORS

    See "RISK FACTORS" beginning on page 1 for a discussion of certain risks
related to the Conversion and Reorganization that should be considered by all
prospective investors.

                                     (xi)
SELECTED CONSOLIDATED FINANCIAL INFORMATION

        The following tables set forth certain information concerning the
     consolidated financial position and results of operations of the Savings
     Bank and its subsidiaries at the dates and for the periods indicated. This
     information is qualified in its entirety by reference to the detailed
     information contained in the Consolidated Financial Statements and Notes
     thereto presented elsewhere in this Prospectus.
At September 30,
                                                         ----------------------------------------------------
                                                           1997       1996       1995       1994       1993
                                                           ---        ----       ----       ----       ----
                                                                            (In Thousands)
SELECTED FINANCIAL CONDITION DATA:
 
Total assets..........................................   $256,993   $209,827   $178,304   $171,533   $168,308
Cash and interest-bearing deposits....................     13,499     13,585      6,630      8,700      5,797
Investment in limited partnership(1)..................      5,004         --         --         --         --
Investment securities available for sale..............     11,326      2,494        800        299         --
Mortgage-backed securities available for sale.........     35,863     43,125     46,344     50,064     12,742
Mortgage-backed securities held for investment........         --         --         --         --     45,935
Loans receivable, net.................................    178,772    140,758    116,539    104,852     97,004
Deposits..............................................    201,002    160,244    148,709    143,380    143,871
Borrowings............................................     15,000     16,000      8,000     10,500      8,500
Stockholders' equity..................................     30,602     29,091     18,232     14,637     13,921
 
                                                                            At September 30,
                                                           --------------------------------------------------
                                                             1997       1996       1995       1994       1993
                                                             ----       ----       ----       ----       ---- 
                                                                                (In Thousands)
 
SELECTED OPERATING DATA:
 
Interest income.......................................   $ 18,396   $ 14,921   $ 13,543   $ 12,075   $ 12,034
Interest expense......................................      9,496      7,425      8,761      5,624      6,184
                                                         --------   --------   --------   --------   --------
 
Net interest income...................................      8,900      7,496      4,782      6,451      5,850
Provision for loan losses.............................        655        349        362        120        364
                                                         --------   --------   --------   --------   --------
Net interest income after provision for loan losses...      8,245      7,147      4,420      6,331      5,486
Other income..........................................      1,855      1,927      3,231      1,565      1,613
General and administrative expenses...................      7,446      6,894      5,540      4,749      4,414
                                                         --------   --------   --------   --------   --------
 
Income before income taxes, change in accounting
 method, and extraordinary item.......................      2,654      2,180      2,111      3,147      2,685
Income taxes..........................................        926        756        194      1,064        947
                                                         --------   --------   --------   --------   --------
Income before change in method of
 accounting for income taxes..........................      1,728      1,424      1,917      2,083      1,738
Cumulative effect of change in method of
 accounting for income taxes..........................         --         --         --        350         --
                                                         --------   --------   --------   --------   --------
Net income............................................   $  1,728   $  1,424   $  1,917   $  2,433   $  1,738
                                                         ========   ========   ========   ========   ========
(footnotes on second following page)

                                     (xii)
Year Ended September 30,
                                             ------------------------------------------------------------

                                                1997         1996         1995         1994       1993
                                                ----         ----         ----         ----       ----
PER SHARE DATA:
 
Earnings per share(2):
  Before cumulative effect of change in
   accounting for income taxes............   $     1.15   $     0.95   $     1.27   $     1.39      N/A
  Cumulative effect of change in
   accounting for income taxes............   $       --   $       --   $       --   $      .23      N/A
                                             ----------   ----------   ----------   ----------
  Net income..............................   $     1.15   $     0.95   $     1.27   $     1.62      N/A
                                             ==========   ==========   ==========   ==========
Dividends per share(3)....................   $     1.35   $     1.20   $     1.05   $     0.76      N/A
                                             ==========   ==========   ==========   ==========
Weighted average shares outstanding.......    1,505,432    1,504,601    1,504,059    1,502,418      N/A
 
                                                              Year Ended September 30,
                                                 -----------------------------------------------------
                                                   1997         1996         1995         1994     1993
                                                   ----         ----         ----         ----     ----
 
SELECTED OTHER DATA:
 
Number of:
 Real estate loans outstanding............        3,446        2,653        2,846        2,889    3,423
 Deposit accounts.........................       32,361       26,135       21,490       16,676   16,735
 Full-service offices.....................            6            5            5            4        3
(footnotes on following page)

                                    (xiii)
KEY OPERATING RATIOS:
                                                                          At or For the
                                                                      Year Ended September 30,
                                                      ---------------------------------------------------------
                                                       1997      1996          1995           1994       1993
                                                      ----       ----          ----           ----       ----
Performance Ratios:
 
Return on average assets (net income divided by
 average assets)...................................     0.72%     0.75%            0.92%     1.20%(4)     1.03%
 
Return on average equity (net income divided by
 average equity)...................................     5.78      7.40            11.88     13.84(4)     13.36
 
Average equity to average assets...................    12.54     10.16             7.77      8.61         7.75
 
Interest rate spread (difference between yield
 on interest-earning assets and average cost of
 interest-bearing liabilities for the period)(5)...     3.57      3.85             3.61      3.54         3.26
 
Net interest margin (net interest income as a
 percentage of average interest-earning assets
 for the period)(5)................................     3.96      4.16             2.90      3.86         3.59
 
Dividend payout ratio(3)...........................   117.39    126.32            82.68     46.91          N/A
 
Non-interest expense to average assets.............     3.20      3.72             2.74      2.74         2.63
 
Average interest-earning assets to average
 interest-bearing liabilities......................   109.36    107.69            86.56    109.36       108.66
 
Asset Quality Ratios:
 
Allowance for loan losses to total loans
  at end of period.................................     1.04      1.08             1.08      0.92         0.91
 
Net charge-offs to average outstanding loans
 during the period.................................     0.18      0.07             0.04      0.04         0.06
 
Ratio of non-performing assets to total assets.....     0.20      0.38             0.33      0.73         0.82
 
Capital Ratios:
 
Average equity to average assets...................    12.54     10.16             7.77      8.61         7.75
----------------------------
(1)  Represents a 20.625% equity investment in a limited partnership that
     invests in mortgage servicing rights.  See "BUSINESS OF THE SAVINGS BANK --
     Lending Activities -- Loan Purchases and, Sales and Servicing" and Note 3
     of Notes to Consolidated Financial Statements.
(2)  The Savings Bank was not a public company before fiscal 1994.
(3)  Takes into account dividends waived by the MHC.  All dividends to the MHC
     have been waived since the first quarter of fiscal 1994.  See Note 18 of
     Notes to Consolidated Financial Statements.  The dividend payout ratio
     based only on dividends actually paid to Public Stockholders was 55.19%,
     22.40%, 6.53% and 3.71% for the years ended September 30, 1997, 1996, 1995
     and 1994, respectively.
(4)  Excludes the effect of the one-time change in method of accounting for
     income taxes in fiscal 1994.  Return on assets and return on average equity
     were 1.40% and 16.16%, respectively.
(5)  Excludes income on mutual funds totalling approximately $1.7 million in
     fiscal 1995, which was reported as gains on sale and included in other
     income.

                                     (xiv)
RISK FACTORS

     Before investing in shares of the Common Stock offered hereby, prospective
investors should carefully consider the matters presented below, in addition to
matters discussed elsewhere in this Prospectus.

CERTAIN LENDING RISKS

     PURCHASED LOAN RISKS.  The Savings Bank actively purchases loans, other
than consumer and commercial business loans.  At September 30, 1997, purchased
loans totalled $25.2 million and consisted of one- to four-family mortgage loans
($19.6 million), construction loans ($4.1 million) and commercial real estate
loans ($1.5 million).  Such loans have been purchased primarily from a mortgage
company located in Hilton Head Island, South Carolina ($7.2 million), and a
mortgage banking company located in Greenville, South Carolina ($17.5 million),
in which a service corporation subsidiary of the Savings Bank has an equity
investment.  See "BUSINESS OF THE SAVINGS BANK -- Subsidiary Activities."  For
the year ended September 30, 1997, the Savings Bank's purchases of one- to four-
family mortgage loans exceeded originations by approximately 25.5%.  See
"BUSINESS OF THE SAVINGS BANK -- Lending Activities -- Loan Purchases and Sales
and Servicing."  The Savings Bank expects that future loans will be purchased
primarily from the Greenville-based mortgage banking company because of
increasing competition in the Hilton Head Island market.

     In addition to the lending risks discussed below, purchased loans have
added risk because they are originated by a third party to borrowers residing,
and secured by properties located, outside of the Savings Bank's primary market
area.  Purchased loans are also more difficult to underwrite and monitor because
of the Savings Bank's unfamiliarity with the economy in which the properties are
located relative to the economy of its primary market area, the higher
probability of lack of personal contact with the borrower, and the distant
location of the collateral, among other things.  Furthermore, loans secured by
properties located in an area whose economy is heavily dependent on tourism,
such as Hilton Head Island, South Carolina, are subject to greater risk because
economic downturns often have a greater adverse impact on tourism.  See
"BUSINESS OF THE SAVINGS BANK -- Lending Activities -- Commercial Real Estate
Lending."

     COMMERCIAL REAL ESTATE LENDING RISKS.  At September 30, 1997, the Savings
Bank's commercial real estate loan portfolio amounted to $27.0 million, or 15.1%
of net loans receivable, compared to $2.6 million, or 2.7% of net loans
receivable, at September 30, 1993.  Commercial real estate lending is inherently
riskier than one- to four-family mortgage lending.  Because payments on loans
secured by commercial properties often depend upon the successful operation and
management of the properties, repayment of such loans may be affected by adverse
conditions in the real estate market or the economy, among other things.  See
"BUSINESS OF THE SAVINGS BANK -- Lending Activities -- Commercial Real Estate
Loans."

     CONSUMER LENDING RISKS.  At September 30, 1997, the Savings Bank's consumer
loan portfolio amounted to $19.2 million, or 10.7% of net loans receivable.
Consumer lending is also inherently riskier than one- to four-family mortgage
lending.  Collateral such as automobiles, boats and other personal property
depreciate rapidly and are often an inadequate repayment source if a borrower
defaults.  In addition,  consumer loan repayments depend on the borrower's
continuing financial stability and are more likely to be adversely affected by
job loss, divorce, illness, personal bankruptcy and other financial hardship.
See "BUSINESS OF THE SAVINGS BANK -- Lending Activities -- Consumer Loans."

     CONSTRUCTION LENDING RISKS.  At September 30, 1997, the Savings Bank's
construction loan portfolio amounted to $17.1 million, or 9.6% of net loans
receivable, of which $6.4 million consisted of speculative construction loans.
Speculative construction loans are so named because there is not a commitment
for permanent financing in place at the time the construction loan is
originated.

     Construction lending is inherently riskier than one- to four-family
mortgage lending.  Construction loans generally have higher loan balances than
one- to four-family mortgage loans.  In addition, the potential for cost

                                       1
overruns because of the inherent difficulties in estimating construction costs
and, therefore, collateral values and the difficulties and costs associated with
monitoring construction progress, among other things, are major contributing
factors to this greater credit risk.  Speculative construction loans have the
added risk that there is not an identified buyer for the completed home when the
loan is originated, with the risk that the builder will have to service the
construction loan debt and finance the other carrying costs of the completed
home for an extended time period until a buyer is identified.  Furthermore, the
demand for construction loans and the ability of construction loan borrowers to
service their debt depends highly on the state of the general economy, including
market interest rate levels, and the state of the economy of the Savings Bank's
primary market area.  A material downturn in economic conditions would be
expected to have a material adverse effect on the credit quality of the
construction loan portfolio.  See "BUSINESS OF THE SAVINGS BANK -- Lending
Activities -- Construction Loans."

     COMMERCIAL BUSINESS LENDING RISKS.  At September 30, 1997, the Savings
Bank's commercial business loan portfolio amounted to $7.2 million, or 4.0% of
net loans receivable.  Subject to market conditions and other factors, the
Savings Bank intends to expand its commercial business lending activities within
its primary market area.  Commercial business lending is inherently riskier than
one- to four-family mortgage lending.  Although commercial business loans are
often collateralized by equipment, inventory, accounts receivable or other
business assets, the liquidation value of these assets in the event of a
borrower default is often an insufficient source of repayment because accounts
receivable may be uncollectible and inventories and equipment may be obsolete or
of limited use, among other things.  See "BUSINESS OF THE SAVINGS BANK --
Lending Activities -- Commercial Business Loans."

     GEOGRAPHIC CONCENTRATION OF CREDIT AND INVESTMENT RISK.  The Savings Bank
has no significant concentration of credit and investment risk other than that a
substantial portion of its loan portfolio is secured by real estate, either as
primary or secondary collateral, located in its primary market area.  In
addition to its lending activities, the Savings Bank, through its investment in
a service corporation subsidiary, engages in commercial and residential property
development in its primary market area.  See "BUSINESS OF THE SAVINGS BANK --
Subsidiary Activities."  This geographic concentration of credit and investment
risk could have a material adverse effect on the Savings Bank's financial
condition and results of operations to the extent there is a material
deterioration in that area's economy and real estate values.  See "BUSINESS OF
THE SAVINGS BANK -- Lending Activities."

INTEREST RATE RISK

     GENERAL.  The financial condition and operations of the Savings Bank, and
of savings institutions in general, are influenced significantly by general
economic conditions, by the related monetary and fiscal policies of the federal
government and by the regulations of the OTS and the FDIC.  Deposit flows and
the cost of funds are influenced by interest rates of competing investments and
general market interest rates.  Lending activities are affected by the demand
for mortgage financing and for consumer and other types of loans, which in turn
is affected by the interest rates at which such financing may be offered and by
other factors affecting the supply of housing and the availability of funds.
The Savings Bank's profitability, like that of most financial institutions,
depends largely on its net interest income, which is the difference between the
interest income received from its interest-earning assets and the interest
expense incurred in connection with its interest-bearing liabilities.  To better
control the impact of changes in interest rates, the Savings Bank has sought to
improve the match between asset and liability maturities or repricing periods
and rates by emphasizing the origination and purchase of adjustable-rate
mortgage ("ARM") loans and shorter term construction, commercial real estate,
commercial business and consumer loans.

     POTENTIAL ADVERSE IMPACT ON RESULTS OF OPERATIONS.  The Savings Bank's
operations would be adversely affected by a material prolonged increase in
market interest rates.  At September 30, 1997, assuming an instantaneous 200
basis point increase in market interest rates, the Savings Bank's net portfolio
value ("NPV") would decrease by approximately $6.7 million or 17%.  See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Interest Rate Sensitivity Analysis of Net Portfolio Value."

                                       2
POTENTIAL ADVERSE IMPACT ON FINANCIAL CONDITION.  Changes in the level of
interest rates also affect the volume of loans originated or purchased by the
Savings Bank and, thus, the amount of loan and commitment fees, as well as the
market value of the Savings Bank's investment securities and other interest-
earning assets.  Changes in interest rates also can affect the average life of
loans.  Decreases in interest rates may result in increased prepayments of
loans, as borrowers refinance to reduce borrowing costs.  Under these
circumstances, the Savings Bank is subject to reinvestment risk to the extent
that it is not able to reinvest such prepayments at rates which are comparable
to the rates on the maturing loans or securities.  Moreover, volatility in
interest rates also can result in disintermediation, or the flow of funds away
from savings institutions into direct investments, such as U.S. Government and
corporate securities and other investment vehicles which, because of the absence
of federal insurance premiums and reserve requirements, generally pay higher
rates of return than savings institutions.

     At September 30, 1997, out of total one-to four-family mortgage loans of
$110.6 million, the Savings Bank had $45.6 million of ARM loans in its
portfolio, the majority of which reprice every year.  Furthermore, the Savings
Bank's ARM loans contain periodic and lifetime interest rate adjustment limits
which, in a rising interest rate environment, may prevent such loans from
repricing to market interest rates.  While management anticipates that ARM loans
will better offset the adverse effects of an increase in interest rates as
compared to fixed-rate mortgages, the increased mortgage payments required of
ARM borrowers in a rising interest rate environment could potentially cause an
increase in delinquencies and defaults.  The Savings Bank has not historically
had an increase in such delinquencies and defaults on ARM loans, but no
assurance can be given that such delinquencies or defaults would not occur in
the future.  The marketability of the underlying property also may be adversely
affected in a high interest rate environment.  Moreover, the Savings Bank's
ability to originate or purchase ARM loans may be affected by changes in the
level of interest rates and by market acceptance of the terms of such loans.  In
a relatively low interest rate environment, as currently exists, borrowers
generally tend to favor fixed-rate loans over ARM loans to hedge against future
increases in interest rates.

     Changes in the level of interest rates also affect the Savings Bank's
portfolio of mortgage-backed securities and CMOs.  Payments in the Savings
Bank's mortgage-backed securities and CMO portfolios may be affected by
declining and rising interest rate environments.  In a low and falling interest
rate environment, prepayments could be expected to increase in future periods.
The Savings Bank's adjustable-rate instruments would be expected to generate
lower yields as a result of the effect of falling interest rates on the indices
for determining payment of interest.  Additionally, the increased principal
payments received may be subject to reinvestment at lower rates.  Conversely, in
a period of rising interest rates, prepayments would be expected to decrease,
which would make  less principal available for reinvestment at higher rates.  In
a rising interest rate environment, adjustable-rate instruments generally would
generate higher yields to the extent that the indices for determining payment of
interest did not exceed the lifetime interest rate caps.  Such changing interest
rate environment may subject the Savings Bank's mortgage-backed securities and
CMO portfolios to yield and price volatility.

     The Savings Bank has an equity investment in a limited partnership that
invests in mortgage servicing rights.  The value of that investment was $5.0
million at September 30, 1997.  See "BUSINESS OF THE SAVINGS BANK -- Lending
Activities -- Equity Investment in Limited Partnership" for additional
information.  The value of this investment would be adversely affected if the
mortgage servicing rights were prematurely extinguished by the prepayment of the
underlying loans.  A decrease in market interest rates could be expected to
increase the rate of prepayments as borrowers refinance at lower interest rates.
In that event, the Savings Bank may be required to accelerate its amortization
of this investment, or even write-off the full value of the investment in a
given period, which would have a material adverse effect on the Savings Bank.

COMPETITION

     The Savings Bank faces significant competition in its primary market area
(Anderson and Oconee Counties, South Carolina) both in making loans and
attracting deposits.  Both counties have a high density of financial
institutions, many of which are branches of Southeastern region bank holding
companies which have greater financial resources than the Savings Bank, all of
which compete with the Savings Bank in varying degrees.  The Savings Bank

                                       3
competes for loans principally with commercial banks, thrift institutions,
credit unions, mortgage banking companies and insurance companies.
Historically, commercial banks, thrift institutions and credit unions have been
the Savings Bank's most direct competition for deposits.  The Savings Bank also
competes with short-term money market funds and with other financial
institutions, such as brokerage firms and insurance companies, for deposits.
See "BUSINESS OF THE SAVINGS BANK -- Competition."

ESTIMATED VALUATION RANGE BELOW MARKET VALUE

     OTS policy requires that the final Exchange Ratio be determined based on
the number of shares issued in the Conversion Offering in order to maintain the
Public Stockholders' approximate 46.98% ownership interest in the Savings Bank.
THE FINAL EXCHANGE RATIO WILL NOT BE BASED ON THE MARKET VALUE OF THE PUBLIC
SAVINGS BANK SHARES.  Based on the Purchase Price ($20.00 per share) and the
Exchange Ratio, an Exchange Share has an equivalent value of $36.66, $43.13,
$49.59 and $57.03 at the minimum, midpoint, maximum, and maximum, as adjusted,
of the Estimated Valuation Range, respectively.  As of _________ ____, 1998, the
last trade in the Public Savings Bank Shares as reported by the Nasdaq Stock
Market was at $____ per share.  There can be no assurance as to the market price
of a Public Savings Bank Shares at the consummation of the Conversion and
Reorganization.  See "THE CONVERSION AND REORGANIZATION -- Stock Pricing,
Exchange ratio and Number of Shares to be Issued."

RETURN ON EQUITY AFTER CONVERSION AND REORGANIZATION

     Return on equity (net income for a given period divided by average equity
during that period) is a ratio used by many investors to compare the performance
of a particular financial institution to its peers.  The Savings Bank's return
on equity for the year ended September 30, 1997 was, and the Holding Company's
post-Conversion and Reorganization return on equity will be, less than the
average return on equity for publicly traded thrift institutions and their
holding companies.  See "SELECTED CONSOLIDATED FINANCIAL INFORMATION" for
numerical information regarding the Savings Bank's historical return on equity
and "CAPITALIZATION" for a discussion of the Holding Company's estimated pro
forma consolidated capitalization as a result of the Conversion and
Reorganization.  In order for the Holding Company to achieve a return on equity
comparable to the historical levels of the Savings Bank, the Holding Company
either would have to increase net income or reduce stockholders' equity, or
both, commensurate with the increase in equity resulting from the Conversion and
Reorganization.  Reductions in equity could be achieved by, among other things,
the payment of regular or special cash dividends (although no assurances can be
given as to their payment or, if paid, their amount and frequency), the
repurchase of shares of Common Stock subject to applicable regulatory
restrictions, or the acquisition of branch offices, other financial institutions
or related businesses (neither the Holding Company nor the Savings Bank has any
present plans, arrangements, or understandings, written or oral, regarding any
repurchase or acquisitions).  See "DIVIDEND POLICY" and "USE OF PROCEEDS."
Achievement of increased net income levels will depend on several important
factors outside management's control, such as general economic conditions,
including the level of market interest rates, competition and related factors,
among others.  In addition, the expenses associated with the 1996 and 1998 MRPs
(see "-- Expenses Associated with MRP"), along with other post-Conversion and
Reorganization expenses are expected to contribute initially to reduced earnings
levels.  Subject to market conditions, initially the Savings Bank intends to
deploy the net proceeds of the Conversion Offerings to support its lending
activities to increase earnings per share and book value per share, with the
goal of achieving a return on equity comparable to the average for publicly
traded thrift institutions and their holding companies.  This goal will likely
take a number of years to achieve and no assurances can be given that this goal
can be attained.  Consequently, for the foreseeable future, investors should not
expect a return on equity which will meet or exceed the average return on equity
for publicly traded thrift institutions, many of which are not newly converted
institutions and have had time to deploy their conversion capital.

                                       4
EXPENSES ASSOCIATED WITH MRP

     In addition to the expense that the Savings Bank will recognize in
connection with the 1996 MRP as shares awarded to recipients vest, the Savings
Bank will recognize material employee compensation and benefit expenses assuming
the 1998 MRP is implemented.  The actual aggregate amount of these new expenses
cannot be currently predicted because applicable accounting practices require
that they be based on the fair market value of the shares of Common Stock when
the expenses are recognized, which would occur at a future date on which the
shares are acquired.  These expenses have been reflected in the pro forma
financial information under "PRO FORMA DATA" assuming the Purchase Price ($20.00
per share) as fair market value.  Actual expenses, however, will be based on the
fair market value of the Common Stock at the time of recognition, which may be
higher or lower than the Purchase Price.  See "MANAGEMENT OF THE SAVINGS BANK --
Benefits -- Management Recognition Plan."

ANTI-TAKEOVER CONSIDERATIONS

     PROVISIONS IN THE HOLDING COMPANY'S GOVERNING INSTRUMENTS AND DELAWARE AND
FEDERAL LAW.  Certain provisions included in the Holding Company's Certificate
of Incorporation and in the DGCL might discourage potential proxy contests and
other potential takeover attempts, particularly those that have not been
negotiated with the Board of Directors.  As a result, these provisions may
preclude takeover attempts that certain stockholders may deem to be in their
best interest and may tend to perpetuate existing management.  These provisions
include, among other things, a provision limiting voting rights of beneficial
owners of more than 10% of the Common Stock and supermajority voting
requirements for certain business combinations.  In addition, the Certificate of
Incorporation provides for the election of directors to staggered terms of three
years, eliminates cumulative voting for directors, and permits the removal of
directors without cause only upon the vote of holders of 80% of the outstanding
voting shares.  Certain provisions of the Certificate of Incorporation of the
Holding Company cannot be amended by stockholders unless an 80% stockholder vote
is obtained.  The Certificate of Incorporation also contains provisions
regarding the timing and content of stockholder proposals and nominations and
limiting the calling of special meetings.  The existence of these anti-takeover
provisions could result in the Holding Company being less attractive to a
potential acquiror and in stockholders receiving less for their shares than
otherwise might be available in the event of a takeover attempt.  Furthermore,
federal regulations prohibit for three years after consummation of the
Conversion and Reorganization the ownership of more than 10% of the Savings Bank
or the Holding Company without prior OTS approval.  Federal law also requires
OTS approval prior to the acquisition of "control" (as defined in OTS
regulations) of an insured institution.  See "RESTRICTIONS ON ACQUISITION OF THE
HOLDING COMPANY."

     VOTING CONTROL BY INSIDERS.  Management's potential voting control alone,
as well as together with additional stockholder support, might preclude or make
more difficult takeover attempts that certain stockholders may deem to be in
their best interest and might tend to perpetuate existing management.  Upon
consummation of the Conversion and Reorganization, directors, officers and
employees of the Holding Company and the Savings Bank would have voting control,
on a fully diluted basis, of 22.6% and 22.1% of the Common Stock, based on the
issuance of the minimum and maximum of the Estimated Valuation Range,
respectively.  These percentages include the anticipated number of Exchange
Shares to be received and the anticipated number of Conversion Shares to be
purchased by such individuals (see "CONVERSION SHARES TO BE PURCHASED BY
MANAGEMENT PURSUANT TO SUBSCRIPTION RIGHTS"), as well as allocation to
participants' accounts of all shares of Common Stock that will be held by the
ESOP, the exercise of all options under the 1993, 1996 and 1998 Stock Option
Plans, and the funding of the 1996 and 1998 MRPs with Common Stock purchased in
the open market.  See "MANAGEMENT OF THE SAVINGS BANK -- Benefits" for a
discussion of the ESOP, 1993, 1996 and 1998 Stock Option Plans, and the 1996 and
1998 MRPs.

     PROVISIONS OF EMPLOYMENT AGREEMENTS.  The employment agreements of Messrs.
Orr, Hall and Visioli provide for cash severance payments and/or the
continuation of health, life and disability benefits in the event of their
termination of employment following a change in control of the Holding Company
or the Savings Bank.  Assuming a change of control occurred as of September 30,
1997, the aggregate value of the severance benefits available to

                                       5
these executive officers under the agreements would have been approximately
$583,000.  These employment agreements may have the effect of increasing the
costs of acquiring the Holding Company, thereby discouraging future attempts to
take over the Holding Company or the Savings Bank.

     See "MANAGEMENT OF THE SAVINGS BANK -- Benefits," "RESTRICTIONS ON
ACQUISITION OF THE HOLDING COMPANY" and "DESCRIPTION OF CAPITAL STOCK OF THE
HOLDING COMPANY."

POSSIBLE DILUTIVE EFFECT OF BENEFIT PROGRAMS

     The exercise of options under the 1993 and 1996 Stock Option Plans and the
1998 Stock Option Plan (assuming its implementation) will be dilutive to
stockholders.  Furthermore, the implementation of the 1998 MRP will also be
dilutive to stockholders to the extent its is funded with authorized but
unissued shares of Common Stock of the Holding Company.  Assuming the exercise
of all outstanding options under the 1993, 1996 and 1998 Stock Option Plans and
the funding of the 1998 MRP with authorized but unissued shares of Common Stock
of the Holding Company, the voting control of stockholders of the Holding
Company would be diluted by 10.4% at each of the minimum, midpoint, maximum, and
maximum, as adjusted, of the Estimated Valuation Range.  See "MANAGEMENT OF THE
SAVINGS BANK -- Benefits" for a discussion of these stock benefit plans.

ABSENCE OF PRIOR MARKET FOR THE COMMON STOCK

     The Holding Company has never issued capital stock and, consequently, there
is no existing market for the Common Stock.  Prior to the Conversion and
Reorganization, the Public Savings Bank Shares have been listed on the Nasdaq
Smallcap Market under the symbol "PERT."  Although the Holding Company has
received conditional approval to list the Common Stock on the Nasdaq National
Market also under the same symbol, there can be no assurance that an active and
liquid trading market for the Common Stock will develop or, if developed, will
continue.  Furthermore, there can be no assurance that purchasers will be able
to sell their shares at or above the Purchase Price.  See "MARKET FOR COMMON
STOCK."

POSSIBLE INCREASE IN ESTIMATED VALUATION RANGE AND NUMBER OF SHARES ISSUED

     The  Estimated Valuation Range may be increased up to 15% to reflect
material changes in the financial condition or results of operations of the
Savings Bank or changes in market conditions or general financial, economic or
regulatory conditions following the commencement of the Conversion Offerings.
If the Estimated Valuation Range is increased, it is expected that the Holding
Company would increase the Estimated Price Range so that up to 2,281,312
Conversion Shares at the Purchase Price would be issued for an aggregate price
of up to $45.6 million.  This increase in the number of shares would decrease a
subscriber's pro forma net income per share and stockholders' equity per share,
increase the Holding Company's pro forma consolidated stockholders' equity and
net earnings, and increase the Purchase Price as a percentage of pro forma
stockholders' equity per share and net income per share.  See "PRO FORMA DATA."

POSSIBLE ADVERSE INCOME TAX CONSEQUENCES OF THE DISTRIBUTION OF SUBSCRIPTION
RIGHTS

     If the Subscription Rights granted to Eligible Account Holders,
Supplemental Eligible Account Holders and Other Members of the Savings Bank are
deemed to have an ascertainable value, receipt of such rights may be a taxable
event (either as capital gain or ordinary income) to those Eligible Account
Holders, Supplemental Eligible Account Holders or Other Members who receive
and/or exercise the Subscription Rights in an amount equal to such value.
Additionally, the Savings Bank could be required to recognize a gain for tax
purposes on such distribution.  Whether Subscription Rights are considered to
have ascertainable value is an inherently factual determination.  The Savings
Bank has been advised by RP Financial that such rights have no value; however,
RP Financial's conclusion is not binding on the Internal Revenue Service
("IRS").  See "THE CONVERSION AND REORGANIZATION --Effects of Conversion and
Reorganization on Depositors and Borrowers of the Savings Bank -- Tax Effects."

                                       6
USE OF PROCEEDS

     The net proceeds from the sale of the Common Stock offered hereby are
estimated to range from $29.3 million to $39.7 million, or up to $45.6 million
if the Estimated Valuation Range is increased by 15%.  See "PRO FORMA DATA" for
the assumptions used to arrive at such amounts.  The Holding Company has
received conditional OTS approval to purchase all of the capital stock of the
Savings Bank to be issued in the Conversion and Reorganization in exchange for
50% of the net proceeds of the Conversion Offerings.  This will result in the
Holding Company retaining approximately $14.2 million to $19.3 million of net
proceeds, or up to $22.2 million if the Estimated Valuation Range is increased
by 15%, and the Savings Bank receiving an equal amount.  See "PRO FORMA DATA."

     Receipt of 50% of the net proceeds of the sale of the Common Stock will
increase the Savings Bank's capital and will support the expansion of the
Savings Bank's existing business activities.  The Savings Bank will use the
funds contributed to it for general corporate purposes, including, initially,
lending and investment in short-term U.S. Government and agency obligations and
mortgage-backed securities.

     The net proceeds retained by the Holding Company initially will be invested
primarily in short-term U.S. Government and agency obligations and mortgage-
backed securities or in a deposit account either at the Savings Bank or another
financial institution.  Such proceeds will be available for additional
contributions to the Savings Bank in the form of debt or equity, to support
future diversification or acquisition activities, as a source of dividends to
the stockholders of the Holding Company and for future repurchases of Common
Stock to the extent permitted under Delaware law and federal regulations.  The
Holding Company will also use a portion of the net proceeds retained by it to
refinance the ESOP's third party loan, which had an outstanding balance of
$804,000 at September 30, 1997.  See "PRO FORMA DATA."

     The Holding Company will consider exploring opportunities to use such funds
to expand operations through acquiring or establishing additional branch offices
or acquiring other financial institutions.  In addition, the Holding Company may
consider exploring opportunities to expand into non-traditional lines of
business, such as securities brokerage, insurance agency and real estate
development activities, to the extent permitted by applicable law.  Currently,
there are no specific plans, arrangements, agreements or understandings, written
or oral, regarding any diversification activities.

          Following consummation of the Conversion and Reorganization, the
Holding Company's Board of Directors will have the authority to adopt plans for
repurchases of Common Stock, subject to statutory and regulatory requirements.
Since the Holding Company has not yet issued stock, there currently is
insufficient information upon which an intention to repurchase stock could be
based.  The facts and circumstances upon which the Board of Directors may
determine to repurchase stock in the future would include but are not limited
to:  (i) market and economic factors such as the price at which the stock is
trading in the market, the volume of trading, the attractiveness of other
investment alternatives in terms of the rate of return and risk involved in the
investment, the ability to increase the book value and/or earnings per share of
the remaining outstanding shares, and the ability to improve the Holding
Company's return on equity; (ii) the avoidance of dilution to stockholders by
not having to issue additional shares to cover the exercise of stock options or
to fund employee stock benefit plans; and (iii) any other circumstances in which
repurchases would be in the best interests of the Holding Company and its
stockholders.  Any stock repurchases will be subject to a determination by the
Board of Directors that both the Holding Company and the Savings Bank will be
capitalized in excess of all applicable regulatory requirements after any such
repurchases and that capital will be adequate, taking into account, among other
things, the level of nonperforming and classified assets, the Holding Company's
and the Savings Bank's current and projected results of operations and
asset/liability structure, the economic environment and tax and other regulatory
considerations.  For a discussion of the regulatory limitations applicable to
stock repurchases and current OTS policy with respect thereto, see "THE
CONVERSION AND REORGANIZATION -- Restrictions on Repurchase of Stock."

                                       7
DIVIDEND POLICY

GENERAL

     The Savings Bank's Board of Directors has adopted a policy of paying
regular cash dividends on the Public Savings Bank Shares. The MHC has waived
receipt of all cash dividends paid by the Savings Bank to date.  See "MARKET FOR
COMMON STOCK" for additional information.  The Board of Directors intends to
declare and pay a regular cash dividend for the first calendar quarter of 1998
to holders of Savings Bank Common Stock.  The MHC does not intend to waive
receipt of this dividend in order to avoid the expense obtaining regulatory
approval to waive the dividend.  The record date for determining the holders of
Savings Bank Common Stock entitled to receipt of the dividend is expected to
pre-date the consummation of the Conversion and Reorganization.  Consequently,
dividends, if any, would not be paid on the Common Stock until after the
consummation of the Conversion and Reorganization, and may not occur before the
first full quarter following the consummation of the Conversion and
Reorganization.

     Upon completion of the Conversion and Reorganization, the Holding Company's
Board of Directors will have the authority to declare dividends on the Common
Stock, subject to statutory and regulatory requirements.  The Board of Directors
of the Holding Company intends to pay cash dividends on the Common Stock at an
initial quarterly rate equal to $0.35 per share divided by the final Exchange
Ratio, resulting in intended economic parity with the dividends currently paid
on the Public Savings Bank Shares.  The first dividend payment on the Common
Stock is expected during the month following the end of the quarter in which the
Conversion and Reorganization is consummated.  Based upon the Estimated
Valuation Range, the Exchange Ratio is expected to be 1.83281, 2.15625, 2.47969
and 2.85164 at the minimum, midpoint, maximum and 15% above the maximum of the
Valuation Price Range, respectively, resulting in an initial quarterly dividend
rate of $0.19, $0.16, $0.14 and $0.12 per share, respectively, commencing with
the first full quarter following consummation of the Conversion and
Reorganization.  In addition, the Board of Directors may determine to pay
periodic special cash dividends in addition to, or in lieu of, regular cash
dividends.  Declarations or payments of any dividends (regular and special) will
be subject to determination by the Board of Directors, which will take into
account the amount of the net proceeds retained by the Holding Company, the
Holding Company's financial condition, results of operations, tax
considerations, capital requirements, industry standards, economic conditions
and other factors, including the regulatory restrictions that affect the payment
of dividends by the Savings Bank to the Holding Company discussed below.  No
assurances can be given that any dividends, either regular or special, will be
declared or, if declared, what the amount of dividends will be or whether such
dividends, if commenced, will continue.

CURRENT RESTRICTIONS

     Dividends from the Holding Company may depend, in part, upon receipt of
dividends from the Savings Bank because the Holding Company initially will have
no source of income other than dividends from the Savings Bank and earnings from
the investment of the net proceeds from the Conversion Offerings retained by the
Holding Company.  OTS regulations require the Savings Bank to give the OTS 30
days' advance notice of any proposed declaration of dividends to the Holding
Company, and the OTS has the authority under its supervisory powers to prohibit
the payment of dividends to the Holding Company.  The OTS imposes certain
limitations on the payment of dividends from the Savings Bank to the Holding
Company which utilize a three-tiered approach that permits various levels of
distributions based primarily upon a savings association's capital level.  The
Savings Bank currently meets the criteria to be designated a Tier 1 association,
as hereinafter defined, and consequently could at its option (after prior notice
to and no objection made by the OTS) distribute up to 100% of its net income
during the calendar year plus 50% of its surplus capital ratio at the beginning
of the calendar year less any distributions previously paid during the year.  In
addition, the Savings Bank may not declare or pay a cash dividend on its capital
stock if the effect thereof would be to reduce the regulatory capital of the
Savings Bank below the amount required for the liquidation account to be
established pursuant to the Savings Bank's Plan of Conversion.  See "REGULATION
-- Federal Regulation of the Savings Bank -- Limitations on Capital
Distributions," "THE CONVERSION AND 

                                       8
REORGANIZATION -- Effects of Conversion and Reorganization on Depositors and
Borrowers of the Savings Bank -- Liquidation Account" and Note 12 of Notes to
the Consolidated Financial Statements included elsewhere herein.

     Under Delaware law, the Holding Company is generally limited to paying
dividends in an amount equal to the excess of its net assets (total assets minus
total liabilities) over its statutory capital or, if no such excess exists, to
its net profits for the current and/or immediately preceding fiscal year.

     The Holding Company has committed to the OTS not to make any tax-free
distributions to stockholders in the form of a return of capital, or take any
preliminary action in contemplation of any such distributions, within the first
year following the consummation of the Conversion.

TAX CONSIDERATIONS

     In addition to the foregoing, retained earnings of the Savings Bank
appropriated to bad debt reserves and deducted for federal income tax purposes
cannot be used by the Savings Bank to pay cash dividends to the Holding Company
without the payment of federal income taxes by the Savings Bank at the then
current income tax rate on the amount deemed distributed, which would include
the amount of any federal income taxes attributable to the distribution.  See
"TAXATION -- Federal Taxation" and Note 11 of Notes to the Consolidated
Financial Statements included elsewhere herein.  The Holding Company does not
contemplate any distribution by the Savings Bank that would result in a
recapture of the Savings Bank's bad debt reserve or create the above-mentioned
federal tax liabilities.

                            MARKET FOR COMMON STOCK

     The Holding Company has never issued capital stock and, consequently, there
is no existing market for the Common Stock.  Although the Holding Company has
received preliminary approval to list the Common Stock on the Nasdaq National
Market System under the symbol "PERT," there can be no assurance that the
Holding Company will meet Nasdaq National Market System listing requirements,
which include a minimum market capitalization, at least three market makers and
a minimum number of record holders.  Sandler O'Neill has agreed to make a market
for the Common Stock following consummation of the Conversion and Reorganization
and will assist the Holding Company in seeking to encourage at least two
additional market makers to establish and maintain a market in the Common Stock.
Making a market involves maintaining bid and ask quotations and being able, as
principal, to effect transactions in reasonable quantities at those quoted
prices, subject to various securities laws and other regulatory requirements.
Based on the level of market making in the Public Savings Bank Shares, the
Holding Company anticipates that prior to the completion of the Conversion and
Reorganization it will be able to obtain the commitment from at least two
additional broker-dealers to act as market maker for the Common Stock.
Additionally, the development of a liquid public market depends on the existence
of willing buyers and sellers, the presence of which is not within the control
of the Holding Company, the Savings Bank or any market maker.  There can be no
assurance that an active and liquid trading market for the Common Stock will
develop or that, if developed, it will continue.  The number of active buyers
and sellers of the Common Stock at any particular time may be limited.  Under
such circumstances, investors in the Common Stock could have difficulty
disposing of their shares on short notice and should not view the Common Stock
as a short-term investment.  Furthermore, there can be no assurance that
purchasers will be able to sell their shares at or above the Purchase Price or
that quotations will be available on the Nasdaq National Market System as
contemplated.

     Since September 30, 1996 (the consummation date of the Additional
Offering), the Public Savings Bank Shares have been listed on the Nasdaq
SmallCap Market under the symbol "PERT."  Before that date, the Public Savings
Bank Shares were unlisted and traded in privately negotiated transactions.  At
September 30, 1997, there were 294 record holders of the Public Savings Bank
Shares (not including holders in nominee or "street name") and four market
makers in the Public Savings Bank Shares as reported by the Nasdaq Stock Market.
The following table sets forth the high and low trading prices, as reported by
Nasdaq, and cash dividends paid for each quarter during the fiscal 1997.  Market
price data for fiscal 1996 is not presented because the Public Savings Bank
Shares traded 

                                       9
in private transactions for which comparable data is unavailable. The Savings
Bank paid a quarterly cash dividend of $0.30 on the outstanding Public Savings
Bank Shares during fiscal 1996.
Cash Dividend
Fiscal 1997                            High     Low       Declared
-----------                           ------   ------   -------------
Quarter Ended December 31, 1996....   $24.25   $20.25           $0.30
Quarter Ended March 31, 1997.......    26.50    22.50            0.35
Quarter Ended June 30, 1997........    29.75    24.00            0.35
Quarter Ended September 30, 1997...    57.00    30.25            0.35
10
CAPITALIZATION

     The following table presents the historical capitalization of the Savings
Bank at September 30, 1997, and the pro forma consolidated capitalization of the
Holding Company after giving effect to the assumptions set forth under "PRO
FORMA DATA," based on the sale of the number of Conversion Shares at the
minimum, midpoint, maximum and maximum, as adjusted, of the Estimated Valuation
Range.  The Conversion Shares that would be issued at the maximum, as adjusted,
of the Estimated Valuation Range would be subject to receipt of OTS approval of
an updated appraisal confirming such valuation.  A CHANGE IN THE NUMBER OF
CONVERSION SHARES TO BE ISSUED IN THE CONVERSION AND REORGANIZATION WOULD
MATERIALLY AFFECT PRO FORMA CONSOLIDATED CAPITALIZATION.
Holding Company Pro Forma Consolidated Capitalization
                                                                                 Based Upon the Sale of
                                            Savings          --------------------------------------------------------------
                                              Bank           1,466,250       1,725,000         1,983,750       2,281,312
                                          Capitalization     Shares at       Shares at          Shares at       Shares at
                                               at              $20.00          $20.00             $20.00          $20.00
                                        September 30, 1997    Per Share(1)    Per Share(1)      Per Share(1)    Per Share(2)
                                        ------------------   ------------     -----------       -----------     -----------
                                                                              (In thousands)
Deposits(3)..........................         $201,002        $  201,002         $  201,002      $  201,002      $  201,002
FHLB advances........................           15,000            15,000             15,000          15,000          15,000
ESOP debt(4).........................              804               804                804             804             804
                                              --------        ----------         ----------      ----------      ----------
Total deposits and borrowed funds....         $216,806        $  216,806         $  216,806      $  216,806      $  216,806
                                              ========        ==========         ==========      ==========      ==========

Stockholders' equity:
   Preferred stock:
     250,000 shares, $.01 par
     value per share, authorized;
     none issued or outstanding......               --                --                 --              --              --

   Common Stock:
     7,500,000 shares, $.01 par
     value per share, authorized;
     specified number of shares
     assumed to be issued and
     outstanding(5)..................            1,509                14                 17              20              23

   Additional paid-in capital........           11,652            41,482             46,574          51,665          57,525

   Retained earnings(6)..............           18,382            18,382             18,382          18,382          18,382
   Unrealized loss on securities
    available-for-sale, net of tax...              188               188                188             188             188
   Less:
     Savings Bank Common Stock
      acquired by ESOP in MHC
      Reorganization and
      Additional Offering............             (804)             (804)              (804)           (804)           (804)
     Common Stock to be acquired
      by 1996 MRP(7).................             (325)             (938)              (938)           (938)           (938)
     Common Stock to be acquired
      by 1998 MRP(8).................               --            (1,173)            (1,380)         (1,587)         (1,825)
                                              --------        ----------         ----------      ----------      ----------

Total stockholders' equity...........         $ 30,602        $   57,151         $   62,039      $   66,927      $   72,551
                                              ========        ==========         ==========      ==========      ==========
(footnotes on following page)

                                       11
-----------------------------
(1)     Does not reflect the possible increase in the Estimated Valuation Range
        to reflect material changes in the financial condition or results of
        operations of the Savings Bank or changes in market conditions or
        general financial, economic and regulatory conditions, or the issuance
        of additional shares under the 1998 Stock Option Plan.
(2)     This column represents the pro forma capitalization of the Holding
        Company if the aggregate number of Conversion Shares issued in the
        Conversion and Reorganization is 15% above the maximum of the Estimated
        Valuation Range.  See "PRO FORMA DATA" and Footnote 1 thereto.
(3)     Withdrawals from deposit accounts for the purchase of Conversion Shares
        are not reflected.  Such withdrawals will reduce pro forma deposits by
        the amounts thereof.
(4)     Represents outstanding balance on third party loan used by ESOP to
        acquire shares of Savings Bank Common Stock in the MHC Reorganization
        and the Additional Offering.
(5)     The Savings Bank's authorized capital will consist solely of 1,000
        shares of common stock, par value $1.00 per share, 1,000 shares of which
        will be issued to the Holding Company, and 9,000 shares of preferred
        stock, no par value per share, none of which will be issued in
        connection with the Conversion and Reorganization.
(6)     Retained earnings are substantially restricted by applicable regulatory
        capital requirements.  Additionally, the Savings Bank will be prohibited
        from paying any dividend that would reduce its regulatory capital below
        the amount in the liquidation account, which will be established for the
        benefit of Eligible Account Holders and Supplemental Eligible Account
        Holders at the consummation of the Conversion and Reorganization and
        adjusted downward thereafter as such account holders reduce their
        balances or cease to be depositors.  See "THE CONVERSION AND
        REORGANIZATION -- Effects of Conversion and Reorganization on Depositors
        and Borrowers of the Savings Bank -- Liquidation Account."
(7)     Pro forma consolidated capitalization reflects funding of remaining
        shares authorized for awards under the 1996 MRP through open market
        purchases of Common Stock.
(8)     Assumes the purchase in the open market at the Purchase Price, pursuant
        to the proposed 1998 MRP, of a number of shares equal to 4% of the
        shares of Conversion Shares issued in the Conversion and Reorganization
        at the minimum, midpoint, maximum and 15% above the maximum of the
        Estimated Valuation Range.  The issuance of such additional Conversion
        Shares from authorized but unissued shares of Common Stock would dilute
        the ownership interest of stockholders by 2.08%.  The shares are
        reflected as a reduction of stockholders' equity.  See "RISK FACTORS --
        Possible Dilutive Effect of Benefit Programs," "PRO FORMA DATA" and
        "MANAGEMENT OF THE SAVINGS BANK -- Benefits -- Management Recognition
        Plan."  The 1998 MRP is subject to stockholder approval, which is
        expected to be sought at a meeting to be held no earlier than six months
        following consummation of the Conversion and Reorganization.

                                       12
HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE

   The following table presents the Savings Bank's historical and pro forma
capital position relative to its capital requirements at September 30, 1997. The
amount of capital infused into the Savings Bank for purposes of the following
table is 50% of the net proceeds of the Conversion Offering. For purposes of the
table below, the cost of the shares acquired by the 1996 MRP (completed
subsequent to September 30, 1997), and expected to be acquired by the 1998 MRP
is deducted from pro forma regulatory capital. For a discussion of the
assumptions underlying the pro forma capital calculations presented below, see
"USE OF PROCEEDS," "CAPITALIZATION" and "PRO FORMA DATA." The definitions of the
terms used in the table are those provided in the OTS capital regulations as
discussed under "REGULATION -- Federal Regulation of the Savings Bank -- Capital
Requirements."
PRO FORMA AT SEPTEMBER 30, 1997
                                                     ------------------------------------------------------------------------------
                                                                                                                     15% above
                                                        Minimum of            Midpoint of           Maximum of       Maximum of 
                                                         Estimated             Estimated             Estimated       Estimated 
                                                      Valuation Range       Valuation Range     Valuation  Range    Valuation Range
                                                     -----------------     -----------------   -----------------  ------------------

                                                        1,466,250             1,725,000           1,983,750           2,281,312
                                                     Conversion Shares     Conversion Shares   Conversion Shares  Conversion Shares
                                                      at $20.00 Per         at $20.00 Per        at $20.00 Per      at $20.00 Per
                                September 30, 1997        Share                 Share              Share                Share
                                ------------------  ----------------     -----------------   ------------------  -------------------

                                         Percent             Percent             Percent             Percent              Percent 
                                           of                   of                 of                  of                   of      
                                        Adjusted             Adjusted            Adjusted            Adjusted             Adjusted 
                                          Total                Total               Total               Total                Total  
                                Amount    Assets(1) Amount    Assets(1)  Amount   Assets(1)  Amount   Assets(1)  Amount   Assets(1)
                                ------   --------   ------    --------   ------   --------   ------   --------   ------   --------
                                                                  (Dollars in thousands)
GAAP capital(2)..............   $30,602    11.91%   $41,811    15.59%   $43,945    16.26%   $46,078    16.91%    $48,533     17.65%
                                                                                                                             
Tangible capital(2)..........    27,321    10.71     38,530    14.47     40,664    15.15     42,797    15.82      45,252     16.58 
Tangible capital requirement.     3,825     1.50      3,994     1.50      4,026     1.50      4,058     1.50       4,094      1.50 
                                -------    -----    -------    -----    -------    -----    -------    -----     -------     ----- 
Excess.......................   $23,496     9.21%   $34,536    12.97%   $36,638    13.65%   $38,739    14.32%    $41,158     15.08%
                                =======    =====    =======    =====    =======    =====    =======    =====     =======     ===== 
                                                                                                                                   
Core capital(2)..............   $27,321    10.71%   $38,530    14.47%   $40,664    15.15%   $42,797    15.82%    $45,252     16.58%
Core capital requirement(3)..     7,651     3.00      7,987     3.00      8,051     3.00      8,115     3.00       8,189      3.00 
                                -------    -----    -------    -----    -------    -----    -------    -----     -------     ----- 
Excess.......................   $19,670     7.71%   $30,543    11.47%   $32,613    12.15%   $34,682    12.82%    $37,063     13.58%
                                =======    =====    =======    =====    =======    =====    =======    =====     =======     ===== 
                                                                                                                                   
Total capital(4).............   $29,067    18.35%   $40,276    25.08%   $42,410    26.33%   $44,543    27.59%    $46,998     29.02%
Risk-based                                                                                                                         
capital requirement..........    12,670     8.00     12,849     8.00     12,883     8.00     12,918     8.00      12,957      8.00 
                                -------    -----    -------    -----    -------    -----    -------    -----     -------     ----- 
Excess.......................   $16,397    10.35%   $27,426    17.08%   $29,527    18.33%   $31,625    19.59%    $34,041     21.02%
                                =======    =====    =======    =====    =======    =====    =======    =====     =======     ===== 
---------------------------
(1)    Based upon total tangible assets of $255.0 million at September 30, 1997
       and $266.2 million, $268.4 million, $270.5 million and $273.0 million at
       the minimum, midpoint, maximum, and maximum, as adjusted, of the
       Estimated Valuation Range, respectively, for purposes of the tangible
       capital requirement, upon total adjusted assets of $255.0 million at
       September 30, 1997 and $266.2 million, $268.2 million, $270.5 million and
       $273.0 million at the minimum, midpoint, maximum, and maximum, as
       adjusted, of the Estimated Valuation Range, respectively, and upon risk-
       weighted assets of $158.4 million at September 30, 1997 and $160.6
       million, $161.0 million, $161.5 million and $162.0 million at the
       minimum, midpoint, maximum, and maximum, as adjusted, of the Estimated
       Valuation Range, respectively, for purposes of the risk-based capital
       requirement.
(2)    A $2.1 million investment in non-includable subsidiaries, a $1.0 million
       deduction associated with the limited partnership interest discussed
       under "BUSINESS OF THE SAVINGS BANK -- Lending Activities -- Equity
       Investment in Limited Partnership" and an unrealized gain on securities
       available-for-sale, net of taxes, of $188,000 account for the difference
       between generally accepted accounting principals ("GAAP") capital and
       both tangible capital and core capital.
(3)    The current OTS core capital requirement for savings associations is 3%
       of total adjusted assets.  The OTS has proposed core capital requirements
       which would require a core capital ratio of 3% of total adjusted assets
       for thrifts that receive the highest supervisory rating for safety and
       soundness and a core capital ratio of 4% to 5% for all other thrifts.
(4)    Percentage represents total core and supplementary capital divided by
       total risk-weighted assets.  Assumes net proceeds are invested in assets
       that carry a 20% risk-weighting.

                                       13
PRO FORMA DATA

  Under the Plan of Conversion, the Conversion Shares must be sold at a price
equal to the estimated pro forma market value of the MHC and the Savings Bank,
as converted, based upon an independent valuation.  The Estimated Valuation
Range as of December 5, 1997 is from a minimum of $29.3 million to a maximum of
$39.7 million with a midpoint of $34.5 million or, at a price per share of
$20.00, a minimum number of shares of 1,466,250, a maximum number of shares of
1,983,750 and a midpoint number of shares of 1,725,000.  The actual net proceeds
from the sale of the Conversion Shares cannot be determined until the Conversion
and Reorganization is completed.  However, net proceeds set forth on the
following table are based upon the following assumptions: (i) Sandler O'Neill
will receive fees of $428,625, $506,250, $583,875 and $673,145 at the minimum,
midpoint, maximum and 15% above the Estimated Valuation Range, respectively (see
"THE CONVERSION AND REORGANIZATION -- Plan of Distribution and Selling
Commissions); (ii) all of the Conversion Shares will be sold in the Subscription
and Direct Community Offerings; and (iii) Conversion and Reorganization
expenses, excluding the fees paid to Sandler O'Neill, will total approximately
$560,000 at each of the minimum, midpoint, maximum and 15% above the Estimated
Valuation Range.  Actual expenses may vary from this estimate, and the fees paid
will depend upon the percentages and total number of shares sold in the
Subscription, Direct Community and Syndicated Community Offerings and other
factors.

