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EXHIBIT NO. 99.1
Gaston Federal Bancorp, Inc.
245 West Main Avenue
P O Box 2249
Gastonia, North Carolina 28053-2249
FAX (704) 868-5226
PRESS RELEASE FOR IMMEDIATE RELEASE
CONTACTS:
Kim S. Price Ronald E. Bostian
President and CEO President and CEO
Gaston Federal Bancorp, Inc. Innes Street Financial Corporation
TEL: (704) 868-5200 TEL: (704) 633-2341
GASTON FEDERAL BANCORP, INC. TO ACQUIRE INNES STREET FINANCIAL CORPORATION
IN A CASH TRANSACTION VALUED AT APPROXIMATELY $38 MILLION
Gastonia and Salisbury, North Carolina. July 16, 2001. Gaston Federal
Bancorp, Inc. (Nasdaq: GBNK) ("Gaston Bancorp"), the holding company for Gaston
Federal Bank, and Innes Street Financial Corporation (Nasdaq: ISFC) ("Innes
Street"), the holding company for Citizens Bank, Inc. ("Citizens Bank"),
announced jointly today that they have entered into a definitive agreement under
which Gaston Bancorp would acquire Innes Street in an all cash transaction
valued at $18.50 per share, or approximately $38 million in total. The Board of
Directors of each company has unanimously approved the transaction. Due
diligence has been completed.
Kim S. Price, President and Chief Executive Officer of Gaston Bancorp,
stated, "We are very pleased to announce the acquisition of Innes Street. For
many years we have been friendly competitors, sharing a similar philosophy as
community bankers. We intend to continue this focus on community banking. At the
same time we will be able to expand customer access to our financial services
and increase our ability to respond to borrowers' needs. From every aspect, I
think we will better serve our market place." Gaston Bancorp is the largest
thrift holding company headquartered in North Carolina, and this transaction
will make Gaston Bancorp the fourteenth largest publicly traded banking
institution headquartered in North Carolina. Upon completion of the transaction,
Gaston Bancorp will have approximately $470 million in assets and will have a
total of nine offices in the southern piedmont region of North Carolina.
Ronald E. Bostian, President and Chief Executive Officer of Innes
Street, stated, "We look forward to becoming a part of the Gaston Bancorp
organization. Our customers as well as our shareholders will benefit from this
new relationship with a bank that has always had our respect and shared our
outlook. We clearly view this transaction as a win-win for both parties."
Gaston Bancorp will continue to be headquartered in Gastonia. Following
the closing, Kim S. Price will continue as President, CEO, and Director. Ronald
E. Bostian, who will remain in Salisbury, will serve as a Director and as an
executive with Gaston Federal Bank and Gaston Bancorp. Customers should
anticipate no change in the type and style of community banking services they
have become accustomed to, and should benefit from an expanded menu of banking
services.
The transaction, which is expected to be completed in the fourth
calendar quarter of 2001, is subject to approval by Innes Street shareholders
and applicable regulatory authorities. Innes Street is expected to merge with
and into Gaston Bancorp upon completion of the transaction, and Citizens Bank
will operate as a division of Gaston Federal Bank.
Gaston Bancorp estimates that the cost savings opportunities between
the companies equals 38% of Innes Street's annualized operating expenses, or
approximately $1.7 million pre-tax, including the elimination of employee
benefit plans and other duplicate expenses. Gaston Bancorp will also seek
opportunities to increase non-interest income in the consolidated company. As a
result of the anticipated cost savings and without considering any potential
revenue enhancements, Gaston Bancorp believes that the transaction will be
immediately accretive to earnings.
In addressing the financial aspects of the transaction, Mr. Price
continued, "The acquisition of Innes Street will effectively leverage our
capital position. In addition, we anticipate the transaction to result in a
significant improvement in return on equity and earnings per share. We have been
conservative in our financial assumptions and feel that these expectations are
very realistic."
Under the terms of the agreement, Innes Street shareholders will
receive $18.50 per share in cash, which represents 138% of Innes Street's
tangible book value per share at March 31, 2001 and 28.5 times Innes Street's
earnings per share for the twelve months ended March 31, 2001. All stock options
awarded under Innes Street's stock option plans will vest upon completion of the
transaction and all outstanding stock options will be canceled in exchange for a
cash payment equivalent to the per share merger consideration less the option
exercise price.
Gaston Bancorp is the holding company for Gaston Federal Bank, a
federal savings bank founded in 1904. Gaston Federal Bank is headquartered in
Gastonia, North Carolina, and operates six full-service banking offices in
Gaston County and one loan production office in Cleveland County. At March 31,
2001, Gaston Bancorp had total assets of $268.2 million, total deposits of
$180.4 million and stockholders' equity of $40.5 million.
Innes Street is the holding company for Citizens Bank, a North Carolina
savings bank founded in 1907. Citizens Bank is headquartered in Salisbury, North
Carolina, and operates three full-service banking offices in Salisbury, Rockwell
and Statesville. At March 31, 2001, Innes Street had total assets of $212.2
million, total deposits of $168.6 million and stockholders' equity of $26.5
million.
Innes Street will be filing a proxy statement and other relevant
documents concerning the merger with the Securities and Exchange Commission
("SEC"). WE URGE INVESTORS TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT
DOCUMENTS FILED WITH THE SEC BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.
Investors and security holders may obtain a free copy of the proxy statement
when it becomes available, and other documents filed by Gaston Bancorp and Innes
Street with the SEC in connection with the merger at the SEC's web site at
www.sec.gov. Documents that Innes Street files with the SEC will be available
free of charge from the Corporate Secretary of Innes Street at 401 West Innes
Street, Salisbury, North Carolina 28144, telephone (704) 633-2341. READ THE
PROXY STATEMENT CAREFULLY BEFORE MAKING A DECISION CONCERNING THE MERGER.
Innes Street will, and its directors and executive officers may, be
soliciting proxies from Innes Street shareholders in favor of the merger. Innes
Street's Board of Directors consists of Ronald E. Bostian, Harold C. Earnhardt,
Malcolm B. Blankenship, Jr., James W. Duke, K. V. Epting, Jr., Gordon P. Hurley,
and Bobby A. Lomax. All of these persons are the beneficial owner of more
than 1% of the outstanding shares of Innes Street common stock.
This news release contains certain forward-looking statements about the
proposed merger of Gaston Bancorp and Innes Street. These statements include
statements regarding the anticipated closing date of the transaction,
anticipated cost savings, and anticipated future results. Forward-looking
statements can be identified by the fact that they include words like "believe,"
"expect," "anticipate," "estimate," and "intend" or future or conditional verbs
such as "will," "would," "should," "could," or "may." Certain factors that could
cause actual results to differ materially from expected include delays in
completing the merger, difficulties in achieving cost savings from the merger or
in achieving such cost savings within the expected time frame, difficulties in
integrating Gaston Bancorp and Innes Street, increased competitive pressures,
changes in the interest rate environment, changes in general economic
conditions, legislative and regulatory changes that adversely affect the
businesses in which Gaston Bancorp and Innes Street are engaged, changes in the
securities markets, and other factors disclosed by Gaston Bancorp and Innes
Street in their periodic filings with the SEC.
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