SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant ( )
Filed by a Party other than the Registrant (X)
Check the appropriate box:
( ) Preliminary Proxy Statement
( ) Confidential, for use of Commission Only (as permitted by Rule 14a-6(e)(2)
( ) Definitive Proxy Statement
( ) Definitive Additional Materials
(X) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Carolina Fincorp, Inc.
(Name of Registrant as Specified In its Chapter)
Patrick Molamphy, Carroll M. Edwards, Patrick Perrotta, Thomas McInnis and
Hilton K. Haines
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies: Common
Stock
2) Aggregate number of securities to which transaction applies: Not
Applicable
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): Not
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4) Proposed maximum aggregate value of transaction: Not Applicable
5) Total fee paid: Not Applicable
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: $0
2) Form, Schedule, or Registration Statement No.: Not Applicable
3) Filing Party: Not Applicable
4) Date Filed: Not Applicable
AN IMPORTANT MESSAGE FROM
THE CAROLINA FINCORP COMMITTEE TO
ENHANCE SHAREHOLDER VALUE
TO: FELLOW SHAREHOLDERS OF
CAROLINA FINCORP, INC.
STOP!
The Carolina Fincorp, Inc. Committee to Enhance Shareholder Value (the
"Committee") and a group of concerned investors as of July 26, 1999 collectively
owned in excess of 5.0% of the outstanding Common Stock of Carolina Fincorp,
Inc. (the "Company"). The group is the largest shareholder of the Company behind
the ESOP.
The Committee is disappointed with the earnings performance of the Company and,
as a result, not confident that the Board of Directors, as presently
constituted, can maximize the value of the company for our mutual benefit as
shareholders. At the annual meeting, to be held in November, shareholders need
to send a message that a change in the direction of the Company is needed. This
is why we will be nominating independent directors at this year's meeting.
Do not vote for management director nominees until you have had an opportunity
to consider the information contained in the Committee's proxy statement.
LOOK!
In the Committee's opinion, the earnings performance of the Company is really
the principal yardstick for measuring management's performance, and is the key
measurement used by other financial institutions when considering what premium
should be paid for the Company in an acquisition. Based on information at the
FDIC web site1, the Company had 1998-year end Return on Equity of 4.5%, compared
to a state average of 14.97%. Return on Assets at the Company were 0.67%,
compared to the state average of 1.28%.
Instead of concentrating on getting the fundamentals of the Company in order,
management is sinking capital into a new branch in Pinehurst, N.C. A new full
service branch in an already crowded, competitive market will be a huge drag on
earnings. A new branch for a commercial bank takes 3 to 5 years to be
profitable, and our Company does not offer the products or services that a
commercial bank offers. In the three years since converting from a building and
loan, Management has yet to hire a commercial lender with a commercial bank
background. Considering that interest rates are rising, which will lower demand
for loan products, and that our return on equity is already well below state
averages, the Committee feels that this move in Moore County is an ill conceived
idea. This is antiquated bank thinking. Sinking millions of dollars into bricks
and mortar will not change the fundamentals of this Company. A new branch in
Pinehurst will be a drag on earnings for years to come.
The Committee feels that management should not be given stock. Compensation
should be earned, not given away at shareholder expense. The so-called
"Management Recognition Plan", which is not based on performance, has negatively
impacted the earnings performance of our Company, and must be replaced with an
incentive based plan. The Committee found in the 1998 proxy statement that CEO
total compensation, which included bonuses and stock awards, totaled $337,554.
In addition, the Chairman of the Board took salary and stock awards totaling
$61,443. This is outrageous considering the FDIC reported 1998 profits of
$746,0001.
It is obvious that the Company needs an additional voice on the Board to promote
the interests of SHAREHOLDERS, not management. The Committee is confident that
management has tried its best, but the results clearly indicate that the Company
is headed in the wrong direction. The Committee found a statement by the CEO in
an interview to be somewhat revealing, "We felt like we had more money than we
knew what to do with, so we returned it to the shareholders," he said. "Let them
invest it, they could probably do a better job of investing their money."2 This
comment was in regards to the $11 million return of capital dividend last year,
and clearly shows management was either unwilling or unqualified to manage the
Company's capital. This is also evident in their share buy back program. Why did
the company wait to buy back shares at over $9, when they could have been buying
back at $7 1/2 two months earlier? This again is indicative of lack of
forethought on management's part. A stock buy back should have been in place
prior to the stock dropping below book value. Why is the Company wasting capital
by buying stock back at a relative premium?
If the Company's management is unable to present to shareholders a comprehensive
plan to provide its shareholders with the returns of other well run banks, then
the Company's management and the Board must establish an alternative plan to
merge the company with an acceptable financial institution. The committee has
talked with several financial institutions, and has determined that the current
environment for a merger is strong. Several institutions have an interest in
acquiring the Company, and the current board has neglected this fact.
