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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
(Fee Required)
For the fiscal year ended December 31, 1993
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
(No Fee Required)
For the transition period from to
Commission File Number: 0-12358
CCB FINANCIAL CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
NORTH CAROLINA 56-1347849
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
</TABLE>
111 CORCORAN STREET,
POST OFFICE BOX 931,
DURHAM, NC 27702
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER,
INCLUDING AREA CODE (919) 683-7777
SECURITIES ISSUED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES ISSUED PURSUANT TO SECTION 12(G) OF THE ACT:
$5.00 PAR VALUE COMMON STOCK
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of February 28, 1994 was $294,687,062. On February 28, 1994, there
were 9,516,379 outstanding shares of the Registrant's $5.00 par value Common
Stock.
Document Incorporated by Reference
Portions of the Proxy Statement of Registrant for the Annual Meeting of
Shareholders to be held on April 5, 1994 are incorporated in Part III of this
report.
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CROSS REFERENCE INDEX
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<S> <C> <C> <C>
Part I. Item 1 Business
Description 1-3
Average Balance Sheets 12
Net Interest Income Analysis -- Taxable Equivalent Basis 12
Net Interest Income and Volume/Rate Variance -- Taxable Equivalent Basis 13
Investment Securities Portfolio 7
Investment Securities -- Maturity/Yield Schedule 7
Types of Loans 14
Maturities and Sensitivities of Loans to Changes in Interest Rates 15
Nonperforming and Risk Assets 18
Loan Loss Experience 16
Average Deposits 14
Maturity Distribution of Large Denomination Time Deposits 14
Return on Equity and Assets 20
Short-Term Borrowings 32
Item 2 Properties 4
Item 3 Legal Proceedings 39
Item 4 There has been no submission of matters to a vote of shareholders during the quarter ended
December 31, 1993
Part II. Item 5 Market for the Registrant's Common Stock and Related Shareholder Matters 10
Item 6 Selected Financial Data 20
Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 5-21
Item 8 Financial Statements and Supplementary Data
Consolidated Balance Sheets at December 31, 1993 and 1992 22
Consolidated Statements of Income for each of the years in the three-year period ended December
31, 1993 23
Consolidated Statements of Shareholders' Equity for each of the years in the three-year period
ended December 31, 1993 24
Consolidated Statements of Cash Flows for each of the years in the three-year period ended
December 31, 1993 25
Notes to Consolidated Financial Statements 26-42
Independent Auditors' Report 44
Item 9 There have been no disagreements with accountants on accounting and financial disclosures
Part III. Item 10 Directors and Executive Officers of the Registrant *
Item 11 Executive Compensation *
Item 12 Security Ownership of Certain Beneficial Owners and Management *
Item 13 Certain Relationships and Related Transactions *
Part IV. Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial Statements (See Item 8 for Reference)
(2) Financial Statement Schedules normally required on Form 10-K are omitted since they are not
applicable.
(3) Exhibits have been filed separately with the Commission and are available upon written
request.
(b) A report on Form 8-K dated October 4, 1993, and as amended October 27, 1993,
was filed under Items 5 and 7.
A report on Form 8-K dated October 14, 1993 was filed under Items 5 and 7.
</TABLE>
* Information called for by Part III (Items 10 through 13) is incorporated by
reference to the Registrant's Proxy Statement for the 1994 Annual Meeting of
Shareholders filed with the Securities and Exchange Commission.
<PAGE>
DESCRIPTION OF BUSINESS
REGISTRANT
CCB Financial Corporation (the Corporation) is a registered bank holding
company headquartered in Durham, North Carolina and is the parent holding
company of Central Carolina Bank and Trust Company, a North Carolina-chartered
commercial bank, CCB Savings Bank of Lenoir, Inc., SSB and Graham Savings Bank,
Inc., SSB, North Carolina-chartered state savings banks, and Central Carolina
Bank-Georgia, a Georgia-chartered special purpose credit card bank (collectively
referred to as the Subsidiary Banks). The principal assets of the Corporation
are all of the outstanding shares of common stock of the Subsidiary Banks and
principal sources of revenue for the Corporation are the interest income,
dividends and management fees its receives from the Subsidiary Banks. At
December 31, 1993, the Corporation had consolidated assets of approximately $3.3
billion and was the eighth largest banking organization headquartered in North
Carolina.
SUBSIDIARY BANKS
Central Carolina Bank and Trust Company (CCB) is chartered under the laws
of the state of North Carolina to engage in general banking business. CCB offers
complete service in the commercial and retail banking, savings and trust fields
through 106 offices located in 34 cities and towns in North Carolina. CCB had
approximately $2.9 billion in assets at December 31, 1993 and was the eighth
largest bank in North Carolina. CCB provides a full range of services including
deposit services, the extension of commercial credit and instalment lending,
acting as custodian and safekeeper of securities, safe deposits, night
depositories and electronic data processing.
CCB Savings of Lenoir, Inc., SSB (CCB Savings) and Graham Savings Bank,
Inc., SSB (Graham Savings) are full-service savings banks that provide
commercial and retail banking and savings services. CCB Savings is based in
Lenoir, North Carolina and operates 4 branch offices in 2 North Carolina cities
and towns. Graham Savings is based in Graham, North Carolina and operates 2
branch offices in 2 North Carolina cities and towns.
Central Carolina Bank-Georgia (CCB-Ga.) provides credit card services from
its headquarters in Columbus, Georgia.
NON-BANK SUBSIDIARIES
CCB has four wholly-owned subsidiaries: Southland Associates, Inc., CCBDE,
1st Home Mortgage Acceptance Corporation (FHMAC) and Central Carolina Bank
Investment and Insurance Service Corporation (CCBIISC). Southland Associates,
Inc. engages in real estate development. CCBDE is an investment holding company
headquartered in Delaware. FHMAC is an issuer of collateralized mortgage
obligations which was acquired through the acquisition of certain assets and
assumption of certain liabilities of 1st Home Federal Savings and Loan
Association, F.A., of Greensboro, North Carolina. CCBIISC engages in the sale of
various annuity and mutual fund products.
COMPETITION
North Carolina banking laws allow for state-wide branching. As a result,
commercial banking in North Carolina is highly competitive. In addition to
competition with smaller independent banks, the Subsidiary Banks compete
directly in many of their markets with one or more of the seven larger banking
organizations in North Carolina. Such competitors range in size from $3 billion
to over $100 billion in total assets, including assets attributable to
affiliates in other states. Consequently, the competing banks may be able to
offer services and products that are not cost-efficient for the Subsidiary Banks
to provide. In addition, the competing banks have access to greater financial
resources that can provide higher lending limits than the Subsidiary Banks. In
addition to in-state competition, banks in North Carolina have a high degree of
competition from out-of-state commercial banks through the presence of loan
production offices.