  The pro forma consolidated net income of the Savings Bank for the year ended
September 30, 1997 has been calculated as if the Conversion and Reorganization
had been consummated at the beginning of the period and the estimated net
proceeds received by the Holding Company and the Savings Bank had been invested
at 5.68% at the beginning of the period, which represents the yield on the one-
year U.S. Treasury Bill at September 30, 1997. Although OTS regulations require
the use of the arithmetic average of the average yield on all interest-earning
assets and the average rate paid on all deposits in computing investment returns
on net proceeds, the yield on the one-year U.S. Treasury Bill is used because
management believes it more appropriately reflects a market rate of return.  As
discussed under "USE OF PROCEEDS," the Holding Company expects to retain 50% of
the net proceeds of the Conversion Offerings from which it will refinance the
existing third-party ESOP loan, with an outstanding balance of $804,000 at
September 30, 1997.  The new loan is expected to have a 10-year term and an
interest rate equal to the prime rate as published in The Wall Street Journal on
the closing date of the Conversion and Reorganization (currently 8.50%).  A pro
forma after-tax return of 3.69% is used for both the Holding Company and the
Savings Bank for the period, after giving effect to an incremental combined
federal and state income tax rate of 35.0% for the year ended September 30,
1997.  Historical and pro forma per share amounts have been calculated by
dividing historical and pro forma amounts by the number of shares of Common
Stock indicated in the footnotes to the table.  Per share amounts have been
computed as if the Common Stock had been outstanding at the beginning of the
period or at September 30, 1997, but without any adjustment of per share
historical or pro forma stockholders' equity to reflect the earnings on the
estimated net proceeds.

  The following table summarizes the historical net income and stockholders'
equity of the Savings Bank and the pro forma consolidated net income and
stockholders' equity of the Holding Company for the periods and at the date
indicated, based on the minimum, midpoint and maximum of the Estimated Valuation
Range and based on a 15% increase in the maximum of the Estimated Valuation
Range.  No effect has been given to: (i) the shares to be reserved for issuance
under the 1998 Stock Option Plan, which is expected to be voted upon by
stockholders at a meeting to be held no earlier than six months following
consummation of the Conversion and Reorganization; (ii) withdrawals from deposit
accounts for the purpose of purchasing Conversion Shares in the Conversion
Offerings; (iii) the issuance of shares from authorized but unissued shares to
the 1998 MRP, which is expected to be voted upon by stockholders at a meeting to
be held no earlier than six months following consummation of the Conversion and
Reorganization; or (iv) the establishment of a liquidation account for the
benefit of Eligible Account Holders and Supplemental Eligible Account Holders.
See "MANAGEMENT OF THE SAVINGS BANK -- Benefits -- 1998 Stock Option Plan" and
"THE CONVERSION AND REORGANIZATION -- Stock Pricing, Exchange Ratio and Number
of Shares Issued."

  THE FOLLOWING PRO FORMA INFORMATION MAY NOT BE REPRESENTATIVE OF THE FINANCIAL
EFFECTS OF THE CONVERSION AND REORGANIZATION AT THE DATE ON WHICH THE CONVERSION
AND REORGANIZATION ACTUALLY OCCURS AND SHOULD NOT BE TAKEN AS INDICATIVE OF
FUTURE RESULTS OF OPERATIONS.  STOCKHOLDERS' EQUITY REPRESENTS THE DIFFERENCE
BETWEEN THE STATED AMOUNTS OF CONSOLIDATED ASSETS AND LIABILITIES OF THE HOLDING
COMPANY COMPUTED ACCORDING TO GAAP.  STOCKHOLDERS' EQUITY HAS NOT BEEN INCREASED
OR DECREASED TO REFLECT THE DIFFERENCE BETWEEN THE CARRYING VALUE OF LOANS AND
OTHER ASSETS AND MARKET VALUE.  STOCKHOLDERS' EQUITY IS NOT INTENDED TO
REPRESENT FAIR MARKET VALUE NOR DOES IT REPRESENT AMOUNTS THAT WOULD BE
AVAILABLE FOR DISTRIBUTION TO STOCKHOLDERS IN THE EVENT OF LIQUIDATION.

                                       14
At or For the Year Ended September 30, 1997
                                                        ---------------------------------------------------------------------------
                                                        Minimum of          Midpoint of            Maximum of        15% Above
                                                        Estimated            Estimated              Estimated        Maximum of
                                                        Valuation            Valuation              Valuation        Estimated
                                                          Range                 Range                  Range     Valuation Range(1)
                                                        ---------             ---------              ---------   ----------------- 
                                                        1,466,250              1,725,000             1,983,750          2,281,312
                                                         Shares                 Shares                 Shares            Shares
                                                        at $20.00             at $20.00              at $20.00          at $20.00
                                                        Per Share             Per Share              Per Share          Per Share
                                                        ---------             ---------              ---------          --------- 
                                                                      (In Thousands, Except Per Share Amounts)
Gross proceeds.......................................   $   29,325             $   34,500            $   39,675         $   45,626
Less: estimated expenses.............................          990                  1,070                 1,150              1,240
                                                        ----------             ----------            ----------         ----------
Estimated net proceeds...............................       28,335                 33,430                38,525             44,386
Less: Common Stock to be acquired by
         1998 MRP....................................       (1,173)                (1,380)               (1,587)            (1,825)
Add:   Assets consolidated from MHC(10)..............           --                     --                    --                 --
                                                        ----------             ----------            ----------         ----------
     Net investable proceeds.........................   $   27,162             $   32,050            $   36,938         $   42,561
                                                        ==========             ==========            ==========         ==========
 
Consolidated net income:
 Historical..........................................        1,728                  1,728                 1,728              1,728
 Pro forma income on net proceeds(2).................        1,003                  1,183                 1,364              1,571
 Pro forma 1996 MRP adjustments(3)...................          (84)                   (84)                  (84)               (84)
 Pro forma 1998 MRP adjustments(4)...................         (152)                  (179)                 (206)              (237)
                                                        ----------             ----------            ----------         ----------
   Pro forma net income..............................   $    2,496             $    2,649            $    2,803         $    2,979
                                                        ==========             ==========            ==========         ==========
 
Consolidated net income per share(5)(6):
 Historical..........................................   $     0.64             $     0.55            $     0.47         $     0.41
 Pro forma income on net proceeds....................         0.38                   0.38                  0.37               0.38
 Pro forma 1996 MRP adjustments(3)...................        (0.03)                 (0.03)                (0.02)             (0.02)
 Pro forma 1998 MRP adjustments(4)...................        (0.06)                 (0.06)                (0.06)             (0.06)
                                                        ----------             ----------            ----------         ----------
   Pro forma net income per share....................   $     0.93             $     0.84            $     0.76         $     0.71
                                                        ==========             ==========            ==========         ==========
 
Consolidated stockholders' equity (book value):
 Historical(10)......................................   $   31,731             $   31,731            $   31,731         $   31,731
 Estimated net proceeds..............................       28,335                 33,430                38,525             44,386
 Less:  Common Stock to be acquired by
           ESOP......................................         (804)                  (804)                 (804)              (804)
        Common Stock acquired by
           1996 MRP..................................         (938)                  (938)                 (938)              (938)
        Common Stock to be acquired by
          1998 MRP(4)................................       (1,173)                (1,380)               (1,587)            (1,825)
                                                        ----------             ----------            ----------         ----------
   Pro forma stockholders' equity(7).................   $   57,151             $   62,039            $   67,927         $   72,550
                                                        ==========             ==========            ==========         ==========
 
Consolidated stockholders' equity per share(6)(8):
 Historical(4)(10)...................................   $    11.48             $     9.76            $     8.48         $     7.38
 Estimated net proceeds..............................        10.24                  10.27                 10.29              10.32
 Less:  Common Stock acquired by
           ESOP......................................        (0.29)                 (0.25)                (0.21)             (0.19)
        Common Stock acquired by
           1996 MRP(3)...............................        (0.34)                 (0.29)                (0.25)             (0.22)
        Common Stock to be acquired by
          1998 MRP(3)................................        (0.42)                 (0.42)                (0.42)             (0.42)
                                                        ----------             ----------            ----------         ----------
   Pro forma stockholders' equity per share(9).......   $    20.67             $    19.07            $    17.89         $    16.87
                                                        ==========             ==========            ==========         ==========
 
Purchase Price as a percentage of pro forma
 stockholders' equity per share......................        96.76%                104.88%               111.79%            118.55%
                                                        ==========             ==========            ==========         ==========
 
Purchase Price as a multiple of pro forma
 net income per share................................       21.51x                 23.81x                26.18x             28.17x
                                                        ==========             ==========            ==========         ==========
(footnotes on following page)

                                       15
------------------------------
(1)     Gives effect to the sale of an additional 297,562 Conversion Shares in
        the Conversion and Reorganization, which may be issued to cover an
        increase in the pro forma market value of the MHC and the Savings Bank,
        as converted, without the resolicitation of subscribers or any right of
        cancellation.  The issuance of such additional shares will be
        conditioned on a determination by RP Financial that such issuance is
        compatible with its determination of the estimated pro forma market
        value of the MHC and the Savings Bank, as converted.  See "THE
        CONVERSION AND REORGANIZATION -- Stock Pricing, Exchange Ratio and
        Number of Shares to be Issued."
(2)     No effect has been given to withdrawals from savings accounts for the
        purpose of purchasing Conversion Shares.  Since funds on deposit at the
        Savings Bank may be withdrawn to purchase shares of Common Stock (which
        will reduce deposits by the amount of such purchases), the net amount of
        funds available to the Savings Bank for investment following receipt of
        the net proceeds of the Conversion Offerings will be reduced by the
        amount of such withdrawals.
(3)     In calculating the pro forma effect of the 1996 MRP, the table reflects
        the effect of completed open market purchases of all remaining 1996 MRP
        shares subsequent to September 30, 1997.  Pro forma net income
        adjustments reflect additional expenses required for a full-year
        amortization above the actual expense (equal to $79,000 on a pre-tax
        basis) recorded for the year ended September 30, 1997.  Pro forma
        stockholders' equity adjustments take into account 1996 MRP stock
        purchases as of September 30, 1997 and open market purchases of all
        remaining shares completed subsequent to September 30, 1997.  As all
        shares for the 1996 MRP have, subsequent to September 30, 1997, have
        been purchased in open market transactions, no assumptions have been
        made for the effects of issuing authorized but unissued shares.  The
        total additional estimated pre-tax 1996 MRP expenses not already
        reflected in net income was equal to $129,000 at each of the minimum,
        midpoint, maximum and 15% above the maximum of the Estimated Valuation
        Range for the year ended September 30, 1997.  No effect has been given
        to the shares reserved for issuance under the 1996 Stock Option Plan.
        See footnote 4 for an analysis of the combined effects of the 1996 and
        1998 Stock Option Plans.
(4)     In calculating the pro forma effect of the 1998 MRP, it is assumed that
        the required stockholder approval has been received, that the shares
        were acquired by the 1998 MRP at the beginning of the period presented
        in open market purchases at the Purchase Price, that 20% of the amount
        contributed was an amortized expense during such period, and that the
        combined federal and state income tax rate is 35.0%.  The issuance of
        authorized but unissued shares of the Common Stock instead of open
        market purchases would dilute the voting interests of existing
        stockholders by approximately 2.08% and pro forma net income per share
        would be $0.92, $0.83, $0.77 and $0.71 at the minimum, midpoint, maximum
        and 15% above the maximum of the Estimated Valuation Range for the year
        ended September 30, 1997, respectively, and pro forma stockholders'
        equity per share would be $20.66, $19.09, $17.94 and $16.93 at the
        minimum, midpoint, maximum and 15% above the maximum of the Estimated
        Valuation Range at September 30, 1997, respectively.  Shares issued
        under the 1998 MRP vest 20% per year and, for purposes of this table,
        compensation expense is recognized on a straight-line basis over each
        vesting period.  In the event the fair market value per share is greater
        than $20.00 per share on the date shares are awarded under the 1998 MRP,
        total 1998 MRP expense would increase.  See "RISK FACTORS -- Expenses
        Associated with MRP."  The total estimated 1998 MRP expense was
        multiplied by 20% (the total percent of shares for which expense is
        recognized in the first year) resulting in pre-tax 1998 MRP expense of
        $235,000, $276,000, $317,000 and $365,000 at the minimum, midpoint,
        maximum and 15% above the maximum of the Estimated Valuation Range for
        the year ended September 30, 1997, respectively.  No effect has been
        given to the shares reserved for issuance under the 1996 Stock Option
        Plan (previously approved by stockholders) or the proposed 1998 Stock
        Option Plan.  Under the 1996 Stock Option Plan, 58,500 shares were
        reserved for issuance and options have been granted thereunder at an
        exercise price of $25.25 per share. If stockholders approve the 1998
        Stock Option Plan following the Conversion and Reorganization, the
        Holding Company will have reserved for issuance under the 1998 Stock
        Option Plan authorized but unissued shares of Common Stock representing
        an amount of shares equal to 10% of the Conversion Shares sold in the
        Conversion Offerings.  If all of the options were to be exercised
        utilizing these authorized but unissued shares rather than treasury
        shares which could be acquired (for both the 1996 and 1998 Stock Option
        Plans), the voting interests of existing stockholders would be diluted
        by approximately 8.25%.  Assuming stockholder approval of the 1998 Stock
        Option Plan, and that all options under the 1996 and 1998 Stock Option
        Plans were exercised at 

                                       16
September 30, 1997 at an exercise price of $25.25 (to be adjusted
        pursuant to the final Exchange Ratio) and $20.00 per share,
        respectively, pro forma net earnings per share would be $0.90, $0.81,
        $0.75 and $0.70, respectively, for the year ended September 30, 1997,
        and pro forma stockholders' equity per share would be $20.38, $18.87,
        $17.76 and $16.79, respectively, for the year ended September 30, 1997
        at the minimum, midpoint, maximum and 15% above the maximum of the
        Estimated Valuation Range. See "MANAGEMENT OF THE SAVINGS BANK --
        Benefits -- 1998 Stock Option Plan" and "-- Benefits --Management
        Recognition Plan" and "RISK FACTORS -- Possible Dilutive Effect of
        Benefit Programs."
(5)     Per share amounts are based upon shares outstanding of 2,695,343,
        3,170,992, 3,646,640 and 4,193,637 at the minimum, midpoint, maximum and
        15% above the maximum of the Estimated Valuation Range for the year
        ended September 30, 1997, respectively, which includes the Conversion
        Shares sold in the Conversion and Reorganization, less the number of
        shares assumed to be held by the ESOP not committed to be released
        within the first year following the Conversion and Reorganization.
(6)     Historical per share amounts have been computed as if the Conversion
        Shares expected to be issued in the Conversion and Reorganization had
        been outstanding at the beginning of the period or on the date shown,
        but without any adjustment of historical net income or historical
        retained earnings to reflect the investment of the estimated net
        proceeds of the sale of shares in the Conversion and Reorganization, the
        ongoing ESOP expense, or the proposed 1998 MRP expense described above.
(7)     "Book value" represents the difference between the stated amounts of the
        Savings Bank's assets and liabilities.  The amounts shown do not reflect
        the liquidation account which will be established for the benefit of
        Eligible Account Holders and Supplemental Eligible Account Holders in
        the Conversion and Reorganization, or the federal income tax
        consequences of the restoration to income of the Savings Bank's special
        bad debt reserves for income tax purposes which would be required in the
        unlikely event of liquidation.  See "THE CONVERSION AND REORGANIZATION -
        - Effects of Conversion and Reorganization to Stock Form on Depositors
        and Borrowers of the Savings Bank" and "TAXATION."  The amounts shown
        for book value do not represent fair market values or amounts
        distributable to stockholders in the unlikely event of liquidation.
(8)     Per share amounts are based upon shares outstanding of 2,764,821,
        3,252,731, 3,740,640 and 4,301,736 at the minimum, midpoint, maximum and
        15% above the maximum of the Estimated Valuation Range, respectively.
(9)     Does not represent possible future price appreciation or depreciation of
        the Common Stock.
(10)    Assets of the MHC (other than investment in the Savings Bank) consist
        solely of $47,000 of cash on deposit at the Savings Bank, which amount
        is eliminated in consolidation.

                                       17
CONVERSION SHARES TO BE PURCHASED
                 BY MANAGEMENT PURSUANT TO SUBSCRIPTION RIGHTS

  The following table sets forth, for each director and executive officer of the
Savings Bank (and their associates) and for all of the directors and executive
officers as a group, (i) Exchange Shares to be held upon consummation of the
Conversion and Reorganization based upon their beneficial ownership of Public
Savings Bank Shares as of September 30, 1997, (ii) proposed purchases of
Conversion Shares, assuming shares available to satisfy their subscriptions, and
(iii) total shares of Common Stock to be held upon consummation of the
Conversion and Reorganization, in each case assuming that 1,725,000 Conversion
Shares are sold at the midpoint of the Estimated Valuation Range.  No individual
has entered into a binding agreement with respect to such intended purchases,
and, therefore, actual purchases could be more or less than indicated below.
Directors and executive officers and their associates may not purchase in excess
of 31% of the shares sold in the Conversion and Reorganization.  Directors,
officers and employees will pay the Purchase Price ($20.00 per share) for each
share for which they subscribe.
Number of      Proposed Purchase of      Total Common Stock
                                              Exchange        Conversion Shares            to be Held
                                              Shares to     ----------------------   -----------------------
                                               be Held                    Number      Number     Percentage
                                               (1)(2)         Amount     of Shares   of Shares   of Total
                                              -------       ----------   ---------   ---------   ----------
Harold A. Pickens, Jr.                         22,657       $  100,000       5,000      27,657          *     
 Chairman of the Board                                                                                        
                                                                                                              
Robert W. Orr                                  31,533           40,000       2,000      33,533        1.0%    
  President and Managing Officer                                                                              
                                                                                                              
Martha S. Clamp                                13,485          100,000       5,000      18,485          *     
 Director                                                                                                     
                                                                                                              
Jack F. McIntosh                               12,253          100,000       5,000      17,253          *     
 Director                                                                                                     
                                                                                                              
Charles W. Fant, Jr.                               --               --          --          --         --     
 Director                                                                                                     
                                                                                                              
Cordes G. Seabrook, Jr.                        19,082          100,000       5,000      24,082          *     
 Director                                                                                                     
                                                                                                              
Jim Gray Watson                                 6,891          100,000       5,000      11,891          *     
 Director                                                                                                     
                                                                                                              
Richard R. Ballenger                            4,801           20,000       1,000       5,801          *     
 Director                                                                                                     
                                                                                                              
F. Stevon Kay                                  15,419          100,000       5,000      20,419          *     
 Director                                                                                                     
                                                                                                              
Thomas C. Hall                                 25,167           10,000         500      25,667          *     
 Treasurer and Chief Financial Officer                                                                        
                                                                                                              
Barry C. Visioli                               22,442           27,500       1,375      23,817          *     
 Senior Vice President                                                                                        
                                                                                                              
All officers and directors                    214,443        1,038,500      51,925     266,368        8.2     
as a group (21 persons)
----------------------
(1)       Excludes shares which may be received upon the exercise of outstanding
          stock options granted under the 1993 Stock Option Plan (which are
          immediately exercisable) and the 1996 Stock Option Plan (which are
          subject to pro rata vesting over a five year period beginning April 8,
          1998).  Based upon the Exchange Ratio of 2.15625 Exchange Shares for
          each Public Savings Bank Share at the midpoint of the Estimated
          Valuation Range, the following persons named in the table would have
          options to purchase Common Stock as follows:  Mr. Pickens, 4,730
          shares; Mr. Orr, 22,101 shares; Ms. Clamp, 4,730 shares; Mr. McIntosh,
          4,730 shares; Mr. Fant, 4,730 shares; Mr. Seabrook, 4,730 shares; Mr.
          Watson, 4,730 shares; Mr. Ballenger, 4,728 shares; Mr. Kay, 4,728
          shares; Mr. Hall, 27,060; Mr. Visioli, 27,060 and all directors and
          executive officers as a group, 133,859 shares.
(2)       Excludes stock options that may be granted under the 1998 Stock Option
          Plan and awards that may be granted under 1998 MRP if such plans are
          approved by stockholders at an annual or special meeting at least six
          months following the Conversion and Reorganization.  See "MANAGEMENT
          OF THE SAVINGS BANK -- Benefits."
(*)       Less than 1%.

                                       18
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARY
                     CONSOLIDATED STATEMENTS OF OPERATIONS

     The following Consolidated Statements of Operations of Perpetual Bank, A
Federal Savings Bank and Subsidiary for the fiscal years ended September 30,
1997, 1996 and 1995 have been audited by KPMG Peat Marwick LLP, Greenville,
South Carolina, independent auditors, whose report thereon appears elsewhere in
this Prospectus.  These statements should be read in conjunction with the
Consolidated Financial Statements and related Notes included elsewhere herein.
1997           1996          1995
                                                         ------------   ------------   ----------
Interest income:
 Loans................................................   $14,406,160    $11,510,222   $ 9,828,507
 Mortgage-backed securities...........................     3,302,541      3,071,524     3,418,355
 Other investment.....................................       687,736        339,222       296,164
                                                         -----------    -----------   ----------- 
   Total interest income..............................    18,396,437     14,920,968    13,543,026
                                                         -----------    -----------   ----------- 
 Interest expense:
  Interest on deposits:
   Transaction accounts...............................       547,795        467,395       361,486
   Passbook accounts..................................       590,738        622,008       742,786
   Certificate accounts...............................     6,979,888      5,679,186     4,904,477
                                                         -----------    -----------   ----------- 
   Total interest on deposits.........................     8,118,421      6,768,589     6,008,749
 Interest on borrowings...............................     1,377,960        656,203     2,752,221
                                                         -----------    -----------   ----------- 
   Total interest expense.............................     9,496,381      7,424,792     8,760,970
                                                         -----------    -----------   ----------- 
 
Net interest income...................................     8,900,056      7,496,176     4,782,056
Provision for loan losses.............................       655,000        349,250       362,000
                                                         -----------    -----------   ----------- 
Net interest income after provision for loan losses...     8,245,056      7,146,926     4,420,056
                                                         -----------    -----------   ----------- 
 
Other income:
 Loan and deposit account service charges.............     1,526,208      1,268,722       770,212
 Gain (loss) on sale of securities, net...............      (307,534)        53,963     1,777,471
 Gain on sale of real estate, net.....................        19,894         79,034        47,544
 Gain on sale of loans, net...........................        12,509        (23,328)       66,785
 Gain (loss) on sale of fixed assets, net.............      (191,894)        23,724           150
 Other................................................       795,773        548,945       568,607
                                                         -----------    -----------   ----------- 
   Total other income.................................     1,854,956      1,927,336     3,230,769
                                                         -----------    -----------   ----------- 
 
General and administrative expenses:
 Salaries and employee benefits.......................     3,926,888      3,056,726     2,801,915
 Occupancy............................................       486,776        386,796       343,762
 Furniture and equipment expense......................       746,182        542,481       464,250
 FDIC insurance premiums..............................       151,903      1,292,262       330,444
 Advertising..........................................       351,694        390,721       475,007
 Data processing......................................       299,951        237,980       204,463
 Office supplies......................................       386,525        332,794       269,302
 Other................................................     1,095,927        654,304       650,902
                                                         -----------    -----------   ----------- 
   Total general and administrative...................     7,445,846      6,894,064     5,540,045
                                                         -----------    -----------   ----------- 
 
Income before income taxes............................     2,654,166      2,180,198     2,110,780
Income taxes..........................................       925,803        755,811       193,742
                                                         -----------    -----------   ----------- 
Net income............................................   $ 1,728,363    $ 1,424,387   $ 1,917,038
                                                         ===========    ===========   ===========
Earnings per share:
Net income............................................         $1.15          $0.95         $1.27
 
Weighted average shares outstanding...................     1,505,432      1,504,601     1,504,059
See accompanying Notes to Consolidated Financial Statements.

                                       19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS

GENERAL

          For much of its existence, the Savings Bank's investment powers were
limited primarily to fixed-rate mortgage loans, share loans and investment
securities funded by a limited range of deposit products.  Since 1989, however,
when applicable law and regulations permitted savings associations to expand the
scope of their operations, the Savings Bank has gradually refocused operations
to become a retail, community-oriented institution by, among other things, (i)
diversifying its balance sheet by placing increasing emphasis on construction,
commercial real estate, commercial business and consumer lending and (ii)
increasing core deposits through the marketing of checking accounts.  The goal
of these strategies is to diversify and maximize the Savings Bank's earnings
stream, while attempting to minimize interest rate risk.  See "RISK FACTORS --
Certain lending Risks" and "-- Interest Rate Risk."

          The Savings Bank's current business plan is focused on a continuation
of its retail community banking strategy.  Key aspects of the business plan
include: (i) continued balance sheet diversification by pursuing commercial real
estate lending, consumer lending and commercial business lending in its primary
market area; (ii) building its retail customer base by increasing consumer
checking accounts and expanding its retail branch network in Anderson, South
Carolina, and surrounding communities; (iii) preserving asset quality by
emphasizing residential mortgage lending in its primary market area, as well as
purchasing loans from selected South Carolina lenders; (iv) maintaining a
substantial portfolio of mortgage-backed securities and investment grade CMOs to
limit credit risk exposure and to earn a spread on excess investable funds; and
(v) offering non-deposit investment products though a wholly-owned service
corporation (see "BUSINESS OF THE SAVINGS BANK -- Subsidiary Activities").

          The Savings Bank has taken traditional steps to implement its retail
community banking strategy.  The Savings Bank opened a branch office in Seneca,
South Carolina, in December 1996 and a new branch office in Anderson, South
Carolina, in October 1997.  Also, during 1996, the Savings Bank established a
customer call center at the main office as a vehicle to cross-sell the Savings
Bank's products and services to its customers.  The opening of the Seneca branch
office and the establishment of the customer call center resulted in increased
general and administrative expenses in recent periods.  The opening of the new
Anderson branch office is expected to increase general and administrative
expenses in future periods; however, management is unable to quantify accurately
the magnitude of such increases.  Furthermore, the Savings Bank has actively
marketed checking accounts through a free checking program, which has led to an
increase in checking account balances and an increase in service charges and fee
income, but has also led to an increase in general and administrative expenses
relating to marketing and promotion of such accounts.  See "BUSINESS OF THE
SAVINGS BANK -- Deposit Activities and Other Sources of Funds."

          The Savings Bank has also used non-traditional vehicles to implement
its retail community banking strategy.  The Savings Bank has an equity
investment, through a service corporation, in a regional mortgage company, from
which the Savings Bank currently purchases one- to four-family mortgage loans
and commercial real estate loans secured by properties located in South
Carolina.  See "BUSINESS OF THE SAVINGS BANK -- Subsidiary Activities."  In
addition, the Savings Bank has an equity investment in a limited partnership
that invests in mortgage servicing rights.  See "BUSINESS OF THE SAVINGS BANK --
Lending Activities --  Equity Investment in Limited Partnership" and "RISK
FACTORS -- Certain Lending Risks -- Purchased Loans and Interest Rate Risk."

     Upon consummation of the Conversion and Reorganization, the Holding Company
will be a unitary savings and loan holding company.  Under current law, a
unitary saving and loan holding company is not subject to any activity
restrictions.  See "REGULATION -- Savings and Loan Holding Company Regulations."
The Holding Company may consider exploring opportunities to expand into non-
traditional lines of business, such as securities brokerage, insurance agency
and real estate development activities, to the extent permitted by applicable
law.

                                       20
AVERAGE BALANCE SHEET

     The following table sets forth, for the periods indicated, information
regarding average balances of assets and liabilities as well as the total dollar
amounts of interest income from average interest-earning assets and interest
expense on average interest-bearing liabilities, resultant yields, interest rate
spread, ratio of interest-earning assets to interest-bearing liabilities and net
interest margin.  Average balances for a period have been calculated using the
monthly average balances during such period.
Years Ended September 30,
                                    -------------------------------------------------------------------------------
                                                      1997                                       1996
                                     ------------------------------              ----------------------------------
                                               Interest                                          Interest
                                    Average       and      Yield/                     Average       and      Yield/
                                    Balance    Dividends    Cost                       Balance    Dividends    Cost
                                    --------   ---------   -------                   --------   ---------   -------
                                                                                     (Dollars in Thousands)
Interest-earning assets(1):
 Mortgage loans..................   $118,030     $ 9,790     8.29%                   $ 91,535     $ 7,984     8.72%
 Commercial real estate loans....     23,098       2,102     9.10                       14,045       1,338     9.52
 Commercial other................      6,114         592     9.68                        4,468         395     8.84
 Consumer loans..................     17,755       1,922    10.82                       18,563       1,793     9.66
                                    --------     -------                              --------     -------
  Total loans....................    164,997      14,406     8.73                      128,611      11,510     8.95

Mortgage-backed securities and
 CMOs............................     48,638       3,303     6.79                       44,793       3,072     6.86
Investment securities............      5,271         339     6.43                          896          65     7.25
Interest-bearing deposits........      4,485         251     5.60                        4,593         193     4.20
Other earning assets.............      1,311          97     7.40                        1,102          81     7.35
                                    --------     -------                              --------     -------
   Total interest-earning assets.    224,702      18,396     8.19                      179,995      14,921     8.29

Non-interest-earning assets:
 Mutual funds(3).................         --                                                --
 Office properties and
  equipment, net.................      5,645                                             4,048
 Real estate, net................         56                                                20
 Other non-interest-earning
  assets.........................      8,072                                             5,339
                                    --------                                          --------
   Total assets..................   $238,475                                          $189,402
                                    ========                                          ========

Interest-bearing liabilities:
 Savings.........................     22,923         590     2.57                       23,482         622     2.65
 Negotiable order of withdrawal
  ("NOW") accounts...............     35,196         548     1.56                       28,412         468     1.65
 Certificates of deposit.........    123,407       6,980     5.56                      102,721       5,679     5.53
                                    --------     -------                               -------       -----
   Total deposits................    181,526       8,118     4.47                      154,615       6,769     4.38

 Other interest-bearing
  liabilities....................     23,951       1,378     5.75                       12,531         656     5.24
                                    --------     -------                              --------     -------
   Total interest-bearing
    liabilities..................    205,477       9,496     4.62                      167,146       7,425     4.44
Years Ended September 30,
                                    ------------------------------------------------------------------------------------------------

                                                     1995
                                    ------------------------------------
                                                  Interest
                                       Average       and      Yield/
                                       Balance    Dividends    Cost
                                       --------   ---------   -------
Interest-earning assets(1):         
 Mortgage loans..................      $ 88,153     $ 7,292     8.28%
 Commercial real estate loans....         5,583         524     9.39
 Commercial other................         2,061         219    10.63
 Consumer loans..................        16,697       1,794    10.74
                                       --------     -------
  Total loans....................       112,494       9,829     8.74
                                       --------     -------
                                    
Mortgage-backed securities and      
 CMOs............................        48,263       3,418     7.08
Investment securities............           246           9     3.66
Interest-bearing deposits........         1,682         127     7.55
Other earning assets.............         2,205         160     7.26
                                       --------     -------
   Total interest-earning assets.       164,890      13,543     8.21
                                    
Non-interest-earning assets:        
 Mutual funds(3).................        33,578
 Office properties and              
  equipment, net.................         3,887
 Real estate, net................           382
 Other non-interest-earning         
  assets.........................         4,801
                                       --------
   Total assets..................      $207,538
                                       ========
                                    
Interest-bearing liabilities:       
 Savings.........................        26,885         743     2.76
 Negotiable order of withdrawal     
  ("NOW") accounts...............        20,923         362     1.73
 Certificates of deposit.........        99,653       4,904     4.92
                                       --------     -------
   Total deposits................       147,461       6,009     4.07
                                    
 Other interest-bearing             
  liabilities....................        43,036       2,752     6.39
                                       --------     -------
   Total interest-bearing           
    liabilities..................       190,497       8,761     4.60
(table continued on next page)

                                       21
Years Ended September 30,
                                               -------------------------------------------------------------------------------------

                                                      1997                                            1996
                                               ---------------------------             --------------------------------------
                                                        Interest                                    Interest
                                               Average    and      Yield/               Average       and      Yield/
                                               Balance  Dividends    Cost               Balance    Dividends    Cost
                                               ---------------------------             --------------------------------------
                                                                                       (Dollars in Thousands)
Non-interest-bearing liabilities:
 Non-interest-bearing deposits..............       397                                      1,186
 Other liabilities..........................     2,693                                      1,827
                                              --------                                   --------
   Total liabilities........................     3,090                                    170,159
Stockholders' equity........................    29,908                                     19,243
                                              --------                                   --------

   Total liabilities and stockholders'
     equity.................................  $238,475                                   $189,402
                                              ========                                   ========

Net interest income.........................              $  8,900                                    $7,496
                                                          ========                                 =========

Interest rate spread........................                        3.57%                                            3.85%
                                                                    ====                                            ======

Net interest margin.........................                        3.96%                                            4.16%
                                                                    ====                                            ======

Ratio of average interest-earning assets to
  average interest-bearing liabilities......                      109.36%                                          107.69%
                                                                  ======                                           =======
Years Ended September 30,
                                               -------------------------------------------------------------------------------------

                                                            1995
                                               ----------------------------------
                                                          Interest
                                               Average       and      Yield/
                                               Balance    Dividends    Cost
                                               --------   ---------   -------
Non-interest-bearing liabilities:            
 Non-interest-bearing deposits..............  
 Other liabilities..........................  
                                                    909
   Total liabilities........................         --
Stockholders' equity........................   --------
                                                191,406
                                                 16,132
   Total liabilities and stockholders'         --------
     equity.................................  
                                              
                                               $207,538
Net interest income.........................   ========
                                              
                                                            $4,782
Interest rate spread........................              =========
                                              
                                                                       3.61%
Net interest margin.........................                          ======
                                              
                                                                       2.90%
Ratio of average interest-earning assets to                           ======
  average interest-bearing liabilities......  
                                              
                                                                      86.56% 
                                                                      =====
------------------------
(1)  Excludes interest on loans 90 days or more past due.
(2)  Represents mutual funds which do not pay interest or dividends.

                                       22
YIELDS EARNED AND RATES PAID

     The following table sets forth for the periods and at the dates indicated,
the weighted average yields earned on the Savings Bank's assets, the weighted
average interest rates paid on the Savings Bank's liabilities, together with the
net yield on interest-earning assets.
At                       Year Ended
                                                         September 30,               September 30,
                                                                          ---------------------------
                                                              1997        1997       1996       1995
                                                         --------------   -----      ----       ----
Weighted average yield earned on:

Loan portfolio........................................        8.49%       8.73%      8.95%      8.74%
Mortgage-backed securities, CMOs and
 adjustable-rate mortgage ("ARM") mutual fund.........        7.25        6.79       6.86       7.08
Investment securities and interest-earning deposits...        7.03        6.21       4.70       7.05
All interest-earning assets...........................        8.20        8.19       8.29       8.21

Weighted average rate paid on:

Deposits..............................................        4.64        4.47       4.38       4.07
FHLB advances and other borrowings....................        6.24        5.53       5.24       6.39
All interest-bearing liabilities......................        4.75        4.60       4.44       4.60

Interest rate spread (spread between weighted
  average rate on all interest-earning assets
  and all interest-bearing liabilities)...............        3.45        3.57       3.85       3.61

Interest rate margin (net interest income as a
  percentage of average interest-earning assets)......        N/A         3.96       4.16       2.90
23
RATE/VOLUME ANALYSIS

     The following table sets forth the effects of changing rates and volumes on
net interest income of the Savings Bank.  Information is provided with respect
to (i) effects on interest income attributable to changes in volume (changes in
volume multiplied by prior rate); (ii) effects on interest income attributable
to changes in rate (changes in rate multiplied by prior volume); (iii) changes
in rate/volume (change in rate multiplied by change in volume); and (iv) the net
change (the sum of the prior columns).
Years Ended September 30,              Years Ended September 30,              
                                1997 Compared to September 30,         1996 Compared to September 30,         
                                1996 Increase (Decrease) Due to        1995 Increase (Decrease) Due to        
                                ------------------------------------   -------------------------------------  
                                                    Rate/                                  Rate/              
                                Volume     Rate    Volume      Net     Volume     Rate    Volume      Net     
                                -------   ------   -------   -------   -------   ------   -------   --------  
                                                                                (Dollars in Thousands)
Interest-earning assets:                                                                                      
 Mortgage loans..............    2,311     (392)     (113)    1,806       280      397        15        692   
 Commercial real estate......      862      (60)      (39)      763       794        8        12        814   
 Commercial other............      146       38        14       198       756      (37)      (43)       176   
 Consumer loans..............      (78)     216        (9)      129       200     (180)      (20)        --   
                                ------    -----     -----    ------   -------    -----     -----    -------   
  Total loans................    3,241     (198)     (147)    2,896     1,530      188       (36)     1,682   
 Mortgage-backed securities                                                                                   
  and                                                                                                         
  CMOs.......................      263      (30)       (2)      231      (246)    (109)        8       (347)  
 Investment securities.......      320       (8)      (38)      274        23        9        25         57   
 Mutual funds................       --       --        --        --        --       --        --         --   
 Interest-earning deposits...       (5)      65        (2)       58       220      (57)      (98)        65   
 Other interest-earning                                                                                       
  assets.....................       16       --        --        16       (80)       2        (1)       (79)  
                                ------    -----     -----    ------   -------    -----     -----    -------   
                                                                                                              
Total net change in income on                                                                                 
  interest-earning assets....    3,800     (143)     (182)    3,475     1,312       89       (23)     1,378   
                                ------    -----     -----    ------   -------    -----     -----    -------   
                                                                                                              
Interest-bearing liabilities:                                                                                 
 Savings accounts............      (15)     (18)       --       (33)      (94)     (31)        4       (121)  
 NOW accounts................      112      (25)       (6)       81       129      (17)       (6)       106   
 Certificates of deposit.....    1,144      131        26     1,301       151      605        19        775   
                                ------    -----     -----    ------   -------    -----     -----    -------   
                                                                                                              
Total deposits...............    1,241       88        20     1,349       186      557        17        760   
                                ------    -----     -----    ------   -------    -----     -----    -------   
                                                                                                              
Other interest-bearing                                                                                        
 liabilities.................      648       37        37       722    (1,951)    (498)      353     (2,096)  
                                ------    -----     -----    ------   -------    -----     -----    -------   
Total net change in expense                                                                                   
 on                                                                                                           
  interest-bearing                                                                                            
   liabilities...............    1,889      125        57     2,071    (1,765)      59       370     (1,336)  
                                ------    -----     -----    ------   -------    -----     -----    -------   
                                                                                                              
Net change in net interest                                                                                    
 income......................   $1,911    $(268)    $(239)   $1,404   $ 3,077    $  30     $(393)   $ 2,714   
                                ======    =====     =====    ======   =======    =====     =====    =======
Years Ended September 30,
                                   1995 Compared to September 30,
                                   1994 Increase (Decrease) Due to
                                  ---------------------------------------
                                                      Rate/
                                  Volume     Rate    Volume      Net
                                  -------   ------ --------    --------
Interest-earning assets:
 Mortgage loans..............        882       97       14        993
 Commercial real estate......        313       19       39        371
 Commercial other............        134        8       19        161
 Consumer loans..............       (375)     330      (65)      (110)
                                  -------   ------ --------    --------
  Total loans................        954      457        7      1,415
 Mortgage-backed securities
  and
  CMOs.......................       (615)     725     (130)       (20)
 Investment securities.......          7       (7)      (4)        (4)
 Mutual funds................        229      (15)    (229)       (15)
 Interest-earning deposits...        (83)     198     (122)        (7)
 Other interest-earning
  assets.....................         50       27       22         99
                                  -------   ------ --------    --------

Total net change in income on
  interest-earning assets....        520    1,439     (491)     1,468

Interest-bearing liabilities:
 Savings accounts............       (173)     (11)       2       (182)
 NOW accounts................        189      (24)     (21)       144
 Certificates of deposit.....        178      784       36        998

                                  -------   ------ --------    --------
Total deposits...............        194      749       17        960
                                  -------   ------ --------    --------

Other interest-bearing
 liabilities.................      1,290      274      613      2,177
                                  -------   ------ --------    --------
Total net change in expense
 on
  interest-bearing
   liabilities...............      1,484    1,023      630      3,137
                                  -------   ------ --------    --------

Net change in net interest
 income......................     $ (964)   $ 416  $(1,121)    $(1,669)
                                  =======   ====== ========    ========
----------------------
(1)  Excludes interest on loans 90 days or more past due.

                                       24
COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 1997 AND 1996

     Total assets increased 22.5% from $209.8 million at September 30, 1996 to
$257.0 million at September 30, 1997 primarily as a result of an increase in
loans receivable and an increase in investment securities available-for-sale.
These increases were funded primarily by deposit growth, FHLB advances and
repayment of mortgage-backed securities.

     Loans receivable increased 27.0% from $140.8 million at September 30, 1996
to $178.8 million at September 30, 1997.  The increase in loans receivable
resulted from growth in all loan categories, except construction loans which
declined slightly from $19.5 million at September 30, 1997 to $17.1 million at
September 30, 1997.

     In December 1996, the Savings Bank invested in a limited partnership that
invests in mortgage loan servicing rights.  At September 30, 1997, the value of
the limited partnership investment was $5.0 million.  See "BUSINESS OF THE
SAVINGS BANK -- Lending Activities -- Equity Investment in Limited Partnership"
for further information.  The value of this investment would be adversely
impacted in the event of a decrease in market interest rates.  See "RISK FACTORS
-- Interest Rate Risk."

     Investment securities available-for-sale increased from $2.5 million at
September 30, 1996 to $11.3 million at September 30, 1997.  In an effort to
increase the average portfolio yield, the Savings Bank purchased additional
investment securities during the year ended September 30, 1997, including a $4.0
million FHLB bond with a yield of 6.30% at September 30, 1997 and a final
maturity of October 2001.  The Savings Bank also invested $3.1 million to
purchase a $15.0 million FHLB zero coupon bond with a coupon rate of 8.00%,
callable in July 2000, and with a final maturity of July 2017, and $3.0 million
to purchase a second $15.0 million FHLB zero coupon bond with a coupon rate of
8.20%, callable in September 1998, and with a final maturity of July 2017.
Although these long-term zero coupon bonds offer higher yields, an increase in
market interest rates would have a material adverse effect on their value.  The
Savings Bank restructured its mortgage-backed securities portfolio by selling
(i) $19.8 million of fixed-rate CMOs yielding 6.25% and with final maturities
ranging from 2001 through 2005, incurring a loss on sale of $280,000 and (ii)
$3.1 million of fixed-rate mortgage-backed securities yielding 6.32%, incurring
a loss on sale of $28,000.  The Savings Bank purchased $8.0 million of
adjustable rate CMOs with a yield of 7.03% at September 30, 1997 and $10.7
million of fixed-rate mortgage-backed securities with a yield of 7.33% at
September 30, 1997.  See "RISK FACTORS -- Interest Rate Risk."

     Real estate held for development increased from $1.4 million at September
30, 1996 to $2.3 million at September 30, 1997 primarily as a result of the
acquisition of the Meadows Development project.  See "BUSINESS OF THE SAVINGS
BANK -- Subsidiary Activities" for further information regarding the Meadows
Development project.

     Premises and equipment, net, increased from $4.9 million at September 30,
1996 to $6.3 million at September 30, 1997 primarily as a result of the
construction of the Perpetual Square branch office in Anderson, South Carolina
($606,000), and the purchase of new hardware and software for the in-house
computer system ($1.1 million).

     Deposits increased 25.5% from $160.2 million at September 30, 1996 to
$201.0 million at September 30, 1997 primarily as a result of an increase in
one-year certificate of deposits.  The Savings Bank aggressively marketed
special seven-month and 13-month certificates of deposit to attract operating
funds.  Although no assurances can be given, based on management's experience
and familiarity with the customers involved and the Savings Bank's pricing
policy relative to that of its competitors, management believes that a
significant portion of such deposits will remain with the Savings Bank.

     Stockholders' equity increased from $29.1 million at September 30, 1996 to
$30.8 million at September 30, 1997 as a result of retained net income, less
dividends paid on the Public Savings Bank Shares.

                                       25
COMPARISON OF THE YEAR ENDED SEPTEMBER 30, 1997 TO THE YEAR ENDED SEPTEMBER 30,
1996

     NET INCOME.  Net income increased 21.4% from $1.4 million, or $0.95 per
share, in 1996 to $1.7 million, or $1.15 per share, in 1997.  Net income for
1996 was adversely affected by the one-time SAIF recapitalization assessment.
See "-- General and Administrative Expenses" below.  Without this one-time
assessment, 1996 net income would have been $2.0 million, or $1.36 per share.

     NET INTEREST INCOME.  Net interest income increased 18.7% from $7.5 million
in 1996 to $8.9 million in 1997.  Interest income on loans increased 25.2% from
$11.5 million to $14.4 million as the average balance of loans receivable
increased 28.3% from $128.6 million in 1996 to $165.0 in 1997 primarily as a
result of growth in loan originations and purchases. Interest income on
mortgage-backed securities increased 6.5% from $3.1 million in 1966 to $3.3
million in 1997 as the average balance of mortgage-backed securities increased
8.5% from $44.8 million in 1996 to $48.6 million in 1997.  Interest income on
other investments increased 102.9% from $339,000 in 1996 to $688,000 in 1997 as
the average balance of other interest earning assets increased 68.2% from $6.6
million in 1996 to $11.1 million in 1997 primarily as a result of investment
securities purchases.

     INTEREST EXPENSE.  Interest expense on deposits increased 19.1% from $6.8
million in 1996 to $8.1 million in 1997 as the average balance of deposits
increased 17.4% from $154.6 million in  1996 to $181.5 million in 1997 and the
weighted average cost of deposits increased from 4.38% for 1996 to 4.47% for
1997.  The increase in the average balance of deposits and the increase in the
weighted average cost of deposits resulted primarily from the promotion of
short-term certificates of deposit.  See "-- Comparison of Financial Condition
at September 30, 1997 and 1996" for further discussion.

     Interest expense on borrowings increased 110.1% from $656,000 for fiscal
1996 to $1.4 million for fiscal 1997 as the average borrowings increased from
$12.5 million in 1996 to $24.9 million in 1997 in order to fund loan
originations and purchases.

     PROVISION FOR LOAN LOSSES.  Provisions for loan losses are charges to
earnings to bring the total allowance for loan losses to a level considered
adequate by management to provide for management's best estimate of inherent
loan losses.  In determining the adequacy of the allowance for loan losses,
management evaluates various factors, including the market value of the
underlying collateral, growth and composition of the loan portfolio, the
relationship of the allowance for loan losses to outstanding loans, loss
experience, delinquency trends and economic conditions.  Management evaluates
the carrying value of loans periodically and the allowance for loan losses is
adjusted accordingly.  See "BUSINESS OF THE SAVINGS BANK -- Lending Activities -
- Allowance for Loan Losses" and Note 4 to Notes to Consolidated Financial
Statements.

     The provision for loan losses increased 87.7% from $349,000 in 1996 to
$655,000 in 1997.  Management deemed the increase necessary in light of net
charge-offs of $304,000 and the growth in the loan portfolio during 1997.  At
September 30, 1997,  the allowance for loan losses was 1.04% of total loans and
was deemed adequate by management at that date.

     OTHER INCOME.  Total other income decreased $72,000 from 1996 to 1997.
Loan and deposit account service charges increased $257,000 from $1.3 million in
1996 to $1.5 million in 1997 as a result of an increase in the number of
checking accounts.  Other income increased $271,000 from $525,000 in 1996 to
$796,000 in 1997 primarily as a result of income of $185,000 from the investment
in a limited partnership that invests in mortgage servicing rights (see
"BUSINESS OF THE SAVINGS BANK -- Lending Activities -- Loan Purchases and, Sales
and Servicing") and gains from sale of real estate held for development (see
"BUSINESS OF THE SAVINGS BANK -- Subsidiary Activities").  These increases were
offset by losses on sale of investments of $308,000 in connection with the
restructuring of the investment securities portfolio and the write-off of
$192,000 of computer hardware and software as a result of the upgrading of the
computer system.  See "-- Comparison of Financial

                                       26
Condition at September 30, 1997 and 1996" for information regarding the
restructuring of the investment securities portfolio.

     GENERAL AND ADMINISTRATIVE EXPENSES.  General and administrative expenses
increased $552,000 from $6.9 million in 1996 to $7.4 million in 1997.  Salaries
and employee benefits increased 28.5% from $3.1 million in 1996 to $3.9 million
in 1997 as a result of the opening of the Seneca branch office, staffing a call
center at the main office, and expenses associated with the ESOP and the 1996
MRP.  Occupancy expense increased $100,000, or 25.8%, primarily as a result of
the opening of the Seneca branch office.  Furniture and equipment expense
increased 37.6% from $542,000 in 1996 to $746,000 in 1997 as a result of the
purchase of additional computer equipment and equipping the Seneca branch office
and the call center.  The FDIC insurance premiums decreased $1.1 million from
$1.3 million in 1996 to $152,000 in 1997, due to the one-time SAIF
recapitalization assessment of $946,000 incurred in September 1996.  Prior to
the SAIF recapitalization, the Savings Bank's total annual deposit insurance
premiums amounted to 0.23% of assessable deposits.  Effective January 1, 1997,
the rate decreased to 0.065% of assessable deposits.  See "REGULATION -- Federal
Regulation of Savings Associations -- Federal Deposit Insurance Corporation."
Advertising expense decreased 10.0% from $391,000 in 1996 to $352,000 in 1997 as
a result of the winding down of the free checking advertising campaign that
began in October 1994.  Data processing expense increased 26.1% from $238,000 in
1996 to $300,000 in 1997 primarily as a result of the new Seneca branch office
and the new call center.  Office supplies increased 16.2% from $333,000 in 1996
to $387,000 in 1997 primarily as a result of the opening of the Seneca branch
office.

     Other operating expenses increased 68.2% from $654,000 in 1996 to $1.1
million in 1997 as a result of the opening of the Seneca branch office, sales
training for the call center, increased postage expense and professional fees,
and supplies for the free checking program.

     INCOME TAXES.  Income taxes increased 22.5% from $756,000 in 1996 to
$926,000 in 1997 due to an increase in income before taxes.  The effective tax
rate was 35% for both 1996 and 1997.

COMPARISON OF THE YEAR ENDED SEPTEMBER 30, 1996 TO THE YEAR ENDED SEPTEMBER 30,
1995

     NET INCOME.  Net income decreased from $1.9 million, or $1.27 per share, in
1995 to $1.4 million, or $0.95 per share, in 1996 primarily as a result of the
one-time SAIF recapitalization assessment of $946,000 ($625,000 after tax).
Without this one-time assessment, 1996 net income would have been $2.0 million,
or $1.36 per share.  Net income for 1995 benefitted from a one-time gain of $1.8
million on the sale of mutual funds.

     NET INTEREST INCOME.  Net interest income increased 56.3% from $4.8 million
in 1996 to $7.5 million in 1996 primarily as a result of decreased interest
expense on borrowings used to purchase mutual fund shares in 1995.  The mutual
funds were sold in 1995 at a gain of $1.8 million.  These funds were selected
for their capital appreciation characteristics; no interest income was
recognized on the mutual fund investments in 1995.  Interest income on loans
increased 17.3% from $9.8 million in 1995 to $11.5 in 1996 as the average
balance of loans receivable increased 14.3% from $112.5 million in 1995 to
$128.6 million in 1996.  Interest income on mortgage-backed securities decreased
9.7% from $3.4 million in 1995 to $3.1 million in 1996 as the average balance of
mortgage-backed securities decreased 7.8% from $48.3 million in 1995 to $44.8
million in 1996.

     INTEREST EXPENSE.  Interest expense on deposits increased 13.3% from $6.0
million in 1995 to $6.8 million in 1996 as the average balance of deposits
increased from $147.5 million in 1995 to $154.6 million in 1996 and the weighted
average cost of deposits increased from 4.07% in 1995 to 4.38% in 1996 as a
result of an increase in market interest rates.  Management attributes the
increase in average deposits to normal deposit growth.

     Interest expense on borrowings decreased $2.1 million from $2.8 million in
1995 to $656,000 in 1996 as the average borrowings decreased from $43.0 million
in 1995 to $12.5 million in 1996.  The FHLB advances were used to fund the
mutual fund investment in 1995.

                                       27
PROVISION FOR LOAN LOSSES.  The provision for loan losses decreased from
$362,000 in 1995 to $349,000 in 1996.  At September 30, 1996, the allowance for
loan losses was 1.08% of total loans and was deemed adequate by management at
that date.

     OTHER INCOME.  Other income decreased $1.3 million from $3.2 million in
1995 to $1.9 million in 1996, primarily as a result of capital gains on the sale
of mutual funds of $1.8 million in 1995 and a 68.8% increase in loan and deposit
account service charges from $770,000 in 1995 to $1.3 million in 1996 as a
result of an increase in the number of deposit accounts.

     GENERAL AND ADMINISTRATIVE EXPENSES.  General and administrative expenses
increased 25.5% from $5.5 million in 1995 to $6.9 million in 1996.  Salaries and
employee benefits increased 9.1% primarily as a result of increases in staff
needed to service the increased number of checking accounts.  Office occupancy
increased 12.5% primarily as a result of general building maintenance costs.
Furniture and equipment expense increased 16.8% from $464,000 in 1995 to
$542,000 in 1996 as a result of an increase in depreciation expense related to
the purchase of check imaging equipment.  FDIC insurance premiums increased
293.9% from $330,000 in 1995 to $1.3 million in 1996 as a result of the one-time
SAIF recapitalization assessment of $946,000.  Advertising expense decreased
17.7% from $475,000 in 1995 to $391,000 in 1996 primarily as a result of the
opening of the Northtowne office in 1995.  Office supplies increased 23.4% from
$269,000 in 1995 to $332,000 in 1996 primarily as a result of the increase in
the number of checking accounts.

     INCOME TAXES.  Income taxes increased from $194,000 (effective tax rate of
9.2%) in 1995 to $756,000 (effective tax rate of 35%) in 1996 due to an increase
in income before taxes.  The lower effective tax rate in 1995 resulted from the
use of capital loss carryforwards to offset $1.8 million in capital gains income
generated by the sale of mutual funds in 1995.

ASSET AND LIABILITY MANAGEMENT

     QUANTITATIVE ASPECTS OF MARKET RISK.  The Savings Bank does not maintain a
trading account for any class of financial instrument nor does it engage in
hedging activities or purchase purchase high-risk derivative instruments.
Furthermore, the Savings Bank is not subject to foreign currency exchange rate
risk or commodity price risk.  For information regarding the sensitivity to
interest rate risk of the Savings Bank's interest-earning assets and interest-
bearing liabilities, see the tables under "BUSINESS OF THE SAVINGS BANK --
Lending Activities -- Loan Maturity," "-- Investment Activities" and "-- Deposit
Activities and Other Sources of Funds -- Time Deposits by Rates and Maturities."

     QUALITATIVE ASPECTS OF MARKET RISK.  The OTS uses a net market value
methodology to measure the interest rate risk exposure of thrift institutions.
This exposure is a measure of the potential decline in the net portfolio value
("NPV") of the institution based upon the effect of an assumed 200 basis point
increase or decrease in interest rates.  NPV is the present value of the
expected net cash flows from the institution's assets, liabilities and off-
balance sheet contracts.  Under OTS regulations, an institution's "normal" level
of interest rate risk in the event of this assumed change in interest rates is a
decrease in the institution's NPV in an amount not exceeding 2% of the present
value of its assets.  This procedure for measuring interest rate risk was
developed by the OTS to replace the "gap" analysis (the difference between
interest-earning assets and interest-bearing liabilities that mature or reprice
within a specific time period).

