Exhibit 99.1

FELDMAN FINANCIAL ADVISORS, INC.

1001 CONNECTICUT AVENUE, NW — SUITE 840

WASHINGTON, DC 20036

202-467-6862 — (FAX) 202-467-6963

Asheville Saving Bank, S.S.B.

Asheville, North Carolina

Conversion Valuation Appraisal Report

Valued as of May 9, 2011

Prepared By

Feldman Financial Advisors, Inc.

Washington, DC

FELDMAN FINANCIAL ADVISORS, INC.

1001 CONNECTICUT AVENUE, NW — SUITE 840

WASHINGTON, DC 20036

202-467-6862 — (FAX) 202-467-6963

May 9, 2011

Board of Directors

Asheville Savings Bank, S.S.B.

11 Church Street

Asheville, North Carolina 28801

Members of the Board:

At your request, we have completed and hereby provide an independent appraisal (“Appraisal”) of the estimated pro forma market value of Asheville Savings Bank, S.S.B. (the “Bank”) in connection with the simultaneous conversion of the Bank from the mutual to stock form of ownership, the issuance of the Bank’s capital stock to ASB Bancorp, Inc. (the “Company”), and the offering of shares of common stock of the Company for sale to certain depositors of the Bank, employee benefit plans of the Bank, and other members of the general public (collectively referred to herein as the “Conversion”). This Appraisal is furnished pursuant to the Bank’s regulatory filing of the Application for Conversion (“Application”) with the Federal Deposit Insurance Corporation (“FDIC”) and the North Carolina Commissioner of Banks.

Feldman Financial Advisors, Inc. (“Feldman Financial”) is a financial consulting and economic research firm that specializes in financial valuations and analyses of business enterprises and securities in the thrift, banking, and mortgage industries. The background of Feldman Financial is presented in Exhibit I. In preparing the Appraisal, we conducted an analysis of the Bank that included discussions with the Bank’s management, the Bank’s legal counsel, Kilpatrick Townsend & Stockton LLP, and the Bank’s independent auditor, Dixon Hughes Goodman LLP. In addition, where appropriate, we considered information based on other available published sources that we believe are reliable; however, we cannot guarantee the accuracy and completeness of such information.

We also reviewed, among other factors, the economy in the Bank’s primary market area and compared the Bank’s financial condition and operating performance with that of selected publicly traded thrift institutions. We reviewed conditions in the securities markets in general and in the market for thrift institution common stocks in particular.

The Appraisal is based on the Bank’s representation that the information contained in the Application and additional evidence furnished to us by the Bank and its independent auditor are truthful, accurate, and complete. We did not independently verify the financial statements and other information provided by the Bank and its independent auditor, nor did we independently value the assets or liabilities of the Bank. The Appraisal considers the Bank only as a going concern and should not be considered as an indication of the liquidation value of the Bank.

FELDMAN FINANCIAL ADVISORS, INC.

Board of Directors

Asheville Savings Bank, S.S.B.

May 9, 2011

Page Two

It is our opinion that, as of May 9, 2011, the estimated aggregate pro forma market value of the Bank was within a range (the “Valuation Range”) of $53,550,000 to $72,450,000 with a midpoint of $63,000,000. The Valuation Range was based upon a 15% decrease from the midpoint to determine the minimum and a 15% increase from the midpoint to establish the maximum. Assuming an additional 15% increase above the maximum value would result in an adjusted maximum of $83,317,500. Thus, assuming an offering price of $10.00 per share of common stock, the Company will offer a minimum of 5,355,000 shares, a midpoint of 6,300,000 shares, a maximum of 7,245,000 shares, and an adjusted maximum of 8,331,750 shares.

Our Appraisal is not intended, and must not be construed, to be a recommendation of any kind as to the advisability of purchasing shares of common stock in the Conversion. Moreover, because the Appraisal is necessarily based upon estimates and projections of a number of matters, all of which are subject to change from time to time, no assurance can be given that persons who purchase shares of stock in the Conversion will thereafter be able to sell such shares at prices related to the foregoing estimate of the Bank’s pro forma market value. Feldman Financial is not a seller of securities within the meaning of any federal or state securities laws and any report prepared by Feldman Financial shall not be used as an offer or solicitation with respect to the purchase or sale of any securities.

The Valuation Range reported herein will be updated as appropriate. These updates will consider, among other factors, any developments or changes in the Bank’s operating performance, financial condition, or management policies, and current conditions in the securities markets for thrift institution common stocks. Should any such new developments or changes be material, in our opinion, to the valuation of the Bank, appropriate adjustments to the estimated pro forma market value will be made. The reasons for any such adjustments will be explained in detail at that time.

Respectfully submitted,

Feldman Financial Advisors, Inc.

/s/ Trent R. Feldman

Trent R. Feldman

President

/s/ Peter W. L. Williams

Peter W. L. Williams

Principal

FELDMAN FINANCIAL ADVISORS, INC.

TABLE OF CONTENTS

TAB			PAGE
	INTRODUCTION			1
I.	Chapter One – BUSINESS OF ASHEVILLE SAVINGS BANK, S.S.B.
	General Overview			4
	Financial Condition			11
	Income and Expense Trends			23
	Interest Rate Risk Management			31
	Asset Quality			34
	Office Properties			37
	Market Area			39
II.	Chapter Two – COMPARISONS WITH PUBLICLY TRADED THRIFTS
	General Overview			51
	Selection Criteria			52
	Recent Financial Comparisons			56
III.	Chapter Three – MARKET VALUE ADJUSTMENTS
	General Overview			70
	Earnings Prospects			71
	Financial Condition			73
	Market Area			74
	Management			75
	Dividend Policy			75
	Liquidity of the Issue			76
	Subscription Interest			77
	Recent Acquisition Activity			78
	Effect of Government Regulations and Regulatory Reform			80
	Stock Market Conditions			80
	New Issue Discount			83
	Adjustments Conclusion			86
	Valuation Approach			86
	Valuation Conclusion			89
IV.	Appendix – EXHIBITS
	I	Background of Feldman Financial Advisors, Inc.		I-1
	II-1	Consolidated Balance Sheets		II-1
	II-2	Consolidated Income Statements		II-2
	II-3	Loan Portfolio Composition		II-3
	II-4	Net Loan Activity		II-4
	II-5	Investment Portfolio Composition		II-5
	II-6	Deposit Account Distribution		II-6
	II-7	Borrowed Funds Distribution		II-7
	II-8	Office Properties		II-8
	III	Financial and Market Data for All Public Thrifts		III-1
	IV-1	Pro Forma Assumptions for Conversion Stock Offering		IV-1
	IV-2	Pro Forma Conversion Valuation Range		IV-2
	IV-3	Pro Forma Conversion Analysis at the Maximum Valuation		IV-3
	IV-4	Comparative Valuation Ratio Differential		IV-4

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FELDMAN FINANCIAL ADVISORS, INC.

LIST OF TABLES{PRIVATE}

TAB			PAGE
I.	Chapter One – BUSINESS OF ASHEVILLE SAVINGS BANK, S.S.B.
	Table 1	Selected Financial Condition Data		11
	Table 2	Relative Balance Sheet Concentrations		12
	Table 3	Income Statement Summary		24
	Table 4	Selected Operating Ratios		25
	Table 5	Income Statement Ratios		27
	Table 6	Yield and Cost Summary		29
	Table 7	Interest Rate Risk Analysis		33
	Table 8	Non-performing Assets Summary		35
	Table 9	Allowance for Loan Loss Summary		36
	Table 10	Branch Office Deposit Data		38
	Table 11	Selected Demographic Data		41
	Table 12	Comparative Employment Concentrations		44
	Table 13	Major Employers in the Asheville Area		45
	Table 14	Deposit Market Share in the Asheville MSA		47
	Table 15	Deposit Market Share in the Greater Asheville Area		48
	Table 16	Residential Mortgage Lending Market Share in the Asheville MSA		50
II.	Chapter Two – COMPARISONS WITH PUBLICLY TRADED THRIFTS
	Table 17	Comparative Group Operating Summary		55
	Table 18	Key Financial Comparisons		57
	Table 19	General Operating Characteristics		64
	Table 20	Summary Financial Performance Ratios		65
	Table 21	Income and Expense Analysis		66
	Table 22	Yield-Cost Structure and Growth Rates		67
	Table 23	Balance Sheet Composition		68
	Table 24	Regulatory Capital, Credit Risk, and Loan Composition		69
III.	Chapter Three – MARKET VALUE ADJUSTMENTS
	Table 25	Summary of Recent North Carolina Acquisition Activity		79
	Table 26	Comparative Stock Index Performance		81
	Table 27	Summary of Recent Standard Conversion Stock Offerings		85
	Table 28	Comparative Pro Forma Market Valuation Analysis		90

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FELDMAN FINANCIAL ADVISORS, INC.

INTRODUCTION

As requested, we have completed and hereby provide an independent appraisal (“Appraisal”) of the estimated pro forma market value of Asheville Savings Bank, S.S.B. (“Asheville Savings Bank,” “ASB,” or the “Bank”) in connection with the simultaneous conversion of the Bank from the mutual to stock form of ownership, the issuance of the Bank’s capital stock to ASB Bancorp, Inc. (the “Company”), and the offering of shares of common stock of the Company for sale to certain depositors of the Bank, employee benefit plans of the Bank, and other members of the general public (collectively referred to herein as the “Conversion”). This appraisal report is furnished pursuant to the Bank’s filing of the Application for Conversion with the Federal Deposit Insurance Corporation (“FDIC”) and the North Carolina Commissioner of Bank. Our estimate of the pro forma market value of ASB is expressed in the form of a range (“Valuation Range”) based on accepted regulatory guidelines.

In the course of preparing the Appraisal, we reviewed and discussed with the Bank’s management and the Bank’s independent accountants, Dixon Hughes Goodman LLP, the audited financial statements of the Bank’s operations for the years ended December 31, 2009 and 2010. We also reviewed and discussed with management other financial matters of the Bank. Where appropriate, we considered information based upon other available public sources, which we believe to be reliable; however, we cannot guarantee the accuracy or completeness of such information. We visited the Bank’s primary market area and examined the prevailing economic conditions. We also examined the competitive environment within which the Bank operates and assessed the Bank’s relative strengths and weaknesses.

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FELDMAN FINANCIAL ADVISORS, INC.

We examined and compared the Bank’s financial performance with selected segments of the thrift industry and selected publicly traded thrift institutions. We reviewed conditions in the securities markets in general and the market for thrift institution common stocks in particular. We included in our analysis an examination of the potential effects of the Conversion on the Bank’s operating characteristics and financial performance as they relate to the estimated pro forma market value of the Bank.

In preparing the Appraisal, we have relied upon and assumed the accuracy and completeness of financial and statistical information provided by the Bank and its independent accountants. We did not independently verify the financial statements and other information provided by the Bank and its independent accountants, nor did we independently value the assets or liabilities of the Bank. The Appraisal considers the Bank only as a going concern and should not be considered as an indication of the liquidation value of the Bank.

Our Appraisal is not intended, and must not be construed, to be a recommendation of any kind as to the advisability of purchasing shares of common stock in the Conversion. Moreover, because the Appraisal is necessarily based on estimates and projections of a number of matters, all of which are subject to change from time to time, no assurance can be given that persons who purchase shares of common stock in the Conversion will thereafter be able to sell such shares at prices related to the foregoing estimate of the Bank’s pro forma market value. Feldman Financial is not a seller of securities within the meaning of any federal and state securities laws and any report prepared by Feldman Financial shall not be used as an offer or solicitation with respect to the purchase or sale of any securities.

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FELDMAN FINANCIAL ADVISORS, INC.

The Valuation Range reported in this Appraisal will be updated as appropriate. These updates will consider, among other factors, any developments or changes in the Bank’s financial performance or management policies, and current conditions in the securities market for thrift institution common stocks. Should any such developments or changes be material, in our opinion, to the valuation of the Bank, appropriate adjustments to the estimated pro forma market value will be made. The reasons for any such adjustments will be explained in detail at that time.

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FELDMAN FINANCIAL ADVISORS, INC.

I. BUSINESS OF ASHEVILLE SAVINGS BANK, S.S.B.

General Overview

Asheville Savings Bank is a North Carolina chartered mutual savings bank headquartered in Asheville, North Carolina. Founded originally in 1936, the Bank operates as a community-oriented financial institution offering traditional financial services to consumer and businesses in its primary market area. At March 31, 2011, ASB had total assets of $750.7 million, net loans of $472.1 million, total deposits of $616.6 million, and equity capital of $63.3 million or 8.43% of total assets. The Bank is subject to extensive regulation by the North Carolina Commissioner of Banks, as its chartering agency, and by the Federal Deposit Insurance Corporation (“FDIC”), as its deposit insurer. The Bank is a member of the Federal Home Loan Bank (“FHLB”) of Atlanta.

ASB is primarily engaged in the business of attracting deposits from the general public and using those funds to originate primarily one- to four-family residential mortgage loans and commercial real estate loans, and, to a lesser extent, home equity loans and lines of credit, consumer loans, construction and land development loans, and commercial and industrial loans. The Bank conducts its lending and deposit activities primarily with individuals and small businesses in its primary market area, which consists of Asheville, North Carolina and the rest of Buncombe County where it operates eight branch offices, as well as Henderson, Madison, McDowell, and Transylvania counties where it has a total of five branch offices.

The Bank has two subsidiaries. Appalachian Financial Services, Inc. was formed to engage in investment activities but is currently inactive. Wenoca, Inc. serves as the Bank’s trustee regarding deeds of trust. Both subsidiaries are organized as North Carolina corporations and do not have a material impact on the Bank’s operating performance.

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FELDMAN FINANCIAL ADVISORS, INC.

The Bank experienced significant growth over the past decade. At December 31, 1999, the Bank had total assets of $364.3 million and nine branch locations. By December 31, 2009, the Bank had expanded its total assets to $749.4 million and operated 13 branch offices. The Bank’s asset base more than doubled over this ten-year period and increased at a compound annual growth rate of 7.5%. In addition, the Bank began to diversify its loan portfolio through the increased origination of commercial real estate and consumer loans. Historically, the Bank had mainly emphasized the origination of one- to four-family residential mortgage loans, which represented 71.5% or $204.0 million of the total loan portfolio of $285.4 million at December 31, 1999. By December 31, 2009, the concentration of residential mortgage loans had declined to 31.9% of the total loan portfolio and amounted to $191.0 million of total loans of $598.1 million. The Bank’s net loan growth was fueled largely by the growth of the commercial real estate loan portfolio, which expanded from $7.5 million at December 31, 1999 to $197.2 million at December 31, 2009. The consumer loan portfolio also expanded, increasing primarily as a result of indirect automobile lending activity. Consumer loans increased from $40.3 million at December 31, 1999 to $86.8 million at December 31, 2009.

The Bank’s asset growth was funded primarily by deposit expansion, supported by increased borrowings and capital accumulation from profitable operations. The Bank reported positive earnings in each year from 2000 to 2009, although its profitability began to decline toward the latter part of the decade due to a narrowed net interest margin attributable mainly to the generally lower interest rate environment and increased provisions for loan losses. In addition, by the end of year-end 2009, the Bank had begun to experience a marked increase in non-performing assets. Total non-performing assets increased from $9.8 million (1.39% of total assets) at year-end 2008 to $20.3 million (2.71% of total assets) and $24.1 million (3.21% of total assets) at year-end 2009 and 2010, respectively.

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FELDMAN FINANCIAL ADVISORS, INC.

The Bank’s increased emphasis on commercial mortgage and commercial construction and land development loans has exposed it to losses as the recent economic recession, whose adverse effects were delayed in impacting Western North Carolina, has unfavorably affected businesses and developers in ASB’s market area. The Bank charged off $7.9 million of commercial construction and land development loans and $6.1 million of commercial mortgage loans in 2010. The Bank also suffered recent losses in its residential mortgage loan portfolio, with charge-offs totaling $1.8 million in 2010 on residential mortgage loans. Total charge-offs in the consumer loan portfolio totaled $1.1 million in 2010. The losses in the Bank’s consumer loan portfolio have been related primarily to its indirect financing of automobile loans and, as a result of such losses, ASB has suspended its indirect automobile financing activities. The Bank is continuing to emphasize its commercial mortgage lending activities. However, due to recent economic conditions, the Bank has suspended financing the construction of any properties built on a speculative basis and is emphasizing the origination of commercial mortgage loans secured by owner-occupied properties.

Because of its heightened credit risk exposure, the Bank increased it provision for loan losses to $22.4 million for the year ended December 31, 2010 as compared to $4.7 million for the year ended December 31, 2009. The increase in the provision was deemed necessary by the Bank to replenish the allowance for loan losses that was depleted due to $18.7 million in net charge-offs of non-performing loans in 2010, as well as management’s efforts to increase the allowance for loan losses in response to continued elevated levels of non-performing loans. The

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FELDMAN FINANCIAL ADVISORS, INC.

increased loan loss provision contributed to a net operating loss of $9.5 million for 2009. In addition, the Bank’s equity capital declined from $73.6 million (9.83% of total assets) at December 31, 2009 to $62.9 million (8.38% of total assets) at December 31, 2010. The Bank returned to profitability for the first quarter of 2011 with reported earnings of $585,000 for the three months ended March 31, 2011, as compared to $430,000 for the three months ended March 31, 2010.

The Bank’s primary objective is to operate and grow a profitable community-oriented financial institution serving customers in its primary market area. ASB has sought to achieve this through the adoption of a business strategy designed to maintain a strong capital position and high asset quality. The Bank has implemented a plan to resolve its current asset quality problems and has hired senior management with backgrounds in consumer and commercial banking to help diversify its product offerings, expand its commercial deposit and lending products, and expand its consumer deposit and lending products, while emphasizing high asset quality standards. The Bank’s operating strategies includes the following:

• Continuing to provide products and services to individuals and businesses in the communities served by its branch offices. ASB has operated continuously as a community-oriented financial institution since it was established in 1936. The Bank is committed to meeting the financial needs of the communities in which it operates, and it is dedicated to providing quality personal service to customers. The Bank provides a broad range of consumer and business financial services through its branch office network and plans to continually seek out ways to improve convenience, safety and service through its product offerings.

• Continuing to originate residential and commercial mortgage loans. The Bank’s primary lending focus has been and will continue to be aimed at operating as a residential and commercial mortgage lender. ASB originates fixed-rate and adjustable-rate residential and commercial mortgage loans that are retained in its loan portfolio. However, most of the fixed-rate residential mortgage loans originated by the Bank are sold into the secondary market with servicing released. At March 31, 2011, residential mortgage loans totaled $177.8 million, or 36.7% of the total loan portfolio, and commercial mortgage loans totaled $162.7 million, or 33.5% of the

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FELDMAN FINANCIAL ADVISORS, INC.

total loan portfolio. Although total residential and commercial mortgage loans have decreased from a high of $388.2 million at December 31, 2009 to $340.5 million at March 31, 2011 as the Bank addressed certain asset quality problems throughout 2009 and 2010 and experienced lower demand for commercial mortgage loans, ASB intends to continue to emphasize its residential and commercial mortgage lending activities.

• Expanding commercial and industrial lending activities and emphasizing the origination of small business loans. The Bank seeks to expand its commercial and industrial lending activities and to originate an increased number of small business loans. ASB has hired additional experienced lending officers and credit management personnel over the past several years in order to continue to prudently manage this type of lending. Although commercial and industrial lending has decreased recently as the Bank has addressed asset quality issues and experienced decreased loan demand, ASB’s goal is to expand this portion of its portfolio using conservative underwriting practices to increase the overall yield of its loan portfolio.

• Emphasizing lower cost core deposits to maintain low funding costs. ASB seeks to increase net interest income by controlling costs of funding. As a traditional thrift institution, a larger concentration of its deposit base has consisted of higher balance, higher cost certificates of deposit. Over the past several years, the Bank has attempted to reduce its dependence on traditional higher cost deposits in favor of stable, lower cost demand deposits. The Bank has utilized additional product offerings, technology, and a focus on customer service in working toward this goal. In addition, ASB intends to seek demand deposits by growing commercial banking relationships.

• Expanding market share within its primary market area. ASB intends to expand its market share in its primary market area by evaluating additional branch expansion opportunities. Subject to favorable market conditions, it is currently the Bank’s goal to continue to open additional branch offices in its primary market area in the years following the Conversion. In addition, ASB is interested in pursuing opportunities to acquire other financial institutions, including through FDIC-assisted transactions, and branches of financial institutions in its primary market area and surrounding areas. However, the Bank currently has no definitive plans or commitments regarding potential acquisition opportunities.

• Seeking to enhance fee income through investment advisory services. The Bank currently provides a full array of investment services for individuals and small businesses, including full access to financial market instruments such as mutual funds and equities, through a relationship with LPL Financial Services (formerly UVEST Investment Services). For the three months ended March 31, 2010 and 2011, commission income relating to investment advisory services totaled $49,000 and $65,000, respectively. In the future, the Bank intends to continue to enhance its fee income by providing investment advisory services to customers through its relationship with LPL Financial Services.

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FELDMAN FINANCIAL ADVISORS, INC.

While the Bank’s present equity capital level is solid at 8.43% of total assets at March 31, 2011, the Bank believes it is a prudent course of action to raise additional capital in order to facilitate its growth objectives and loan diversification, and provide a greater capital cushion in response to the heightened risk profile associated with uncertain economic conditions. The Bank’s equity position recently increased from $62.8 million or 8.38% of total assets at December 31, 2010 to $63.3 million at March 31, 2011, but remains below the level of $73.6 million or 9.82% of total assets at year-end 2009 prior to incurring the net loss in 2010.

As a stock corporation upon completion of the Conversion, the Bank will be organized in the form used by commercial banks, most major corporations, and a majority of savings institutions. The ability to raise new equity capital through the issuance and sale of capital stock will allow the Bank the flexibility to increase its equity capital position more rapidly than by accumulating earnings.

The Bank also believes that the ability to attract new capital also will help address the needs of the communities it serves and enhance its ability to expand or to make acquisitions. After the Conversion, the Bank will have increased ability to merge with or acquire other financial institutions or business enterprises. Finally, the Bank expects to benefit from its employees and directors having stock ownership in its business, since that is viewed as an effective performance incentive and a means of attracting, retaining, and compensating employees and directors.

As a stock holding company, the Company also will have greater flexibility than the Bank now has in structuring mergers and acquisitions, including the offer consideration paid in a transaction. The Bank’s current mutual savings bank structure, by its nature, limits its ability to

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FELDMAN FINANCIAL ADVISORS, INC.

offer any common stock as consideration in a merger or acquisition transactions. The stock holding company structure will enhance the ability of the Company to compete with other bidders when acquisition opportunities arise by better enabling it to offer stock or cash consideration, or a combination of the two.

In summary, the Bank’s primary reasons for implementing the Conversion and undertaking the stock offering are to:

• enhance profitability and earnings through reinvesting and leveraging the offering proceeds, primarily through traditional funding and lending activities;

• support future branching activities and/or the acquisition of financial institutions or financial services companies;

• enhance the Bank’s ability to compete in its primary market area by offering new products and services; and

• increase capital to meet anticipated industry-wide increases in regulatory capital requirements; and

• implement equity compensation plans to retain and attract qualified directors, officers, and staff and to enhance the current incentive-based compensation programs.

The remainder of Chapter I examines in more detail the trends addressed in this section, including the impact of changes in the Bank’s economic and competitive environment, and recent management initiatives. The discussion is supplemented by the exhibits in the Appendix. Exhibit II-1 summarizes the Bank’s consolidated balance sheets as of the years ended December 31, 2009 and 2010 and as of March 31, 2011. Exhibit II-2 presents the Bank’s consolidated income statements for the years ended December 31, 2009 and 2010 and the three months ended March 31, 2010 and 2011.

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Financial Condition

Table 1 presents selected data concerning the Bank’s financial position as of December 31, 2006 to 2010 and March 31, 2011. Table 2 displays relative balance sheet concentrations for the Bank as of similar fiscal year-end periods.

Table 1

Selected Financial Condition Data

As of December 31, 2006 to 2010 and March 31, 2011

(Dollars in Thousands)

	March 31, 2011		December 31,
			2010		2009		2008		2007		2006
Total assets	$	750,709	$	749,965	$	749,307	$	705,095	$	638,656	$	597,034
Cash and cash equivalents		26,436		24,234		23,176		39,384		54,789		54,006
Investment securities available-for-sale		198,596		175,445		90,057		37,362		26,996		23,930
Investment securities held-to-maturity		5,720		5,948		6,958		5,442		10,856		12,523
Federal Home Loan Bank stock		3,970		3,970		3,993		5,020		3,325		2,952
Loans receivable, net		472,097		487,327		588,607		583,692		516,080		482,000
Loans held for sale		1,263		8,386		3,890		2,926		2,548		2,107
Foreclosed real estate		10,506		10,650		3,699		6,272		—		—
Total deposits		616,586		619,757		608,538		535,640		505,290		480,296
Federal Home Loan Bank advances		60,000		60,000		60,000		60,000		50,000		40,000
Overnight and short-term borrowings		1,404		1,008		1,694		31,219		4,561		1,704
Total equity		63,295		62,881		73,649		69,921		71,059		66,822

Source: Asheville Savings Bank, preliminary prospectus.

Asset Composition

The Bank’s total assets amounted to $750.7 million at March 31, 2011, reflecting a marginal 0.2% or $1.4 million increase from total assets of $749.3 million at year-end 2009. The negligible asset growth was primarily due to shrinkage of the loan portfolio by 19.8% or $116.5 million since year-end 2009. Net loans receivable declined from $588.6 million at year-end 2009 to $472.1 million at March 31, 2011 due to reduced loan originations and increased levels of loan sales, charge-off activity, and transfer of foreclosed loans to real estate owned.

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Table 2

Relative Balance Sheet Concentrations

As of December 31, 2006 to 2010 and March 31, 2011

(Percent of Total Assets)

	March 31,		December 31,
	2011		2010		2009		2008		2007		2006
	(%)		(%)		(%)		(%)		(%)		(%)
Cash and cash equivalents		3.52		3.23		3.09		5.59		8.58		9.05
Investment securities available-for-sale		26.45		23.39		12.02		5.30		4.23		4.01
Investment securities held-to-maturity		0.76		0.79		0.93		0.77		1.70		2.10
Federal Home Loan Bank stock		0.53		0.53		0.53		0.71		0.52		0.49
Loans receivable, net		62.89		64.98		78.55		82.78		80.81		80.23
Loans held for sale		0.17		1.12		0.52		0.41		0.40		0.35
Foreclosed real estate		1.40		1.42		0.49		0.89		—		—
Other assets		4.28		4.53		3.86		3.55		3.77		3.77
Total assets		100.00		100.00		100.00		100.00		100.00		100.00
Total deposits		82.13		82.64		81.21		75.97		79.12		80.45
Federal Home Loan Bank advances		7.99		8.00		8.01		8.51		7.83		6.70
Overnight and short-term borrowings		0.19		0.13		0.23		4.43		0.71		0.29
Other liabilities		1.26		0.84		0.72		1.18		1.21		1.38
Total liabilities		91.57		91.62		90.17		90.08		88.87		88.81
Total equity		8.43		8.38		9.83		9.92		11.13		11.19
Total liabilities and equity		100.00		100.00		100.00		100.00		100.00		100.00

Source: Asheville Savings Bank, preliminary prospectus; Feldman Financial calculations.