In recent years, competition between commercial banks, thrift institutions
and credit unions has intensified significantly. Primarily as a result of
legislation aimed at effecting a deregulation of the financial institution
industry, along with other regulatory changes effected by the primary federal
regulators of the various types of financial institutions, the practical
distinctions between a commercial bank and a thrift institution have been almost
totally eliminated.
The Subsidiary Banks also face substantial competition in all of their
operations from other providers of financial services. Such competition includes
money market funds and other investment vehicles; brokerage firms offering cash
1
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management accounts; finance companies; factoring companies; insurance
companies; leasing companies; mortgage companies, and companies that issue
national and regional credit cards, including large retail establishments.
SUPERVISION AND REGULATION
BANK HOLDING COMPANY REGULATION
The Corporation is a bank holding company, registered with the Board of
Governors of the Federal Reserve System (the Federal Reserve) under the Bank
Holding Company Act of 1956, as amended (the BHC Act). As such the Corporation
and its Subsidiary Banks are subject to the supervision, examination and
reporting requirements contained in the BHC Act and the regulations of the
Federal Reserve. The BHC Act requires that a bank holding company obtain the
prior approval of the Federal Reserve before (i) acquiring direct or indirect
ownership or control of more than 5% of the voting shares of any bank, (ii)
taking any action that causes a bank to become a subsidiary of the bank holding
company, (iii) acquiring all or substantially all of the assets of any bank or
(iv) merging or consolidating with any other bank holding company.
The BHC Act generally prohibits a bank holding company, with certain
exceptions, from engaging in activities other than banking, or managing or
controlling banks or other permissible subsidiaries, and from acquiring or
retaining direct or indirect control of any company engaged in any activities
other than those activities determined by the Federal Reserve to be closely
related to banking, or managing or controlling banks, as to be a proper incident
thereto. In determining whether a particular activity is permissible, the
Federal Reserve must consider whether the performance of such an activity can
reasonably be expected to produce benefits to the public, such as greater
convenience, increased competition or gains in efficiency, that outweigh
possible adverse effects, such as undue concentration of resources, decreased or
unfair competition, conflicts of interest or unsound banking practices. For
example, factoring accounts receivable, acquiring or servicing loans, leasing
personal property, conducting discount securities brokerage activities,
performing certain data processing services, acting as agent or broker in
selling credit life insurance and certain other types of insurance underwriting
activities have all been determined by regulations of the Federal Reserve to be
permissible activities of bank holding companies. Despite prior approval, the
Federal Reserve has the power to order a bank holding company or its
subsidiaries to terminate any activity or to terminate its ownership or control
of any subsidiary, when it has reasonable cause to believe that continuation of
such activity or such ownership or control constitutes a serious risk to the
financial safety, soundness or stability of any bank subsidiary of that bank
holding company.
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve on any extension of credit to the
bank holding company or any of its subsidiaries, investment in the stock or
securities thereof and the acceptance of such stock or securities as collateral
for loans to any borrower. A bank holding company and its subsidiaries are also
prevented from engaging in certain tie-in arrangements in connection with any
extension of credit, lease or sale of property or furnishing of services.
The Federal Reserve may issue cease and desist orders against bank holding
companies and non-bank subsidiaries to stop actions believed to present a
serious threat to a subsidiary bank. The Federal Reserve also regulates certain
debt obligations, changes in control of bank holding companies and capital
requirements.
Under the provisions of the North Carolina Bank Holding Company Act of
1984, the Corporation is registered with and subject to regulations of the North
Carolina Commissioner of Banks (Commissioner).
In July of 1984, the General Assembly of North Carolina adopted the North
Carolina Regional Reciprocal Banking Act (the Reciprocal Act). The Reciprocal
Act permits banking organization in fourteen southeastern states and the
District of Columbia with similar reciprocal legislation to acquire North
Carolina banking organizations. All of these jurisdictions have enacted similar
reciprocal legislation. As a result of this interstate banking legislation, the
Corporation may become an acquisition target of banking organizations located in
those states with reciprocal agreements. Additionally, the Corporation may
pursue the acquisition of banking organizations located in those same states,
although no such acquisitions are pending or presently contemplated. As a result
of the consolidation in the banking industry and the expansion of the North
Carolina super-regional bank holding companies, the North Carolina General
Assembly enacted legislation during 1993 to terminate the Reciprocal Act on July
1, 1996. Termination of the Reciprocal Act will allow the acquisition of North
Carolina banking organizations by banking organizations headquartered in any
state.
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SUBSIDIARY BANK REGULATION
As a North Carolina-chartered bank, CCB is supervised and regulated by the
North Carolina Banking Commission, the Commissioner and the FDIC. As North
Carolina-chartered savings banks, CCB Savings and Graham Savings are regulated
by the Administrator of the North Carolina Savings Institutions Division and the
FDIC. Deposits in the Subsidiary Banks are insured by the FDIC. The Subsidiary
Banks also are subject to numerous state and federal statutes and regulations
which affect their business, activities and operations.
NEW BANKING REGULATION
The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA)
was designed to reform the banking industry and to promote the viability of the
industry and of the deposit insurance system. Among other items, FDICIA tightens
bank regulation and modifies the scope and manner of computing the cost of
federal deposit insurance as summarized below.
Under FDICIA, regulatory supervision is linked to bank capital. Regulators
have set five capital levels for banks, ranging from well capitalized to
critically undercapitalized. Regulatory action would be mandatory as capital
fell. In addition, regulators must draft a new set of non-capital measures of
bank safety, such as underwriting standards and minimum earnings levels, to take
effect December 1, 1993. The legislation also requires regulators to perform
annual on-site bank examinations, place limits on real estate lending by banks
and tighten auditing standards.
FDICIA reduces the scope of federal deposit insurance. The most significant
change ends the too big to fail doctrine under which the government protects all
deposits in most banks, including those exceeding the $100,000 insurance limit.
The FDIC's current ability to reimburse uninsured deposits, those over $100,000,
will be sharply limited after 1994. The Federal Reserve's ability to finance
banks with extended loans from its discount window has been restricted,
beginning in December 1993. In addition, only the best capitalized banks will be
able to offer insured brokered deposits or to insure accounts established under
employee pension plans. The legislation instructed the FDIC to change the way it
assesses banks for deposit insurance, moving from flat premiums to fees that
require banks engaging in risky practices to pay higher premiums than
conservatively managed banks.