                                       28
The following table is provided to the Savings Bank by the OTS and
illustrates the percent change in NPV as of September 30, 1997, based on OTS
assumptions.  No effect has been given to any steps that the Savings Bank may
take to counteract the effect of the interest rate movements presented in the
table.
Basis                                                     NPV as Percent of             
Point ("bp")            Net Portfolio Value            Present Value of Assets      
Change             ------------------------------      ------------------------     
In Rates           Amount   $ Change    % Change       NPV Ratio       Change       
------------       ------   ---------   ---------      -----------   ---------
400 bp        24,217   $(14,457)        (37)%         9.84%       (479)bp      
     300 bp        28,092    (10,581)        (27)         11.19        (343)        
     200 bp        31,972     (6,702)        (17)         12.50        (213)        
     100 bp        35,469     (3,204)         (8)         13.63        (100)        
       0 bp        38,673                                 14.62                     
    (100 bp)       41,265      2,591           7          15.39          77         
    (200 bp)       43,761      5,087          13          16.10         148         
    (300 bp)       46,961      8,287          21          17.01         239         
    (400 bp)       51,467     12,793          33          18.26         364
As with any method of measuring interest rate risk, certain shortcomings
are inherent in the method of analysis presented in the foregoing table.  For
example, although certain assets and liabilities may have similar maturities or
periods to repricing, they may react in different degrees to changes in market
interest rates.  Also, the interest rates on certain types of assets and
liabilities may fluctuate in advance of changes in market interest rates, while
interest rates on other types may lag behind changes in market rates.
Furthermore, in the event of a change in interest rates, expected rates of
prepayments on loans and early withdrawals from certificates likely could
deviate significantly from those assumed in calculating the table.  Therefore,
the data presented in the table should not be relied upon as necessarily
indicative of actual results.

LIQUIDITY AND CAPITAL RESOURCES

     The Savings Bank's primary sources of funds are deposits, repayment of loan
principal (including mortgage-backed securities ("MBSs" and CMOs) and, to a
lesser extent, sales of mortgage-backed securities available for sale,
maturities of investment securities, and short-term investments and operations.
While scheduled loan repayments and maturing investments are relatively
predictable, deposit flows and early loan repayments are more influenced by
interest rates, general economic conditions, and competition.  The Savings Bank
attempts to price its deposits to meet its asset/liability objectives discussed
above, consistent with local market conditions.  Excess balances are generally
invested in overnight funds.  In addition, the Savings Bank is eligible to
borrow funds from the FHLB of Atlanta.

     Under OTS regulations, a member thrift institution is required to maintain
an average daily balance of liquid assets (cash, certain time deposits and
savings accounts, bankers' acceptances, and specified U.S. Government, state or
federal agency obligations and certain other investments) equal to a monthly
average of not less than a specified percentage of its net withdrawable accounts
plus short-term borrowings.  The current liquidity requirement is 4.0%.
Monetary penalties may be imposed for failure to meet liquidity requirements.
The Savings Bank's liquidity ratio at September 30, 1997 was 5.64%.

     The primary investing activity of the Savings Bank is lending.  During the
years ended September 30, 1997 and 1996, the Savings Bank originated $77.3
million and $68.3 million, respectively, of loans, of which $5.7 million in 1997
and $9.6 million in 1996 were sold to the Federal Home Loan Mortgage Corporation
("FHLMC").  The retained originations were funded by $59.5 million and $27.0
million, respectively, in principal repayments on loans and mortgage-backed
securities.

                                       29
Liquidity management is both a short-and long-term responsibility of the
Savings Bank's management.  The Savings Bank adjusts its investments in liquid
assets based upon management's assessment of (i) expected loan demand, (ii)
projected loan sales, (iii) expected deposit flows, (iv) yields available on
interest-bearing deposits, and (v) liquidity of its asset/liability management
program.  Excess liquidity is invested generally in interest-bearing overnight
deposits and other short-term government and agency obligations.  If the Savings
Bank requires funds beyond its ability to generate them internally, it has
additional borrowing capacity with the FHLB and collateral eligible for
repurchase agreements.

     The Savings Bank anticipates that it will have sufficient funds available
to meet current loan commitments.  At September 30, 1997, the Savings Bank had
outstanding commitments to originate loans (including commitments to fund
letters of credit) of $27.9 million.  The Savings Bank expects to fund these
commitments with funds received from normal operations.  See Note 17 to
Consolidated Financial Statements.

     Certificates of deposit scheduled to mature in one year or less at
September 30, 1997 totaled $115.7 million.  Although no assurances can be given,
based upon management's experience and familiarity with the customers involved
and the Savings Bank's pricing policy relative to that of its perceived
competitors, management believes that a significant portion of such deposits
will remain with the Savings Bank.

     Since 1980, the Savings Bank has diversified its lending to include home
equity, second mortgage and consumer loans.  This diversification has been
designed to increase earnings and reduce interest rate risk.  The Savings Bank
has also increased the origination of home equity and second mortgage loans
secured by one- to four-family dwellings and intends to reduce the balance of
its MBSs by deploying funds into more profitable whole loans and becoming more
commercial bank-like in lending philosophy and direction.  The Savings Bank will
continue to divest itself of mortgage-backed securities, when opportunities
arise to invest such funds in higher yielding whole loans.  These changes in
lending and investment strategy will reduce the Savings Bank's liquidity in the
future as lower-yielding, more liquid assets are redeployed into higher-yielding
assets.

     The Savings Bank must maintain minimum capital standards as promulgated by
the FDIC and the OTS which are:  (1) a leverage limit requiring all thrift
institutions to maintain core capital in an amount not less than 3% of the
institution's total assets; (2) a tangible capital requirement of not less than
1.5% of total assets; and (3) a risk-based capital requirement of not less than
8% of the institution's total assets, substantially the same as the risk-based
capital requirements for national banks.  The Savings Bank met all regulatory
capital requirements at September 30, 1997 and 1996.  See "HISTORICAL AND PRO
FORMA REGULATORY CAPITAL COMPLIANCE."

                                       30
IMPACT OF ACCOUNTING PRONOUNCEMENTS AND REGULATORY POLICIES

     ACCOUNTING FOR STOCK-BASED COMPENSATION.  Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation,"
establishes financial accounting and reporting standards for stock-based
employee compensation plans.  This statement encourages all entities to adopt a
new method of accounting to measure compensation cost of all employee stock
compensation plans based on the estimated fair value of the award at the date it
is granted.  Companies are, however, allowed to continue to measure compensation
cost for those plans using the intrinsic value based method of accounting, which
generally does not result in compensation expense recognition for most plans.
Companies that elect to remain with the existing accounting method are required
to disclose in a footnote to the financial statements pro forma net income and,
if presented, earnings per share, as if this statement had been adopted.  The
accounting requirements of this statement are effective for transactions entered
into in fiscal years that begin after December 15, 1995; however, companies are
required to disclose information for awards granted in their first fiscal year
beginning after December 15, 1994.  Management of the Savings Bank uses the
intrinsic value method.

     ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND
EXTINGUISHMENT OF LIABILITIES.  SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities," provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishment of liabilities.  This statement applies prospectively
to transactions occurring after December 31, 1996, and establishes new standards
that focus on control whereas, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the liabilities it
has incurred, derecognizes financial assets when control has been surrendered,
and derecognizes liabilities when extinguished.  The adoption of SFAS No. 125
did not have a material impact on the Savings Bank's results of operations or
financial position.

     DEFERRAL OF THE EFFECTIVE DATE OF CERTAIN PROVISIONS OF SFAS NO. 125.  In
December 1996, the Financial Accounting Standards Board ("FASB") issued SFAS No.
127, "Deferral of the Effective Date of Certain Provisions of FASB Statement No.
125."  SFAS No. 127 defers for one year the effective date of portions of SFAS
No. 125 that address secured borrowings and collateral for all transactions.
Additionally, SFAS No. 127 defers for one year the effective date of transfers
of financial assets that are part of repurchase agreements, securities lending
and similar transactions.

     EARNINGS PER SHARE.  In February 1997, the FASB issued SFAS No. 128,
"Earnings Per Share."  SFAS 128 applies to entities with publicly traded common
stock or potential common stock and is effective for financial statements for
periods ending after December 15, 1997, including interim periods.  SFAS 128
simplifies the standards for computing earnings per share ("EPS") previously
found in Accounting Principles Board ("APB") Opinion 15, "Earnings Per Share."
It replaces the presentation of primary EPS with a presentation of basic EPS.
It also requires dual presentation of basic and diluted EPS on the face of the
income statement for all companies with complex capital structures and requires
a reconciliation of the numerator and denominator of the basic EPS computation
to the numerator and denominator of the diluted EPS computation.  The Savings
Bank's present computation of diluted EPS under APB Opinion 15 is applied
against a materiality test of 3%.  For financial statements issued by the
Savings Bank after December 15, 1997, the materiality test will no longer apply
and the Savings Bank will report basic and diluted EPS for each period presented
as well as the further reconciliations required by SFAS 128.  Although earlier
application is not permitted, SFAS 128 will require restatement of all prior-
period EPS data presented.

     DISCLOSURE OF INFORMATION ABOUT CAPITAL STRUCTURE.  In February 1997, the
FASB also issued SFAS No. 129, "Disclosure of Information about Capital
Structure."  The purpose of SFAS 129 is to consolidate existing disclosure
requirements for ease of retrieval.  SFAS 129 contains no change in disclosure
requirements for companies, such as the Savings Bank that were subject to the
previously existing requirements.  It applies to all entities and is effective
for financial statement issued for periods ending after December 15, 1997.

                                       31
REPORTING COMPREHENSIVE INCOME.  In June 1997, the FASB issued SFAS No.
130, "Reporting Comprehensive Income."  The purpose of SFAS 130 is to address
concerns over the practice of reporting elements of comprehensive income
directly in equity.  This SFAS requires all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed in equal prominence with the
other financial statements.  This statement is effective for periods beginning
after December 15, 1997.  Comparative financial statements are required to be
reclassified to reflect the provisions of this statement.  The Savings Bank will
adopt the provisions of this SFAS for fiscal year 1998.

     DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION.  In
June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information."  This statement applies to all public
entities.  The provisions of SFAS 131 require certain disclosures regarding
material industry segments within an entity.  SFAS 131 is not expected to have a
material impact on the Savings Bank.

YEAR 2000 CONSIDERATIONS

     Many existing computer programs use only two digits to identify a year in
the date datum field.  These programs were designed and developed without
considering the impact of the upcoming change in the century.  If uncorrected,
many computer applications could fail or create erroneous results by or at the
Year 2000.  The Year 2000 issue affects virtually all companies and
organizations.

     The Savings Bank has an in-house computer system to process customer
records and monetary transactions, post deposit and general ledger entries and
record activity in installment lending, loan servicing and loan originations.
Based on internal testing procedures and conversations with the software
provider, the Savings Bank does not expect that the cost of addressing any Year
2000 issue will be a material event or uncertainty that would cause its reported
financial information not to be necessarily indicative of future operating
results or future financial condition, or that the costs or consequences of
incomplete or untimely resolution of any Year 2000 issue represent a known
material event or uncertainty that is reasonably likely to affect its future
financial results, or cause its reported financial information not to be
necessarily indicative of future operating results or future financial
condition.

EFFECT OF INFLATION AND CHANGING PRICES

     The Consolidated Financial Statements and related financial data presented
herein have been prepared in accordance with GAAP which require the measurement
of financial position and operating results in terms of historical dollars,
without considering the changes in relative purchasing power of money over time
due to inflation.  The primary impact of inflation on operations of the Savings
Bank is reflected in increased operating costs.  Unlike most industrial
companies, virtually all the assets and liabilities of a financial institution
are monetary in nature.  As a result, interest rates generally have a more
significant impact on a financial institution's performance than do general
levels of inflation.  Interest rates do not necessarily move in the same
direction or to the same extent as the prices of goods and services.

                        BUSINESS OF THE HOLDING COMPANY

GENERAL

     The Holding Company was organized as a Delaware business corporation at the
direction of the Savings Bank on November 5, 1997 for the purpose of becoming a
holding company for the Savings Bank upon completion of the Conversion and
Reorganization.  As a result of the Conversion and Reorganization, the Savings
Bank will be a wholly-owned subsidiary of the Holding Company and all of the
issued and outstanding capital stock of the Savings Bank will be owned by the
Holding Company.

                                       32
BUSINESS

     Prior to the Conversion and Reorganization, the Holding Company has not
engaged and will not engage in any significant activities other than of an
organizational nature.  Upon completion of the Conversion and Reorganization,
the Holding Company's primary business activity will be the ownership of the
outstanding capital stock of the Savings Bank.  In the future, the Holding
Company may acquire or organize other operating subsidiaries, although there are
no current plans, arrangements, agreements or understandings, written or oral,
to do so.

     Initially, the Holding Company will neither own nor lease any property but
will instead use the premises, equipment and furniture of the Savings Bank with
the payment of appropriate rental fees, as required by applicable law and
regulations.

     Since the Holding Company will only hold the outstanding capital stock of
the Savings Bank upon consummation of the Conversion and Reorganization, the
competitive conditions applicable to the Holding Company will be the same as
those confronting the Savings Bank.  See "BUSINESS OF THE SAVINGS BANK --
Competition."

                          BUSINESS OF THE SAVINGS BANK

GENERAL

     The Savings Bank operates, and intends to continue to operate, as a
community oriented financial institution and is devoted to serving the needs of
its customers.  The Savings Bank's business consists primarily of attracting
retail deposits from the general public and using those funds to originate real
estate loans.  See "-- Lending Activities."

MARKET AREA

     The Savings Bank considers Anderson and Oconee Counties, South Carolina, as
its primary market area.  Additional loan origination demand is generated from
customers living in contiguous counties.  The Savings Bank also purchases loans
secured by properties in South Carolina located outside its primary market area.

     The Savings Bank's main office and four branch offices are located in the
City of Anderson, the county seat and largest city in Anderson County, South
Carolina.  Anderson County is included in the Greenville/Spartanburg
metropolitan statistical area.  The Cities of Greenville and Spartanburg are
located 30 and 60 miles northeast of Anderson, respectively, and Atlanta,the
closest major city, is 120 miles to the southwest.

     Much of Anderson County is rural and roughly half of the land area is used
for agricultural purposes.  Anderson County has benefitted from the growth of
the Greenville metropolitan area and is experiencing significant residential and
commercial development along Interstate 85, a major transportation route that
crosses through Anderson County.  Major area employers include BMW Manufacturing
Corp., Hoechst Celenese Corporation, Owens Corning and Michelin Tire.  Oconee is
a smaller but rapidly growing county located west of Anderson County.  According
to recent government statistics, the September 1997 unemployment rates for
Anderson and Oconee Counties were both less than the South Carolina and national
averages.

LENDING ACTIVITIES

     GENERAL.  Historically, the Savings Bank's principal lending activity has
been the origination of residential real estate loans for the purpose of
constructing or financing one- to four-family residential properties.  At
September 30, 1997, the Savings Bank's loan portfolio consisted of $118.3
million of one- to four-family residential

                                       33
loans, $17.1 million of construction loans, $19.2 million of consumer loans,
$27.0 million of commercial real estate loans, and $7.2 million of commercial
business loans.  In recent periods, the Savings Bank has increased its
investment in commercial real estate loans, commercial business loans and
construction loans.

                                       34
LOAN PORTFOLIO ANALYSIS.  The following table sets forth the composition of
the Savings Bank's loan portfolio at the dates indicated.
At September 30, 
                                -------------------------------------------------------------------------------------
                                       1997                  1996                  1995                  1994         
                                --------------------  -------------------   -------------------   ------------------- 
                                 Amount    Percent     Amount    Percent     Amount    Percent     Amount    Percent  
                                --------   --------   --------   --------   --------   --------   --------   -------- 
                                                                          (Dollars in Thousands)
Mortgage loans:                                                                                                      
One- to four-family(1).......   $118,279     66.16%   $ 91,186     64.78%   $ 81,226     69.70%   $ 77,624     74.03% 
Multi-family.................      1,245      0.70       1,010      0.72         630      0.54          --        --  
Commercial real estate.......     26,976     15.09      17,009     12.08       7,355      6.31       5,158      4.92  
Construction.................     17,145      9.59      19,509     13.86      11,523      9.89       7,159      6.83  
                                --------    ------    --------    ------    --------    ------    --------    ------  
     Total mortgage loans....    163,645     91.54     128,714     91.44     100,734     86.44      89,941     85.78  
                                --------    ------    --------    ------    --------    ------    --------    ------  
                                                                                                                     
Commercial business loans....      7,182      4.02       5,529      3.93       3,657      3.13       1,222      1.17  
                                                                                                                     
Consumer loans:                                                                                                      
 Home equity and second                                                                                              
  mortgage...................      3,405      1.90       5,036      3.58       7,535      6.47      10,071      9.60  
 Lines of credit.............      9,156      5.12       6,713      4.77       6,279      5.39       6,045      5.77  
 Automobile loans............      3,540      1.98       2,677      1.90       1,438      1.23         735      0.70  
 Other.......................      3,072      1.72       2,490      1.77       2,293      1.97       1,837      1.75  
                                --------    ------    --------    ------    --------    ------    --------    ------  
     Total consumer loans....     19,173     10.72      16,916     12.02      17,545     15.06      18,688     17.82  
                                --------    ------    --------    ------    --------    ------    --------    ------  
     Total loans.............    190,000    106.28     151,159    107.39     121,936    104.63     109,851    104.77  
                                                                                                                     
Less:                                                                                                                
Undisbursed proceeds for                                                                                             
 loans in process............      8,985     (5.03)      8,866     (6.30)      4,119     (3.53)      4,037     (3.85) 
Unearned discounts...........        357        --          --        --          --        --          --        --  
Allowance for loan losses....      1,886     (1.05)      1,535     (1.09)      1,278     (1.10)        962     (0.92) 
                                --------    ------    --------    ------    --------    ------    --------    ------  
     Net loans receivable....   $178,772    100.00%   $140,758    100.00%   $116,539    100.00%   $104,852    100.00%  
                                ========    ======    ========    ======    ========    ======    ========    ======  

                                                At September 30, 
--------------------------------------------------------------------------------------------------  
                                        1993
                                 -------------------   
                                  Amount    Percent
                                 --------   --------
Mortgage loans:               
One- to four-family(1).......   $ 68,461     70.58%
Multi-family.................         --        --
Commercial real estate.......      2,584      2.66
Construction.................      5,112      5.27
                                --------    ------
     Total mortgage loans....     76,157     78.51
                                --------    ------
                              
Commercial business loans....        222      0.23
                              
Consumer loans:               
 Home equity and second       
  mortgage...................     14,956     15.42
 Lines of credit.............      5,915      6.10
 Automobile loans............        942      0.97
 Other.......................      2,168      2.23
                                --------    ------
     Total consumer loans....     23,981     24.72
                                --------    ------
     Total loans.............    100,360    103.46
                              
Less:                         
Undisbursed proceeds for      
 loans in process............      2,471     (2.55)
Unearned discounts...........         --        --
Allowance for loan losses....        884     (0.91)
                                --------    ------
     Net loans receivable....   $ 97,005    100.00%
                                ========    ======
 
-------------------------
(1)     Includes construction loans converted to permanent loans and
participation loans.

                                       35
ONE- TO FOUR-FAMILY AND MULTI-FAMILY MORTGAGE LOANS.  The Savings Bank
originates permanent conventional mortgage loans secured by one- to four-family
residential properties with original loan-to-value ratios up to 90% of the
appraised value or the purchase price of the property, whichever is less.  At
September 30, 1997, the Savings Bank had $118.3 million, or 66% of total loans,
in one- to four-family mortgage loans.  The Savings Bank requires hazard
insurance on the property securing the loan.  All one- to four-family mortgage
loans require a title examination or abstract of title.  Title insurance is
required on all fixed-rate mortgage loans so that they may be sold in the
secondary market.  One- to four-family mortgage loans are generally underwritten
to conform to FHLMC guidelines.  Loan to value ratios are limited to 80% but may
be increased to 95%, provided that private mortgage insurance coverage is
obtained for amounts over 80%.

     The Savings Bank offers both fixed-rate mortgages and ARM loans with terms
of 15 to 30 years.  At September 30, 1997, ARM loans totalled $45.6 million, or
38.5% of the one- to four-family loan portfolio.  The Savings Bank offers four
conventional ARM loans:  a one year ARM loan with annual adjustment periods
indexed to the One Year Treasury Bill; a three year ARM loan with annual
adjustment periods indexed to the Three Year Treasury Bill; a five year ARM loan
with annual adjustment periods indexed to the One Year Treasury Bill; and a ten
year ARM loan with annual adjustment periods indexed to the One Year Treasury
Bill.  The one year ARM loan and the three year ARM loan provide that the amount
of any increase or decrease in the interest rate is limited to two percentage
points (upward or downward) per adjustment period and generally contain a 6%
maximum adjustment over the life of the loan.  The five year ARM loan and the
ten year ARM loan provide that the amount of any increase or decrease in the
interest rate is limited to two percentage points (upward or downward) per
adjustment period and generally contain a 5% maximum adjustment over the life of
the loan.  At September 30, 1997, the majority of the ARM loans in the Savings
Bank's portfolio, that were originated by the Savings Bank, were the three year
and five year varieties.  If market interest rates increase, these rate
adjustment limitations may prevent such ARM loans from repricing to market
interest rates, which would have an adverse effect on net interest income.
Borrower demand for ARMs versus fixed-rate mortgage loans is a function of the
level of interest rates, the expectations of changes in the level of interest
rates and the difference between the interest rates and loan fees for fixed-rate
mortgage loans and interest rates and loan fees for ARMs.  Fixed-rate loans are
originated for sale in the secondary market, though loans with terms of 15 years
occasionally are retained in the Savings Bank's portfolio.  The relative amount
of fixed-rate and ARM loans that can be originated at any time is largely
determined by the demand for each in the prevailing competitive environment.

     In recent periods, the Savings Bank has purchased one- to four-family
mortgage loans from a mortgage banking company located in Hilton Head Island,
South Carolina, and a mortgage banking company located in Greenville, South
Carolina.  These purchases account for a substantial portion of the growth in
the one- to four-family loan portfolio in recent periods.  During the year ended
September 30, 1997, the Savings Bank purchased $23.6 million of one- to four-
family mortgage loans.  Substantially all of these purchases were from the
Greenville mortgage company. In future periods, the Savings Bank expects that a
substantial portion of purchased loan volume will come from that company, rather
than the Hilton Head Island mortgage company, because of the increasing
competition in the Hilton Head Island market.

     At September 30, 1997, the Savings Bank had $4.1 million of purchased loans
secured by residential properties on Hilton Head Island, South Carolina, all of
which were one year ARM loans.  These loans were all purchased from the same
mortgage company, located on Hilton Head Island.  Prior to purchase, the Savings
Bank reviews each loan for conformance to the Savings Bank's underwriting
criteria.  At September 30, 1997, the average size of such loans was
approximately $238,000 and the largest loan had an outstanding balance of $1.3
million.  Although all such loans were performing according to their terms at
September 30, 1997, they do possess certain risks due to the average size of
such loans and the location of the properties outside the Savings Bank's primary
market area.  Subject to market conditions, the Savings Bank expects to purchase
additional such loans.

     At September 30, 1997, the Savings Bank had $23.7 million of purchased one-
to four-family mortgage loans secured by residential properties located
primarily in Greenville, South Carolina.  These loans were all

                                       36
purchased from the mortgage company in which a service corporation subsidiary of
the Savings Bank has an equity investment.  See "-- Subsidiary Activities."
Prior to purchase, the Savings Bank reviewes each loan for conformity with the
Savings Bank's underwriting criteria.  At September 30, 1997, the average size
of such loans was approximately $126,000.  Subject to market conditions, the
Savings Bank expects to purchase additional such loans.

     The Savings Bank does not actively solicit multi-family loans but extends
them as an accommodation to existing customers.  At September 30, 1997, multi-
family loans totalled $416,000, or 0.01% of net loans receivable, and consisted
of two loans, the largest of which had an outstanding balance of $240,000.  All
such loans are secured by properties located in the Savings Bank's primary
market area.  At September 30, 1997, all multi-family loans were performing
according to their terms.

     CONSTRUCTION LOANS.  The construction loan portfolio was $17.1 million, or
9.0% of the total loan portfolio at September 30, 1997.  The Savings Bank
intends to continue emphasizing and expanding this type of lending.  Such loans
are primarily combined construction and permanent mortgage loans.  The
construction portion of the loan is for a period of up to 12 months on an
interest only basis and at a maximum loan to value ratio of 95%.  The permanent
mortgage is made for up to 30 years.  Construction-permanent loans are made at
the same fixed- or adjustable-rates of interest that are offered for permanent
residential mortgage loans made by the Savings Bank.  The majority of
construction loans are made against binding sales contracts for the home being
built.  The Savings Bank also originates speculative construction loans to a
small number of residential builders in its primary market area well known to
the Savings Bank.  At September 30, 1997, the Savings Bank had $17.1 million, or
9.59% of total loans, in construction loans, of which $6.4 million were
speculative constructive loans.  During the year ended September 30, 1997, the
Savings Bank purchased speculative construction loans secured by one- to four-
family properties located on Hilton Head Island, South Carolina, in the
aggregate amount of $2.5 million, of which $343,000 was outstanding as of
September 30, 1997.  All of these purchased construction loans were performing
according to their terms at September 30, 1997.

     Construction lending generally is considered to involve a higher degree of
credit risk than long-term financing of residential properties.  The risk of
loss on a construction loan is dependent largely upon the accuracy of the
initial estimate of the property's value at completion of construction or
development and the estimated cost (including interest) of construction.  If the
estimate of construction cost and the marketability of the property upon
completion of the project prove to be inaccurate, the Savings Bank may be
compelled to advance additional funds to complete the development.  If the
borrower is unable to sell the completed project in a timely manner or obtain
adequate proceeds to repay the loan, the loan may become non-performing.
Furthermore, if the estimate of value proves to be inaccurate, the Savings Bank
may be confronted with, at or prior to the maturity of the loan, a project with
a value which is insufficient to assure full repayment.  The ability of the
developer or builder to sell developed lots or completed dwelling units will
depend on, among other things, demand, pricing and availability of comparable
properties, and economic conditions.

     The Savings Bank's underwriting criteria are designed to evaluate and
minimize the risks of each construction loan.  Among other things, the Savings
Bank considers evidence of the availability of permanent financing for the
borrower, the reputation of the borrower, the amount of the borrower's equity in
the project, the independent appraisal and review of cost estimates, the pre-
construction sale and leasing information, and the cash flow projections of the
borrower.  In addition, except for the purchased construction loans on Hilton
Head Island, South Carolina, the majority of the construction loans granted by
the Savings Bank are secured by property in the Savings Bank's primary market
area.  The Savings Bank reviews such purchased construction loans for conformity
with the Savings Bank's underwriting criteria before purchase.

     COMMERCIAL REAL ESTATE LOANS.  The Savings Bank originates and purchases
commercial real estate loans.  Commercial real estate loans totalled $27.0
million, or 15% of the total loan portfolio, at September 30, 1997.  Currently,
the Savings Bank originates commercial real estate loans only to select
borrowers known to the Savings Bank and secured by properties in its primary
market area and generally in amounts between $100,000 and

                                       37
$500,000.  The commercial real estate loan portfolio has increased in recent
periods from $17.0 million, or 12% of the total loan portfolio at September 30,
1996, to $27.0 million, or 15%, at September 30, 1997.  The Savings Bank intends
to continue emphasizing and expanding this type of lending.  At September 30,
1997, the largest commercial real estate loan originated by the Savings Bank had
an outstanding balance of $2.0 million and was secured by multiple units of one-
to- four family dwellings and land located in Anderson.  The loan was performing
according to its terms at that date.  At September 30, 1997, the largest
purchased commercial real estate loan had an outstanding balance of $1.5 million
and was secured by a sub-division development located in Greenville, South
Carolina.  The loan was performing according to its terms at that date.

     Of primary concern in commercial real estate lending is the borrower's
creditworthiness and the feasibility and cash flow potential of the project.
The Savings Bank's income property collateral is not concentrated in any one
industry or area.  Examples of the types of collateral securing the income
property loans include office buildings and residential rental properties.
Loans secured by income properties are generally larger and involve greater
risks than residential mortgage loans because payments on loans secured by
income properties are often dependent on successful operation or management of
the properties.  As a result, repayment of such loans may be subject, to a
greater extent than residential real estate loans, to supply and demand in the
market in the type of property securing the loan and, therefore, may be subject
to adverse conditions in the real estate market or the economy.  If the cash
flow from the project is reduced, the borrowers ability to repay the loan may be
impaired.

     COMMERCIAL BUSINESS LOANS.  At September 30, 1997, the Savings Bank had
$7.2 million of commercial business loans, which represented 4% of total loans.
Commercial business loans generally include equipment loans with terms of up to
five years and lines of credit secured by savings accounts and unsecured line of
credit.  Such loans are generally made in amounts up to $100,000 and carry
adjustable rates of interest.  The Savings Bank generally requires annual
financial statements from its commercial business borrowers and personal
guarantees if the borrower is a corporation.  At September 30, 1997, the largest
outstanding commercial business loan was a $500,000 line of credit with an
outstanding balance of $237,000 that was secured by an assignment of residential
mortgages.  The loan was performing according to its terms at that date.

     Commercial business lending generally involves greater risk than
residential mortgage lending and involves risks that are different from those
associated with residential, commercial and multi-family real estate lending.
Real estate lending is generally considered to be collateral based lending with
loan amounts based on predetermined loan to collateral values and liquidation of
the underlying real estate collateral is viewed as the primary source of
repayment in the event of borrower default.  Although commercial business loans
are often collateralized by equipment, inventory, accounts receivable or other
business assets, the liquidation of collateral in the event of a borrower
default is often not a sufficient source of repayment because accounts
receivable may be uncollectible and inventories and equipment may be obsolete or
of limited use, among other things.  Accordingly, the repayment of a commercial
business loan depends primarily on the creditworthiness of the borrower (and any
guarantors), while liquidation of collateral is a secondary and often
insufficient source of repayment.

     CONSUMER LOANS.  The Savings Bank originates a wide variety of consumer
loans, which are made primarily on a secured basis to existing customers.
Consumer loans include savings account loans, direct automobile loans, direct
boat loans, renewable lines of credit and unsecured loans.  These loans are made
at both fixed- and variable-rates of interest, adjustable annually, and with
varying terms depending on the type of loan.  In addition, the Savings Bank
offers unsecured consumer loans.  Consumer loans totalled $19.2 million at
September 30, 1997, or 11% of the Savings Bank's total loan portfolio.

     At September 30, 1997, the largest components of the consumer loan
portfolio were home equity and second mortgage loans and lines of credit.  At
September 30, 1997, such loans totalled $12.6 million, or 7.0% of the total loan
portfolio.  At September 30, 1997, commitments to extend credit under lines of
credit totalled $10.3 million.

                                       38
Home equity and second mortgage loans are generally for the improvement of
residential properties.  The majority of these loans are made to existing loan
customers and are secured by a first or second mortgage on residential property.
The Savings Bank actively solicits these types of loans by contacting their
borrowing customers directly.  The loan-to-value ratio on these properties is
typically below 80%, including the first mortgage and home equity or second
mortgage loan.  Home equity and second mortgage loans are typically variable
rate loans with a fixed payment that matures over 15 years.  Rates adjust
monthly; however, the payment remains constant over the loan term and any rate
adjustment is reflected in an increase in the loan term.  The interest rate is
tied to the prime lending rate.

     Lines of credit are generally secured by a second mortgage on residential
property and are generally made to existing customers.  Credit lines are
generally 80% of the appraised value of the collateral property.  Terms range
from five to 15 years and the interest rate is generally tied to the prime
lending rate.

     The Savings Bank views consumer lending as an important component of its
business operations because consumer loans generally have shorter-terms and
higher yields, thus reducing exposure to changes in interest rates.  In
addition, the Savings Bank believes that offering consumer loans helps to expand
and create stronger ties to its customer base.  The Savings Bank intends to
continue emphasizing this type of lending.

     The Savings Bank employs strict underwriting standards for consumer loans.
These procedures include an assessment of the applicant's payment history on
other debts and ability to meet existing obligations and payments on the
proposed loans.  Although the applicant's creditworthiness is a primary
consideration, the underwriting process also includes a comparison of the value
of the security, if any, to the proposed loan amount.  The Savings Bank
underwrites and originates all of its consumer loans internally, which
management believes limits exposure to credit risks relating to loans
underwritten or purchased from brokers or other outside sources.

     Consumer loans entail greater risk than do residential mortgage loans,
particularly in the case of consumer loans which are unsecured or secured by
assets that depreciate rapidly, such as automobiles.  In the latter case,
repossessed collateral for a defaulted consumer loan may not provide an adequate
source of repayment for the outstanding loan and the remaining deficiency often
does not warrant further substantial collection efforts against the borrower.
In addition, consumer loan collections are dependent on the borrower's
continuing financial stability, and thus are more likely to be adversely
affected by job loss, divorce, illness or personal bankruptcy.  Furthermore, the
application of various federal and state laws, including federal and state
bankruptcy and insolvency laws, may limit the amount which can be recovered on
such loans.  Such loans may also give rise to claims and defenses by the
borrower against the Savings Bank as the holder of the loan, and a borrower may
be able to assert claims and defenses which it has against the seller of the
underlying collateral.

LOAN MATURITY

     The following table sets forth certain information at September 30, 1997
regarding the dollar amount of loans maturing in the Savings Bank's portfolio
based on their contractual terms to maturity.  Demand loans, loans having no
stated schedule of repayments and no stated maturity, and overdrafts are
reported as due in one year or less.  Loan balances do not include undisbursed
loan proceeds, unearned discounts, unearned income and allowance for loan
losses.

                                       39
Within     One Year         After 3 Years    After 5 Years
                             One Year   Through 3 Years  Through 5 Years  Through 10 Years    Beyond 10 Years         Total
                             --------   ---------------  ---------------  ----------------    ---------------         -----
                                                                           (In Thousands)
Residential mortgage(1)...   $27,466      $35,284           $20,606            $18,913              $8,314            $110,583
Commercial real estate....    13,365        7,884             5,024                568                  91              26,932
Commercial business.......     5,148        1,174               732                128                  --               7,182
Construction..............    16,698          447                --                 --                  --              17,145
Automobile................       203        1,350             1,939                 48                  --               3,540
Savings account loans.....     1,089          144                88                 12                  12               1,345
Other.....................    11,519        2,083                12                674                  --              14,288
                             -------      -------           -------            -------              ------            --------
     Total loans..........   $75,488      $48,366           $28,401            $20,343              $8,417            $181,015
                             =======      =======           =======            =======              ======            ========
------------------------
(1)  Includes one- to four-family and multi-family loans.

     The following table sets forth the dollar amount of all loans due after
September 30, 1998, which have fixed interest rates and have floating or
adjustable interest rates.
Fixed          Floating or
                              Rates        Adjustable Rates
                             -------       ----------------
                                   (In Thousands)
Residential mortgage(1)...   $48,357            $34,760
Commercial real estate....    12,101              1,466
Commercial business.......     1,220                814
Construction..............       447                 --
Automobile................     3,337                 --
Savings account loans.....       256                 --
Other.....................       748              2,021
                             -------            -------
     Total................   $66,466            $39,061
                             =======            =======
----------------------
(1)  Includes one- to four-family and multi-family loans.

     LOAN SOLICITING AND PROCESSING.  Loan originations come from a number of
sources.  The Savings Bank's customary sources of loans are from realtors, walk-
in customers, referrals and existing customers.  A formal business development
program has been implemented where loan officers and sales personnel make
regular sales calls on building contractors and realtors.

     The Savings Banks' Loan Committee approves loan applications up to and
including $500,000.  The Loan Committee is composed of Robert W. Orr, President,
Managing Officer and Director, Barry C. Visioli, Senior Vice President, John
Dawkins, Vice President, and David Peters, Vice President.  Loan applications in
excess of $500,000 must be approved by the full Board of Directors.

     LOAN PURCHASES AND SALES AND SERVICING.  The Savings Bank is an active
purchaser of loans.  In recent periods, the Savings Bank has purchased ARM
loans, construction loans and lot loans secured by properties on Hilton Head
Island, South Carolina.  See "-- Lending Activities -- One- to Four-Family and
Multi-Family Mortgage Loans" and "-- Lending Activities -- Construction Loans."
In addition, the Savings Bank purchases one- to four-family, commercial real
estate and construction loans from a mortgage company in which a service
corporation subsidiary of the Savings Bank has an equity investment.
Furthermore, the Savings Bank purchases periodically participation interests in
permanent real estate loans and construction loans.  Any participation interest
purchased must meet the Savings Bank's own underwriting standards.  The Savings
Bank purchases loans from institutions in the State of South Carolina.

                                       40
The Savings Bank periodically sells one- to four-family mortgage loans to
the FHLMC in order to comply with the regulations limiting the amount of loans
to one borrower or to reduce the amount of fixed-rate loans in the Savings
Bank's portfolio.  The Savings Bank generally sells all fixed-rate, 30-year
residential mortgage loans.

     The Savings Bank participates in loan servicing activities both directly
and indirectly.  Direct servicing activities arise in connection with loans that
the Savings Bank originates but sells with servicing rights retained.  The
Savings Bank generally receives a fee payable monthly of 1/4% to 3/8% per annum
of the unpaid balance of each loan for which it retains servicing rights.  At
September 30, 1997, the Savings Bank was servicing loans for others aggregating
$62.1 million.  During the year ended September 30, 1997, the Savings Bank
earned servicing fee income of $198,000.

     The Savings Bank participates indirectly in loan servicing activities
through its equity investment, through a service corporation subsidiary, in a
mortgage banking company (see "-- Subsidiary Activities") and through an
investment in a limited partnership.  At September 30, 1997, the mortgage
banking company was servicing 226 loans for others aggregating $28.0 million.

     The following table sets forth total loans originated, purchased, sold and
repaid during the periods indicated.
Years Ended September 30,
                                  ---------------------------------
                                    1997        1996        1995
                                  ---------   ---------   ---------
                                       (Dollars in Thousands)
Total loans at beginning of
 period........................   $151,159    $121,936    $109,851
                                  --------    --------    --------

Loans originated:
 One- to four-family...........     18,783      30,065      16,167
 Multi-family..................        240       1,312         526
 Commercial real estate........     11,912       7,113       5,804
 Construction loans............     10,934      12,816      12,169
 Commercial business...........     10,731       6,302       4,735
 Consumer......................     24,739      10,696      14,984
                                  --------    --------    --------
   Total loans originated......   $ 77,339    $ 68,304      54,385
                                  --------    --------    --------
 
Loans purchased:
 One- to four-family...........     23,581      18,242       6,543
 Commercial real estate(1).....      3,146          --         813
                                  --------    --------    --------
   Total loans purchased.......     26,727      18,242       7,356
                                  --------    --------    --------
 
Loans sold:
 Total whole loans sold........     (5,747)     (9,556)     (9,614)
                                  --------    --------    --------
    Total loans sold...........     (5,747)     (9,556)     (9,614)
 
Mortgage loan principal
 repayments....................    (59,478)    (47,767)    (40,042)
 
Net loan activity..............     38,841      29,223      12,085
                                  --------    --------    --------
 
Total loans at end of period...   $190,000    $151,159    $121,936
                                  ========    ========    ========
----------------------
(1)  In 1997, includes a $2.3 million purchased loan secured by single-family
     lots located in Greenville, South Carolina.

                                       41
EQUITY INVESTMENT IN LIMITED PARTNERSHIP.  In December 1996, the Savings
Bank purchased a 20.625% interest in a limited partnership that invests in
mortgage servicing rights.  Through this limited partnership, the Savings Bank
invests in servicing rights tied to a national portfolio of residential mortgage
loans.  For the year ended September 30, 1997, the Savings Bank's return on
investment was approximately 5.89%.  For the year ended September 30, 1997, the
Savings Bank recorded other income of $185,000 on its investment based on the
net income of the limited partnership as audited by independent certified public
accountants.  See Note 3 of Notes to Consolidated Financial Statements.  The
value of the Savings Bank's investment in the limited partnership would be
adversely affected by credit quality deterioration of the underlying mortgage
loans.  The value of the investment would also be adversely affected by an
increase in market interest rates.  See "RISK FACTORS -- Interest Rate Risk."

     LOAN COMMITMENTS.  The Savings Bank issues commitments for fixed- and
adjustable-rate single-family residential mortgage loans conditioned upon the
occurrence of certain events.  Such commitments are made in writing on specified
terms and conditions and are honored for up to 30 days from approval, depending
on the type of transaction. The Savings Bank had outstanding loan commitments
(including commitments to fund letters of credit) of approximately $27.9 million
at September 30, 1997.  See Note 17 of Notes to Consolidated Financial
Statements.

     LOAN ORIGINATION AND OTHER FEES.  The Savings Bank, in most instances,
receives loan origination fees and discount "points."  Loan fees and points are
a percentage of the principal amount of the mortgage loan that are charged to
the borrower for funding the loan.  The Savings Bank usually charges origination
fees of 0.5% to 1.0% on one- to four-family residential real estate loans and
1.0% to 2.0% on long-term commercial real estate loans.  Current accounting
standards require fees received for originating loans to be deferred and
amortized into interest income over the contractual life of the loan.  Deferred
fees associated with loans that are sold are recognized as income at the time of
sale.

     The Savings Bank offsets all loan origination fees and certain related
direct loan origination costs against all fees and costs associated with loan
origination.  The resulting net amount is deferred and amortized over the
contractual life of the related loans as an adjustment to the yield on such
loans, unless prepayments of a large group of similar loans are probable and the
timing and amount of prepayments can be reasonably estimated.  The Savings Bank
offsets commitment fees against related direct costs and the resulting net
amount is recognized over the contractual life of the related loans as an
adjustment of yield if the commitment is exercised.  If the commitment expires
unexercised, the fees collected are recognized as non-interest income upon
expiration of the commitment.

     DELINQUENCIES.  The Savings Bank's collection procedures provide for a
series of contacts with delinquent borrowers.  After a delinquency of 15 days, a
late charge is assessed.  If the delinquency continues, subsequent efforts will
be made to contact the delinquent borrower.  The Savings Bank's collection
procedures provide that when a loan is 30 days overdue, and again on the 45th
day, the borrower will be contacted by mail and payment will be requested.  If a
loan continues in a delinquent status for 90 days or more, the Savings Bank
generally initiates foreclosure proceedings.  In certain instances, however, the
Board may decide to modify the loan or grant a limited moratorium on loan
payments to enable the borrower to reorganize his financial affairs.

                                       42
The following table sets forth information with respect to the Savings
Bank's non-performing assets for the periods indicated.  During the periods
shown, the Savings Bank had no restructured loans within the meaning of SFAS No.
15.
At September 30,
                                            ---------------------------------------------
                                             1997      1996     1995     1994      1993
                                            -------   ------   ------   -------   -------
                                                       (Dollars in Thousands)
Loans accounted for on a non-
 accrual basis:
Mortgage.................................   $  220    $ 190    $ 348    $  435    $   --
Consumer.................................       --       --      124       163       448
Commercial...............................      183      126       --        --        --
                                            ------    -----    -----    ------    ------
                                               403      316      472       598       448
                                            ------    -----    -----    ------    ------

Accruing loans which are contractually
 past due 90 days or more:
Real estate:
 Residential.............................        6      467       82        60       826
Consumer.................................        8        2        9        17        17
Commercial...............................      465       10       --        --        --
                                            ------    -----    -----    ------    ------
                                               479      479       91        77       843
                                            ------    ------    -----    -----    ------

Total of non-accrual and
 past due 90 days or more................      882      795      563       675     1,291
                                            ------    -----    -----    ------    ------

Real estate owned, net...................      163        3       32       575        87
                                            ------    -----    -----    ------    ------
Total non-performing assets..............   $1,045    $ 798    $ 595    $1,250    $1,378
                                            ======    =====    =====    ======    ======

Total loans delinquent 90 days
  or more to net loans...................     0.49%    0.56%    0.48%     0.64%     1.33%

Total loans delinquent 90 days
  or more to total assets................     0.34%    0.38%    0.32%     0.39%     0.77%

Total non-performing assets to
 total assets............................     0.41%    0.38%    0.33%     0.73%     0.82%
The increase in non-performing assets at September 30, 1997 resulted
primarily from an increase in accruing commercial real estate loans
contractually past due 90 days or more.  At September 30, 1997, accruing
commercial real estate loans contractually past due 90 days or more consisted
primarily of one loan with an outstanding balance of $330,000, which was secured
by a commercial property located in the Savings Bank's primary market area.

     The Savings Bank does not accrue interest loans, including impaired loans
under SFAS No. 114, for which management deems the collection of additional
interest to be doubtful.  If interest on these non-accrual loans had been
accrued, interest income of approximately $19,000 would have been recorded for
the year ended September 30, 1997.

     ASSET CLASSIFICATION.  OTS regulations require that each insured
institution review and classify its assets on a regular basis.  In addition, in
connection with examinations of insured institutions, OTS examiners have
authority to identify problem assets and, if appropriate, require them to be
classified.  There are three classifications for problem assets:  substandard,
doubtful and loss.  "Substandard" assets must have one or more defined
weaknesses and are characterized by the distinct possibility that the insured
institution will sustain some loss if the deficiencies

                                       43
are not corrected.  "Doubtful" assets have the weaknesses of substandard assets
with the additional characteristic that the weaknesses make collection or
liquidation in full on the basis of currently existing facts, conditions and
values questionable, and there is a high possibility of loss.  An asset
classified "loss" is considered uncollectible and of such little value that
continuance as an asset of the institution is not warranted.  The regulations
have also created a "special mention" category, described as assets which do not
currently expose an insured institution to a sufficient degree of risk to
warrant classification but do possess credit deficiencies or potential
weaknesses deserving management's close attention.  Assets classified as
substandard or doubtful require the institution to establish general allowances
for loan losses.  If an asset or portion thereof is classified loss, the insured
institution must either establish specific allowances for loan losses in the
amount of 100% of the portion of the asset classified loss or charge-off such
amount.  A portion of general loss allowances established to cover possible
losses related to assets classified substandard or doubtful may be included in
determining an institution's regulatory capital, while specific valuation
allowances for loan losses generally do not qualify as regulatory capital.

     The aggregate amounts of the Savings Bank's classified assets and of the
Savings Bank's general and specific loss allowances and charge-offs for the
period then ended, were as follows:
At or For the Years
                                       Ended September 30,
                              -------------------------------------
                               1997           1996            1995
                              ------          ----            ----
                                         (In Thousands)
Loss.......................   $  140         $  125          $   86
Doubtful...................        8             32              --
Substandard assets.........    1,227            598             575
Special mention............       58             --              --
                              ------         ------          ------
                              $1,433         $  755          $  661
                              ======         ======          ======

General loss allowances....    1,746          1,410           1,192
Specific loss allowances...      140            125              86
Net charge-offs............      304             92              46
At September 30, 1997, loss assets consisted of one commercial real estate
loan ($10,000), five one- to four-family mortgage loans ($34,000), one secured
commercial business loan ($9,000), and one unsecured commercial business loan
($87,000); doubtful assets consisted of an unsecured consumer loan; substandard
assets consisted of 18 one- to four-family mortgage loans ($662,000), two
commercial real estate loans ($370,000), two secured commercial business loan
($168,000), four secured consumer loans ($16,000) and seven unsecured consumer
loan ($11,000); and special mention assets consisted of one commercial real
estate loan ($3,000) and a one- to four-family mortgage loan ($55,000).

     REAL ESTATE OWNED.  Real estate acquired by the Savings Bank as a result of
foreclosure or by deed-in-lieu of foreclosure is classified as real estate owned
until it is sold.  When property is acquired it is recorded at the fair value of
the property received.  Subsequently, it is carried at the lower of its new cost
basis or fair value, less estimated selling costs.  The Savings Bank had
$163,000 of real estate owned at September 30, 1997.

     ALLOWANCE FOR LOAN LOSSES.  The Savings Bank's management evaluates the
need to establish allowances against losses on loans each year based on
estimated losses on specific loans when a decline in value has occurred.  Such
evaluation includes a review of all loans for which full collectibility may not
be reasonably assured and considers, among other matters, the estimated market
value of the underlying collateral of problem loans, prior loss experience,
economic conditions and overall portfolio quality.  The provision for loan
losses is charged against earnings in the year it is established.  In recent
periods, the Savings Bank has increased the provision for loan losses in
recognition of the changing composition of the loan portfolio toward an
increased emphasis on commercial real estate loans, construction loans, and
other types of lending that carry a greater degree of credit risk than one- to

                                       44
four-family mortgage lending.  At September 30, 1997, the Savings Bank had an
allowance for loan losses of $1.9 million, or 1.04% of total loans.  Based on
past experience and future expectations, management believes that the allowance
for loan losses is adequate at September 30, 1997.

     While the Savings Bank believes it has established its existing allowance
for loan losses in accordance with GAAP, the allowance is based on estimates
which are subject to change based upon changes in the loan portfolio and
economic conditions, among other things.  Furthermore, there can be no assurance
that the Savings Bank's regulators, in reviewing the Savings Bank's loan
portfolio, will not request that the Savings Bank increase its allowance for
loan losses, thereby negatively affecting the Savings Bank's financial condition
and earnings based upon information available to the regulators at the time of
their examination.

     The following table sets forth an analysis of the Savings Bank's gross
allowance for possible loan losses for the periods indicated.  Where specific
loan loss reserves have been established, any difference between the loss
reserve and the amount of loss realized has been charged or credited to current
income.
Years Ended September 30,
                                         ----------------------------------------------
                                           1997       1996     1995      1994     1993
                                           ----       ----     ----      ----     ----
Allowance at beginning of                                                       
 period......................             $  1,535    $1,278   $   962   $884     $624
                                          --------    ------   -------   ----     ----
                                                                                
Provision for loan losses....                  655       349       362    120      364
Transfers to real estate                                                        
 owned valuation allowance...                   --        --        --     --       50
                                                                                
Recoveries:                                                                     
  Residential mortgage.......                    4         6        --     --       --
  Consumer...................                   24        17         6      6        7
   Total recoveries..........                   28        23         6      6        7
                                          --------    ------   -------   ----     ----
                                                                                
Charge-offs:                                                                    
  Residential mortgage.......                    4        18        --     13        4
  Consumer...................                  100        97        52     35       57
  Commercial.................                  228        --        --     --       --
                                          --------    ------   -------   ----     ----
   Total charge-offs.........                  332       115        52     48       61
                                          --------    ------   -------   ----     ----
   Net charge-offs...........                  304        92        46     42       54
                                          --------    ------   -------   ----     ----
Allowance at end of period...             $  1,886    $1,535   $ 1,278   $962     $884
                                          ========    ======   =======   ====     ====
                                                                                
Ratio of allowance to total                                                     
 loans outstanding at the end                                                   
 of the period...............                 1.04%     1.08%     1.08%  0.92%    0.91%
                                                                                
Ratio of net charge-offs to                                                     
 average loans outstanding                                                
 during the period...........                 0.18%     0.07%     0.04%  0.84%    0.06%
45
The following table sets forth the breakdown of the allowance for loan
losses by loan category for the dates indicated.
At September 30,
                                ----------------------------------------------------------------------------------------------------
                                           1997                             1996                             1995
                                -----------------------------    ------------------------------    ---------------------------------
                                         As a %      % of                  As a %      % of                 As a %      % of
                                         of Out-     Loans in              of Out-     Loans in             of Out-     Loans in
                                         standing    Category              standing    Category             standing    Category
                                         Loans in    to Total              Loans in    to Total             Loans in    to Total
                                Amount   Category    Loans       Amount    Category    Loans       Amount   Category    Loans
                                ------   --------    --------    ------    --------    --------    ------   --------    --------
                                                                     (Dollars in Thousands)
Real estate -
 mortgage.....................  $  766       0.60%         70    $  726        0.71%         72%   $  573       0.57%         83%
Commercial real estate
 and commercial
 business.....................     737       2.16          19       465        2.06          16       297       8.12           3
Consumer.....................      383       2.00          11       344        2.03          12       408       2.32          14
                                ------                    ---    ------                     ---    ------                    ---
Total allowance for loan
 losses.......................  $1,886       1.04%        100%   $1,535        1.08%        100%   $1,278       1.08%        100%
                                ======                    ===    ======                     ===    ======                    ===
At September 30,
                                -----------------------------------------------------------------
                                              1994                             1993
                                  -----------------------------    ------------------------------
                                            As a %      % of                 As a %      % of
                                            of Out-     Loans in             of Out-     Loans in
                                            standing    Category             standing    Category
                                            Loans in    to Total             Loans in    to Total
                                   Amount   Category    Loans       Amount   Category    Loans
                                   ------   --------    --------    ------   --------    --------
                                                           (Dollars in Thousands)
Real estate -
 mortgage....................      $493       0.48%         51%     $506       0.67%         76%
Commercial real estate
 and commercial
 business....................       100       1.94          10        --         --          --
Consumer.....................       369       1.70          39       378       1.56          24
                                   ----                    ---      ----                    ---
Total allowance for loan
 losses......................      $962       0.92%        100%     $884       0.91%        100%
                                   ====                    ===      ====                    ===
46
INVESTMENT ACTIVITIES

     The Savings Bank has made significant investments in mortgage-backed
securities, including CMOs.  The Savings Bank had mortgage-backed securities
with an amortized cost of $35.7 million and a market value of $35.9 million at
September 30, 1997, all of which were invested in U.S. Government agency
securities, investment grade securities, and securities guaranteed by the
funding arm of the Resolution Trust Corporation ("RTC").

     In an effort to increase the average portfolio yield, the Savings Bank
restructured its investment securities portfolio during the year ended September
30, 1997 by, in part, investing in callable, U.S. Government agency zero coupon
bonds with maturities exceeding ten years.  See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Comparison of
Financial Condition at September 30, 1997 and 1996" for further discussion.
Although these bonds offer higher yields, an increase in market interest rates
would have a material adverse effect on their value.  See "RISK FACTORS --
Interest Rate Risk."

     At September 30, 1997, the Savings Bank had invested $22.0 million in CMOs
($10.3 million in U.S. Government agency issues and $11.7 million in investment
grade private issues) with an average estimated life varying from six months to
five years and ranging in original principal amount from $2.0 million to $6.0
million.  The weighted average yield to expected maturity on the CMOs at
September 30, 1997 was 7.30%.  At September 30, 1997, CMOs consisted of Federal
National Mortgage Association ("FNMA"), as well as investment grade private
issues.  CMOs may be used as collateral for borrowings and, through repayments,
as a source of liquidity.  Management considers CMOs to be advantageous since
they offer yields above those available for investments of comparable credit
quality and duration and qualify as thrift investments under the qualified
thrift lender ("QTL") test.  See "REGULATION -- Federal Regulation of Savings
Associations -- Qualified Thrift Lender Test."  At September 30, 1997, the CMO
portfolio consisted of various tranches but no residuals.  In recent years, the
Savings Bank has used the proceeds from the paydown of CMOs to invest in one- to
four-family and other types of lending, and expects to continue to do so in the
future, subject to market conditions.