As a result of the shrinkage of the loan portfolio, net loans receivable declined from 82.8% of total assets at December 31, 2008 to 62.9% at March 31, 2011. Conversely, the level of securities available for sale increased from 5.3% at December 31, 2008 to 26.5% at March 31, 2011. Total cash and securities increased from $87.2 million or 12.4% of total assets at December 31, 2008 to $234.7 million or 31.3% of total assets at March 31, 2011.

As presented in Exhibit II-3, the Bank’s current loan portfolio includes residential mortgages and commercial mortgage as core products. The largest component of the Bank’s loan portfolio are real estate mortgage loans, primarily one- to four-family residential mortgage loans and commercial mortgage loans, and to a lesser extent, revolving mortgage loans (which consist

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of home equity loans and lines of credit), consumer loans, construction and land development loans, and commercial and industrial loans. The Bank originates loans for investment purposes, although it generally sells fixed-rate residential mortgage loans into the secondary market with servicing released. ASB intends to continue to emphasize residential and commercial mortgage lending, while also concentrating on ways to expand its commercial and industrial lending activities with a focus on serving small businesses and emphasizing relationship banking in its primary market area. The Bank does not offer, and has not offered, subprime, Alt-A, or no-documentation mortgage loans.

Residential mortgage loans. Residential mortgage loans totaled $177.8 million or 36.7% of the Bank’s loan portfolio at March 31, 2011. The Bank’s residential lending policies and procedures generally conform to the secondary market guidelines. ASB generally offers a mix of adjustable-rate mortgage loans and fixed-rate mortgage loans with terms of up to 30 years. The relative amount of fixed-rate mortgage loans and adjustable-rate mortgage loans that can be originated at any time is largely determined by the demand for each in a competitive environment. Interest rates and payments on the Bank’s adjustable-rate mortgages generally adjust annually after an initial fixed period that typically ranges from one to seven years. Interest rates and payments on adjustable-rate mortgages generally are indexed to the one year U.S. Treasury Constant Maturity Index.

The Bank generally does not make owner-occupied one- to four-family residential real estate loans with loan-to-value ratios exceeding 95%. Loans with loan-to-value ratios in excess of 80% typically require private mortgage insurance. In addition, ASB generally does not make non-owner occupied, one- to four-family residential real estate loans with loan-to-value ratios

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exceeding 80%. The Bank requires all properties securing mortgage loans to be appraised by a Board-approved independent appraiser. The Bank also requires title insurance on all first mortgage loans. Borrowers must obtain hazard insurance, and flood insurance is required for all loans located in flood hazard areas.

Commercial mortgage loans. Commercial mortgage loans totaled $162.7 million or 33.5% of the Bank’s loan portfolio at March 31, 2011. ASB offers fixed-rate and adjustable-rate mortgage loans secured by non-residential real estate and multi-family properties. The Bank’s commercial mortgage loans are generally secured by commercial, industrial and manufacturing, small to moderately-sized office and retail properties, hotels, multi-family properties, and hospitals and churches located in its primary market area. Although ASB has historically made commercial mortgage loans that are secured by both owner-occupied and non-owner occupied properties, the Bank is currently emphasizing the origination of commercial mortgage loans that are secured by owner-occupied properties. At March 31, 2011, $35.6 million or 21.9% of the Bank’s commercial real estate loans were secured by owner-occupied properties.

The Bank originates fixed-rate and adjustable-rate commercial mortgage loans, generally with terms of three to five years and payments based on an amortization schedule of up to 25 years, resulting in “balloon” balances at maturity. For adjustable-rate commercial mortgage loans, interest rates are typically equal to the prime lending rate as reported in the Wall Street Journal plus an applicable margin. Currently, the Bank’s adjustable-rate commercial mortgage loans typically provide for an interest rate floor. Loans are secured by first mortgages, are generally originated with a maximum loan-to-value ratio of 85%, and may require specified debt service coverage ratios depending on the characteristics of the project. Rates and other terms on

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such loans generally depend on the Bank’s assessment of credit risk after considering such factors as the borrower’s financial condition, credit history, loan-to-value ratio, debt service coverage ratio and other factors, including whether the property securing the loan will be owner-occupied. At March 31, 2011, the Bank’s largest commercial mortgage loan had an outstanding balance of $7.0 million. This loan was originated in November 2009 and is secured by a multi-use property, including a warehouse and office space, located in Fletcher, North Carolina. The loan is currently performing in accordance with its original terms.

Construction and land development loans. Construction and land development loans totaled $35.7 million or 7.4% of the Bank’s loan portfolio at March 31, 2011. The Bank has originated construction and land development loans for commercial properties, such as retail shops and office units, and multi-family properties, and construction and land development loans for one-to four-family homes. At March 31, 2011, commercial construction and land development loans totaled $27.8 million and residential construction and land development loans totaled $7.9 million. Residential construction loans are typically for a term of 12 months with monthly interest only payments, and generally are followed by an automatic conversion to a 15-year to 30-year permanent loan with monthly payments of principal and interest. Except for speculative loans, residential construction loans are generally only made to homeowners and the repayment of such loans generally comes from the proceeds of a permanent mortgage loan for which a commitment is typically in place when the construction loan is originated. Interest rates on construction loans are generally tied to an index plus an applicable margin. ASB generally requires a maximum loan-to-value ratio of 80% for all construction loans. The Bank generally disburses funds on a percentage-of-completion basis following an inspection by a third party inspector.

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In the past, the Bank has originated speculative construction loans to builders who have not identified a buyer for the completed property at the time of origination. However, due to recent economic conditions, ASB is no longer emphasizing the origination of speculative construction loans. At March 31, 2011, the Bank had speculative residential construction loans of $3.1 million and speculative commercial construction loans of $9.6 million.

At March 31, 2011, the Bank’s largest construction loan secured by a project being built on speculation was an $8.6 million loan secured by a mixed-use residential condominium, commercial office and retail project located in Western North Carolina. The borrower is in Chapter 11 bankruptcy. Through the bankruptcy process, ASB made an additional loan to a third party totaling $2.3 million. That third party then made a $2.9 million “debtor in possession” loan to the original borrower to facilitate the completion of the building. An interest reserve for the $8.6 million loan was created with a portion of the proceeds of the additional $2.9 million debtor in possession loan. The $2.3 million loan to the third party debtor in possession lender is secured by an assignment of the debtor in possession note. Both of these loans are performing in accordance with their terms. The mixed-use condominium, commercial office and retail project serving as collateral for the original $8.6 million loan consists of 29 residential condominiums, of which one has been sold, 11 commercial office condominiums, of which three have been sold, and eight commercial retail spaces, of which four are currently leased.

The Bank also selectively originates loans to individuals and developers for the purpose of developing vacant land in its primary market area, typically for building an individual’s future residence or, in the case of a developer, residential subdivisions. Land development loans, which are offered for terms of up to 18 months, are generally indexed to the prime rate as reported in

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the Wall Street Journal plus an applicable margin. The Bank generally requires a maximum loan-to-value ratio to 75% of the discounted market value based upon expected cash flows upon completion of the project. ASB also originates loans to individuals secured by undeveloped land held for investment purposes. These loans are typically amortized for no more than 15 years with a three or five year balloon payment. At March 31, 2011, the Bank’s largest land development loan had an outstanding balance of $3.9 million and was performing in accordance with its original terms.

Revolving mortgages and consumer loans. The Bank offers revolving mortgage loans, which consist of home equity loans and lines of credit, and various consumer loans, including automobile loans and loans secured by deposits. At March 31, 2011, revolving mortgage loans amounted to $52.0 million, or 10.7% of total loans, and consumer loans totaled $41.1 million, or 8.5% of the overall loan portfolio. The Bank’s revolving mortgage loans consist of fixed-rate home equity loans with terms of up to 15 years and adjustable-rate lines of credit with interest rates indexed to the prime rate, as published in the Wall Street Journal, plus an applicable margin. Consumer loans typically have shorter maturities and higher interest rates than traditional one- to four-family residential loans. The Bank typically does not originate home equity loans with loan-to-value ratios exceeding 80%, including any first mortgage loan balance. Until recently, ASB originated indirect financing for automobile loans. However, this product was suspended because the Bank began experiencing substantial losses on that segment of the loan portfolio. The Bank has indicated that any future restatement of the indirect automobile lending program will be conducted in accordance with prudent underwriting standards.

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Commercial and industrial loans. Commercial and industrial loans totaled $15.8 million or 3.2% of the Bank’s loan portfolio at March 31, 2011. ASB typically offers commercial and industrial loans to small businesses located in its primary market area. Commercial and industrial loans consist of floating rate loans indexed to the prime rate as published in the Wall Street Journal plus an applicable margin and fixed-rate loans for terms of up to 25 years, depending on the collateral type. The Bank’s commercial and industrial loan portfolio consists primarily of loans that are secured by equipment, accounts receivable and inventory, but also includes a smaller amount of unsecured loans for purposes of financing expansion or providing working capital for general business purposes.

At March 31, 2011, ASB’s largest commercial and industrial loan was a $2.3 million it made to a third party to finance a debtor in possession loan in connection with its largest speculative construction loan, which is performing in accordance with its original terms. At March 31, 2011, the Bank’s second largest commercial and industrial loan had an outstanding balance of $1.4 million. This loan was originated in October 2009 and is secured by the borrower’s inventory of automobile parts. The loan is currently performing in accordance with its original terms.

As shown in Exhibit II-4, total loan originations decreased from $320.6 million in 2008 to $275.1 million in 2009 and $197.1 million for 2010. The reduction in loan originations was primarily related to decrease volumes of commercial mortgage and indirect automobile loans. Loan sales increased from $50.1 million in 2008 to $116.4 million and $97.1 million for 2009 and 2010, respectively. The Bank generally sells in the secondary market long-term, fixed-rate residential mortgage loans that it originates. The decision by the Bank to sell loans is based on

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prevailing market interest rate conditions, interest rate management, and liquidity needs. Occasionally, the Bank has purchased participation interests in commercial real estate loans to supplement its loan origination volume. At March 31, 2011, participation interests totaled $18.4 million, $11.0 million of which was secured by out-of-market properties.

Exhibit II-5 presents a summary of the Bank’s investment portfolio as of December 31, 2009 and 2010 and March 31, 2011. At March 31, 2011, the Bank’s securities portfolio consisted of securities of U.S. government agencies and corporations, securities of state and local governments, and mortgage-backed securities issued by Freddie Mac, Fannie Mae, and Ginnie Mae. The Bank’s securities portfolio is used to invest excess funds for increased yield, manage interest rate risk, and as collateralization for public unit deposits.

At March 31, 2011, the Bank’s securities portfolio represented 27.2% of total assets ($204.3 million), compared to 6.1% of total assets ($42.8 million) at December 31, 2008 as a result of an increase in liquidity due to increased loan sales and reduced loan originations. As of March 31, 2011, $198.6 million of the securities portfolio was classified as available for sale and $5.7 million of the securities portfolio was classified as held to maturity. The securities portfolio was composed of $63.3 million of U.S. government agency securities, $133.4 million of mortgage-backed securities, and $6.9 million of state and local government securities. In addition, at March 31, 2011, the Bank had $4.0 million of other investments, at cost, which consisted solely of FHLB of Atlanta common stock. Securities increased by $22.9 million, or 12.6% to $204.3 million at March 31, 2011 from $181.4 million at December 31, 2010 primarily as a result of proceeds from loan repayments and sales being invested in securities.

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Total securities increased by $84.4 million, or 87.0%, to $181.4 million at December 31, 2010 from $97.0 million at December 31, 2009 primarily as a result of proceeds from loan repayments and sales being invested in securities. For all periods presented, the Bank’s mortgage-backed and related securities did not include any private label issues or real estate mortgage investment conduits.

Liability Composition

Deposits are the Bank’s major external source of funds for lending and investment purposes. Exhibit II-6 presents a summary of the Bank’s deposit composition as of December 31, 2009 and 2010 and March 31, 2011. Total deposits amounted to $616.6 million or 82.1% of total assets and 89.7% of total liabilities at March 31, 2011. Deposits have been held relatively steady over the past two years, totaling $608.5 million and $619.8 million at December 31, 2009 and 2010, respectively.

ASB accepts deposits primarily from individuals and businesses who are located in its primary market area or who have a pre-existing lending relationship with the Bank. ASB relies on competitive pricing, customer service, account features, and branch office locations to attract and retain deposits. Deposit accounts offered include individual and business checking accounts, money market accounts, individual NOW accounts, savings accounts, and certificates of deposit. Non-interest bearing accounts consist of free checking and commercial checking accounts.

The Bank’s deposit base at March 31, 2011 comprised $280.7 million of certificate accounts (45.5% of total deposits), $135.3 million of NOW accounts (22.0%), $133.1 million of money market accounts (21.6%), $45.0 million of non-interest bearing accounts (7.3%), and $22.5 million of savings accounts (3.6%). Jumbo certificates of deposit, which have minimum balances of $100,000, amounted to $100.7 million or 16.3% of total deposits at March 31, 2011.

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Non-interest bearing and NOW accounts increased by 37.4% and 10.1% for the years ended December 31, 2009 and 2010, respectively, and increased 0.3% during the three months ended March 31, 2011. The increases in demand deposit and NOW accounts were primarily due to customers moving funds out of certificates of deposit and the Bank’s marketing efforts to attract non-interest bearing deposit and NOW accounts. Certificates of deposit decreased by $6.7 million during the three months ended March 31, 2011 and decreased $20.9 million in 2010 from $308.3 million at December 31, 2009 to $287.4 million at December 31, 2010. The decrease reflects management’s continued focus on reducing deposit interest rates to improve the Bank’s net interest margin. A portion of these certificate accounts moved to other types of interest-bearing deposits with the Bank including money market accounts. The Bank’s need for loan funding, ability to invest these funds for a positive return, and consideration of other customer relationships influences its willingness to match competitor’s rates to retain these accounts, which ASB has not been willing to do in recent periods.

The Bank utilizes borrowings as a supplemental, cost-effective source of funds when they can be invested at a positive interest rate spread or to meet asset-liability management objectives. The Bank’s borrowings consist of FHLB advances, federal funds purchased, and other short-term borrowings. The Bank’s FHLB advances are fixed-rate borrowings that at the option of the FHLB can be converted to variable rates. If the FHLB exercises its options to convert the fixed-rate advances to variable rates, then ASB can accept the new terms or repay the advance without any prepayment penalty.

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As of March 31, 2011, the Bank had $60.0 million in FHLB advances outstanding and the ability to borrow an additional $55.3 million of FHLB advances. The average balance of FHLB advances outstanding amounted to $60.0 million for 2009, 2010, and the three months ended March 31, 2011. Also, as of March 31, 2011, the Bank had $1.4 million of borrowings through securities sold under agreements to repurchase. The weighted average interest rate of outstanding FHLB advances at March 31, 2011 was 4.03%. The weighted average interest rate of outstanding repurchase agreements at March 31, 2011 was 0.22%.

Equity Capital

ASB has historically maintained solid capital levels. Due to a net operating loss of $9.5 million for the year ended December 31, 2010, the Bank’s equity capital declined from $73.6 million or 9.83% of total assets at year-end 2010 to $62.9 million or 8.38% of total assets at year-end 2010. As of March 31, 2011, the Bank’s equity capital of $63.3 million measured 8.43% of total assets.

ASB’s capital level remains strong in comparison to minimum regulatory requirements. The Bank’s regulatory capital ratios of Tier 1 Leverage Capital, Tier 1 Risk-based Capital, and Total Risk-based Capital were 8.60%, 13.67%, and 14.94%, respectively, as of March 31, 2011. In comparison, the minimum regulatory requirements under FDIC guidelines were 4.00%, 4.00%, and 8.00%, and the threshold requirements for regulatory “well capitalized” levels were 5.00%, 6.00%, and 10.00%, respectively. Based on these regulatory capital ratios and requirements, the Bank was considered “well capitalized” as of March 31, 2011.

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Income and Expense Trends

Table 3 displays the main components of ASB’s earnings performance for the years ended December 31, 2006 to 2010 and the three months ended March 31, 2010 and 2011. Table 4 presents a summary of selected operating ratios. Table 5 displays the Bank’s principal income and expense ratios as a percent of average assets. Table 6 presents the Bank’s weighted average yields on interest-earning assets and weighted average costs of interest-bearing liabilities.

General Overview

ASB historically had exhibited a record of above-average profitability, reflecting a trend of relatively stable net interest margins, consistently high levels of non-interest income, and favorable efficiency ratios. The Bank’s return on average assets (“ROA”) indicated an average level of 0.71% for the ten-year period from 2000 to 2009. However, from 2006 to 2010, the Bank’s ROA declined continually from 0.90% in 2006 and 0.75% in 2007 to 0.37% in 2008 and 0.21% in 2009, before dropping to negative 1.25% for 2010. The Bank’s downward trend in profitability was caused by a decreasing net interest margin and increased levels of loan loss provisions. The net loss of $9.5 million sustained in 2010 was attributable to an increased provision for loan losses amounting to $22.4 million.

Three Months Ended March 31, 2010 and 2011

Net income was $585,000 for the quarter ended March 31, 2011 as compared to $430,000 for the quarter ended March 31, 2010. The annualized ROA improved to 0.32% for the first quarter of 2011 versus 0.23% for the 2010 period. The $155,000 or 36.0% earnings increase in the 2011 period was primarily due to a $1.2 million decrease in the loan loss provision, partially offset by decreases of $549,000 in net interest income and $378,000 in non-interest income.

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Table 3

Income Statement Summary

For the Years Ended December 31, 2006 to 2010

And the Three Months Ended March 31, 2010 and 2011

(Dollars in Thousands)

	Three Months Ended March 31,				Year Ended December 31,
	2011		2010		2010			2009		2008		2007		2006
Interest and dividend income	$	7,382	$	8,678	$	32,815		$	35,654	$	36,683	$	39,091	$	35,126
Interest expense		2,304		3,051		11,444			14,772		16,745		19,116		15,751
Net interest income		5,078		5,627		21,371			20,882		19,938		19,975		19,375
Provision for loan losses		657		1,859		22,419			4,655		3,049		932		647
Net interest income (loss) after provision for loan losses		4,421		3,768		(1,048	)		16,227		16,889		19,043		18,728
Non-interest income		1,680		2,058		7,683			7,166		5,286		5,686		5,920
Non-interest expense		5,232		5,154		22,167			21,071		18,361		17,395		16,402
Income (loss) before income taxes		869		672		(15,532	)		2,322		3,814		7,334		8,246
Income tax provision (benefit)		284		242		(6,074	)		791		1,382		2,642		2,983
Net income (loss)	$	585	$	430	$	(9,458	)	$	1,531	$	2,432	$	4,692	$	5,263

Source: Asheville Savings Bank, preliminary prospectus.

Net interest income decreased by $549,000, or 9.8%, to $5.1 million for the three months ended March 31, 2011 as compared to the three months ended March 31, 2010. Total interest income decreased by $1.3 million, or 14.9%, to $7.4 million for the three months ended March 31, 2011 as compared to the three months ended March 31, 2010, primarily as a result of a 64 basis point decrease in the weighted average yield on interest-earning assets from 4.89% to 4.25%. Increased concentrations of securities versus loans in the generally lower interest rate environment contributed to the lower yield on earning assets. The average balance of investment securities and mortgage-backed securities increased $26.8 million and $56.9 million, or 77.5% and 85.5%, respectively, to $61.4 million and $123.4 million, respectively, for the three months ended March 31, 2011 as compared to the three months ended March 31, 2010, primarily as a result of the reinvestment in securities of proceeds from loan repayments and sales.

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Table 4

Selected Operating Ratios

As of or For the Years Ended December 31, 2006 to 2010

And As of or For the Three Months Ended March 31, 2010 and 2011

	Three Months Ended March  31,						Year Ended December 31,
	2011			2010			2010			2009			2008			2007			2006
Performance Ratios (1)
Return on average assets		0.32	%		0.23	%		(1.25	)%		0.21	%		0.37	%		0.75	%		0.90	%
Return on average equity		3.73			2.32			(13.01	)		2.14			3.33			6.70			8.10
Interest rate spread (2)		2.76			2.93			2.73			2.69			2.74			2.83			3.06
Net interest margin (3)		2.92			3.17			2.95			2.98			3.15			3.33			3.49
Other expenses to average assets		2.85			2.78			2.92			2.88			2.77			2.77			2.81
Efficiency ratio (4)		77.42			66.95			76.18			75.07			72.79			67.79			64.84
Capital Ratios
Tangible capital as a percent of adjusted total assets		8.43			9.73			8.38			9.83			9.92			11.13			11.19
Tier 1 leverage capital as a percent of average adjusted total assets		8.60			10.13			8.33			10.13			10.98			11.16			11.34
Tier 1 risk-based capital as a percent of average risk-weighted assets		13.67			13.78			13.04			13.72			13.84			15.42			15.59
Total risk-based capital as a percent of average risk-weighted assets		14.94			15.03			14.31			14.98			15.03			16.51			16.67
Asset Quality Ratios
Allowance for loan losses as a percent of total loans		2.60			1.54			2.49			1.50			1.08			0.97			0.95
Allowance for loan losses as a percent of non-performing loans		89.02			51.75			94.43			54.23			180.32			103.00			192.45
Net charge-offs to average outstanding loans during the period		0.58			1.22			3.37			0.34			0.31			0.10			0.14
Non-performing loans as a percent of total loans		2.92			2.98			2.68			2.77			0.60			0.94			0.50
Non-performing assets as a percent of total assets		3.29			2.82			3.21			2.71			1.39			0.77			0.40
Other Data
Number of offices		13			13			13			13			13			12			12
Number of deposit accounts		71,389			64,965			72,297			64,623			55,572			49,614			49,654
Number of loans		10,356			12,871			10,417			13,766			15,449			21,816			21,585

(1) Performance ratios for the three months ended March 31, 2010 and 2011 are annualized.

(2) Represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities. Tax exempt income is reported on a tax equivalent basis using a federal marginal tax rate of 34%.

(3) Represents net interest income as a percent of average interest-earning assets. Tax exempt income is reported on a tax equivalent basis using a federal marginal tax rate of 34%.

(4) Represents other expenses divided by the sum of net interest income and other income.

Source: Asheville Savings Bank, preliminary prospectus.

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The provision for loan losses was $657,000 for the three months ended March 31, 2011 compared to $1.9 million for the three months ended March 31, 2010. The decrease in the provision was due to fewer charge-offs on the loan portfolio and lower loan balances. The allowance for loan losses had been bolstered significantly during the year ended December 31, 2010. The allowance for loan losses as a percent of total loans was 2.60% at March 31, 2011, as compared to 1.54% at March 31, 2010. The allowance for loan losses as a percent of non-performing loans was 89.0% at March 31, 2011, as compared to 51.8% at March 31, 2010.

Non-interest income decreased $378,000 to $1.7 million during the March 2011 quarter from $2.1 million for the March 2010 quarter. Factors that contributed to the decrease in non-interest income during the 2011 period were no gains on the sale of securities for the March 2011 quarter compared to gains on the sale of securities of $486,000 for the March 2010 quarter and a $96,000 decrease in fees on deposit and other service charge income, partially offset by a $33,000 increase in fees related to debit cards and a $157,000 increase in mortgage banking income resulting from an increase in refinanced mortgage loans that were sold during the period.

Non-interest expense increased $78,000 for the three months ended March 31, 2011 as compared to the three months ended March 31, 2010. Foreclosed property expenses increased $72,000 and salary and benefits expense decreased by $54,000 primarily due to a reduction in accruals under the management incentive plan. Data processing fees increased by $66,000 during the three months ended March 31, 2011 as a result of expenses related to additional data processing services, and advertising expenses decreased $103,000 during the three months ended March 31, 2011 compared to the three months ended March 31, 2010. The annualized ratio of non-interest expense to average assets increased from 2.78% to 2.85% over the observed periods.

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Table 5

Income Statement Ratios

For the Years Ended December 31, 2006 to 2010

And the Three Months Ended March 31, 2010 and 2011

(Percent of Average Assets)

	Three Months Ended March 31,						Year Ended December 31,
	2011(1)			2010(1)			2010			2009			2008			2007			2006
Interest and dividend income		4.02	%		4.68	%		4.32	%		4.88	%		5.53	%		6.22	%		6.02	%
Interest expense		1.25			1.65			1.51			2.02			2.52			3.04			2.70
Net interest income		2.77			3.03			2.81			2.86			2.01			3.18			3.32
Provision for loan losses		0.36			1.00			2.95			0.64			0.46			0.15			0.11
Net interest income (loss) after provision for loan losses		2.41			2.03			(0.14	)		2.22			2.55			3.03			3.21
Non-interest income		0.92			1.11			1.01			0.98			0.80			0.91			1.01
Non-interest expense		2.85			2.78			2.92			2.88			2.77			2.77			2.81
Income (loss) before income taxes		0.47			0.36			(2.05	)		0.32			0.58			1.17			1.41
Income taxes		0.15			0.13			(0.80	)		0.11			0.21			0.42			0.51
Net income (loss)		0.32	%		0.23	%		(1.25	)%		0.21	%		0.37	%		0.75	%		0.90	%

(1) Ratios for the three months ended March 31, 2010 and 2011 are annualized.

Source: Asheville Savings Bank, preliminary prospectus; Feldman Financial calculations.

Years Ended December 31, 2009 and 2010

ASB incurred a net loss of $9.5 million for the year ended December 31, 2010 compared to net income of $1.5 million for the year ended December 31, 2009, primarily due to a $17.8 million increase in the provision for loan losses to $22.4 million in 2010 versus $4.7 million in 2009. The significant increase in the provision for loan losses was due to an increase of $16.7 million in net loan charge-offs from $2.0 million in 2009 to $18.7 million in 2010. The Bank’s primary source of income during each of the years ended December 31, 2009 and 2010 was net interest income, which increased from $20.9 million at December 31, 2009 to $21.4 million at December 31, 2010. Non-interest income increased by $517,000 during the year ended December 31, 2010, while non-interest expense increased by $1.1 million during 2010.

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Net interest income increased by $489,000, or 2.3%, for the year ended December 31, 2010 as compared to the year ended December 31, 2009, primarily due to a decrease in interest on loans, which was offset by an increase in income from securities, as well as a decrease in interest expense. Total interest income decreased by $2.8 million, or 8.0%, as loan interest income decreased by $4.2 million, or 12.8%, during the year ended December 31, 2010, due primarily to a decrease in average loan balances of $44.0 million, or 7.2%, primarily because loan charge-offs and loan repayments were not replaced by new loan originations, and a 32 basis point decrease in the yield earned on loans during fiscal 2010. Income from securities increased by $1.3 million primarily due to an increase in the average balance of investment securities and mortgage-backed and related securities of $31.4 million and $37.4 million, respectively, the effect of which was partially offset by a decrease in the yield earned on investment securities and mortgage-backed and related securities of 139 basis points and 103 basis points, respectively. The increased balance of investment securities and mortgage-backed and related securities was primarily due to the reinvestment into securities of proceeds from loan repayments and sales and as well as deposit growth. Total interest expense decreased by $3.3 million, or 22.5%, during the year ended December 31, 2010, primarily resulting from a 61 basis point decrease in the cost of interest-bearing liabilities, the effect of which was partially offset by a $22.6 million, or 3.7%, increase in average interest-bearing liabilities. Interest-bearing liabilities increased due primarily to an increase in the average balance of deposits of $25.5 million, or 4.6%, principally due to growth in NOW and money market accounts. The cost of interest bearing liabilities decreased primarily due to a decrease of 68 basis points in the cost of deposits. The decrease in the cost of deposits was due primarily to the Bank’s continued focus on reducing deposit interest rates by not aggressively competing for certificates of deposit.

