WASHINGTON -- North Carolina regulators have rebuffed a mutual savings bank's controversial plan to give depositors free stock as it converts to public ownership.

The state rejection on Thursday came two weeks after federal regulators gave the go-ahead for the deal. Lexington, N.C.-based Perpetual Savings Bank had planned to give its depositors up to $1.1 million in cash or free shares as it sold stock for the first time.

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