On September 15, 1992, the FDIC announced an increase in the annual deposit
insurance assessment for all covered banks and thrifts, which implements the
risk-related deposit insurance system required by FDICIA. The new insurance
premiums took effect January 1, 1993. Under the FDIC risk-related deposit
insurance system, each insured depository institution is assigned to one of the
three categories, well capitalized, adequately capitalizedor under-capitalized
as defined in regulations promulgated pursuant to FDICIA by federal bank
regulatory agencies. These categories are subdivided into three subgroups based
upon the FDIC's evaluations of the risk posed by the depository institution,
based in part on examinations by the institution's primary federal and/or state
regulator.
This risk-related system initially has resulted in an eight basis point
spread between the highest and lowest deposit insurance premiums, and this
spread will increase to nine basis points with an anticipated additional
increase of one basis point for all but the lowest premium level on January 1,
1995. During 1993, the strongest institutions paid annual deposit insurance
premiums of .23% and the weakest paid .31%. The Subsidiary Banks have been
assigned to the highest classification level and, until the classification level
or assessment rate changes, will be assessed at a rate of $.23 for every $100 of
deposits.
EFFECT OF GOVERNMENTAL POLICIES
The earnings and business of the Corporation are and will be affected by
the policies of various regulatory authorities of the United States, especially
the Federal Reserve. The Federal Reserve, among other functions, regulates the
supply of credit and deals with general economic conditions within the United
States. The instruments of monetary policy employed by the Federal Reserve for
these purposes influence in various ways the overall level of investments,
loans, other extensions of credit and deposits, and the interest rates paid on
liabilities and received on assets.
EMPLOYEE RELATIONS
As of December 31, 1993, the Corporation and its Subsidiary Banks employed
1,578 full-time equivalent employees. The Corporation and its Subsidiary Banks
are not parties to any collective bargaining agreements and employee relations
are considered to be good.
3
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PROPERTIES
The Corporation's principal executive offices are located at 111 Corcoran
Street, Durham, North Carolina in a 17-story office building constructed in
1937. This office building is owned in fee simple by the Corporation and also
serves as the home office of CCB. A majority of the major staff functions are
located therein. The Corporation's Customer Service Center is a one-story leased
building located at 2323 Operations Drive, Durham, North Carolina that has been
occupied since 1990. The Subsidiary Banks operate 112 branch bank locations,
approximately 58 of which are either leased buildings or leased property on
which the Subsidiary Banks have constructed banking offices.
Southland Associates, Inc. owns real estate, other than premises, with a
net book value of approximately $6,624,000 at December 31, 1993. This real
estate consists of various parcels of land that are being developed for
commercial and residential use in the City of Durham and in Durham County, North
Carolina.
4
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The purpose of this discussion and analysis is to aid in the understanding
and evaluation of the financial condition and changes therein and results of
operations of the Corporation and its Subsidiary Banks for the years ended
December 31, 1993, 1992 and 1991. The consolidated financial statements also
include the accounts and results of operations of CCB's wholly-owned
subsidiaries, CCBIISC, CCBDE, FHMAC and Southland Associates, Inc.
This discussion and analysis is intended to complement the audited
financial statements and footnotes and the supplemental financial data and
charts appearing elsewhere in this report, and should be read in conjunction
therewith. This discussion and analysis will focus on five major areas:
Acquisitions, Liquidity and Interest Sensitivity, Capital Resources, Results of
Operations and Asset Quality.
ACQUISITIONS
During 1993, the Corporation acquired three savings banks in North Carolina
and CCB acquired certain assets and assumed certain liabilities of the
Greensboro, North Carolina operations of a savings and loan association
(collectively, the Acquisitions). As all of the Acquisitions were accounted for
as purchases, the results of operations of the financial institutions acquired
prior to the dates of acquisition are not included in the consolidated financial
statements. Table 1 provides information relating to the Acquisitions.
TABLE 1 ACQUISITIONS
<TABLE>
<CAPTION>
DATE
INSTITUTION ACQUIRED OFFICES
<S> <C> <C>
Mutual Savings Bank, SSB April 1, 1993 2
Lenoir, North Carolina
Branches of 1st Home Federal Savings and Loan Association, F.A. May 31, 1993 10
Greensboro, North Carolina
Graham Savings Bank, SSB October 1, 1993 2
Graham, North Carolina
Citizens Savings, SSB October 15, 1993 2
Lenoir, North Carolina
<CAPTION>
TOTAL ASSETS
INSTITUTION (AT ACQUISITION DATE)
<S> <C>
Mutual Savings Bank, SSB $110 million
Lenoir, North Carolina
Branches of 1st Home Federal Savings and Loan Association, F.A. $420 million
Greensboro, North Carolina
Graham Savings Bank, SSB $111 million
Graham, North Carolina
Citizens Savings, SSB $137 million
Lenoir, North Carolina
</TABLE>
The acquisitions of Mutual Savings Bank, SSB, Graham Savings Bank, SSB and
Citizens Savings, SSB involved their conversions from mutual savings banks to
stock savings banks and their simultaneous acquisition by the Corporation. In
conjunction with these transactions, the Corporation sold 688,742 shares of its
common stock. Subsequent to acquisition by the Corporation, Mutual Savings Bank,
SSB changed its name to CCB Savings Bank of Lenoir, Inc., SSB. Citizens Savings,
SSB was merged with and into CCB Savings in mid-November 1993. Graham Savings
and CCB Savings are operating as full-service savings bank operations. The
banking offices acquired through the 1st Home Federal acquisition became CCB
branch offices on May 31, 1993.
LIQUIDITY AND INTEREST SENSITIVITY
In general, the term liquidity refers to the ability of an enterprise to
generate adequate funding to meet its needs for cash. More specifically, for a
banking holding company organization, liquidity insures that adequate funds are
available in the banking subsidiaries to meet deposit withdrawals, fund loan and
capital expenditure commitments, maintain reserve requirements, pay operating
expenses, provide funds to the parent company for dividends, debt service and
other commitments and further operate the organization on an ongoing basis.
Funds are primarily provided through financial resources from operating
activities, expansion of the deposit base, borrowing funds in money market
operations and through the sale or maturity of assets.
Net cash provided by operating activities has historically been a primary
source of liquidity for the Corporation. These funds amounted to approximately
$44,318,000, $52,820,000 and $23,058,000 in 1993, 1992 and 1991, respectively.
Deposits are another primary source of liquidity. Average total deposits have
grown by approximately $93,966,000 (excluding the Acquisitions), $107,132,000
and $54,333,000 during the three previous years. Certificates of deposit in
denominations of $100,000 or more were $172,034,000 at December 31, 1993 and
represented only 6.1% of the total deposits on that date. Management has decided
to reduce the Corporation's reliance on the higher-cost large certificates of
deposit because of weak loan demand and a lack of other investment alternatives
in which to invest the
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funds at profitable spreads. Management considers these certificates of deposit
a secondary source of liquidity that can be obtained if needed in a relatively
short period of time.