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FELDMAN FINANCIAL ADVISORS, INC.

Table 6

Yield and Cost Summary

For the Years Ended December 31, 2008 to 2010

And the Three Months Ended March 31, 2010 and 2011

And as of March 31, 2011

	As of March  31, 2011			Three Mos. Ended March 31,						Year Ended December 31,
				2011			2010			2010			2009			2008
Weighted Average Yields
Interest-bearing deposits		0.25	%		0.24	%		0.26	%		0.27	%		0.24	%		2.35	%
Loans receivable (1)		4.96			5.05			5.26			5.07			5.39			6.05
Investment securities		2.51			2.56			3.90			3.13			4.52			5.77
Mortgage-backed and related securities		2.84			2.57			3.74			3.07			4.09			4.73
Other interest-earning assets		0.79			0.82			0.30			0.38			0.20			4.16
Total interest-earning assets		4.18			4.25			4.89			4.52			5.09			5.79
Weighted Average Costs
NOW accounts		0.81			0.95			1.62			1.39			1.58			1.12
Money market accounts		0.56			0.55			0.96			0.84			1.24			1.99
Savings accounts		0.31			0.32			0.38			0.35			0.40			0.50
Certificates of deposit		1.70			1.73			2.18			2.00			2.96			4.01
Total interest-bearing deposits		1.17			1.22			1.75			1.56			2.24			2.96
FHLB advances		4.04			4.03			4.03			4.03			4.03			3.77
Overnight and short-term borrowings		0.22			0.47			0.27			0.25			0.37			3.40
Total interest-bearing liabilities		1.44			1.49			1.96			1.79			2.40			3.05
Net interest spread (2)		2.74			2.76			2.93			2.73			2.69			2.74
Net interest margin (3)		NA			2.92			3.17			2.95			2.98			3.15

(1) Includes non-accrual loans for the respective periods.

(2) Difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.

(3) Net interest income as a percentage of average interest-earning assets.

Source: Asheville Savings Bank, preliminary prospectus.

The provision for loan losses was increased to $22.4 million for the year ended December 31, 2010 as compared to $4.7 million for the year ended December 31, 2009. The increase in the provision was necessary to replenish the allowance for loan losses that was depleted due to $18.7 million in net charge-offs of non-performing loans in 2010, as well as management’s efforts to increase the allowance for loan losses in response to continued elevated levels of non-performing loans, which increased from $3.6 million at December 31, 2008 to $16.6 million and $13.4

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FELDMAN FINANCIAL ADVISORS, INC.

million at December 31, 2009 and 2010, respectively. Net charge-offs of $2.1 million and $18.7 million were recognized in 2009 and 2010, respectively. The allowance is determined based upon management’s analysis of historical loss, as well as updated calculations for allowances needed for impaired loans. Among the qualitative risk factors that the Bank considers in determining the loss percentages include current industry conditions, unemployment rates, the levels and trends of delinquencies, percentage of classified loans to total loans, charge-offs, bankruptcy filings, and collateral values in its primary market area.

Non-interest income increased $517,000, or 7.2%, to $7.7 million in 2010 as compared to $7.2 million for 2009. The increase in non-interest income was primarily the result of an increase of $259,000 in gains realized from sales of investment securities, a $178,000 increase in income from debit card services, and a $76,000 increase in deposit and other service charge income, partially offset by a decrease of $14,000 in mortgage banking income. The ratio of non-interest income to average assets increased moderately from 0.98% in 2009 to 1.01% in 2010.

Non-interest expense increased by $1.1 million or 5.2% to $22.2 million for 2010 as compared to $21.1 million for 2009. The primary factors for the increase were a $2.0 million increase in foreclosed property expenses as a result of higher provisions for write-downs of foreclosed properties and a $126,000 increase in professional and outside services, partially offset by a $722,000 decrease in salaries and employee benefits due primarily to the decision to limit accrued payouts in 2010 under the Bank’s management incentive and long-term incentive plans, as well as a $377,000 decrease in federal deposit insurance premiums due to a special assessment in 2009. The ratio of non-interest expense to average assets increased moderately from 2.88% in 2009 to 2.92% for 2010.

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FELDMAN FINANCIAL ADVISORS, INC.

Interest Rate Risk Management

ASB seeks to manage the interest rate sensitivity of its interest-bearing liabilities and interest-earning assets in an effort to minimize the adverse effects of changes in the interest rate environment. Deposit accounts typically react more quickly to changes in market interest rates than mortgage loans because of the shorter maturities of deposits. As a result, sharp increases in interest rates may adversely affect the Bank’s earnings while decreases in interest rates may beneficially affect its earnings. To reduce the potential volatility of its earnings, the Bank has sought to improve the match between asset and liability maturities and rates, while maintaining an acceptable interest rate spread.

ASB’s strategy for managing interest rate risk emphasizes: (i) adjusting the maturities of borrowings; (ii) adjusting the investment portfolio mix and duration; and (iii) generally selling in the secondary market substantially all newly originated fixed-rate one- to four-family residential mortgage loans. The Bank currently does not participate in hedging programs, interest rate swaps, or other activities involving the use of derivative financial instruments.

Management actively monitors and manages the Bank’s interest rate risk exposure. The Bank has an Asset-Liability Management Committee, which includes members of management, to communicate, coordinate, and control all aspects involving asset-liability management. The committee establishes and monitors the volume, maturities, pricing, and mix of assets and funding sources with the objective of managing assets and funding sources to provide results that are consistent with liquidity, growth, risk limits, and profitability goals. The Bank’s overriding goal is to manage asset and liability positions to moderate the effects of interest rate fluctuations on net interest and net income.

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FELDMAN FINANCIAL ADVISORS, INC.

The Bank measures its interest rate sensitivity based on the net portfolio value (“NPV”) of market equity as facilitated by the regulatory analytical framework. NPV reflects the simulated equity of the Bank as obtained by estimating the economic present value of its assets, liabilities, and off-balance sheet items under different interest rate scenarios. Table 7 summarizes the interest rate sensitivity of the Bank’s NPV and projected net interest income as of March 31, 2011, assuming instantaneous and sustained parallel shifts in the U.S. Treasury yield curve of 100 to 300 basis points either up or down in various increments. Because of the current level of interest rates, scenarios of down 200-plus basis points have not been considered.

As shown in Table 7 the Bank’s NPV and projected net interest income would be negatively impacted by an immediate increase or decrease in interest rates from current levels. Table 7 indicates that the Bank’s NPV was $89.1 million as of March 31, 2011. Based upon the assumptions utilized, an immediate 100 basis point increase in market interest rates would result in a $5.4 million decrease in the Bank’s NPV and $715,000 decrease in projected net interest income. An immediate 200 basis point increase in market interest rates would result in a $13.5 million decrease in the Bank’s NPV and a $1.5 million decrease in projected net interest income. Similarly, an immediate 100 basis point decrease in market interest rates would result in a $7.0 million decrease in the Bank’s NPV and a $919,000 decrease in projected net interest income.

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FELDMAN FINANCIAL ADVISORS, INC.

Table 7

Interest Rate Risk Analysis

As of March 31, 2011

(Dollars in Thousands)

	Net Portfolio Value of Equity								Projected Net Interest Income
Change in Interest Rates(1) (basis points)	Estimated NPV(2)		Change from Base (000s)			Change from Base (%)			Net Interest Income (000s)		Change from Base (000s)			Change from Base (%)
+ 300 b.p.	$	68,639	$	(20,425	)		(22.9	)%	$	20,292	$	(1,992	)		(8.9	)%
+ 200 b.p.		75,529		(13,536	)		(15.2	)%		20,745		(1,539	)		(6.9	)%
+ 100 b.p.		83,679		(5,385	)		(6.0	)%		21,569		(715	)		(3.2	)%
0 b.p.		89,065		—			—			22,284		—			—
- 100 b.p.		82,107		(6,957	)		(7.8	)%		21,365		(919	)		(4.1	)%

⁽¹⁾  Assumes instantaneous and sustained parallel shifts in interest rates.

⁽²⁾  NPV is the discounted present value of expected cash flows from assets, liabilities, and off-balance sheet items.

Source: Asheville Savings Bank, preliminary prospectus.

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FELDMAN FINANCIAL ADVISORS, INC.

Asset Quality

Table 8 summarizes the Bank’s total non-performing assets (“NPAs”) as of December 31, 2006 to 2010 and March 31, 2011. Historically, ASB had exhibited an excellent record of asset quality until experiencing an upturn in NPAs during 2009. The Bank’s ratio of non-performing assets to total assets increased from 1.39% at year-end 2008 to 2.71% and 3.21% at year-end 2009 and 2010, respectively. As of March 31, 2011, the ratio of NPAs to assets was 3.29%. The Bank experienced increases in non-accrual loans and foreclosed assets in its portfolios of commercial mortgage, construction and land development, and residential mortgage loans. As of March 31, 2011, the Bank’s non-performing assets totaled $24.7 million and comprised $10.5 million of real estate owned (“REO”), $5.3 million in commercial mortgages, $4.7 million of commercial construction and land development loans, and $3.3 million of residential mortgages. In addition to non-performing assets, the Bank also had $11.6 million of performing troubled debt restructurings, which are loans that have been modified through term extensions or other concessions to help borrowers stay current and avoid foreclosure.

In order to reflect the increased risk inherent in the loan portfolio, the Bank increased its loan loss provision from $4.7 million in 2009 to $22.4 million for 2010, reflecting the increased levels of non-performing assets and loan charge-offs. Total charge-offs increased from $2.2 million in 2009 to $18.9 million in 2010, including $7.9 million of commercial construction and land development loans and $6.1 million of commercial mortgage loans. As a result, the loan loss allowance increased by $3.7 million from $9.0 million or 1.50% of total loans at year-end 2009 to $12.7 million or 2.49% of total loans at year-end 2010. At March 31, 2011, the loan loss allowance was $12.6 million, measuring 2.60% of total loans and 89.0% of non-performing loans.

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FELDMAN FINANCIAL ADVISORS, INC.

Table 8

Non-performing Assets Summary

As of December 31, 2006 to 2010 and March 31, 2011

(Dollars in Thousands)

	March 31,			December 31,
	2011			2010			2009			2008			2007			2006
Non-accrual loans
Commercial:
Construction and land development	$	4,744		$	5,205		$	438		$	—		$	2,949		$	93
Commercial mortgage		5,319			3,810			6,666			—			—			787
Other commercial real estate		—			—			—			—			—			—
Commercial and industrial		308			377			1,408			—			—			—
Total non-accrual commercial loans		10,371			9,392			8,512			—			2,949			880
Non-commercial:
Construction and land development		280			553			456			—			—			—
Residential		3,259			3,194			5,558			—			—			—
Revolving mortgage		239			191			489			—			—			—
Consumer		41			94			1,463			—			37			33
Total non-accrual non-commercial loans		3,819			4,032			7,966			—			37			33
Total non-accrual loans		14,190			13,424			16,478			—			2,986			913
Accruing loans past due 90 days or more
Commercial:
Construction and land development		—			—			—			12			13			550
Commercial mortgage		—			—			—			—			—			38
Other commercial real estate		—			—			—			—			—			—
Commercial and industrial		—			—			—			68			3			9
Total accruing comm. loans past due 90+ days		—			—			—			80			16			597
Non-commercial:
Construction and land development		—			—			—			374			—			—
Residential		—			—			91			1,790			849			301
Revolving mortgage		—			—			—			525			456			168
Consumer		—			—			15			782			619			431
Total accruing non-comm. past due 90+ days		—			—			106			3,471			1,924			900
Total accruing loans past due 90+ days		—			—			106			3,551			1,940			1,497
Total non-performing loans (non-accrual and 90 days or more past due)		14,190			13,424			16,584			3,551			4,926			2,410
Real estate owned		10,506			10,650			3,699			6,272			—			—
Other non-performing assets		—			—			—			—			—			—
Total non-performing assets		24,696			24,074			20,283			9,823			4,926			2,410
Performing troubled debt restructurings (1)		11,575			18,246			21,216			—			199			513
Performing troubled debt restructurings and total non-performing assets	$	36,271		$	42,230		$	41,499		$	9,823		$	5,125		$	2,923
Total non-performing loans to total loans		2.92	%		2.68	%		2.77	%		0.60	%		0.94	%		0.50	%
Total non-performing loans to total assets		1.89	%		1.79	%		2.21	%		0.50	%		0.77	%		0.40	%
Total non-performing assets and troubled debt restructurings to total assets		3.29	%		3.21	%		2.71	%		1.39	%		0.77	%		0.40	%
Performing troubled debt restructurings and total non-performing assets to total assets		4.83	%		5.64	%		5.54	%		1.39	%		0.80	%		0.49	%

(1) Performing troubled debt restructurings do not include troubled debt restructurings that remain on non-accrual status and are included in non-accrual loans above.

Source: Asheville Savings Bank, preliminary prospectus.

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FELDMAN FINANCIAL ADVISORS, INC.

Table 9

Allowance for Loan Loss Summary

For the Years Ended December 31, 2006 to 2010

And the Three Months Ended March 31, 2011

(Dollars in Thousands)

	Three Months Ended March  31,						Year Ended December 31,
	2011			2010			2010			2009			2008			2007			2006
Allowance for loan losses at beginning of period	$	12,676		$	8,994		$	8,994		$	6,403		$	5,074		$	4,638		$	4,640
Provision for loan losses		657			1,859			22,419			4,655			3,049			931			647
Charge-offs
Commercial:
Construction and land development		23			930			7,926			—			488			—			—
Commercial mortgage		109			—			6,074			—			—			—			—
Commercial and industrial		14			160			692			214			—			—			—
Total commercial loans		146			1,090			14,692			214			488			—			—
Non-commercial:
Constr. and land dev. (1-4 family residential)		78			148			351			94			—			—			—
Residential mortgage		181			131			1,767			82			—			—			17
Revolving mortgage		274			120			919			199			—			—			—
Consumer		125			328			1,134			1,604			1,405			681			899
Total non-commercial loans		658			727			4,171			1,979			1,405			681			916
Total charge-offs		804			1,817			18,863			2,193			1,893			681			916
Recoveries
Commercial:
Construction and land development		—			—			—			—			31			—			—
Commercial mortgage		—			—			—			—			—			—			—
Other commercial real estate		—			—			—			—			—			—			—
Commercial and industrial		66			2			12			9			—			—			—
Total commercial loans		66			2			12			9			31			—			—
Non-commercial:
Constr. and land dev. (1-4 family residential)		1			—			—			—			—			—			—
Residential mortgage		1			—			—			—			—			—			—
Revolving mortgage		7			—			—			1			—			—			—
Consumer		28			36			115			120			142			185			237
Total non-commercial loans		37			36			115			121			142			185			237
Total recoveries		103			38			127			130			173			185			237
Net charge-offs		701			1,779			18,737			2,064			1,720			496			679
Allowance for loan losses at end of period	$	12,632		$	9,074		$	12,676		$	8,994		$	6,403		$	5,074		$	4,638
Allowance for loan losses to non-performing Loans		89.02	%		51.75	%		94.43	%		54.23	%		180.32	%		103.00	%		192.45	%
Allowance for loan losses to total loans outstanding at the end of the period		2.60	%		1.54	%		2.49	%		1.50	%		1.08	%		0.97	%		0.95	%
Net charge-offs to average loans outstanding during the period		0.58	%		1.22	%		3.37	%		0.34	%		0.31	%		0.10	%		0.13	%

Source: Asheville Savings Bank, preliminary prospectus.

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FELDMAN FINANCIAL ADVISORS, INC.

Office Properties

ASB currently conducts business from its 13 branch offices. Exhibit II-8 provides certain information relating to the Bank’s office properties as of March 31, 2011. A map of the Bank’s branch office network is presented below. Six branch offices are located in Buncombe County, two in Henderson County, and one each in Madison, McDowell, and Transylvania counties.

Table 10 provides deposit data for the Bank’s branch offices from June 30, 2005 to June 30, 2010. The Bank’s deposits increased by a compound annual growth rate (“CAGR”) of 7.0% over this period with the bulk of the deposit increase occurring in Buncombe and Henderson counties. Approximately 69% of the Bank’s deposits as of June 30, 2010 were maintained in Buncombe County branches, followed by approximately 11% in Henderson County branches and 9% in the McDowell County branch.

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FELDMAN FINANCIAL ADVISORS, INC.

Table 10

Branch Office Deposit Data

		June 30,						‘09-‘10			‘05-‘10
		2005		2009		2010		CAGR			CAGR
Address	City	($000s)		($000s)		($000s)		(%)			(%)
Buncombe County
11 Church Street	Asheville	$	59,183	$	84,627	$	96,621		14.17			10.30
1879 Hendersonville Road	Asheville		47,906		69,133		67,390		(2.52	)		7.06
300 West State Street	Asheville		47,262		56,356		59,861		6.22			4.84
10 South Tunnel Road	Asheville		44,994		54,068		54,836		1.42			4.04
778 Merrimon Avenue	Asheville		43,241		57,035		59,696		4.67			6.66
1012 Patton Avenue	Asheville		48,265		50,839		50,702		(0.27	)		0.99
5 Old Eastwood Village Blvd.	Asheville		13,099		26,538		25,630		(3.42	)		14.37
907 Smoky Park Highway	Candler		7,771		23,183		27,129		17.02			28.41
Henderson County
601 North Main Street	Hendersonville		34,630		51,882		55,683		7.33			9.96
3551 Hendersonville Road	Fletcher		—		7,284		9,368		28.61			NA
Madison County
105 North Main Street	Mars Hill		29,212		36,874		38,045		3.18			5.43
McDowell County
162 North Main Street	Marion		48,847		55,979		54,694		(2.30	)		2.29
Transylvania County
2 Market Street	Brevard		12,014		29,482		28,355		(3.82	)		18.74
Deposits By County ($000s)
Buncombe County			303,950		398,596		414,736		4.05			6.41
Henderson County			34,630		59,166		65,051		9.95			13.44
Madison County			29,212		36,874		38,045		3.18			5.43
McDowell County			48,847		55,979		54,694		(2.30	)		2.29
Transylvania County			12,014		29,482		28,355		(3.82	)		18.74
Total Deposits		$	428,653	$	580,097	$	600,881		3.58			6.99
Deposits By County (%)
Buncombe County			70.91		68.71		69.02
Henderson County			8.08		10.20		10.83
Madison County			6.81		6.36		6.33
McDowell County			11.40		9.65		9.10
Transylvania County			2.80		5.08		4.72
Total Deposits			100.00		100.00		100.00

Source: SNL Financial.

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FELDMAN FINANCIAL ADVISORS, INC.

Market Area

Overview of Market Area

ASB is headquartered in Asheville, North Carolina, the county seat of Buncombe County, and considers its primary market area to comprise Buncombe, Madison, McDowell, Henderson, and Transylvania counties in Western North Carolina and the surrounding areas. Asheville is the largest city in Western North Carolina based on population and Asheville and Buncombe County are the principal city and county, respectively, in the Asheville Metropolitan Statistical Area (“MSA”), which is composed of Buncombe, Haywood, Henderson, and Madison counties. In addition to the Asheville MSA, the Greater Asheville Area is generally considered to include Jackson, McDowell, Polk, Rutherford, Transylvania, and Yancey counties. ASB operates a branch network encompassing 13 offices located in the Asheville MSA. The Bank has eight branch offices in Buncombe County, two branches in Henderson County, and one branch each in Madison, McDowell, and Transylvania counties.

Asheville is located in the heart of the Blue Ridge Mountains, which are part of the Appalachian Mountain range. The city is positioned at the confluence of the French Broad River and the Swannanoa River, and situated on a plateau in the Blue Ridge Mountains. Asheville is both a valley and mountain town, and its climate is mild and temperate with four distinct seasons. The surrounding mountains insulate the valley and are responsible for the moderate weather, which allows residents to enjoy outdoor activities year round. In addition, the Asheville metropolitan area has a vibrant cultural and arts community that parallels that of many larger cities in the United States and is home to a number of historical attractions, the most prominent of which is the Biltmore Estate, a historic mansion with gardens and a winery that draws

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FELDMAN FINANCIAL ADVISORS, INC.

approximately 900,000 tourists each year. Due to its scenic location and diverse cultural and historical offerings, the Asheville MSA has become a popular destination for tourists, which has historically positively impacted the local economy. Furthermore, affordable housing prices, combined with the region’s favorable climate, scenic surroundings and cultural attractions, have also made the Asheville MSA an increasingly attractive destination for retirees seeking to relocate from other parts of the United States.

Table 11 presents comparative demographic data for the United States, the state of North Carolina, and the Asheville MSA. Also included in Table 11 is demographic information for McDowell and Transylvania counties. The Asheville MSA had a population of approximately 421,000 in 2010, which represented an increase of 14.0% over the prior decade and surpassed the nationwide population growth rate of 10.6%. Over the five-year period from 2010 to 2015, the population in the Asheville MSA is projected to increase by 5.5% to approximately 444,000. The population growth has been fueled by in-migration of residents from the retiring baby-boom generation. The median age in the Asheville MSA is 43.3 years as compared to the national median of 37.0 years. Within the Asheville MSA, the most populous county is Buncombe County with a total of approximately 235,000 residents, followed by Henderson County with nearly 107,000 residents. Buncombe County’s population increased by 13.9% from 2000 to 2010 and is projected to expand by 5.7% from 2010 to 2015. Henderson County’s population increased by 19.9% over the past decade and is forecast to increase by 7.8% from 2010 to 2015. At the present time, ASB is emphasizing expansion of its operations in Henderson County, where it operates two branch offices. Smaller population totals were evident in McDowell County (45,000), Transylvania County (31,000), and Madison County (21,000) with projected growth rates over the next five years in the 2% to 3% range.

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FELDMAN FINANCIAL ADVISORS, INC.

Table 11

Selected Demographic Data

	United			North			Asheville			McDowell			Transylvania
	States			Carolina			MSA			County			County
Total Population
2010 - Current		311,212,863			9,552,054			420,918			44,846			31,327
2015 - Projected		323,209,391			10,345,227			444,059			45,775			32,234
% Change 2000-10		10.59	%		18.67	%		14.02	%		6.39	%		6.79	%
% Change 2010-15		3.85	%		8.30	%		5.50	%		2.07	%		2.90	%
Age Distribution, 2010
0 - 14 Age Group		20.08	%		19.59	%		16.81	%		18.40	%		14.80	%
15 - 34 Age Group		27.22	%		26.71	%		22.12	%		23.23	%		20.65	%
35 - 54 Age Group		28.03	%		29.08	%		28.52	%		29.56	%		25.03	%
55- 69 Age Group		15.54	%		15.96	%		19.72	%		18.13	%		22.96	%
70+ Age Group		9.12	%		8.66	%		12.83	%		10.67	%		16.56	%
Median Age (years)		37.0			37.6			43.3			40.6			47.9
Total Households
2010 - Current		116,761,140			3,761,099			179,985			18,045			13,543
2015 - Projected		121,359,607			4,088,898			191,081			18,530			14,046
% Change 2000-10		10.69	%		20.09	%		16.65	%		8.68	%		9.93	%
% Change 2010-15		3.94	%		8.72	%		6.16	%		2.69	%		3.71	%
Median Household Income
2010 - Current	$	54,442		$	50,887		$	45,954		$	40,053		$	49,512
2015 - Projected	$	61,189		$	57,697		$	53,092		$	45,345		$	55,171
% Change 2000-10		29.12	%		29.85	%		26.51	%		23.53	%		27.83	%
% Change 2010-15		12.39	%		13.38	%		15.53	%		13.21	%		11.43	%
Average Household Income
2010 - Current	$	70,173		$	63,346		$	55,978		$	47,313		$	56,794
2015 - Projected	$	79,340		$	70,818		$	61,889		$	51,854		$	62,425
% Change 2000-10		23.88	%		23.66	%		19.16	%		17.27	%		17.87	%
% Change 2010-15		13.06	%		11.80	%		10.56	%		9.60	%		9.91	%
Per Capita Income
2010 - Current	$	26,739		$	25,349		$	24,288		$	19,483		$	25,015
2015 - Projected	$	30,241		$	28,417		$	27,010		$	21,487		$	27,712
% Change 2000-10		23.87	%		24.83	%		21.06	%		20.94	%		20.46	%
% Change 2010-15		13.10	%		12.10	%		11.21	%		10.29	%		10.78	%

41

FELDMAN FINANCIAL ADVISORS, INC.

Table 11 (continued)

Selected Demographic Data

	United States			North Carolina			Asheville MSA			McDowell County			Transylvania County
Household Net Worh
Median	$	93,084		$	79,981		$	75,541		$	47,003		$	105,140
Average	$	418,865		$	385,990		$	361,236		$	231,217		$	376,037
Current Household Net Worth
$0 - $35,000		34.96	%		37.22	%		37.36	%		43.98	%		31.82	%
$35,000 - $100,000		16.38	%		17.00	%		18.60	%		22.80	%		16.92	%
$100,000 - $250,000		19.13	%		18.58	%		19.67	%		17.17	%		21.62	%
$250,000 - $500,000		12.97	%		12.28	%		11.12	%		8.19	%		16.12	%
$500,000+		16.56	%		14.92	%		13.25	%		7.85	%		13.52	%
Total Number of Owner
Occupied Housing Units
2010 - Current		76,868,769			2,607,757			132,724			13,940			10,718
2015 - Projected		80,072,859			2,839,374			141,113			14,318			11,130
% Change 2000-10		10.10	%		20.04	%		16.65	%		8.72	%		9.58	%
% Change 2010-15		4.17	%		8.88	%		6.32	%		2.71	%		3.84	%
Value of Owner Occupied
Housing Units
2007 - Median	$	201,000		$	150,700		$	190,200		$	100,700		$	173,400
2009 - Median	$	185,200		$	155,500		$	193,000		$	115,300		$	178,400
% Change 2007-09		-7.9	%		3.2	%		1.5	%		14.5	%		2.9	%
Current Value of Owner
Occupied Housing Units
$0 - $100,000		27.39	%		32.58	%		34.37	%		46.15	%		25.20	%
$100,000 - $200,000		34.48	%		40.15	%		33.47	%		40.11	%		37.72	%
$200,000 - $300,000		17.08	%		15.70	%		17.24	%		9.38	%		19.72	%
$300,000 - $500,000		12.49	%		7.81	%		10.17	%		3.09	%		11.89	%
$500,000 +		8.56	%		3.76	%		4.75	%		1.27	%		5.47	%
Unemployment Rates
2009 Annual Average		9.3	%		10.8	%		9.0	%		14.8	%		9.0	%
2010 Annual Average		9.6	%		10.6	%		8.5	%		12.7	%		9.2	%
March 2011		8.8	%		9.7	%		8.1	%		12.3	%		9.0	%

Source: SNL Financial, ESRI, and U.S. Census Bureau.

42

FELDMAN FINANCIAL ADVISORS, INC.

The economy of the Asheville MSA constitutes a diverse cross section of employment sectors, with a mix of educational and health services, retail and wholesale trade, leisure and hospitality, and manufacturing. There is no single employer or industry upon which a significant concentration of the labor force is dependent. Table 12 provides comparative employment sector data for the United States, North Carolina, and the Asheville MSA. Table 13 presents a summary of the largest employers in the Asheville MSA.