     CMOs are subject to repayment by the mortgagors of the underlying
collateral at any time.  Such prepayment may subject the Savings Bank's CMOs to
yield and price volatility.  To assess this volatility, the OTS requires the
Savings Bank to test annually its CMOs to determine whether they are high-risk
or non-high-risk securities.  The policy established a three-part risk
measurement test for fixed-rate and a one-part test for floating-rate CMOs and
other mortgage derivative securities.  Securities failing any one of the tests
are deemed to be high-risk securities.  The OTS may require an institution to
dispose of one or all of the CMOs failing such tests.  At September 30, 1997,
all of the Savings Bank's CMOs met the criteria established by the policy
designated as non-high-risk securities for continuing classification as suitable
investments.  However, changes in interest rates may cause one or more of the
Savings Bank's CMOs to fail a stress test.  The OTS may then require the Bank to
dispose of the CMOs failing the test.  This may affect the classification of
such securities under SFAS No. 115.

     Changes in the level of interest rates can have an adverse effect on the
mortgage-backed securities and CMO portfolio, thereby exposing the Savings Bank
to repayment risk and reinvestment risk.  See "RISK FACTORS -- Interest Rate
Risk."

     Investment decisions are made by the Savings Bank's Asset/Liability
Committee which consists of Senior Vice President Thomas C. Hall (Chairman),
President Robert W. Orr, Senior Vice President Barry C. Visioli, Vice President
David L. Peters, Vice President Teresa Hix, Vice President Quinnette Morrison
and Assistant Treasurer Brad Jones.  The Savings Bank's investment objectives
are: (i) to provide and maintain liquidity within regulatory guidelines; (ii) to
maintain a balance of high quality, diversified investments to minimize risk;
(iii) to serve as a balance to earnings; and (iv) to maximize returns.

                                       47
The following table sets forth the composition of the Savings Bank's
investment portfolio at the dates indicated.
At September 30,
                                ------------------------------------------------------------------------------------
                                           1997                                1996                  1995
                                --------------------------                  -----------   --------------------------
                                 Amortized     Percent of     Amortized     Percent of     Amortized     Percent of
                                  Cost(1)       Portfolio      Cost(1)       Portfolio      Cost(1)       Portfolio
                                ------------   -----------   ------------   -----------   ------------   -----------
                                                               (Dollars in Thousands)
U.S. agency securities.......     $10,191              22%     $    --              --%     $    --              --%
Certificates of deposit......          --              --          100              --           --              --
U.S. Treasury securities.....         998               2        2,395               5          798               2
Mortgage-backed securities
  and CMOs...................      35,714              76       44,362              95       47,269              98
                                  -------             ---      -------            ----      -------             ---
Total........................     $46,903             100%     $46,857             100%     $48,067             100%
                                  =======             ===      =======            ====      =======             ===
------------------
(1)  The market value of the Savings Bank's investment portfolio amounted to
     $47.2 million, $45.6 million and $47.1 million at September 30, 1997, 1996,
     and 1995, respectively.

     The following table sets forth the maturities and weighted average yields
of the debt securities in the Savings Bank's investment securities portfolio at
September 30, 1997.
Less Than          One to            Five to           Over Ten
                                   One Year         Five Years         Ten Years            Years
                                ---------------   ---------------   ----------------   ----------------
                                Amount   Yield    Amount   Yield    Amount    Yield    Amount    Yield
                                ------   ------   ------   ------   -------   ------   -------   ------
                                                        (Dollars in Thousands)
U.S. agency securities.......   $   --      --%   $4,003    6.26%   $    --      --%   $ 6,188    8.10%
U.S. Treasury securities.....      998    5.64        --      --         --      --         --      --
Mortgage-backed securities
  and CMOs...................      395    6.65     1,455    7.56     11,666    7.55     22,198    7.08
                                ------            ------            -------            -------
Total........................   $1,393    5.93    $5,458    6.61    $11,666    7.55    $28,386    7.30
                                ======            ======            =======            =======
The following table sets forth certain information with respect to each
security (other than U.S. Government and agency securities) which had an
aggregate amortized cost in excess of 10% of the Savings Bank's stockholders'
equity at the dates indicated.
At September 30,
                                                    ------------------------------------------------------------
                                                           1997                 1996                 1995
                                                    ------------------   ------------------   ------------------
                                                    Carrying   Market    Carrying   Market    Carrying   Market
                                                     Value      Value     Value      Value     Value      Value
                                                    --------   -------   --------   -------   --------   -------
                                                                           (In thousands)
RTC mortgage-backed
 securities......................................    $   889   $   888    $ 1,447   $ 1,414    $ 1,479   $ 1,430
CMOs.............................................     21,138    21,211     34,836    33,804     36,743    35,900
                                                     -------   -------    -------   -------    -------   -------
   Total.........................................    $22,027   $22,099    $36,283   $35,218    $38,222   $37,330
                                                     =======   =======    =======   =======    =======   =======
48
DEPOSIT ACTIVITIES AND OTHER SOURCES OF FUNDS

     GENERAL.  Deposits are the major source of the Savings Bank's funds for
lending and other investment purposes.  In addition to deposits, the Savings
Bank derives funds from loan principal repayments.  Loan repayments are a
relatively stable source of funds while deposit inflows and outflows may be
significantly influenced by general interest rates and money market conditions.
The Savings Bank also has access to advances from the FHLB-Atlanta.  These
advances can be used on a short-term basis to compensate for reductions in the
availability of funds from other sources or they may be used on a longer-term
basis for general business purposes.  The Savings Bank has also on occasion
utilized repurchase agreements.

     DEPOSIT ACCOUNTS.  Local deposits are and traditionally have been the
primary source of the Savings Bank's funds for use in lending and other general
business purposes.  The Savings Bank offers a number of deposit accounts,
including passbook, individual retirement accounts ("IRAs"), money market
deposits and certificate accounts currently ranging in maturity from three
months to five years.  Deposit accounts vary as to terms, with the principal
differences being the minimum balance required, the time period the funds must
remain on deposit and the interest rate.  From time to time, the Savings Bank
offers premiums to attract deposits.  The Savings Bank is a member of an
automated teller machine network, which is available to the Savings Bank's
checking account depositors.

     In recent years, the Savings Bank has offered newly authorized types of
short-term accounts and other savings alternatives that are more responsive to
changes in market rates of interest than passbook accounts and longer maturity
fixed-rate, fixed-term certificates that were the Savings Bank's primary source
of deposits prior to 1978.  There has been some shifting of deposit mix which
has primarily resulted from the progressive elimination of federally imposed
rate ceilings on various types of deposits offered by federally insured
financial institutions such as the Savings Bank.  The deregulation of various
federal controls on insured deposits has allowed the Savings Bank to be more
competitive in obtaining funds and has given it more flexibility to meet the
threat of net deposit outflows.  The Savings Bank reviews the interest rates
offered on various savings accounts periodically so as to remain competitive
with other financial institutions in its market area.

     Since early 1995, the Savings Bank has increased its core deposit base by
aggressively promoting checking accounts.  At September 30, 1997, checking
account balances totalled $37.8 million.

     At September 30, 1997, certificate of deposits scheduled to mature within
one year totalled $115.7 million.  Although no assurances can be given, based on
past experience, the Savings Bank believes that a substantial portion of these
certificates of deposit will be renewed.

     At September 30, 1997, the Savings Bank had no brokered deposits.

                                       49
The following table sets forth information concerning the Savings Bank's
deposits at September 30, 1997.
Percentage
Interest                                                          Minimum              of Total
Rate            Term              Category                         Amount    Balance    Deposits
----            ----              --------                         ------    -------   ---------
                                                                          (In Thousands)
2.28%           None              NOW accounts                     $  100   $ 25,996      12.93%
 --             None              Non-interest-bearing accounts       100     11,812       5.88
2.67            None              Savings accounts                    100     24,360      12.12
 
                                  Certificates of Deposit
                                  -----------------------
 
5.71            Within 6 months   Fixed-term, fixed-rate            1,000     75,002      37.31
5.89            7 - 12 months     Fixed-term, fixed-rate            1,000     40,649      20.22
6.00            13 - 36 months    Fixed-term, fixed-rate            1,000     22,347      11.12
6.06            37 - 120 months   Fixed-term, fixed-rate            1,000        836       0.42
                                                                            --------     ------
                                                                            $201,002     100.00%
                                                                            ========     ======
The following table indicates the amount of jumbo certificates of deposit
by time remaining until maturity at September 30, 1997.  Jumbo certificates of
deposit require minimum deposits of $100,000 and have negotiable interest rates.
Certificates
Maturity Period                      of Deposits
---------------------------------   --------------
                                    (In Thousands)
Three months or less.............         $ 4,677
Over three through six months....           5,721
Over six through twelve months...           5,061
Over twelve months...............           3,081
                                          -------
     Total.......................         $18,540
                                          =======
50
DEPOSIT FLOW

     The following table sets forth the balances of deposits in the various
types of accounts offered by the Savings Bank at the dates indicated.
At September 30,
                                         -----------------------------------------------------------------------------------------
                                                     1997                               1996                          1995
                                         ------------------------------     --------------------------------   -------------------
                                                    Percent                            Percent                            Percent
                                                       of       Increase                  of       Increase                  of
                                          Amount     Total     (Decrease)    Amount     Total     (Decrease)    Amount     Total
                                         --------   --------   ----------   --------   --------   ----------   --------   --------
                                                                          (Dollars in Thousands)
Non-interest-bearing..................   $ 11,812      5.88%     $ 3,464    $  8,957      5.59%     $ 4,885    $  4,072      2.74%
NOW checking..........................     25,996     12.93        1,703      24,293     15.16        4,401      19,892     13.37
Regular savings accounts..............     24,360     12.12        1,249      23,111     14.42           80      23,031     15.49
 
Fixed-rate certificates which
 mature in the year ending(1)(2):
  Within 1 year.......................    115,651     57.53       31,881      83,770     52.28        2,148      81,622     54.89
  After 1 year, but within 2 years....     16,999      8.46        1,148      15,851      9.89        3,311      12,540      8.43
  After 2 years, but within 5 years...      6,184      3.08        1,922       4,262      2.66       (3,290)      7,552      5.08
                                         --------    ------      -------    --------    ------      -------    --------    ------
 
     Total............................   $201,002    100.00%     $41,367    $160,244    100.00%     $11,535    $148,709    100.00%
                                         ========    ======      =======    ========    ======      =======    ========    ======
-----------------------
(1)  At September 30, 1997, 1996 and 1995, jumbo certificates amounted to $18.5
     million, $13.7 million and $11.8 million, respectively.
(2)  IRA accounts included in certificate balances are $18.8 million, $15.7
     million and $14.8 million at September 30, 1997, 1996 and 1995,
     respectively.
 
TIME DEPOSITS BY RATES AND MATURITIES
 
          The following table sets forth the time deposits in the Savings Bank
          classified by rates at the dates indicated.

 
 
                                            At September 30,
                                 ---------------------------------
                                   1997          1996        1995
                                   ----          ----        ----
                                             (In Thousands)
Below 3.00%..................  $    194      $     --    $    503
 3.00 -  5.00%................     2,012         4,119      18,623
 5.01 -  7.00%................   136,400        99,182      81,903
 7.01 -  9.00%................       228           582         685
                                --------      --------    --------
     Total....................  $138,834      $103,883    $101,714
                                ========      ========    ========
51
The following table sets forth the amount and maturities of time deposits
at September 30, 1997.
Amount Due
                                               -------------------------------------------------------------------------------------
                                                                                                                          Percent
                                                            One to     Over Two   Over Three    Over Five                 of Total
                                               Less Than      Two      to Three     to Five      to Ten                 Certificate
                                               One Year      Years      Years        Years        Years       Total       Accounts
                                               ---------   ---------   --------   -----------   ---------   ---------   ------------
                                                                              (Dollars in Thousands)
2.50 - 5.00%................................    $  2,206     $    --    $   --        $  --         $ --    $  2,206          1.58%

5.01 - 7.00%................................     113,445      17,017     5,330          506          102     136,400         98.26
7.01 - 9.00%................................          --          --        --          159           69         228          0.16
                                                --------     -------    ------         ----         ----    --------        -------
Total.......................................    $115,651     $17,017    $5,330         $665         $171    $138,834        100.00%
                                                ========     =======    ======         ====         ====    ========        =======
DEPOSIT ACTIVITY
 
  The following table sets forth the savings activities of the Savings Bank for
the periods indicated.
Years Ended September 30,
                                                             ----------------------------------
                                                                1997       1996         1995
                                                                ----       ----         ----
                                                                      (In Thousands)
Beginning balance...........................                  $160,244    $148,709    $143,380
                                                              --------    --------    --------

Net increase (decrease) before
 interest credited..........................                    32,599       4,724        (496)
Interest credited...........................                     8,159       6,811       5,825

Net increase in savings deposits............                    40,758      11,535       5,329
                                                               -------    --------    --------

Ending balance..............................                  $201,002    $160,244    $148,709
                                                              ========    ========    ========
BORROWINGS.  Historically, the Savings Bank has relied on repurchase
agreements as a source of borrowings to finance the purchase of investment
securities.  Funding for lending activities has been provided from deposits and
borrowings from the FHLB-Atlanta.  Under repurchase agreements, the Savings Bank
"sells" securities (generally U.S. Treasury securities and federal agency
obligations and mortgage-backed securities) under an agreement to buy them back
at a specified price at a later date.  Repurchase agreements are subject to
renewal, and are deemed to be borrowings collateralized by the securities sold.
The Savings Bank had no repurchase agreements outstanding at September 30, 1997.

     The Savings Bank has issued retail and commercial repurchase agreements and
would consider issuing them again in the future in an appropriate interest rate
environment.  Under commercial repurchase agreements, the Savings Bank sells the
investment security to broker dealers who may then loan the security to other
parties in the normal course of operations.  Commercial repurchase agreements
generally mature within 90 days from the date of the transaction.

     Advances from the FHLB are typically secured by the Savings Bank's first
mortgage loans.  At September 30, 1997, the Savings Bank was eligible to borrow
up to $55.0 million from the FHLB-Atlanta.  The Savings Bank had FHLB advances
of $15.0 million outstanding at September 30, 1997.  See Note 9 of Notes to
Consolidated Financial Statements.

                                       52
The FHLB functions as a central reserve bank providing credit for savings
and loan associations and certain other member financial institutions.  As a
member, the Savings Bank is required to own capital stock in the FHLB and is
authorized to apply for advances on the security of such stock and certain of
its mortgage loans and other assets (principally securities which are
obligations of, or guaranteed by, the U.S. Government) provided certain
standards related to creditworthiness have been met.  Advances are made pursuant
to several different programs.  Each credit program has its own interest rate
and range of maturities.  Depending on the program, limitations on the amount of
advances are based either on a fixed percentage of an institution's net worth or
on the FHLB's assessment of the institution's creditworthiness.  Under its
current credit policies, the FHLB generally limits advances to 20% of a member's
assets, and short-term borrowings of less than one year may not exceed 10% of
the institution's assets.  The FHLB determines specific lines of credit for each
member institution.

     The following table sets forth certain information regarding borrowings by
the Savings Bank at the end of and during the periods indicated:
At September 30,
                                                                 --------------------------
                                                                 1997       1996       1995
                                                                 ----       ----       ----
Weighted average rate paid on:
  FHLB-Atlanta advances.......................................   6.24%      5.30%       5.77%
Years Ended September 30,
                                                                                               -------------------------   
                                                                                               1997      1996       1995
                                                                                               ----      ----       ----
                                                                                                  (Dollars in Thousands)
Maximum amount of borrowings outstanding at any month end:
 Securities sold under agreements to repurchase...............                               $    --    $    --    $ 5,907
 FHLB-Atlanta advances........................................                                15,000     19,000     57,500
 
Approximate average borrowings outstanding with respect to:
 Securities sold under agreements to repurchase...............                                    --         --      1,338
 FHLB-Atlanta advances........................................                                23,951     12,531     39,222
 
Approximate weighted average rate paid on:
 Securities sold under agreements to repurchase...............                                    --         --       5.73%
 FHLB-Atlanta advances........................................                                  5.75%      5.24%      6.22
COMPETITION

     Anderson and Oconee Counties have a relatively large number of financial
institutions, many of which are branches of large southeast regional financial
institutions, and thus the Savings Bank faces strong competition in the
attraction of savings deposits (its primary source of lendable funds) and in the
origination of loans.  Its most direct competition for savings deposits and
loans has historically come from other thrift institutions, credit unions and
commercial banks located in its market area.  Particularly in times of high
interest rates, the Savings Bank has faced additional significant competition
for investors' funds from short-term money market securities and other corporate
and government securities and mutual funds.  The Savings Bank's competition for
loans comes principally from other thrift institutions, credit unions,
commercial banks, finance companies, mortgage banking companies and mortgage
brokers.

SUBSIDIARY ACTIVITIES

     The Savings Bank had an ownership interest in three service corporations at
September 30, 1997.  Under OTS regulations, the Savings Bank is authorized to
invest up to 3% of its assets in service corporations, with

                                       53
amounts in excess of 2% only if used primarily for community purposes.  At
September 30, 1997, the Savings Bank's net investment of approximately $2.1
million in its service corporations did not exceed this investment authority.

     The Savings Bank has three service corporations: United Service Corporation
of Anderson, Inc. ("United Service"), United Investments Services, Inc. ("United
Investments") and Mortgage First Service Corporation ("Mortgage First").

     United Service is a wholly-owned subsidiary of the Savings Bank.  At
September 30, 1997, United Service had assets of $2.4 million. United Service is
involved in the following residential and commercial real estate development
projects:

     Perpetual Square.   A 33-acre commercial development in Anderson County
purchased in January 1996 for a purchase price of $850,000.  The purchase price
and infrastructure improvement costs (i.e., installation of roads, utilities,
                                      ----                                   
etc.) were financed by a loan from the Savings Bank that had an outstanding
balance of $375,000 at September 30, 1997.  As of September 30, 1997,
approximately eight acres have been sold and the Savings Bank did not have loans
outstanding to any of the purchasers.  In October 1997, the Savings Bank
established a branch office at this location.  See "-- Properties."  At
September 30, 1997, the Savings Bank's net investment in this project was
approximately $566,000.

     The Meadows Development.  A 99-acre residential subdivision consisting of
approximately 108 lots located in Anderson County purchased in October 1996 for
a purchase price of $225,000.  The purchase price and infrastructure improvement
costs were financed by a loan from the Savings Bank that had an outstanding
balance of $1.0 million at September 30, 1997.  The Savings Bank has entered
into a contractual agreement with the local office of a national realtor to
market the subdivision lots, and marketing began in September 1997.  The realtor
has no investment in the project.  As of September 30, 1997, three lots were
sold and the Savings Bank had outstanding loans to purchasers totaling $21,000.
At September 30, 1997, the Savings Bank's net investment in this project was
approximately $1.1 million.

     Ashton Place Subdivision.  A 24-acre multi-family housing development
consisting of 44 lots located in Anderson County purchased in January 1996 for a
purchase price of $164,000.  The purchase price and infrastructure improvement
costs were financed by a loan from the Savings Bank that had an outstanding
balance of $82,000 as of September 30, 1997.  The lots are being developed in
four phases of 11 lots each.  As of September 30, 1997, 29 lots have been sold,
four lots remain unsold in phase III and all 11 lots remain unsold in phase IV.
At September 30, 1997, the Savings Bank had loans outstanding to purchasers
totaling $397,000.  At September 30, 1997, the Savings Bank's net investment in
this project was approximately $271,000.

     North Park.  A 57-acre industrial park located in Anderson County purchased
in June 1996 at a purchase price of $248,000.  The purchase price and
infrastructure improvement costs were financed by a loan from the Savings Bank
that had an outstanding balance of $203,000 as of September 30, 1997.  As of
September 30, 1997, 12 acres had been sold and the Savings Bank had outstanding
loans to purchasers totaling $573,000, all of which were permanent mortgage
loans.  At September 30, 1997, the Savings Bank's net investment in this project
was approximately $389,000.

     United Investments, a wholly-owned subsidiary of United Service, offers
full service brokerage services.  On a consolidated basis United Service and
United Investments had net income of $114,000 for the year ended September 30,
1997.

     Mortgage First is a wholly-owned subsidiary of the Savings Bank.  In August
1996, Mortgage First made a $400,000 equity investment in a start-up regional
mortgage banking company known as "First Trust Mortgage

                                       54
Corporation of the South" ("First Trust"), with offices in Rock Hill, Columbia,
Clemson and Greenville, South Carolina.  During the year ended September 30,
1997, First Trust closed 810 loans totalling $100.6 million.

     The Savings Bank has purchased loans from First Trust in recent periods.
See "-- Lending Activities --Loan Purchases and Sales and Servicing."  All loans
are purchased from First Trust subject to the Savings Bank's underwriting
standards.  The Savings Bank intends to purchase at least $18.0 million of loans
from First Trust monthly.  At September 30, 1997, the Savings Bank's financial
commitment to First Trust and its maximum exposure to share in any losses
incurred by First Trust were limited solely to the amount of its equity
investment through Mortgage First.  The Savings Bank, either directly or through
Mortgage First, may undertake future additional financial commitments that would
increase its loss exposure to First Trust's operations; however, there are no
such agreements, plans or understandings at present.  The Savings Bank recorded
a loss of approximately $100,000 related to First Trust's operations for the
year ended September 30, 1997.  Robert W. Orr and Barry C. Visioli are directors
of First Trust.  See "MANAGEMENT OF THE SAVINGS BANK -- Directors and Executive
Officers and Directors."

PROPERTIES

     The following table sets forth certain information relating to the Savings
Bank's offices as of March 31, 1997.  All offices are owned by the Savings Bank
except as noted in the table.
Lease
                                 Year        Owned or            Square              Expiration
Location                         Opened      Leased              Footage             Date
--------                         ------      ------              -------             ----
Main Office:

907 N. Main Street               1979        Owned              50,000              --
Anderson, South Carolina

Branch Offices:

104 Whitehall Road               1975        Building owned      2,000              December 31, 2004, with
Anderson, South Carolina                     Land leased                            two renewal options for ten
                                                                                    years each

2821 South Main Street           1976        Building owned      2,500              April 30, 2000, with five
Anderson, South Carolina                     Land leased                            renewal options for five years
                                                                                    each

Windsor Place Winn Dixie(1)      1993        Leased                450              March 1, 1998, with two
SC Highway 81                                                                       renewal options for five
Anderson, South Carolina                                                            years each

Northtowne                       1994        Owned               2,800              --
3898 Liberty Highway
Anderson, South Carolina

1007 By-Pass 123                 1996        Owned               2,900              --
Seneca, South Carolina
_________________
(1)  In October 1997, this branch office was closed in conjunction with the
     opening of a new 2,700 square foot branch office on SC Highway 81,
     Anderson, South Carolina in the Perpetual Square complex.  The Savings

                                       55
Bank owns the building and real estate of this new branch office.  See 
     "-- Subsidiary Activities" for additional information regarding Perpetual
     Square.

     The Savings Bank has an in-house computer system to process customer
records and monetary transactions, post deposit and general ledger entries and
record activity in installment lending, loan servicing and loan originations.
See "MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Year 2000 Considerations."

PERSONNEL

     As of September 30, 1997, the Savings Bank had 96 full-time employees and
33 part-time employees.  The employees are not represented by a collective
bargaining unit.  The Savings Bank believes its relationship with its employees
are good.

LEGAL PROCEEDINGS

     Periodically, there have been various claims and lawsuits involving the
Savings Bank, such as claims to enforce liens, condemnation proceedings on
properties in which the Savings Bank holds security interests, claims involving
the making and servicing of real property loans and other issues incident to the
Savings Bank's business.  The Savings Bank is not a party to any pending legal
proceedings that it believes would have a material adverse effect on the
financial condition or operations of the Savings Bank.

                       MANAGEMENT OF THE HOLDING COMPANY

     Directors shall be elected by the stockholders of the Holding Company for
staggered three-year terms, or until their successors are elected and qualified,
at the first annual meeting of stockholders following the consummation of the
Conversion and Reorganization.  The Holding Company's Board of Directors
consists of seven persons, divided into three classes, each of which will
contain approximately one third of the Board.  One class will have a term of
office expiring at the first annual meeting of stockholders; a second class will
have a term of office expiring at the second annual meeting of stockholders; and
a third class will have a term of office expiring at the third annual meeting of
stockholders.

     The executive officers of the Holding Company are elected annually and hold
office until their respective successors have been elected and qualified or
until death, resignation or removal by the Board of Directors. The executive
officers of the Holding Company are:

     Name                     Position
     ----                     --------

     Cordes G. Seabrook, Jr.  Chairman of the Board
     Robert W. Orr            President and Chief Executive Officer
     Thomas C. Hall           Treasurer and Chief Financial Officer
     Barry C. Visioli         Senior Vice President
     Sylvia B. Reed           Corporate Secretary

     Since the formation of the Holding Company, none of the executive officers,
directors or other personnel has received remuneration from the Holding Company.
For information concerning the principal occupations, employment and
compensation of the directors and executive officers of the Holding Company
during the past five years, see "MANAGEMENT OF THE SAVINGS BANK -- Biographical
Information."

                                       56
MANAGEMENT OF THE SAVINGS BANK

DIRECTORS AND EXECUTIVE OFFICERS

     The Board of Directors of the Savings Bank is presently composed of nine
members who are elected for terms of three years, approximately one-third of
whom are elected annually in accordance with the Bylaws of the Savings Bank.
The Savings Bank also has two non-voting Directors Emeriti.  The executive
officers of the Savings Bank are elected annually by the Board of Directors and
serve at the Board's discretion.  The following table sets forth information,
with respect to the directors and executive officers of the Savings Bank, all of
whom will continue to serve as directors and executive officers of the Savings
Bank and the Holding Company.

                                   DIRECTORS
Current
                                                                                 Director   Term
Name                               Age (1)   Position                            Since     Expires
----                               ------    --------                            -----     -------
Harold A. "Drew" Pickens,          64        Chairman of Board                   1977      1998
 Jr.

Robert W. "Lujack" Orr             49        President, Managing Officer         1989      1998
                                               and a Director

Jack F. McIntosh                   69        Director                            1988      1999

Charles W. Fant, Jr.               71        Director                            1977      1999

Cordes G. Seabrook, Jr.            70        Director                            1976      1999

Richard C. Ballenger               49        Director                            1996      1999

F. Stevon Kay                      46        Director                            1996      1999

Jim Gray Watson                    68        Director                            1976      1998

Martha S. Clamp                    55        Director                            1988      1997

J. Roy Martin, Jr.                 79        Director Emeritus                   1988        --

Wade A. Watson, Jr.                79        Director Emeritus                   1989        --
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Thomas C. Hall                     50        Senior Vice President                 --        --
                                              and Treasurer
 
Barry C. Visioli                   49        Senior Vice President                 --        --
 
Sylvia B. Reed                     57        Corporate Secretary                   --        --
----------------------
(1)  As of September 30, 1997.

                                       57
BIOGRAPHICAL INFORMATION

     Set forth below is certain information regarding the Directors and
executive officers of the Savings Bank.  Unless otherwise stated, each Director
and executive officer has held his or her current occupation for the last five
years.  There are no family relationships among or between the Directors or
executive officers.

     Harold A. "Drew" Pickens, Jr. is the owner of Harold A. Pickens and Sons,
Inc., with which he has been affiliated since 1956.  Mr. Pickens serves as an
Elder at First Presbyterian Church.

     Robert W. "Lujack" Orr has been employed by the Savings Bank since 1974 and
has held a variety of positions, such as Senior Vice President/Funds Acquisition
and Executive Vice President, prior to assuming his current position as
President and Managing Officer on January 1, 1991.  Mr. Orr is a member of the
Board of the Community Financial Institutions of South Carolina and he is
Secretary of the America's Community Bankers Association.  He is active in
numerous civic organizations, serving as President of the YMCA, on the Board of
Directors of the Chamber of Commerce, on the Board of Visitors of Anderson
College, and as an Elder of Central Presbyterian Church.  Mr. Orr is a director
of First Trust, the mortgage banking company in which a service corporation
subsidiary of the Savings Bank has an equity investment.

     Jack F. McIntosh is a partner in the law firm of McIntosh and Sherard,
Anderson, South Carolina, with which he has been affiliated for 35 years.
McIntosh and Sherard serves as General Counsel for the Savings Bank's wholly-
owned subsidiary, United Service, since 1984.  Mr. McIntosh is also a member of
the Board of the Alzheimer's Association and of Medical University for South
Carolina.

     Charles W. Fant, Jr. is a partner in the architectural firm of Fant & Fant
Architects, Anderson, South Carolina, with which he has been affiliated since
1956.  Mr. Fant is also active in the community, serving as a Trustee of Connie
Maxwell Children's Home and on the Board of Adjustment and Appeals for both the
City of Anderson and Anderson County, South Carolina.

     Cordes G. Seabrook, Jr. is a partner in Value Systems, Gastonia, North
Carolina, an association management company.  In this capacity, Mr. Seabrook is
the organizer and manager of the Textile Purchasing Association.  Mr. Seabrook
is active in several community organizations, serving as a member of the Board
of Anderson Memorial Hospital, Anderson Area Arts Council, SCETV Endowment and
the Tri-County Tech Endowment.  Mr. Seabrook is a minority stockholder and also
serves as a member of the Board of Directors of DS1, Greer, South Carolina, a
company that designs and manufactures security information systems.

     Richard C. Ballenger is the President of City Glass Company and D&B Glass
Company, Inc., with which he has been affiliated since 1972.  He serves as an
Elder at First Presbyterian Church, is a member of the Board of Directors of the
Anderson Rotary Club and is on the Advisory Board of the Salvation Army.

     F. Stevon Kay is the President of Hill Electric Company, Inc., with which
he has been affiliated since 1969.  He is a Board member of the Salvation Army
Boys and Girls Club and the President of the Anderson Youth Association.  He
attends Concord Baptist Church.

     Jim Gray Watson, the Savings Bank's former President and Chief Executive
Officer, was employed by the Savings Bank for 31 years prior to his retirement
in December 1990.  Mr. Watson is also involved in numerous charitable and
community organizations.

     Martha C. Clamp, a certified public accountant, was employed for six years
as a staff accountant for the accounting firm of Cole, Hook & Cleary, CPAs,
Anderson, South Carolina, and has been self-employed as an accountant since
1988.  Ms. Clamp also serves as the Treasurer of the Foothills Sertoma Club, a
member of the

                                       58
Board of the Anderson County Easter Seals and the Anderson College Alumni Board
and as a Panel Allocation member of the United Way.

     J. Roy Martin, Jr. served as a member of the Savings Bank's Board of
Directors from 1970 until 1988.  Since 1988, Mr. Martin has served as a Director
Emeritus of the Savings Bank.

     Wade A. Watson, Jr. served as a member of the Savings Bank's Board of
Directors from 1960 until 1989.  Mr. Watson has served as a Director Emeritus of
the Savings Bank since 1989.  Mr. Watson is the brother of the Savings Bank's
former President and Chief Executive Officer, Jim Gray Watson.

     Thomas C. Hall has been employed by the Savings Bank since 1975 and
currently serves as Senior Vice President, Treasurer and Chief Financial Officer
responsible for areas of accounting, investments, data processing and deposits.
Mr. Hall is a member of the Financial Managers Society, a Board member of the
Foothills United Way, a member of the Institute of Management Accountants, and a
Board member of the University of South Carolina Alumni Association, Anderson
Chapter.

     Barry C. Visioli has been affiliated with the Savings Bank since 1973.  Mr.
Visioli serves as Senior Vice President and is responsible for Lending
Operations.  He is a Council Member of the Salvation Army Boys and Girls Club, a
Board Member of the Family Counseling Agency and serves on the Anderson County
Board of Assessment Appeals.  Mr. Visioli is a director of First Trust, the
mortgage banking company in which a service corporation subsidiary of the
Savings Bank has an equity investment.

     Sylvia B. Reed joined the Savings Bank in 1986 and currently serves as
Corporate Secretary.  Ms. Reed is a member and Treasurer of the Anderson Chapter
of the American Business Women's Association, which furnishes college
scholarships for students.  She is a member of the choir at Taylor Memorial
Church.

BENEFICIAL OWNERSHIP OF SAVINGS BANK COMMON STOCK BY DIRECTORS AND EXECUTIVE
OFFICERS

     The following table sets forth, as of September 30, 1997, certain
information as to the beneficial ownership of Savings Bank Common Stock by: (i)
persons known by the Savings Bank to beneficially own more than 5% of the
outstanding shares of Common Stock, (ii) the directors of the Savings Bank,
(iii) the executive officers of the Savings Bank, and (iv) by all officers and
directors as a group.  For purposes of this table, an individual is considered
to beneficially own shares of Savings Bank Common Stock if he or she has or
shares voting power (which includes the power to vote or direct the voting of
the shares) or investment power (which includes the power to dispose of or
direct the disposition of the shares).  Unless otherwise indicated, all shares
are owned directly by the officers and directors or by the officers and
directors indirectly through a trust, corporation or association, or by the
officers and directors or their spouses as custodians or trustees for the shares
of minor children.  The officers and directors effectively exercise sole voting
and investment power over such shares.  Shares which are subject to stock
options that are exercisable within 60 days of September 30, 1997 are deemed to
be beneficially owned.  For information regarding proposed purchases of
Conversion Shares by the directors and officers and their anticipated ownership
of Common Stock upon consummation of the Conversion and Reorganization, see
"CONVERSION SHARES TO BE PURCHASED BY MANAGEMENT PURSUANT TO SUBSCRIPTION
RIGHTS."

                                       59
Shares Beneficially
                                       Owned at March
Name                                 September 30, 1997
----                            ---------------------------------
                                    Number(1)         Percent
                                    ---------         --------
SouthBanc Shares, M.H.C.               800,000          53.02%
Harold A. Pickens, Jr.                  10,508           0.70
Martha S. Clamp                          6,254           0.41
Jack F. McIntosh                         5,683           0.38
Charles W. Fant, Jr.                        --             --
Cordes G. Seabrook, Jr.                  8,850           0.59
Jim Gray Watson                          3,196           0.21
Richard C. Ballenger                     2,227           0.15
F. Stevon Kay                            7,151           0.47
J. Roy Martin, Jr.                          --             --
Wade A. Watson, Jr.                      5,538           0.23
Robert W. Orr                           14,624           0.97
Thomas C. Hall                          13,972(2)        0.93
Barry C. Visioli                        12,708(3)        0.84

All Officers and
Directors as a
Group (21 persons)                     104,052(4)        6.90%
--------------------------
(1)  In accordance with Rule 13d-3 under the Exchange Act, a person is deemed to
     be the beneficial owner, for purposes of this table, of any shares of
     Common Stock if he or she has voting and/or investment power with respect
     to such security.  The table includes shares owned by spouses, other
     immediate family members in trust, shares held in retirement accounts or
     funds for the benefit of the named individuals, and other forms of
     ownership, over which shares the persons named in the table may possess
     voting and/or investment power.  Shares which are subject to stock options
     that are exercisable within 60 days of September 30, 1997 are deemed to be
     beneficially owned.
(2)  Includes 2,300 shares of Common Stock which may be received upon the
     exercise of stock options that are exercisable within 60 days of September
     30, 1997.
(3)  Includes 2,300 shares of Common Stock which may be received upon the
     exercise of stock options that are exercisable within 60 days of September
     30, 1997.
(4)  Includes 4,600 shares of Common Stock which may be received upon the
     exercise of stock options that are exercisable within 60 days of September
     30, 1997.

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

     The business of the Savings Bank is conducted through meetings and
activities of its Board of Directors and its committees.  During the fiscal year
ended September 30, 1997, the Board of Directors held 12 regular meetings and no
director attended fewer than 75% of the total meetings of the Board of Directors
of the Savings Bank and committees on which such director served.

     The Executive Committee of the Board of Directors, which consists of
Directors Fant (Chairman), Pickens, Seabrook, Watson and Orr, meets as necessary
in between meetings of the full Board of Directors.  All actions of the
Executive Committee must be ratified by the full Board of Directors.  The
Executive Committee reviews directors' and officers' compensation and makes
recommendations to the full Board of Directors in this regard.  The Executive
Committee also recommends prospective new Board members to the full Board of
Directors and insures

                                       60
that all directors, directors emeriti and officers are acting in compliance with
the Savings Bank's Charter and Bylaws.  The Executive Committee met once during
the fiscal year ended September 30, 1997.

     The Audit Committee of the Savings Bank consists of Directors Pickens
(Chairman), Clamp,  Orr and Watson and Thomas C. Hall, Senior Vice President,
and Doris Hoover, a Savings Bank staff member.  This committee is responsible
for developing and monitoring the Savings Bank's audit program.  The committee
selects the Savings Bank's outside auditor and meets with them to discuss the
results of the annual audit and any related matters.  The members of the
committee also receive and review all the reports and findings and other
information presented to them by the Savings Bank's officers regarding financial
reporting policies and practices.  In addition, the Savings Bank's Internal
Auditor and Compliance Coordinator operate under the direction of the Audit
Committee and report quarterly to the committee.  The committee meets quarterly.
The Audit Committee met four times during the fiscal year ended September 30,
1997.

     The Savings Bank's full Board of Directors serves as a Nominating
Committee.  The Board of Directors met once in its capacity as the nominating
committee during the 1997 fiscal year.

     The Savings Bank also has standing Loan, Pension Plan, Strategic Planning
and Asset/Liability Management Committees.

DIRECTORS' COMPENSATION

     Directors (including Directors Emeriti, but excluding directors who are
full-time employees) receive annual compensation of $10,800, payable $900
monthly, and $100 for each committee meeting attended.  No fees are paid for
attending special meetings of the Board.  The Savings Bank's Chairman of the
Board receives compensation of $12,000 per year.  The Savings Bank paid a total
of $109,000 in directors' and committee fees for the fiscal year ended September
30, 1997.  Director compensation is deducted by $100 for each meeting absence.
Directors also participate in the Savings Bank's stock option programs.

                                       61
EXECUTIVE COMPENSATION

     Summary Compensation Table.  The following information is furnished for the
     --------------------------                                                 
named executive officers.
==================================================================================================================================

                                                    SUMMARY COMPENSATION TABLE
---------------------------------------------------------------------------------------------------------------------------------
                                                                     Long-Term Compensation
                                                                -----------------------------------------------------------------
                    Annual Compensation                                   Awards            Payouts
---------------------------------------------------------------------------------------------------------------------------------
Name and                                          Other
     Principal                                         Annual      Restricted                              All Other
     Position                                         Compen-        Stock                   LTIP          Compensa-
     with the                      Salary    Bonus     sation       Awards      Options    Payouts           tion
   Savings Bank            Year    ($)(1)     ($)       ($)         ($)(2)        (#)        ($)            ($)(3)
 ---------------------------------------------------------------------------------------------------------------------------------
 Robert W. Orr,            1997   $95,000    $59,299    $    --      330,525    10,250        --              $14,658
 President and                                            5,750
 Managing Officer          1996    71,350     61,017                      --        --        --               13,085
                                                          5,750
                           1995    69,077     58,889                      --        --        --               12,185

Thomas C. Hall,            1997    80,000     50,616         --      330,525    10,250        --               12,409
Senior Vice
President                  1996    60,902     52,082      2,880           --        --        --               10,904

                           1995    58,962     50,265      2,870           --        --        --               10,218

Barry C. Visioli           1997    70,000     48,552         --      330,525    10,250        --               11,263
Senior Vice
President                  1996    58,418     49,958      2,880           --        --        --               10,483

                           1995    56,557     48,216      2,870           --        --        --                9,844
==================================================================================================================================
---------------------------
(1)  Includes salary and directors' fees.
(2)  Represents the value of shares of Savings Bank Common Stock awarded under
     the 1996 MRP that vested in equal installment over a five-year period
     beginning on April 7, 1998.  Dividends are paid on such awards if and when
     dividends are declared and paid by the Savings Bank.  At September 30,
     1997, the value of the awards were $330,525 for each of Mr. Orr, Mr. Hall
     and Mr. Visioli (5,850 shares at $56.50 per share).
(3)  Represents employer 401(k) Plan contributions.

                                       62
EMPLOYMENT AGREEMENTS

     The MHC and the Savings Bank currently maintain employment agreements with
Messrs. Orr, Hall and Visioli that were entered into in connection with the MHC
Reorganization.  In connection with the Conversion and Reorganization, the
Holding Company and the Savings Bank (collectively, the "Employers") will enter
into three-year employment agreements ("Employment Agreements") with these same
individuals (individually, the "Executive"), which have substantially the same
terms as and will replace the existing agreements.

     Under the Employment Agreements, the initial salary levels for Messrs. Orr,
Hall and Visioli will be $98,800, $83,200 and $72,800, respectively, which
amounts will be paid by the Savings Bank and may be increased at the discretion
of the Board of Directors.  On each anniversary of the commencement date of the
Employment Agreements, the term of each agreement may be extended for an
additional year at the discretion of the Board.  The agreement is terminable by
the Employers at any time, by the Executive if the Executive is assigned duties
inconsistent with his initial position, duties, responsibilities and status, or
upon the occurrence of certain events specified by federal regulations.  In the
event that an Executive's employment is terminated without cause or upon the
Executive's voluntary termination in certain circumstances, the Savings Bank
would be required to honor the terms of the agreement through the expiration of
the then current term, including payment of current cash compensation and
continuation of employee benefits.

     The Employment Agreements also provide for severance payments and other
benefits in the event of involuntary termination of employment in connection
with any change in control of the Employers.  Severance payments also will be
provided on a similar basis in connection with a voluntary termination of
employment where, subsequent to a change in control, an Executive is assigned
duties inconsistent with his position, duties, responsibilities and status
immediately prior to such change in control.  The term "change in control" is
defined in the agreement as having occurred when, among other things, (a) a
person other than the Holding Company purchases shares of Common Stock pursuant
to a tender or exchange offer for such shares, (b) any person (as such term is
used in Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the
beneficial owner, directly or indirectly, of securities of the Holding Company
representing 25% or more of the combined voting power of the Holding Company's
then outstanding securities, (c) the membership of the Board of Directors
changes as the result of a contested election, or (d) shareholders of the
Holding Company approve a merger, consolidation, sale or disposition of all or
substantially all of the Holding Company's assets, or a plan of partial or
complete liquidation.

     The maximum value of the severance benefits under the Employment Agreements
is 2.99 times the Executive's average annual compensation during the five-year
period preceding the effective date of the change in control (the "base
amount").  The Employment Agreements provide that the value of the maximum
benefit may be distributed, at the Executive's election, (i) in the form of a
lump sum cash payment equal to 2.99 times the Executive's base amount or (ii) a
combination of a cash payment and continued coverage under the Employers'
health, life and disability programs for a 36-month period following the change
in control, the total present value of which does not exceed 2.99 times the
Executive's base amount.  Assuming that a change in control had occurred at
September 30, 1997 and that each Executive elected to receive a lump sum cash
payment, Messrs. Orr, Hall and Visioli would be entitled to payments of
approximately $220,000, $187,000 and $176,000, respectively.  Section 280G of
the Internal Revenue Code of 1986, as amended ("Code"), provides that severance
payments that equal or exceed three times the individual's base amount are
deemed to be "excess parachute payments" if they are contingent upon a change in
control.  Individuals receiving excess parachute payments are subject to a 20%
excise tax on the amount of such excess payments, and the Employers would not be
entitled to deduct the amount of such excess payments.

     The Employment Agreements restrict the Executive's right to compete against
the Employers for a period of one year from the date of termination of the
agreement if an Executive's employment is terminated without cause, except if
such termination occurs after a change in control.

                                       63
OPTION GRANTS TABLE.  The following table sets forth all grants of options
to the named executive officers for the fiscal year ended September 30, 1997.
============================================================================================
                             OPTION GRANTS IN LAST FISCAL YEAR
--------------------------------------------------------------------------------------------
                                     Individual Grants
--------------------------------------------------------------------------------------------
                                                      Percent of
                                                   Total Options
                                       Number of     Granted to     Exercise
                                        Options    Employees in       Price     Expiration
                Name                    Granted     Fiscal Year     Per Share      Date

 --------------------------------------------------------------------------------------------
Robert W. Orr                             10,250              26%      $25.25   April 2007
 --------------------------------------------------------------------------------------------
Thomas C. Hall                            10,250              26%      $25.25   April 2007
--------------------------------------------------------------------------------------------
Barry C. Visioli                          10,250              26%      $25.25   April 2007
============================================================================================
OPTION EXERCISE/VALUE TABLE.  The following table sets forth all exercises
of options by the named executive officers for the fiscal year ended September
30, 1997.
============================================================================================================= 
                              AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                                     AND FISCAL YEAR END OPTION VALUES
 
-------------------------------------------------------------------------------------------------------------- 
                                                                                                 Value of
                                                                               Number of        Unexercised
                                                     Number of                Unexercised      In-the-Money
                                                      Shares                  Options at        Options at
                                                     Acquired     Dollar    Fiscal Year End   Fiscal Year End
                                                        on        Value      Exercisable/      Exercisable/
      Name                                           Exercise    Realized    Unexercisable     Unexercisable
Robert W. Orr                                          2,956    $57,642             --/--       $--/$--
--------------------------------------------------------------------------------------------------------------  
Thomas C. Hall                                            --         --          2,300/--      $106,950/$--
-------------------------------------------------------------------------------------------------------------- 
Barry C. Visioli                                          --         --          2,300/--      $106,950/$--
==============================================================================================================
BENEFITS

     INSURANCE.  Full-time employees are provided, with minimal contribution or
expense to them, with group plan insurance that covers hospitalization,
dependent coverage, long-term disability and life insurance.  This insurance is
available generally and on the same basis to all full-time employees.  Long-term
disability insurance is available after completion of a minimum of one year of
service, while the other benefits are available immediately.

     CAFETERIA PLAN.  The Savings Bank offers full-time employees the ability to
enroll in a cafeteria or flexible benefit plan which allows employees to set
aside a portion of their pre-tax salary to be used for, among other things,

                                       64
medical expenses not covered by insurance and child care expenses.  The decision
to enroll in the Cafeteria Plan and the benefits selected is at each employee's
discretion.

     PROFIT SHARING AND 401(K) PLAN.  The Savings Bank sponsors a tax-qualified
cash or deferred profit sharing plan ("401(k) Plan") for the benefit of its
employees.  Employees become eligible to participate under the 401(k) Plan on
the first day of October following their date of employment.  Benefits under the
401(k) Plan are determined based upon annual employee salary reduction and
employer discretionary contributions to the 401(k) Plan.  Employer discretionary
contributions are allocated to participant accounts as a percentage of total
compensation of such participant to the compensation of all participants.  At
the end of each year the Board of Directors determines whether to make a
discretionary contribution and the amount of the contribution to the 401(k)
Plan, based upon a number of factors, such as the Savings Bank's retained
earnings, profits, regulatory capital and employee performance.  In addition,
the Board of Directors may authorize a discretionary matching contribution not
to exceed 4.5% of each participants compensation for the 401(k) Plan year.  Each
year participants are permitted to contribute voluntarily up to $10,000 (as
indexed for inflation).  However, each participant's salary deferrals and
employee and employer contributions when added to other defined contribution
plan contributions each year cannot exceed the lessor of 25% of compensation or
$30,000 for each 401(k) Plan year.

     Benefits are payable upon termination of employment, retirement, death,
disability or 401(k) Plan termination.  Additionally, under certain financial
hardship circumstances, early withdrawal of salary deferrals may be authorized
by the Savings Bank.  Benefits are normally paid in a lump-sum payment or under
various installment payment or annuity alternatives.  Normal retirement age
under the 401(k) Plan is age 65.  Early retirement age under the 401(k) Plan is
age 55 with at least ten years of service.

     Employer discretionary contributions under the 401(k) Plan are fully vested
upon the completion of five years of service.  Employees are always 100% vested
in their salary deferrals and in the employer matching contributions.  The
Savings Bank's total contribution to the 401(k) Plan for all employees for the
fiscal year ended September 30, 1997 was $219,000.

     Participants in the 401(k) Plan self-direct the investment of plan assets
credited to their account.  The available investment options include mutual
funds and Common Stock.  In connection with the Conversion and Reorganization,
eligible Participants will have the opportunity to direct the investment of
their 401(k) Plan account balance to purchase shares of the Common Stock.  A
participant in the 401(k) Plan who elects to purchase Common Stock in the
Conversion and Reorganization through the 401(k) Plan will receive the same
subscription priority and be subject to the same individual purchase limitations
as if the participant had elected to make such purchase using other funds.  See
"THE CONVERSION AND REORGANIZATION -- Limitations on Purchases of Conversion
Shares."

     EMPLOYEE STOCK OWNERSHIP PLAN.  In connection with the MHC Reorganization,
the Savings Bank established an ESOP for the exclusive benefit of participating
employees.  In order to participate under the ESOP, employees must be 21 years
old and complete one year of service with the Savings Bank.  The ESOP acquired
8,050 shares of Savings Bank Common Stock in the MHC Reorganization with the
proceeds of a loan obtained from a third party lender.  The ESOP debt was
retired on January 24, 1996 and all shares were allocated to the accounts of
participating employees.  In connection with the Additional Offering, the ESOP
acquired 46,800 shares of Savings Bank Common Stock with the proceeds of a loan
obtained from an unrelated third party lender.  The loan is repaid principally
from the Savings Bank's contributions to the ESOP and dividends payable on
Savings Bank Common Stock held by the ESOP over the term of the loan.  In
connection with the Conversion and Reorganization, it is anticipated that the
Holding Company will lend sufficient funds to the ESOP to enable the ESOP to
repay the outstanding principal balance of the loan ($804,000 at September 30,
1997) and accrued interest thereon through the closing date of the Conversion
and Reorganization.  Shares of Common Stock acquired by the ESOP in the
Additional Offering will, to the extent not yet allocated to ESOP participants,
serve as collateral for the Holding Company loan and be held in a suspense
account pending repayment of the loan.  It is anticipated that the interest

                                       65
rate on the Holding Company loan will be equal to the prime rate reported in The
Wall Street Journal on the closing date of the Conversion and Reorganization.

     In connection with the Conversion and Reorganization, the shares of Savings
Bank Common Stock held by the ESOP will be converted into Exchange Shares based
on the final Exchange Ratio.  In light of management's evaluation of the
anticipated compensation expense associated with the ESOP, the ESOP does not
intend to purchase any Conversion Shares in the Conversion Offerings.

     Contributions to the ESOP and shares released from the suspense account
will be allocated among participants based on compensation.  Except for
participants who retire, become disabled or die during the Plan year, all other
participants will be required to have completed at least 1,000 hours of service
and be employed on the last day of the Plan year in order to receive an
allocation.  Participant benefits vest over a seven-year period with 20% vested
after three years of service and 100% vested after seven years of service.  All
years of service are counted toward vesting.  Vesting will be accelerated upon
retirement, death, disability or termination of the ESOP.  Forfeitures are
applied to reduce future contributions by the Savings Bank or reallocated to
other participants to reduce future funding costs.  Benefits may be payable upon
retirement, death, disability or separation from service.  Contributions to the
ESOP are not fixed, so benefits payable under the ESOP cannot be estimated.

     Under the ESOP, participating employees may vote shares of Common Stock
allocated to their account.  Shares for which employees do not give instructions
and unallocated shares will be voted by the ESOP Trustee in the same proportion
as determined by the vote of participants with respect to allocated shares.

     The Board of Directors has appointed Directors Fant, Jim Gray Watson, Orr
and McIntosh and Director Emeritus Wade Watson as the committee ("ESOP
Committee") to administer the ESOP and the serve as ESOP trustees.  The Board of
Directors may amend the ESOP in any manner which it deems desirable, except that
the ESOP may not be amended in any way to deprive any participant or beneficiary
of any benefits to which he is entitled with respect to contributions previously
made.

     Although the ESOP will not purchase any Conversion Shares in the Conversion
Offerings, the ESOP may purchase Common Stock in the open market at then
prevailing prices from time to time following the Conversion and Reorganization.
The timing, amount, and manner of such discretionary contributions will be
affected by several factors, including applicable regulatory policies, the
requirements of applicable laws and regulations, market conditions.

     STOCK OPTION PLANS.  In connection with the MHC Reorganization, the Savings
Bank adopted the 1993 Option Plan for the benefit of key employees and
nonemployee directors, pursuant to which 11,504 shares of Savings Bank Common
Stock were reserved for issuance upon the exercise of stock options awarded
thereunder.  In connection with the Additional Offering, the Savings Bank
adopted the 1996 Option Plan for the benefit of key employees and nonemployee
directors, pursuant to which 58,500 shares of Savings Bank Common Stock were
reserved for issuance upon the exercise of stock options awarded thereunder.  As
of September 30, 1997, stock options have been awarded with respect to all
shares reserved under the 1993 Option Plan, and with respect to 58,500 shares
reserved under the 1996 Stock Option Plan, including 10,250 options to each of
Mr. Orr,  Mr. Hall and Mr. Visioli.  The Holding Company will assume the 1993
and 1996 Stock Option Plans in connection with the Conversion and
Reorganization, and appropriate adjustments to the exercise price and the number
of shares subject to stock options outstanding under each plan will be made in
accordance with the final Exchange Ratio.

     The 1998 Option Plan will be designed to attract and retain qualified
management personnel and nonemployee directors, to provide such key employees
and nonemployee directors with a proprietary interest in the Holding Company as
an incentive to contribute to the success of the Holding Company and the Savings
Bank, and to reward officers and key employees for outstanding performance.  The
1998 Option Plan will provide for the grant of incentive stock options ("ISOs")
intended to comply with the requirements of Section 422 of the Code and for

                                       66
nonqualified stock options ("NQOs").  Upon receipt of stockholder approval of
the 1998 Option Plan, stock options may be granted to nonemployee directors and
key employees of the Holding Company and its subsidiaries. Unless sooner
terminated, the 1998 Option Plan will continue in effect for a period of ten
years from the date the 1998 Option Plan is approved by stockholders.  Under
current OTS regulations, the approval of a majority vote of the Holding
Company's outstanding shares is required prior to the implementation of the 1998
Option Plan within one year of the consummation of the Conversion and
Reorganization.

     A number of authorized shares of Common Stock equal to 10% of the number of
Conversion Shares issued in connection with the Conversion and Reorganization
will be reserved for future issuance under the 1998 Option Plan (198,375 shares
based on the issuance of 1,983,750 Conversion Shares at the maximum of the
Estimated Valuation Range).  Shares acquired upon exercise of options will be
authorized but unissued shares or treasury shares.  In the event of a stock
split, reverse stock split, stock dividend, or similar event, the number of
shares of Common Stock under the 1998 Option Plan, the number of shares to which
any award relates and the exercise price per share under any option may be
adjusted by the Committee (as defined below) to reflect the increase or decrease
in the total number of shares of Common Stock outstanding.

     The 1998 Option Plan will be administered and interpreted by the Board of
Directors.  Subject to applicable OTS regulations,  the Board will determine
which nonemployee directors and key employees will be granted options, whether,
in the case of officers and employees, such options will be ISOs or NQOs, the
number of shares subject to each option, and the exercisability of such options.
All options granted to nonemployee directors will be NQOs.  The per share
exercise price of all options will equal at least 100% of the fair market value
of a share of Common Stock on the date the option is granted.

     It is anticipated that all options granted under the 1998 Option Plan will
be granted subject to a vesting schedule whereby the options become exercisable
over a specified period following the date of grant.  Under OTS regulations, if
the Stock Option plan is implemented within the first year following
consummation of the Conversion and Reorganization the minimum vesting period
will be five years.  All unvested options will be immediately exercisable in the
event of the recipient's death or disability.  Unvested options also will be
exercisable following a change in control (as defined in the 1998 Option Plan)
of the Holding Company or the Savings Bank to the extent authorized or not
prohibited by applicable law or regulations.  OTS regulations currently provide
that, if the 1998 Option Plan is implemented prior to the first anniversary of
the Conversion and Reorganization, vesting may not be accelerated upon a change
in control of the Holding Company or the Savings Bank.

