Frequently Asked Questions

Since New South Federal Savings Bank first opened its doors in 1985, the bank has consistently exceeded regulatory capital requirements and has provided positive returns to its shareholders. In fact, during every year of operation, the bank's capital level has exceeded the level required for the OTS "well capitalized" designation, the thrift regulator's highest capital category, and the bank has never had an unprofitable year. At $1.4 billion in total assets, New South is currently the largest thrift and the seventh largest financial institution in the state of Alabama. Including servicing assets and securitizations would bring New South's total assets to approximately $4 billion. Despite this long track record of performance, customers and investors who are unfamiliar with the bank may have questions about the bank's condition and ability to perform on its commitments; the purpose of this memorandum is to provide standardized responses to those questions.

How can you pay higher rates?

Unlike traditional financial institutions, New South does not maintain an extensive, and expensive, retail branch system, and does not offer checking accounts and ATMs. Rather, New South has one "inconveniently located" full service branch in Irondale, Alabama, a suburb of Birmingham, the state's largest city. New South's top-quality customer service is provided primarily through telephone and internet contacts. This unique, low cost deposit strategy allows New South to pass cost savings to our customers in the form of competitive certificate of deposit rates. This is a strategy that New South pioneered, and is now being copied by start-up institutions all over the United States.

Does management have banking experience?

Yes. Our management team has extensive experience in all areas of retail and mortgage banking. Approximately 39% of New South's employees have been with the bank for 6 years more.

Are my deposits safe?

Your deposits at New South are insured by the full faith and credit of the United States Government to the full extent allowed by current law. New South's FDIC certificate number is 32276. You can confirm New South's FDIC membership by visiting the FDIC website at www.fdic.gov, or, you can call the FDIC consumer hotline at 1-800-934-3342.

How much of my deposit is FDIC insured?

FDIC insurance rules can be very complex. We advise that you consult your attorney, or the FDIC consumer hotline at 1-800-934-3342, or use the FDIC's Electronic Deposit Insurance Estimator at http://www2.fdic.gov/edie/ for an interactive guide to deposit insurance.

How can I access New South's financial information?

All banks are required to provide summary financial information to their customers who request it. You can request New South's latest summary financial information by calling 1-888-NEW-SOUTH. Likewise, all financial institutions must provide extensive financial information to their primary regulator. This information is obtainable at the FDIC's website at www.fdic.gov.

Is New South rated by a nationally-recognized investment rating service?

No. New South is not rated by a nationally-recognized investment rating service. There are primarily three such services available, Moody's, Standard and Poor's, and Thompson Bankwatch. Generally, these services, which charge institutions to provide a rating, specialize in institutions that have total assets greater than $10 billion. As a result, very few institutions with total assets below $10 billion, including most community banks, employ these firms. Additionally, these services are very expensive and few investors or depositors have expressed a concern about not having them.

There are a few services that provide "free" ratings of financial institutions. In particular, some of these services are available on internet websites which advertise financial service providers. Generally, investors and depositors should be very cautious in relying upon the ratings provided by these services. Nationally-recognized investment rating services devote extensive resources and a large staff of analysts to their ratings determination, and they only review a fraction of institutions. Prior to relying upon ratings that claim to provide an objective opinion of all financial institutions, investors and depositors should review the ratings methodology, the resources and personnel involved in the rating process, and the track record, if any, of the firm providing the rating. Often, these services employ a single analyst who uses an automated program, completely ignoring the factors that really impact an institution's financial stability, such as the economic environment of the institution's market, the institution's "niche" or specialty, or the institution's capital structure.

How may loan investors be comfortable that their investments are safe?

Because New South will only sell loans on a nonrecourse basis, loan investors need to be aware that they are taking on credit risk with any whole loan purchase. New South loan investors may be assured, however, that the bank will service their loans with the same servicing standards employed for the bank's own portfolio. New South's servicing policies and procedures are consistent with industry standards, and New South's servicing personnel are experienced and professional. New South services loans not only for private investors, but also for GNMA, FNMA, FHLMC, five AAA-rated mortgage securitizations, and one AAA-rated automobile loan securitization. New South's servicing operations have to undergo a rigorous periodic review process in order to be approved by these entities. New South's external auditors conduct an annual review of the bank's servicing practices to ensure that they conform to the bank's servicing policies and procedures. The report generated by this review is available upon request.