The Asheville MSA labor force comprised nearly 165,000 workers with the largest concentration in the educational and health services sector, numbering approximately 43,000 employees of 26.1% of total employment as compared to the national level of 21.6%. The Asheville MSA is home to University of North Carolina at Asheville, Montreat College, Warren Wilson College, Mars Hill College, and Asheville-Buncombe Technical Community College. Mission Health System Inc., based in Asheville, is the state’s sixth largest health system and the tertiary care regional referral center for western North Carolina. The health care sector has especially been a targeted growth area, along with advanced manufacturing technology. The leisure and hospitality industry remains an important sector in the Asheville MSA with The Biltmore Company and The Grove Park Inn Resort and Spa serving as the primary employers.

The unemployment rate in the Asheville MSA has hovered below the national and state rates in recent years, while the North Carolina rate has slightly exceeded the national rate. The unemployment rate for the Asheville MSA measured 8.1% in March 2011, below the national and state rates of 8.8% and 9.7%, respectively. Buncombe County and Henderson County reported March 2011 unemployment rates of 8.1% and 8.3%, respectively, as compared to 9.8% for Transylvania County, 10.2% for Madison County, and 12.3% for McDowell County.

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FELDMAN FINANCIAL ADVISORS, INC.

Table 12

Comparative Employment Concentrations

Average for the Quarter Ended September 30, 2010

Industry Sector	United States			North Carolina			Asheville MSA
Number Employed
Educational and Health Services		27,101,257			873,681			42,986
Retail and Wholesale Trade		20,009,725			605,478			27,365
Professional and Business Services		17,075,069			495,101			15,511
Leisure and Hospitality		13,997,471			412,827			23,505
Manufacturing		11,625,614			434,019			18,225
Public Administration		7,621,682			243,725			9,719
Financial Activities		7,422,070			196,699			5,505
Construction		5,832,636			179,646			7,809
Transportation and Utilities		5,524,448			135,852			5,482
Other Services		4,434,131			94,110			4,791
Information		2,849,791			69,383			1,924
Natural Resources and Mining		1,942,826			35,165			1,696
Unclassified		169,887			1,789			65
Total Employment		125,606,605			3,777,475			164,583
Percent of Total
Educational and Health Services		21.6	%		23.1	%		26.1	%
Retail and Wholesale Trade		15.9	%		16.0	%		16.6	%
Professional and Business Services		13.6	%		13.1	%		9.4	%
Leisure and Hospitality		11.1	%		10.9	%		14.3	%
Manufacturing		9.3	%		11.5	%		11.1	%
Public Administration		6.1	%		6.5	%		5.9	%
Financial Activities		5.9	%		5.2	%		3.3	%
Construction		4.6	%		4.8	%		4.7	%
Transportation and Utilities		4.4	%		3.6	%		3.3	%
Other Services		3.5	%		2.5	%		2.9	%
Information		2.3	%		1.8	%		1.2	%
Natural Resources and Mining		1.5	%		0.9	%		1.0	%
Unclassified		0.1	%		0.0	%		0.0	%
Total Employment		100.0	%		100.0	%		100.0	%

Source: U.S. Department of Labor, Bureau of Labor Statistics;

Employment Security Commission of North Carolina.

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FELDMAN FINANCIAL ADVISORS, INC.

Table 13

Major Employers in the Asheville Area

Company / Organization	Industry Description	Employees
Buncombe County Public Schools	Educational Services		3,000+
Mission Health System and Hospital	Hospitals		3,000+
City of Asheville	Executive, Legislative, & Other General Govt.		1,000-2,999
The Biltmore Company	Museums, Historical Sites & Similar Institutions		1,000-2,999
Buncombe County Government	Executive, Legislative, & Other General Govt.		1,000-2,999
The Grove Park Inn Resort & Spa	Accommodation		1,000-2,999
Ingles Markets, Inc. (Home Office Buncombe County)	Food & Beverage Stores		1,000-2,999
VA Medical Center-Asheville Dept. of Veterans Affairs	Hospitals		1,000-2,999
BorgWarner Turbo & Emissions Systems	Transportation Equip. Manufacturing		750-999
CarePartners	Nursing & Residential Care Facilities		750-999
Eaton Corporation - Electrical Division	Electrical Equip., Appliance & Component Mfg.		750-999
Asheville City Schools	Educational Services		500-749
Arvato Digital Services	Computer & Electronic Product Manufacturing		500-749
Sitel, A Subsidiary of Onex Corp.	Administrative & Support Services		500-749
Thermo Fisher Scientific, Inc.	Machinery Manufacturing		500-749
University of North Carolina at Asheville	Educational Services		500-749
Asheville-Buncombe Technical Community College	Educational Services		400-499
Black Mountain Neuro-Medical Treatment Center	Nursing & Residential Care Facilities		400-499
Kearfott Guidance & Navigation Corp.	Computer & Electronic Product Manufacturing		400-499
Wal-Mart Stores, Inc.	General Merchandise Stores		400-499
YMCA of Western NC	Religious, Civic, Professional Organizations		400-499
Burger King Restaurants (Carrols Corp.)	Food Services & Drinking Places		300-399
Flint Group	Machinery Manufacturing		300-399
Givens Estates United Methodist Retirement Community	Nursing & Residential Care Facilities		300-399
MB Haynes Corp. (Division Offices)	Construction of Buildings		300-399
McDonald’s Corp., Corporate Office	Food Services & Drinking Places		300-399
Unison Engine Components	Transportation Equip. Manufacturing		300-399
Taylor & Murphy Construction Company, Inc.	Heavy & Civil Engineering Construction		300-399
CPU2	Administrative & Support Services		300-399
Advantage Care Services	Ambulatory Health Care Services		200-299
Asheville Radiology Associates, P.A.	Ambulatory Health Care Services		200-299
Biltmore Estate Winery	Beverage & Tobacco Product Manufacturing		200-299
Colbond, Inc.	Chemical Manufacturing		200-299
Deerfield Episcopal Retirement Community	Nursing & Residential Care Facilities		200-299
Eaton Corporation - Electrical Division	Electrical Equip., Appliance & Component Mfg.		200-299
Genova Diagnostics	Ambulatory Health Care Services		200-299
Highland Farms Retirement Community	Nursing & Residential Care Facilities		200-299
HomeTrust Bank	Credit Intermediation & Related Activities		200-299
Inn on Biltmore Estate	Accommodation		200-299
J & S Cafeteria (Buncombe County)	Food Services & Drinking Places		200-299
J. Crew Group	Clothing & Clothing Accessories Stores		200-299
Medical Action Industries, Inc.	Misc. Manufacturing		200-299
Milkco, Inc.	Food Manufacturing		200-299
Mills Manufacturing Corp.	Textile Product Manufacturing		200-299
NC State Alcohol & Drug Abuse Treatment Ctr.	Hospitals		200-299
Nypro Asheville, Inc.	Plastics & Rubber Products Manufacturing		200-299
Pisgah Valley Retirement Community	Nursing & Residential Care Facilities		200-299
Sam’s Club (A Division of Wal-Mart Stores, Inc.)	General Merchandise Stores		200-299
Swannanoa Valley Youth Development Center	Justice, Public Order & Safety Activities		200-299
Tyco Electronics Corp.	Electrical Equip., Appliance & Component Mfg.		200-299
United Parcel Service (Asheville)	Couriers & Messengers		200-299
United States Postal Service - Asheville Facility	Postal Service		200-299
Volvo Construction Equipment North America, Inc.	Merchant Whols., Durable Goods		200-299
Warren Wilson College	Educational Services		200-299

Source: Asheville Metro Business & Industry Directory 2009-2010.

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FELDMAN FINANCIAL ADVISORS, INC.

Market Share Analysis

Table 14 displays branch deposit data for the top 25 financial institutions in the Asheville MSA as of June 30, 2010 (with deposit data adjusted for completed and pending mergers). ASB ranked fourth in the Asheville MSA out of 36 financial institutions with total deposits of $545.0 million and a market share of 7.4%. Previously, as of June 30, 2009, the Bank ranked fourth in the Asheville MSA with total deposits of $517.8 and a market share of 7.2% million. ASB’s deposits increased by 5.2% between June 30, 2009 and 2010, while the total deposits in the Asheville MSA increased by 3.1% from $7.2 billion to $7.4 billion over the same period.

The top three financial institutions (Wells Fargo & Company, First Citizens BancShares, and HomeTrust Bank) held $3.2 billion or 43.1% of the deposit market in the Asheville MSA. The deposit market in the local area has been altered by recent acquisition activity. Wells Fargo entered the market and seized the top deposit share position through its acquisition of Wachovia Bank in October 2008. TD Bank acquired Carolina First Bank in May 2010. Through a failed bank acquisition, First Bancorp assumed the operations of Bank of Asheville in January 2011.

Table 15 displays branch deposit data for the top 25 financial institutions as of June 30, 2010 in the Greater Asheville Area, which includes Buncombe, Haywood, Henderson, Madison, Jackson, McDowell, Polk, Rutherford, Transylvania, and Yancey counties. ASB ranked fifth in the Greater Asheville Area out of 50 financial institutions with total deposits of $628.0 million as of June 30, 2010 and a market share of 6.1%. The top three deposit market leaders in the Greater Asheville Area were the same financial institutions (Wells Fargo, First Citizens, and HomeTrust Bank) as in the Asheville MSA. However, BB&T Corp. surpassed ASB to occupy the fourth position in the Greater Asheville Area with deposits of $698.6 million and a market share of 6.8%.

46

FELDMAN FINANCIAL ADVISORS, INC.

Table 14

Deposit Market Share in the Asheville MSA

Data as of June 30, 2010

(Adjusted for Completed and Pending Mergers)

Rank	Financial Institution	Type	Branch Count		Deposit Market Share (%)		Total Deposits ($000)
1	Wells Fargo & Co. (CA)	Bank		17		19.14		1,413,860
2	First Citizens BancShares Inc. (NC)	Bank		22		15.34		1,133,067
3	HomeTrust Bank (NC)	Thrift		8		8.65		638,772
4	Asheville Savings Bank, S.S.B. (NC)	Thrift		11		7.38		544,961
5	SunTrust Banks Inc. (GA)	Bank		15		6.89		508,797
6	1st Financial Services Corp. (NC)	Bank		6		5.84		431,696
7	BB&T Corp. (NC)	Bank		9		5.44		402,085
8	Bank of America Corp. (NC)	Bank		9		5.22		385,811
9	TD Bank (Canada)	Bank		10		5.02		370,427
10	RBC Bank (Canada)	Bank		8		3.00		221,693
11	First Bancorp (NC)	Bank		5		2.73		201,409
12	United Community Banks, Inc. (GA)	Bank		3		2.04		150,641
13	Mountain Credit Union (NC)	Credit Union		7		2.02		149,158
14	Champion Credit Union (NC)	Credit Union		2		1.71		126,200
15	Macon Bancorp (NC)	Thrift		2		1.54		113,675
16	Capital Bank Corporation (NC)	Bank		4		1.28		94,525
17	Blue Ridge Savings Bank, Inc. (NC)	Thrift		5		1.17		86,704
18	Telco Community Credit Union (NC)	Credit Union		1		0.89		65,916
19	Forest Commercial Bank (NC)	Bank		1		0.83		60,987
20	Oldtown Bank (NC)	Bank		1		0.78		57,372
21	Pisgah CommunityBank (NC)	Bank		1		0.76		55,780
22	WNC Community Credit Union	Credit Union		1		0.67		49,472
23	Black Mountain Svgs. Bank, S.S.B. (NC)	Thrift		1		0.44		32,217
24	Southern Community Financial (NC)	Bank		1		0.34		25,299
25	Oteen VA Federal Credit Union (NC)	Credit Union		1		0.31		22,874
	Total (36 financial institutions)			193		100.00		7,386,024

Source: SNL Financial.

47

FELDMAN FINANCIAL ADVISORS, INC.

Table 15

Deposit Market Share in the Greater Asheville Area

Data as of June 30, 2010

(Adjusted for Completed and Pending Mergers)

						Deposit
						Market		Total
				Branch		Share		Deposits
Rank	Financial Institution	Type		Count		(%)		($000)
1	Wells Fargo & Co. (CA)		Bank		24		18.38		1,879,790
2	First Citizens BancShares Inc. (NC)		Bank		31		14.18		1,450,096
3	HomeTrust Bank (NC)		Thrift		11		8.33		852,521
4	BB&T Corp. (NC)		Bank		16		6.83		698,614
5	Asheville Savings Bank, S.S.B. (NC)		Thrift		13		6.14		628,010
6	1st Financial Services Corp. (NC)		Bank		10		5.96		609,204
7	TD Bank (Canada)		Bank		18		5.61		574,152
8	SunTrust Banks Inc. (GA)		Bank		15		5.29		540,897
9	Bank of America Corp. (NC)		Bank		12		4.84		495,003
10	RBC Bank (Canada)		Bank		13		3.86		394,831
11	United Community Banks, Inc. (GA)		Bank		10		3.80		388,653
12	Macon Bancorp (NC)		Thrift		7		3.61		368,968
13	First Bancorp (NC)		Bank		5		1.97		201,409
14	Mountain Credit Union (NC)		Credit Union		7		1.46		149,158
15	Blue Ridge Savings Bank, Inc. (NC)		Thrift		6		1.34		136,821
16	Champion Credit Union (NC)		Credit Union		2		1.23		126,200
17	Fifth Third Bancorp (OH)		Bank		5		1.12		114,234
18	Capital Bank Corporation (NC)		Bank		4		0.92		94,525
19	Telco Community Credit Union (NC)		Credit Union		1		0.64		65,916
20	Forest Commercial Bank (NC)		Bank		1		0.60		60,987
21	Oldtown Bank (NC)		Bank		1		0.56		57,372
22	Pisgah CommunityBank (NC)		Bank		1		0.55		55,780
23	First National Bank of Shelby (NC)		Bank		1		0.50		50,780
24	WNC Community Credit Union (NC)		Credit Union		1		0.48		49,472
25	Ecusta Credit Union (NC)		Credit Union		1		0.40		40,901
	Total (50 financial institutions)				291		100.00		10,229,621

Source: SNL Financial.

48

FELDMAN FINANCIAL ADVISORS, INC.

Table 16 provides residential mortgage market share data for the top 25 lenders in the Asheville MSA as ranked by loans funded in 2009. Wells Fargo (Wachovia) and HomeTrust Bank ranked among the top two leading residential lenders in the local market area, funding $374.1 million (13.3% market share) and $304.8 million (10.8% market share) in residential loans, respectively. Bank of America, BB&T Corp., and State Employees’ Credit Union were included in the top five residential lenders. ASB ranked sixth in the Asheville MSA with $136.5 million of residential loans funded and a market share of 4.9%. The top six lenders, including ASB, accounted for 50.5% of the residential loan originations in the Ashville MSA for 2009.

Previously, the Bank ranked 12^th with a market share of 3.2% based on total residential mortgage loans funded of $79.6 million in 2008. Total residential mortgage originations in the Asheville MSA increased 14.1% from $2.5 billion in 2008 to $2.8 billion in 2009. The average residential mortgage loan funded in the Asheville MSA was approximately $190,500 in 2009 compared to $188,900 in 2008. The Bank’s average residential mortgage loan funded in the Asheville MSA was approximately $190,100 in 2009 compared to $197,900 in 2008.

49

FELDMAN FINANCIAL ADVISORS, INC.

Table 16

Residential Mortgage Lending Market Share in the Asheville MSA

Data for 2009

(Adjusted for Completed and Pending Mergers)

					Total		Total
			No. of		Market		Funded
			Funded		Share		Loans
Rank	Company	Type	Loans		(%)		($000)
1	Wells Fargo & Co. (CA)	Bank		1,932		13.30		374,100
2	HomeTrust Bank (NC)	Thrift		1,526		10.83		304,830
3	Bank of America Corp. (NC)	Bank		1,365		9.26		260,407
4	BB&T Corp. (NC)	Bank		927		6.69		188,168
5	State Employees’ Credit Union (NC)	Credit Union		948		5.61		157,762
6	Asheville Savings Bank, S.S.B. (NC)	Thrift		718		4.85		136,499
7	SunTrust Banks, Inc. (GA)	Bank		611		4.56		128,321
8	Cunningham & Company, Inc. (NC)	Mortgage Bank		468		3.40		95,698
9	First Citizens BancShares, Inc. (NC)	Bank		395		3.23		91,014
10	1st Financial Services Corp. (NC)	Bank		353		2.30		64,688
11	TD Bank (Canada)	Bank		277		1.94		54,480
12	JPMorgan Chase & Co. (NY)	Bank		304		1.88		52,899
13	Quicken Loans, Inc. (MI)	Mortgage Bank		244		1.52		42,825
14	Fifth Third Bancorp (OH)	Bank		202		1.40		39,447
15	WR Starkey Mortgage, LLP (TX)	Mortgage Bank		215		1.39		39,231
16	United Community Banks, Inc. (GA)	Bank		221		1.37		38,486
17	USAA Federal Savings Bank (TX)	Thrift		194		1.30		36,457
18	RBC Bank (Canada)	Bank		161		1.21		34,069
19	New York Community Bancorp (NY)	Thrift		133		0.94		26,508
20	Carolina Bank Holdings, Inc. (NC)	Bank		120		0.89		24,944
21	U.S. Bancorp (MN)	Bank		132		0.81		22,889
22	Flagstar Bank, FSB (MI)	Thrift		109		0.76		21,343
23	Champion Credit Union (NC)	Credit Union		246		0.67		18,724
24	Citigroup Inc. (NY)	Bank		122		0.63		17,761
25	Provident Funding Assoc. L.P. (CA)	Mortgage Bank		88		0.63		17,690
	Total			14,765		100.00		2,813,503

Source: SNL Financial.

50

FELDMAN FINANCIAL ADVISORS, INC.

II. COMPARISONS WITH PUBLICLY TRADED THRIFTS

General Overview

The comparative market approach provides a sound basis for determining estimates of going-concern valuations where a regular and active market exists for the stocks of peer institutions. The comparative market approach was utilized in determining the estimated pro forma market value of the Bank because: (i) reliable market and financial data are readily available for comparable institutions; (ii) the comparative market method is accepted by the applicable regulatory guidelines; and (iii) other alternative valuation methods (such as income capitalization, liquidation analysis, or discounted cash flow) are unlikely to produce a valuation relevant to the future trading patterns of the related equity interest. The generally employed valuation method in initial public offerings, where possible, is the comparative market approach, which also can be relied upon to determine pro forma market value in a thrift stock conversion.

The comparative market approach derives valuation benchmarks from the trading patterns of selected peer institutions which, due to certain factors such as financial performance and operating strategies, enable the appraiser to estimate the potential value of the subject institution in a stock conversion offering. The pricing and trading history of recent initial public offerings of thrifts are also examined to provide evidence of the “new issue discount” that must be considered. In Chapter II, our valuation analysis focuses on the selection and comparison of the Bank with a comparable group of publicly traded thrift institutions (the “Comparative Group”). Chapter III will detail any additional discounts or premiums that we believe are appropriate to the Bank’s pro forma market value.

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Selection Criteria

Selected market price and financial performance data for all public thrifts listed on major stock exchanges are shown in Exhibit III. The list excludes companies that are subject to being acquired under a pending transaction and companies that have a majority ownership interest controlled by a mutual holding company (“MHC”). Several criteria, discussed below, were used to select the individual members of the Comparative Group from the overall universe of publicly traded thrifts.

• Operating characteristics – An institution’s operating characteristics are the most important factors because they affect investors’ expected rates of return on a company’s stock under various business/economic scenarios, and they influence the market’s general perception of the quality and attractiveness of a given company. Operating characteristics, which may vary in importance during the business cycle, include financial variables such as profitability, balance sheet growth, capitalization, asset quality, and other factors such as lines of business and management strategies.

• Degree of marketability and liquidity – Marketability of a stock reflects the relative ease and promptness with which a security may be sold when desired, at a representative current price, without material concession in price merely because of the necessity of sale. Marketability also connotes the existence of buying interest as well as selling interest and is usually indicated by trading volumes and the spread between the bid and asked price for a security. Liquidity of the stock issue refers to the organized market exchange process whereby the security can be converted into cash. We attempted to limit our selection to companies that have access to a regular trading market or price quotations, and therefore only considered companies listed on major stock exchanges. We eliminated from the Comparative Group companies with market prices that were materially influenced by announced acquisitions or other unusual circumstances. However, the expectation of continued industry consolidation is currently embedded in thrift equity valuations.

• Geographic Location – The region of the country where a company operates is also of importance in selecting the comparative group. The operating environment for thrift institutions varies from region to region with respect to business and economic environments, real estate market conditions, speculative takeover activity, and investment climates. Economic and investor climates can also vary greatly within a region, particularly due to takeover activity.

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The operations of the Bank fit the general profile of a diversifying thrift institution, concentrating primarily on real estate lending in its local market and relying significantly on certificates of deposit and other interest-bearing deposit accounts as funding sources. Residential mortgage loans remain as a core product in the Bank’s loan portfolio. However, the Bank has diversified its loan mix through the origination of commercial real estate and consumer loans and, to a lesser extent, commercial business and construction and land development loans.

In determining the Comparative Group composition, we focused chiefly on ASB’s asset size, capital level, credit risk profile, and geographic location. Attempting to concentrate on the Bank’s performance characteristics and to develop a meaningful number of comparables for valuation purposes, we expanded the geographic criterion for comparable thrifts beyond the South region of the United States. As with any composition of a group of comparable companies, the selection criteria were broadened sufficiently to assemble a meaningful number of members. Specifically, we applied the following selection criteria:

• Publicly traded thrift – stockholder-owned thrift whose shares are traded on the New York, NYSE Amex, or NASDAQ stock markets.

• Non-acquisition target – company is not subject to a pending acquisition.

• Excludes mutual holding companies – company’s majority ownership interest is not held by an MHC.

• Seasoned trading issue – company has been publicly traded for a minimum of one full year.

• Asset size – total assets between $500.0 million and $1.25 billion.

• Capitalization –tangible equity to assets ratio greater than or equal to 8.0%.

• Credit risk exposure – ratio of total non-performing assets to total assets less than or equal to 8.0%.

• Geographic location – preference for companies based in the South, with consideration also granted to companies in Mid-Atlantic or Midwest states.

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FELDMAN FINANCIAL ADVISORS, INC.

As a result of applying the stated criteria, the screening process produced a reliable representation of publicly traded thrifts. A general operating summary of the ten companies included in the Comparative Group is presented in Table 17. All of the selected companies except one are traded on the NASDAQ market; Teche Holding Company is listed on the NYSE Amex. The Comparative Group ranged in asset size from $512.8 million at First Savings Financial Group, Inc. to approximately $1.1 billion at CFS Bancorp, Inc. and HopFed Bancorp, Inc. The median and average asset sizes of the Comparative Group were $662.6 million and $756.5 million, respectively, compared to ASB’s total assets of $750.7 million at March 31, 2011.

Six of the comparables are located in Southern states (Citizens South Banking Corp. in North Carolina, Community Financial Corporation in Virginia, HopFed Bancorp in Kentucky, Jefferson Bancshares, Inc. in Tennessee, and Home Bancorp, Inc. and Teche Holding Company in Louisiana). Citizens South Banking Corp. is based in Gastonia, North Carolina, approximately 100 miles southeast east of Asheville. Three companies are located in Midwestern states (Citizens Community Bancorp, Inc. in Wisconsin and CFS Bancorp, Inc. and First Savings Financial Group in Indiana). Headquartered in Baltimore, Maryland, BCSB Bancorp, Inc. is located in the Mid-Atlantic region.

In comparison to recent performance trends of the aggregate public thrift industry, the Comparative Group generally exhibited lower profitability returns, moderately lower capital levels, and more favorable asset quality ratios. While some differences inevitably may exist between ASB and the individual companies, we believe that the chosen Comparative Group on the whole provides a meaningful basis of financial comparison for valuation purposes.

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FELDMAN FINANCIAL ADVISORS, INC.

Table 17

Comparative Group Operating Summary

As of March 31, 2011

Company	City	State	No. of Offices		Conversion Offering Date	Total Assets ($Mil.)		Tang. Equity/ Assets (%)
Asheville Savings Bank, S.S.B.	Asheville	NC		13	NA	$	750.7		8.43
Comparative Group
BCSB Bancorp, Inc.	Baltimore	MD		18	04/11/08		624.8		8.07
CFS Bancorp, Inc.	Munster	IN		22	07/24/98		1,144.0		9.94
Citizens Community Bancorp (1)	Eau Claire	WI		27	11/01/06		580.3		8.81
Citizens South Banking Corp.	Gastonia	NC		21	04/13/98		1,041.4		8.72
Community Financial Corp. (1)	Staunton	VA		11	03/30/88		527.7		9.29
First Savings Financial Group	Clarksville	IN		12	10/07/08		512.8		9.48
Home Bancorp, Inc.	Lafayette	LA		18	10/03/08		700.5		18.73
HopFed Bancorp, Inc.	Hopkinsville	KY		18	02/09/98		1,074.0		10.02
Jefferson Bancshares, Inc.	Morristown	TN		12	07/02/03		577.5		9.34
Teche Holding Company	New Iberia	LA		19	04/19/95		782.2		9.49

(1) As of December 31, 2010.

Source: Asheville Savings Bank; SNL Financial.

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FELDMAN FINANCIAL ADVISORS, INC.

Recent Financial Comparisons

Table 18 summarizes certain key financial comparisons between ASB and the Comparative Group. Tables 19 through 24 contain the detailed financial comparisons of the Bank with the individual Comparative Group companies based on measures of profitability, income and expense components, yield-cost structure, capital levels, balance sheet composition, asset quality, and growth rates. Financial data for the Bank, the Comparative Group, and All Public Thrift aggregate were utilized for the latest available period as of for the last twelve months (“LTM”) ended March 31, 2011.

ASB’s LTM ROA was negative 1.22%, reflecting a profitability measure below the Comparative Group median of positive 0.26% and the All Public Thrift median of positive 0.43%. The Bank’s lower ROA was attributable mainly to a lower net interest margin and higher level of loan loss provisions The Bank’s LTM return on average equity (“ROE”) was negative 13.60% and positioned below the Comparative Group median of positive 2.71%. Three members of the Comparative Group reported losses for the LTM period, while the remaining seven exhibited positive earnings. Similar to ASB, the Comparative Group companies reporting negative earnings displayed elevated levels of loan loss provisions for the LTM period.

Based on core earnings as adjusted to exclude intangibles amortization expense and non-recurring income and expense items, ASB’s core profitability ratios also lagged behind those of the Comparative Group. The Bank’s core earnings for the LTM period excluded $312,000 of pre-tax gains on sales of investment securities. The Bank’s core ROA of negative 1.25% was below the Comparative Group median of positive 0.25% and the All Public Thrift median of positive 0.46%.