     Each stock option that is awarded to an officer or key employee will remain
exercisable at any time on or after the date it vests through the earlier to
occur of the tenth anniversary of the date of grant or three months after the
date on which the optionee terminates employment (one year in the event of the
optionee's termination by reason of death or disability), unless such period is
extended by the Board.  Each stock option that is awarded to a nonemployee
director will remain exercisable through the earlier to occur of the tenth
anniversary of the date of grant or one year (two years in the event of a
nonemployee director's death or disability) following the termination of a
nonemployee director's service on the Board.  Except as authorized by the Board,
all stock options are nontransferable except by will or the laws of descent or
distribution.

     Under current provisions of the Code, the federal tax treatment of ISOs and
NQOs is different.  With respect to ISOs, an optionee who satisfies certain
holding period requirements will not recognize income at the time the option is
granted or at the time the option is exercised.  If the holding period
requirements are satisfied, the optionee will generally recognize capital gain
or loss upon a subsequent disposition of the shares of Common Stock received
upon the exercise of a stock option.  If the holding period requirements are not
satisfied, the difference between the fair market value of the Common Stock on
the date of grant and the option exercise price, if any, will be taxable to the
optionee at ordinary income tax rates.  A federal income tax deduction generally
will not be available to the Holding Company as a result of the grant or
exercise of an ISO, unless the optionee fails to satisfy the holding period
requirements.  With respect to NQOs, the grant of an NQO generally is not a
taxable event for the optionee and no tax deduction will be available to the
Holding Company.  However, upon the exercise of an NQO, the difference

                                       67
between the fair market value of the Common Stock on the date of exercise and
the option exercise price generally will be treated as compensation to the
optionee upon exercise, and the Holding Company will be entitled to a
compensation expense deduction in the amount of income realized by the optionee.

     Although no specific award determinations have been made at this time, the
Holding Company and the Savings Bank anticipate that if stockholder approval is
obtained it would provide awards to its directors and key employees to the
extent and under terms and conditions permitted by applicable regulations.
Under current OTS regulations, if the 1998 Option Plan is implemented within one
year of the consummation of the Conversion and Reorganization, (i) no officer or
employee may receive an award of options covering in excess of 25%, (ii) no
nonemployee director could receive in excess of 5% and (iii) nonemployee
directors, as a group, may not receive in excess of 30% of the number of shares
reserved for issuance under the 1998 Option Plan.

     MANAGEMENT RECOGNITION PLANs.  In connection with the MHC Reorganization,
the Savings Bank adopted the 1993 MRP for the benefit of key employees, pursuant
to which 3,450 shares of Savings Bank Common Stock were reserved for issuance in
the form of restricted stock.  In connection with the Additional Offering, the
Savings Bank adopted the 1996 MRP for the benefit of key employees, pursuant to
which 23,400 shares of Savings Bank Common Stock were reserved for issuance in
the form of restricted stock.  As of September 30, 1997, all shares under the
1993 MRP have been awarded and are fully vested, and such shares will be
converted into Exchange Shares based on the final Exchange Ratio in the same
manner as shares held by other Public Stockholders.  As of September 30, 1997,
awards for 23,400 shares of Savings Bank Common Stock have been awarded under
the 1996 MRP, including 5,850 shares to Mr. Orr, 5,850 shares to Mr. Hall and
5,850 shares to Mr. Visioli, subject to a five-year vesting period.  Such shares
will be converted into Exchange Shares based on the final Exchange Ratio in the
same manner as shares held by other Public Stockholders.  The Holding Company
will assume and continue the 1996 MRP in connection with the Conversion and
Reorganization.

     The Board of Directors believes that continuation of the MRP is important
to the Savings Bank's overall compensation strategy, which emphasizes providing
appropriate incentives to attract and retain capable employees.  Specifically,
the continuation of the MRP will enable the Holding Company to provide
participants with a proprietary interest in the Holding Company as an incentive
to contribute to the success of the Holding Company.  Accordingly, the Holding
Company's Board of Directors intends to adopt the 1998 MRP for officers and
employees of the Holding Company.

     The 1998 MRP will be submitted to stockholders for approval at a meeting to
be held no earlier than six months following consummation of the Conversion and
Reorganization.  The approval of a majority vote of the Holding Company's
stockholders is required prior to implementation of the 1998 MRP within one year
of the consummation of the Conversion and Reorganization.  The 1998 MRP expects
to acquire a number of shares of Common Stock equal to 4% of the Conversion
Shares issued in the Conversion Offerings (79,350 shares based on the issuance
of 1,983,750 Conversion Shares at the maximum of the Estimated Valuation Range).
Such shares will be acquired on the open market, if available, with funds
contributed by the Savings Bank to a trust which the Holding Company may
establish in conjunction with the 1998 MRP ("1998 MRP Trust") or from authorized
but unissued shares or treasury shares of the Holding Company.

     The Board of Directors will administer the 1998 MRP, members of which will
also serve as trustees of the 1998 MRP Trust, if formed.  The trustees will be
responsible for the investment of all funds contributed by the Savings Bank to
the 1998 MRP Trust.

     It is anticipated that shares of Common Stock granted pursuant to the 1998
MRP will be in the form of restricted stock payable ratably over a five-year
period following the date of grant.  During the period of restriction, all
shares will be held in escrow by the Holding Company or by the 1998 MRP Trust.
If a recipient terminates employment for reasons other than death or disability,
the recipient will forfeit all rights to allocated shares that are then subject
to restriction.  In the event of the recipient's death or disability, all
restrictions will expire and all allocated shares will become unrestricted.  In
addition, all allocated shares will become unrestricted in the event of

                                       68
a change in control (as defined in the 1998 MRP) of the Holding Company to the
extent authorized or not prohibited by applicable law or regulations.  Current
OTS regulations, however, do not permit accelerated vesting of 1998 MRP awards
in the event of a change in control.  Compensation expense in the amount of the
fair market value of the Common Stock at the date of the grant to the recipient
will be recognized during the years in which the shares vest.

     The Board of Directors may terminate the 1998 MRP at any time and, upon
termination, all unallocated shares of Common Stock will revert to the Savings
Bank.

     A recipient of a 1998 MRP award in the form of restricted stock generally
will not recognize income upon an award of shares of Common Stock, and the
Holding Company will not be entitled to a federal income tax deduction, until
the termination of the restrictions.  Upon such termination, the recipient will
recognize ordinary income in an amount equal to the fair market value of the
Common Stock at the time and the Holding Company will be entitled to a deduction
in the same amount after satisfying federal income tax withholding requirements.
However, the recipient may elect to recognize ordinary income in the year the
restricted stock is granted in an amount equal to the fair market value of the
shares at that time, determined without regard to the restrictions.  In that
event, the Holding Company will be entitled to a deduction in such year and in
the same amount.  Any gain or loss recognized by the recipient upon subsequent
disposition of the stock will be either a capital gain or capital loss.

     Although no specific award determinations have been made, the Savings Bank
anticipates that if stockholder approval is obtained it would provide awards to
its directors, officers and employees to the extent permitted by applicable
regulations.  OTS regulations currently provide that no individual officer or
employee may receive more than 25% of the shares reserved for issuance under any
stock compensation plan and that non-employee directors may not receive more
than 5% of such shares individually or 30% in the aggregate for all non employee
directors.

TRANSACTIONS WITH THE SAVINGS BANK

     Federal regulations require that all loans or extensions of credit by the
Savings Bank to executive officers and directors must generally be made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons (unless
the loan or extension of credit is made under a benefit program generally
available to all other employees and does not give preference to any insider
over any other employee) and must not involve more than the normal risk of
repayment or present other unfavorable features.  The Savings Bank's policy is
not to make any new loans or extensions of credit to the Savings Bank's
executive officers and directors at different rates or terms than those offered
to the general public.  In addition, loans made to a director or executive
officer in an amount that, when aggregated with the amount of all other loans to
such person and his or her related interests, are in excess of the greater of
$25,000, or 5% of the Savings Bank's capital and surplus (up to a maximum of
$500,000) must be approved in advance by a majority of the disinterested members
of the Board of Directors.  See "REGULATION -- Federal Regulation of the Savings
Bank -- Transactions with Affiliates."  The aggregate amount of loans by the
Savings Bank to its executive officers and directors and their associates was
$926,000 at September 30, 1997, or approximately 1.4% of the Holding Company's
pro forma stockholders' equity (based on the issuance of Conversion Shares at
the maximum of the Estimated Valuation Range).

                                   REGULATION

GENERAL

     The Savings Bank is subject to extensive regulation, examination and
supervision by the OTS as its chartering agency, and the FDIC, as the insurer of
its deposits.  The activities of federal savings institutions are governed by
the Home Owners' Loan Act, as amended ("HOLA") and, in certain respects, the
Federal Deposit Insurance Act ("FDIA") and the regulations issued by the OTS and
the FDIC to implement these statutes.  These laws and regulations delineate the
nature and extent of the activities in which federal savings associations may
engage.  Lending activities and other investments must comply with various
statutory and regulatory capital requirements.  In addition, the Savings Bank's
relationship with its depositors and borrowers is also regulated to a

                                       69
great extent, especially in such matters as the ownership of deposit accounts
and the form and content of the Savings Bank's mortgage documents.  The Savings
Bank must file reports with the OTS and the FDIC concerning its activities and
financial condition in addition to obtaining regulatory approvals prior to
entering into certain transactions such as mergers with, or acquisitions of,
other financial institutions.  There are periodic examinations by the OTS and
the FDIC to review the Savings Bank's compliance with various regulatory
requirements.  The regulatory structure also gives the regulatory authorities
extensive discretion in connection with their supervisory and enforcement
activities and examination policies, including policies with respect to the
classification of assets and the establishment of adequate loan loss reserves
for regulatory purposes.  Any change in such policies, whether by the OTS, the
FDIC or Congress, could have a material adverse impact on the Holding Company,
the Savings Bank and their operations.  The Holding Company, as a savings and
loan holding company, will also be required to file certain reports with, and
otherwise comply with the rules and regulations of, the OTS and the SEC.

FEDERAL REGULATION OF THE SAVINGS BANK

     OFFICE OF THRIFT SUPERVISION.  The OTS is an office in the Department of
the Treasury subject to the general oversight of the Secretary of the Treasury.
The OTS generally possesses the supervisory and regulatory duties and
responsibilities formerly vested in the Federal Home Loan Bank Board.  Among
other functions, the OTS issues and enforces regulations affecting federally
insured savings associations and regularly examines these institutions.

     FEDERAL HOME LOAN BANK SYSTEM.  The FHLB System, consisting of 12 FHLBs, is
under the jurisdiction of the Federal Housing Finance Board ("FHFB").  The
designated duties of the FHFB are to:  supervise the FHLBs; ensure that the
FHLBs carry out their housing finance mission; ensure that the FHLBs remain
adequately capitalized and able to raise funds in the capital markets; and
ensure that the FHLBs operate in a safe and sound manner.  The Savings Bank, as
a member of the FHLB-Atlanta, is required to acquire and hold shares of capital
stock in the FHLB-Atlanta in an amount equal to the greater of (i) 1.0% of the
aggregate outstanding principal amount of residential mortgage loans, home
purchase contracts and similar obligations at the beginning of each year, or
(ii) 1/20 of its advances (borrowings) from the FHLB-Atlanta.  At September 30,
1997, the Savings Bank complied with this requirement with an investment in
FHLB-Atlanta stock of $1.7 million.  Among other benefits, the FHLB-Atlanta
provides a central credit facility primarily for member institutions.  It is
funded primarily from proceeds derived from the sale of consolidated obligations
of the FHLB System.  It makes advances to members in accordance with policies
and procedures established by the FHFB and the Board of Directors of the FHLB-
Atlanta.

     FEDERAL DEPOSIT INSURANCE CORPORATION.  The FDIC is an independent federal
agency established originally to insure the deposits, up to prescribed statutory
limits, of federally insured banks and to preserve the safety and soundness of
the banking industry.  The FDIC maintains two separate insurance funds: the Bank
Insurance Fund ("BIF") and the SAIF.  As insurer of the Savings Bank's deposits,
the FDIC has examination, supervisory and enforcement authority over all savings
associations.

     The Savings Bank's deposit accounts are insured by the FDIC under the SAIF
to the maximum extent permitted by law.  The Savings Bank pays deposit insurance
premiums to the FDIC based on a risk-based assessment system established by the
FDIC for all SAIF-member institutions.  Under applicable regulations,
institutions are assigned to one of three capital groups that are based solely
on the level of an institution's capital ("well capitalized," "adequately
capitalized" or "undercapitalized"), which are defined in the same manner as the
regulations establishing the prompt corrective action system under the FDIA as
discussed below.  The Savings Bank's assessments expensed for the year ended
September 30, 1997 equaled $152,000.

     Pursuant to the Deposit Insurance Fund ("DIF") Act, which was enacted on
September 30, 1996, the FDIC imposed a special assessment on each depository
institution with SAIF-assessable deposits which resulted in the SAIF achieving
its designated reserve ratio.  In connection therewith, the FDIC reduced the
assessment schedule for SAIF members, effective January 1, 1997, to a range of
0% to 0.27%, with most institutions, including the Savings Bank, paying 0%.
This assessment schedule is the same as that for the BIF, which reached its
designated reserve ratio in

                                       70
1995.  In addition, since January 1, 1997, SAIF members are charged an
assessment of 0.065% of SAIF-assessable deposits for the purpose of paying
interest on the obligations issued by the Financing Corporation ("FICO") in the
1980s to help fund the thrift industry cleanup.  BIF-assessable deposits will be
charged an assessment to help pay interest on the FICO bonds at a rate of
approximately .013% until the earlier of December 31, 1999 or the date upon
which the last savings association ceases to exist, after which time the
assessment will be the same for all insured deposits.

     The DIF Act provides for the merger of the BIF and the SAIF into the
Deposit Insurance Fund on January 1, 1999, but only if no insured depository
institution is a savings association on that date.  The DIF Act contemplates the
elimination of federal savings association charter, and would require all
federal savings associations to become national banks or state-chartered
institutions.  It is not known what effect, if any, the adoption of such
legislation would have on the operation of the Savings Bank.

     The FDIC may terminate the deposit insurance of any insured depository
institution if it determines after a hearing that the institution has engaged or
is engaging in unsafe or unsound practices, is in an unsafe or unsound condition
to continue operations, or has violated any applicable law, regulation, order or
any condition imposed by an agreement with the FDIC.  It also may suspend
deposit insurance temporarily during the hearing process for the permanent
termination of insurance, if the institution has no tangible capital.  If
insurance of accounts is terminated, the accounts at the institution at the time
of termination, less subsequent withdrawals, shall continue to be insured for a
period of six months to two years, as determined by the FDIC.  Management is
aware of no existing circumstances that could result in termination of the
deposit insurance of the Savings Bank.

     LIQUIDITY REQUIREMENTS.  Under OTS regulations, each savings institution is
required to maintain an average daily balance of liquid assets (cash, certain
time deposits and savings accounts, bankers' acceptances, and specified U.S.
Government, state or federal agency obligations and certain other investments)
equal to a monthly average of not less than a specified percentage (currently
4.0%) of its net withdrawable accounts plus short-term borrowings.  Monetary
penalties may be imposed for failure to meet liquidity requirements.  At
September 30, 1997, the Savings Bank's liquidity ratio was 5.64%.

     PROMPT CORRECTIVE ACTION.  Each federal banking agency is required to
implement a system of prompt corrective action for institutions that it
regulates.  The federal banking agencies have promulgated substantially similar
regulations to implement this system of prompt corrective action.  Under the
regulations, an institution shall be deemed to be (i) "well capitalized" if it
has a total risk-based capital ratio of 10.0% or more, has a Tier I risk-based
capital ratio of 6.0% or more, has a leverage ratio of 5.0% or more and is not
subject to specified requirements to meet and maintain a specific capital level
for any capital measure; (ii) "adequately capitalized" if it has a total risk-
based capital ratio of 8.0% or more, a Tier I risk-based capital ratio of 4.0%
or more and a leverage ratio of 4.0% or more (3.0% under certain circumstances)
and does not meet the definition of "well capitalized;" (iii) "undercapitalized"
if it has a total risk-based capital ratio that is less than 8.0%, a Tier I
risk-based capital ratio that is less than 4.0% or a leverage ratio that is less
than 4.0% (3.0% under certain circumstances); (iv) "significantly
undercapitalized" if it has a total risk-based capital ratio that is less than
6.0%, a Tier I risk-based capital ratio that is less than 3.0% or a leverage
ratio that is less than 3.0%; and (v) "critically undercapitalized" if it has a
ratio of tangible equity to total assets that is equal to or less than 2.0%.

     A federal banking agency may, after notice and an opportunity for a
hearing, reclassify a well capitalized institution as adequately capitalized and
may require an adequately capitalized institution or an undercapitalized
institution to comply with supervisory actions as if it were in the next lower
category if the institution is in an unsafe or unsound condition or has received
in its most recent examination, and has not corrected, a less than satisfactory
rating for asset quality, management, earnings or liquidity.  The OTS may not,
however, reclassify a significantly undercapitalized institution as critically
undercapitalized.

     An institution generally must file a written capital restoration plan that
meets specified requirements, as well as a performance guaranty by each company
that controls the institution, with the appropriate federal banking agency

                                       71
within 45 days of the date that the institution receives notice or is deemed to
have notice that it is undercapitalized, significantly undercapitalized or
critically undercapitalized.  Immediately upon becoming undercapitalized, an
institution shall become subject to various mandatory and discretionary
restrictions on its operations.

     At September 30, 1997, the Savings Bank was categorized as "well
capitalized" under the prompt corrective action regulations of the OTS.

     STANDARDS FOR SAFETY AND SOUNDNESS.  The FDIA requires the federal banking
regulatory agencies to prescribe, by regulation, standards for all insured
depository institutions relating to: (i) internal controls, information systems
and internal audit systems; (ii) loan documentation; (iii) credit underwriting;
(iv) interest rate risk exposure; (v) asset growth; and (vi) compensation, fees
and benefits.  The federal banking agencies recently adopted final regulations
and Interagency Guidelines Prescribing Standards for Safety and Soundness
("Guidelines").  The Guidelines set forth the safety and soundness standards
that the federal banking agencies use to identify and address problems at
insured depository institutions before capital becomes impaired.  If the OTS
determines that the Savings Bank fails to meet any standard prescribed by the
Guidelines, the agency may require the Savings Bank to submit to the agency an
acceptable plan to achieve compliance with the standard.  OTS regulations
establish deadlines for the submission and review of such safety and soundness
compliance plans.

     QUALIFIED THRIFT LENDER TEST.  All savings associations are required to
meet a QTL test to avoid certain restrictions on their operations.  A savings
institution that fails to become or remain a QTL shall either become a national
bank or be subject to the following restrictions on its operations:  (i) the
association may not make any new investment or engage in activities that would
not be permissible for national banks; (ii) the association may not establish
any new branch office where a national bank located in the savings institution's
home state would not be able to establish a branch office; (iii) the association
shall be ineligible to obtain new advances from any FHLB; and (iv) the payment
of dividends by the association shall be subject to the statutory and regulatory
dividend restrictions applicable to national banks.  Also, beginning three years
after the date on which the savings institution ceases to be a QTL, the savings
institution would be prohibited from retaining any investment or engaging in any
activity not permissible for a national bank and would be required to repay any
outstanding advances to any FHLB.  In addition, within one year of the date on
which a savings association controlled by a company ceases to be a QTL, the
company must register as a bank holding company and become subject to the rules
applicable to such companies.  A savings institution may requalify as a QTL if
it thereafter complies with the QTL test.

     Currently, the QTL test requires that either an institution qualify as a
domestic building and loan association under the Code or that 65% of an
institution's "portfolio assets" (as defined) consist of certain housing and
consumer-related assets on a monthly average basis in nine out of every 12
months.  Assets that qualify without limit for inclusion as part of the 65%
requirement are loans made to purchase, refinance, construct, improve or repair
domestic residential housing and manufactured housing; home equity loans;
mortgage-backed securities (where the mortgages are secured by domestic
residential housing or manufactured housing); FHLB stock; direct or indirect
obligations of the FDIC; and loans for educational purposes, loans to small
businesses and loans made through credit cards.  In addition, the following
assets, among others, may be included in meeting the test subject to an overall
limit of 20% of the savings institution's portfolio assets:  50% of residential
mortgage loans originated and sold within 90 days of origination; 100% of
consumer loans; and stock issued by FHLMC or FNMA.  Portfolio assets consist of
total assets minus the sum of (i) goodwill and other intangible assets, (ii)
property used by the savings institution to conduct its business, and (iii)
liquid assets up to 20% of the institution's total assets.  At September 30,
1997, the qualified thrift investments of the Savings Bank were approximately
88.8% of its portfolio assets.

     CAPITAL REQUIREMENTS.  Under OTS regulations a savings association must
satisfy three minimum capital requirements: core capital, tangible capital and
risk-based capital.  Savings associations must meet all of the standards in
order to comply with the capital requirements.  The Holding Company is not
subject to any minimum capital requirements.

                                       72
OTS capital regulations establish a 3% core capital or leverage ratio
(defined as the ratio of core capital to adjusted total assets).  Core capital
is defined to include common stockholders' equity, noncumulative perpetual
preferred stock and any related surplus, and minority interests in equity
accounts of consolidated subsidiaries, less (i) any intangible assets, except
for certain qualifying intangible assets; (ii) certain mortgage servicing
rights; and (iii) equity and debt investments in subsidiaries that are not
"includable subsidiaries," which is defined as subsidiaries engaged solely in
activities not impermissible for a national bank, engaged in activities
impermissible for a national bank but only as an agent for its customers, or
engaged solely in mortgage-banking activities.  In calculating adjusted total
assets, adjustments are made to total assets to give effect to the exclusion of
certain assets from capital and to account appropriately for the investments in
and assets of both includable and nonincludable subsidiaries.  An institution
that fails to meet the core capital requirement would be required to file with
the OTS a capital plan that details the steps they will take to reach
compliance.  In addition, the OTS's prompt corrective action regulation provides
that a savings institution that has a leverage ratio of less than 4% (3% for
institutions receiving the highest CAMEL examination rating) will be deemed to
be "undercapitalized" and may be subject to certain restrictions.  See "--
Federal Regulation of the Savings Bank -- Prompt Corrective Action."

     Savings associations also must maintain "tangible capital" not less than
1.5% of the Savings Bank's adjusted total assets. "Tangible capital" is defined,
generally, as core capital minus any "intangible assets" other than purchased
mortgage servicing rights.  The prompt corrective action standards also
establish, in effect, a 2% tangible capital standard.

     Each savings institution must maintain Tier 1 (core) capital to risk-
weighted assets of at least 4% and total risk-based capital equal to at least 8%
of risk-weighted assets.  Total risk-based capital consists of the sum of core
and supplementary capital, provided that supplementary capital cannot exceed
core capital, as previously defined.  Supplementary capital includes (i)
permanent capital instruments such as cumulative perpetual preferred stock,
perpetual subordinated debt and mandatory convertible subordinated debt, (ii)
maturing capital instruments such as subordinated debt, intermediate-term
preferred stock and mandatory convertible subordinated debt, subject to an
amortization schedule, and (iii) general valuation loan and lease loss
allowances up to 1.25% of risk-weighted assets.

     The risk-based capital regulation assigns each balance sheet asset held by
a savings institution to one of four risk categories based on the amount of
credit risk associated with that particular class of assets.  Assets not
included for purposes of calculating capital are not included in calculating
risk-weighted assets.  The categories range from 0% for cash and securities that
are backed by the full faith and credit of the U.S. Government to 100% for
repossessed assets or assets more than 90 days past due.  Qualifying residential
mortgage loans (including multi-family mortgage loans) are assigned a 50% risk
weight.  Consumer, commercial, home equity and residential construction loans
are assigned a 100% risk weight, as are nonqualifying residential mortgage loans
and that portion of land loans and nonresidential construction loans that do not
exceed an 80% loan-to-value ratio.  The book value of assets in each category is
multiplied by the weighing factor (from 0% to 100%) assigned to that category.
These products are then totalled to arrive at total risk-weighted assets.  Off-
balance sheet items are included in risk-weighted assets by converting them to
an approximate balance sheet "credit equivalent amount" based on a conversion
schedule.  These credit equivalent amounts are then assigned to risk categories
in the same manner as balance sheet assets and included risk-weighted assets.

     The OTS has incorporated an interest rate risk component into its
regulatory capital rule.  Under the rule, savings associations with "above
normal" interest rate risk exposure would be subject to a deduction from total
capital for purposes of calculating their risk-based capital requirements.  A
savings association's interest rate risk is measured by the decline in the net
portfolio value of its assets (i.e., the difference between incoming and
                               ----                                     
outgoing discounted cash flows from assets, liabilities and off-balance sheet
contracts) that would result from a hypothetical 200 basis point increase or
decrease in market interest rates divided by the estimated economic value of the
association's assets, as calculated in accordance with guidelines set forth by
the OTS.  A savings association whose measured interest rate risk exposure
exceeds 2% must deduct an interest rate risk component in calculating its total
capital under the risk-based capital rule.  The interest rate risk component is
an amount equal to one-half of the difference between the institution's measured
interest rate risk and 2%, multiplied by the estimated economic value of the
association's

                                       73
assets.  That dollar amount is deducted from an association's total capital in
calculating compliance with its risk-based capital requirement.  Under the rule,
there is a two quarter lag between the reporting date of an institution's
financial data and the effective date for the new capital requirement based on
that data.  A savings association with assets of less than $300 million and
risk-based capital ratios in excess of 12% is not subject to the interest rate
risk component, unless the OTS determines otherwise.  The rule also provides
that the Director of the OTS may waive or defer an association's interest rate
risk component on a case-by-case basis.  Under certain circumstances, a savings
association may request an adjustment to its interest rate risk component if it
believes that the OTS-calculated interest rate risk component overstates its
interest rate risk exposure.  In addition, certain "well-capitalized"
institutions may obtain authorization to use their own interest rate risk model
to calculate their interest rate risk component in lieu of the OTS-calculated
amount.  Presently, the OTS has postponed the date that the component will first
be deducted from an institution's total capital.

     See "HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE" for a table
that sets forth in terms of dollars and percentages the OTS tangible, core and
risk-based capital requirements, the Savings Bank's historical amounts and
percentages at September 30, 1997 and pro forma amounts and percentages based
upon the assumptions stated therein.

     LIMITATIONS ON CAPITAL DISTRIBUTIONS.  OTS regulations impose uniform
limitations on the ability of all savings associations to engage in various
distributions of capital such as dividends, stock repurchases and cash-out
mergers.  In addition, OTS regulations require the Savings Bank to give the OTS
30 days' advance notice of any proposed declaration of dividends, and the OTS
has the authority under its supervisory powers to prohibit the payment of
dividends.  The regulation utilizes a three-tiered approach which permits
various levels of distributions based primarily upon a savings association's
capital level.

     A Tier 1 savings association has capital in excess of its fully phased-in
capital requirement (both before and after the proposed capital distribution).
A Tier 1 savings association may make (without application but upon prior notice
to, and no objection made by, the OTS) capital distributions during a calendar
year up to 100% of its net income to date during the calendar year plus one-half
its surplus capital ratio (i.e., the amount of capital in excess of its fully
                           ----                                              
phased-in requirement) at the beginning of the calendar year or the amount
authorized for a Tier 2 association.  Capital distributions in excess of such
amount require advance notice to the OTS.  A Tier 2 savings association has
capital equal to or in excess of its minimum capital requirement but below its
fully phased-in capital requirement (both before and after the proposed capital
distribution).  Such an association may make (without application) capital
distributions up to an amount equal to 75% of its net income during the previous
four quarters depending on how close the association is to meeting its fully
phased-in capital requirement.  Capital distributions exceeding this amount
require prior OTS approval.  A Tier 3 savings association has capital below the
minimum capital requirement (either before or after the proposed capital
distribution).  A Tier 3 savings association may not make any capital
distributions without prior approval from the OTS.

     The Savings Bank currently meets the criteria to be designated a Tier 1
association and, consequently, could at its option (after prior notice to, and
no objection made by, the OTS) distribute up to 100% of its net income during
the calendar year plus 50% of its surplus capital ratio at the beginning of the
calendar year less any distributions previously paid during the year.

     LOANS TO ONE BORROWER.  Under the HOLA, savings institutions are generally
subject to the national bank limit on loans to one borrower.  Generally, this
limit is 15% of the Savings Bank's unimpaired capital and surplus, plus an
additional 10% of unimpaired capital and surplus, if such loan is secured by
readily-marketable collateral, which is defined to include certain financial
instruments and bullion.  The OTS by regulation has amended the loans to one
borrower rule to permit savings associations meeting certain requirements,
including capital requirements, to extend loans to one borrower in additional
amounts under circumstances limited essentially to loans to develop or complete
residential housing units.  At September 30, 1997, the Savings Bank's largest
aggregate amount of loans to one borrower was $2.0 million, which represented
6.5% of the Savings Bank's unimpaired capital and surplus at September 30, 1997.

                                       74
ACTIVITIES OF SAVINGS BANKS AND THEIR SUBSIDIARIES.  When a savings
association establishes or acquires a subsidiary or elects to conduct any new
activity through a subsidiary that the association controls, the savings
association must notify the FDIC and the OTS 30 days in advance and provide the
information each agency may, by regulation, require.  Savings associations also
must conduct the activities of subsidiaries in accordance with existing
regulations and orders.

     The OTS may determine that the continuation by a savings association of its
ownership control of, or its relationship to, the subsidiary constitutes a
serious risk to the safety, soundness or stability of the association or is
inconsistent with sound banking practices or with the purposes of the FDIA.
Based upon that determination, the FDIC or the OTS has the authority to order
the savings association to divest itself of control of the subsidiary.  The FDIC
also may determine by regulation or order that any specific activity poses a
serious threat to the SAIF.  If so, it may require that no SAIF member engage in
that activity directly.

     TRANSACTIONS WITH AFFILIATES.  Savings associations must comply with
Sections 23A and 23B of the Federal Reserve Act ("Sections 23A and 23B")
relative to transactions with affiliates in the same manner and to the same
extent as if the savings association were a Federal Reserve member bank.   A
savings and loan holding company, its subsidiaries and any other company under
common control are considered affiliates of the subsidiary savings association
under the HOLA.  Generally, Sections 23A and 23B:  (i) limit the extent to which
the insured association or its subsidiaries may engage in certain covered
transactions with an affiliate to an amount equal to 10% of such institution's
capital and surplus and place an aggregate limit on all such transactions with
affiliates to an amount equal to 20% of such capital and surplus, and (ii)
require that all such transactions be on terms substantially the same, or at
least as favorable to the institution or subsidiary, as those provided to a non-
affiliate.  The term "covered transaction" includes the making of loans, the
purchase of assets, the issuance of a guarantee and similar types of
transactions.  Any loan or extension of credit by the Savings Bank to an
affiliate must be secured by collateral in accordance with Section 23A.

     Three additional rules apply to savings associations: (i) a savings
association may not make any loan or other extension of credit to an affiliate
unless that affiliate is engaged only in activities permissible for bank holding
companies; (ii) a savings association may not purchase or invest in securities
issued by an affiliate (other than securities of a subsidiary); and (iii) the
OTS may, for reasons of safety and soundness, impose more stringent restrictions
on savings associations but may not exempt transactions from or otherwise
abridge Section 23A or 23B.  Exemptions from Section 23A or 23B may be granted
only by the Federal Reserve Board, as is currently the case with respect to all
FDIC-insured banks.  The Savings Bank has not been significantly affected by the
rules regarding transactions with affiliates.

     The Savings Bank's authority to extend credit to executive officers,
directors and 10% shareholders, as well as entities controlled by such persons,
is governed by Sections 22(g) and 22(h) of the Federal Reserve Act, and
Regulation O thereunder.  Among other things, these regulations generally
require that such loans be made on terms and conditions substantially the same
as those offered to unaffiliated individuals and not involve more than the
normal risk of repayment.  Generally, Regulation O also places individual and
aggregate limits on the amount of loans the Savings Bank may make to such
persons based, in part, on the Savings Bank's capital position, and requires
certain board approval procedures to be followed.  The OTS regulations, with
certain minor variances, apply Regulation O to savings institutions.

     COMMUNITY REINVESTMENT ACT.  Under the federal Community Reinvestment Act
("CRA"), all federally-insured financial institutions have a continuing and
affirmative obligation consistent with safe and sound operations to help meet
all the credit needs of its delineated community.  The CRA does not establish
specific lending requirements or programs nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to meet all the credit needs of its delineated community.  The CRA
requires the federal banking agencies, in connection with regulatory
examinations, to assess an institution's record of meeting the credit needs of
its delineated community and to take such record into account in evaluating
regulatory applications to establish a new branch office that will accept
deposits, relocate an existing office, or merge or consolidate with, or

                                       75
acquire the assets or assume the liabilities of, a federally regulated financial
institution, among others.  The CRA requires public disclosure of an
institution's CRA rating.  The Savings Bank received an "outstanding" rating as
a result of its latest evaluation.

     REGULATORY AND CRIMINAL ENFORCEMENT PROVISIONS.  The OTS has primary
enforcement responsibility over savings institutions and has the authority to
bring action against all "institution-affiliated parties," including
stockholders, and any attorneys, appraisers and accountants who knowingly or
recklessly participate in wrongful action likely to have an adverse effect on an
insured institution.  Formal enforcement action may range from the issuance of a
capital directive or cease and desist order to removal of officers or directors,
receivership, conservatorship or termination of deposit insurance.  Civil
penalties cover a wide range of violations and can amount to $27,500 per day, or
$1.1 million per day in especially egregious cases.  Under the FDIA, the FDIC
has the authority to recommend to the Director of the OTS that enforcement
action be taken with respect to a particular savings institution.  If action is
not taken by the Director, the FDIC has authority to take such action under
certain circumstances.  Federal law also establishes criminal penalties for
certain violations.

SAVINGS AND LOAN HOLDING COMPANY REGULATIONS

     HOLDING COMPANY ACQUISITIONS.  The HOLA and OTS regulations issued
thereunder generally prohibit a savings and loan holding company, without prior
OTS approval, from acquiring more than 5% of the voting stock of any other
savings association or savings and loan holding company or controlling the
assets thereof.  They also prohibit, among other things, any director or officer
of a savings and loan holding company, or any individual who owns or controls
more than 25% of the voting shares of such holding company, from acquiring
control of any savings association not a subsidiary of such savings and loan
holding company, unless the acquisition is approved by the OTS.

     HOLDING COMPANY ACTIVITIES.  As a unitary savings and loan holding company,
the Holding Company generally is not subject to activity restrictions under the
HOLA.  If the Holding Company acquires control of another savings association as
a separate subsidiary other than in a supervisory acquisition, it would become a
multiple savings and loan holding company.  There generally are more
restrictions on the activities of a multiple savings and loan holding company
than on those of a unitary savings and loan holding company.  The HOLA provides
that, among other things, no multiple savings and loan holding company or
subsidiary thereof which is not an insured association shall commence or
continue for more than two years after becoming a multiple savings and loan
association holding company or subsidiary thereof, any business activity other
than:  (i) furnishing or performing management services for a subsidiary insured
institution, (ii) conducting an insurance agency or escrow business, (iii)
holding, managing, or liquidating assets owned by or acquired from a subsidiary
insured institution, (iv) holding or managing properties used or occupied by a
subsidiary insured institution, (v) acting as trustee under deeds of trust, (vi)
those activities previously directly authorized by regulation as of March 5,
1987 to be engaged in by multiple holding companies or (vii) those activities
authorized by the Federal Reserve Board as permissible for bank holding
companies, unless the OTS by regulation, prohibits or limits such activities for
savings and loan holding companies.  Those activities described in (vii) above
also must be approved by the OTS prior to being engaged in by a multiple savings
and loan holding company.

     QUALIFIED THRIFT LENDER TEST.  The HOLA provides that any savings and loan
holding company that controls a savings association that fails the QTL test, as
explained under "-- Federal Regulation of the Savings Bank -- Qualified Thrift
Lender Test," must, within one year after the date on which the association
ceases to be a QTL, register as and be deemed a bank holding company subject to
all applicable laws and regulations.

                                       76
TAXATION

FEDERAL TAXATION

     GENERAL.  Upon consummation of the Conversion and Reorganization, the
Holding Company and the Savings Bank will report their income on a fiscal year
basis using the accrual method of accounting and will be subject to federal
income taxation in the same manner as other corporations with some exceptions,
including particularly the Savings Bank's reserve for bad debts discussed below.
The following discussion of tax matters is intended only as a summary and does
not purport to be a comprehensive description of the tax rules applicable to the
Savings Bank or the Holding Company.  For additional information regarding
income taxes, see Note 11 of Notes to Consolidated Financial Statements.

     BAD DEBT RESERVE.  Historically, savings institutions such as the Savings
Bank which met certain definitional tests primarily related to their assets and
the nature of their business ("qualifying thrift") were permitted to establish a
reserve for bad debts and to make annual additions thereto, which may have been
deducted in arriving at their taxable income.  The Savings Bank's deductions
with respect to "qualifying real property loans," which are generally loans
secured by certain interest in real property, were computed using an amount
based on the Savings Bank's actual loss experience, or a percentage equal to 8%
of the Savings Bank's taxable income, computed with certain modifications and
reduced by the amount of any permitted additions to the non-qualifying reserve.
Due to the Savings Bank's loss experience, the Savings Bank generally recognized
a bad debt deduction equal to 8% of taxable income.

     The provisions repealing the current thrift bad debt rules were passed by
Congress as part of "The Small Business Job Protection Act of 1996."  The new
rules eliminate the 8% of taxable income method for deducting additions to the
tax bad debt reserves for all thrifts for tax years beginning after December 31,
1995.  These rules also require that all institutions recapture all or a portion
of their bad debt reserves added since the base year (last taxable year
beginning before January 1, 1988).  The Savings Bank has previously recorded a
deferred tax liability equal to the bad debt recapture and as such the new rules
will have no effect on the net income or federal income tax expense.  For
taxable years beginning after December 31, 1995, the Savings Bank's bad debt
deduction will be determined under the experience method using a formula based
on actual bad debt experience over a period of years or, if the Savings Bank is
a "large" association (assets in excess of $500 million) on the basis of net
charge-offs during the taxable year.  The new rules allow an institution to
suspend bad debt reserve recapture for the 1996 and 1997 tax years if the
institution's lending activity for those years is equal to or greater than the
institutions average mortgage lending activity for the six taxable years
preceding 1996 adjusted for inflation.  For this purpose, only home purchase or
home improvement loans are included and the institution can elect to have the
tax years with the highest and lowest lending activity removed from the average
calculation.  If an institution is permitted to postpone the reserve recapture,
it must begin its six year recapture no later than the 1998 tax year.  The
unrecaptured base year reserves will not be subject to recapture as long as the
institution continues to carry on the business of banking.  In addition, the
balance of the pre-1988 bad debt reserves continue to be subject to provisions
of present law referred to below that require recapture in the case of certain
excess distributions to shareholders.

     DISTRIBUTIONS.  To the extent that the Savings Bank makes "nondividend
distributions" to the Holding Company, such distributions will be considered to
result in distributions from the balance of its bad debt reserve as of December
31, 1987 (or a lesser amount if the Savings Bank's loan portfolio decreased
since December 31, 1987) and then from the supplemental reserve for losses on
loans ("Excess Distributions"), and an amount based on the Excess Distributions
will be included in the Savings Bank's taxable income.  Nondividend
distributions include distributions in excess of the Savings Bank's current and
accumulated earnings and profits, distributions in redemption of stock and
distributions in partial or complete liquidation.  However, dividends paid out
of the Savings Bank's current or accumulated earnings and profits, as calculated
for federal income tax purposes, will not be considered to result in a
distribution from the Savings Bank's bad debt reserve.  The amount of additional
taxable income created from an Excess Distribution is an amount that, when
reduced by the tax attributable to the income, is equal to the amount of the
distribution.  Thus, if, after the Conversion, the Savings Bank makes a
"nondividend

                                       77
distribution," then approximately one and one-half times the Excess Distribution
would be includable in gross income for federal income tax purposes, assuming a
34% corporate income tax rate (exclusive of state and local taxes).  See
"REGULATION" and "DIVIDEND POLICY" for limits on the payment of dividends by the
Savings Bank.  The Savings Bank does not intend to pay dividends that would
result in a recapture of any portion of its tax bad debt reserve.

     CORPORATE ALTERNATIVE MINIMUM TAX.  The Code imposes a tax on alternative
minimum taxable income ("AMTI") at a rate of 20%.  The excess of the tax bad
debt reserve deduction using the percentage of taxable income method over the
deduction that would have been allowable under the experience method is treated
as a preference item for purposes of computing the AMTI.  In addition, only 90%
of AMTI can be offset by net operating loss carryovers.  AMTI is increased by an
amount equal to 75% of the amount by which the Savings Bank's adjusted current
earnings exceeds its AMTI (determined without regard to this preference and
prior to reduction for net operating losses).  For taxable years beginning after
December 31, 1986, and before January 1, 1996, an environmental tax of 0.12% of
the excess of AMTI (with certain modification) over $2.0 million is imposed on
corporations, including the Savings Bank, whether or not an Alternative Minimum
Tax is paid.

     DIVIDENDS-RECEIVED DEDUCTION.  The Holding Company may exclude from its
income 100% of dividends received from the Savings Bank as a member of the same
affiliated group of corporations.  The corporate dividends-received deduction is
generally 70% in the case of dividends received from unaffiliated corporations
with which the Holding Company and the Savings Bank will not file a consolidated
tax return, except that if the Holding Company or the Savings Bank owns more
than 20% of the stock of a corporation distributing a dividend, then 80% of any
dividends received may be deducted.

     AUDITS.  The Savings Bank's federal income tax returns have not been
audited within the last five years.

STATE TAXATION

     SOUTH CAROLINA TAXATION.  South Carolina has adopted the Code, with certain
modifications, as it relates to savings and loan associations, effective for
taxable years beginning after December 31, 1984.  The Savings Bank is subject to
South Carolina income tax at the rate of 6%.  This rate of tax is imposed on
savings and loan associations and savings banks in lieu of the general state
business corporation income tax.

     At September 30, 1997, the Savings Bank had net operating loss
carryforwards for state tax purposes of approximately $62.0 million, which
expire in varying amounts between fiscal years 1998 and 2006.

     The Savings Bank's state income tax returns have not been audited within
the last five years.

     DELAWARE.  As a Delaware holding company not earning income in Delaware,
the Holding Company is exempt from Delaware corporate income tax, but is
required to file an annual report with and pay an annual franchise tax to the
State of Delaware.

                                       78
THE CONVERSION AND REORGANIZATION

     THE OTS HAS APPROVED THE PLAN OF CONVERSION SUBJECT TO ITS APPROVAL BY THE
MEMBERS OF THE SAVINGS BANK AND THE STOCKHOLDERS OF THE SAVINGS BANK ENTITLED TO
VOTE THEREON AND TO THE SATISFACTION OF CERTAIN OTHER CONDITIONS IMPOSED BY THE
OTS IN ITS APPROVAL.  OTS APPROVAL DOES NOT CONSTITUTE A RECOMMENDATION OR
ENDORSEMENT OF THE PLAN OF CONVERSION.

GENERAL

     On September 22, 1997, the Boards of Directors of the MHC and the Savings
Bank unanimously adopted, and on December 22, 1997, unanimously amended, the
Plan of Conversion, pursuant to which the MHC will convert from a mutual holding
company to a stock holding company and the Savings Bank simultaneously
reorganize as a wholly-owned subsidiary of the Holding Company, a newly formed
Delaware corporation.  THE FOLLOWING DISCUSSION OF ALL MATERIAL ASPECTS OF THE
PLAN OF CONVERSION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE PLAN OF
CONVERSION, WHICH IS ATTACHED AS EXHIBIT A TO BOTH THE MHC'S PROXY STATEMENT AND
THE SAVINGS BANK'S PROXY STATEMENT, AND IS AVAILABLE TO BOTH MEMBERS OF THE MHC
AND STOCKHOLDERS OF THE SAVINGS BANK UPON REQUEST.  The Plan of Conversion is
also filed as an exhibit to the Registration Statement.  See "ADDITIONAL
INFORMATION."  The OTS has approved the Plan of Conversion subject to its
approval by the members of the MHC entitled to vote on the matter at the Special
Meeting of Members called for that purpose to be held on ____________, 1998, its
approval by the stockholders of the Savings Bank entitled to vote on the matter
at the Stockholders' Meeting called for that purpose to be held on ____________,
1998, and its approval by the stockholders of the Savings Bank (excluding the
MHC) entitled to vote on the matter at the Stockholders' Meeting, and subject to
the satisfaction of certain other conditions imposed by the OTS in its approval.

     Pursuant to the Plan of Conversion, (i) the MHC will convert from a
federally-chartered mutual holding company to a federally-chartered interim
stock savings bank (i.e. Interim A) and simultaneously merge with and into the
                    ----                                                      
Savings Bank, pursuant to which the MHC will cease to exist and the shares of
Savings Bank Common Stock held by the MHC will be canceled, and (ii) Interim A
will then merge with and into the Savings Bank.  As a result of the merger of
Interim A with and into the Savings Bank, the Savings Bank will become a wholly
owned subsidiary of the Holding Company and the Public Savings Bank Shares will
be converted into the Exchange Shares pursuant to the Exchange Ratio, which will
result in the holders of such shares owning in the aggregate approximately the
same percentage of the Common Stock to be outstanding upon the completion of the
Conversion and Reorganization (i.e., the Conversion Shares and the Exchange
                               ----                                        
Shares) as the percentage of Savings Bank Common Stock owned by them in the
aggregate immediately prior to consummation of the Conversion and
Reorganization, but before giving effect to (a) the payment of cash in lieu of
issuing fractional Exchange Shares and (b) any shares of Conversion Stock
purchased by the Savings Bank's stockholders in the Conversion Offerings.

     As part of the Conversion and Reorganization, the Holding Company is
offering Conversion Shares in the Subscription Offering to holders of
Subscription Rights in the following order of priority: (i) Eligible Account
Holders (depositors of the Savings Bank with $50.00 or more on deposit as of the
close of business on June 30, 1996); (ii) Supplemental Eligible Account Holders
(depositors of the Savings Bank with $50.00 or more on deposit as of the close
of business on December 31, 1997); and (iii) Other Members (depositors of the
Savings Bank as of the close of business on ___________, 1998 and borrowers of
the Savings Bank with loans outstanding as of the close of business on October
26, 1993, which continue to be outstanding as of the close of business on
__________, 1997).

     Concurrently with the Subscription Offering, any Conversion Shares not
subscribed for in the Subscription Offering may be offered for sale in the
Direct Community Offering to members of the general public, with priority being
given first to Public Stockholders as of the close of business on the Voting
Record Date (who are not Eligible Account Holders, Supplemental Eligible Account
Holders or Other Members) and then to natural persons and trusts of natural
persons residing in the Local Community.  Conversion Shares not sold in the
Subscription and Direct Community Offerings may be offered in the Syndicated
Community Offering.  Regulations require that the Direct

                                       79
Community and Syndicated Community Offerings be completed within 45 days after
completion of the fully extended Subscription Offering unless extended by the
Savings Bank or the Holding Company with the approval of the regulatory
authorities.  If the Syndicated Community Offering is determined not to be
feasible, the Board of Directors of the Savings Bank will consult with the
regulatory authorities to determine an appropriate alternative method for
selling the unsubscribed Conversion Shares.  The Plan of Conversion provides
that the Conversion and Reorganization must be completed within 24 months after
the date of the approval of the Plan of Conversion by the members of the MHC.

     No sales of Common Stock may be completed, either in the Subscription
Offering, Direct Community Offering or Syndicated Community Offerings unless the
Plan of Conversion is approved by the members of the MHC and the stockholders of
the Savings Bank.

     The completion of the Conversion Offerings, however, is subject to market
conditions and other factors beyond the Savings Bank's control.  No assurance
can be given as to the length of time after approval of the Plan of Conversion
at the Special Members Meeting and the Stockholders Meeting that will be
required to complete the Direct Community or Syndicated Community Offerings or
other sale of the Conversion Shares.  If delays are experienced, significant
changes may occur in the estimated pro forma market value of the MHC and the
Savings Bank, as converted, together with corresponding changes in the net
proceeds realized by the Holding Company from the sale of the Conversion Shares.
If the Conversion and Reorganization is terminated, the Savings Bank would be
required to charge all Conversion and Reorganization expenses against current
income.

     Orders for Conversion Shares will not be filled until at least 1,466,250
Conversion Shares have been subscribed for or sold and the OTS approves the
final valuation and the Conversion and Reorganization closes.  If the Conversion
and Reorganization is not completed within 45 days after the last day of the
fully extended Subscription Offering and the OTS consents to an extension of
time to complete the Conversion and Reorganization, subscribers will be given
the right to increase, decrease or rescind their subscriptions.  Unless an
affirmative indication is received from subscribers that they wish to continue
to subscribe for shares, the funds will be returned promptly, together with
accrued interest at the Savings Bank's passbook rate from the date payment is
received until the funds are returned to the subscriber.  If such period is not
extended, or, in any event, if the Conversion and Reorganization is not
completed, all withdrawal authorizations will be terminated and all funds held
will be promptly returned together with accrued interest at the Savings Bank's
passbook rate from the date payment is received until the Conversion and
Reorganization is terminated.

PURPOSES OF CONVERSION AND REORGANIZATION

     The MHC, as a federally chartered mutual holding company, does not have
stockholders and has no authority to issue capital stock.  As a result of the
Conversion and Reorganization, the Holding Company will be structured in the
form used by holding companies of commercial banks, most business entities and a
growing number of savings institutions.  The holding company form of
organization will provide the Holding Company with the ability to diversify the
Holding Company's and the Savings Bank's business activities through acquisition
of or mergers with both stock savings institutions and commercial banks, as well
as other companies.  Although there are no current arrangements, understandings
or agreements regarding any such opportunities, the Holding Company will be in a
position after the Conversion and Reorganization, subject to regulatory
limitations and the Holding Company's financial position, to take advantage of
any such opportunities that may arise.

     In their decision to pursue the Conversion and Reorganization, the Board of
Directors of the MHC and the Savings Bank considered various regulatory
uncertainties associated with the mutual holding company structure including the
ability to waive dividends in the future as well as the general uncertainty
regarding a possible elimination of the federal savings association charter.

     The Conversion and Reorganization will be important to the future growth
and performance of the holding company organization by providing a larger
capital base to support the operations of the Savings Bank and Holding

                                       80
Company and by enhancing their future access to capital markets, their ability
to diversify into other financial services related activities, and their ability
to provide services to the public.  Since the MHC's ownership interest in the
Savings Bank is 53.03% as of the date of this Prospectus, the Savings Bank
currently does not have the ability to raise additional capital through the sale
of additional shares of Savings Bank Common Stock because OTS regulations
require that the MHC hold a majority of the outstanding shares of Savings Bank
Common Stock.

     The Conversion and Reorganization also will result in an increase in the
number of shares of Common Stock to be outstanding as compared to the number of
outstanding shares of Public Savings Bank Shares which will increase the
likelihood of the development of an active and liquid trading market for the
Common Stock.  See "MARKET FOR COMMON STOCK."  In addition, the Conversion and
Reorganization permit the Holding Company to engage in stock repurchases without
adverse federal income tax consequences, unlike the Savings Bank.  Currently,
the Holding Company has no plans or intentions to engage in any stock
repurchases.

     An additional benefit of the Conversion and Reorganization will be an
increase in the accumulated earnings and profits of the Savings Bank for federal
income tax purposes.  When the Savings Bank (as a mutual institution)
transferred substantially all of its assets and liabilities to its stock savings
bank successor in the MHC Reorganization, its accumulated earnings and profits
tax attribute was not able to be transferred to the Savings Bank because no tax-
free reorganization was involved.  Accordingly, this tax attribute was retained
by the Savings Bank when it converted its charter to that of the MHC, even
though the underlying retained earnings were transferred to the Savings Bank.
The Conversion and Reorganization has been structured to re-unite the
accumulated earnings and profits tax attribute retained by the MHC in the MHC
Reorganization with the retained earnings of the Savings Bank by merging the MHC
with and into the Savings Bank in a tax-free reorganization.  This transaction
will increase the Savings Bank's ability to pay dividends to the Holding Company
in the future.  See "DIVIDEND POLICY."

     If the Savings Bank had undertaken a standard conversion involving the
formation of a stock holding company in 1993, applicable OTS regulations would
have required a greater amount of common stock to be sold than the amount of net
proceeds raised in the MHC Reorganization.  Management believed that it was
advisable to profitably invest the $946,000 of net proceeds raised in the MHC
Reorganization and the $10.7 million of net proceeds raised in the Additional
Offering prior to raising the larger amount of capital that would have been
raised in a standard conversion.  A standard conversion in 1993 also would have
immediately eliminated all aspects of the mutual form of organization.

     In light of the foregoing, the Boards of Directors of the Primary Parties
believe that the Conversion and Reorganization is in the best interests of the
MHC and the Savings Bank, their respective members and stockholders, and the
communities served by the Savings Bank.

EFFECTS OF CONVERSION AND REORGANIZATION ON DEPOSITORS AND BORROWERS OF THE
SAVINGS BANK

     GENERAL.  Prior to the Conversion and Reorganization, each depositor in the
Savings Bank has both a deposit account in the institution and a pro rata
ownership interest in the net worth of the MHC based upon the balance in his or
her account, which interest may only be realized in the event of a liquidation
of the MHC.  However, this ownership interest is tied to the depositor's account
and has no tangible market value separate from such deposit account.  A
depositor who reduces or closes his or her account receives a portion or all of
the balance in the account but nothing for his or her ownership interest in the
net worth of the MHC, which is lost to the extent that the balance in the
account is reduced.

     Consequently, the depositors of the Savings Bank normally have no way to
realize the value of their ownership interest in the MHC, which has realizable
value only in the unlikely event that the MHC is liquidated.  In such event, the
depositors of record at that time, as owners, would share pro rata in any
residual surplus and reserves of the MHC after other claims are paid.

                                       81
Upon consummation of the Conversion and Reorganization, permanent
nonwithdrawable capital stock will be created to represent the ownership of the
net worth of the Holding Company.  The Common Stock is separate and apart from
deposit accounts and cannot be and is not insured by the FDIC or any other
governmental agency.  Certificates are issued to evidence ownership of the
permanent stock.  The stock certificates are transferable, and therefore the
stock may be sold or traded if a purchaser is available with no effect on any
deposit and/or loan account(s) the seller may hold in the Savings Bank.

     CONTINUITY.  The Conversion and Reorganization will not interrupt the
Savings Bank's normal business of accepting deposits and making loans.  The
Savings Bank will continue to be subject to regulation by the OTS and the FDIC.
After the Conversion and Reorganization, the Savings Bank will continue to
provide services for depositors and borrowers under current policies by its
present management and staff.

     The directors and officers of the Savings Bank at the time of the
Conversion and Reorganization will continue to serve as directors and officers
of the Savings Bank after the Conversion and Reorganization.  The directors and
officers of the Holding Company consist of individuals currently serving as
directors and officers of the MHC and the Savings Bank, and they generally will
retain their positions in the Holding Company after the Conversion and
Reorganization.