The Subsidiary Banks do not rely heavily on borrowing funds in money market
operations such as federal funds purchased and repurchase agreements to provide
liquidity. The Subsidiary Banks have historically been a net seller of federal
funds and only rarely purchased federal funds to meet liquidity requirements.
Correspondent relationships are maintained with several larger banks in order to
have access to federal funds purchases when needed. Also available as secondary
liquidity sources are access to the Federal Reserve discount window and lines of
credit maintained with the Federal Home Loan Bank (the FHLB). The Corporation's
average short-term investments net of average short-term borrowings were
$82,590,000, $94,893,000 and $48,157,000 in the years ended December 31, 1993,
1992 and 1991, respectively.
Maturities of investment securities are another primary source of
liquidity. As shown in Table 2, investment securities with book values of
approximately $207,424,000 mature in 1994. In addition to the liquidity provided
by the normal maturity of securities, liquidity is also available through the
marketability of the portfolio. At December 31, 1993 and 1992, the Corporation
held $44,474,000 and $9,399,000 respectively, of mutual fund investments that
were carried in Other securities on the Consolidated Balance Sheet. These mutual
fund investments reprice daily and may be used in funds management activities as
an alternative to federal funds sold and other short-term investments due to
yield considerations.
After considering the activity in the investment securities portfolio
during 1993, the Corporation revised its investment securities accounting policy
during the third quarter of 1993 as described in Note 1 to the Consolidated
Financial Statements. Under the revised policy, investment securities that
management has the intent and ability to hold until maturity are classified as
held for investment and are carried at amortized cost. Investment securities
that management may sell prior to maturity or will hold for indefinite periods
of time are carried at the lower of aggregate cost or market value and are
classified as available for sale. Securities classified as available for sale
will be considered in the Corporation's asset/liability management strategies
and may be sold in response to changes in interest rates, liquidity needs and/or
significant prepayment risk. In accordance with the revised policy, $553,292,000
of investment securities are classified as available for sale at December 31,
1993. The available for sale portfolio is comprised of U.S. Treasury securities,
U.S. Government agency and corporation obligations and investments in mutual
funds. The available for sale portfolio had unrealized gains of approximately
$10,641,000 and unrealized losses of approximately $746,000 at December 31,
1993. The total investment securities portfolio showed an appreciation (market
less book value) of $14,322,000 at December 31, 1993. This compares to an
appreciation of $14,151,000 and $16,601,000 at December 31, 1992 and 1991,
respectively. At December 31, 1993, there were no securities of a single issuer
held in the portfolio that exceeded 10% of consolidated shareholders' equity.
Liquidity at the Parent Company level is provided through cash dividends
from the Subsidiary Banks, the repayment of demand notes payable to the Parent
Company from the Subsidiary Banks and the capacity of the Parent Company to
raise additional funds as needed.
In addition to insuring adequate liquidity, the Corporation is concerned
with the management of the Corporation's balance sheet to maintain relatively
stable net interest margins despite changes in the interest rate environment.
Responsibility for both liquidity and interest sensitivity management rests with
the Corporation's Asset/Liability Management Committee (ALCO) comprised of
senior management. ALCO reviews the Corporation's interest rate and liquidity
exposures and, based on its view of existing and expected market conditions,
adopts balance sheet strategies that are intended to optimize net interest
income to the extent possible while minimizing the risk associated with
unanticipated changes in interest rates. Determining and monitoring the
appropriate balance between interest sensitive assets and interest sensitive
liabilities and the impact on earnings of changes in interest rates is
accomplished through ALCO's use of Gap Analysis and Simulation Analysis.
Gap Analysis measures the interest sensitivity of assets and liabilities at
a given point in time. A positive interest sensitive gap occurs when interest
sensitive assets exceed interest sensitive liabilities. The reverse situation
results in a negative gap. Management feels that an essentially balanced
position ([plus/minus]10% of total earning assets) between interest
sensitive assets and liabilities is necessary in order to protect against
wide interest rate fluctuations. An analysis of the Corporation's interest
sensitivity position at December 31, 1993 is presented in Table 3. At
December 31, 1993, the Corporation had a cumulative negative gap
(interest sensitive liabilities exceeding interest sensitive assets)
of $234,825,000 or 7.88 % of total earning assets over a six
month horizon. The ratio of interest sensitive assets to interest sensitive
liabilities was .86x. Gap Analysis as a measurement tool is limited, however,
because it does not incorporate
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the interrelationships between interest rates charged or paid, balance sheet
trends and management actions in response to interest rate changes. In addition,
a gap analysis model does not consider that changes in interest rates do not
affect all categories of assets and liabilities equally or simultaneously.
Therefore, ALCO also uses Simulation Analysis to better estimate the impact of
changes in interest rates.
TABLE 2 INVESTMENT SECURITIES PORTFOLIO
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31
1993 1992 1991
BOOK MARKET BOOK MARKET BOOK MARKET
VALUE VALUE VALUE VALUE VALUE VALUE
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury $266,465 275,346 264,350 273,389 192,475 201,337
U.S. Government agencies and corporations 242,353 243,368 124,484 125,382 105,031 109,171
States and political subdivisions 50,341 54,768 43,602 47,816 55,693 59,292
Equity securities 58,260 58,259 15,902 15,902 25,687 25,687
Total investment securities $617,419 631,741 448,338 462,489 378,886 395,487
MATURITY AND YIELD SCHEDULE
December 31, 1993
</TABLE>
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
BOOK YIELD
VALUE (1)
<S> <C> <C>
U.S. Treasury:
Within 1 year $ 69,287 5.33%
After 1 but within 5 years 161,469 6.53
After 5 but within 10 years 35,709 7.37
Total U.S. Treasury 266,465 6.33
U.S. Government agencies and corporations:
Within 1 year 134,595 3.50
After 1 but within 5 years 51,608 4.24
After 5 but within 10 years 8,000 5.15
After 10 years (2) 48,150 7.54
Total U.S. Government agencies and corporations 242,353 4.52
States and political subdivisions:
Within 1 year 3,542 13.33
After 1 but within 5 years 7,235 12.66
After 5 but within 10 years 14,007 10.99
After 10 years 25,557 9.37
Total states and political subdivisions 50,341 10.57
Equity securities 58,260 5.79
Total investment securities $617,419 5.91%
</TABLE>
(1) The weighted average yield is computed on a taxable equivalent basis using
35% federal and 7.91% state tax rates where applicable.
(2) The amount shown consists primarily of Government National Mortgage
Association securities which have monthly curtailments of principal even
though the final maturity of each security is in excess of 10 years.