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Table 18

Key Financial Comparisons

Asheville Savings Bank and the Comparative Group

As of For the Last Twelve Months Ended March 31, 2011

(Ratios in Percent)

	Asheville Savings Bank			Comparative Group Median		All Public Thrift Median
Profitability
LTM Return on Average Assets (ROA)		(1.22	)		0.26		0.43
LTM Return on Average Equity (ROE)		(13.60	)		2.71		3.50
Core Return on Avg. Assets (Core ROA)		(1.25	)		0.25		0.46
Core Return on Avg. Equity (Core ROE)		(13.90	)		2.59		3.79
Income and Expense (% of avg. assets)
Total Interest Income		4.14			4.80		4.54
Total Interest Expense		1.41			1.35		1.45
Net Interest Income		2.74			3.47		3.13
Provision for Loan Losses		2.79			0.71		0.48
Other Operating Income		0.92			0.71		0.60
Net Secs. Gains and Non-rec. Income		0.04			0.02		0.01
General and Administrative Expense		2.93			2.89		2.84
Intangibles Amortization Expense		0.00			0.03		0.00
Non-recurring Expense		0.00			0.01		0.00
Pre-tax Core Earnings		(2.06	)		0.29		0.67
Efficiency Ratio		79.98			70.38		69.82
Yield-Cost Data
Yield on Interest-earning Assets		4.36			5.34		4.93
Cost of Interest-bearing Liabilities		1.67			1.62		1.75
Net Interest Spread		2.69			3.57		3.39
Net Interest Margin		2.88			3.73		3.41
Asset Utilization (% of avg. total assets)
Avg. Interest-earning Assets		95.08			90.66		93.63
Avg. Interest-bearing Liabilities		84.09			82.78		81.80
Avg. Net Interest-earning Assets		10.99			8.88		10.96

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FELDMAN FINANCIAL ADVISORS, INC.

Table 18 (continued)

Key Financial Comparisons

Asheville Savings Bank and the Comparative Group

As of For the Last Twelve Months Ended March 31, 2011

(Ratios in Percent)

	Asheville Savings Bank			Comparative Group Median			All Public Thrift Median
Balance Sheet Composition (% of total assets)
Cash and Securities		31.27			23.39			23.22
Loans Receivable, net		63.06			67.34			68.38
Real Estate		1.40			0.80			0.40
Intangible Assets		0.00			0.14			0.05
Other Assets		4.28			6.47			4.85
Total Deposits		82.13			79.04			73.20
Borrowed Funds		8.18			9.16			13.09
Other Liabilities		1.26			0.70			0.95
Total Equity		8.43			9.79			10.98
Loan Portfolio (% of total loans)
Residential First Mortgage Loans		36.66			31.50			41.55
Other Real Estate Mortgage Loans		51.61			53.17			47.48
Non-mortgage Loans		11.73			13.91			8.18
Growth Rates
Total Assets		(1.38	)		2.26			0.03
Total Loans		(18.33	)		(4.36	)		(3.43	)
Total Deposits		(0.37	)		1.96			2.30
Regulatory Capital Ratios
Tier 1 Leverage Ratio		8.60			9.24			9.75
Tier 1 Risk-based Capital		13.67			12.51			15.27
Total Risk-based Capital		14.94			13.76			16.17
Credit Risk Ratios
Non-performing Loans / Total Loans		2.92			2.98			3.46
Non-performing Assets / Total Assets		4.83			2.44			3.42
Reserves / Total Loans		2.60			1.72			1.63
Reserves / Non-performing Loans		89.02			39.91			44.26

Source: Asheville Savings Bank; SNL Financial; Feldman Financial.

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As shown in Table 18, the Bank’s net interest margin of 2.88% significantly trailed the Comparative Group median of 3.73% and the All Public Thrift median of 3.41%. The Bank’s net interest margin has been hampered by its increased level of liquidity as its loan portfolio has shrunk due to a combination of loan sales and reduced loan originations. The Bank’s level of cash and securities amounted to 31.3% of total assets and surpassed the Comparative Group median of 21.8% and All Public Thrift median of 23.2%. The Bank’s lower equity position also places its net interest margin at a slight disadvantage. None of the Comparative Group companies exhibited a net interest margin below 3.00% with HopFed Bancorp reporting the lowest net interest margin at 3.12%. Similar to the Bank, HopFed Bancorp also held a relatively large concentration of cash and securities on its balance sheet.

While its cost of interest-bearing liabilities was comparable to the Comparative Group median, the Bank’s yield on interest-earning assets was much lower. The Bank’s 1.67% cost of interest-bearing liabilities was slightly higher than the Comparative Group median of 1.62%. However, the Bank’s 4.36% yield on interest-earning assets was 98 basis points lower than the Comparative Group median of 5.34%. Generally, yields on investment securities are lower than yields on loans and the Bank’s higher concentration of securities places its overall yield on interest-earning assets at a comparative disadvantage.

The Bank’s non-interest operating income totaled 0.92% of average assets, noticeably exceeding the Comparative Group and All Public Thrift medians of 0.71% and 0.60%, respectively. The Bank has consistently generated a stable stream of non-interest revenue from mortgage banking operations, service charges on deposit accounts, debit card services, and other fee income sources. The Bank’s recent level of non-interest operating income at 0.92% of

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FELDMAN FINANCIAL ADVISORS, INC.

average assets for the LTM period surpassed the reported levels for all of the Comparative Group companies except for Teche Holding Company. The Bank also generated gains on sale of investment securities, which amounted to 0.04% of average assets for the LTM period and exceeded the Comparative Group and All Public Thrift medians of 0.02% and 0.01%, respectively.

The Bank’s operating expense ratio at 2.93% of average assets was slightly higher than the Comparative Group median of 2.89% and All Public Thrift median of 2.84%. The Bank’s operating expense ratio increased in recent periods as the amount of absolute expense has risen at a greater pace than average assets, which have been held relatively constant over the past two years due to loan portfolio shrinkage. In addition, the Bank’s operating expense total was inflated by higher foreclosed property expenses of $2.1 million for the recent LTM period. Excluding the foreclosed property expenses, the Bank’s operating expense ratio would have measured 2.65% for the LTM ended March 31, 2011.

The Bank’s efficiency ratio (non-interest expense less intangibles amortization expense as a percent of net interest income before provision plus non-interest operating income) was higher at 80.0% versus the Comparative Group and All Public Thrift medians of 70.4% and 69.8%, respectively. Although the operating expense levels are comparable and the Bank has a higher level of non-interest income, the Bank is disadvantaged by a lower level of net interest income at 2.74% of average assets in contrast to the Comparative Group median of 3.47%. For the recent LTM period, the Bank’s net interest income was not sufficient to cover the amount of operating expenses. Only two members of the Comparative Group (CFS Bancorp and Teche Holding Company) exhibited a similar imbalance of net interest income versus operating expenses.

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Prior to 2010, the Bank had increased its provision for loan losses gradually to reflect the overall growth of the loan portfolio. However in 2010, ASB increased the provision significantly due to increased levels of loan charge-offs and heightened credit risk exposure. For the LTM period, the Bank’s provision for loan losses amounted to 2.79% of average assets and exceeded the Comparative Group and All Public Thrift medians of 0.71% and 0.48%, respectively. Several members of the Comparative Group also reported elevated levels of loan loss provisions that contributed to negative earnings or very low profitability.

Table 23 profiles the overall balance sheet composition of the Bank versus that of the Comparative Group. The Bank’s net total loans amounted to 63.1% of total assets as of March 31, 2011, below the median of 67.3% for the Comparative Group. Conversely, the Bank’s ratio of cash and securities to total assets was 31.3% and surpassed the median of 21.8% for the Comparative Group. As noted previously, the Bank’s increased level of cash and securities has contributed to its lower net interest margin in the current interest rate environment. The Bank had no goodwill or other intangible assets on its balance sheet as of March 31, 2011. The Bank’s real estate owned measured 1.4% of total assets and was slightly higher than the 0.1% level reflected by the Comparative Group median. The Bank’s ratio of other assets to total assets measured 4.8% and was lower than the Comparative Group median of 6.9%. The Bank’s category of other assets largely consisted of fixed assets and deferred tax assets.

The Bank’s borrowings level at 8.2% of assets primarily reflected its usage of FHLB advances as a supplemental funding source, and was similar to the Comparative Group’s median borrowings level of 9.2%. The Bank’s deposit level at 82.1% of total assets was similar to the Comparative Group’s median deposit level of 79.0%. The Bank’s equity level before the Conversion was 8.43% relative to total assets, which was slightly lower than the Comparative Group and All Public Thrift medians of 9.79% and 10.98%, respectively.

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The Bank had made considerable strides toward diversifying its loan portfolio away from the traditional thrift model’s reliance on residential mortgages as evidenced by the loan composition data displayed in Table 24. The Bank’s level of residential first mortgage loans measured 36.7% of total loans based on regulatory financial data as of March 31, 2011, compared to the Comparative Group and All Public Thrift medians of 31.5% and 41.6%, respectively. The Bank’s concentration of other real estate mortgage loans, which include commercial mortgages, revolving mortgages, and construction and land development loans, measured 51.6% of total loans and was comparable to the Comparative Group median of 53.2%. The Bank’s ratio of non-mortgage loans, which include consumer loans and commercial and industrial loans, amounted to 11.7% of total loans and was positioned slightly below the Comparative Group median of 13.9%.

The Bank’s restrained balance sheet growth in recent periods is reflected in the comparative growth rates. The Bank’s asset growth rate measured negative 1.4% over the recent LTM period and trailed the Comparative Group median of positive 2.3%. The Bank also exhibited negative growth rates of loans and deposits, while the Comparative Group reported median growth rates that were negative for loans and slightly positive for deposits. The sluggish economy and mounting credit-related losses have forced many financial institutions to emphasize capital preservation and credit remediation over growth objectives.

The Bank’s 2.92% ratio of non-performing loans to total loans was comparable to the Comparative Group median of 2.98% and below the All Public Thrift median of 3.42%.

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However, the Bank’s ratio of total non-performing assets to total assets was higher at 4.83% versus the Comparative Group and All Public Thrift medians of 2.44% and 3.42%, respectively. For comparative purposes, total non-performing assets include restructured or renegotiated loans in addition to non-performing loans and real estate owned. The Bank’s ratio of reserves to non-performing loans compared favorably to the aggregate medians and reflected the substantial additions to reserves made by the Bank in 2010. The Bank’s 2.60% ratio of reserves to total loans surpassed the Comparative Group and All Public Thrift medians of 1.72% and 1.63%, respectively, and exceeded the high ratios of 2.36% and 2.34% reported by CFS Bancorp and HopFed Bancorp, respectively. Additionally, the Bank’s 89.0% ratio of reserves to non-performing was higher than the Comparative Group and All Public Thrift medians of 39.9% and 44.3%, respectively.

In summary, the Bank’s recent earnings performance trailed the results exhibited by the Comparative Group and All Public Thrift segments. The Bank’s profitability is characterized by a lower net interest margin and, more recently, increased provisions for loan losses. The Bank’s net interest margin has been restrained by the yield potential of its balance sheet structure including comparatively higher levels of investment securities. While the Bank exhibited a higher level of non-interest income and comparable level of non-interest expense, these factors did not offset the Bank’s lower net interest margin. ASB’s earnings growth outlook will depend largely on the Bank’s ability to sustain satisfactory loan quality as its manages and grows the portfolio, improve the net interest margin across movements in the interest rate environment, and control non-interest expense as it expands operations.

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Table 19

General Operating Characteristics

As of March 31, 2011

	City	State	Ticker	Exchange	No. of Offices	Conversion Offering Date	Total Assets ($000s)		Net Loans ($000s)		Total Deposits ($000s)		Total Equity ($000s)
Asheville Savings Bank, S.S.B.	Asheville	NC	NA	NA	13	NA		750,709		473,360		616,586		63,295
Comparative Group Average								756,525		505,274		605,170		78,764
Comparative Group Median								662,620		462,964		543,417		66,819
Comparative Group
BCSB Bancorp, Inc.	Baltimore	MD	BCSB	NASDAQ	18	04/11/08		624,764		374,037		543,215		50,451
CFS Bancorp, Inc.	Munster	IN	CITZ	NASDAQ	22	07/24/98		1,144,041		707,128		980,517		113,764
Citizens Community Bancorp (1)	Eau Claire	WI	CZWI	NASDAQ	27	11/01/06		580,338		446,306		482,393		51,801
Citizens South Banking Corp.	Gastonia	NC	CSBC	NASDAQ	21	04/13/98		1,041,444		713,904		832,803		92,276
Community Financial Corp. (1)	Staunton	VA	CFFC	NASDAQ	11	03/30/88		527,684		479,622		386,129		49,028
First Savings Financial Group, Inc.	Clarksville	IN	FSFG	NASDAQ	12	10/07/08		512,789		341,059		368,991		56,059
Home Bancorp, Inc.	Lafayette	LA	HBCP	NASDAQ	18	10/03/08		700,475		438,541		543,619		132,574
HopFed Bancorp, Inc.	Hopkinsville	KY	HFBC	NASDAQ	18	02/09/98		1,074,043		580,729		833,903		108,294
Jefferson Bancshares, Inc.	Morristown	TN	JFBI	NASDAQ	12	07/02/03		577,524		393,711		469,237		55,818
Teche Holding Company	New Iberia	LA	TSH	NYSE Amex	19	04/19/95		782,152		577,701		610,892		77,578

(1) As of December 31, 2010.

Source: Asheville Savings Bank; SNL Financial; Feldman Financial.

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Table 20

Summary Financial Performance Ratios

As of or For the Last Twelve Months Ended March 31, 2011

	Total Assets ($000s)		Total Equity/ Assets (%)		Tang. Equity/ Assets (%)		Total NPAs/ Assets (%)		Net Interest Margin (%)		Effcy. Ratio (%)		LTM ROA (%)			LTM ROE (%)			Core ROA (%)			Core ROE (%)
Asheville Savings Bank, S.S.B.		750,709		8.43		8.43		4.83		2.88		79.98		(1.22	)		(13.60	)		(1.25	)		(13.90	)
Comparative Group Average		756,525		10.46		10.19		3.32		3.81		72.35		(0.21	)		(2.73	)		0.24			1.89
Comparative Group Median		662,620		9.79		9.41		2.44		3.73		70.38		0.26			2.71			0.25			2.59
All Public Thrift Average		2,790,311		11.90		11.21		4.27		3.33		72.02		0.03			(3.68	)		0.04			(5.43	)
All Public Thrift Median		870,061		10.98		10.00		3.19		3.41		69.82		0.43			3.50			0.46			3.79
Comparative Group
BCSB Bancorp, Inc.		624,764		8.08		8.07		1.81		3.18		83.10		0.23			2.36			0.24			2.47
CFS Bancorp, Inc.		1,144,041		9.94		9.94		7.90		3.59		82.42		0.29			2.86			0.28			2.72
Citizens Community Bancorp (1)		580,338		8.93		8.81		2.65		3.87		69.67		(1.29	)		(13.94	)		(0.38	)		(4.07	)
Citizens South Banking Corp.		1,041,444		8.86		8.72		3.19		3.41		71.09		(0.24	)		(2.68	)		(0.22	)		(2.44	)
Community Financial Corp. (1)		527,684		9.29		9.29		7.56		4.19		61.88		0.26			2.86			0.26			2.86
First Savings Financial Group, Inc.		512,789		10.93		9.48		1.49		4.45		67.65		0.61			5.66			0.83			7.69
Home Bancorp, Inc.		700,475		18.93		18.73		0.32		4.72		72.17		0.66			3.50			0.85			4.49
HopFed Bancorp, Inc.		1,074,043		10.08		10.02		1.41		3.12		68.64		0.26			2.57			0.06			0.65
Jefferson Bancshares, Inc.		577,524		9.67		9.34		4.67		3.30		78.43		(3.75	)		(39.57	)		(0.43	)		(4.54	)
Teche Holding Company		782,152		9.92		9.49		2.22		4.25		68.47		0.92			9.07			0.92			9.08

(1) As of for the LTM ended December 31, 2010.

Source: Asheville Savings Bank; SNL Financial; Feldman Financial.

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Table 21

Income and Expense Analysis

For the Last Twelve Months Ended March 31, 2011

	As a Percent of Average Assets
	Interest Income		Interest Expense		Net Interest Income		Other Oper. Income		Non-rec. Income			Loan Loss Prov.		Gen. & Admin. Expense		Amort. & Imp. Intang,		Non-rec. Expense		Pretax Core Earnings
Asheville Savings Bank, S.S.B.		4.14		1.41		2.74		0.92		0.04			2.79		2.93		0.00		0.00		(2.06	)
Comparative Group Average		4.79		1.35		3.46		0.77		0.02			0.77		3.09		0.48		0.05		0.36
Comparative Group Median		4.80		1.35		3.47		0.71		0.02			0.71		2.89		0.03		0.01		0.29
All Public Thrift Average		4.54		1.48		3.07		0.87		0.03			0.76		2.90		0.06		0.03		0.28
All Public Thrift Median		4.54		1.45		3.13		0.60		0.01			0.48		2.84		0.00		0.00		0.67
Comparative Group
BCSB Bancorp, Inc.		4.45		1.50		2.95		0.42		(0.02	)		0.23		2.80		0.00		0.00		0.34
CFS Bancorp, Inc.		4.10		0.87		3.22		0.76		0.07			0.27		3.40		0.00		0.04		0.32
Citizens Community Bancorp (1)		5.61		1.89		3.72		0.36		(0.39	)		1.33		2.84		1.02		0.00		(0.10	)
Citizens South Banking Corp.		4.19		1.31		2.91		0.73		0.05			1.30		2.75		0.05		0.03		(0.41	)
Community Financial Corp. (1)		5.15		1.15		4.00		0.75		0.00			1.55		2.94		0.00		0.00		0.26
First Savings Financial Group, Inc.		5.15		1.13		4.05		0.59		0.03			0.26		3.21		0.06		0.31		1.17
Home Bancorp, Inc.		4.94		0.82		4.12		0.86		(0.19	)		0.09		3.59		0.04		0.06		1.30
HopFed Bancorp, Inc.		4.67		1.96		2.82		0.68		0.34			0.90		2.45		0.03		0.01		0.16
Jefferson Bancshares, Inc.		4.33		1.44		2.89		0.44		0.32			1.25		2.83		3.55		0.00		(0.75	)
Teche Holding Company		5.27		1.39		3.88		2.09		0.00			0.52		4.09		0.00		0.00		1.37

(1) For the LTM ended December 31, 2010.

Source: Asheville Savings Bank; SNL Financial; Feldman Financial.

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Table 22

Yield-Cost Structure and Growth Rates

For the Last Twelve Months Ended March 31, 2011

	Avg. Int. Earn. Assets/ Assets		Avg. Int.-Bear. Liabs./ Assets		Avg. Net Earning Assets/ Assets			Avg. Equity/ Assets		Yield on Int-Earn. Assets		Cost of Int-Bear. Liabs.		Net Interest Spread		Asset Growth Rate			Loan Growth Rate			Deposit Growth Rate
Asheville Savings Bank, S.S.B.		95.08		84.09		10.99			8.99		4.36		1.67		2.69		(1.38	)		(18.33	)		(0.37	)
Comparative Group Average		90.67		81.72		8.95			10.63		5.29		1.64		3.65		(0.34	)		(5.26	)		3.09
Comparative Group Median		90.66		82.78		8.88			9.81		5.34		1.62		3.57		2.26			(4.36	)		1.96
All Public Thrift Average		93.06		81.24		11.32			11.43		4.91		1.72		3.25		0.83			(1.99	)		4.39
All Public Thrift Median		93.63		81.80		10.96			10.53		4.93		1.75		3.39		0.03			(3.43	)		2.30
Comparative Group
BCSB Bancorp, Inc.		92.63		84.18		8.45			9.62		4.80		1.78		3.02		4.00			(5.72	)		4.97
CFS Bancorp, Inc.		89.82		80.55		9.27			10.13		4.56		1.09		3.48		4.75			(4.87	)		10.53
Citizens Community Bancorp (1)		96.14		86.83		9.31			9.28		5.83		2.18		3.65		2.42			0.26			18.83
Citizens South Banking Corp.		85.34		87.29		(1.95	)		8.82		4.94		1.50		3.44		(8.05	)		(8.29	)		(5.81	)
Community Financial Corp. (1)		95.40		84.38		11.02			9.06		5.39		1.36		4.03		(2.45	)		(3.43	)		(3.98	)
First Savings Financial Group, Inc.		90.94		82.46		8.48			10.81		5.69		1.37		4.32		3.75			(3.85	)		1.92
Home Bancorp, Inc.		87.13		66.80		20.33			18.94		5.67		1.23		4.44		0.54			(2.34	)		0.68
HopFed Bancorp, Inc.		90.37		83.10		7.27			9.99		5.29		2.35		2.93		2.11			(9.61	)		2.00
Jefferson Bancshares, Inc.		87.46		81.93		5.54			9.47		4.95		1.76		3.19		(12.91	)		(12.25	)		(2.32	)
Teche Holding Company		91.47		79.70		11.77			10.13		5.77		1.75		4.02		2.42			(2.46	)		4.12

(1) For the LTM ended December 31, 2010.

Source: Asheville Savings Bank; SNL Financial; Feldman Financial.

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Table 23

Balance Sheet Composition

As of March 31, 2011

	As a Percent of Total Assets
	Cash & Securities		Net Loans		Real Est. Owned		Intang. Assets		Other Assets		Total Deposits		Borrowed Funds		Other Liabs.		Total Liabs.		Total Equity
Asheville Savings Bank, S.S.B.		31.27		63.06		1.40		0.00		4.28		82.13		8.18		1.26		91.57		8.43
Comparative Group Average		23.67		68.32		0.98		0.30		6.72		79.55		9.08		0.91		89.54		10.46
Comparative Group Median		23.39		67.34		0.80		0.14		6.47		79.04		9.16		0.70		90.21		9.79
All Public Thrift Average		26.04		66.33		0.84		0.71		5.31		73.25		13.73		1.05		88.16		11.84
All Public Thrift Median		23.22		68.38		0.40		0.05		4.85		73.20		13.09		0.95		89.02		10.98
Comparative Group
BCSB Bancorp, Inc.		33.77		59.87		0.35		0.01		6.00		86.95		2.72		2.25		91.92		8.08
CFS Bancorp, Inc.		28.32		61.81		2.06		0.01		7.80		85.71		3.55		0.80		90.06		9.94
Citizens Community Bancorp (1)		19.63		76.90		0.09		0.13		3.25		83.12		7.38		0.58		91.07		8.93
Citizens South Banking Corp.		21.84		68.55		1.59		0.15		7.87		79.97		10.34		0.84		91.14		8.86
Community Financial Corp. (1)		2.27		90.89		1.58		0.00		5.26		73.17		16.93		0.60		90.71		9.29
First Savings Financial Group, Inc.		26.76		66.51		0.26		1.61		4.86		71.96		16.59		0.52		89.07		10.93
Home Bancorp, Inc.		24.93		62.61		0.77		0.25		11.45		77.61		3.00		0.47		81.07		18.93
HopFed Bancorp, Inc.		40.47		54.07		0.84		0.07		4.55		77.64		11.67		0.61		89.92		10.08
Jefferson Bancshares, Inc.		20.25		68.17		1.96		0.36		9.26		81.25		7.98		1.11		90.33		9.67
Teche Holding Company		18.47		73.86		0.26		0.47		6.94		78.10		10.69		1.29		90.08		9.92

(1) As of December 31, 2010.

Source: Asheville Savings Bank; SNL Financial; Feldman Financial.

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Table 24

Regulatory Capital, Credit Risk, and Loan Composition

As of or For the Last Twelve Months Ended March 31, 2011

	Tier 1 Leverage Capital Ratio		Tier 1 Risk- based Capital		Total Risk- based Capital		NPLs/ Loans		Total NPAs/ Assets		Resrvs./ NPLs		Resrvs./ Loans		Resid. First Mtgs./ Loans		Other Real Est. Mtgs./ Loans		Non-mtg. Loans/ Loans
Asheville Savings Bank, S.S.B.		8.60		13.67		14.94		2.92		4.83		89.02		2.60		36.66		51.61		11.73
Comparative Group Average		9.83		14.18		15.24		3.62		3.32		55.23		1.64		37.87		46.76		15.36
Comparative Group Median		9.24		12.51		13.76		2.98		2.44		39.91		1.72		31.50		53.17		13.91
All Public Thrift Average		10.31		16.61		17.71		5.05		4.47		59.12		1.89		44.19		45.39		10.42
All Public Thrift Median		9.75		15.27		16.17		3.46		3.42		44.26		1.63		41.55		47.48		8.18
Comparative Group
BCSB Bancorp, Inc.		10.91		17.24		18.26		2.41		1.81		54.91		1.32		41.24		55.38		3.38
CFS Bancorp, Inc.		8.94		12.18		13.22		9.23		7.90		25.57		2.36		27.68		62.21		10.11
Citizens Community Bancorp (1)		9.16		10.74		11.50		3.30		2.65		29.66		0.98		58.53		0.16		41.31
Citizens South Banking Corp.		9.89		15.44		16.70		3.42		3.19		21.68		1.65		25.06		66.82		8.12
Community Financial Corp. (1)		9.32		11.03		12.28		6.45		7.56		29.69		1.92		31.89		49.83		18.28
First Savings Financial Group, Inc.		8.26		11.94		13.03		1.63		1.49		67.44		1.20		48.06		38.37		13.57
Home Bancorp, Inc.		15.46		22.85		23.65		0.59		0.32		186.32		0.91		30.98		52.38		16.64
HopFed Bancorp, Inc.		9.37		15.37		16.22		2.65		1.41		34.52		2.34		31.11		57.00		11.89
Jefferson Bancshares, Inc.		8.45		12.32		13.58		4.24		4.67		45.29		1.96		29.95		53.96		16.09
Teche Holding Company		8.54		12.69		13.94		2.23		2.22		57.26		1.78		54.24		31.51		14.25

(1) As of or for the LTM ended December 31, 2010.

Source: Asheville Savings Bank; SNL Financial; Feldman Financial.

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III. MARKET VALUE ADJUSTMENTS

General Overview

This concluding chapter of the Appraisal identifies certain additional adjustments to the Bank’s estimated pro forma market value relative to the Comparative Group selected in Chapter II. The adjustments discussed in this chapter are made from the viewpoints of potential investors, which would include depositors holding subscription rights and unrelated parties who may purchase stock in a community offering. It is assumed that these potential investors are aware of all relevant and necessary facts as they would pertain to the value of the Bank relative to other publicly traded thrift institutions and relative to alternative investments.

Our appraised value is predicated on a continuation of the current operating environment for the Bank and thrift institutions in general. Changes in the Bank’s operating performance along with changes in the local and national economy, the stock market, interest rates, the regulatory environment, and other external factors may occur from time to time, often with great unpredictability, which could impact materially the pro forma market value of the Bank or thrift stocks in general. Therefore, the Valuation Range provided herein is subject to a more current re-evaluation prior to the actual completion of the Conversion.

In addition to the comparative operating fundamentals discussed in Chapter II, it is important to address additional market value adjustments based on certain financial and other criteria, which include, among other factors:

(1) Earnings Prospects

(2) Financial Condition

(3) Market Area

(4) Management

(5) Dividend Policy

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(6) Liquidity of the Issue

(7) Subscription Interest

(8) Recent Acquisition Activity

(9) Effect of Government Regulations and Regulatory Reform

(10) Stock Market Conditions

(11) New Issue Discount

Earnings Prospects

Earnings prospects are dependent upon the sensitivity of asset yields and liability costs to changes in market rates, the credit quality of assets, the stability of non-interest components of income and expense, and the ability to leverage the balance sheet. Each of the foregoing is an important factor for investors in assessing earnings prospects. The Bank’s profitability in recent years has declined steadily due to a combination of earnings fundamentals reflecting a narrowing net interest margin and increased loan loss provisions.