     EFFECT ON PUBLIC SAVINGS BANK SHARES.  Under the Plan of Conversion, upon
consummation of the Conversion and Reorganization, the Public Savings Bank
Shares shall be converted into Exchange Shares based upon the Exchange Ratio
without any further action on the part of the holder thereof.  Upon surrender of
the Public Savings Bank Shares, Common Stock will be issued in exchange for such
shares.  See "-- Delivery and Exchange of Stock Certificates."

     Upon consummation of the Conversion and Reorganization, the Public
Stockholders will become stockholders of the Holding Company.  For a description
of certain changes in the rights of stockholders as a result of the Conversion
and Reorganization, see "COMPARISON OF STOCKHOLDERS' RIGHTS."

     VOTING RIGHTS.  Presently, depositors and borrowers of the Savings Bank are
members of, and have voting rights in, the MHC as to all matters requiring
membership action.  Upon completion of the Conversion and Reorganization, the
MHC will cease to exist and all voting rights in the Savings Bank will be vested
in the Holding Company as the sole stockholder of the Savings Bank.  Exclusive
voting rights with respect to the Holding Company will be vested in the holders
of Common Stock.  Depositors and borrowers of the Savings Bank will not have
voting rights in the Holding Company after the Conversion and Reorganization,
except to the extent that they become stockholders of the Holding Company.

     SAVINGS ACCOUNTS AND LOANS.  The Savings Bank's savings accounts, account
balances and existing FDIC insurance coverage of savings accounts will not be
affected by the Conversion and Reorganization.  Furthermore, the Conversion and
Reorganization will not affect the loan accounts, loan balances or obligations
of borrowers under their individual contractual arrangements with the Savings
Bank.

     TAX EFFECTS.  The Savings Bank has received an opinion from Breyer &
Aguggia, Washington, D.C., that the Conversion and Reorganization will
constitute a nontaxable reorganization under Section 368(a)(1)(A) of the Code.
Among other things, the opinion provides that: (i) the conversion of the MHC
from a mutual holding company to a federally-chartered interim stock savings
bank (i.e., Interim A) and its simultaneous merger with and into the Savings
      ----                                                                  
Bank, with the Savings Bank as the surviving entity will qualify as a
reorganization within the meaning of Section 368(a)(1)(A) of the Code, (ii) no
gain or loss will be recognized by the Savings Bank upon the receipt of the
assets of the MHC in such merger, (iii) the merger of Interim B with and into
the Savings Bank, with the Savings Bank as the surviving entity, will qualify as
a reorganization within the meaning of Section 368(a)(1)(A) of the Code, (iv) no
gain or loss will be recognized by Interim B upon the transfer of its assets to
the Savings Bank, (v) no gain or loss will be recognized by the Savings Bank
upon the receipt of the assets of Interim B, (vi) no gain or loss will be
recognized by the Holding Company upon the receipt of Savings Bank Common Stock
solely in

                                       82
exchange for Common Stock, (vii) no gain or loss will be recognized by the
Public Stockholders upon the receipt of Exchange Shares in exchange for their
Public Savings Bank Shares, (viii) the basis of the Exchange Shares to be
received by the Public Stockholders will be the same as the basis of the Public
Savings Bank Shares surrendered in exchange therefor, before giving effect to
any payment of cash in lieu of fractional Exchange Shares, (ix) the holding
period of the Exchange Shares to be received by the Public Stockholders will
include the holding period of the Public Savings Bank Shares, provided that the
Public Savings Bank Shares were held as a capital asset on the date of the
exchange, (x) no gain or loss will be recognized by the Holding Company upon the
sale of shares of Conversion Shares in the Conversion Offerings, (xi) the
Eligible Account Holders, Supplemental Eligible Account Holders and Other
Members will recognize gain, if any, upon the issuance to them of withdrawable
savings accounts in the Savings Bank following the Conversion and
Reorganization, interests in the liquidation account and  nontransferable
subscription rights to purchase Conversion Stock, but only to the extent of the
value, if any, of the subscription rights, and (xii) the tax basis to the
holders of Conversion Shares purchased in the Conversion Offerings will be the
amount paid therefor, and the holding period for the Conversion Shares will
begin on the date of consummation of the Conversion Offerings, if purchased
through the exercise of Subscription Rights, and on the day after the date of
purchase, if purchased in the Community Offering or the Syndicated Community
Offering.  Unlike a private letter ruling issued by the IRS, an opinion of
counsel is not binding on the IRS and the IRS could disagree with the
conclusions reached therein.  In the event of such disagreement, no assurance
can be given that the conclusions reached in an opinion of counsel would be
sustained by a court if contested by the IRS.

     Based upon past rulings issued by the IRS, the opinion provides that the
receipt of Subscription Rights by Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members under the Plan of Conversion will be
taxable to the extent, if any, that the Subscription Rights are deemed to have a
fair market value.  RP Financial, a financial consulting firm retained by the
Savings Bank, whose findings are not binding on the IRS, has issued a letter
indicating that the Subscription Rights do not have any value, based on the fact
that such rights are acquired by the recipients without cost, are
nontransferable and of short duration and afford the recipients the right only
to purchase shares of the Common Stock at a price equal to its estimated fair
market value, which will be the same price paid by purchasers in the Direct
Community Offering for unsubscribed shares of Common Stock.  If the Subscription
Rights are deemed to have a fair market value, the receipt of such rights may
only be taxable to those Eligible Account Holders, Supplemental Eligible Account
Holders and Other Members who exercise their Subscription Rights.  The Savings
Bank could also recognize a gain on the distribution of such Subscription
Rights.  Eligible Account Holders, Supplemental Eligible Account Holders and
Other Members are encouraged to consult with their own tax advisors as to the
tax consequences in the event the Subscription Rights are deemed to have a fair
market value.

     The Savings Bank has also received an opinion from Evans, Carter, Kunes &
Bennett, P.A., Charleston, South Carolina, that, assuming the Conversion and
Reorganization does not result in any federal income tax liability to the
Savings Bank, its account holders, or the Holding Company, implementation of the
Plan of Conversion will not result in any South Carolina tax liability to such
entities or persons.

     The opinions of Breyer & Aguggia and Evans, Carter, Kunes & Bennett, P.A.
and the letter from RP Financial are filed as exhibits to the Registration
Statement.  See "ADDITIONAL INFORMATION."

     PROSPECTIVE INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS
REGARDING THE TAX CONSEQUENCES OF THE CONVERSION AND REORGANIZATION PARTICULAR
TO THEM.

     LIQUIDATION ACCOUNT.  In the unlikely event of a complete liquidation of
the MHC, each depositor of the Savings Bank would receive his or her pro rata
share of any assets of the MHC remaining after payment of claims of all
creditors.  Each depositor's pro rata share of such remaining assets would be in
the same proportion as the value of his or her deposit account was to the total
value of all deposit accounts in the Savings Bank at the time of liquidation.
After the Conversion and Reorganization, each depositor, in the event of a
complete liquidation of the Savings Bank, would have a claim as a creditor of
the same general priority as the claims of all other general

                                       83
creditors of the Savings Bank.  However, except as described below, his or her
claim would be solely in the amount of the balance in his or her deposit account
plus accrued interest.  Each stockholder would not have an interest in the value
or assets of the Savings Bank or the Holding Company above that amount.

     The Plan of Conversion provides for the establishment, upon the completion
of the Conversion and Reorganization, of a special "liquidation account" for the
benefit of Eligible Account Holders and Supplemental Eligible Account Holders in
an amount equal to the amount of any dividends waived by the MHC plus the
greater of (i) the Savings Bank's retained earnings of $12.9 million at March
31, 1993, the date of the latest statement of financial condition contained in
the final offering circular utilized in the MHC Reorganization, or (ii) 53.02%
of the Savings Bank's total stockholders' equity as reflected in its latest
statement of financial condition contained in the final Prospectus utilized in
the Conversion Offerings.  As of the date of this Prospectus, the initial
balance of the liquidation account would be $____ million.  Each Eligible
Account Holder and Supplemental Eligible Account Holder, if he or she were to
continue to maintain his or her deposit account at the Savings Bank, would be
entitled, upon a complete liquidation of the Savings Bank after the Conversion
and Reorganization to an interest in the liquidation account prior to any
payment to the Holding Company as the sole stockholder of the Savings Bank.
Each Eligible Account Holder and Supplemental Eligible Account Holder would have
an initial interest in such liquidation account for each deposit account,
including passbook accounts, transaction accounts such as checking accounts,
money market deposit accounts and certificates of deposit, held in the Savings
Bank at the close of business on June 30, 1996 or December 31, 1997, as the case
may be.  Each Eligible Account Holder and Supplemental Eligible Account Holder
will have a pro rata interest in the total liquidation account for each of his
or her deposit accounts based on the proportion that the balance of each such
deposit account on the Eligibility Record Date (June 30, 1996) or the
Supplemental Eligibility Record Date (December 31, 1997), as the case may be,
bore to the balance of all deposit accounts in the Savings Bank on such date.

     If, however, on any September 30 annual closing date of the Savings Bank,
commencing September 30, 1998, the amount in any deposit account is less than
the amount in such deposit account on June 30, 1996 or December 31, 1997, as the
case may be, or any other annual closing date, then the interest in the
liquidation account relating to such deposit account would be reduced by the
proportion of any such reduction, and such interest will cease to exist if such
deposit account is closed.  In addition, no interest in the liquidation account
would ever be increased despite any subsequent increase in the related deposit
account.  Any assets remaining after the above liquidation rights of Eligible
Account Holders and Supplemental Eligible Account Holders are satisfied would be
distributed to the Holding Company as the sole stockholder of the Savings Bank.

THE SUBSCRIPTION, DIRECT COMMUNITY AND SYNDICATED COMMUNITY OFFERINGS

     SUBSCRIPTION OFFERING.  In accordance with the Plan of Conversion,
nontransferable Subscription Rights to purchase the Conversion Shares have been
issued to persons and entities entitled to purchase the Conversion Shares in the
Subscription Offering.  The amount of Conversion Shares which these parties may
purchase will be subject to the availability of the Conversion Shares for
purchase under the categories set forth in the Plan of Conversion.  Subscription
priorities have been established for the allocation of stock to the extent that
the Conversion Shares are available.  These priorities are as follows:

     Category 1:  Eligible Account Holders.  Each depositor with $50.00 or more
on deposit at the Savings Bank as of the close of business on June 30, 1996 will
receive nontransferable Subscription Rights to subscribe for up to 50,000
Conversion Shares, one-tenth of one percent of the total offering of Conversion
Shares or 15 times the product (rounded down to the next whole number) obtained
by multiplying the total number of Conversion Shares to be issued by a fraction
of which the numerator is the amount of qualifying deposit of the Eligible
Account Holder and the denominator is the total amount of qualifying deposits of
all Eligible Account Holders.  If the exercise of Subscription Rights in this
category results in an oversubscription, Conversion Shares will be allocated
among subscribing Eligible Account Holders so as to permit each Eligible Account
Holder, to the extent possible, to purchase a number of shares sufficient to
make such person's total allocation equal 100 shares or the number of

                                       84
shares actually subscribed for, whichever is less.  Thereafter, unallocated
shares will be allocated among subscribing Eligible Account Holders
proportionately, based on the amount of their respective qualifying deposits as
compared to total qualifying deposits of all Eligible Account Holders.
Subscription Rights received by officers and directors in this category based on
their increased deposits in the Savings Bank in the one year period preceding
June 30, 1996 are subordinated to the Subscription Rights of other Eligible
Account Holders.

     Category 2:  Supplemental Eligible Account Holders.  Each depositor with
$50.00 or more on deposit as of the close of business on December 31, 1997 will
receive nontransferable Subscription Rights to subscribe for up to the greater
of 50,000 Conversion Shares, one-tenth of one percent of the total offering of
Common Stock or 15 times the product (rounded down to the next whole number)
obtained by multiplying the total number of Conversion Shares to be issued by a
fraction of which the numerator is the amount of qualifying deposits of the
Supplemental Eligible Account Holder and the denominator is the total amount of
qualifying deposits of all Supplemental Eligible Account Holders.  If the
exercise of Subscription Rights in this category results in an oversubscription,
Conversion Shares will be allocated among subscribing Supplemental Eligible
Account Holders so as to permit each Supplemental Eligible Account Holder, to
the extent possible, to purchase a number of shares sufficient to make his total
allocation equal 100 shares or the number of shares actually subscribed for,
whichever is less.  Thereafter, unallocated shares will be allocated among
subscribing Supplemental Eligible Account Holders proportionately, based on the
amount of their respective qualifying deposits as compared to total qualifying
deposits of all Supplemental Eligible Account Holders.

     Category 3:  Other Members.  Each depositor of the Savings Bank as of the
close of business on the Voting Record Date (___________, 1998) and each
borrower with a loan outstanding as of the close of business on October 26,
1993, which continues to be outstanding as of the close of business on the
Voting Record Date, will receive nontransferable Subscription Rights to purchase
up 50,000 Conversion Shares to the extent shares are available following
subscriptions by Eligible Account Holders and Supplemental Eligible Account
Holders.  In the event of an oversubscription in this category, the available
shares will be allocated proportionately based on the amount of the respective
subscriptions.

     SUBSCRIPTION RIGHTS ARE NONTRANSFERABLE.  PERSONS SELLING OR OTHERWISE
TRANSFERRING THEIR RIGHTS TO SUBSCRIBE FOR COMMON STOCK IN THE SUBSCRIPTION
OFFERING OR SUBSCRIBING FOR COMMON STOCK ON BEHALF OF ANOTHER PERSON WILL BE
SUBJECT TO FORFEITURE OF SUCH RIGHTS AND POSSIBLE FURTHER SANCTIONS AND
PENALTIES IMPOSED BY THE OTS OR ANOTHER AGENCY OF THE U.S. GOVERNMENT.  EACH
PERSON EXERCISING SUBSCRIPTION RIGHTS WILL BE REQUIRED TO CERTIFY THAT HE OR SHE
IS PURCHASING SUCH SHARES SOLELY FOR HIS OR HER OWN ACCOUNT AND THAT HE OR SHE
HAS NO AGREEMENT OR UNDERSTANDING WITH ANY OTHER PERSON FOR THE SALE OR TRANSFER
OF SUCH SHARES.  ONCE TENDERED, SUBSCRIPTION ORDERS CANNOT BE REVOKED WITHOUT
THE CONSENT OF THE SAVINGS BANK AND THE HOLDING COMPANY.

     The Holding Company and the Savings Bank will make reasonable attempts to
provide a Prospectus and related offering materials to holders of Subscription
Rights.  However, the Subscription Offering and all Subscription Rights under
the Plan of Conversion will expire at Noon, Eastern Time, on the Expiration
Date, whether or not the Savings Bank has been able to locate each person
entitled to such Subscription Rights.  ORDERS FOR COMMON STOCK IN THE
SUBSCRIPTION OFFERING RECEIVED IN HAND BY THE SAVINGS BANK AFTER THE EXPIRATION
DATE WILL NOT BE ACCEPTED.  The Subscription Offering may be extended by the
Holding Company and the Savings Bank up to ______, 1998 without the OTS's
approval.  OTS regulations require that the Holding Company complete the sale of
Conversion Shares within 45 days after the close of the Subscription Offering.
If the Direct Community Offering and the Syndicated Community Offerings are not
completed by __________, 1998 (or ___________, 1998, if the Subscription
Offering is fully extended), all funds received will be promptly returned with
interest at the Savings Bank's passbook rate and all withdrawal authorizations
will be canceled or, if regulatory approval of an extension of the time period
has been granted, all subscribers and purchasers will be given the right to
increase, decrease or rescind their orders.  If an extension of time is
obtained, all subscribers will be notified of such extension and of the duration
of any extension that has been granted, and will be given the right to increase,
decrease or rescind their

                                       85
orders. If an affirmative response to any resolicitation is not received by the
Holding Company from a subscriber, the subscriber's order will be rescinded and
all funds received will be promptly returned with interest (or withdrawal
authorizations will be canceled).  No single extension can exceed 90 days.

     DIRECT COMMUNITY OFFERING.  Concurrently with the Subscription Offering,
Conversion Shares will be offered by the Holding Company to certain members of
the general public in a Direct Community Offering, with preference given first
to Public Stockholders as of the close of business on the Voting Record Date
(who are not eligible to subscribe for Conversion Shares in the Subscription
Offering) and then to natural persons and trusts of natural persons residing in
the Local Community.  Purchasers in the Direct Community Offering are eligible
to purchase up to 50,000 Conversion Shares.  In the event an insufficient number
of shares are available to fill orders in the Direct Community Offering, the
available shares will be allocated on a pro rata basis determined by the amount
of the respective orders.  The Direct Community Offering will terminate on the
Expiration Date, unless extended by the Holding Company and the Savings Bank,
with approval of the OTS.  Any extensions beyond 45 days after the close of the
fully extended Subscription Offering would require a resolicitation of orders,
wherein subscribers for the maximum numbers of shares of Common Stock would be,
and certain other large Subscribers in the discretion of the Holding Company and
the Savings Bank may be, given the opportunity to continue their orders, in
which case they will need to reconfirm affirmatively their subscriptions prior
to the expiration of the resolicitation offering or their subscription funds
will be promptly refunded with interest at the Savings Bank's passbook rate, or
be permitted to modify or cancel their orders.  THE RIGHT OF ANY PERSON TO
PURCHASE SHARES IN THE DIRECT COMMUNITY OFFERING IS SUBJECT TO THE ABSOLUTE
RIGHT OF THE HOLDING COMPANY AND THE SAVINGS BANK TO ACCEPT OR REJECT SUCH
PURCHASES IN WHOLE OR IN PART.  IF AN ORDER IS REJECTED IN PART, THE PURCHASER
DOES NOT HAVE THE RIGHT TO CANCEL THE REMAINDER OF THE ORDER.  THE HOLDING
COMPANY PRESENTLY INTENDS TO TERMINATE THE DIRECT COMMUNITY OFFERING AS SOON AS
IT HAS RECEIVED ORDERS FOR ALL SHARES AVAILABLE FOR PURCHASE IN THE CONVERSION
AND REORGANIZATION.

     If all of the Common Stock offered in the Subscription Offering is
subscribed for, no Common Stock will be available for purchase in the Direct
Community Offering and all funds submitted pursuant to the Direct Community
Offering will be promptly refunded with interest.

     SYNDICATED COMMUNITY OFFERING.  The Plan of Conversion provides that all
shares of Common Stock not purchased in the Subscription Offering and Direct
Community Offering may be offered for sale to certain members of the general
public in a Syndicated Community Offering through a syndicate of registered
broker-dealers to be managed by Sandler O'Neill acting as agent of the Holding
Company.  THE HOLDING COMPANY AND THE SAVINGS BANK HAVE THE RIGHT TO REJECT
ORDERS, IN WHOLE OR PART, IN THEIR SOLE DISCRETION IN THE SYNDICATED COMMUNITY
OFFERING.  Neither Sandler O'Neill nor any registered broker-dealer shall have
any obligation to take or purchase any shares of the Common Stock in the
Syndicated Community Offering; however, Sandler O'Neill has agreed to use its
best efforts in the sale of shares in the Syndicated Community Offering.

     Conversion Shares sold in the Syndicated Community Offering also will be
sold at the $20.00 Purchase Price.  See "-- Stock Pricing, Exchange Ratio and
Number of Shares to be Issued."  No person will be permitted to subscribe for
more than 50,000 Conversion Shares in the Syndicated Community Offering.  See "-
- Plan of Distribution and Selling Commissions" for a description of the
commission to be paid to the selected dealers and to Sandler O'Neill.

     Sandler O'Neill may enter into agreements with selected dealers to assist
in the sale of shares in the Syndicated Community Offering.  During the
Syndicated Community Offering, selected dealers may only solicit indications of
interest from their customers to place orders with the Holding Company as of a
certain date ("Order Date") for the purchase of shares of Conversion Stock.
When and if Sandler O'Neill and the Holding Company believe that enough
indications of interest and orders have been received in the Subscription
Offering, the Direct Community Offering and the Syndicated Community Offering to
consummate the Conversion and Reorganization, Sandler O'Neill will request, as
of the Order Date, selected dealers to submit orders to purchase shares for
which they have received indications of interest from their customers.  Selected
dealers will send confirmations to such

                                       86
customers on the next business day after the Order Date.  Selected dealers may
debit the accounts of their customers on a date which will be three business
days from the Order Date ("Settlement Date").  Customers who authorize selected
dealers to debit their brokerage accounts are required to have the funds for
payment in their account on but not before the Settlement Date.  On the
Settlement Date, selected dealers will remit funds to the account that the
Holding Company established for each selected dealer.  Each customer's funds so
forwarded to the Holding Company, along with all other accounts held in the same
title, will be insured by the FDIC up to the applicable $100,000 legal limit.
After payment has been received by the Holding Company from selected dealers,
funds will earn interest at the Savings Bank's passbook rate until the
completion of the Conversion Offerings.  At the completion of the Conversion and
Reorganization, the funds received in the Conversion Offerings will be used to
purchase the shares of Common Stock ordered.  The shares issued in the
Conversion and Reorganization cannot and will not be insured by the FDIC or any
other government agency.  In the event the Conversion and Reorganization is not
consummated as described above, funds with interest will be returned promptly to
the selected dealers, who, in turn, will promptly credit their customers'
brokerage accounts.

     The Syndicated Community Offering may terminate on or at any time
subsequent to the Expiration Date, but no later than 45 days after the close of
the Subscription Offering, unless extended by the Holding Company and the
Savings Bank, with approval of the OTS.

     In the event the Savings Bank is unable to find purchasers from the general
public for all unsubscribed shares, other purchase arrangements will be made by
the Board of Directors of the Savings Bank, if feasible.  Such other
arrangements will be subject to the approval of the OTS.  The OTS may grant one
or more extensions of the offering period, provided that (i) no single extension
exceeds 90 days, (ii) subscribers are given the right to increase, decrease or
rescind their subscriptions during the extension period, and (iii) the
extensions do not go more than two years beyond the date on which the members
approved the Plan of Conversion.  If the Conversion and Reorganization is not
completed within 45 days after the close of the Subscription Offering, either
all funds received will be returned with interest (and withdrawal authorizations
canceled) or, if the OTS has granted an extension of time, all subscribers will
be given the right to increase, decrease or rescind their subscriptions at any
time prior to 20 days before the end of the extension period.  If an extension
of time is obtained, all subscribers will be notified of such extension and of
their rights to modify their orders.  If an affirmative response to any
resolicitation is not received by the Holding Company from a subscriber, the
subscriber's order will be rescinded and all funds received will be promptly
returned with interest (or withdrawal authorizations will be canceled).

     PERSONS IN NON-QUALIFIED STATES.  The Holding Company and the Savings Bank
will make reasonable efforts to comply with the securities laws of all states in
the United States in which persons entitled to subscribe for stock pursuant to
the Plan of Conversion reside.  However, the Holding Company and the Savings
Bank are not required to offer stock in the Subscription Offering to any person
who resides in a foreign country or resides in a state of the United States with
respect to which (i) a small number of persons otherwise eligible to subscribe
for shares of Common Stock reside in such state or (ii) the Holding Company or
the Savings Bank determines that compliance with the securities laws of such
state would be impracticable for reasons of cost or otherwise, including but not
limited to a request or requirement that the Holding Company and the Savings
Bank or their officers, directors or trustees register as a broker, dealer,
salesman or selling agent, under the securities laws of such state, or a request
or requirement to register or otherwise qualify the Subscription Rights or
Common Stock for sale or submit any filing with respect thereto in such state.
Where the number of persons eligible to subscribe for shares in one state is
small, the Holding Company and the Savings Bank will base their decision as to
whether or not to offer the Common Stock in such state on a number of factors,
including the size of accounts held by account holders in the state, the cost of
reviewing the registration and qualification requirements of the state (and of
actually registering or qualifying the shares) or the need to register the
Holding Company, its officers, directors or employees as brokers, dealers or
salesmen.

                                       87
PLAN OF DISTRIBUTION AND SELLING COMMISSIONS

     The Primary Parties have engaged Sandler O'Neill as a financial and
marketing advisor in connection with the Offering, and Sandler O'Neill has
agreed to use its best efforts to assist the Holding Company with the
solicitation of subscriptions and purchase orders for Conversion Shares in the
Conversion Offerings.  The services to be rendered by Sandler O'Neill include
the following: (i) consulting as to the securities marketing implications of any
aspect of the Plan of Conversion or related corporate documents; (ii) reviewing
with the Board of Directors RP Financial's appraisal of the aggregate pro forma
market value of the MHC and the Savings Bank, as converted; (iii) reviewing all
offering documents, including this Prospectus, stock order forms and related
offering materials; (iv) assisting in the design and implementation of a
marketing strategy for the Conversion Offerings; (v) assisting in obtaining all
requisite regulatory approvals, (vi) assisting management in scheduling and
preparing for meetings with potential investors and broker-dealers; and (vii)
providing such other general advice and assistance as may be requested to
promote the successful completion of the Conversion Offerings.  In addition,
Sandler O'Neill will manage the Syndicated Community Offering, if necessary.
The engagement of Sandler O'Neill and the services performed thereunder,
including any "due diligence" investigation of the operations of the Primary
Parties, should not be construed as an endorsement or recommendation of the
suitability of an investment in the Common Stock or a verification of the
accuracy or completeness of the information contained herein.  Sandler O'Neill
has not prepared any report or opinion constituting a recommendation or advice
to the Primary Parties or to persons who may purchase Conversion Shares
regarding the suitability of an investment in the Common Stock or as to the
prices at which the Common Stock may trade after the consummation of the
Conversion and Reorganization.

     Based upon negotiations between the Primary Parties and Sandler O'Neill,
Sandler O'Neill will receive a fee equal to 1.50% of the aggregate purchase
price of Conversion Shares sold in the Subscription and Community Offerings.  No
fees will be paid to Sandler O'Neill on subscriptions by any director, officer
or employee of the Primary Parties or members of their immediate families.  In
the event that a selected dealers agreement is entered into in connection with a
Syndicated Community Offering, the Primary Parties will pay a fee to such
selected dealers, any sponsoring dealer's fees, and a management fee to Sandler
O'Neill of 1.75% for shares sold by a National Association of Securities
Dealers, Inc. ("NASD") member firm, other than Sandler O'Neill, pursuant to a
selected dealers agreement; provided, however, that any fees payable to Sandler
O'Neill for any Conversion Shares sold by them pursuant to such a selected
dealers agreement shall not exceed 1.75% of the aggregate purchase price of such
shares and that the aggregate fees payable to Sandler O'Neill and selected
dealers shall not exceed 7.0% of the aggregate purchase price of such shares.
Sandler O'Neill will also be reimbursed for its reasonable out-of-pocket
expenses, including legal fees, for these services, in an amount not to exceed
$75,000.  Notwithstanding the foregoing, in the event the Conversion Offerings
are not consummated or Sandler O'Neill ceases, under certain circumstances after
the subscription solicitation activities are commenced, to provide assistance to
the Primary Parties, Sandler O'Neill will be entitled to be reimbursed for its
reasonable out-of-pocket expenses as described above.  The Primary Parties have
agreed to indemnify Sandler O'Neill in connection with certain claims or
liabilities, including certain liabilities under the Securities Act.  Sandler
O'Neill has received advances towards its fees totalling $25,000.  Total
marketing fees to Sandler O'Neill are expected to be $428,625, $506,250,
$583,875 and $673,145 at the minimum, midpoint, maximum, and 15% above the
maximum of the Estimated Valuation Range, respectively.  See "PRO FORMA DATA"
for the assumptions used to arrive at these estimates.

     The management and employees of the Primary Parties may participate in the
Conversion Offerings in clerical capacities, providing administrative support in
effecting sales transactions or answering questions of a mechanical nature
relating to the proper execution of the order form.  Management of the Primary
Parties may answer questions regarding the respective businesses of the Primary
Parties.  Other questions of prospective purchasers, including questions as to
the advisability or nature of the investment, will be directed to registered
representatives.  The management and employees of the Primary Parties have been
instructed not to solicit offers to purchase Conversion Shares or to provide
advice regarding the purchase of Conversion Shares.  None of the Primary
parties' employees or directors who participate in the Conversion Offerings will
receive any special compensation or other remuneration for such activities.

                                       88
None of the Primary Parties' personnel participating in the Subscription
and Community Offering are registered or licensed as a broker or dealer or an
agent of a broker or dealer.  The Primary Parties' personnel will assist in the
above-described sales activities pursuant to an exemption from registration as a
broker or dealer provided by Rule 3a4-1 ("Rule 3a4-1") promulgated under the
Exchange Act.  Rule 3a4-1 generally provides that an "associated person of an
issuer" of securities shall not be deemed a broker solely by reason of
participation in the sale of securities of such issuer if the associated person
meets certain conditions.  Such conditions include, but are not limited to, that
the associated person participating in the sale of an issuer's securities not be
compensated in connection therewith at the time of participation, that such
person not be associated with a broker or dealer and that such person observe
certain limitations on his participation in the sale of securities.  For
purposes of this exemption, "associated person of an issuer" is defined to
include any person who is a director, officer or employee of the issuer or a
company that controls, is controlled by or is under common control with the
issuer.

PROCEDURE FOR PURCHASING SHARES IN THE SUBSCRIPTION AND DIRECT COMMUNITY
OFFERINGS

     To ensure that each purchaser receives a prospectus at least 48 hours prior
to the Expiration Date in accordance with Rule 15c2-8 under the Exchange Act, no
Prospectus will be mailed any later than five days prior to such date or hand
delivered any later than two days prior to such date.  Execution of the Order
Form will confirm receipt or delivery in accordance with Rule 15c2-8.  Order
Forms will only be distributed with a Prospectus.  The Savings Bank will accept
for processing only orders submitted on original Order Forms.  The Savings Bank
is not obligated to accept orders submitted on photocopied or telecopied Order
Forms.  ORDERS CANNOT AND WILL NOT BE ACCEPTED WITHOUT THE EXECUTION OF THE
CERTIFICATION APPEARING ON THE REVERSE SIDE OF THE ORDER FORM.

     To purchase shares in the Subscription Offering, an executed Order Form
with the required full payment for each share subscribed for, or with
appropriate authorization for withdrawal of full payment from the subscriber's
deposit account with the Savings Bank (which may be given by completing the
appropriate blanks in the Order Form), must be received by the Savings Bank by
Noon, Eastern Time, on the Expiration Date.  Order Forms which are not received
by such time or are executed defectively or are received without full payment
(or without appropriate withdrawal instructions) are not required to be
accepted.  The Holding Company and the Savings Bank have the right to waive or
permit the correction of incomplete or improperly executed Order Forms, but do
not represent that they will do so.  Pursuant to the Plan of Conversion, the
interpretation by the Holding Company and the Savings Bank of the terms and
conditions of the Plan of Conversion and of the Order Form will be final.  In
order to purchase shares in the Direct Community Offering, the Order Form,
accompanied by the required payment for each share subscribed for, must be
received by the Savings Bank prior to the time the Direct Community Offering
terminates, which may be on or at any time subsequent to the Expiration Date.
Once received, an executed Order Form may not be modified, amended or rescinded
without the consent of the Savings Bank unless the Conversion and Reorganization
has not been completed within 45 days after the end of the Subscription
Offering, unless such period has been extended.

     In order to ensure that Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members are properly identified as to their stock
purchase priorities, depositors as of the close of business on the Eligibility
Record Date (June 30, 1996) and/or the Supplemental Eligibility Record Date
(December 31, 1997) and/or the Voting Record Date (___________, 1998) must list
all accounts on the Order Form giving all names in each account, the account
number and the approximate account balance as of such date.

     Full payment for subscriptions may be made (i) in cash if delivered in
person at the Stock Information Center, (ii) by check, bank draft, or money
order, or (iii) by authorization of withdrawal from deposit accounts maintained
with the Savings Bank.  Appropriate means by which such withdrawals may be
authorized are provided on the Order Form.  No wire transfers will be accepted.
Interest will be paid on payments made by cash, check, bank draft or money order
at the Savings Bank's passbook rate from the date payment is received until the
completion or termination of the Conversion and Reorganization.  If payment is
made by authorization of withdrawal from deposit accounts, the funds authorized
to be withdrawn from a deposit account will continue to accrue interest at the
contractual rates until completion or termination of the Conversion and
Reorganization (unless the certificate

                                       89
matures after the date of receipt of the Order Form but prior to closing, in
which case funds will earn interest at the passbook rate from the date of
maturity until consummation of the Conversion and Reorganization), but a hold
will be placed on such funds, thereby making them unavailable to the depositor
until completion or termination of the Conversion and Reorganization.  At the
completion of the Conversion and Reorganization, the funds received in the
Conversion Offerings will be used to purchase the shares of Common Stock
ordered.  THE SHARES OF COMMON STOCK ISSUED IN THE CONVERSION AND REORGANIZATION
CANNOT AND WILL NOT BE INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY.  If
the Conversion and Reorganization is not consummated for any reason, all funds
submitted will be promptly refunded with interest as described above.

     If a subscriber authorizes the Savings Bank to withdraw the amount of the
aggregate Purchase Price from his or her deposit account, the Savings Bank will
do so as of the effective date of Conversion and Reorganization, though the
account must contain the full amount necessary for payment at the time the
subscription order is received.  The Savings Bank will waive any applicable
penalties for early withdrawal from certificate accounts. If the remaining
balance in a certificate account is reduced below the applicable minimum balance
requirement at the time that the funds actually are transferred under the
authorization the certificate will be canceled at the time of the withdrawal,
without penalty, and the remaining balance will earn interest at the Savings
Bank's passbook rate.

     IRAs maintained in the Savings Bank do not permit investment in the Common
Stock.  A depositor interested in using his or her IRA funds to purchase Common
Stock must do so through a self-directed IRA.  Since the Savings Bank does not
offer such accounts, it will allow such a depositor to make a trustee-to-trustee
transfer of the IRA funds to a trustee offering a self-directed IRA program with
the agreement that such funds will be used to purchase Conversion Shares.  There
will be no early withdrawal or IRS interest penalties for such transfers.  The
new trustee would hold the Conversion Shares in a self-directed account in the
same manner as the Savings Bank now holds the depositor's IRA funds.  An annual
administrative fee may be payable to the new trustee.  Depositors interested in
using funds in a Savings Bank IRA to purchase Common Stock should contact the
Stock Information Center so that the necessary forms may be forwarded for
execution and returned prior to the Expiration Date.  In addition, the
provisions of ERISA and IRS regulations require that officers, directors and 10%
shareholders who use self-directed IRA funds to purchase shares of Common Stock
in the Subscription Offering, make such purchases for the exclusive benefit of
IRAs.

STOCK PRICING, EXCHANGE RATIO AND NUMBER OF SHARES TO BE ISSUED

     The Plan of Conversion requires that the purchase price of the Conversion
Shares must be based on the appraised pro forma market value of the Conversion
Shares, as determined on the basis of an independent valuation. The Primary
Parties have retained RP Financial to make such valuation. For its services in
making such appraisal and any expenses incurred in connection therewith, RP
Financial will receive a maximum fee of $30,000 plus out-of-pocket expenses,
together with a fee of no greater than $7,500 plus out-of-pocket expenses for
the preparation of a business plan and other services performed in connection
with the Holding Company's holding company application to the OTS.  The Primary
Parties have agreed to indemnify RP Financial and its employees and affiliates
against certain losses (including any losses in connection with claims under the
federal securities laws) arising out of its services as appraiser, except where
RP Financial's liability results from its negligence or bad faith.

     The appraisal has been prepared by RP Financial in reliance upon the
information contained in this Prospectus, including the Consolidated Financial
Statements.  RP Financial also considered the following factors, among others:
the present and projected operating results and financial condition of the
Primary Parties and the economic and demographic conditions in the Savings
Bank's existing market area; certain historical, financial and other information
relating to the Savings Bank; a comparative evaluation of the operating and
financial statistics of the Savings Bank with those of other similarly situated
publicly-traded companies located in South Carolina and other regions of the
United States; the aggregate size of the offering of the Conversion Shares; the
impact of the Conversion and Reorganization on the Savings Bank's capital and
earnings potential; the proposed dividend policy of the Holding Company and the
Savings Bank; and the trading market for the Savings Bank Common Stock and
securities of comparable companies and general conditions in the market for such
securities.

                                       90
On the basis of the foregoing, RP Financial has advised the Primary Parties
in its opinion that the estimated pro forma market value of the MHC and the
Savings Bank, as converted, was $65.1 million as of December 5, 1997.  Because
the holders of the Public Savings Bank Shares will continue to hold the same
aggregate percentage ownership interest in the Holding Company as they currently
hold in the Savings Bank (before giving effect to the payment of cash in lieu of
issuing fractional Exchange Shares and any Conversion Shares purchased by the
Savings Bank's stockholder in the Conversion Offerings), the appraisal was
multiplied by 53.02%, which represents the MHC's percentage interest in the
Savings Bank.  The resulting amount represents the midpoint of the valuation
($65.1 million), and the minimum and maximum of the valuation were set at 15%
below and above the midpoint, respectively, resulting in a range of $55.3
million to $74.8 million.  The Boards of Directors of the Primary Parties
determined that the Conversion Shares would be sold at $20.00 per share,
resulting in a range of 1,466,250 to 1,983,750 Conversion Shares being offered.
Upon consummation of the Conversion and Reorganization, the Conversion Shares
and the Exchange Shares will represent approximately 53.02% and 46.98%,
respectively, of the Holding Company's total outstanding shares.  The Boards of
Directors of the Primary Parties reviewed RP Financial's appraisal report,
including the methodology and the assumptions used by RP Financial, and
determined that the Estimated Valuation Range was reasonable and adequate.  The
Boards of Directors of the Primary Parties also established the formula for
determining the Exchange Ratio. Based upon such formula and the Estimated
Valuation Range, the Exchange Ratio ranged from a minimum of 1.83281 to a
maximum of 2.47969 Exchange Shares for each Public Savings Bank Shares, with a
midpoint of 2.15625.  Based upon these Exchange Ratios, the Holding Company
expects to issue between 1,299,231 and 1,757,783 shares of Exchange Shares to
the holders of Public Savings Bank Shares outstanding immediately prior to the
consummation of the Conversion and Reorganization.  The Estimated Valuation
Range and the Exchange Ratio may be amended with the approval of the OTS, if
required, or if necessitated by subsequent developments in the financial
condition of any of the Primary Parties or market conditions generally.  If the
appraisal is updated to below $55.3 million or above $86.1 million (the maximum
of the Estimated Valuation Range, as adjusted by 15%), such appraisal will be
filed with the SEC by post-effective amendment.

     Based upon current market and financial conditions and recent practices and
policies of the OTS, in the event the Holding Company receives orders for
Conversion Shares in excess of $39.7 million (the maximum of the Estimated
Valuation Range) and up to $45.6 million (the maximum of the Estimated Valuation
Range, as adjusted by 15%), the Holding Company may be required by the OTS to
accept all such orders.  No assurances, however, can be made that the Holding
Company will receive orders for Conversion Shares in excess of the maximum of
the Estimated Valuation Range or that, if such orders are received, that all
such orders will be accepted because the Holding Company's final valuation and
number of shares to be issued are subject to the receipt of an updated appraisal
from RP Financial which reflects such an increase in the valuation and the
approval of such increase by the OTS.  There is no obligation or understanding
on the part of management to take and/or pay for any shares of Conversion Shares
to complete the Conversion Offerings.

     RP Financial's valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing such shares.  RP
Financial did not independently verify the Savings Bank's Consolidated Financial
Statements and other information provided by the Savings Bank and the MHC, nor
did RP Financial value independently the assets or liabilities of the Savings
Bank.  The valuation considers the Savings Bank and the MHC as going concerns
and should not be considered as an indication of the liquidation value of the
Savings Bank and the MHC.  Moreover, because such valuation is necessarily based
upon estimates and projections of a number of matters, all of which are subject
to change from time to time, no assurance can be given that persons purchasing
Conversion Shares or receiving Exchange Shares in the Conversion and
Reorganization will thereafter be able to sell such shares at prices at or above
the Purchase Price or in the range of the foregoing valuation of the pro forma
market value thereof.

     No sale of Conversion Shares or issuance of Exchange Shares may be
consummated unless prior to such consummation RP Financial confirms that nothing
of a material nature has occurred which, taking into account all relevant
factors, would cause it to conclude that the Purchase Price is materially
incompatible with the estimate of the pro forma market value of a share of
Common Stock upon consummation of the Conversion and Reorganization.

                                       91
If such is not the case, a new Estimated Valuation Range may be set, a new
Exchange Ratio may be determined based upon the new Estimated Valuation Range, a
new Subscription and Community Offering and/or Syndicated Community Offering or
Public Offering may be held or such other action may be taken as the Primary
Parties shall determine and the OTS may permit or require.

     Depending upon market or financial conditions following the commencement of
the Subscription Offering, the total number of Conversion Shares to be issued in
the Conversion Offerings may be increased or decreased without a resolicitation
of subscribers, provided that the product of the total number of shares times
the Purchase Price is not below the minimum or more than 15% above the maximum
of the Estimated Valuation Range. In the event market or financial conditions
change so as to cause the aggregate Purchase Price of the shares to be below the
minimum of the Estimated Valuation Range or more than 15% above the maximum of
such range, purchasers will be resolicited (i.e., permitted to continue their
                                            ----                             
orders, in which case they will need to affirmatively reconfirm their
subscriptions prior to the expiration of the resolicitation offering or their
subscription funds will be promptly refunded with interest at the Savings Bank's
passbook rate of interest, or be permitted to modify or rescind their
subscriptions).  Any increase or decrease in the number of Conversion Shares
will result in a corresponding change in the number of Exchange Shares, so that
upon consummation of the Conversion and Reorganization, the Conversion Shares
and the Exchange Shares will represent approximately 53.03% and 46.97%,
respectively, of the Holding Company's total outstanding shares of Common Stock
(exclusive of the effects of the exercise of outstanding stock options).

     An increase in the number of Conversion Shares as a result of an increase
in the appraisal of the estimated pro forma market value would decrease both a
subscriber's ownership interest and the Holding Company's pro forma net earnings
and stockholders' equity on a per share basis while increasing pro forma net
earnings and stockholders' equity on an aggregate basis. A decrease in the
number of Conversion Shares would increase both a subscriber's ownership
interest and the Holding Company's pro forma net earnings and stockholders'
equity on a per share basis while decreasing pro forma net earnings and
stockholders' equity on an aggregate basis.  See "RISK FACTORS --Possible
Dilutive Effect of Benefit Programs" and "PRO FORMA DATA."

     The appraisal report of RP Financial has been filed as an exhibit to this
Registration Statement and Application for Conversion of which this Prospectus
is a part and is available for inspection in the manner set forth under
"ADDITIONAL INFORMATION."

LIMITATIONS ON PURCHASES OF CONVERSION SHARES

     The Plan of Conversion provides for certain limitations to be placed upon
the purchase of Common Shares by eligible subscribers and others in the
Conversion and Reorganization.  Each subscriber must subscribe for a minimum of
25 Conversion Shares.  The Plan of Conversion provides for the following
purchase limitations: (i) no person may purchase in either the Subscription
Offering, Direct Community Offering or Syndicated Community Offering more 50,000
Conversion Shares, (ii) no person, together with associates of or persons acting
in concert with such person, may purchase in either the Subscription Offering,
Direct Community Offering or Syndicated Community Offering more than 50,000
Conversion Shares, (iii) the maximum number of shares of Conversion Shares which
may be subscribed for or purchased in all categories in the Conversion and
Reorganization by any person, when combined with any Exchange Shares received,
shall not exceed 50,000 shares of Common Stock to be issued in the Conversion
and Reorganization, and (iv) the maximum number of shares of Conversion Shares
which may be subscribed for or purchased in all categories in the Conversion and
Reorganization by any person, together with any associate or any group of
persons acting in concert, when combined with any Exchange Shares received,
shall not exceed 50,000 shares of Common Stock to be issued in the Conversion
and Reorganization.  For purposes of the Plan of Conversion, the directors are
not deemed to be acting in concert solely by reason of their Board membership.
Pro rata reductions within each Subscription Rights category will be made in
allocating shares to the extent that the maximum purchase limitations are
exceeded.

                                       92
BECAUSE OTS POLICY REQUIRES THAT THE MAXIMUM PURCHASE LIMITATION INCLUDES
EXCHANGE SHARES TO BE ISSUED TO PUBLIC STOCKHOLDERS IN EXCHANGE FOR THEIR PUBLIC
SAVINGS BANK SHARES, CERTAIN PUBLIC STOCKHOLDERS MAY BE LIMITED IN THEIR ABILITY
TO PURCHASE CONVERSION SHARES, OR EVEN PREVENTED FROM PURCHASING CONVERSION
SHARES.

     The Boards of Directors of the Primary Parties may, in their sole
discretion, increase the maximum purchase limitation set forth above up to 9.99%
of the Conversion Shares sold in the Conversion and Reorganization, provided
that orders for shares which exceed 5% of the Conversion Shares sold in the
Conversion and Reorganization may not exceed, in the aggregate, 10% of the
shares sold in the Conversion and Reorganization.  The Savings Bank and the
Holding Company do not intend to increase the maximum purchase limitation unless
market conditions are such that an increase in the maximum purchase limitation
is necessary to sell a number of shares in excess of the minimum of the
Estimated Valuation Range.  If the Boards of Directors decide to increase the
purchase limitation above, persons who subscribed for the maximum number of
Conversion Shares will be, and other large subscribers in the discretion of the
Holding Company and the Savings Bank may be, given the opportunity to increase
their subscriptions accordingly, subject to the rights and preferences of any
person who has priority Subscription Rights.

     The term "acting in concert" is defined in the Plan of Conversion to mean
(i) knowing participation in a joint activity or interdependent conscious
parallel action towards a common goal whether or not pursuant to an express
agreement; or (ii) a combination or pooling of voting or other interests in the
securities of an issuer for a common purpose pursuant to any contract,
understanding, relationship, agreement or other arrangement, whether written or
otherwise.  In general, a person who acts in concert with another party shall
also be deemed to be acting in concert with any person who is also acting in
concert with that other party.

     The term "associate" of a person is defined in the Plan of Conversion to
mean (i) any corporation or organization (other than the Savings Bank or a
majority-owned subsidiary of the Savings Bank) of which such person is an
officer or partner or is, directly or indirectly, the beneficial owner of 10% or
more of any class of equity securities; (ii) any trust or other estate in which
such person has a substantial beneficial interest or as to which such person
serves as trustee or in a similar fiduciary capacity (excluding tax-qualified
employee plans); and (iii) any relative or spouse of such person, or any
relative of such spouse, who either has the same home as such person or who is a
director or officer of the Savings Bank or any of its parents or subsidiaries.
For example, a corporation of which a person serves as an officer would be an
associate of such person and, therefore, all shares purchased by such
corporation would be included with the number of shares which such person could
purchase individually under the above limitations.

     The term "officer" is defined in the Plan of Conversion to mean an
executive officer of the Savings Bank, including its Chairman of the Board,
President, Executive Vice Presidents, Senior Vice Presidents, Vice Presidents in
charge of principal business functions, Secretary and Treasurer.

     Common Shares purchased pursuant to the Conversion and Reorganization will
be freely transferable, except for shares purchased by directors and officers of
the Savings Bank and the Holding Company and by NASD members.  See "--
Restrictions on Transferability by Directors and Officers and NASD Members."

DELIVERY AND EXCHANGE OF STOCK CERTIFICATES

     CONVERSION STOCK.  Certificates representing Conversion Shares will be
mailed by the Holding Company's transfer agent to the persons entitled thereto
at the addresses of such persons appearing on the Order Form as soon as
practicable following the consummation of the Conversion and Reorganization.
Any undeliverable certificates will be held by the Holding Company until claimed
by persons legally entitled thereto or otherwise disposed according to
applicable law.  Purchasers of Conversion Shares may be unable to sell such
shares until certificates are available and delivered to them.

                                       93
EXCHANGE SHARES.  After the consummation of the Conversion and
Reorganization, each holder of a certificate(s) theretofore evidencing issued
and outstanding shares of Savings Bank Common Stock (other than the MHC), upon
surrender of the same to an agent, duly appointed by the Holding Company, which
is anticipated to be the transfer agent for the Common Stock ("Exchange Agent"),
shall be entitled to receive in exchange therefor a certificate(s) representing
the number of full Exchange Shares based on the Exchange Ratio.  The Exchange
Agent shall mail a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to such certificate shall
pass, only upon delivery of such certificate to the Exchange Agent) advising
such holder of the terms of the Exchange Offering and the procedure for
surrendering to the Exchange Agent such certificates in exchange for a
certificate(s) evidencing Common Stock.  THE SAVINGS BANK STOCKHOLDERS SHOULD
NOT FORWARD SAVINGS BANK COMMON STOCK CERTIFICATES TO THE SAVINGS BANK OR THE
EXCHANGE AGENT UNTIL THEY HAVE RECEIVED THE TRANSMITTAL LETTER.

     No holder of a certificate theretofore representing shares of Savings Bank
Common Stock shall be entitled to receive any  dividends on the Common Stock
until the certificate representing such shares is surrendered in exchange for
certificates representing shares of Common Stock.  In the event that dividends
are declared and paid by the Holding Company in respect of Common Stock after
the consummation of the Conversion and Reorganization, but before surrender of
certificates representing shares of Savings Bank Common Stock, dividends payable
in respect of shares of Common Stock not then issued shall accrue (without
interest).  Any such dividends shall be paid (without  interest) upon surrender
of the certificates representing such shares of Savings Bank Common Stock.
After the consummation of the Conversion and Reorganization, the Holding Company
shall be entitled to treat certificates representing shares of Savings Bank
Common Stock as evidencing ownership of the number of full shares of Common
Stock into which the shares of Savings Bank Common Stock represented by such
certificates shall have been converted, notwithstanding the failure on the part
of the holder thereof to surrender such certificates.

     The Holding Company shall not be obligated to deliver a certificate(s)
representing shares of Common Stock to which a holder of Savings Bank Common
Stock would otherwise be entitled as a result of the Conversion and
Reorganization until such holder surrenders the certificate(s) representing the
shares of Savings Bank Common Stock for exchange as provided above, or, in
default thereof, an appropriate affidavit of loss and indemnity agreement and/or
a bond as may be required in each case by the Holding Company.  If any
certificate evidencing shares of Common Stock is to be issued in a name other
than that in which the certificate evidencing Savings Bank Common Stock
surrendered in exchange therefor is registered, it shall be a condition of the
issuance thereof that the certificate so surrendered shall be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange pay to the Exchange Agent any transfer or other tax required by reason
of the issuance of a certificate for shares of Common Stock in any name other
than that of the registered holder of the certificate surrendered or otherwise
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable.

RESTRICTIONS ON REPURCHASE OF STOCK

     Pursuant to OTS regulations, OTS-regulated savings associations (and their
holding companies) may not for a period of three years from the date of an
institution's mutual-to-stock conversion repurchase any of its common stock from
any person, except in the event of (i) an offer made to all of its stockholders
to repurchase the common stock on a pro rata basis, approved by the OTS; or (ii)
the repurchase of qualifying shares of a director; or (iii) a purchase in the
open market by a tax-qualified or non-tax-qualified employee stock benefit plan
in an amount reasonable and appropriate to fund the plan.  Furthermore,
repurchases of any common stock are prohibited if the effect thereof would cause
the association's regulatory capital to be reduced below (a) the amount required
for the liquidation account or (b) the regulatory capital requirements imposed
by the OTS.  Repurchases are generally prohibited during the first year
following conversion.  Upon ten days' written notice to the OTS, and if the OTS
does not object, an institution may make open market repurchases of its
outstanding common stock during years two and three following the conversion,
provided that certain regulatory conditions are met and that the repurchase
would not adversely affect the financial condition of the association.  Any
repurchases of common stock by the Holding Company would be subject to these
regulatory restrictions unless the OTS would provide otherwise.

                                       94
RESTRICTIONS ON TRANSFERABILITY BY DIRECTORS AND OFFICERS AND NASD MEMBERS

     Shares of Common Stock purchased in the Conversion Offerings by directors
and officers of the Holding Company may not be sold for a period of one year
following consummation of the Conversion and Reorganization, except in the event
of the death of the stockholder or in any exchange of the Common Stock in
connection with a merger or acquisition of the Holding Company.  Shares of
Common Stock received by directors or officers through the ESOP or the MRP or
upon exercise of options issued pursuant to the Stock Option Plan or purchased
subsequent to the Conversion and Reorganization are not subject to this
restriction.  Accordingly, shares of Common Stock issued by the Holding Company
to directors and officers shall bear a legend giving appropriate notice of the
restriction and, in addition, the Holding Company will give appropriate
instructions to the transfer agent for the Holding Company's Common Stock with
respect to the restriction on transfers.  Any shares issued to directors and
officers as a stock dividend, stock split or otherwise with respect to
restricted Common Stock shall be subject to the same restrictions.

     Purchases of outstanding shares of Common Stock of the Holding Company by
directors, executive officers (or any person who was an executive officer or
director of the Savings Bank after adoption of the Plan of Conversion and
Reorganization) and their associates during the three-year period following
Conversion and Reorganization may be made only through a broker or dealer
registered with the SEC, except with the prior written approval of the OTS.
This restriction does not apply, however, to negotiated transactions involving
more than 1% of the Holding Company's outstanding Common Stock or to the
purchase of stock pursuant to the Stock Option Plan.

     The Holding Company has filed with the SEC a registration statement under
the Securities Act for the registration of the Common Stock to be issued
pursuant to the Conversion and Reorganization.  The registration under the
Securities Act of shares of the Common Stock to be issued in the Conversion and
Reorganization does not cover the resale of such shares.  Shares of Common Stock
purchased by persons who are not affiliates of the Holding Company may be resold
without registration.  Shares purchased by an affiliate of the Holding Company
will be subject to the resale restrictions of Rule 144 under the Securities Act.
If the Holding Company meets the current public information requirements of Rule
144 under the Securities Act, each affiliate of the Holding Company who complies
with the other conditions of Rule 144 (including those that require the
affiliate's sale to be aggregated with those of certain other persons) would be
able to sell in the public market, without registration, a number of shares not
to exceed, in any three-month period, the greater of (i) 1% of the outstanding
shares of the Holding Company or (ii) the average weekly volume of trading in
such shares during the preceding four calendar weeks.  Provision may be made in
the future by the Holding Company to permit affiliates to have their shares
registered for sale under the Securities Act under certain circumstances.

     Under guidelines of the NASD, members of the NASD and their associates are
subject to certain restrictions on the transfer of securities purchased in
accordance with Subscription Rights and to certain reporting requirements upon
purchase of such securities.

                       COMPARISON OF STOCKHOLDERS' RIGHTS

     GENERAL.  As a result of the Conversion and Reorganization, holders of the
Savings Bank Common Stock will become stockholders of the Holding Company, a
Delaware corporation.  There are certain differences in stockholder rights
arising from distinctions between the Savings Bank's Federal Stock Charter and
Bylaws and the Holding Company's Certificate of Incorporation and Bylaws and
from distinctions between laws with respect to federally chartered savings
institutions and Delaware law.