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TABLE 3 INTEREST SENSITIVITY ANALYSIS
December 31, 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
30 DAY 60 DAY 90 DAY 6 MONTH TOTAL INTEREST
SENSITIVE SENSITIVE SENSITIVE SENSITIVE SENSITIVE SENSITIVE TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
EARNING ASSETS:
Time deposits in other banks $ 35,332 -- -- -- 35,332 100 35,432
Federal funds sold and other short-term
investments 169,286 -- -- -- 169,286 -- 169,286
Investment securities 108,185 59,549 43,022 30,262 241,018 376,401 617,419
Loans and lease financing 876,912 33,414 35,886 98,779 1,044,991 1,114,498 2,159,489
Total earning assets 1,189,715 92,963 78,908 129,041 1,490,627 1,490,999 2,981,626
INTEREST BEARING LIABILITIES:
Savings deposits 420,344 -- -- -- 420,344 -- 420,344
Other time deposits 772,635 124,335 114,463 251,448 1,262,881 712,113 1,974,994
Federal funds purchased and securities
sold under agreements to repurchase 25,127 -- -- 400 25,527 -- 25,527
Other short-term borrowed funds 16,202 -- -- -- 16,202 -- 16,202
Long-term debt 83 83 83 249 498 78,200 78,698
Total interest bearing liabilities 1,234,391 124,418 114,546 252,097 1,725,452 790,313 2,515,765
INTEREST SENSITIVITY GAP $ (44,676) (31,455) (35,638) (123,056) (234,825)
CUMULATIVE GAP $ (44,676) (76,131) (111,769) (234,825)
CUMULATIVE RATIO OF INTEREST SENSITIVE
ASSETS TO INTEREST SENSITIVE LIABILITIES .96x .94 .92 .86
</TABLE>
(1) Assets and liabilities that mature in six months or less and/or have
interest rates that can be adjusted during this period are considered
interest sensitive. The interest sensitivity position has meaning only as of
the date for which it is prepared.
Simulation Analysis is accomplished through a computer-based
asset/liability model that incorporates current portfolio balances and rates,
maturity and repricing streams and anticipated growth levels. Including this
level of detail provides a more accurate simulation of the effect that changes
in interest rates and balances will have on the Corporation's earnings. The
accuracy of the results obtained are dependent on the validity of the
assumptions used in the model but Simulation Analysis does provide management
with a more complete picture of the impact on earnings.
Management uses both on-and off-balance sheet strategies to manage the
balance sheet in accordance with their projected interest rate environment. The
most efficient and cost effective method of on-balance sheet management is
creating desired maturity and repricing streams through the strategic pricing of
interest-earning and interest-bearing products. ALCO reviews the
interest-earning and interest-bearing portfolios to ensure that the Corporation
has a proper mix of fixed and variable rate products. Emphasis continues to be
directed to granting loans with short maturities and floating rates where
possible. At year-end, approximately 41% of all loans reprice or mature within
30 days compared to 42% at December 31, 1992. See Table 12 for additional detail
regarding loan maturity and sensitivity to changes in interest rates at December
31, 1993. This strategy increases liquidity and is necessitated by the continued
shortening of maturities and more frequent repricing opportunities of the
Corporation's funding sources.
Off-balance sheet management strategies include a $100,000,000 interest
rate corridor contract with a large commercial bank. The corridor contract was
structured to offset exposure from a rising interest rate environment and at the
same time, to take advantage of balance sheet sensitivity in a falling interest
rate environment. Credit risk resulting from the counterparty's nonperformance
of the contract is monitored through review of the counterparty's financial
ratings.
The Corporation has not experienced liquidity problems in the past nor are
future problems anticipated. Reliance will continue to be placed on the same
funding sources, primarily financial resources provided by operating activities
and expansion of the core deposit base. Management will continue to monitor the
Corporation's interest sensitivity position in order to insure adequate
liquidity, while at the same time seeking adequate spreads between the yield on
fund uses and the rate paid for fund sources in order to maintain profitability.
8
<PAGE>
CAPITAL RESOURCES
The Corporation's capital position has historically been strong as
evidenced by the Corporation's ratios of average shareholders' equity to average
total assets of 7.78%, 8.12% and 7.81% for 1993, 1992 and 1991, respectively.
Further, Table 4 shows that the Corporation and its Subsidiary Banks
significantly exceed regulatory capital requirements at December 31, 1993.
TABLE 4 CAPITAL RATIOS
<TABLE>
<CAPTION>
AS OF DECEMBER
31 REGULATORY
1993 1992 MINIMUM
<S> <C> <C> <C>
Tier I Capital: 4.00%
Corporation 9.93% 11.03
CCB 9.12 11.06
Graham Savings 34.16 --
CCB Savings 17.87 --
CCB-Ga. 30.42 --
Total Capital: 8.00
Corporation 12.86 13.37
CCB 11.21 12.20
Graham Savings 35.90 --
CCB Savings 19.67 --
CCB-Ga. 31.26 --
Leverage: 4.00
Corporation 8.50 8.14
CCB 7.47 7.95
Graham Savings 16.64 --
CCB Savings 8.59 --
CCB-Ga. 35.35 --
</TABLE>
During 1993, the Subsidiary Banks had the highest rating in regards to the
FDIC insurance assessment and accordingly, paid the lowest deposit insurance
premium of $.23 per $100 of deposits.
During the second quarter of 1993, the Corporation called and converted
substantially all of its convertible subordinated debentures. In the fourth
quarter of 1993, the Corporation issued $40,000,000 of subordinated notes due in
2003 bearing a 6.75% interest rate. Outstanding FHLB advances amounted to
$20,838,000 at December 31, 1993 and were drawn specifically to fund matched
maturity loans. The majority of long-term debt was originated in 1993 in the
form of FHLB advances and subordinated notes and bears interest at fixed rates
ranging from 4.50% to 6.78%. The Corporation's ratio of long-term debt to
shareholders' equity increased in 1993 due to the aforementioned new debt issue
and FHLB advances and stood at 31.4% at December 31, 1993, compared to 14.6% and
15.1% at December 31, 1992 and 1991, respectively.
In the past, the Corporation's primary source of additional capital has
been retained earnings. However, during 1993, the primary source of additional
capital was the issuance of common stock in conjunction with the Acquisitions
and through a public offering. In the second quarter of 1993 the Corporation
purchased and subsequently retired 450,000 shares owned by the estate of the
former Chairman of the Corporation. Additions to equity capital from these
issuances, net of repurchases, totaled $22,587,000 in 1993. Capital has been
increased through the retention of earnings by approximately $17,467,000,
$16,541,000 and $13,468,000 in 1993, 1992 and 1991, respectively. Table 5
presents the rate of internal capital growth for the Corporation for each of the
five previous years. This growth rate decreased slightly to 8.98% in 1993 from
1992's 9.36% due to the Acquisitions and should be adequate to support future
growth and expansion.