ASB’s core earnings compared unfavorably to the Comparative Group for the recent LTM period. The Bank’s core earnings amounted to negative 1.25% of average assets versus the Comparative Group median of positive 0.25%. The Bank’s lower net interest margin and higher level of loan loss provisions were the chief factors contributing to the Bank’s earnings disadvantage. As discussed earlier, the Bank’s net interest margin has been restrained by the increased liquidity on its balance sheet. The Bank’s yield on earning assets was 4.36% for the LTM ended March 31, 2011, markedly lower than the Comparative Group median of 5.34%. The earning asset yield limitation contributed to the Bank’s net interest spread of 2.69% trailing the Comparative Group median of 3.57%. The Bank intends to continue to emphasize residential and commercial mortgage lending as a means of increasing its ratio of loans to assets and improving its earnings potential. However, this objective is challenged by the current economic

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environment, existing credit quality issues that must be resolved, and persistently low loan demand. The Bank has taken steps to strengthen its ability to compete for loan opportunities and increase its market share. Simultaneously, the Bank is monitoring its interest rate risk exposure to rising rates as it seeks to deploy excess liquidity into loans or higher yielding investments.

Asset expansion over the past decade allowed the Bank to leverage its operating structure and reap the benefits of improved efficiency in the form of a declining operating expense ratio. However, as asset growth stalled due to loan portfolio shrinkage, the Bank’s operating expenses continued to grow on the same level of assets. In addition, Bank’s operating expenses will increase following the Conversion as result of the stock-benefit plans.

Generation of fee income has been a historical strength of the Bank. ASB derives steady non-interest revenue from overdraft protection, mortgage banking operations, debit card interchange fees, deposit service charges, and investment advisory income. Recent regulatory changes will place increased pressure on the ability to expand its non-interest revenue at historical growth rates.

The Bank reported profitable operations for the quarter ended March 31, 2011, registering net income of $585,000 for an annualized ROA of 0.32%. An important challenge confronting the Bank is returning to consistent profitability in the face of the credit quality issues it is currently addressing. In 2009 and 2010, the Bank’s net interest income did not exceed its non-interest expense. Thus, with such a narrow net interest margin, the Bank’s profitability is very susceptible to adverse interest rate movements or elevated credit-related losses in the near term given its current balance sheet structure. Additionally, in an effort to expand its lending activity and improve its franchise penetration in local and other contiguous markets, the Bank is likely to

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encounter increased competition which will place additional pressure on operating margins. The Bank’s increased capital position following the Conversion will help to improve its net interest margin across changing interest rate and business cycles and provide additional leverage capacity to grow the balance sheet. However, based on the Bank’s current earnings fundamentals and recent operating results, we believe that a slight downward adjustment is warranted to the Bank’s pro forma market value for fundamental earnings prospects relative to the Comparative Group.

Financial Condition

As discussed and summarized in Chapter I, the Bank’s overall loan composition reflects a solid concentration of residential and commercial mortgage loans. Because of unfavorable credit performance experience, the Bank has suspended its speculative construction lending and indirect automobile financing. In addition to continuing to emphasize its residential and commercial mortgage lending activity, the Bank seeks to expand its commercial and industrial loan portfolio. The shrinkage of the overall loan portfolio has contributed to a buildup of investment securities on the balance sheet. The Bank’s ratio of net loans to assets measured 63.1% of assets at March 31, 2011, compared to the Comparative Group median of 67.3%. The Bank’s ratio of cash and securities to assets measured 31.3% of assets at March 31, 2011, compared to the Comparative Group median of 23.4%. Based on the financial comparisons reviewed in the prior chapter, we note that the Bank’s balance sheet structure is very similar to that of the Comparative Group on the whole, with the notable exception of the larger liquidity concentration.

The Bank’s ratio of non-performing loans to total loans was comparable to the Comparative Group median; however, its ratio of total non-performing assets (including

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FELDMAN FINANCIAL ADVISORS, INC.

restructured loans) was higher than the Comparative Group median. The Bank’s level of reserves has been fortified by the sizable provision for loan losses during 2010 and reflects higher coverage ratios in relation to total loans and non-performing versus that of the Comparative Group. Before the infusion of net capital proceeds, the Bank’s equity ratio at 8.43% of assets was in range of the Comparative Group median of 9.79% and should likely surpass this median on a pro forma basis.

The selection criteria for the Comparative Group ensured a collection of companies with solid capital positions and generally satisfactory asset quality, similar to the Bank. We believe that the balance sheet, asset quality, and funding structure fundamentals of the Bank are largely similar to that of the Comparative Group. Therefore, on the whole, we believe that no additional adjustment is warranted for the Bank’s financial condition relative to the Comparative Group.

Market Area

The members of the Comparative Group were drawn from the Southern, Midwestern, and Mid-Atlantic regions of the country. The selection criteria parameters produced one public thrift operating in the Bank’s home state of North Carolina (Citizens South Banking Corp. based in Gastonia), along with five other companies from Southern states (Community Financial in Virginia, HopFed Bancorp in Kentucky, and Home Bancorp and Teche Holding Company in Louisiana). The Comparative Group companies are characterized by a cross-section of market areas that encompass smaller to mid-sized metropolitan areas with relatively stable economies, steady housing values, and moderate population growth prospects, very similar to that experienced by the Bank’s market area. In recognition of these factors, we believe that no adjustment is warranted for market area.

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FELDMAN FINANCIAL ADVISORS, INC.

Management

Management’s principal challenges are to generate profitable results, monitor credit risks, and control operating costs while the Bank competes in an increasingly challenging financial services environment. The normal challenges facing the Bank in attempting to deliver earnings growth and enhance its competitiveness remain paramount as it attempts to leverage the stock offering proceeds. The Bank has assembled a senior management team led by individuals who have been promoted from within and recruited externally where specific competencies were targeted. As reflected by its historical operating results, we believe that investors will take into account that the Bank is professionally and capably managed by an experienced management team. Investors will likely rely upon actual earnings results as the means of evaluating the future performance of ASB’s management as the Bank pursues its earnings and growth objectives following the Conversion. Therefore, based on these considerations, we believe no adjustment is warranted relative to the Comparative Group for this factor.

Dividend Policy

Following the Conversion, the Board of Directors of ASB will consider adopting a policy of paying cash dividends. However, there is no guarantee that the Company will pay dividends or that, if paid, dividends will not be reduced or eliminated in the future. The Board of Directors may declare and pay periodic special cash dividends in addition to, or in lieu of, regular cash dividends. In determining whether to declare or pay any dividends, whether regular or special, the Board of Directors will take into account the Company’s and Bank’s financial condition and operating results, tax considerations, capital requirements, industry standards, applicable regulatory guidelines, and economic conditions.

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FELDMAN FINANCIAL ADVISORS, INC.

Payment of cash dividends has become commonplace among publicly traded thrifts with relatively high capital levels. Of the ten members of the Comparative Group, four currently pay regular cash dividends and another three companies previously paid regular cash dividends but have suspended the practice at the present time. The average dividend yield of the Comparative Group was 0.94% and the median was 0.00% as of May 9, 2011. The average dividend yield of the All Public Thrift aggregate was 1.59% and the median was 1.06% as of May 9, 2011. Although ASB has yet to establish a policy of paying regular cash dividends, we believe that investors will take note of its solid dividend-paying capacity as evidenced by strong pro forma capital ratios. Therefore, we have concluded that no adjustment was warranted for purposes of dividend policy.

Liquidity of the Issue

With the increased number of market makers and institutional investors following thrift stocks, the majority of thrift stock conversions are able to develop a public market for their new stock issues. Most publicly traded thrift stocks continue to be traded on the NASDAQ market. Nine of the ten members of the Comparative Group are listed on the NASDAQ market, with Teche Holding Company listed on the NYSE Amex exchange. In conjunction with the Conversion, ASB will apply to have its common stock listed on the NASDAQ market.

The number of active buyers and sellers of shares of common stock at any particular time may be limited, which may have an adverse effect on the price at which shares of common stock can be sold. In order to list its shares on NASDAQ, the Company must have at least three broker-dealers who will make a market in the common stock following the Conversion. The development of a public market having the desirable characteristics of depth, liquidity and

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FELDMAN FINANCIAL ADVISORS, INC.

orderliness is facilitated by trading on an active exchange such as the NASDAQ market. Therefore, we have concluded the no adjustment to the Bank’s pro forma market value is warranted for anticipated liquidity of its common stock issue.

Subscription Interest

ASB has retained the services of Keefe, Bruyette & Woods, Inc. to assist in the marketing and sale of the stock offering. The Bank’s employee stock ownership plan (“ESOP”) plans to purchase 8.0% of the amount of stock to be sold in the stock offering. ASB expects its directors, executive officers and their associates, to purchase 160,500 shares of common stock in the offering for an aggregate amount of approximately $1.6 million based on a $10.00 offering price per share. Except for the ESOP, no person may purchase in the aggregate more than $300,000 of the common stock, or 30,000 shares sold in the offering. No person, either alone or together with associates of or persons acting in concert with such person, may purchase more than $500,000 of the common stock, or 50,000 shares sold in the offering. The minimum purchase in the offering will be 25 shares or an aggregate amount of $250.

Recent subscription interest in thrift stock conversion offerings has been solid and broad-based. Three thrift stock conversion offerings were completed in the month of April 2011 and each offering was oversubscribed and closed at the adjusted maximum of the valuation range. Until recently over the prior twelve months, while a few conversion offering experienced robust interest and received orders above the maximum offering amount, most converting thrifts had moderately exceeded the minimum of offering ranges and two conversion transactions had been deferred due to an inability to sell sufficient shares. As evident, subscription interest is cyclical and influenced by general stock market conditions and the overall economic outlook. As shown

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later in Table 27, the after-market performance of recently converted thrifts has also been mixed with the NASDAQ issues outperforming the over-the-counter (“OTC”) issues. We are not currently aware of any meaningful market evidence or characteristics that may help predict the likely level of interest in ASB’s subscription offering. Accordingly, absent actual results of the subscription offering, we believe that subscription interest is currently a neutral factor and at present requires no further adjustment.

Recent Acquisition Activity

Table 25 summarizes recent acquisition activity involving banks and thrifts based in North Carolina. HomeTrust Bank, a mutual thrift based in Asheville, has continued to expand through mergers with other mutual thrifts. The largest recent acquisition of a North Carolina bank or thrift involved the purchase in December 2008 of Wachovia Corporation by Wells Fargo & Company. Several mid-sized banks, ranging in asset size from $500 million to $2 billion, have also been acquired.

Many of the recent bank acquisition transactions were characterized by sellers experiencing financial difficulties and subsequently being acquired or recapitalized in change of control transactions at prices below book value. However, this profile of the merger and acquisition environment is occurring nationwide as premiums in bank and thrift acquisitions have been pushed downward to historically low levels. The articles of incorporation and bylaws of the Company and certain regulations may prevent or make more difficult an involuntary acquisition of the Company. Accordingly, at the present time, we do not believe that acquisition premiums are a significant factor to consider in determining the Company’s pro forma market value.

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Table 25

Summary of Recent North Carolina Acquisition Activity

Transactions Announced Since January 1, 2008

						Seller’s Prior Financial Data																Offer Value to
Buyer	State		Seller	B/T (1)		Total Assets ($Mil.)		Equity/ Assets (%)		YTD ROA (%)			YTD ROE (%)			Date Anncd.		Status (2)		Offer Value ($Mil.)		Book Value (%)		Tang. Book (%)		LTM EPS (x)		Total Assets (%)
Average							58,428.9		13.20		(2.01	)		(12.18	)		NA		NA		1,400.4		82.7		88.9		42.4		9.89
Median							163.7		9.31		(0.80	)		(9.26	)		NA		NA		30.6		79.0		79.5		51.5		9.64
FNB United Corp.		NC	Bank of Granite Corporation		B		875.8		2.78		(2.40	)		(64.11	)		04/26/11		P		13.0		53.4		53.4		NM		1.49
Piedmont Community Bank		NC	Crescent Financial Corp.		B		973.0		8.12		(1.00	)		(11.18	)		02/23/11		P		30.6		77.3		77.7		NM		11.36
American National Bankshares		VA	MidCarolina Financial Corp.		B		552.3		7.60		0.21			2.88			12/15/10		P		38.7		104.1		104.1		52.3		7.00
Piedmont Community Bank		NC	Community Bank of Rowan		B		149.5		6.87		(0.60	)		(8.13	)		11/19/10		C		10.0		97.8		97.8		NM		7.92
North American Fin’l Holdings		NC	Capital Bank Corporation		B		1,694.3		7.41		(2.19	)		(27.23	)		11/03/10		C		41.3		80.7		81.4		NM		11.67
HomeTrust Bank		NC	Cherryville Federal S&LA (3)		T		100.7		14.36		0.55			3.84			05/20/10		C		NA		NA		NA		NA		NA
HomeTrust Bank		NC	Industrial FSB (3)		T		168.4		24.79		1.01			4.02			10/13/09		C		NA		NA		NA		NA		NA
Piedmont Community Bank		NC	VantageSouth Bank		B		96.4		7.58		(1.46	)		(18.96	)		06/10/09		C		NA		84.6		84.6		NM		12.40
Carolina Trust Bank		NC	Carolina Commerce Bank		B		103.5		9.49		(1.67	)		(17.47	)		06/03/09		C		5.2		53.4		53.4		NM		5.06
Four Oaks Fincorp, Inc.		NC	Nuestro Banco		B		16.8		54.66		(20.28	)		(30.50	)		04/29/09		C		2.7		29.1		29.1		NM		15.90
First Community Bancshares		VA	TriStone Community Bank		B		152.4		9.37		(0.19	)		(1.76	)		04/02/09		C		8.3		58.2		58.2		NM		5.45
Wells Fargo & Company		CA	Wachovia Corporation		B		812,433.0		9.25		(1.03	)		(10.40	)		10/03/08		C		15,127.2		23.1		57.3		NM		1.86
Yadkin Valley Fin’l Corp.		NC	American Community Bancshs		B		529.9		10.34		0.57			5.34			09/09/08		C		94.4		167.5		206.2		23.4		17.82
First Community Bancshares		VA	Coddle Creek Financial Corp.		T		158.9		12.25		0.38			3.16			07/31/08		C		33.0		163.3		163.3		51.5		20.79

(1) B=bank; T=thrift.

(2) P=pending; C=completed.

(3) Merger involving two mutual thrift institutions.

Source: SNL Financial.

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Effect of Government Regulations and Regulatory Reform

In response to the financial crisis of 2008 and early 2009, Congress has taken actions that are intended to strengthen confidence and encourage liquidity in financial institutions. The Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted on July 21, 2010, and provides for new restrictions and an expanded framework of regulatory oversight for financial institutions and their holding companies. The legislation also provides for the creation of a consumer financial protection bureau that will have broad authority to issue regulations governing the services and products provided by financial institutions. The implemented legislation could increase compliance costs, raise regulatory capital requirements, alter loan loss provisioning practices, and otherwise adversely impact operations of banks and thrifts. The potential also exists for additional federal or state laws and regulations, or changes in policy, affecting lending and funding practices and liquidity standards.

As a fully converted stock thrift insured by the FDIC and supervised by its primary regulators, ASB will continue to operate in the same regulatory environment that is substantially similar to that faced by the Comparative Group companies. As of March 31, 2011, the Bank was considered well capitalized, similar to all the members of the Comparative Group. Therefore, given these factors, we believe that no specific adjustment is necessary for the effect of government regulations and regulatory reform.

Stock Market Conditions

Table 26 displays the performance of the SNL All Public Thrift, SNL All Southeast Thrift, SNL $500 Million to $1 Billion-Asset Thrift indexes, as compared to the Dow Jones Industrials Average Standard & Poor’s 500-Stock Index (“S&P 500”) over various periods.

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Following the stock market turmoil in 2008 related to the systemic financial crisis, the overall market rebounded in 2009 and 2010 while the various public thrift indexes were generally more sluggish. The All Public Thrift Index declined by 38.2% in 2008, parallel with the 38.5% decline in the S&P 500. The All Public Thrift Index declined further by 10.2% in 2009, while the S&P 500 rebounded firmly and advanced 23.5% in 2009. While the broader market staged a strong rally in 2009, the financial sector continued to suffer due to intensifying credit losses and mounting failures of distressed institutions.

The All Public Thrift Index stabilized in 2010 with a change of 0.9%, while the SNL $500 Million-$1 Billion-Asset Thrift Index increased by 7.4%. The Southeast Thrift Index continued to decline in 2010, as many of the region’s financial institutions were beset with asset quality problems related to widespread collapses of real estate construction and development markets.

Table 26

Comparative Stock Index Performance

Index	12/31/08- 12/31/09			12/31/09- 12/31/10			12/31/10- 05/09/11			12/31/08- 05/09/11
SNL All Public Thrifts		-10.2	%		0.9	%		-5.2	%		-14.2	%
SNL Thrifts $500 Mil.-$1 Bil. Assets		-8.3	%		7.4	%		7.7	%		6.1	%
SNL Southeast Thrifts		-39.2	%		-8.9	%		5.8	%		-41.4	%
SNL NASDAQ Thrifts		-12.0	%		-4.2	%		-3.8	%		-18.8	%
Dow Jones Industrials Average		18.8	%		11.0	%		9.6	%		44.5	%
S&P 500 Stock Index		23.5	%		12.8	%		7.1	%		49.1	%

Source: SNL Financial.

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As the banking industry showed increased signs of stabilizing into 2010, the public thrift indexes fared better through the first of half of 2010. However, commencing in the month of July 2010, there was a major sell-off in financial stocks. Trading prices of banks and thrifts fell on the lack of consensus regarding the prospects for economic growth and increased uncertainty about the Federal Reserve’s capacity to revive the stumbling economic recovery. The declining market in the summer months also reflected concerns of a potential “double dip” in the U.S. economy, as growth in consumer spending slowed and unemployment remained at historically high levels. Trading prices of bank and thrift stocks turned weaker again in October 2010 on the heels of negative industry news concerning improper mortgage foreclosure practices and fraudulent documentation. Through the first quarter of calendar 2011, financial stocks staged a rally, spurred by more favorable industry earnings developments. However, concerns about the sustainability of the economic recovery, underpinned by rising oil prices, stalled the rally in the spring and most thrift stock indexes have turned negative based on year-to-date performance.

The FDIC recently reported that the thrift industry reported positive earnings of $1.86 billion for the first quarter of 2011. The first quarter profit of $1.86 billion was down from $2.18 billion in the previous quarter and from $2.05 billion in the first quarter one year earlier. Profitability as measured by ROA was 0.59% in the first quarter, as compared to 0.70% in the fourth quarter of 2010, and 0.65% in the first quarter a year ago. While net interest margins were higher and provisions for loan losses were lower, these benefits were offset by increased operating expenses for the first quarter of 2011. Slight improvements in asset quality were apparent as total non-performing assets (non-current loans, restructured loans, and real estate owned) decreased to 3.81% of assets at the end of the first quarter from 3.95% at the end of the previous quarter and from 3.86% from one year earlier.

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Thrift industry earnings results for the first quarter of 2011 were sustained by improving net interest margins, but continue to be dampened by loan loss provisions. The thrift industry continued to prepare for future asset quality challenges by building its provision for loan losses. Simultaneously, the industry also managed to maintain a solid capital cushion, with equity capital measuring 11.58% of assets at the end of the first quarter, up from 11.09% a year earlier. Nonetheless, industry challenges remain as the number of “problem” institutions (including both banks and thrifts) as reported by the FDIC increased to 888, the highest since March 31, 1993, when there were 928. Therefore, we continue to believe the uncertain industry environment and the volatile swings in the market for bank and thrift stocks warrant a downward adjustment.

New Issue Discount

A “new issue” discount that reflects investor concerns and investment risks inherent in all initial public offerings (“IPOs”) is a factor to be considered for purposes of valuing converting thrifts. The magnitude of the new issue discount typically expands during periods of declining thrift stock prices as investors require larger inducements, and narrows during strong market conditions. The thrift conversion market continues to respond to the after-market performance of recent offerings. Table 27 presents a summary of standard full conversion offerings since January 1, 2010.

Thrift stock conversion activity had diminished considerably in the wake of the sharp marked downturn in market conditions. There were only four standard conversion offerings in 2008, followed by three such transactions in 2009. Thrift conversion activity accelerated in 2010 as improved market conditions in the first half of the year, increased regulatory uncertainty, and mounting capital pressures converged to stimulate interest in the conversion market. Twelve

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standard thrift conversions were completed in 2010, followed by five such offerings thus far in 2011. The recent after-market price performance of standard thrift conversion IPOs has been mixed. Of the 17 standard conversion offerings completed since January 1, 2010, the average and median one-week price changes were 7.6% and 7.5%, respectively. The after-market performance for thrift conversions traded on NASDAQ exhibited average and median one-week price changes of 9.9% and 14.0%, respectively, while the OTC conversion issues displayed average and median one-week price changes of 5.0% and 0.0%, respectively. As shown in Table 27, the cumulative price changes for all conversion issues were an average of 30.2% and median of 35.3%

The pro forma pricing ratios for the recent standard conversion offerings indicated an average and median price-to-book value ratios of 51.5% and 53.6%, respectively. The average and median pro forma price-to-tangible book value ratios were 52.1% and 54.2%, respectively. The average and median pro forma price-to-LTM earnings ratios were 25.7x and 23.7x, respectively. However, approximately half of the companies reported not meaningful (“NM”) ratios on a P/E basis due to negative or extremely low levels of pro forma earnings.

Accordingly, thrift conversions continue to be priced at discounts to publicly traded companies. This is due to the relatively high pro forma equity ratios, expected low returns on equity, and the uncertainty regarding the prospects of an institution to leverage the balance sheet prudently and effectively in the current low interest rate environment and against the backdrop of unsteady real estate market conditions. Moreover, the uneven after-market price performance of thrift IPOs provides added reason to continue to factor in a new issue discount for valuation of current thrift IPOs.

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Table 27

Summary of Recent Standard Conversion Stock Offerings

Transactions Completed Since January 1, 2010

									Pro Forma Ratios										After-Market Trading Price Change
Company	State	Stock Exchange	IPO Conv. Date		Total Assets ($Mil.)		Gross Offering Proceeds ($Mil.)		Price/ Book Value (%)		Price/ Tang. Book (%)		Price/ LTM EPS (x)		IPO Price ($)		5/09/11 Closing Price ($)		One Day (%)			One Week (%)			One Month (%)			Change Through 5/09/11 (%)
Average - All Standard Offerings	NA	NA		NA		319.1		33.2		51.5		52.1		25.7		NA		NA		7.3			7.6			8.5			30.2
Median - All Standard Offerings	NA	NA		NA		233.9		17.3		53.6		54.2		23.7		NA		NA		3.9			7.5			7.5			35.3
Average - NASDAQ	NA	NA		NA		504.2		55.5		54.0		54.9		22.7		NA		NA		11.1			9.9			10.9			34.0
Median - NASDAQ	NA	NA		NA		395.8		34.8		58.0		58.0		20.8		NA		NA		16.0			14.0			7.2			39.9
Average - OTC	NA	NA		NA		110.9		8.1		48.8		48.9		28.1		NA		NA		3.1			5.0			6.1			25.9
Median - OTC	NA	NA		NA		90.7		6.1		44.0		44.0		22.5		NA		NA		0.0			0.0			5.0			12.5
Franklin Financial Corporation	VA	NASDAQ		04/28/11		980.7		138.9		58.0		58.0		NM		10.00		11.88		19.7			18.5			NA			18.8
Sunshine Financial Inc.	FL	OTC		04/06/11		149.9		12.3		49.5		50.0		49.4		10.00		11.25		12.5			13.5			15.0			12.5
Fraternity Community Bancorp, Inc.	MD	OTC		04/01/11		169.7		15.9		53.6		53.6		NM		10.00		10.55		12.6			11.7			10.0			5.5
Anchor Bancorp	WA	NASDAQ		01/26/11		522.2		25.5		37.7		37.7		38.5		10.00		10.00		0.0			0.0			4.5			0.0
Wolverine Bancorp, Inc.	MI	NASDAQ		01/20/11		307.6		25.1		40.2		40.2		NM		10.00		14.50		24.5			20.0			35.0			45.0
SP Bancorp, Inc.	TX	NASDAQ		11/01/10		233.9		17.3		55.9		55.9		NM		10.00		11.99		(6.0	)		(6.2	)		(9.9	)		19.9
Madison Bancorp, Inc.	MD	OTC		10/07/10		150.7		6.1		44.0		44.0		NM		10.00		10.00		0.0			0.0			0.0			0.0
Standard Financial Corp.	PA	NASDAQ		10/07/10		395.8		34.8		49.4		57.0		10.7		10.00		15.34		19.0			18.5			29.5			53.4
Century Next Financial Corp.	LA	OTC		10/01/10		90.7		10.6		61.5		61.5		21.4		10.00		16.00		0.0			15.0			10.0			60.0
United-American Savings Bank	PA	OTC		08/06/10		60.2		3.0		54.2		54.2		23.7		10.00		13.05		0.0			(5.0	)		5.0			30.5
Peoples Federal Bancshares, Inc.	MA	NASDAQ		07/07/10		487.7		66.1		65.2		65.2		27.8		10.00		13.99		4.0			7.5			4.2			39.9
Fairmount Bancorp, Inc.	MD	OTC		06/03/10		67.3		4.4		44.0		44.0		10.1		10.00		16.00		0.0			5.0			10.0			60.0
Harvard Illinois Bancorp, Inc.	IL	OTC		04/09/10		157.2		7.8		43.1		43.1		NM		10.00		9.90		0.0			0.0			(1.0	)		(1.0	)
OBA Financial Services, Inc.	MD	NASDAQ		01/22/10		357.9		46.3		59.4		59.4		NM		10.00		14.75		3.9			1.5			3.0			47.5
OmniAmerican Bancorp, Inc.	TX	NASDAQ		01/21/10		1,006.3		119.0		62.0		62.0		NM		10.00		14.58		18.5			14.0			9.9			45.8
Versailles Financial Corporation	OH	OTC		01/11/10		41.6		4.3		40.5		40.5		36.0		10.00		14.00		0.0			0.0			0.0			40.0
Athens Bancshares Corporation	TN	NASDAQ		01/07/10		246.0		26.8		58.0		58.8		13.9		10.00		13.53		16.0			15.0			10.6			35.3

Source: SNL Financial.

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Adjustments Conclusion

It is our opinion that the Bank’s pro forma market value should be discounted relative to the Comparative Group because of factors associated with earnings prospects, stock market conditions, and the new issue discount. Individual discounts and premiums are not necessarily additive and may, to some extent, offset or overlay each other. Currently, converting thrifts are often valued at meaningful discounts to peer institutions relative to price-to-book and price-to-earnings ratios. It is the judgment of the appraiser to balance the relative dynamics of price-to-book and price-to-earnings discounts or premiums.

Valuation Approach

In determining the estimated pro forma market value of ASB, we have employed the comparative company approach and considered the following pricing ratios: price-to-earnings per share (“P/E”), price-to-book value per share (“P/B”), price-to-tangible book value per share (“P/TB”), and price-to-assets (“P/A”). Table 28 presents the trading market valuation ratios of the Comparative Group and All Public Thrift averages and medians as of May 9, 2011. As shown in Table 28, the average and median P/B ratios for the Comparative Group were 66.6% and 67.2%, respectively. The average and median P/TB ratios for the Comparative Group were 68.8% and 72.5%, respectively. The average and median P/E ratios for the Comparative Group were 17.2x and 18.3x, respectively. On a core earnings basis, average and median core P/E ratios of the Comparative Group were 22.5x and 19.0x, respectively. Four of the Comparative Group companies reported P/E ratios that were either negative due to losses or distortedly high due to low levels of profitability. Such ratios are represented as not meaningful and were not utilized for comparative valuation analysis.