     The discussion herein is not intended to be a complete statement of the
differences affecting the rights of stockholders, but rather summarizes the
material differences and similarities affecting the rights of stockholders.  The
discussion herein is  qualified in its entirety by reference to the Certificate
of Incorporation and Bylaws of the Holding Company and the DGCL.  See
"ADDITIONAL INFORMATION" for procedures for obtaining a copy of the Holding
Company's Certificate of Incorporation and Bylaws.

                                       95
AUTHORIZED CAPITAL STOCK.  The Holding Company's authorized capital stock
consists of 7,500,000 shares of Common Stock, par value $.01 per share and
250,000 shares of preferred stock, par value $.01 per share ("Preferred Stock").
The Savings Bank's authorized capital stock consists of 4,000,000 shares of
Savings Bank Common Stock and 1,000,000 shares of serial preferred stock, par
value $1.00 per share.  The shares of Common Stock and Preferred Stock were
authorized in an amount greater than that to be issued in the Conversion and
Reorganization to provide the Holding Company's Board of Directors with
flexibility to effect, among other transactions, financings, acquisitions, stock
dividends, stock splits and employee stock options.  However, these additional
authorized shares may also be used by the Board of Directors consistent with its
fiduciary duty to deter future attempts to gain control of the Holding Company.
The Board of Directors also has sole authority to determine the terms of any one
or more series of Preferred Stock, including voting rights, conversion rates,
and liquidation preferences.  As a result of the ability to fix voting rights
for a series of Preferred Stock, the Board has the power, to the extent
consistent with its fiduciary duty, to issue a series of Preferred Stock to
persons friendly to management in order to attempt to block a post tender offer
merger or other transaction by which a third party seeks control, and thereby
assist management to retain its position.  The Holding Company's Board currently
has no plan for the issuance of additional shares, other than the issuance of
additional shares pursuant to stock benefit plans.

     ISSUANCE OF CAPITAL STOCK.  Pursuant to applicable laws and regulations,
the MHC is required to own not less than a majority of the outstanding Savings
Bank Common Stock.  There will be no such restriction applicable to the Holding
Company following consummation of the Conversion and Reorganization.

     The Holding Company's Certificate of Incorporation do not contain
restrictions on the issuance of shares of capital stock to directors, officers
or controlling persons of the Holding Company, whereas the Savings Bank's
Federal Stock Charter restricts such issuance to general public offerings, or if
qualifying shares, to directors, unless the share issuance or the plan under
which they would be issued has been approved by a majority of the total votes
eligible to be cast at a legal stockholders meeting.  Thus, stock-related
compensation plans such as stock option plans could be adopted by the Holding
Company without stockholder approval and shares of Holding Company capital stock
could be issued directly to directors or officers without stockholder approval.
The Bylaws of the NASD, however, generally require corporations with securities
which are quoted on the Nasdaq National Market System to obtain stockholder
approval of most stock compensation plans for directors, officers and key
employees of the corporation.  Moreover, although generally not required,
stockholder approval of stock related compensation plans may be sought in
certain instances in order to qualify such plans for favorable federal income
tax and securities law treatment under current laws and regulations.  The
Holding Company plans to submit the stock compensation plans discussed herein to
its stockholders for approval.

     VOTING RIGHTS.  Neither the Savings Bank's Federal Stock Charter or Bylaws
nor the Holding Company's Certificate of Incorporation or Bylaws currently
provide for cumulative voting in elections of directors.  For additional
information regarding voting rights, see "-- Limitations on Acquisitions of
Voting Stock and Voting Rights" below.

     PAYMENT OF DIVIDENDS.  The ability of the Savings Bank to pay dividends on
its capital stock is restricted by OTS regulations and by federal income tax
considerations related to savings institutions such as the Savings Bank.  See
"REGULATION -- Federal Regulation of the Savings Bank -- Capital Requirements"
and "TAXATION." Although the Holding Company is not subject to these
restrictions as a Delaware corporation, such restrictions will indirectly affect
the Holding Company because dividends from the Savings Bank will be a primary
source of funds of the Holding Company for the payment of dividends to
stockholders of the Holding Company.

     Certain restrictions generally imposed on Delaware corporations may also
have an impact on the Holding Company's ability to pay dividends.  The DGCL
generally provides that the Holding Company is limited to paying dividends in an
amount equal to the excess of its net assets (total assets minus total
liabilities) over its statutory capital or, if no such excess exists, equal to
its net profits for the current year and/or the immediately preceding fiscal
year.

                                       96
BOARD OF DIRECTORS.  The Savings Bank's Federal Stock Charter and Bylaws
and the Holding Company's Certificate of Incorporation and Bylaws each require
the Board of Directors of the Savings Bank and the Holding Company to be divided
into three classes as nearly equal in number as possible and that the members of
each class shall be elected for a term of three years and until their successors
are elected and qualified, with one class being elected annually.

     Under the Savings Bank's Bylaws, any vacancies in the Board of Directors of
the Savings Bank may be filled by the affirmative vote of a majority of the
remaining directors although less than a quorum of the Board of Directors.
Persons elected by the directors of the Savings Bank to fill vacancies may only
serve until the next annual meeting of stockholders.  Under the Holding
Company's Certificate of Incorporation, any vacancy occurring in the Board of
Directors of the Holding Company, including any vacancy created by reason of an
increase in the number of directors, may be filled by the remaining directors,
and any director so chosen shall hold office for the remainder of the term to
which the director has been elected and until his or her successor is elected
and qualified.

     Under the Savings Bank's Bylaws, any director may be removed for cause by
the holders of a majority of the outstanding voting shares.  The Holding
Company's Certificate of Incorporation provide that any director may be removed
for cause by a majority of the directors of the Holding Company or by the
holders of at least 80% of the outstanding voting shares of the Holding Company.

     LIMITATIONS ON LIABILITY.  The Holding Company's Certificate of
Incorporation provides that the directors of the Holding Company shall not be
personally liable for monetary damages to the Holding Company for certain
breaches of their fiduciary duty as directors, except for liabilities that
involve intentional misconduct or a knowing violation of law by the director,
the authorization or illegal distributions or receipt of an improper personal
benefit from their actions as directors.  This provision might, in certain
instances, discourage or deter shareholders or management from bringing a
lawsuit against directors for a breach of their duties even though such an
action, if successful, might have benefitted the Holding Company.

     Currently, federal law does not permit federally chartered savings
institutions such as the Savings Bank to limit the personal liability of
directors in the manner provided by the DGCL and the laws of many other states.

     INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.  The Savings
Bank's Federal Stock Charter and Bylaws do not contain any provision relating to
indemnification of directors and officers of the Savings Bank.  Under current
OTS regulations, however, the Savings Bank shall indemnify its directors,
officers and employees for any costs incurred in connection with any litigation
involving any such person's activities as a director, officer or employee if
such person obtains a final judgment on the merits in his or her favor.  In
addition, indemnification is permitted in the case of a settlement, a final
judgment against such person or final judgment other than on the merits, if a
majority of disinterested directors determine that such person was acting in
good faith within the scope of his or her employment as he or she could
reasonably have perceived it under the circumstances and for a purpose he or she
could reasonably have believed under the circumstances was in the best interest
of the Savings Bank or its stockholders.  The Savings Bank also is permitted to
pay ongoing expenses incurred by a director, officer or employee if a majority
of disinterested directors concludes that such person may ultimately be entitled
to indemnification.  Before making any indemnification payment, the Savings Bank
is required to notify the OTS of its intention and such payment cannot be made
if the OTS objects thereto.

     The officers, directors, agents and employees of the Holding Company are
indemnified with respect to certain actions pursuant to the Holding Company's
Certificate of Incorporation, which complies with the DGCL regarding
indemnification.  The DGCL allows the Holding Company to indemnify the
aforementioned persons for expenses, settlements, judgments and fines in suits
in which such person has made a party by reason of the fact that he or she is or
was an agent of the Holding Company.  No such indemnification may be given if
the acts or omissions of the person are adjudged to be in violation of law, if
such person is liable to the corporation for an unlawful distribution, or if
such person personally received a benefit to which he or she was not entitled.

                                       97
SPECIAL MEETINGS OF STOCKHOLDERS.  The Holding Company's Certificate of
Incorporation provides that special meetings of the stockholders of the Holding
Company may be called only by the board of directors or an authorized committee
thereof.  The Savings Bank's Federal Stock Charter provides that, until October
26, 1998 (i.e., five years after the consummation of the MHC Reorganization),
          ----                                                               
special meetings of the Savings Bank's stockholders may only be called by the
Board of Directors.  Thereafter, special meetings may be called by the Chairman,
President, a majority of the Board of Directors or the holders of not less than
a majority of the outstanding capital stock of the Savings Bank entitled to vote
at the meeting.

     STOCKHOLDER NOMINATIONS AND PROPOSALS.  The Savings Bank's Bylaws generally
provide that stockholders may submit nominations for election as director at an
annual meeting of stockholders and any new business to be taken up at such a
meeting by filing such in writing with the Savings Bank at least thirty days
before the date of any such meeting.

     The Holding Company's Bylaws generally provide that any stockholder
desiring to make a nomination for the election of directors or a proposal for
new business at a meeting of stockholders must submit written notice to the
Holding Company at least 30 days and not more than 60 days in advance of the
meeting, together with certain information relating to the nomination or new
business.  However, if less than 31 days notice of the meeting is given,
stockholders must submit such written notice no later than the tenth day
following the date on which notice of the meeting is mailed to stockholders.
Failure to comply with these advance notice requirements will preclude such
nominations or new business from being considered at the meeting.  Management
believes that it is in the best interests of the Holding Company and its
stockholders to provide sufficient time to enable management to disclose to
stockholders information about a dissident slate of nominations for directors.
This advance notice requirement may also give management time to solicit its own
proxies in an attempt to defeat any dissident slate of nominations, should
management determine that doing so is in the best interest of stockholders
generally.  Similarly, adequate advance notice of stockholder proposals will
give management time to study such proposals and to determine whether to
recommend to the stockholders that such proposals be adopted.  In certain
instances, such provisions could make it more difficult to oppose management's
nominees or proposals, even if stockholders believe such nominees or proposals
are in their best interests.

     STOCKHOLDER ACTION WITHOUT A MEETING.  The Bylaws of the Savings Bank
provide that any action to be taken or which may be taken at any annual or
special meeting of stockholders may be taken if a consent in writing, setting
forth the actions so taken, is given by the holders of all outstanding shares
entitled to vote.  The Holding Company's Certificate of Incorporation
specifically denies the authority of stockholders to act without a meeting.

     STOCKHOLDER'S RIGHT TO EXAMINE BOOKS AND RECORDS.  A federal regulation
which is applicable to the Savings Bank provides that stockholders may inspect
and copy specified books and records of a federally  chartered savings
institution after proper written notice for a proper purpose.  The DGCL
similarly provides that a stockholder may inspect books and records upon written
demand stating the purpose of the inspection, if such purpose is reasonably
related to such person's interest as a stockholder.

     LIMITATIONS ON ACQUISITIONS OF VOTING STOCK AND VOTING RIGHTS.  The Holding
Company's Certificate of Incorporation provide that no person shall directly or
indirectly offer to acquire or acquire the beneficial ownership of (i) more than
10% of the issued and outstanding shares of any class of an equity security of
the Holding Company, or (ii) any securities convertible into, or exercisable
for, any equity securities of the Holding Company if, assuming conversion or
exercise by such person of all securities of which such person is the beneficial
owner which are convertible into, or exercisable for, such equity securities
(but of no securities convertible into, or exercisable for, such equity
securities of which such person is not the beneficial owner), such person would
be the beneficial owner of more than 10% of any class of an equity security of
the Holding Company.  The term "person" is broadly defined in the Certificate of
Incorporation to prevent circumvention of this restriction.

     The foregoing restrictions do not apply to (i) any offer with a view toward
public resale made exclusively to the Holding Company by underwriters or a
selling group acting on its behalf, (ii) any employee benefit plan

                                       98
established by the Holding Company or the Savings Bank, and (iii) any other
offer or acquisition approved in advance by the affirmative vote of two-thirds
of the Holding Company's Board of Directors.  In the event that shares are
acquired in violation of this restriction, all shares beneficially owned by any
person in excess of 10% shall not be counted as shares entitled to vote and
shall not be voted by any person or counted as voting shares in connection with
any matters submitted to stockholders for a vote.

     Neither the Charter nor the Bylaws of the Savings Bank contains a provision
which restricts voting rights of certain stockholders of the Savings Bank in the
manner set forth above.

     MERGERS, CONSOLIDATIONS AND SALES OF ASSETS.  A federal regulation requires
the approval of two-thirds of the Board of Directors of the Savings Bank and the
holders of two-thirds of the outstanding stock of the Savings Bank entitled to
vote thereon for mergers, consolidations and sales of all or substantially all
of the Savings Bank's assets.  Such regulation permits the Savings Bank to merge
with another corporation without obtaining the approval of its stockholders if:
(i) it does not involve an interim savings institution; (ii) the Savings Bank's
Federal Stock Charter is not changed; (iii) each share of the Savings Bank's
stock outstanding immediately prior to the effective date of the transaction is
to be an identical outstanding share or a treasury share of the Savings Bank
after such effective date; and (iv) either:  (A) no shares of voting stock of
the Savings Bank and no securities convertible into such stock are to be issued
or delivered under the plan of combination or (B) the authorized unissued shares
or the treasury shares of voting stock of the Savings Bank to be issued or
delivered under the plan of combination, plus those initially issuable upon
conversion of any securities to be issued or delivered under such plan, do not
exceed 15% of the total shares of voting stock of the Savings Bank outstanding
immediately prior to the effective date of the transaction.

     The Holding Company's Certificate of Incorporation requires the approval of
the holders of at least 80% of the Holding Company's outstanding shares of
voting stock to approve certain "Business Combinations" (as defined therein)
involving a "Related Person" (as defined therein) except in cases where the
proposed transaction has been approved in advance by a majority of those members
of the Holding Company's Board of Directors who are unaffiliated with the
Related Person and were directors prior to the time when the Related Person
became a Related Person.  The term "Related Person" is defined to include any
individual, corporation, partnership or other entity (other than the Holding
Company or its subsidiary) which owns beneficially or controls, directly or
indirectly, 10% or more of the outstanding shares of voting stock of the Holding
Company or an affiliate of such person or entity.  This provision of the
Certificate of Incorporation applies to any "Business Combination," which is
defined to include:  (i) any merger or consolidation of the Holding Company with
or into any Related Person; (ii) any sale, lease, exchange, mortgage, transfer,
or other disposition of 25% or more of the assets of the Holding Company or
combined assets of the Holding Company and its subsidiaries to a Related Person;
(iii) any merger or consolidation of a Related Person with or into the Holding
Company or a subsidiary of the Holding Company; (iv) any sale, lease, exchange,
transfer, or other disposition of 25% or more of the assets of a Related Person
to the Holding Company or a subsidiary of the Holding Company; (v) the issuance
of any securities of the Holding Company or a subsidiary of the Holding Company
to a Related Person; (vi) the acquisition by the Holding Company or a subsidiary
of the Holding Company of any securities of a Related Person; (vii) any
reclassification of common stock of the Holding Company or any recapitalization
involving the common stock of the Holding Company; or (viii) any agreement or
other arrangement providing for any of the foregoing.

     Under Delaware law, absent this provision, business combinations, including
mergers, consolidations and sales of substantially all of the assets of a
corporation must, subject to certain exceptions, be approved by the vote of the
holders of a majority of the outstanding shares of common stock of the Holding
Company and any other affected class of stock.  One exception under Delaware law
to the majority approval requirement applies to stockholders owning 15% or more
of the common stock of a corporation for a period of less than three years.
Such 15% stockholder, in order to obtain approval of a business combination,
must obtain the approval of two-thirds of the outstanding stock, excluding the
stock owned by such 15% stockholder, or satisfy other requirements under
Delaware law relating to board of director approval of his or her acquisition of
the shares of the Holding Company.  The increased stockholder vote required to
approve a business combination may have the effect of foreclosing

                                       99
mergers and other business combinations which a majority of stockholders deem
desirable and placing the power to prevent such a merger or combination in the
hands of a minority of stockholders.

     The Holding Company's Certificate of Incorporation requires the Holding
Company's Board of Directors to consider certain factors in addition to the
amount of consideration to be paid when evaluating certain business combinations
or a tender or exchange offer.  These additional factors include:  (i) the
social and economic effects of the transaction; (ii) the business and financial
condition and earnings prospects of the acquiring person or entity; and (iii)
the competence, experience, and integrity of the acquiring person or entity and
its management.

     As holder of all of the outstanding Savings Bank Common Stock after
consummation of the Conversion and Reorganization, the Holding Company generally
will be able to authorize a merger, consolidation or other business combination
involving the Savings Bank without the approval of the stockholders of the
Holding Company.

     DISSENTERS' RIGHTS OF APPRAISAL.  OTS regulations generally provide that a
stockholder of a federally chartered savings institution that engages in a
merger, consolidation or sale of all or substantially all of its assets shall
have the right to demand from such institution payment of the fair or appraised
value of his or her stock in the institution, subject to specified procedural
requirements.  This regulation also provides, however, that the stockholders of
a federally chartered savings institution with stock which is listed on a
national securities exchange or quoted on the Nasdaq Stock System are not
entitled to dissenters'  rights in connection with a merger involving such
savings institution if the stockholder is required to accept only "qualified
consideration" for his or her stock, which is defined to include cash, shares of
stock of any institution or corporation which at the effective date of the
merger will be listed on a national securities exchange or quoted on the Nasdaq
National Market System or any combination of such shares of stock and cash.

     Under the DGCL, shareholders of the Holding Company will generally have
dissenter's appraisal rights in connection with (i) a plan of merger to which
the Holding Company is a party; (ii) a plan of share exchange to which the
Holding Company is a party as the corporation whose shares will be acquired;
(iii) certain sales or exchanges of all, or substantially all, of the Holding
Company's property other than in the regular course of business; and (iv)
amendments to the Holding Company's Certificate of Incorporation effecting a
material reverse stock split.

     AMENDMENT OF GOVERNING INSTRUMENTS.  No amendment of the Savings Bank's
Federal Stock Charter may be made unless it is first proposed by the Board of
Directors of the Savings Bank, then preliminarily approved by the OTS, and
thereafter approved by the holders of a majority of the total votes eligible to
be cast at a legal meeting.  The Holding Company's Certificate of Incorporation
may be amended by the vote of the holders of a majority of the outstanding
shares of Holding Company Common Stock, except that the provisions of the
Certificate of Incorporation governing (i) the calling of meeting of
stockholders, (ii) stockholders' nominations and proposals, (iii) authorized
capital stock, (iv) denial of preemptive rights, (v) the number and staggered
terms of directors, (vi) removal of directors, (vii) approval of certain
business combinations, (viii) the evaluation of certain business combinations,
(ix) elimination of directors' liability, (x) indemnification of officers and
directors, and (xi) the manner of amending the Certificate of Incorporation and
Bylaws, each may not be repealed, altered, amended or rescinded except by the
vote of the holders of at least 80% of the outstanding shares of the Holding
Company.  This provision is intended to prevent the holders of a lesser
percentage of the outstanding stock of the Holding Company from circumventing
any of the foregoing provisions by amending the Certificate of Incorporation to
delete or modify one of such provisions.

     The Bylaws of the Savings Bank may be amended by a majority vote of the
full Board of Directors of the Savings Bank or by a majority vote of the votes
cast by the stockholders of the Savings Bank at any legal meeting.  The Holding
Company's Bylaws may only be amended by a majority vote of the Board of
Directors of the Holding Company or by the holders of at least 80% of the
outstanding stock by the Holding Company.

     PURPOSE AND TAKEOVER DEFENSIVE EFFECTS OF THE HOLDING COMPANY'S CERTIFICATE
OF INCORPORATION AND BYLAWS.  The Board of Directors of the Savings Bank
believes that the provisions described above are prudent and

                                      100
will reduce the Holding Company's vulnerability to takeover attempts and certain
other transactions that have not been negotiated with and approved by its Board
of Directors.  These provisions will also assist the Savings Bank in the orderly
deployment of the Conversion and Reorganization proceeds into productive assets
during the initial period after the Conversion and Reorganization.  The Board of
Directors believes these provisions are in the best interest of the Savings Bank
and Holding Company and its stockholders.  In the judgment of the Board of
Directors, the Holding Company's Board will be in the best position to determine
the true value of the Holding Company and to negotiate more effectively for what
may be in the best interests of its stockholders.  Accordingly, the Board of
Directors believes that it is in the best interest of the Holding Company and
its stockholders to encourage potential acquirors to negotiate directly with the
Board of Directors of the Holding Company and that these provisions will
encourage such negotiations and discourage hostile takeover attempts.  It is
also the view of the Board of Directors that these provisions should not
discourage persons from proposing a merger or other transaction at a price
reflective of the true value of the Holding Company and that is in the best
interest of all stockholders.

     Attempts to acquire control of financial institutions and their holding
companies have recently become increasingly common.  Takeover attempts that have
not been negotiated with and approved by the Board of Directors present to
stockholders the risk of a takeover on terms that may be less favorable than
might otherwise be available.  A transaction that is negotiated and approved by
the Board of Directors, on the other hand, can be carefully planned and
undertaken at an opportune time in order to obtain maximum value of the Holding
Company for its stockholders, with due consideration given to matters such as
the management and business of the acquiring corporation and maximum strategic
development of the Holding Company's assets.

     An unsolicited takeover proposal can seriously disrupt the business and
management of a corporation and cause it great expense.  Although a tender offer
or other takeover attempt may be made at a price substantially above the current
market prices, such offers are sometimes made for less than all of the
outstanding shares of a target company.  As a result, stockholders may be
presented with the alternative of partially liquidating their investment at a
time that may be disadvantageous, or retaining their investment in an enterprise
that is under different management and whose objectives may not be similar to
those of the remaining stockholders.  The concentration of control, which could
result from a tender offer or other takeover attempt, could also deprive the
Holding Company's remaining stockholders of benefits of certain protective
provisions of the Exchange Act, if the number of beneficial owners became less
than 300, thereby allowing for deregistration under the Exchange Act.

     Despite the belief of the Savings Bank and the Holding Company as to the
benefits to stockholders of these provisions of the Holding Company's
Certificate of Incorporation and Bylaws, these provisions may also have the
effect of discouraging a future takeover attempt that would not be approved by
the Holding Company's Board, but pursuant to which stockholders may receive a
substantial premium for their shares over then current market prices.  As a
result, stockholders who might desire to participate in such a transaction may
not have any opportunity to do so.  Such provisions will also render the removal
of the Holding Company's Board of Directors and of management more difficult.
The Board of Directors of the Savings Bank and the Holding Company, however,
have concluded that the potential benefits outweigh the possible disadvantages.

     Following the Conversion and Reorganization, pursuant to applicable law
and, if required, following the approval by stockholders, the Holding Company
may adopt additional anti-takeover charter provisions or other devices regarding
the acquisition of its equity securities that would be permitted for a Delaware
business corporation.

          The cumulative effect of the restriction on acquisition of the Holding
Company contained in the Certificate of Incorporation and Bylaws of the Holding
Company and in Federal and Delaware law may be to discourage potential takeover
attempts and perpetuate incumbent management, even though certain stockholders
of the Holding Company may deem a potential acquisition to be in their best
interests, or deem existing management not to be acting in their best interests.

                                      101
RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY

     The following discussion is a summary of certain provisions of federal law
and regulations and Delaware corporate law relating to stock ownership and
transfers, the Board of Directors and business combinations, all of which may be
deemed to have "anti-takeover" effects.  The description of these provisions is
necessarily general and reference should be made to the actual law and
regulations.

CONVERSION REGULATIONS

     OTS regulations prohibit any person from making an offer, announcing an
intent to make an offer or participating in any other arrangement to purchase
stock or acquiring stock or subscription rights in a converting institution (or
its holding company) from another person prior to completion of its conversion.
Further, without the prior written approval of the OTS, no person may make such
an offer or announcement of an offer to purchase shares or actually acquire
shares in the converting institution (or its holding company) for a period of
three years from the date of the completion of the conversion if, upon the
completion of such offer, announcement or acquisition, that person would become
the beneficial owner of more than 10% of the outstanding stock of the
institution (or its holding company).  The OTS has defined "person" to include
any individual, group acting in concert, corporation, partnership, association,
joint stock company, trust, unincorporated organization or similar company, a
syndicate or any other group formed for the purpose of acquiring, holding or
disposing of securities of an insured institution.  However, offers made
exclusively to an association (or its holding company) or an underwriter or
member of a selling group acting on the converting institution's (or its holding
company's) behalf for resale to the general public are excepted.  The regulation
also provides civil penalties for willful violation or assistance in any such
violation of the regulation by any person connected with the management of the
converting institution (or its holding company) or who controls more than 10% of
the outstanding shares or voting rights of a converting or converted institution
(or its holding company).

     As permitted by OTS regulations, the Savings Bank's Federal Stock Charter
contains a provision whereby the acquisition or offer to acquire ownership of
more than 10% of the issued and outstanding shares of any class of equity
securities of the Savings Bank by any person, either directly or through an
affiliate of such person, will be prohibited for a period of five years
following the date of consummation of the Conversion and Reorganization.  Any
stock in excess of 10% acquired in violation of the Federal Stock Charter
provision will not be counted as outstanding for voting purposes.  Furthermore,
for five years from the consummation date of the MHC Reorganization,
stockholders of the Savings Bank will not be permitted to call a special meeting
of stockholders relating to a change of control of the Savings Bank or a charter
amendment and will not be permitted to cumulate their votes in the election of
directors.

CHANGE OF CONTROL REGULATIONS

     Under the Change in Bank Control Act, no person may acquire control of an
insured federal savings and loan association or its parent holding company
unless the OTS has been given 60 days' prior written notice and has not issued a
notice disapproving the proposed acquisition.  In addition, OTS regulations
provide that no company may acquire control of a savings association without the
prior approval of the OTS.  Any company that acquires such control becomes a
"savings and loan holding company" subject to registration, examination and
regulation by the OTS.

     Control, as defined under federal law, means ownership, control of or
holding irrevocable proxies representing more than 25% of any class of voting
stock, control in any manner of the election of a majority of the savings
association's directors, or a determination by the OTS that the acquiror has the
power to direct, or directly or indirectly to exercise a controlling influence
over, the management or policies of the institution.  Acquisition of more than
10% of any class of a savings association's voting stock, if the acquiror also
is subject to any one of eight "control factors," constitutes a rebuttable
determination of control under the regulations.  Such control factors include
the acquiror being one of the two largest stockholders.  The determination of
control may be rebutted by submission

                                      102
to the OTS, prior to the acquisition of stock or the occurrence of any other
circumstances giving rise to such determination, of a statement setting forth
facts and circumstances which would support a finding that no control
relationship will exist and containing certain undertakings.  The regulations
provide that persons or companies which acquire beneficial ownership exceeding
10% or more of any class of a savings association's stock must file with the OTS
a certification form that the holder is not in control of such institution, is
not subject to a rebuttable determination of control and will take no action
which would result in a determination or rebuttable determination of control
without prior notice to or approval of the OTS, as applicable.  There are also
rebuttable presumptions in the regulations concerning whether a group "acting in
concert" exists, including presumed action in concert among members of an
"immediate family."

     The OTS may prohibit an acquisition of control if it finds, among other
things, that (i) the acquisition would result in a monopoly or substantially
lessen competition, (ii) the financial condition of the acquiring person might
jeopardize the financial stability of the institution, or (iii) the competence,
experience or integrity of the acquiring person indicates that it would not be
in the interest of the depositors or the public to permit the acquisition of
control by such person.

              DESCRIPTION OF CAPITAL STOCK OF THE HOLDING COMPANY

GENERAL

     The Holding Company is authorized to issue 7,500,000 shares of Common Stock
having a par value of $.01 per share and 250,000 shares of preferred stock
having a par value of $.01 per share.  The Holding Company currently expects to
issue up to 3,741,533 shares of Common Stock (subject to adjustment up to
4,302,763 shares) and no shares of preferred stock in the Conversion and
Reorganization.  Each share of the Holding Company's Common Stock will have the
same relative rights as, and will be identical in all respects with, each other
share of Common Stock.  Upon payment of the Purchase Price for the Common Stock,
in accordance with the Plan of Conversion, all such stock will be duly
authorized, fully paid and nonassessable.

     THE COMMON STOCK OF THE HOLDING COMPANY WILL REPRESENT NONWITHDRAWABLE
CAPITAL, WILL NOT BE AN ACCOUNT OF ANY TYPE, AND WILL NOT BE INSURED BY THE FDIC
OR ANY OTHER GOVERNMENT AGENCY.

COMMON STOCK

     DIVIDENDS.  The Holding Company can pay dividends out of statutory surplus
or from certain net profits if, as and when declared by its Board of Directors.
The payment of dividends by the Holding Company is subject to limitations which
are imposed by law and applicable regulation.  See "DIVIDEND POLICY" and
"REGULATION."  The holders of Common Stock of the Holding Company will be
entitled to receive and share equally in such dividends as may be declared by
the Board of Directors of the Holding Company out of funds legally available
therefor.  If the Holding Company issues preferred stock, the holders thereof
may have a priority over the holders of the Common Stock with respect to
dividends.

     STOCK REPURCHASES.  The Plan of Conversion and OTS regulations place
certain limitations on the repurchase of the Holding Company's capital stock.
See "THE CONVERSION AND REORGANIZATION --Restrictions on Repurchase of Stock"
and "USE OF PROCEEDS."

     VOTING RIGHTS.  Upon Conversion and Reorganization, the holders of Common
Stock of the Holding Company will possess exclusive voting rights in the Holding
Company.  They will elect the Holding Company's Board of Directors and act on
such other matters as are required to be presented to them under Federal law or
as are otherwise presented to them by the Board of Directors.  Except as
discussed in "RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY," each holder
of Common Stock will be entitled to one vote per share and will not have any
right to cumulate votes in the election of directors.  If the Holding Company
issues preferred stock, holders of the Holding Company preferred stock may also
possess voting rights.  Certain matters

                                      103
require a vote of 80% of the outstanding shares entitled to vote thereon.  See
"RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY."

     As a federal stock savings bank, corporate powers and control of the
Savings Bank are vested in the Board of Directors, who elect the officers of the
Savings Bank and who fill any vacancies on the Board of Directors as it exists
upon Conversion and Reorganization.  Subsequent to Conversion and
Reorganization, voting rights will be vested exclusively in the owners of the
shares of capital stock of the Savings Bank, all of which will be owned by the
Holding Company, and voted at the direction of the Holding Company's Board of
Directors.  Consequently, the holders of the Common Stock will not have direct
control of the Savings Bank.

     LIQUIDATION.  In the event of any liquidation, dissolution or winding up of
the Savings Bank, the Holding Company, as holder of the Savings Bank's capital
stock would be entitled to receive, after payment or provision for payment of
all debts and liabilities of the Savings Bank (including all deposit accounts
and accrued interest thereon) and after distribution of the balance in the
special liquidation account to Eligible Account Holders and Supplemental
Eligible Account Holders (see "THE CONVERSION AND REORGANIZATION"), all assets
of the Savings Bank available for distribution.  In the event of liquidation,
dissolution or winding up of the Holding Company, the holders of its common
stock would be entitled to receive, after payment or provision for payment of
all its debts and liabilities, all of the assets of the Holding Company
available for distribution.  If Holding Company preferred stock is issued, the
holders thereof may have a priority over the holders of the Common Stock in the
event of liquidation or dissolution.

     PREEMPTIVE RIGHTS.  Holders of the Common Stock of the Holding Company will
not be entitled to preemptive rights with respect to any shares that may be
issued.  The Common Stock is not subject to redemption.

PREFERRED STOCK

     None of the shares of the authorized Holding Company preferred stock will
be issued in the Conversion and Reorganization and there are no plans to issue
the preferred stock.  Such stock may be issued with such designations, powers,
preferences and rights as the Board of Directors may from time to time
determine.  The Board of Directors can, without stockholder approval, issue
preferred stock with voting, dividend, liquidation and conversion rights that
could dilute the voting strength of the holders of the Common Stock and may
assist management in impeding an unfriendly takeover or attempted change in
control.

RESTRICTIONS ON ACQUISITION

     Acquisitions of the Holding Company are restricted by provisions in its
Certificate of Incorporation and Bylaws and by the rules and regulations of
various regulatory agencies.  See "REGULATION" and "RESTRICTIONS ON ACQUISITION
OF THE HOLDING COMPANY."

EFFECT OF RECEIVERSHIP ON THE COMMON STOCK

     In the event of the receivership of the Savings Bank, the FDIC, as
receiver, shall, by operation of law, succeed to, among other things, all the
rights, titles, powers and privileges of the Savings Bank and its stockholder,
the Holding Company.  As provided by the procedures and priorities applicable to
receiverships of savings institutions, the holders of the Common Stock would be
entitled to receive any funds remaining after all depositors, creditors, other
claimants (other than holders of stock ranking junior to or on a parity with the
Common Stock) and administrative expenses are paid.

TRANSFER AGENT AND REGISTRAR

     ChaseMellon Securities is the transfer agent and registrar for shares of
the Common Stock.

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REGISTRATION REQUIREMENTS

     The Holding Company will register the Common Stock with the SEC pursuant to
Section 12(g) of the Exchange Act upon the completion of the Conversion and
Reorganization and will not deregister its Common Stock for a period of at least
three years following the completion of the Conversion and Reorganization.  Upon
such registration, the proxy solicitation and tender offer rules, insider
trading reporting and restrictions, annual and periodic reporting and other
requirements of the Exchange Act will apply.

                             LEGAL AND TAX OPINIONS

     The legality of the Common Stock has been passed upon for the Holding
Company by Breyer & Aguggia, Washington, D.C.  The federal tax consequences of
the Conversion and Reorganization have been opined upon by Breyer & Aguggia and
the South Carolina tax consequences of the Conversion and Reorganization have
been opined upon by Evans, Carter, Kunes & Bennett, P.A., Charleston, South
Carolina.  Breyer & Aguggia and Evans, Carter, Kunes & Bennett, P.A. have
consented to the references herein to their opinions.  Certain legal matters
will be passed upon for Sandler O'Neill by Muldoon, Murphy & Faucette,
Washington, D.C.

                                    EXPERTS

     The consolidated financial statements of the Savings Bank as of September
30, 1997 and 1996 and for each of the years in the three-year period ended
September 30, 1997, have been included herein and in the Registration Statement
in reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants, appearing elsewhere herein, and upon the authority of said
firm as experts in accounting and auditing.

     RP Financial has consented to the publication herein of the summary of its
report to the Savings Bank setting forth its opinion as to the estimated pro
forma market value of the MHC and the Savings Bank, as converted, and its letter
with respect to subscription rights and to the use of its name and statements
with respect to it appearing herein.

                             ADDITIONAL INFORMATION

     The Holding Company has filed with the SEC a Registration Statement on Form
S-1 (File No. 333-_____) under the Securities Act with respect to the Common
Stock offered in the Conversion and Reorganization.  This Prospectus does not
contain all the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
SEC.  Such information may be inspected at the public reference facilities
maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549 and at its regional offices at 500 West Madison Street, Suite 1400,
Chicago, Illinois  60661; and 7 World Trade Center, Suite 1300, New York, New
York  10048.  Copies may be obtained at prescribed rates from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Registration Statement also is available through the SEC's World Wide Web
site on the Internet (http://www.sec.gov).

     The MHC has filed with the OTS an Application for Approval of Conversion,
which includes proxy materials for the Special Members' Meeting and the
Stockholders' Meeting and certain other information.  This Prospectus omits
certain information contained in such Application.  The Application, including
the proxy materials, exhibits and certain other information that are a part
thereof, may be inspected, without charge, at the offices of the OTS, 1700 G
Street, N.W., Washington, D.C. 20552 and at the office of the Regional Director
of the OTS at the OTS Southeast Regional Office, 1475 Peachtree Street, N.E.,
Atlanta, Georgia 30309.

                                      105
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
             PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARY
Page
                                                            ----
Independent Auditors' Report.............................    F-1
 
Consolidated Balance Sheets as of
 September 30, 1997 and 1996.............................    F-2
 
Consolidated Statements of Operation for the
 Years Ended September 30, 1997, 1996 and 1995...........     19
 
Consolidated Statements of Stockholders' Equity
 for the Years Ended September 30, 1997, 1996 and 1995...    F-3
 
Consolidated Statements of Cash Flows for the
 Years Ended September 30, 1997, 1996 and 1995...........    F-4
 
Notes to Consolidated Financial Statements...............    F-6
*      *      *

     All schedules are omitted as the required information either is not
applicable or is included in the Consolidated Financial Statements or related
Notes.

     Separate financial statements for the MHC have not been included herein
because the MHC has no material assets other than shares of Savings Bank Common
Stock (which will be canceled as part of the Conversion and Reorganization) and
no significant liabilities (contingent or otherwise), revenues or expenses, and
has not engaged in any significant activities to date.

     Separate financial statements for the Holding Company have not been
included herein because the Holding Company, which has engaged in only
organizational activities to date, has no significant assets, liabilities
(contingent or otherwise), revenues or expenses.

                                      106
[LETTERHEAD OF KPMG PEAT MARWICK LLP]

                          Independent Auditors' Report
                          ----------------------------

The Board of Directors
Perpetual Bank, A Federal Savings Bank
 and Subsidiaries

We have audited the consolidated balance sheets of Perpetual Bank, A Federal
Savings Bank and subsidiaries as of September 30, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the years in the three-year period ended September 30, 1997.  These
consolidated financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Perpetual Bank, A
Federal Savings Bank and subsidiaries as of September 30, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended September 30, 1997 in conformity with generally accepted
accounting principles.

                                         /s/ KPMG Peat Marwick LLP
                                         KPMG Peat Marwick LLP

Greenville, South Carolina
November 7, 1997

                                      F-1
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES
                          Consolidated Balance Sheets
                          September 30, 1997 and 1996
Assets                                            1997                   1996
                       ------                                            ----                   ----
Cash and cash equivalents                                             $13,499,332            13,584,568
Investment securities available for sale (amortized cost
  of $11,188,937 in 1997 and $2,494,535 in 1996)                       11,325,700             2,493,888
Federal Home Loan Bank stock, at cost                                   1,650,000               993,700
Mortgage-backed securities available for sale (amortized cost
  of $35,713,975 in 1997 and $44,362,007 in 1996)                      35,862,700            43,124,998
Loans receivable, (net of allowance for loan losses of
  $1,886,243 in 1997 and $1,534,773 in 1996)                          178,772,266           140,757,990
Investment in limited partnership                                       5,003,835                    - 
Real estate acquired in settlement of loans                               162,776                 2,750
Real estate held for development                                        2,284,038             1,406,144
Premises and equipment, net                                             6,294,465             4,852,366
Accrued interest receivable:
  Loans receivable                                                      1,330,255             1,113,386
  Mortgage-backed and other securities                                    238,186               356,827
Other                                                                     569,787             1,140,556
                                                                     ------------           -----------
       Total assets                                                  $256,993,340           209,827,173
                                                                     ============           ===========
 
       Liabilities and Stockholders' Equity
       ------------------------------------                          
Deposits                                                              201,001,858           160,243,623
Advances from the Federal Home Loan Bank ("FHLB")                      15,000,000            16,000,000
Advance payments by borrowers for property taxes and insurance            396,886               404,322
Accrued interest payable                                                1,362,483               747,059
Accrued expenses and other liabilities                                  8,630,370             3,341,375
                                                                     ------------           -----------
       Total liabilities                                              226,391,597           180,736,379
                                                                     ------------           -----------
 
Stockholders' equity:
  Common stock ($1.00 par value; authorized 20,000,000 shares;
     issued and outstanding 1,508,873 shares in 1997 and
     1,504,601 shares in 1996                                           1,508,873             1,504,601
  Additional paid-in capital                                           11,651,917            11,696,679
  Retained earnings, restricted                                        18,381,766            17,607,269
  Unrealized gain (loss) on securities available for sale, net            188,423              (816,855)
  Indirect guarantee of ESOP debt                                        (804,024)             (900,900)
  Deferred compensation for Management Recognition
     Plan ("MRP")                                                        (325,212)                   -  
                                                                     ------------           -----------
       Total stockholders' equity                                      30,601,743            29,090,794
                                                                     ------------           -----------
 
Commitments and contingencies
 
       Total liabilities and stockholders' equity                    $256,993,340           209,827,173
                                                                     ============           ===========
See accompanying notes to consolidated financial statements.

                                      F-2
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES
                Consolidated Statements of Stockholders' Equity
                 Years ended September 30, 1997, 1996 and 1995
Unrealized                             
                                                                           Gain (Loss)    Indirect                
                                                                          on Securities  Guarantee        Deferred 
                                               Additional                 Available for      of         Compensation
                                   Common        Paid-in      Retained      Sale, Net       ESOP             for   
                                   Stock         Capital      Earnings      of Taxes        Debt             MRP         Total
                                   -----         -------      --------      --------        ----             ---         -----
Balance at September 30, 1994    $1,503,943       847,044    14,709,955    (2,320,660)     (80,500)        (23,010)   14,636,772
                                             
 Change in unrealized loss on                
   securities available for                  
    sale, net                             -             -             -     1,711,405            -               -     1,711,405
 Exercise of stock options                   
   (658 shares)                         658         5,922             -             -            -               -         6,580
 Reduction of ESOP debt                   -             -             -             -       73,790               -        73,790
 Earned portion of MRP                    -             -             -             -            -          11,490        11,490
 Dividends on common stock                -             -      (125,089)            -            -               -      (125,089)
 Net income for 1995                      -             -     1,917,038             -            -               -     1,917,038
                                 ----------    ----------    ----------    ----------     --------        --------    ----------
Balance at September 30, 1995     1,504,601       852,966    16,501,904      (609,255)      (6,710)        (11,520)   18,231,986
                                             
 Change in unrealized loss on                
   securities available for                  
    sale, net                             -             -             -      (207,600)           -               -      (207,600)
 Reduction on ESOP debt                   -             -             -             -        6,710           6,710
 Earned portion of MRP                    -             -             -             -            -          11,520        11,520
 Dividends on common stock                -             -      (319,022)            -            -               -      (319,022)
 Sale of common stock (less                  
   offering cost of $417,536)             -    10,843,713             -             -            -               -    10,843,713
 Indirect guaranteed of ESOP                 
  debt                                    -             -             -             -     (900,900)              -      (900,900)
 Net income for 1996                      -             -     1,424,387             -                            -     1,424,387
                                 ----------    ----------    ----------    ----------     --------        --------    ----------
Balance at September 30, 1996     1,504,601    11,696,679    17,607,269      (816,855)    (900,900)              -    29,090,794
                                             
 Change in unrealized loss on                
   securities, net                        -             -             -     1,005,278            -               -     1,005,278
 Exercise of stock options            4,272        38,448             -             -            -               -        42,720
 Reduction of ESOP debt                   -             -             -             -       96,876               -        96,876
 ESOP expense                             -        32,152             -             -            -               -        32,152
 Purchase of common stock                    
   for MRP                                -             -             -             -            -        (404,093)     (404,093)
 Earned portion of MRP                    -             -             -             -            -          78,881        78,881
 Dividends on common stock                -             -      (953,866)            -            -               -      (953,866)
 Offering costs for the sale                 
   of common stock                        -      (115,362)            -             -            -               -      (115,362)
 Net income for 1997                      -             -     1,728,363             -            -               -     1,728,363
                                 ----------    ----------    ----------    ----------     --------        --------    ----------
Balance at September 30, 1997    $1,508,873    11,651,917    18,381,766       188,423     (804,024)       (325,212)   30,601,743
                                 ==========    ==========    ==========    ==========     ========        ========    ==========
See accompanying notes to consolidated financial statements.

                                      F-3
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES
                     Consolidated Statements of Cash Flows
                 Years ended September 30, 1997, 1996 and 1995
1997            1996            1995    
                                                                       ----            ----            ----      
Cash flows from operating activities:
Net income                                                      $  1,728,363      1,424,387       1,917,038
  Adjustments to reconcile net income to net                    
     cash provided by operating activities:                     
       Depreciation and amortization                                   703,213        597,306         583,281
       Provision for loan losses                                       655,000        349,250         362,000
       Earnings of investment in                                
          limited partnership                                         (184,960)             -               -
       (Increase) decrease in deferred tax assets                            -              -          27,000
       Gain on sale of mutual funds, net                                     -              -      (1,763,967)
       Gain on sale of investments, net                                307,534        (53,963)        (13,504)
       Gain on sale of real estate                                    ( 19,894)       (79,034)        (47,544)
       Deferred compensation                                           111,033         11,520          11,490
       Loss (gain) on sale of loans, net                               (12,509)        23,328         (66,785)
       Loss (gain) on sale of fixed assets, net                        191,894        (26,096)              -
       Decrease (increase) in accrued interest                  
          receivable and other assets                                  (46,895)      (789,076)       (205,004)
       Increase (decrease) in other liabilities                      5,656,419      1,190,696        (131,300)
                                                                  ------------    -----------    ------------
          Net cash provided by                                  
            operating activities                                     9,089,198      2,648,318         672,705
                                                                  ------------    -----------    ------------
                                                                                                             
Cash flows from investing activities:                           
  Proceeds from sales of investment securities                               -              -       7,625,359
  Proceeds from maturities of investment securities                  2,550,000        800,000         393,242
  Purchase of investment securities                                (11,181,806)    (2,488,144)       (797,625)   
  Purchase of investments in limited partnership                    (4,818,875)             -               -
  Purchase of mutual funds                                                   -              -    (144,640,000)
  Proceeds from sales of mutual funds                                        -              -     146,403,967
  Proceeds from the sales of fixed assets                                    -         91,096               -
  Principal repayments on mortgage-backed                                                                    
     securities                                                      4,412,449      2,967,619       3,501,516
  Proceeds from sales of mortgage-backed                                                                     
     securities                                                     22,570,776      2,922,009               -
  Purchase of mortgage-backed securities                           (18,760,688)             -      (5,055,120)
  Proceeds from redemption of FHLB stock                               650,000      1,804,600       1,110,000
  Purchases of FHLB stock                                           (1,306,300)      (398,300)     (2,424,700)
                                                                                                             
  Increase in loans receivable, net                                (12,676,474)   (18,966,369)    (21,874,020)
  Purchases of loans receivable                                    (31,960,810)   (18,242,510)              -
  Sales of loans receivable                                          5,746,769      9,555,720       9,614,274
  Proceeds from sale of real estate owned                               95,186        120,959         869,086
  Proceeds from sale of real estate held for                                                                 
     development                                                     1,149,353              -               -
  Purchase of premises and equipment                                (2,281,841)    (1,558,569)       (731,153)
  Purchase of real estate held for development                      (2,027,247)    (1,406,144)              -
                                                                  ------------    -----------    ------------
          Net cash used in investing activities                    (47,821,198)   (24,798,033)     (6,005,174)
                                                                  ------------    -----------    ------------
F-4
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

               Consolidated Statements of Cash Flows, Continued
1997           1996           1995
                                                               ----           ----           ----
Cash flows from financing activities:
  Increase in deposit accounts                              40,758,235     10,926,744       5,774,086
  Proceeds from FHLB advances                               68,000,000     61,000,000     216,150,000
  Repayment of FHLB advances                               (69,000,000)   (53,000,000)   (218,650,000)
  Proceeds from sale of common stock, less
     expenses                                                  (72,642)    10,843,714           6,580
  Purchase of stock for MRP                                   (404,093)             -               -
  Repayments of ESOP Loan                                       96,876              -               -
  Dividends paid on common stock                              (705,866)      (319,022)       (125,089)
  (Decrease) increase in advance payments by
     borrowers for  property taxes and insurance                (7,436)      (346,858)        106,605
                                                          ------------    -----------    ------------
          Net cash provided by
            financing activities                            38,665,074     29,104,578       3,262,182
                                                          ------------    -----------    ------------
 
Net increase (decrease) in cash and cash equivalents           (85,236)     6,954,863      (2,070,287)
 
Cash and cash equivalents, beginning of year                13,584,568      6,629,705       8,699,992
                                                          ------------    -----------    ------------
 
Cash and cash equivalents, end of year                    $ 13,499,332     13,584,568       6,629,705
                                                          ============    ===========    ============
 
Supplemental disclosures:
  Cash paid during the year for
     Interest                                             $  9,537,349      7,434,366       8,535,117
                                                          ============    ===========    ============
     Taxes                                                $    641,000        745,840         415,500
                                                          ============    ===========    ============
 
Noncash investing activity:
  Additions to real estate acquired in
     settlement of loans                                  $    233,748         50,859         277,511
                                                          ============    ===========    ============
  Loans receivable exchanged for
     mortgage-backed securities                           $          -      3,061,294               -
                                                          ============    ===========    ============
  Change in unrealized net loss on securities
     available for sale, net of tax                       $  1,005,278       (207,600)     (1,711,405)
                                                          ============    ===========    ============
  Change in Employee Stock Ownership Plan
     debt guaranteed by the Bank                          $    (96,876)       894,190         (73,790)
                                                          ============    ===========    ============
See accompanying notes to consolidated financial statements.

                                      F-5
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(1)  Organization and Summary of Significant Accounting Policies
     -----------------------------------------------------------

     On May 15, 1992, the Bank's Board of Directors adopted a plan of
     reorganization pursuant to which Perpetual Bank, a Federal Savings Bank
     ("Perpetual" or "Bank") proposed to reorganize from a federally chartered
     mutual savings and loan association into a mutual holding company ("MHC").

     To implement the reorganization, Perpetual incorporated a federally
     chartered capital stock savings bank (New Federal Savings Bank).  In
     exchange for the common shares of the New Federal Savings Bank to be issued
     to the MHC, Perpetual transferred substantially all of its assets and all
     of its liabilities to the New Federal Savings Bank.  The New Federal
     Savings Bank was renamed Perpetual Bank, a Federal Savings Bank and became
     a majority-owned subsidiary of the MHC.

     Perpetual has the power to issue shares of capital stock (including common
     and preferred stock) to persons other than the MHC.  So long as the MHC is
     in existence, the aggregate amount of voting stock that may be issued to
     persons other than the MHC must be less than 50% of the issued and
     outstanding voting stock of Perpetual.  The New Federal Savings Bank may
     issue any amount of non-voting stock to persons other than the MHC.

     On October 26, 1993, Perpetual completed the reorganization and sold
     116,969 shares of common stock at $10 per share.  The remaining 1,385,000
     shares of common stock were transferred to the MHC.

     The costs related to the reorganization and offering were charged against
     the proceeds of the sale of stock.  Capitalized costs related to this
     transaction were approximately $223,443.  These costs were treated as a
     reduction of paid-in capital.

     In September 1996, Perpetual sold 585,000 shares of common stock from its
     authorized but unissued shares.  SouthBanc Shares, MHC presently owns
     53.02% of Perpetual, and the minority ownership is 46.98%.  The 585,000
     shares were sold at a price of $19.25 per share generating proceeds of
     $11,261,249, less offering cost of $532,898, for a net proceed of
     $10,728,351.

     In September 1997, the Board of Directors of Perpetual Bank and the MHC
     adopted a proposed Plan of Conversion to convert the MHC to stock form and
     to reorganize the MHC and Perpetual by forming a new Stock Holding Company
     ("SHC") to become the parent company of Perpetual.  The SHC will exchange
     certain shares of its common stock for the outstanding common stock of
     Perpetual and will issue and offer for sale certain additional shares of
     its common stock.  The additional shares of common stock of the SHC will be
     offered to eligible account holders of Perpetual as of June 30, 1996, who
     will receive nontransferable subscription rights to purchase these shares,
     as well as certain other persons as provided for in the Plan.  The

                                      F-6
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(1)  Organization and Summary of Significant Accounting Policies, Continued
     ----------------------------------------------------------------------

     amount and pricing of the proposed stock offering will be based on an
     independent appraisal of Perpetual.

     In connection with the proposed transaction, the MHC will file an
     application with the Office of Thrift Supervision and a registration
     statement with the U.S. Securities and Exchange Commission with respect to
     the reorganization and common stock offering.  After receipt of the
     required regulatory approvals, the Plan of Conversion will be submitted to
     the members of the MHC for approval by at least a majority of the votes
     eligible to be cast at a special meeting and will also be submitted by
     Perpetual's stockholders for approval at a special meeting.  The
     transaction is expected to be completed during the second calendar quarter
     of 1998.

     At the time of the conversion, Perpetual will establish a liquidation
     account in an amount equal to its equity as reflected in the consolidated
     balance sheet used in the final conversion prospectus.  The liquidation
     account will be maintained for the benefit of eligible account holders and
     supplemental eligible account holders who continue to maintain their
     accounts at Perpetual after the conversion.  The liquidation account will
     be reduced annually, to the extent that eligible account holders and
     supplemental eligible account holders have reduced their qualifying
     deposits as of each anniversary date.  Subsequent increases will not
     restore an eligible account holder's or supplemental eligible account
     holder's interest in the liquidation account.  In the event of a complete
     liquidation of Perpetual, each eligible account holder and supplemental
     eligible account holder will be entitled to receive a distribution from the
     liquidation account in an amount proportionate to the current adjusted
     qualifying balances for accounts then held.

     Subsequent to the conversion, Perpetual may not declare or pay cash
     dividends on or repurchase any of its shares of common stock if the effect
     thereof would cause equity to be reduced below applicable regulatory
     capital maintenance requirements or if such declaration and payment would
     otherwise violate regulatory requirement.

     Conversion costs will be deferred and reduce the proceeds from the shares
     sold in the conversion.  If the conversion is not completed, all costs will
     be charged as an expense.

     Consolidation
     -------------
     The accompanying consolidated financial statements include the accounts of
     Perpetual and its wholly owned subsidiaries, United Service Corporation
     ("USC"), which has a wholly owned subsidiary, United Investment Service
     Corporation and primarily engages in real estate development and Mortgage
     First Service Corporation, which holds an equity investment in a mortgage
     banking company (collectively the "Bank"). All significant intercompany
     items and transactions have been eliminated in consolidation.

                                      F-7
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(1) Organization and Summary of Significant Accounting Policies, Continued
    ----------------------------------------------------------------------

    Loans Receivable, Net
    ---------------------
    Loans receivable are stated at their unpaid principle balances less the
    allowance for loan losses, and net of deferred loan origination fees and
    discounts.

    The Bank provides for loan losses on the allowance method. Accordingly, all
    loan losses are charged to the related allowance and all recoveries are
    credited to the allowance. Additions to the allowance for loan losses are
    provided by charges to operations based on various factors which, in
    management's judgment, deserve current recognition in estimating possible
    losses. Such factors considered by management include the market value of
    the underlying collateral, growth and composition of the loan portfolios,
    the relationship of the allowance for loan losses to outstanding loans, loss
    experience, delinquency trends and economic conditions. Management evaluates
    the carrying value of loans periodically and the allowance is adjusted
    accordingly. While management uses the best information available to make
    evaluations, future adjustments to the allowance may be necessary if
    economic conditions differ substantially from the assumptions used in making
    evaluations. Allowances for loan losses are subject to periodic evaluation
    by various regulatory authorities and may be subject to adjustment upon
    their examination.