9
<PAGE>
TABLE 5 RATE OF INTERNAL CAPITAL GROWTH
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1993 (1) 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Average assets to average equity
x 12.85x 12.32 12.81 13.62 13.93
Return on average assets
= 1.08% 1.16 1.04 1.03 1.13
Return on average shareholders' equity
x 13.94% 14.32 13.32 14.00 15.77
Earnings retained
= 64.46% 65.37 62.77 63.45 66.38
Rate of internal capital growth 8.98% 9.36 8.36 8.88 10.47
</TABLE>
(1) Excludes the impact of cumulative changes in accounting principles from the
adoption of Statements of Financial Accounting Standards No. 106, Employers'
Accounting for Postretirement Benefits Other Than Pensions and No. 109,
Accounting for Income Taxes.
TABLE 6 STOCK PRICES AND DIVIDENDS
<TABLE>
<CAPTION>
CASH
DIVIDEND
HIGH LOW CLOSE DECLARED
<S> <C> <C> <C> <C>
1993
First Quarter $41.00 36.00 38.75 .30
Second Quarter 42.50 34.50 36.25 .30
Third Quarter 37.75 35.50 37.25 .32
Fourth Quarter 37.25 32.50 33.25 .32
1992
First Quarter 30.17 27.83 29.33 .27
Second Quarter 31.17 29.00 30.00 .27
Third Quarter 36.17 30.17 30.77 .30
Fourth Quarter 35.75 32.00 35.63 .30
</TABLE>
The Corporation's common stock is traded in the over-the-counter market
under the Nasdaq symbol CCBF. At December 31, 1993, there were 4,193
shareholders of record of the Corporation's common stock.
Dividends have been increased during each of the three previous years. Cash
dividends declared amounted to approximately $10,386,000, $8,769,000 and
$7,986,000 for 1993, 1992 and 1991, respectively. These dividends amounted to
35.5%, 34.6% and 37.2% of income before cumulative changes in accounting
principles. The Corporation's dividend guideline is to pay approximately 30 to
40% of net income in dividends. Management feels that this policy provides a
reasonable return to shareholders and at the same time maintains sufficient
equity to support future growth and expansion.
Capital expenditures for new and improved facilities as well as furniture
and equipment amounted to approximately $6,918,000 in 1993, $4,860,000 in 1992
and $3,301,000 in 1991. There were no significant capital resource commitments
at December 31, 1993 other than the operating lease commitments specified in
Note 14 of the Notes to Consolidated Financial Statements.
RESULTS OF OPERATIONS
Income before cumulative changes in accounting principles for the year
ended December 31, 1993 amounted to $29,225,000, an increase of $3,903,000 or
15.4% over the year ended 1992. Primary income per share before cumulative
changes in accounting principles was $3.50 in 1993 compared to $3.30 in 1992.
Net income in 1993 increased by $2,532,000 or 10.0% to $27,854,000 from
$25,322,000 in 1992. Primary income per share in 1993 was $3.33, a $.03 increase
from $3.30 in 1992.
On a fully diluted basis (which assumes conversion of the Corporation's
convertible subordinated debentures issued in 1985), income per share before
cumulative changes in accounting principles was $3.41 in 1993 versus $3.10 in
1992, a 10.0% increase. Fully diluted income per share in 1993 was $3.25, a $.15
or 4.8% increase from 1992's level of $3.10.
10
<PAGE>
Net income in 1992 increased by $3,867,000 or 18.0% from $21,454,000 in
1991. Primary income per share increased by $.49 or 17.4% from $2.81 in 1991,
while fully diluted income per share increased $.44 or 16.5% from $2.66 in 1991.
Table 7 compares the contributions to primary earnings per share for each income
statement caption for the years ended December 31, 1993, 1992 and 1991 and the
respective change from year to year.
TABLE 7 COMPONENTS OF EARNINGS PER PRIMARY SHARE
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 CHANGE FROM
1993 1992 1991 (1) 1993/1992
<S> <C> <C> <C> <C>
Interest income $23.04 22.14 24.46 .90
Interest expense 8.85 9.22 12.59 (.37)
Net interest income 14.19 12.92 11.87 1.27
Provision for loan and lease losses .77 .78 .97 (.01)
Net interest income after provision 13.42 12.14 10.90 1.28
Other income 4.68 4.27 4.28 .41
Other expenses 12.85 11.56 11.21 1.29
Income before income taxes and cumulative changes in accounting
principles 5.25 4.85 3.97 .40
Income taxes 1.75 1.55 1.16 .20
Income before cumulative changes in accounting principles 3.50 3.30 2.81 .20
Cumulative changes in accounting principles (2) (.17) -- -- (.17)
Net income $ 3.33 3.30 2.81 .03
<CAPTION>
1992/1991
<S> <C>
Interest income (2.32)
Interest expense (3.37)
Net interest income 1.05
Provision for loan and lease losses (.19)
Net interest income after provision 1.24
Other income (.01)
Other expenses .35
Income before income taxes and cumulative changes in accounting
principles .88
Income taxes .39
Income before cumulative changes in accounting principles .49
Cumulative changes in accounting principles (2) --
Net income .49
</TABLE>
(1) Amounts for 1991 have been restated to give effect to the three for two
stock split effected in the form of a 50% stock dividend paid October 1,
1992.
(2) The cumulative changes in accounting principles reflect the adoption of
Statement of Financial Accounting Standards No. 106, Employers' Accounting
for Postretirement Benefits Other Than Pensions, which resulted in a
one-time net charge of $2,271,234 ($3,736,834 pre-tax) in recognition of the
entire Accumulated Postretirement Benefit Obligation and adoption of
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes, which resulted in a one-time benefit of $900,000.
During 1993, the Corporation adopted two accounting standards whose impacts
on the financial position and results of operations of the Corporation were
properly recorded as cumulative changes in accounting principles. Under
Statement of Financial Accounting Standards No. 106 (SFAS 106), Employers'
Accounting for Postretirement Benefits Other Than Pensions, the Corporation is
required to accrue, during its employees' time of service, the expected costs of
providing certain medical and life insurance benefits to them after their
retirement. Previously, these expenses were recorded when paid. Upon its
adoption in the first quarter of 1993, the Corporation recorded a one-time
charge of $2,271,000 ($3,737,000 pre-tax) in recognition of the entire
accumulated postretirement benefit obligation. The Corporation also adopted
Statement of Financial Accounting Standards No. 109 (SFAS 109), Accounting for
Income Taxes in the first quarter of 1993. SFAS 109 requires certain changes in
the asset and liability method of accounting for income taxes. Upon adoption of
SFAS 109, the Corporation recorded a favorable one-time benefit of $900,000.