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Investors continue to make decisions to purchase thrift conversion stocks and more seasoned thrift issues based upon consideration of core earnings profitability and P/B comparisons. The P/E ratio remains an important valuation ratio in the current thrift stock market environment. However, as noted above, the P/E ratio is not useful for companies reporting negative earnings such as ASB. The Bank’s LTM earnings for the period ended March 31, 2011 amounted to negative $9.3 million. On a core earnings basis, which excludes the Bank’s gain on sales of investments, the Bank’s LTM core earnings amounted to negative $9.5 million. Therefore, in the absence of meaningful earnings results, more reliance is on placed on the P/B and P/TB ratios to determine trading valuation benchmarks.

Based on our comparative financial and valuation analyses, we concluded that the Bank should be discounted relative to the trading valuation ratios of the overall Comparative Group. In consideration of the foregoing factors along with the additional adjustments discussed in this chapter, we have determined a pro forma P/B and P/TB ratio of 53.9% for the Bank, which reflects an aggregate midpoint value of $63.0 million based on the assumptions summarized in Exhibit IV. Employing a range of 15% above and below the midpoint, the resulting minimum value of approximately $53.6 million reflects a 49.3% P/B ratio and the resulting maximum value of approximately $72.5 million reflects a 57.9% P/B ratio. The adjusted maximum, computed as an additional 15.0% above the maximum, is positioned at approximately $83.3 million and a P/B ratio of 62.0%. The Bank’s pro forma P/B and P/TB ratios are equivalent due to the absence of any intangible assets on the Bank’s balance sheet.

The Bank’s pro forma midpoint P/B ratio of 53.9% reflects a discount of 19.8% to the Comparative Group average P/B ratio of 66.6% and a discount of 19.1% to the Comparative

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Group median P/B ratio of 67.2%. At the adjusted maximum, the Bank’s pro forma P/B ratio of 62.0% is positioned at a 6.9% discount to the Comparative Group average and 7.7% discount to the Comparative Group median. Also, at the adjusted maximum, the Bank’s pro forma P/TB ratio of 62.0% is positioned at a 9.9% discount to the corresponding Comparative Group average of 68.8% and 14.5% discount to the Comparative Group median of 72.5%. Based on the Valuation Range as indicated above, the Bank’s pro forma P/E ratios reflected negative values represented as NM or not meaningful due to the Bank’s negative earnings position.

Based on the price-to-assets valuation metric, the Bank’s pro forma midpoint of $63.0 million reflects a corresponding P/A ratio of 7.83%, ranging from 6.73% at the pro forma valuation minimum to 8.92% and 10.14% at the maximum and adjusted maximum, respectively. The Bank’s stronger capitalization level on a pro forma basis resulted in P/A ratio premiums range in contrast to the Comparative Group average P/A ratio of 6.85% and median P/A ratio of 5.53%.

On a pro forma basis, the Company’s ratio of equity to assets ranges from 13.64% at the valuation minimum and 14.52% at the midpoint to 15.39% and 16.36% at the maximum and adjusted maximum, respectively. However, we note that the Bank’s higher pro forma P/A valuation ratios are also indicative of the challenge facing the Bank in generating a competitive ROA and ROE and advancing the other valuation metrics to trading market levels.

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Valuation Conclusion

It is our opinion that, as of May 9, 2011, the aggregate estimated pro forma market value of the Bank on a fully converted basis was within a Valuation Range of $53,550,000 to $72,450,000 with a midpoint of $63,000,000. The Valuation Range was based upon a 15% decrease from the midpoint to determine the minimum and a 15% increase to establish the maximum. An additional 15% increase above the maximum results in an adjusted maximum of $83,317,500.

Exhibit IV-1 displays the assumptions utilized in calculating the pro forma financial consequences of the stock offering. Exhibit IV-2 displays the pro forma financial data at each level of the Valuation Range. Exhibit IV-3 provides more detailed data at the maximum valuation. Exhibit IV-4 compares the Bank’s pro forma valuation ratios with the averages and medians reported by the Comparative Group and All Public Thrifts.

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Table 28

Comparative Pro Forma Market Valuation Analysis

Asheville Saving Bank, S.S.B. and the Comparative Group

Computed from Market Price Data as of May 9, 2011

Company	Current Stock Price ($)		Total Market Value ($Mil.)		Price/ LTM EPS (x)		Price/ Core EPS (x)		Price/ Book Value (%)		Price/ Tang. Book (%)		Price/ Total Assets (%)		Total Equity/ Assets (%)		Tang. Equity/ Assets (%)		Current Dividend Yield (%)
Asheville Savings Bank, S.S.B.(1)
Pro Forma Minimum		10.00		53.6		NM		NM		49.3		49.3		6.73		13.64		13.64		0.00
Pro Forma Midpoint		10.00		63.0		NM		NM		53.9		53.9		7.83		14.52		14.52		0.00
Pro Forma Maximum		10.00		72.5		NM		NM		57.9		57.9		8.92		15.39		15.39		0.00
Pro Forma Adj. Maximum		10.00		83.3		NM		NM		62.0		62.0		10.14		16.36		16.36		0.00
Comparative Group Average		NA		51.4		17.2		22.5		66.6		68.8		6.85		10.46		10.19		0.94
Comparative Group Median		NA		48.7		18.3		19.0		67.2		72.5		5.53		9.79		9.41		0.00
All Public Thrift Average(2)		NA		339.1		20.7		24.7		80.8		87.2		9.37		11.85		11.15		1.59
All Public Thrift Median(2)		NA		63.3		17.9		17.1		82.3		85.1		8.66		10.98		10.00		1.06
Comparative Group
BCSB Bancorp, Inc.		13.37		42.7		NM		NM		84.6		84.7		6.83		8.08		8.07		0.00
CFS Bancorp, Inc.		5.49		59.7		18.3		19.3		52.5		52.5		5.22		9.94		9.94		0.73
Citizens Community Bancorp, Inc.		5.25		26.8		NM		NM		51.8		52.6		4.63		8.93		8.81		0.00
Citizens South Banking Corporation		4.75		54.7		NM		NM		76.2		77.8		5.35		8.86		8.72		0.84
Community Financial Corporation		3.14		13.7		20.9		20.9		37.3		37.3		2.66		9.29		9.29		0.00
First Savings Financial Group, Inc.		16.00		37.9		11.3		8.3		67.6		79.2		7.39		10.93		9.48		0.00
Home Bancorp, Inc.		14.79		119.6		23.9		18.6		90.2		91.4		17.08		18.93		18.73		0.00
HopFed Bancorp, Inc.		8.20		60.2		18.2		57.2		66.7		67.2		5.70		10.08		10.02		3.90
Jefferson Bancshares, Inc.		3.45		22.9		NM		NM		41.0		42.6		3.96		9.67		9.34		0.00
Teche Holding Company		36.41		75.9		10.9		10.9		97.8		102.7		9.70		9.92		9.49		3.95

⁽¹⁾ Pro forma ratios assume sale of 100% of the to-be-outstanding common stock, reflecting gross proceeds of $53.6 million at the minimum, $63.0 million at the midpoint, $72.5 million at the maximum, and $83.3 million at the adjusted maximum of the valuation range.

⁽²⁾ Excludes companies subject to mutual holding company ownership or pending acquisition.

Source: Asheville Savings Bank; SNL Financial; Feldman Financial.

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Exhibit I

Background of Feldman Financial Advisors, Inc.

Overview of Firm

Feldman Financial Advisors provides consulting and advisory services to financial institutions and mortgage companies in the areas of corporate valuations, mergers and acquisitions, strategic planning, branch sales and purchases, developing and implementing regulatory business and capital plans, and expert witness testimony and analysis. Our senior staff members have been involved in the stock conversion process since 1982 and have valued more than 350 converting institutions.

Feldman Financial Advisors was incorporated in February 1996 by a group of consultants who were previously associated with Credit Suisse First Boston and Kaplan Associates. Each of the principals at Feldman Financial Advisors has more than 10 years experience in consulting and all were officers of their prior firm. Our senior staff collectively has worked with more than 1,000 banks, thrifts and mortgage companies nationwide. The firm’s office is located in Washington, D.C.

Background of Senior Professional Staff

Trent Feldman - President. Trent is a nationally recognized expert in providing strategic advice to and valuing service companies, and advising on mergers and acquisitions. Trent was with Kaplan Associates for 14 years and was one of three founding principals at that firm. Trent also has worked at the Federal Home Loan Bank Board and with the California State Legislature. Trent holds Bachelors and Masters Degrees from the University of California at Los Angeles.

Peter Williams - Principal. Peter specializes in merger and acquisition analysis, stock and other corporate valuations, strategic business plans and retail delivery analysis. Peter was with Kaplan Associates for 13 years. Peter also served as a Corporate Planning Analyst with the Wilmington Trust Company in Delaware. Peter holds a BA in Economics from Yale University and an MBA in Finance and Investments from George Washington University.

Michael Green - Principal. Mike is an expert in mergers and acquisition analysis, financial institution and corporate valuations, and strategic and business plans. During Mike’s 10 years at Kaplan Associates, his experience also included business restructurings, litigation support, mark-to-market analysis, and goodwill valuations. Mike holds a BA in Finance and Economics from Rutgers College.

Greg Izydorczyk - Senior Vice President. Greg specializes in merger and acquisition analysis and corporate valuations and also has experience in mark-to-market analysis and business plans. Greg was with Kaplan Associates for three years. Previous, Greg worked as a Senior Auditor for First Virginia Bank and Integra Financial and as a Financial Analyst with Airbus Industrie of N.A. Greg holds a BS in Finance from Pennsylvania State University and an MBA in Finance from the Katz Graduate School, University of Pittsburgh.

I-1

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit II-1

Consolidated Balance Sheets

Asheville Savings Bank, S.S.B.

As of December 31, 2009 and 2010 and March 31, 2011

(Dollars in Thousands)

	March 31, 2011			December 31,
				2010			2009
ASSETS
Cash and due from banks	$	8,399		$	7,836		$	10,316
Interest-bearing deposits with banks		18,037			16,398			12,860
Investment securities, available for sale		198,596			175,445			90,057
Investment securities, held to maturity		5,720			5,948			6,958
Federal Home Loan Bank stock		3,970			3,970			3,993
Loans receivable		484,729			500,003			597,601
Allowance for loan losses		(12,632	)		(12,676	)		(8,994	)
Loans receivable, net		472,097			487,327			588,607
Loans held for sale		1,263			8,386			3,890
Foreclosed real estate, net		10,506			10,650			3,699
Premises and equipment, net		14,624			14,844			14,980
Other assets		17,497			19,161			13,947
TOTAL ASSETS	$	750,709		$	749,965		$	749,307
LIABILITIES AND EQUITY
Total deposits	$	616,586		$	619,757		$	608,538
Federal Home Loan Bank advances		60,000			60,000			60,000
Overnight and short-term borrowings		1,404			1,008			1,694
Other liabilities		9,424			6,319			5,426
Total liabilities		687,414			687,084			675,658
Retained earnings		67,107			66,522			75,950
Accumulated other comprehensive loss, net		(3,812	)		(3,641	)		(2,331	)
Total equity		63,295			62,881			73,649
TOTAL LIABILITIES AND EQUITY	$	750,709		$	749,965		$	749,307

Source: Asheville Savings Bank, financial statements.

II-1

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit II-2

Consolidated Income Statements

Asheville Savings Bank, S.S.B.

For the Years Ended December 31, 2009 and 2010

And the Three Months Ended March 31, 2010 and 2011

(Dollars in Thousands)

	Three Months Ended March 31,				Year Ended December 31,
	2011		2010		2010			2009
Total interest and dividend income	$	7,382	$	8,678	$	32,815		$	35,654
Total interest expense		2,304		3,051		11,444			14,772
Net interest income		5,078		5,627		21,371			20,882
Provision for loan losses		657		1,859		22,419			4,655
Net interest income (loss) after provision		4,421		3,768		(1,048	)		16,227
Deposit and other service charge income		846		942		3,688			3,612
Income from debit card services		295		262		1,176			998
Mortgage banking income		367		210		1,419			1,433
Gain on sale of investment securities		—		486		798			539
Other non-interest income		172		158		602			584
Total non-interest income		1,680		2,058		7,683			7,166
Salaries and employee benefits		2,530		2,584		9,652			10,374
Occupancy expense, net		753		761		3,099			3,018
Foreclosed property expenses		98		19		2,014			(20	)
Data processing fees		418		352		1,511			1,557
Federal deposit insurance premiums		—		253		1,037			1,414
Advertising		139		42		805			834
Professional and outside services		238		158		778			652
Other expenses		809		785		3,271			3,242
Total non-interest expense		5,232		5,154		22,167			21,071
Income (loss) before income tax provision		869		672		(15,532	)		2,322
Income tax provision (benefit)		284		242		(6,074	)		791
Net income (loss)	$	585	$	430	$	(9,458	)	$	1,531

Source: Asheville Savings Bank, financial statements.

II-2

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit II-3

Loan Portfolio Composition

As of December 31, 2009 and 2010 and March 31, 2011

(Dollars in Thousands)

	March 31, 2011					December 31,
						2010					2009
	Amount		Percent			Amount		Percent			Amount		Percent
Commercial
Commercial mortgage	$	162,675		33.53	%	$	164,553		32.88	%	$	197,239		32.98	%
Construction & land development		27,830		5.74			28,473		5.68			30,158		5.04
Commercial and industrial		15,764		3.25			17,656		3.53			22,794		3.81
Total		206,269		42.52			210,682		42.10			250,191		41.83
Non-commercial
Residential mortgage	$	177,846		36.65		$	180,439		36.06		$	190,965		31.93
Construction & land development 1-4 family residential		7,864		1.62			8,670		1.73			15,141		2.53
Revolving mortgage		52,042		10.73			53,432		10.68			55,038		9.20
Consumer		41,315		8.48			47,212		9.43			86,768		14.51
Total		278,887		57.48			289,753		57.90			347,912		58.17
Total loans		485,156		100.00	%		500,435		100.00	%		598,103		100.00	%
Less:
Deferred loan origination fees		427					432					502
Allowance for loan losses		12,632					12,676					8,994
Loans receivable, net	$	472,097				$	487,327				$	588,607

Source: Asheville Savings Bank, preliminary prospectus.

II-3

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit II-4

Net Loan Activity

For the Years Ended December 31, 2009 and 2010

And the Three Months Ended March 31, 2010 and 2011

(Dollars in Thousands)

	Three Months Ended						Year Ended
	March 31,						December 31,
	2011			2010			2010			2009
Total loans at beginning of period	$	495,713		$	592,497		$	592,497		$	586,618
Loans originated
Commercial loans:
Commercial mortgage		1,520			1,161			43,547			74,382
Commercial and land development		586			54			—			—
Commercial and industrial		450			881			7,737			10,742
Non-commercial loans:
Residential mortgage		29,463			28,715			121,439			131,017
Commercial and land development		618			—			15,845			12,142
Revolving mortgage		208			1,433			7,966			20,524
Consumer		88			123			523			26,248
Total loans originated		32,933			32,367			197,057			275,055
Loans purchased
Commercial loans:
Commercial mortgage		—			18			2,191			6,209
Commercial and land development		104			26			41			—
Total loans purchased		104			44			2,232			6,209
Deduct:
Loan principal repayments		28,966			28,021			163,910			151,368
Loan sales		25,468			15,958			97,103			116,352
Foreclosed loans transferred to REO		200			688			12,585			2,968
Charge-offs		804			1,817			18,863			2,193
Deductions for other items (1)		(48	)		70			3,612			2,504
Net loan activity		(22,353	)		(14,143	)		(96,784	)		5,879
Total loans at end of period	$	473,360		$	578,354		$	495,713		$	592,497

(1) Other items consist of fees, allowance for loan losses, and loans in process.

Source: Asheville Savings Bank, preliminary prospectus.

II-4

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit II-5

Investment Portfolio Composition

As of December 31, 2009 and 2010 and March 31, 2011

(Dollars in Thousands)

	March 31,				December 31,
	2011				2010				2009
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Securities available for sale
U.S. government agencies and corporations	$	62,732	$	62,250	$	50,254	$	50,043	$	25,048	$	25,108
Mortgage-backed securities and related securities		131,734		131,216		121,896		121,449		60,880		61,338
State and local government		4,494		4,460		3,379		3,287		1,026		1,030
Other debt securities		—		—		—		—		2,070		1,944
Other equity securities		669		670		664		666		641		637
		199,629		198,596		176,193		175,445		89,665		90,057
Securities held to maturity
U.S. government agencies and corporations	$	1,087	$	1,151	$	1,090	$	1,168	$	1,102	$	1,096
Mortgage-backed securities and related securities		2,223		2,362		2,449		2,598		3,452		3,590
State and local government		2,410		2,484		2,409		2,432		2,404		2,498
Other debt securities		—		—		—		—		—		—
Other equity securities		—		—		—		—		—		—
		5,720		5,997		5,948		6,198		6,958		7,184
Total investment securities	$	205,349	$	204,593	$	182,141	$	181,643	$	96,623	$	97,241

Source: Asheville Savings Bank, preliminary prospectus.

II-5

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit II-6

Deposit Account Distribution

As of December 31, 2009 and 2010 and March 31, 2011

(Dollars in Thousands)

	March 31,					December 31,
	2011					2010					2009
	Amount		Percent			Amount		Percent			Amount		Percent
Non-interest bearing deposits	$	45,039		7.30	%	$	44,996		7.26	%	$	37,715		6.20	%
Interest-bearing deposits:
NOW accounts		135,347		21.95			134,836		21.76			125,648		20.65
Money market accounts		133,075		21.58			131,138		21.16			117,866		19.37
Savings accounts		22,461		3.64			21,384		3.45			18,973		3.12
Certificates of deposit		280,664		45.53			287,403		46.37			308,336		50.67
Total interest-bearing deposits		571,547		92.70			574,761		92.74			570,823		93.80
Total deposits	$	616,586		100.00	%	$	619,757		100.00	%	$	608,538		100.00	%

Source: Asheville Savings Bank, preliminary prospectus.

II-6

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit II-7

Borrowed Funds Distribution

As of or For the Years Ended December 31, 2009 and 2010

And As of or For the Three Months Ended March 31, 2011

(Dollars in Thousands)

	Three Months Ended March 31, 2011
				Year Ended December 31,
				2010			2009
FHLB Advances
Average balance outstanding	$	60,000		$	60,000		$	60,000
Maximum outstanding at any month-end		60,000			60,000			60,000
Balance outstanding at period-end		60,000			60,000			60,000
Weighted average rate during period		4.03	%		4.03	%		4.03	%
Weighted average rate at end of period		4.03	%		4.03	%		4.02	%
Overnight and short-term borrowings
Average balance outstanding	$	1,737		$	1,189		$	4,051
Maximum outstanding at any month-end		1,617			1,638			30,783
Balance outstanding at period-end		1,404			1,008			1,694
Weighted average rate during period		0.47	%		0.25	%		0.37	%
Weighted average rate at end of period		0.22	%		0.33	%		0.28	%

Source: Asheville Savings Bank, preliminary prospectus.

II-7

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit II-8

Office Properties

As of March 31, 2011

Location	Year Opened		Square Footage		Owned/ Leased		Lease Expiration Date		Net Book Value ($000s)
Banking Centers
Downtown Asheville (Main Office) 11 Church Street Asheville, North Carolina 28801		1936		24,124		Owned		—	$	3,662
Black Mountain 300 West State Street Black Mountain, North Carolina 28711		1960		4,500		Owned		—		322
Mars Hill 105 North Main Street Mars Hill, North Carolina 28754		1974		2,500		Owned		—		1,373
Skyland 1879 Hendersonville Road Asheville, North Carolina 28803		1976		3,108		Owned		—		706
East Asheville 10 South Tunnel Road Asheville, North Carolina 28805		1978		3,570		Owned		—		133
North Asheville 778 Merrimon Avenue Asheville, North Carolina 28804		1979		9,846		Owned		—		447
West Asheville 1012 Patton Avenue Asheville, North Carolina 28806		1981		3,670		Owned		—		383
Marion 162 North Main Street Marion, North Carolina 28752		1981		6,000		Owned		—		197
Hendersonville 601 North Main Street Hendersonville, North Carolina 28792		1992		4,000		Owned		—		660
Brevard 2 Market Street Brevard, North Carolina 28712		1995		2,100		Owned		—		869
Reynolds 5 Olde Eastwood Village Boulevard Asheville, North Carolina 28803		2001		3,500		Owned		—		1,069
Enka-Candler 907 Smoky Park Highway Candler, North Carolina 28715		2003		3,500		Owned		—		1,080
Fletcher 3551 Hendersonville Road Fletcher, North Carolina 28732		2008		3,415		Lot Leased Structure Owned		1/31/2027		1,017
Other Offices
Operations Center 901 Smoky Park Highway Candler, North Carolina 28715		2003		46,000		Leased		4/30/2017		465
Commercial Lending 11 Church Street Asheville, North Carolina 28801		1998		1,940		Owned		—		—	(1)

(1) Net book value is reflected in net book value for main office location.

Source: Asheville Savings Bank, preliminary prospectus.

II-8

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit III

Financial and Market Data for All Public Thrifts

Company	State		Ticker		Total Assets ($Mil.)		Total Equity/ Assets (%)			Tang. Equity/ Assets (%)			LTM ROA (%)			LTM ROE (%)			Closing Price 5/09/11 ($)		Total Market Value ($Mil.)		Price/ LTM EPS (x)		Price/ Core EPS (x)		Price/ Book Value (%)		Price/ Tang. Book (%)		Price/ Total Assets (%)		Div. Yield (%)
All Public Thrifts(1)
Alliance Bancorp, Inc.		PA		ALLB		472		18.15			18.15			0.34			2.93			10.92		59.8		39.0		NA		NA		NA		NA		1.47
Anchor Bancorp		WA		ANCB		510		12.18			12.18			NA			NA			10.00		25.5		NA		NA		41.0		41.0		5.00		0.00
Anchor BanCorp Wisconsin Inc.		WI		ABCW		3,581		(0.27	)		(0.27	)		(1.22	)		(185.57	)		0.72		15.6		NM		NM		NM		NM		0.45		0.00
Astoria Financial Corporation		NY		AF		17,707		7.14			6.16			0.46			7.14			14.22		1,400.6		15.1		14.9		110.8		129.8		7.91		3.66
Athens Bancshares Corporation		TN		AFCB		284		17.56			17.44			0.63			3.51			13.53		37.6		19.9		20.0		75.4		76.1		13.25		1.48
Atlantic Coast Financial Corporation		FL		ACFC		810		6.77			6.76			(1.70	)		(27.55	)		9.73		25.6		NM		NA		NA		NA		NA		0.00
Bank Mutual Corporation		WI		BKMU		2,529		12.47			10.58			(2.29	)		(19.83	)		3.76		172.9		NM		NM		55.1		66.5		6.82		1.06
BankAtlantic Bancorp, Inc.		FL		BBX		4,471		(0.20	)		(0.52	)		(3.19	)		(206.35	)		0.93		57.6		NM		NM		NM		NM		1.31		0.00
BankFinancial Corporation		IL		BFIN		1,531		16.55			15.15			(0.28	)		(1.64	)		8.74		184.2		NM		NM		72.7		80.8		12.03		3.20
BankUnited, Inc.		FL		BKU		10,808		13.29			12.74			NA			NA			27.89		2,712.0		45.7		NA		188.7		198.2		25.09		2.01
BCSB Bancorp, Inc.		MD		BCSB		625		8.08			8.07			0.23			2.36			13.37		42.7		NM		NM		84.6		84.7		6.83		0.00
Beacon Federal Bancorp, Inc.		NY		BFED		1,034		10.77			10.77			0.53			5.18			14.29		91.7		15.5		13.7		82.3		82.3		8.87		1.40
Berkshire Hills Bancorp, Inc.		MA		BHLB		2,885		13.52			8.02			0.47			3.39			21.13		354.5		22.0		17.6		76.5		137.0		10.34		3.03
BofI Holding, Inc.		CA		BOFI		1,736		8.19			8.19			1.29			14.76			16.29		168.6		9.0		9.4		123.0		123.0		9.74		0.00
Broadway Financial Corporation		CA		BYFC		484		6.79			6.79			0.37			5.85			2.25		3.9		5.1		5.1		23.4		23.4		0.84		0.00
Brookline Bancorp, Inc.		MA		BRKL		3,058		16.36			14.90			1.06			5.76			8.87		524.0		18.9		18.7		105.3		117.7		17.15		3.83
Cape Bancorp, Inc.		NJ		CBNJ		1,062		13.29			11.37			1.10			8.79			10.39		138.3		10.9		10.8		98.0		117.1		13.03		0.00
Capitol Federal Financial, Inc.		KS		CFFN		9,798		20.61			20.61			0.42			3.59			10.98		1,839.1		52.3		29.5		91.1		91.1		18.77		2.73
Carver Bancorp, Inc.		NY		CARV		744		4.42			4.40			(4.56	)		(62.62	)		0.58		1.5		NM		NA		15.5		15.7		0.20		0.00
Central Bancorp, Inc.		MA		CEBK		488		9.66			9.25			0.33			3.74			18.85		31.7		27.7		30.1		84.7		90.1		6.63		1.06
Central Federal Corporation		OH		CFBK		275		5.81			5.77			(2.41	)		(35.52	)		1.07		4.4		NM		NM		49.5		50.2		1.65		0.00
CFS Bancorp, Inc.		IN		CITZ		1,144		9.94			9.94			0.29			2.86			5.49		59.7		18.3		19.3		52.5		52.5		5.22		0.73
Chicopee Bancorp, Inc.		MA		CBNK		582		15.82			15.82			0.10			0.59			14.37		85.9		NM		184.1		93.4		93.4		14.77		0.00
Citizens Community Bancorp, Inc.		WI		CZWI		580		8.93			8.81			(1.29	)		(13.94	)		5.25		26.8		NM		NM		51.8		52.6		4.63		0.00
Citizens South Banking Corporation		NC		CSBC		1,041		8.86			8.72			(0.24	)		(2.68	)		4.75		54.7		NM		NM		76.2		77.8		5.35		0.84
CMS Bancorp, Inc.		NY		CMSB		246		8.78			8.78			0.07			0.73			8.92		16.6		NM		NM		77.1		77.1		6.77		0.00
Colonial Financial Services, Inc.		NJ		COBK		590		11.76			11.76			0.67			6.83			12.72		53.3		13.1		12.9		76.8		76.8		9.02		0.00
Community Financial Corporation		VA		CFFC		528		9.29			9.29			0.26			2.86			3.14		13.7		20.9		20.9		37.3		37.3		2.66		0.00
Dime Community Bancshares, Inc.		NY		DCOM		4,143		8.14			6.88			1.05			13.32			14.54		504.3		11.4		NA		149.6		179.2		12.17		3.85
Eagle Bancorp Montana, Inc.		MT		EBMT		335		15.82			15.82			0.75			4.94			11.25		45.9		17.9		17.9		86.8		86.8		13.73		2.49

III-1

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit III (continued)