    Statement of Financial Accounting Standards ("SFAS") No. 114, "Accounting by
    Creditors for Impairment of a Loan", ("SFAS No. 114") requires that
    creditors value all specifically reviewed loans for which it is probable
    that the creditors will be unable to collect all amounts due according to
    the terms of the loan agreement at either the present value of expected cash
    flows discounted at the loan's effective interest rate, or if more
    practical, the market price or value of the collateral. If the resulting
    value of the impaired loan is less than the recorded balance, the impairment
    must be recognized by creating a valuation allowance for the difference and
    recognizing a corresponding bad debt expense. SFAS No. 118, "Accounting by
    Creditors for Impairment of a Loan - Income Recognition and Disclosures",
    amends SFAS No. 114 to allow a creditor to use existing methods for
    recognizing interest income on an impaired loan and requires additional
    disclosures about how a creditor recognizes interest income related to
    impaired loans. The Savings Bank adopted the provisions of SFAS No. 114 and
    No. 118 effective October 1, 1995. The adoption of these standards required
    no increase to the reserve for loan losses and had no impact on net income.

    Interest income on loans and lease financing is recorded on the accrual
    basis. Accrual of interest on loans (including loans impaired under SFAS No.
    114) is discontinued when management deems that collection of additional
    interest is doubtful. Interest received on nonaccrual loans and impaired
    loans is generally applied against principal or may be reported as interest
    income depending on management's judgment as to the collectibility of
    principal. When borrowers with loans on a nonaccrual status demonstrate
    their ability to repay their loans in accordance with the contractual terms
    of the notes, the loans are returned to accrual status.

                                      F-8
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(1) Organization and Summary of Significant Accounting Policies, Continued
    ----------------------------------------------------------------------
 
    The Bank provides an allowance for uncollectible interest based on an
    experience method of anticipated collections. This allowance is netted
    against accrued interest receivable for financial statement reporting
    purposes.

    Loan fees and direct incremental costs of originating loans are deferred and
    amortized over the contractual life of the related loan. The amortization of
    the net fees or costs are recognized as a yield adjustment using the
    interest method.

    Loans Held For Sale
    -------------------
    Loans held for sale are accounted for at the lower of aggregate cost or
    market value.

    Investment and Mortgage-Backed Securities
    ------------------------------------------
    The Bank adopted SFAS No. 115, "Accounting for Certain Investments in Debt
    and Equity Securities", on October 1, 1993. SFAS No. 115 addresses the
    accounting and reporting for investments in equity securities that have
    readily determinable fair values and for all investments in debt securities.
    These investments are classified in three categories and are accounting for
    as follows: (a) debt securities that the Bank has the positive intent and
    ability to hold to maturity are classified as held for investment and
    reported at amortized cost; (b) debt and equity securities that are bought
    and held principally for the purpose of selling them in the near term are
    classified as trading securities and reported at fair value, with unrealized
    gains and losses included in earnings; and (c) debt and equity securities
    not classified as either held for investment securities or trading
    securities are classified as available for sale securities and reported at
    fair value, with unrealized gains and losses excluded from earnings and
    reported as a separate component of stockholders' equity. The Bank has no
    securities classified as held for investment or trading. Upon adoption of
    SFAS No. 115, the net unrealized loss on securities available for sale, net
    of taxes, was reported as a separate component of stockholders' equity. SFAS
    No. 115 will cause fluctuations in stockholders' equity based on changes in
    values of debt and equity securities classified as available for sale.

    Securities classified as available for sale will be considered in the Bank's
    asset/liability management strategies and may be sold in response to changes
    in interest rates, liquidity needs and/or significant prepayment risk. The
    cost of investment securities sold is determined by the "identified
    certificate" method.

    Declines in the fair value of individual securities below their cost that
    are deemed by management to be other than temporary result in write-downs of
    the individual securities to their fair value. The write-downs are included
    in earnings as realized losses.

    At September 30, 1997, the Bank had increased stockholders' equity by
    approximately $188,000 for the unrealized gain, net of income taxes, on
    securities available for sale, and, a

                                      F-9
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(1) Organization and Summary of Significant Accounting Policies, Continued
    ----------------------------------------------------------------------
 
    September 30, 1996, the Bank had reduced stockholders' equity by
    approximately $817,000 for the unrealized loss, net of income taxes, on
    securities available for sale.

    Investment In Limited Partnership
    ---------------------------------
    Investment in limited partnership represents an equity investment in a
    limited partnership in which Perpetual owned more than 20 per cent but not
    in excess of 50 per cent of the limited partnership and is accounted for
    under the equity method.

    Real Estate Acquired in Settlement of Loans
    -------------------------------------------
    Real estate acquired in settlement of loans represents real estate acquired
    through foreclosure and is initially recorded at estimated fair value.
    Subsequent to acquisition, real estate acquired in settlement of loans is
    stated at the lower of cost or fair value, less estimated selling costs.
    Costs related to holding these properties are charged to operations. Market
    values of real estate acquired in settlement of loans are reviewed regularly
    and allowances for losses are established when the carrying values of real
    estate acquired in settlement of loans exceeds fair value less costs to
    sell.

    Premises and Equipment
    ----------------------
    Premises and equipment are carried at cost less accumulated depreciation.
    Depreciation is calculated primarily on the straight-line method over the
    estimated useful lives of the respective assets, five to forty years.

    Securities Sold Under Agreements to Repurchase
    ----------------------------------------------
    The Bank enters into sales of securities under agreements to repurchase.
    Fixed-coupon reverse repurchase agreements are treated as financings, with
    the obligation to repurchase securities sold being reflected as a liability
    and the securities underlying the agreements remaining as an asset. The
    securities are delivered by appropriate entry by the Bank's safekeeping
    agent to the counterparties' accounts. The dealers may have sold, loaned or
    otherwise disposed of such securities to other parties in the normal course
    of their operations, and have agreed to resell to the Bank substantially
    identical securities at the maturities of the agreements.

    Income Taxes
    ------------
    The provision for income taxes is based upon income and expense reported for
    financial statement purposes after adjustment for permanent differences such
    as tax-exempt interest income.

    When income and expenses are recognized in different periods for financial
    reporting purposes than for income tax purposes, deferred taxes are provided
    in recognition of these temporary differences. The Bank computes its income
    taxes in accordance with SFAS No. 109

                                      F-10
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(1) Organization and Summary of Significant Accounting Policies, Continued
    ----------------------------------------------------------------------

    "Accounting for Income Taxes" which requires the use of the liability method
    to record income taxes. The liability method calculates the effect of tax
    rates expected to be in place when the related temporary differences
    reverse. Subsequent changes in tax rates will require adjustment to these
    deferred tax assets and liabilities.

    Stock Based Compensation
    ------------------------
    In 1996, the Bank adopted the disclosure provisions of SFAS No. 123
    "Accounting for Stock Based Compensation". The statement permits the Bank to
    continue accounting for stock based compensation as set forth in Accounting
    Principles Board ("APB") Opinion 25, "Accounting for Stock Issued to
    Employees", provided the Bank discloses the pro forma effect on net income
    and earnings per share of adopting the full provisions of SFAS No. 123.
    Accordingly, the Bank continues to account for stock based compensation
    under APB Opinion 25 and has provided the required pro forma disclosures.

    Earnings Per Share
    ------------------
    Earnings per share for the year ended September 30, 1997, 1996, and 1995
    were computed based upon the weighted average shares outstanding.

    Risks and Uncertainties
    -----------------------
    In the normal course of its business, the Bank encounters two significant
    types of risk: economic and regulatory. There are three main components of
    economic risk: interest rate risk, credit risk and market risk. The Bank is
    subject to interest rate risk to the degree that its interest-bearing
    liabilities mature or reprice at different speeds, or on different bases,
    than its interest earning assets. Credit risk is the risk of default on the
    Bank's loan portfolio that results from the borrowers' inability or
    unwillingness to make contractually required payments. Market risk reflects
    changes in the value of collateral underlying loans receivable, the
    valuation of real estate held by the Bank, and the valuation of loans held
    for sale.

    The Bank is subject to the regulations of various government agencies. These
    regulations can and do change significantly from period to period. The Bank
    also undergoes periodic examinations by the regulatory agencies, which may
    subject it to further changes with respect to asset valuations, amounts of
    required loss allowances and operating restrictions resulting from the
    regulators' judgments based on information available to them at the time of
    their examination.

                                      F-11
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(1) Organization and Summary of Significant Accounting Policies, Continued
    ----------------------------------------------------------------------

    In preparing the financial statements, management is required to make
    estimates and assumptions that affect the reported amounts of assets and
    liabilities and disclosures of contingent assets and liabilities as of the
    dates of the balance sheets and revenues and expenses for the periods
    covered. Actual results could differ significantly from those estimates and
    assumptions.

    Reclassification
    ----------------
    Certain reclassifications of accounts reported for previous periods have
    been made in these consolidated financial statements. Such reclassifications
    had no effect on stockholders' equity or the net income as previously
    reported.
 
(2) Cash and Cash Equivalents
    -------------------------

    Cash and cash equivalents consisted of the following at September 30, 1997
    and 1996:
1997        1996
                                                   ----        ----
Working funds                            $ 2,229,557   1,789,074
      Noninterest-earning demand deposits        1,805,522   2,352,194
      Interest-earning overnight deposits        9,464,253   9,443,300
                                               -----------  ----------
 
                                               $13,499,332  13,584,568
                                               ===========  ==========
(3) Investment In Limited Partnership
    ---------------------------------

    At September 30, 1997, the Bank's investment in Limited Partnership
    consisted of a 20.625 percent interest in Dovenmuehle Mortgage Company
    Limited Partnership which invests in mortgage servicing rights. The Bank
    invested in Dovenmuehle in December 1996.

                                      F-12
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(3) Investment In Limited Partnership, Continued
    --------------------------------------------

    The table below contains the summarized financial information of
    Dovenmuehle.
Year Ended
Condensed Income Statement                          September 30, 1997
                                                    ------------------
Service Fees                                            $ 6,626,798
Other Income                                                416,475
                                                        -----------
     Total Income                                         7,043,273
                                                        -----------
 
Servicing Expense                                         1,558,802
PMSR Amortization                                         3,429,082
Other Expense                                             1,153,408
                                                        -----------
     Total Expense                                        6,141,292
                                                        -----------
 
     Net Income                                         $   901,981
                                                        ===========
 
Condensed Balance Sheet                            At September 30, 1997
                                                   ---------------------
 
Cash                                                    $ 2,049,912
Accounts Receivable                                       1,496,187
Purchased Mortgage Servicing Rights                      48,412,490
Organizational Costs                                        472,827
                                                        -----------
     Total Assets                                       $52,431,416
                                                        ===========
 
Accounts Payable                                          4,405,194
Long Term Debt                                           23,760,000
Shareholders' Equity                                     24,266,222
                                                        -----------
     Total Liabilities and Shareholders'
      Equity                                            $52,431,416
                                                        ===========
F-13
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(4)  Investment and Mortgage-Backed Securities Available for Sale
     ------------------------------------------------------------

     The Bank had securities available for sale as follows:
Gross      Gross
                                   Amortized      Unrealized Unrealized     Fair
                                     Cost           Gains      Losses       Value
                                  -----------      -------   ----------   ----------
September 30, 1997
 ------------------
 Investment securities:
  Federal Home Loan Bank
   Indexed Principal
   Reduction Bond                 $ 4,002,933            -        7,773    3,995,160
  FHLB Optional Principal
   Redemption Bond                  6,187,732      144,368            -    6,332,100
  U.S. T-Note                         998,272          168            -      998,440
                                  -----------      -------   ----------   ----------
                                  $11,188,937      144,536        7,773   11,325,700
                                  ===========      =======   ==========   ==========
 
 Mortgage-backed securities:
  FHLMC and FNMA
   fixed rate                      13,117,125      114,313       23,290   13,208,148
  FHLMC five year balloons            131,893            -          315      131,578
  Agency adjustable rate,
   30 year original
   maturity                           438,330            -       14,271      424,059
  Collateralized mortgage
   obligations (CMOs)              22,026,627       73,179          891   22,098,915
                                  -----------      -------   ----------   ----------
 
                                  $35,713,975      187,492       38,767   35,862,700
                                  ===========      =======   ==========   ==========
F-14
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(4)  Investment and Mortgage-Backed Securities Available for Sale (Continued)
     ------------------------------------------------------------------------
September 30, 1996                                                                 
          ------------------
Investment securities:                                                             
           Federal Farm Credit Bond         $1,999,533           -        1,033    1,998,500 
           Certificate of deposit              100,000           -            -      100,000 
           FNMA discount note                  395,002         386            -      395,388 
                                           -----------      ------    ---------   ---------- 
                                            $2,494,535         386        1,033    2,493,888 
                                           ===========      ======    =========   ========== 
                                                                                             
          Mortgage-backed securities:                                                        
           FHLMC and FNMA                                                                    
            fixed rate                      $6,411,100      31,646      197,050    6,245,696 
           FHLMC five year balloons          1,134,918           -        2,386    1,132,532 
           Agency adjustable rate,                                                           
            generally 30 year                                                                
            original maturities                532,971           -        3,928      529,043 
           Collateralized mortgage                                                           
            obligations (CMOs)              36,283,018      12,764    1,078,055   35,217,727 
                                           -----------      ------    ---------   ---------- 
                                                                                             
                                           $44,362,007      44,410    1,281,419   43,124,998 
                                           ===========      ======    =========   ==========
Included in accrued expenses and other liabilities in the accompanying
     consolidated balance sheet at September 30, 1997, was an amount payable for
     the purchase of an investment security totaling $5,177,284 included in
     FHLMC and FNMA Fixed Rate above, which had not settled as of September 30,
     1997.

     The amounts of scheduled maturities of investment and mortgage-backed
     securities at September 30, 1997 were as follows:
Amortized        Fair   
                                           Cost         Value   
                                        ---------       -----
Less than one year            $ 1,393,377    1,393,231
          One year to five years          5,457,451    5,457,979
          Five years to ten years        11,666,060   11,740,436
          Ten and Over                   28,386,024   28,596,754
                                        -----------   ----------
                                                                
                                        $46,902,912   47,188,400
                                        ===========   ==========
F-15
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(4)  Investment and Mortgage-Backed Securities Available for Sale (Continued)
     ------------------------------------------------------------------------

     Proceeds from sales of mutual funds and securities available for sale and
     the related gross realized gains and losses were as follows:
1997           1996          1995
                                                                          ----           ----          ----
Proceeds from sales of mutual funds                         $         -             -  146,403,967
          Proceeds from sales of securities                           $22,872,420     2,922,009    7,625,359
          Gross realized gains                                        $     7,866        56,228    1,843,902
          Gross realized losses                                       $   315,400         2,265       66,431
(5) Loans Receivable, Net
    ---------------------
 
    Loans receivable at September 30, 1997 and 1996 are summarized as follows:
1997          1996
                                                                          ----          ----
First mortgage loans, substantially all
           one to four family                                         $118,663,177    91,329,530
          Construction                                                  17,145,456    19,508,595
          Commercial real estate                                        26,975,976    17,150,980
          Loan participations purchased                                    859,952       979,951
          Home improvement loans                                         3,405,621     5,035,871
          Commercial loans                                               7,181,746     5,528,527
          Consumer loans                                                14,422,484    10,931,490
          Loans secured by deposits                                      1,345,137       948,337
                                                                      ------------   -----------
                                                                       189,999,549   151,413,281
          Less:                          
           Deferred loan fees, net                                         356,780       254,434
           Allowance for loan losses                                     1,886,243     1,534,773
           Undisbursed loans in process                                  8,984,260     8,866,084
                                                                      ------------   -----------
                                         
                Loans receivable, net                                 $178,772,266   140,757,990
                                                                      ============   ===========
Changes in the allowance for loan losses for the years ended September 30,
    1997, 1996, and 1995 are summarized as follows:
1997         1996        1995
                                         ----         ----        ----
Balance, beginning of year  $1,534,773   1,278,423      961,672
          Provision for loan losses      655,000     349,250      362,000
          Charge-offs                   (332,194)   (115,558)     (51,082)
          Recoveries                      28,664      22,658        5,833
                                      ----------   ---------    ---------
                                   
          Balance, end of year        $1,886,243   1,534,773    1,278,423
                                      ==========   =========    =========
F-16
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(5)  Loans Receivable, Net, Continued
     --------------------------------

     Loans serviced for others amounted to approximately $62,148,000,
     $73,303,000, and $73,195,000 at September 30, 1997, 1996 and 1995,
     respectively.

     At September 30, 1997 and 1996, the Bank had approximately $479,000 and
     $368,000, respectively, in loans receivable, which were ninety days or more
     delinquent and accruing interest.

     As of September 30, 1997, the Bank had purchased loans in the state of
     South Carolina as follows:

          1 - 4 family residential      $19,600,000
          Real estate development         1,500,000
          Construction                    4,100,000

     Loans Held for Sale at September 30, 1997 and September 30, 1996 were
     $7,102,000 and $1,101,000, respectively.

     At September 30, 1997 and 1996, the Bank had approximately $403,000 and
     $316,000, respectively, in non-accrual loans. The amount of interest income
     that would have been recognized had these loans performed according to
     their contractual terms amounted to approximately $19,000 and $22,000
     during the years ended September 30, 1997 and 1996, respectively.

     At September 30, 1997 and 1996, the carrying value of loans that are
     considered to be impaired under SFAS No. 114 totaled approximately $517,000
     and $795,000, respectively. No impairment allowance has been recorded on
     these impaired loans. The average balance of impaired loans and interest
     income recognized on impaired loans for fiscal 1997 and 1996 were $512,000
     and $68,414, and $687,400 and $28,176, respectively.

     Activity in loans to officers, directors and other related parties for the
     years ended September 30, 1997 and 1996 is summarized as follows:
1997        1996   
                                               ----        ----
Balance at beginning of year      $ 975,762     554,464 
          New loans                           143,923     593,508 
          Repayments                         (194,182)   (172,210)
                                            ---------    -------- 
                                                                  
          Balance at end of year            $ 925,503     975,762 
                                            =========    ========
F-17
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(5)  Loans Receivable, Net, Continued
     --------------------------------

     The Bank primarily grants residential loans to customers in Anderson
     County, South Carolina, and the surrounding communities. The Bank's ability
     to collect these balances depends substantially upon the economic
     conditions and real estate market in the region. The Bank does not have any
     concentrations of loans to any one borrower. The Bank has increased its
     commercial and consumer loan portfolios which may entail greater risk than
     residential mortgage loans.
 
(6)  Real Estate
     -----------

     Real estate is summarized at September 30, 1997 and 1996 as follows:
1997            1996
                                                             ----            ----
Real estate held for development               $ 2,284,038      1,406,144
          Real estate acquired in settlement of loans        162,776          2,750
                                                         -----------     ----------
 
                                                         $ 2,446,814      1,408,894
                                                         ===========     ==========
(7)  Premises and Equipment
     ----------------------
     Premises and equipment are summarized at September 30, 1997 and 1996 as
     follows:
1997            1996
                                                             ----            ----
Land                                           $   871,242        707,876
          Office and other buildings                       3,643,431      3,289,002
          Furniture, fixtures and equipment                4,543,952      4,003,594
                                                         -----------     ----------
                                                           9,058,625      8,000,472
          Less accumulated depreciation                   (2,764,160)    (3,148,106)
                                                         -----------     ----------
 
                                                         $ 6,294,465      4,852,366
                                                         ===========     ==========
Depreciation expense was $647,848, $472,343, and $430,029 for the years
     ended September 30, 1997, 1996 and 1995, respectively.

                                      F-18
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(8)  Deposits
     --------
     Deposits outstanding by type of account and range of interest rates at
     September 30, 1997 and 1996 are summarized as follows:
1997                              1996       
                                                          ----------------------------     ----------------------------
                                                                           Range of                         Range of
                                                                           Interest                         Interest
                                                             Balance         Rates          Balance          Rates
                                                             -------         -----          -------          -----
Non-interest bearing checking accounts          $ 11,811,694              -     $  8,956,602               -
          Interest-bearing checking accounts                25,995,824   1.75% - 4.76%      24,292,692    1.75% - 3.63%
          Passbook accounts                                 24,359,999   1.75% - 3.00%      23,111,051    1.75% - 3.00%
                                                          ------------                    ------------
                                                            62,167,517                      56,360,345
                                                          ------------                    ------------
                                               
          Certificate accounts                             138,834,341   2.50% - 8.00%     103,883,278    3.35% - 5.55%
                                                          ------------                    ------------
                                               
                                                          $201,001,858                    $160,243,623
                                                          ============                    ============
                                               
           Weighted average interest rate                                    4.64%                            4.25%
                                                                             =====                            =====
The amounts of scheduled maturities of certificate accounts at September
     30, 1997 and 1996 were as follows:
1997            1996
                                                              ----            ----
Maturing within one year                        $115,651,298     83,770,480
          Maturing one through three years                  22,328,414     19,334,013
          Maturing after three years                           854,629        778,785
                                                          ------------    -----------
 
                                                          $138,834,341    103,883,278
                                                          ============    ===========
At September 30, 1997 and 1996, the aggregate amounts of time deposits of
     $100,000 or more amounted to approximately $18,540,473 and $13,650,728,
     respectively. Accrued interest payable on deposits was $1,362,480 and
     $747,059 at September 30, 1997 and 1996, respectively, and included in
     accrued expenses and other liabilities in the consolidated balance sheets.

                                      F-19
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(9)  Advances from the FHLB
     ----------------------

     Advances from the FHLB at September 30, 1997 and 1996 are summarized as
     follows:
Maturity          September 30, 1997                September 30, 1996
       Date        Interest Rate        Balance      Interest Rate        Balance
       ----        -------------        -------      -------------        -------
1997              - %          $         -         5.55%         $ 2,000,000
      1998           6.47             10,000,000         6.38            5,000,000
      1999           5.78              5,000,000         4.64            9,000,000
                                     -----------                       -----------
 
                                     $15,000,000                       $16,000,000
                                     ===========                       ===========
During fiscal 1996, the line of credit expired and was replaced by a
     blanket floating lien on qualifying mortgage loan collateral for advances.
     At September 30, 1997, the Bank had $15,000,000 in outstanding FHLB
     advances and, based upon eligible collateral, available credit of
     $40,000,000.

     At September 30, 1997 and 1996, as collateral for its advances, the Bank
     has pledged securities with a carrying value of approximately $3,761,000
     and $18,804,000, respectively. All of the pledged securities are held in
     safekeeping at the FHLB of Atlanta.

(10) Securities Sold Under Agreements to Repurchase
     ----------------------------------------------

     The Bank had no outstanding securities sold under agreements to repurchase
     at September 30, 1997, 1996 and 1995, and the Bank did not enter into
     agreements during fiscal 1997 and 1996. The maximum amount outstanding at
     any month end during fiscal 1995 was $5,907,000. The average amount of
     outstanding agreements for fiscal 1995 was approximately $1,338,000. The
     securities underlying the agreements were under the institution's control.
 

(11) Income Taxes
     ------------

     Income taxes for the years ended September 30, 1997, 1996, and 1995 are
     summarized as follows:
1997        1996          1995
                              ----        ----          ----
Current federal       $544,803    1,008,811      292,313
      Deferred federal       381,000     (253,000)     (98,571)
                            --------    ---------      -------
 
              Total         $925,803      755,811      193,742
                            ========    =========      =======
F-20
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(11) Income Taxes, Continued
     -----------------------

     Income tax expense differs from the amount computed at the federal
     statutory rates of 34% for the years ended September 30, 1997, 1996 and
     1995, as a result of the following:
1997        1996       1995
                                               ---------   --------   ---------
Income taxes at federal rate             $902,416    741,267     717,665
      Differences resulting from:
         State taxes, net of
           federal benefit                       81,000     71,000      67,200
         Change in amount of unrecognized
           tax benefits relating to
           future deductions                          -          -     167,630
         Decrease in beginning of year
           valuation allowance                  (81,000)   (71,000)   (807,000)
         Other                                   23,387     14,544      48,247
                                               --------    -------    --------
                                               $925,803    755,811     193,742
                                               ========    =======    ========
At September 30, 1997, the Bank has state net operating loss carryforwards
     of approximately $62 million. These carryforwards expire in various amounts
     beginning in fiscal year 1998 through 2006.

     The tax effects of temporary differences that give rise to significant
     portions of the deferred tax assets and deferred tax liabilities at
     September 30, 1997 and 1996 are presented below:
1997          1996
                                                                        ----          ----
Deferred tax assets:
         Loan loss allowances deferred for tax purposes             $   716,000       583,000
         Deferred fees recognized for tax purposes as received                -        70,000
         Expenses deducted under the economic
           performance rules                                                  -       359,000
         Unrealized losses on securities available for sale                   -       421,000
         State loss carryforwards                                     2,465,000     2,502,000
         Other                                                           89,000       100,000
                                                                    -----------    ----------
              Total gross deferred tax assets                         3,270,000     4,035,000
 
         Less valuation allowances, primarily for tax
           loss carryforwards                                        (2,480,000)   (2,561,000)
                                                                    -----------    ----------
 
              Net deferred tax assets                                   790,000     1,474,000
                                                                    -----------    ----------
F-21
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(11) Income Taxes, Continued
     -----------------------
1997      1996
                                                                                        ----      ----
Deferred tax liabilities:
         Depreciation for tax purposes in excess of such
           amount for financial reporting purposes                                  $172,000    99,000
         Tax bad debt reserve in excess of base year                                 307,000   310,000
         Unrealized gain on securities available for sale                             97,000         -
         Loan fee income adjustments for tax purposes                                 36,000         -
         Other                                                                       148,000   136,000
                                                                                    --------   -------
              Total gross deferred tax liabilities                                   760,000   545,000
                                                                                    --------   -------
 
              Net deferred tax asset (included in other assets)                     $ 30,000   929,000
                                                                                    ========   =======
A portion of the change in the deferred tax asset relates to unrealized
     losses on securities available for sale. In fiscal 1997, the related
     deferred tax expense of $518,000 has been recorded directly to
     stockholders' equity. The balance of the change in the net deferred tax
     asset results from the current period deferred tax expense of $381,000. In
     fiscal 1996, the deferred taxes related to the unrealized losses on
     securities available for sale of $107,000 has been recorded directly to
     stockholders' equity with the balance of the change in the net deferred tax
     asset resulting from the current period deferred tax benefit of $253,000.

     The realization of net deferred tax assets may be based on utilization of
     carrybacks to prior taxable periods, anticipation of future taxable income
     in certain periods, and the utilization of tax planning strategies.
     Management has determined that it is more likely than not that the net
     deferred tax assets can be supported based upon these criteria except for
     the state loss carryforwards. A valuation allowance for the deferred tax
     asset has been reflected to reduce the potential deferred tax assets,
     primarily for state loss carryforwards, to an amount that more likely than
     not can be realized at September 30, 1997 and 1996.

     Prior to enactment of recent tax legislation (the Small Business Job
     Protection Act of 1996 "SBJPA '96") effective with the year ending
     September 30, 1997, savings and loan associations which met certain
     definitional tests and operating requirements prescribed by the Internal
     Revenue Code were allowed a special bad debt deduction and other special
     tax provisions. If a savings and loan association did not continue to meet
     the federal income tax requirements necessary to meet these definitions,
     the savings and loan may have lost the benefits of these special
     provisions. Taxable income of subsidiaries was generally computed without
     the benefit of these special provisions.

     The special bad debt deduction was based on either specified experience
     formulas (the "Experience Method") or a specified percentage of taxable
     income before such deduction (the "Percentage of Taxable Income Method").
     For the two years ended September 30, 1996 and 1995, the percentage of
     taxable income bad debt deduction was eight percent of adjusted taxable
     income. The deduction was subject to certain limitations based on the
     aggregate loans, saving account balances and retained earnings at year end.
     Gains and losses on sales of repossessed property and provisions for losses
     on loans and foreclosed real estate were generally

                                      F-22
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(11) Income Taxes, Continued
     -----------------------

     adjustments to the tax bad debt reserve and not includable in the
     computation of taxable income before this deduction.

     As a result of SBJPA '96, the Bank will be required to change its overall
     method of accounting for tax bad debts to the Experience Method beginning
     with the fiscal year ending September 30, 1997. The Bank will be required
     to recapture approximately $808,000 over an eight-year period in connection
     with the change.

     Retained earnings at September 30, 1997 and 1996 includes tax bad debt
     reserves of approximately $5.2 million for which no provision for federal
     income tax has been made. If, in the future, these amounts are used for any
     purpose other than to absorb bad debt losses, they may be subject to
     federal income tax at the then prevailing corporate tax rate.

(12) Capital
     -------

     The Bank's actual capital and ratios, those required by the Bank's primary
     regulator, the Office of Thrift Supervision (OTS), as well as those
     required in order to be considered well capitalized according to the Prompt
     Corrective Action Provisions are presented in the following table. As of
     September 30, 1997, the most recent notification from the OTS categorized
     the Bank as well capitalized under the regulatory framework for prompt
     corrective action. To be categorized as well capitalized, the Bank must
     maintain minimum total risk-based, Tier I risked-based, and Tier I core
     ("leverage") ratios as set forth in the table. There are no conditions or
     events since that notification that management believes have changed the
     institution's category.
To Be Well
                                                                                                       Capitalized Under
                                                                              For Capital Adequacy     Prompt Corrective
                                                                 Actual             Purposes           Action Provisions
                                                                 ------             --------           ----------------- 
 
                                                         Amount     Ratio      Amount         Ratio     Amount     Ratio
                                                         ------     -----      ------         -----     ------     ----- 
                                                                             (Dollars in Thousands)
As of September 30, 1997:
-------------------------
Tangible Capital (To Total Assets)                        $27,321    10.6%        3,825         1.5%          -        -
Core Capital (To Total Assets)                             27,321    10.6         7,651         3.0     $12,811     5.00%
Tier I Capital (To Risk-Based Assets)                      27,321    17.3             -           -       9,503     6.00
Risk-Based Capital (To Risk-Based
     Assets)                                               29,067    18.4        12,670        8.00      15,838    10.00
 
As of September 30, 1996:
-------------------------
Tangible Capital (To Total Assets)                         27,786    13.2         3,166         1.5           -        -
Core Capital (To Total Assets)                             27,786    13.2         6,332         3.0      10,495     5.00
Tier I Capital (To Risk-Based Assets)                      27,786    23.3             -           -       7,155     6.00
Risk-Based Capital (To Risk-Based
     Assets)                                               29,196    24.5         9,548         8.0      11,925    10.00
F-23
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(13) Employee Benefit Plans
     ----------------------

     The Bank has a profit sharing and deferred compensation plan for
     substantially all full-time employees. The plan permits eligible
     participants to contribute a percentage of their salary up to amounts
     permitted by the Internal Revenue Code each year. At the discretion of the
     Board of Directors, the Bank may match a percentage of each participant's
     contribution during the plan year. In addition the Board of Directors may
     from year to year make a discretionary contribution to the plan. The Bank's
     contribution recorded as expense for the years ended September 30, 1997,
     1996 and 1995, was $219,123, $160,525 and $141,879, respectively.

(14) Stock Option Plan
     -----------------

     In October 1993, the Bank's Board of Directors adopted a stock option and
     incentive plan. Pursuant to the plan, an aggregate of 11,504 shares of
     common stock were reserved for issuance by the Bank upon exercise of stock
     options and awards to be granted to directors, officers, and other key
     employees from time to time under the plan. The Bank's management was
     granted incentive stock options, and the Bank's non-officer directors were
     granted non-incentive stock options. These options expire on October 2003.
 
     In April 1997, the stockholders approved a second stock option plan and
     incentive plan. Pursuant to the plan, 58,500 shares of common stock have
     been reserved for issuance by the Bank upon exercise of stock options and
     awards to be granted to directors, officers, and other key employees from
     time to time under the plan. The Bank's management was granted incentive
     stock options, and the Bank's non-officer directors were granted non-
     qualified stock options. These options are priced at $25.25 and expire in
     April 2007.

     The following table summarizes option activity during the years ended
     September 30, 1997, 1996 and 1995:
Number of   Price Per
                                             Shares      Share
                                             ------      -----
Outstanding at September 30, 1994       9,530     $10.00
      Granted                                     -          -
      Exercised                                 658      10.00
                                             ------     ------
      Outstanding at September 30, 1995       8,872      10.00
      Granted                                     -          -
      Exercised                                   -          -
                                             ------     ------
      Outstanding at September 30, 1996       8,872      10.00
      Granted                                58,500      25.25
      Exercised                               4,272      10.00
                                             ------     ------
      Outstanding at September 30, 1997      63,100     $24.14
                                             ======     ======
F-24
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(14) Stock Option Plan, Continued
     ----------------------------

     The Bank applies APB Opinion 25 in accounting for the stock-based option
     plans which are described in the preceding paragraph. Accordingly, no
     compensation expense has been recognized for the stock-based option plans.
     Had compensation cost been recognized for the stock-based option plans
     applying the fair-value-based method as prescribed by SFAS 123, the Bank's
     net income and earnings per share would have been reduced to the proforma
     amounts indicated below:
1997        1996
                                     ----        ----    
          Net Income
          ----------
As Reported        $1,728,303   1,424,387
               Proforma            1,702,803   1,424,387
 
          Earnings Per Share
          ------------------    
 
               As Reported        $     1.15         .95
               Proforma                 1.13         .95
The effects of applying SFAS 123 may not be representative of the effects
     on reported net income in future years.

     The fair value of each option granted is estimated on the date of grant
     using the Black-Scholes option-pricing model with the following weighted-
     average assumptions used for grants in 1997:
 
                         Dividend yield            3.25%
                         Expected volatility         38%
                         Risk-free interest rate   6.59%
                         Expected lives            7.5 years

     There were no options granted in 1996.

(15) Management Recognition Plan
     ---------------------------

     The Board of Directors initially adopted a Management Recognition Plan
     ("MRP") during fiscal 1994. Those eligible to receive benefits under the
     MRP included certain officers of the Bank as determined by a committee
     appointed by the Board of Directors of the Bank. During the year ended
     September 30, 1994, 3,450 shares of common stock were granted to management
     under the MRP, vesting over a three year period. Vested shares at September
     30, 1997 and 1996 was 3,450 for both years. All shares are vested at
     September 30, 1997 and 1996. Compensation

                                      F-25
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

 
(15) Management Recognition Plan, Continued
     --------------------------------------

     related to vesting of the shares was $0, $11,520, and $11,490 for fiscal
     1997, 1996 and 1995, respectively.

     In April 1997, the stockholders approved a second Management Recognition
     Plan ("1996 MRP") with 23,400 shares of common stock being granted to
     management under the 1996 MRP, vesting over a five-year period. During the
     fiscal year 1997, 11,985 shares were purchased by the Company with 11,415
     shares remaining to be purchased. Compensation expense related to vesting
     of shares was $78,881 for fiscal 1997.

(16) Employee Stock Ownership Plan
     -----------------------------

     The Bank has an Employee Stock Ownership Plan (ESOP) established by the
     Board of Directors during fiscal 1994. The ESOP borrowed $80,500 from a
     federal savings bank and acquired 8,050 shares of the Bank's common stock
     in October 1993. All shares acquired in 1993 have been allocated to
     participants. With the stock offering in September 1996, the ESOP borrowed
     $900,900 from a federal savings bank and acquired 46,800 shares of the
     Bank's common stock. The Bank has presented the outstanding loan amounts as
     an other liability and as a reduction of stockholders' equity in the
     accompanying consolidated balance sheets at September 30, 1997 and 1996.
     Interest on the unpaid principal balance is due quarterly and is based on
     the prime rate. During fiscal 1997 and 1996, the Bank paid interest of
     $72,552 and $3,535, respectively. Compensation recorded under the ESOP was
     $129,028, $10,245 and $74,490 for the fiscal years 1997, 1996 and 1995,
     respectively.

(17) Commitments
     -----------
 
     In conjunction with its lending activities, the Bank enters into various
     commitments to extend credit and issue letters of credit. Loan commitments
     (unfunded loans and unused lines of credit) and letters of credit are
     issued to accommodate the financing needs of the Bank's customers. Loan
     commitments are agreements by the Bank to lend monies at a future date, so
     long as there are no violations of any conditions established in the
     agreement. Letters of credit commit the Bank to make payments on behalf of
     customers when certain specified events occur.

     Financial instruments where the contract amount represents the Bank's
     credit risk at September 30, 1997 and 1996, include loan and letter of
     credit commitments of $27,941,000 and $10,014,175, respectively.

                                      F-26
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(17) Commitments, Continued
     ----------------------

     These loan and letter of credit commitments are subject to the same credit
     policies and reviews as loans on the balance sheet. Collateral, both the
     amount and nature, is obtained based upon management's assessment of the
     credit risk. Since many of the extensions of credit are expected to expire
     without being drawn, the total commitment amounts do not necessarily
     represent future cash requirements.

     Outstanding commitments on mortgage loans not yet closed amounted to
     approximately $174,000 and $119,000 at September 30, 1997 and 1996,
     respectively. Substantially, all of these commitments were at variable
     interest rates. Such commitments, which are funded subject to certain
     limitations, extend over varying periods of time with the majority being
     funded within thirty days.

     These commitments will be funded with the cash flow generated from normal
     operations, as well as possible utilization of existing credit facilities
     available to the Bank.

(18) Carrying Amounts and Fair Value of Financial Instruments
     --------------------------------------------------------
 
     The Bank's fair value methods, assumptions, carrying amounts and fair value
     of financial instruments at September 30, 1997 and 1996 are summarized
     below:

     For cash and cash equivalents and FHLB stock, the carrying value is a
     reasonable estimate of fair value.
 
     For investment securities available for sale, mortgage-backed securities
     and collateralized mortgage obligations, fair value is based on available
     quoted market prices or quoted market prices for similar securities if a
     quoted market price is not available.

     The fair value of fixed and adjustable rate loans is estimated based upon
     discounted future cash flows using discount rates comparable to rates
     currently offered for such loans. The discounted future cash flows reflect
     estimated maturity dates adjusted for expected prepayments.

     The fair value of time deposits is estimated by discounting the amounts
     payable at the certificate rates currently offered for deposits of similar
     remaining maturities. The fair value of all other deposit account types is
     the amount payable on demand at year-end.

     For FHLB advances, fair value is estimated based on discounting amounts
     payable at the current rates offered to the Bank for debt of the same
     remaining maturities.

                                      F-27
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(18) Carrying Amounts and Fair Value of Financial Instruments, Continued
     -------------------------------------------------------------------
1997                        1996
                                      ------------                 -----------
                                        Carrying     Calculated     Carrying     Calculated
                                         Amount      Fair Value      Amount      Fair Value
                                      ------------   -----------   -----------   -----------
Financial assets:
 Cash and cash equivalents            $ 13,499,332    13,499,332    13,584,568    13,584,568
 Investment in Limited Partnership       5,003,835     5,003,835             -             -
 Investment securities available
  for sale                              11,325,700    11,325,700     2,493,888     2,493,888
 Federal Home Loan Bank stock            1,650,000     1,650,000       993,700       993,700
 Mortgage-backed securities and
  collateralized mortgage
  obligations, net                      35,862,700    35,862,700    43,124,998    43,124,998
 Loans receivable, net                 178,772,266   179,094,089   140,757,990   143,404,634
                                      ------------   -----------   -----------   -----------
 
                                      $246,113,833   246,435,656   200,955,144   203,601,788
                                      ============   ===========   ===========   ===========
Financial liabilities:
 Deposits
  Demand deposits                     $ 62,167,517    62,301,280    55,752,124    55,752,124
  Certificate accounts                 138,834,341   139,272,816   103,883,278   103,732,129
 Advances from the FHLB                 15,000,000    15,069,702    16,000,000    15,954,810
                                      ------------   -----------   -----------   -----------
 
                                      $216,001,858   216,643,798   175,635,402   175,439,063
                                      ============   ===========   ===========   ===========
The Bank had $27.9 million of off-balance sheet financial commitments,
     which are commitments to originate loans and unused consumer lines of
     credit. Since these obligations are based on current market rates, the
     carrying amount is considered to be a reasonable estimate of fair value.
 
     Fair value estimates are made at a specific point in time, based on
     relevant market information and information about the financial instrument.
     These estimates do not reflect any premium or discount that could result
     from offering for sale the Bank's entire holdings of a particular financial
     instrument. Because no active market exists for a significant portion of
     the Bank's financial instruments, fair value estimates are based on
     judgments regarding future expected loss experience, current economic
     conditions, current interest rates and prepayment trends, risk
     characteristics of various financial instruments, and other factors. These
     estimates are subjective in nature and involve uncertainties and matters of
     significant judgment and therefore cannot be determined with precision.
     Changes in any of these assumptions used in calculating fair value would
     also significantly affect the estimates. Further, the fair value estimates
     were calculated as of September 30, 1997 and 1996. Changes in market
     interest rates and prepayment assumptions could significantly change the
     fair value. Therefore, management believes that the foregoing information
     is of limited value and has no basis for determining whether the fair value
     presented would be indicative of the value which could be negotiated during
     an actual sale.

                                      F-28
PERPETUAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

(18) Carrying Amounts and Fair Value of Financial Instruments, Continued
     -------------------------------------------------------------------

     Fair value estimates are based on existing on and off-balance sheet
     financial instruments without attempting to estimate the value of
     anticipated future business and the value of assets and liabilities that
     are not considered financial instruments. For example, the Bank has
     significant assets and liabilities that are not considered financial assets
     or liabilities including deposit franchise value, loan servicing portfolio,
     real estate, deferred tax liabilities, premises and equipment, and
     goodwill. In addition, the tax ramifications related to the realization of
     the unrealized gains and losses can have a significant effect on fair value
     estimates and have not been considered in any of these estimates.

(19) Dividends
     ---------

     During fiscal 1997, the Board of Directors declared cash dividends of $.30
     per share for the first quarter and $.35 per share for the second, third,
     and fourth quarters. For all 1997 dividends, the Bank obtained permission
     from the OTS to waive dividends payable to the MHC.

     During fiscal 1996, the Board of Directors declared cash dividends of $.30
     per share for all four quarters. For fiscal 1996 dividends, the Bank
     obtained permission from the OTS to waive dividends payable to the MHC.

     During fiscal 1995, the Board of Directors declared cash dividends of $.25
     per share for the first three quarters and $.30 per share for the fourth
     quarter. The dividends payable to the MHC were waived by the OTS.

                                      F-29
No dealer, salesman or any other person has been authorized to give any
information or to make any representation other than as contained in this
Prospectus in connection with the offering made hereby, and, if given or made,
such other information or representation must not be relied upon as having been
authorized by the Primary Parties or Sandler O'Neill.  This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby to any person or in any jurisdiction in which such
offer or solicitation is not authorized or in which the person making such offer
or solicitation is not qualified to do so, or to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction.  Neither the
delivery of this Prospectus nor any sale hereunder shall under any circumstances
create any implication that there has been no change in the affairs of the
Primary Parties since any of the dates as of which information is furnished
herein or since the date hereof.

               Table of Contents                                       Page
               -----------------                                       ----

Prospectus Summary...........................................   
Selected Consolidated Financial Information..................
Risk Factors.................................................   
Use of Proceeds..............................................   
Dividend Policy..............................................
Market for Common Stock......................................
Capitalization...............................................   
Historical and Pro Forma Regulatory Capital Compliance.......
Pro Forma Data...............................................   
Conversion Shares to be Purchased by Management..............
Pursuant to Subscription Rights..............................
Perpetual Bank, A Federal Savings Bank and Subsidiary........
Consolidated Statements of Operations........................
Management's Discussion and Analysis of Financial............
Condition and Results of Operations..........................
Business of the Holding Company..............................
Business of the Savings Bank.................................
Management of the Holding Company............................
Management of the Savings Bank...............................
Regulation...................................................
Taxation.....................................................   
The Conversion and Reorganization............................
Comparison of Stockholders' Rights...........................
Restrictions on Acquisition of the Holding Company...........
Description of Capital Stock of the Holding Company..........
Registration Requirements....................................
Legal and Tax Opinions.......................................
Experts......................................................
Additional Information.......................................
Index to Consolidated Financial Statements...................

UNTIL THE LATER OF ____________, 1998, OR 25 DAYS AFTER COMMENCEMENT OF THE
SYNDICATED COMMUNITY OFFERING OF COMMON STOCK, IF ANY, ALL DEALERS EFFECTING
TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.  THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

                             SOUTHBANC SHARES, INC.

                                     [Logo]

                         (Proposed Holding Company for
                    Perpetual Bank, A Federal Savings Bank)

                           Up to 3,741,533 Shares of
                                  Common Stock

                             ----------------------

                                   Prospectus

                        SANDLER O'NEILL & PARTNERS, L.P.

                             _______________, 1998
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24. Indemnification of Officers and Directors

    Article XVI of the Certificate of Incorporation of SouthBanc Shares, Inc.
requires indemnification of directors, officers and employees to the fullest
extent permitted by Delaware law.

    Section 145 of the Delaware General Corporation Law sets forth circumstances
under which directors, officers, employees and agents may be insured or
indemnified against liability which they may incur in their capacities:

    145 INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS;
INSURANCE.--(a) A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.  The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.

    (b)  A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.

    (c)  To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.

    (d)  Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section.  Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.

                                     II-1
(e)  Expenses (including attorneys' fees) incurred by an officer or director
in defending any civil, criminal, administrative or investigative action, suit
or proceeding may be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the corporation as
authorized in this section.  Such expenses (including attorneys' fees) incurred
by other employees and agents may be so paid upon such terms and conditions, if
any, as the board of directors deems appropriate.

    (f)  The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.

    (g)  A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
incurred by him any such capacity, or arising out of his status as such, whether
or not the corporation would have the power to indemnify him against such
liability under this section.

    (h)  For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agents, so that any
person who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.

    (i)  For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.

    (j)  The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.

                                     II-2
Item 25.  Other Expenses of Issuance and Distribution(1)
Legal fees and expenses.....................  $  180,000
  Securities Marketing Firm legal fees........      75,000
  EDGAR, printing, copying, postage, mailing..     150,000
  Appraisal/business plan fees and expenses...      40,000
  Accounting fees.............................      40,000
  Securities marketing fees (1)...............     506,250
  Data processing fees and expenses...........      18,000
  SEC filing fee..............................      21,500
  OTS filing fee..............................       8,400
  Blue sky legal fees and expenses............       7,500
  Other.......................................      23,350
                                                ----------
      Total...................................  $1,070,000
                                                ==========
___________________
     (1) Assumes a total offering of Conversion Shares of $34.5 million
(midpoint of the Estimated Valuation Range), a fee of 1.50% of the aggregate
Purchase Price of the shares of Common Stock sold in the Subscription and Direct
Community Offering and the Syndicated Community Offering, excluding shares
purchased by officers and directors of the Savings Bank and their associates.
See "THE CONVERSION AND REORGANIZATION -- Plan of Distribution and Selling
Commissions."

Item 26.  Recent Sales of Unregistered Securities.

          Not Applicable

Item 27.  Exhibits

          The exhibits filed as part of this Registration Statement are as
 follows:
 
(a)  List of Exhibits

1.1  --   Form of proposed Agency Agreement among SouthBanc Shares, Inc.,
          Perpetual Bank, a Federal Savings Bank, SouthBanc Shares, M.H.C. and
          Sandler O'Neill & Partners, L.P. (a)

1.2  --   Engagement Letter with Perpetual Bank, A Federal Savings Bank and
          Sandler O'Neill & Partners, L.P.

2    --   Plan of Conversion and Agreement and Plan of Reorganization of
          SouthBanc Shares, M.H.C. and Perpetual Bank, A Federal Savings Bank
          (attached as an exhibit to the Special Meeting Proxy Statement and the
          Annual Meeting Proxy Statement included herein as Exhibits 99.5 and
          99.6, respectively)
 
3.1  --   Certificate of Incorporation of SouthBanc Shares, Inc.
 
3.2  --   Bylaws of SouthBanc Shares, Inc.
 
4    --   Form of Certificate for Common Stock
 
5    --   Opinion of Breyer & Aguggia regarding legality of securities
          registered

8.1  --   Form of Federal Tax Opinion of Breyer & Aguggia
 
 
                                     II-3
8.2    --   State Tax Opinion of Evans, Carter, Kunes & Bennett, P.A. (a)
 
8.3    --   Opinion of RP Financial, LC. as to the value of subscription rights
 
10.1   --   Proposed Form of Employment Agreement for Executive Officers
 
10.2   --   Perpetual Bank, A Federal Savings Bank 401(k) Plan (a)
 
21     --   Subsidiaries of SouthBanc Shares, Inc.
 
23.1   --   Consent of KPMG Peat Marwick LLP
 
23.2   --   Consent of Breyer & Aguggia as to its Federal Tax Opinion (contained
            in opinion included as Exhibit 8.1)
 
23.3   --   Consent of Evans, Carter, Kunes & Bennett, P.A. as to its State 
            Tax Opinion (contained in opinion included as Exhibit 8.2) (a)

23.4   --   Consent of RP Financial, LC.
 
24     --   Power of Attorney (included in signature page)
 
99.1   --   Order and Acknowledgement Form (contained in the marketing materials
            included herein as Exhibit 99.2)
 
99.2   --   Solicitation and Marketing Materials
 
99.3   --   Appraisal Agreement with RP Financial, LC.
 
99.4   --   Appraisal Report of RP Financial, LC. (a)
 
99.5   --   Proxy Statement for Special Meeting of Members of SouthBanc Shares,
            M.H.C.

99.6   --   Proxy Statement for Annual Meeting of Stockholders of Perpetual
            Bank, A Federal Savings Bank

_____________________
(a)  To be filed by amendment.

Item 28.  Undertakings

     The undersigned Registrant hereby undertakes:

     (1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:

         (i)   Include any prospectus required by section 10(a)(3) of the
Securities Act of 1933, as amended ("Securities Act");

         (ii)  Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected 

                                     II-4
in the form of prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement.

         (iii) Include any additional or changed material information on the
plan of distribution.

     (2) For determining liability under the Securities Act, treat each post-
effective amendment as a new registration statement of the securities offered,
and the offering of the securities at that time shall be the initial bona fide
offering.

     (3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.

     (4) The undersigned registrant hereby undertakes to provide the underwriter
at the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.

     (5) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act, and is therefore, unenforceable.  In the event that a
claim for indemnification against liabilities (other than the payment by the
small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.

                                     II-5
SIGNATURES

     In accordance with the requirements of the Securities Act of 1933, as
amended, the registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-1 and authorized this
Registration Statement to be signed on its behalf by the undersigned, in the
City of Anderson, State of South Carolina, on this 17th day of December 1997.

                              SOUTHBANC SHARES, INC.

                              By: /s/ Robert W. Orr
                                  ---------------------------------------------
                                  Robert W. Orr
                                  President and Chief Executive Officer

                               POWER OF ATTORNEY

          We, the undersigned directors and officers of SouthBanc Shares, Inc.,
do hereby severally constitute and appoint Robert W. Orr, our true and lawful
attorney and agent, to do any and all things and acts in our names in the
capacities indicated below and to execute all instruments for us and in our
names in the capacities indicated below which said Robert W. Orr may deem
necessary or advisable to enable SouthBanc Shares, Inc. to comply with the
Securities Act of 1933, as amended, and any rules, regulations and requirements
of the Securities and Exchange Commission, in connection with the Registration
Statement on Form S-1 relating to the offering of SouthBanc Shares, Inc.'s
Common Stock, including specifically but not limited to, power and authority to
sign for us or any of us in our names in the capacities indicated below the
Registration Statement and any and all amendments (including post-effective
amendments) thereto; and we hereby ratify and confirm all that Robert W. Orr
shall do or cause to be done by virtue hereof.

          Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signatures                                    Title                             Date
----------                                    -----                             ----
/s/ Robert W. Orr                             President, Chief                  December 17, 1997
-----------------------------------------
Executive                                     Officer and Director                          
Robert W. Orr                                 (Principal Executive Officer) 
                             

/s/ Thomas C. Hall                            Treasurer and Chief Financial     December 17, 1997 
-----------------------------------------
Thomas C. Hall                                Officer (Principal Financial 
                                              and Accounting Officer) 
                             

 
/s/ Cordes G. Seabrook, Jr.                   Chairman of the Board             December 17, 1997 
-----------------------------------------
Cordes G. Seabrook, Jr.

/s/ Harold A. Pickens, Jr.                    Director                          December 17, 1997     
-----------------------------------------
Harold A. Pickens, Jr.
/s/ Martha S. Clamp                           Director                          December 17, 1997 
-----------------------------------------
Martha S. Clamp

/s/ Jack F. McIntosh                          Director                          December 17, 1997 
-----------------------------------------
Jack F. McIntosh

/s/ Charles W. Fant, Jr.                      Director                          December 17, 1997 
-----------------------------------------
Charles W. Fant, Jr.

/s/ Jim Gray Watson                           Director                          December 17, 1997 
-----------------------------------------
Jim Gray Watson

/s/ Richard C. Ballenger                      Director                          December 17, 1997 
-----------------------------------------
Richard C. Ballenger

/s/ F. Stevon Kay                             Director                          December 17, 1997 
-----------------------------------------
F. Stevon Kay
INDEX TO EXHIBITS

1.1   --  Form of proposed Agency Agreement among SouthBanc Shares, Inc.,
          Perpetual Bank, A Federal Savings Bank, SouthBanc Shares, M.H.C. and
          Sandler O'Neill & Partners, L.P. (a)

1.2   --  Engagement Letter between Perpetual Bank, A Federal Savings Bank and
          Sandler O'Neill & Partners, L.P.

2     --  Plan of Conversion and Agreement and Plan of Reorganization of
          Perpetual Bank, A Federal Savings Bank and SouthBanc Shares, M.H.C. 
          (attached as an exhibit to the Special Meeting Proxy Statement and the
          Annual Meeting Proxy Statement included herein as Exhibits 99.5 and 
          99.6, respectively)
 
3.1   --  Certificate of Incorporation of SouthBanc Shares, Inc.
 
3.2   --  Bylaws of SouthBanc Shares, Inc.
 
4     --  Form of Certificate for Common Stock
 
5     --  Opinion of Breyer & Aguggia regarding legality of securities
          registered
 
8.1   --  Form of Federal Tax Opinion of Breyer & Aguggia
 
8.2   --  State Tax Opinion of Evans, Carter, Kunes & Bennett, P.A (a)
 
8.3   --  Opinion of RP Financial, LC. as to the value of subscription rights
 
10.1  --  Proposed Form of Employment Agreement For Executive Officers
 
10.2  --  Perpetual Bank, A Federal Savings Bank 401(k) Plan (a)
 
21    --  Subsidiaries of SouthBanc Shares, Inc.
 
23.1  --  Consent of KPMG Peat Marwick LLP

23.2  --  Consent of Breyer & Aguggia as to its Federal Tax Opinion (contained 
          in opinion included as Exhibit 8.1)

23.3  --  Consent of Evans, Carter, Kunes & Bennett, P.A as to its State Tax  
          Opinion (contained in opinion included as Exhibit 8.2) (a)
 
23.4  --  Consent of RP Financial, LC.
 
24    --  Power of Attorney (included in signature page)
 
99.1  --  Order and Acknowledgement Form (contained in the marketing materials
          included herein as Exhibit 99.2)
 
99.2  --  Solicitation and Marketing Materials
 
99.3  --  Appraisal Agreement with RP Financial, LC.
 
99.4  --  Appraisal Report of RP Financial, LC. (a)
 
99.5  --  Proxy Statement for Special Meeting of Members of SouthBanc Shares,
          M.H.C.
 
99.6  --  Proxy Statement for Annual Meeting of Stockholders of Perpetual Bank,
          A Federal Savings Bank
 
_____________________
(a) To be filed by amendment.