Included in 1993 earnings are income and expense items related to purchase
accounting adjustments for the Acquisitions. These items included amortization
of goodwill, accretion of negative goodwill, recognition of other incremental
costs and amortization of mark-to-market adjustments for loans and deposits
acquired. Operating earnings were not significantly affected in 1993 as
increases in net interest income and other income from the Acquisitions were
offset by conversion costs and other expenses. The Acquisitions are anticipated
to have an accretive effect on earnings in 1994 and beyond.
Net interest income is one of the major determining factors in a financial
institution's performance. Table 8 presents average balance sheets and a net
interest income analysis on a taxable equivalent basis for each of the years in
the three-year period ended December 31, 1993. Table 9 presents a volume and
rate variance analysis for the years ended December 31, 1993 and 1992.
11
<PAGE>
TABLE 8 AVERAGE BALANCES AND NET INTEREST INCOME ANALYSIS
(TAXABLE EQUIVALENT BASIS -- IN THOUSANDS) (1)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1993 1992 1991
INTEREST AVERAGE INTEREST AVERAGE INTEREST
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EARNING ASSETS:
Loans and lease financing (2) $1,804,656 155,689 8.63% 1,489,943 138,929 9.32 1,408,595 149,566
U.S. Treasury and agency
obligations 459,713 27,400 5.96 307,280 23,090 7.51 315,589 27,905
State and political subdivision
obligations 43,965 5,235 11.91 45,959 5,574 12.13 58,603 7,303
Other securities 37,342 2,344 6.28 23,869 1,625 6.81 14,070 1,168
Federal funds sold and other
short-term investments 132,722 4,135 3.12 136,869 4,906 3.58 94,838 5,476
Time deposits in other banks 17,892 536 3.00 -- -- -- 1,360 132
Total earning assets 2,496,290 195,339 7.83% 2,003,920 174,124 8.69 1,893,055 191,550
NON-EARNING ASSETS:
Cash and due from banks 132,500 116,591 103,796
Premises and equipment 40,185 35,106 36,274
All other assets, net 25,998 23,835 29,028
Total assets $2,694,973 2,179,452 2,062,153
INTEREST BEARING LIABILITIES:
Savings and time deposits $2,012,108 69,939 3.48 1,613,716 67,232 4.17 1,541,736 91,545
Federal funds purchased and
securities sold under agreements
to repurchase 29,016 564 1.94 26,525 654 2.47 30,418 1,459
Other short-term borrowed funds 21,116 668 3.16 15,451 483 3.13 16,263 799
Long-term debt 36,681 2,650 7.22 27,735 2,268 8.18 25,639 2,236
Total interest bearing
liabilities 2,098,921 73,821 3.52% 1,683,427 70,637 4.20 1,614,056 96,039
OTHER LIABILITIES AND
SHAREHOLDERS' EQUITY:
Demand deposits 346,343 298,646 263,494
Other liabilities 40,037 20,510 23,593
Shareholders' equity 209,672 176,869 161,010
Total liabilities and
shareholders' equity $2,694,973 2,179,452 2,062,153
NET INTEREST INCOME AND NET
INTEREST MARGIN (3) $121,518 4.87% 103,487 5.16 95,511
INTEREST RATE SPREAD (4) 4.31% 4.49
<CAPTION>
AVERAGE
YIELD/
RATE
<S> <C>
EARNING ASSETS:
Loans and lease financing (2) 10.62
U.S. Treasury and agency
obligations 8.84
State and political subdivision
obligations 12.46
Other securities 8.30
Federal funds sold and other
short-term investments 5.77
Time deposits in other banks 9.71
Total earning assets 10.12
NON-EARNING ASSETS:
Cash and due from banks
Premises and equipment
All other assets, net
Total assets
INTEREST BEARING LIABILITIES:
Savings and time deposits 5.94
Federal funds purchased and
securities sold under agreements
to repurchase 4.80
Other short-term borrowed funds 4.91
Long-term debt 8.72
Total interest bearing
liabilities 5.95
OTHER LIABILITIES AND
SHAREHOLDERS' EQUITY:
Demand deposits
Other liabilities
Shareholders' equity
Total liabilities and
shareholders' equity
NET INTEREST INCOME AND NET
INTEREST MARGIN (3) 5.05
INTEREST RATE SPREAD (4) 4.17
</TABLE>
(1) The taxable equivalent basis is computed using 35% federal and 7.91% state
tax rates in 1993, 34% federal and 7.98% state tax rates in 1992 and 34%
federal and 8.06% state tax rates in 1991 where applicable.
(2) The average loan and lease financing balances include nonaccruing loans and
lease financing. Loan fees of $8,109,000, $6,316,000 and $3,387,000 for
1993, 1992 and 1991, respectively, are included in interest income.
(3) Net interest margin is computed by dividing net interest income by total
earning assets.
(4) Interest rate spread equals the earning asset yield minus the interest
bearing liability rate.
As shown in Table 8, the Corporation realized net interest income of
$121,518,000 in 1993. Narrowing of overall interest spreads in 1993 and the
effect of the Acquisitions, whose interest spreads and margins were less than
the Corporation's, resulted in the net interest margin falling to 4.87% from
1992's 5.16%. The increase in average earning assets of $492,370,000 or 24.6%
was due primarily to the Acquisitions as average interest earning assets
excluding the Acquisitions amounted to approximately $2,189,291,000, a
$185,371,000 increase or 9.3% over 1992. Net amortization of mark-to-market
adjustments for loans and deposits acquired in the Acquisitions had a favorable
7 basis point impact on the net interest margin. Overall, yields on earning
assets fell 86 basis points in 1993 which was not entirely offset by the 68
basis point decrease in the cost of interest bearing liabilities. Consequently,
the interest rate spread fell to 4.31% in 1993 from 1992's 4.49%. The
contribution of free liabilities fell to .56% in 1993 from .67% in 1992 due
primarily to the
12
<PAGE>
Acquisitions not having a significant amount of noninterest bearing deposits.
Table 9 illustrates that the overall increase in net interest income was due to
increases in volume totaling $22,777,000, primarily due to the Acquisitions, and
that this increase was offset somewhat by decreases in rate totaling $4,746,000.