Financial and Market Data for All Public Thrifts

Company	State	Ticker	Total Assets ($Mil.)		Total Equity/ Assets (%)		Tang. Equity/ Assets (%)		LTM ROA (%)			LTM ROE (%)			Closing Price 5/09/11 ($)		Total Market Value ($Mil.)		Price/ LTM EPS (x)		Price/ Core EPS (x)		Price/ Book Value (%)		Price/ Tang. Book (%)		Price/ Total Assets (%)		Div. Yield (%)
Elmira Savings Bank, FSB	NY	ESBK		494		11.50		9.13		0.98			8.62			17.15		33.7		10.0		10.3		NA		NA		NA		4.66
ESB Financial Corporation	PA	ESBF		1,925		8.79		6.73		0.80			9.02			12.85		191.1		12.9		12.9		112.0		149.3		9.88		2.59
ESSA Bancorp, Inc.	PA	ESSA		1,094		14.86		14.86		0.40			2.50			11.86		151.6		32.1		37.9		NA		NA		NA		1.69
FedFirst Financial Corporation	PA	FFCO		339		17.50		17.18		0.16			1.04			14.65		43.8		NM		NA		NA		NA		NA		0.82
FFD Financial Corporation	OH	FFDF		211		8.89		8.89		0.69			7.78			14.25		14.4		10.0		NA		NA		NA		NA		4.77
Fidelity Bancorp, Inc.	PA	FSBI		685		7.29		NA		0.07			1.00			9.38		28.7		NM		14.8		66.7		NA		4.24		0.85
First Advantage Bancorp	TN	FABK		345		19.33		19.33		0.49			2.48			13.16		61.0		33.7		35.1		81.0		81.0		15.66		1.52
First Bancshares, Inc.	MO	FBSI		204		10.05		10.00		(1.54	)		(14.31	)		6.05		9.4		NM		NM		45.7		45.9		4.59		0.00
First Capital, Inc.	IN	FCAP		449		NA		NA		0.83			NA			16.50		46.0		12.2		12.1		NA		NA		NA		4.61
First Clover Leaf Financial Corp.	IL	FCLF		575		13.45		11.53		0.65			4.88			6.99		55.0		14.3		15.0		71.3		85.0		9.59		3.43
First Community Bank Corporation	FL	FCFL		471		6.11		6.11		(3.62	)		(48.79	)		0.27		2.3		NM		NM		14.4		14.4		0.33		0.00
First Defiance Financial Corp.	OH	FDEF		2,062		12.76		10.00		0.45			3.85			14.30		139.0		16.3		14.1		61.4		85.2		6.87		0.00
First Federal Bancshares of Arkansas	AR	FFBHD		578		6.02		6.02		(1.01	)		(15.78	)		10.44		171.2		NM		NM		54.7		54.7		1.80		0.00
First Federal of North. Mich. Bancp.	MI	FFNM		215		10.91		10.68		0.09			0.84			3.38		9.7		48.3		NM		41.5		42.5		4.52		0.00
First Financial Holdings, Inc.	SC	FFCH		3,302		9.43		8.39		(0.37	)		(3.88	)		10.32		170.6		NM		NM		69.2		81.6		5.27		1.94
First Financial Northwest, Inc.	WA	FFNW		1,184		14.91		14.91		(2.78	)		(19.17	)		6.20		116.6		NM		NM		66.1		66.1		9.85		0.00
First PacTrust Bancorp, Inc.	CA	FPTB		835		16.25		16.25		0.30			2.33			14.33		124.6		62.3		NM		102.8		102.8		16.70		2.93
First Place Financial Corp.	OH	FPFC		3,153		8.01		7.75		(0.97	)		(11.45	)		1.94		33.6		NM		NM		18.0		18.9		1.07		0.00
First Savings Financial Group, Inc.	IN	FSFG		513		10.93		9.48		0.61			5.66			16.00		37.9		11.3		8.3		67.6		79.2		7.39		0.00
Flagstar Bancorp, Inc.	MI	FBC		13,017		9.50		9.50		(2.34	)		(27.39	)		1.42		786.5		NM		NM		79.7		79.7		6.16		0.00
Flushing Financial Corporation	NY	FFIC		4,317		9.13		8.76		0.91			10.13			14.21		446.0		11.2		10.6		113.1		118.3		10.32		3.66
Fox Chase Bancorp, Inc.	PA	FXCB		1,071		19.31		19.31		0.30			1.84			13.34		194.1		53.4		84.7		93.8		93.8		18.12		0.60
Franklin Financial Corporation	VA	FRNK		NA		NA		NA		NA			NA			11.88		169.9		NA		NA		NA		NA		NA		0.00
Hampden Bancorp, Inc.	MA	HBNK		575		16.15		16.15		0.33			2.03			13.25		90.1		45.7		44.1		NA		NA		NA		0.91
Harleysville Savings Financial Corp.	PA	HARL		856		6.42		6.42		0.58			9.27			14.89		55.6		11.2		NA		101.0		101.0		6.49		5.10
Heritage Financial Group, Inc.	GA	HBOS		952		12.75		12.31		0.25			2.22			12.24		106.6		53.2		NM		87.9		91.4		11.20		0.98
HF Financial Corp.	SD	HFFC		1,207		7.91		7.58		0.31			4.06			11.05		77.1		20.1		19.0		80.7		84.6		6.39		4.07
Hingham Institution for Savings	MA	HIFS		1,033		7.26		7.26		1.09			15.06			51.24		108.8		10.1		10.1		145.1		145.1		10.54		1.87
HMN Financial, Inc.	MN	HMNF		879		7.92		7.92		(2.87	)		(31.81	)		3.00		13.2		NM		NM		29.1		29.1		1.54		0.00
Home Bancorp, Inc.	LA	HBCP		700		18.93		18.73		0.66			3.50			14.79		119.6		23.9		18.6		90.2		91.4		17.08		0.00
Home Federal Bancorp, Inc.	ID	HOME		1,336		14.84		14.61		(0.39	)		(2.30	)		10.89		180.4		NM		NA		91.0		92.7		13.50		2.02

III-2

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit III (continued)

Financial and Market Data for All Public Thrifts

Company	State	Ticker	Total Assets ($Mil.)		Total Equity/ Assets (%)		Tang. Equity/ Assets (%)		LTM ROA (%)			LTM ROE (%)			Closing Price 5/09/11 ($)		Total Market Value ($Mil.)		Price/ LTM EPS (x)		Price/ Core EPS (x)		Price/ Book Value (%)		Price/ Tang. Book (%)		Price/ Total Assets (%)		Div. Yield (%)
Home Federal Bancorp, Inc.	LA	HFBL		218		23.17		23.17		0.98			4.84			13.06		39.8		19.8		NA		NA		NA		NA		1.84
HopFed Bancorp, Inc.	KY	HFBC		1,074		10.08		10.02		0.26			2.57			8.20		60.2		18.2		57.2		66.7		67.2		5.70		3.90
Hudson City Bancorp, Inc.	NJ	HCBK		52,429		9.02		8.75		(0.28	)		(3.02	)		9.41		4,956.2		NM		NM		104.8		108.4		9.45		3.40
Jacksonville Bancorp, Inc.	IL	JXSB		308		11.89		11.10		0.77			7.08			12.74		24.5		10.5		11.7		NA		NA		NA		2.35
Jefferson Bancshares, Inc.	TN	JFBI		578		9.67		9.34		(3.75	)		(39.57	)		3.45		22.9		NM		NM		41.0		42.6		3.96		0.00
Kaiser Federal Financial Group, Inc.	CA	KFFG		902		17.22		NA		0.95			7.11			12.27		117.3		13.9		13.9		NA		NA		NA		1.63
Louisiana Bancorp, Inc.	LA	LABC		324		18.79		18.79		0.79			3.96			15.20		55.1		20.8		NA		90.3		90.3		16.97		0.00
LSB Financial Corp.	IN	LSBI		372		9.57		9.57		0.56			6.09			15.60		24.2		11.5		11.5		68.1		68.1		6.52		0.00
Mayflower Bancorp, Inc.	MA	MFLR		245		8.51		8.51		0.54			6.53			9.00		18.7		13.8		16.4		89.6		89.6		7.62		2.67
Meta Financial Group, Inc.	IA	CASH		1,130		6.26		6.16		1.14			16.36			14.35		44.7		3.7		3.5		63.1		64.2		3.95		3.62
MutualFirst Financial, Inc.	IN	MFSF		1,447		9.05		8.78		0.31			3.40			8.04		56.2		20.6		12.9		56.7		59.2		3.97		2.99
NASB Financial, Inc.	MO	NASB		1,337		12.70		12.53		0.49			4.20			13.78		108.4		15.5		17.9		63.8		64.8		8.11		0.00
New Hampshire Thrift Bancshares, Inc.	NH	NHTB		1,002		9.35		6.67		0.83			8.93			12.90		74.5		9.7		11.8		89.0		135.6		7.51		4.03
New York Community Bancorp, Inc.	NY	NYB		41,047		13.50		7.87		1.32			10.03			16.16		7,067.5		13.0		NA		127.6		232.9		17.22		6.19
Newport Bancorp, Inc.	RI	NFSB		450		11.17		11.17		0.44			4.00			14.35		50.1		24.3		25.1		99.7		99.7		11.14		0.00
North Central Bancshares, Inc.	IA	FFFD		452		10.87		10.74		0.37			3.47			16.64		22.5		19.1		19.2		57.6		58.6		5.09		0.24
Northwest Bancshares, Inc.	PA	NWBI		8,122		15.85		13.99		0.76			4.72			12.25		1,299.6		21.5		20.4		102.5		118.7		16.25		3.59
OBA Financial Services, Inc.	MD	OBAF		354		22.75		22.75		(0.08	)		(0.42	)		14.75		68.3		NA		NA		84.7		84.7		19.27		0.00
Ocean Shore Holding Co.	NJ	OSHC		861		11.81		11.81		0.63			5.29			12.55		91.6		16.1		15.9		90.0		90.0		10.63		1.91
OceanFirst Financial Corp.	NJ	OCFC		2,263		9.10		9.10		0.94			10.73			14.01		264.0		12.1		12.1		128.2		128.2		11.66		3.43
OmniAmerican Bancorp, Inc.	TX	OABC		1,335		14.86		14.86		0.14			0.82			14.58		172.6		NM		107.0		87.0		87.0		12.93		0.00
Oneida Financial Corp.	NY	ONFC		683		12.70		9.36		0.74			5.95			8.84		63.3		13.8		12.8		NA		NA		NA		5.43
Oritani Financial Corp.	NJ	ORIT		2,557		25.28		25.28		0.71			3.10			12.14		682.3		37.9		38.0		105.6		105.6		26.68		3.29
Park Bancorp, Inc.	IL	PFED		212		8.51		8.51		(2.48	)		(24.52	)		3.65		4.4		NM		NM		24.2		24.2		2.06		0.00
Parkvale Financial Corporation	PA	PVSA		1,801		6.88		5.42		(0.83	)		(12.20	)		10.42		58.2		NM		8.5		63.2		90.5		3.29		0.77
Peoples Federal Bancshares, Inc.	MA	PEOP		529		22.04		22.04		(0.02	)		(0.09	)		13.99		99.9		NA		NA		85.8		85.8		18.90		0.00
People’s United Financial, Inc.	CT	PBCT		24,962		20.67		13.94		0.54			2.32			13.48		4,847.5		38.5		31.1		92.7		149.2		19.17		4.67
Provident Financial Holdings, Inc.	CA	PROV		1,339		10.42		10.42		1.04			10.84			8.10		92.5		6.5		6.8		66.3		66.3		6.91		0.49
Provident Financial Services, Inc.	NJ	PFS		6,794		13.63		NA		0.76			5.60			13.98		839.3		15.4		14.5		90.6		NA		12.35		3.43
Provident New York Bancorp	NY	PBNY		2,919		14.40		9.31		0.70			4.80			9.17		348.8		17.0		22.0		83.1		136.1		11.96		2.62
Pulaski Financial Corp.	MO	PULB		1,338		8.87		8.59		0.75			8.94			7.19		79.0		8.9		8.8		90.4		94.8		6.05		5.29

III-3

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit III (continued)

Financial and Market Data for All Public Thrifts

Company	State	Ticker	Total Assets ($Mil.)		Total Equity/ Assets (%)		Tang. Equity/ Assets (%)		LTM ROA (%)			LTM ROE (%)			Closing Price 5/09/11 ($)		Total Market Value ($Mil.)		Price/ LTM EPS (x)		Price/ Core EPS (x)		Price/ Book Value (%)		Price/ Tang. Book (%)		Price/ Total Assets (%)		Div. Yield (%)
PVF Capital Corp.	OH	PVFC		777		9.58		9.58		(1.17	)		(12.22	)		1.90		48.8		NM		NM		65.5		65.5		6.28		0.00
River Valley Bancorp	IN	RIVR		387		8.34		8.32		0.62			7.52			15.65		23.7		11.8		NA		86.9		87.1		6.20		5.37
Riverview Bancorp, Inc.	WA	RVSB		859		12.50		9.79		0.51			4.29			3.16		71.0		13.2		13.0		66.4		87.5		8.27		0.00
Rockville Financial, Inc.	CT	RCKB		1,678		9.92		9.86		0.76			7.48			9.61		283.5		21.8		22.1		164.1		165.2		16.27		1.78
Severn Bancorp, Inc.	MD	SVBI		968		10.98		10.94		0.22			2.01			4.45		44.8		NM		NA		56.7		56.9		4.76		0.00
SI Financial Group, Inc.	CT	SIFI		929		13.87		13.49		0.30			3.11			10.10		106.8		38.8		42.7		82.9		85.6		11.49		1.19
SP Bancorp, Inc.	TX	SPBC		239		13.44		13.44		0.23			2.65			11.99		20.7		NM		115.4		64.4		64.4		8.66		0.00
Standard Financial Corp.	PA	STND		436		17.35		15.50		0.53			3.72			15.34		53.3		NA		NA		70.6		80.8		12.25		0.00
Teche Holding Company	LA	TSH		782		9.92		9.49		0.92			9.07			36.41		75.9		10.9		10.9		97.8		102.7		9.70		3.95
Territorial Bancorp Inc.	HI	TBNK		1,488		15.29		15.29		0.87			5.56			20.29		243.1		18.3		18.5		107.3		107.3		16.40		1.77
TF Financial Corporation	PA	THRD		684		10.85		10.26		0.46			4.39			21.99		62.1		18.2		18.2		83.6		89.0		9.07		0.91
Timberland Bancorp, Inc.	WA	TSBK		744		11.77		11.04		0.43			3.62			5.91		41.6		19.7		16.6		58.1		63.5		5.72		0.00
TrustCo Bank Corp NY	NY	TRST		4,008		6.45		6.44		0.77			11.59			5.75		444.9		14.7		16.0		171.8		172.2		11.08		4.57
United Community Financial Corp.	OH	UCFC		2,115		8.39		8.37		(1.29	)		(14.58	)		1.31		40.5		NM		NM		22.9		22.9		1.92		0.00
United Financial Bancorp, Inc.	MA	UBNK		1,600		14.01		13.54		0.69			4.80			15.97		257.2		22.5		21.9		114.7		119.3		16.07		2.00
ViewPoint Financial Group, Inc.	TX	VPFG		2,796		14.30		14.26		0.77			6.01			12.49		435.1		18.4		20.4		108.8		109.1		15.56		1.60
Washington Federal, Inc.	WA	WFSL		13,389		13.73		NA		0.58			4.29			15.40		1,725.9		22.0		24.0		93.9		NA		12.89		1.56
Wayne Savings Bancshares, Inc.	OH	WAYN		409		9.28		8.83		0.54			5.83			8.40		25.2		11.1		10.9		66.4		70.2		6.16		2.86
Westfield Financial, Inc.	MA	WFD		1,241		17.68		NA		0.24			1.26			8.82		247.4		NM		NM		112.8		NA		19.94		2.72
Wolverine Bancorp, Inc.	MI	WBKC		314		13.35		13.35		(1.16	)		(8.23	)		14.50		36.4		NA		NA		NA		NA		NA		0.00
WSB Holdings, Inc.	MD	WSB		409		12.79		12.79		(0.96	)		(7.46	)		3.10		24.8		NM		NA		47.3		47.3		6.06		0.00
WSFS Financial Corporation	DE	WSFS		3,952		9.39		NA		0.46			5.08			42.79		367.8		23.0		28.1		115.4		NA		9.43		1.12
WVS Financial Corp.	PA	WVFC		247		11.46		11.46		0.20			2.22			8.75		18.0		29.2		29.2		63.5		63.5		7.28		1.83
Average	NA	NA		2,794		11.85		11.15		0.03			(3.69	)		NA		339.1		20.7		24.7		80.8		87.2		9.37		1.59
Median	NA	NA		890		10.98		10.00		0.43			3.50			NA		63.3		17.9		17.1		82.3		85.1		8.66		1.06

⁽¹⁾  Public thrifts traded on NYSE, NYSE Amex, and NASDAQ; excludes companies subject to pending acquisitions or mutual holding company ownership.

Source: SNL Financial; Feldman Financial.

III-4

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit IV-1

Pro Forma Assumptions for Conversion Stock Offering

1. The total amount of the net offering proceeds was fully invested at the beginning of the applicable period.

2. The net offering proceeds are invested to yield a return of 0.80%, which represented the yield on two-year U.S. Treasury securities at March 31, 2011. The effective combined federal and state corporate income tax rate was assumed to be 38.0%, resulting in a net after-tax yield of 0.50%.

3. It is assumed that 8.0% of the total shares of common stock to be sold in the offering will be acquired by the Bank’s employee stock ownership plan (“ESOP”). Pro forma adjustments have been made to earnings and equity to reflect the impact of the ESOP. The annual expense is estimated based on a 15-year loan to the ESOP from the Company. No re-investment is assumed on proceeds used to fund the ESOP.

4. It is assumed that that the Bank’s restricted stock plan (“RSP”) will purchase in the open market a number of shares equal to 4.0% of the total shares sold in the offering. Also, it is assumed that these shares are acquired at the initial public offering price of $10.00 per share. Pro forma adjustments have been made to earnings and equity to reflect the impact of the RSP. The annual expense is estimated based on a five-year vesting period. No re-investment is assumed on proceeds used to fund the RSP.

5. It is assumed that an additional 10.0% of the total shares sold in the offering will be reserved for issuance by the Bank’s stock option plan. Pro forma net income has been adjusted to reflect the expense associated with the granting of options at an assumed options value of $4.11 per share. It is further assumed that options for all shares reserved under the plan were granted to plan participants at the beginning of the period, 25% of the options granted were non-qualified options for income tax purposes, the options would vest at a rate of 20% per year, and compensation expense will be recognized on a straight-line basis over the five-year vesting period

6. The fair value of stock options has been estimated at $4.11 per option using the Black-Scholes option pricing model with the following assumptions: a grant-date share price and option exercise price of $10.00; dividend yield of 0.00%; an expected option life of 10 years; a risk-free interest rate of 3.47%; and a volatility rate of 22.56% based on an index of publicly traded thrift institutions.

7. Total fixed offering expenses, excluding marketing agent fees, are estimated at $1.36 million. The marketing agent will receive a success fee equal to 1.0% of the aggregate dollar amount of common stock sold in the subscription and community offerings, excluding shares purchased by the ESOP or by the Bank’s officers, directors, employees, and their family members.

8. No effect has been given to withdrawals from deposit accounts for the purpose of purchasing common stock in the offering.

9. No effect has been given in the pro forma equity calculation for the assumed earnings on the net proceeds.

IV-1

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit IV-2

Pro Forma Conversion Valuation Range

Asheville Savings Bank, S.S.B.

Historical Financial Data as of March 31, 2011

(Dollars in Thousands, Except Per Share Data)

	Minimum			Midpoint			Maximum			Adj. Max.
Shares sold		5,355,000			6,300,000			7,245,000			8,331,750
Offering price	$	10.00		$	10.00		$	10.00		$	10.00
Gross proceeds	$	53,550		$	63,000		$	72,450		$	83,318
Less: estimated offering expenses		(1,837	)		(1,924	)		(2,010	)		(2,110	)
Net offering proceeds		51,713			61,076			70,440			81,207
Less: ESOP purchase		(4,284	)		(5,040	)		(5,796	)		(6,665	)
Less: RSP purchase		(2,142	)		(2,520	)		(2,898	)		(3,333	)
Net investable proceeds	$	45,287		$	53,516		$	61,746		$	71,209
Net Income:
Historical LTM ended 3/31/11	($	9,303	)	($	9,303	)	($	9,303	)	($	9,303	)
Pro forma income on net proceeds		226			268			309			356
Pro forma ESOP adjustment		(177	)		(208	)		(240	)		(276	)
Pro forma RSP adjustment		(266	)		(312	)		(359	)		(413	)
Pro forma option adjustment		(398	)		(469	)		(539	)		(620	)
Pro forma net income	($	9,918	)	($	10,024	)	($	10,132	)	($	10,256	)
Pro forma earnings per share	($	2.00	)	($	1.72	)	($	1.51	)	($	1.33	)
Core Earnings:
Historical LTM ended 3/31/11	($	9,496	)	($	9,496	)	($	9,496	)	($	9,496	)
Pro forma income on net proceeds		226			268			309			356
Pro forma ESOP adjustment		(177	)		(208	)		(240	)		(276	)
Pro forma RSP adjustment		(266	)		(312	)		(359	)		(413	)
Pro forma option adjustment		(398	)		(469	)		(539	)		(620	)
Pro forma core earnings	($	10,111	)	($	10,217	)	($	10,325	)	($	10,449	)
Pro forma core earnings per share	($	2.04	)	($	1.75	)	($	1.54	)	($	1.36	)
Total Equity	$	63,295		$	63,295		$	63,295		$	63,295
Net offering proceeds		51,713			61,076			70,440			81,207
Less: ESOP purchase		(4,284	)		(5,040	)		(5,796	)		(6,665	)
Less: RSP purchase		(2,142	)		(2,520	)		(2,898	)		(3,333	)
Pro forma total equity	$	108,582		$	116,811		$	125,041		$	134,504
Pro forma book value	$	20.28		$	18.54		$	17.26		$	16.14
Tangible Equity	$	63,295		$	63,295		$	63,295		$	63,295
Net offering proceeds		51,713			61,076			70,440			81,207
Less: ESOP purchase		(4,284	)		(5,040	)		(5,796	)		(6,665	)
Less: RSP purchase		(2,142	)		(2,520	)		(2,898	)		(3,333	)
Pro forma tangible equity	$	108,582		$	116,811		$	125,041		$	134,504
Pro forma tangible book value	$	20.28		$	18.54		$	17.26		$	16.14
Total Assets	$	750,709		$	750,709		$	750,709		$	750,709
Net offering proceeds		51,713			61,076			70,440			81,207
Less: ESOP purchase		(4,284	)		(5,040	)		(5,796	)		(6,665	)
Less: RSP purchase		(2,142	)		(2,520	)		(2,898	)		(3,333	)
Pro forma total assets	$	795,996		$	804,225		$	812,455		$	821,918
Pro Forma Ratios:
Price / LTM EPS		NM			NM			NM			NM
Price / Core EPS		NM			NM			NM			NM
Price / Book Value		49.3	%		53.9	%		57.9	%		62.0	%
Price / Tangible Book Value		49.3	%		53.9	%		57.9	%		62.0	%
Price / Total Assets		6.73	%		7.83	%		8.92	%		10.14	%
Total Equity / Assets		13.64	%		14.52	%		15.39	%		16.36	%
Tangible Equity / Assets		13.64	%		14.52	%		15.39	%		16.36	%

IV-2

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit IV-3

Pro Forma Conversion Analysis at the Maximum Valuation

Asheville Savings Bank, S.S.B.

Historical Financial Data as of March 31, 2011

Valuation Parameters	Symbol	Data
Net income — LTM	Y	$	-9,303,000
Core earnings — LTM	Y		-9,496,000
Net worth	B		63,295,000
Tangible net worth	B		63,295,000
Total assets	A		750,709,000
Expenses in conversion	X		2,010,490
Other proceeds not reinvested	O		8,694,000
ESOP purchase	E		5,796,000
ESOP expense (pre-tax)	F		387,097
RSP purchase	M		2,898,000
RSP expense (pre-tax)	N		579,032
Stock option expense (pre-tax)	Q		595,539
Option expense tax-deductible	D		25.00	%
Re-investment rate (after-tax)	R		0.50	%
Tax rate	T		38.00	%
Shares for EPS	S		92.53	%
Pro Forma Valuation Ratios at Maximum Value
Price / LTM EPS	P/E		NM
Price / Core EPS	P/E		NM
Price / Book Value	P/B		57.94	%
Price / Tangible Book	P/TB		57.94	%
Price / Assets	P/A		8.92	%

Pro Forma Calculation at Maximum Value
						Based on
	V	=	(P/E /S)*((Y-R*(O+X)-(F+N)*(1-T)-(Q-Q*D*T)))	=	$72,450,000	[LTM earnings]
			1 - (P/E / S) * R
	V	=	(P/E / S)*((Y-R*(O+X)-(F+N)*(1-T)-(Q-Q*D*T))	=	$72,450,000	[Core earnings]
			1 - (P/E / S) * R
	V	=	P/B * (B - X - E - M)	=	$72,450,000	[Book value]
			1 - P/B
	V	=	P/TB * (B - X - E - M)	=	$72,450,000	[Tangible book]
			1 - P/TB
	V	=	P/A * (B - X - E - M)	=	$72,450,000	[Total assets]
			1 - P/A

Pro Forma Valuation Range
Minimum	=	$	63,000,000         x	0.85	=	$53,550,000
Midpoint	=	$	63,000,000         x	1.00	=	$63,000,000
Maximum	=	$	63,000,000         x	1.15	=	$72,450,000
Adj. Max.	=	$	72,450,000         x	1.15	=	$83,317,500

IV-3

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit IV-4

Comparative Valuation Ratio Differential

Pro Forma Conversion Valuation Range

Computed from Market Price Data as of May 9, 2011

		Asheville		Comparative
Valuation		Savings		Group
Ratio	Symbol	Bank		Average			Median
Price / Book Value	P/B				66.6			67.2
Minimum	(%)		49.3		-26.0	%		-26.6	%
Midpoint			53.9		-19.1	%		-19.8	%
Maximum			57.9		-13.1	%		-13.8	%
Adj. Maximum			62.0		-6.9	%		-7.7	%
Price / Tangible Book	P/TB				68.8			72.5
Minimum	(%)		49.3		-28.3	%		-32.0	%
Midpoint			53.9		-21.7	%		-25.7	%
Maximum			57.9		-15.8	%		-20.1	%
Adj. Maximum			62.0		-9.9	%		-14.5	%
Price / LTM EPS	P/E				17.2			18.3
Minimum	(x)		NM		NA			NA
Midpoint			NM		NA			NA
Maximum			NM		NA			NA
Adj. Maximum			NM		NA			NA
Price / Core EPS	P/E				22.5			19.0
Minimum	(x)		NM		NA			NA
Midpoint			NM		NA			NA
Maximum			NM		NA			NA
Adj. Maximum			NM		NA			NA
Price / Total Assets	P/A				6.85			5.53
Minimum	(%)		6.73		-1.8	%		21.7	%
Midpoint			7.83		14.3	%		41.8	%
Maximum			8.92		30.2	%		61.4	%
Adj. Maximum			10.14		48.0	%		83.5	%

IV-4