SHAREHOLDERS SHOULD NOT SUFFER BECAUSE OF THE BOARD'S INABILITY TO INCREASE
EARNINGS AND PERFORMANCE RATIOS.
LISTEN!
Listen to our message. NOW IS THE TIME TO MERGE OUR COMPANY. Management and the
Current Board have demonstrated they are unable to achieve the operating results
of other well run banks. Our Company cannot survive over the long term on the
present course, AND IT IS IN THE BEST INTERESTS OF SHAREHOLDERS TO MERGE THE
COMPANY WITH A FINANCIALLY STRONG INSTITUTION AS SOON AS POSSIBLE. INDEPENDENT
DIRECTORS ARE NEEDED TO REPRESENT THE INTERESTS OF SHAREHOLDERS IN A MERGER.
STOP Don't vote Management's Proxy Card.
LOOK For our Proxy Material and our Green Proxy Card.
LISTEN To our program which we believe will maximize
the value of the stock you own.
IF YOUR SHARES ARE HELD IN "STREET NAME" ONLY YOUR BANK OR BROKER CAN VOTE THESE
SHARES, AND ONLY UPON RECEIPT OF YOUR SPECIFIC INSTRUCTIONS. PLEASE CONTACT THE
PERSON RESPONSIBLE FOR YOUR ACCOUNT AND INSTRUCT THEM NOT TO VOTE AT THIS TIME.
IF YOU HAVE ANY QUESTIONS OR NEED FURTHER ASSISTANCE, PLEASE CALL PATRICK
MOLAMPHY AT (910) 997-4581, OR OUR PROXY SOLICITOR: BEACON HILL PARTNERS, INC.,
90 BROAD STREET, NEW YORK, NEW YORK 10004 (800) 755-5001.
NOMINEES OF THE COMMITTEE FOR THE BOARD OF DIRECTORS OF THE COMPANY:
DAVID FOOTE retired in 1996 from CFX Corporation, the holding company
of Cheshire County Savings Bank. At Cheshire, David was Senior Vice President
and Senior Lending Officer. After converting the thrift, David was appointed
President and Chief Executive Officer of Monadnock Bank, which was wholly owned
by CFX Corporation. In 1994, David merged Monadnock Bank back to the parent,
CFX, and became Senior Vice President, whose duties included Mergers and
Acquisitions.
JEFF EDWARDS is President of Edwards Wood Products, Marshville, North
Carolina. Jeff oversees daily operations of the largest manufacturing operation
of wood pallets in the United States. With over three hundred employees, Edwards
Wood Products is one of North Carolina's business success stories. Carroll
Edwards, father of Jeff, is CEO of Edwards Wood Products, and is Carolina
Fincorps largest individual stockholder.
THOMAS MCINNIS is managing partner of Iron Horse Auction Co. Inc., a
regional auction marketing organization for real estate and personal property.
Thomas is also President of Ironhorse Transportation Services, which buys,
sells, and refurbishes railroad equipment1 and power units, and is also managing
partner of Stanly Richmond & Co. LLC. Thomas is a Graduate of Certified
Auctioneers Institute, Indiana University, and The Auction Market Institute
Accredited Auctioneer of Real Estate.
PATRICK MOLAMPHY is the principal of Molamphy and Associates, which
specializes in insurance and investments, and principal of Pinehurst
Hospitality, a North Carolina LLC which owns the Holiday Inn Convention Center,
Southern Pines, NC. Prior to forming his own firm, Pat has experience in
Commercial Lending with Southern National Bank, now BB&T, and the former
Citizens and Southern National Bank, now Bank of America. Pat has a Bachelor of
Science Degree in Business Administration from The Citadel.
NUMBER OF SHARES PERCENT OF
NAME BUSINESS ADDRESS BENEFICIALLY OWNED CLASS
---- ---------------- ------------------ -----
CARROLL M. EDWARDS PO 219 55,000 2.94%
MARSHVILLE, NC 28103
PATRICK MOLAMPHY PO 1324 18,800 1.0%
ROCKINGHAM, NC 28380
PATRICK PERROTTA 3548 DUNLIN SHORE CT. 7,000 .37%
NORCROSS, GA 30082
THOMAS MCINNIS PO 1267 18,000 .96%
ROCKINGHAM, NC 28380
HILTON D. HAINES PO 1174 4,000 .21%
ROCKINGHAM, NC 28380
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1 www.fdic.gov/databank/index.html Go to directory, Choose FDIC CERT#28034,
Compare December 31, 1998 to all institutions/NC.
2 Richmond County Daily Journal, May 27, 1999
i