TABLE 9 VOLUME AND RATE VARIANCE ANALYSIS
(TAXABLE EQUIVALENT BASIS -- IN THOUSANDS) (1)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1993 1992
VOLUME RATE TOTAL VOLUME
VARIANCE (2) VARIANCE (2) VARIANCE VARIANCE (2)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans and lease financing $ 27,635 (10,875) 16,760 8,300
U.S. Treasury and agency obligations 9,771 (5,461) 4,310 (719)
State and political subdivision obligations (16) (323) (339) (1,538)
Other securities 861 (142) 719 697
Federal funds sold and other short-term investments (147) (624) (771) 1,931
Time deposits in other banks 536 -- 536 (132)
Total interest income 38,640 (17,425) 21,215 8,539
INTEREST EXPENSE:
Savings and time deposits 14,954 (12,247) 2,707 4,101
Federal funds purchased and securities sold under agreements
to repurchase 58 (148) (90) (168)
Other short-term borrowed funds 180 5 185 (38)
Long-term debt 671 (289) 382 177
Total interest expense 15,863 (12,679) 3,184 4,072
INCREASE IN NET INTEREST INCOME $ 22,777 (4,746) 18,031 4,467
<CAPTION>
RATE TOTAL
VARIANCE (2) VARIANCE
<S> <C> <C>
INTEREST INCOME:
Loans and lease financing (18,937) (10,637)
U.S. Treasury and agency obligations (4,096) (4,815)
State and political subdivision obligations (191) (1,729)
Other securities (240) 457
Federal funds sold and other short-term investments (2,501) (570)
Time deposits in other banks -- (132)
Total interest income (25,965) (17,426)
INTEREST EXPENSE:
Savings and time deposits (28,414) (24,313)
Federal funds purchased and securities sold under agreements
to repurchase (637) (805)
Other short-term borrowed funds (278) (316)
Long-term debt (145) 32
Total interest expense (29,474) (25,402)
INCREASE IN NET INTEREST INCOME 3,509 7,976
</TABLE>
(1) The taxable equivalent basis is computed using 35% federal and 7.91% state
tax rates in 1993, 34% federal and 7.98% state tax rates in 1992 and 34%
federal and 8.06% state tax rates in 1991 where applicable.
(2) The rate/volume variance for each category has been allocated on a
consistent basis between rate and volume variances based on the percentage
of the rate or volume variance to the sum of the two absolute variances.
In 1992 the average earning asset base was expanded by $110,865,000 or 5.9%
over 1991. Lowering of interest rates and a steepening positive yield curve
improved the interest rate spread by 32 basis points over 1991's level to 4.49%.
Offsetting this improvement was a decline of 21 basis points in the contribution
of free liabilities to .67%. As a result, the net interest margin improved by 11
basis points to 5.16%. Net interest income improved by $7,976,000 or 8.4%. Table
9 shows that this increase was due primarily to favorable net volume and rate
variances of $4,467,000 and $3,509,000, respectively.
Other than the Acquisitions, expansion of the earning asset base during the
periods presented has been funded primarily with increases in the deposit base
and the aforementioned proceeds from the sale of the Corporation's common stock
and subordinated notes. Table 10 presents the average deposit base by major
category for the three previous years. Substantially all deposits originate
within the Subsidiary Banks' market areas. Average total deposits, excluding the
Acquisitions, increased by approximately $93,966,000 or 4.9% in 1993, while in
1992 the increase was $107,132,000 or 5.9%. Growth in 1993 and 1992 centered
around money market accounts, which include interest bearing transaction
accounts, and demand deposits. These favorable shifts in the mix of deposits
helped to lessen the negative impact of declines in the yield on interest
earning assets.
13
<PAGE>
TABLE 10 AVERAGE TOTAL DEPOSITS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1993 1992 1991
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE
<S> <C> <C> <C> <C> <C>
SAVINGS AND TIME DEPOSITS:
Savings accounts $ 47,188 2.52% 45,314 4.47 43,445
Money market accounts 977,936 2.49 813,343 3.18 740,963
Time 986,984 4.50 755,059 5.22 757,328
Total savings and time deposits 2,012,108 3.48% 1,613,716 4.17 1,541,736
DEMAND DEPOSITS 346,343 298,646 263,494
Total deposits $2,358,451 1,912,362 1,805,230
<CAPTION>
AVERAGE
RATE
<S> <C>
SAVINGS AND TIME DEPOSITS:
Savings accounts 4.96
Money market accounts 5.01
Time 6.90
Total savings and time deposits 5.94
DEMAND DEPOSITS
Total deposits
</TABLE>
At December 31, 1993, time certificates of deposit in amounts of $100,000
or more were approximately $172,034,000. The following is a remaining maturity
schedule of these deposits (in thousands):
<TABLE>
<CAPTION>
OVER 3 OVER 6
3 MONTHS THROUGH THROUGH OVER
OR LESS 6 MONTHS 12 MONTHS 12 MONTHS TOTAL
<S> <C> <C> <C> <C>
$110,347 41,362 18,023 2,302 172,034
</TABLE>
Growth in the average earning asset base in the two previous years has
primarily occurred in the loans and lease financing and investment securities
portfolios. Average loans and lease financing excluding acquisitions increased
by approximately $99,940,000 or 6.7% in 1993 and $81,348,000 or 5.8% in 1992.
Average investment securities, excluding the Acquisitions, increased by
approximately $92,679,000 or 24.6% in 1993 and decreased $11,154,000 or 2.9% in
1992. Growth in the investment securities portfolio in 1993 was due to a weaker
loan demand that necessitated investing excess funds in investment securities.
Table 11 shows the year-end breakdown of the major categories of the loans
and lease financing portfolio for the previous five years. The majority of loans
are made on a secured basis and, with the exception of marketable mortgage
loans, are originated for retention in the Subsidiary Banks' portfolios. In
general, the Subsidiary Banks do not purchase loans or participate with others
in the origination of loans and confine their lending activities to North
Carolina. The Subsidiary Banks do not engage in highly leveraged transactions or
foreign lending activities. There were no concentrations of loans exceeding 10%
of total loans other than those categories in Table 11.
TABLE 11 LOANS AND LEASE FINANCING
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Commercial, financial and agricultural $ 386,204 321,488 343,418 279,617 268,040
Real estate -- construction 220,395 170,641 166,372 173,523 155,446
Real estate -- mortgage 1,153,503 682,445 609,816 607,435 578,382
Instalment loans to individuals 201,984 163,996 181,146 190,432 191,228
Credit card receivables 175,485 161,873 119,262 100,960 87,207
Lease financing 25,062 24,241 29,767 33,544 28,335
Total gross loans and lease financing 2,162,633 1,524,684 1,449,781 1,385,511 1,308,638
Less unearned income 3,144 3,548 4,906 6,221 5,427
Total loans and lease financing $2,159,489 1,521,136 1,444,875 1,379,290 1,303,211
</TABLE>
Loans in the commercial, financial and agricultural category consist
primarily of short-term and/or floating rate commercial loans made to
medium-sized companies. There is no substantial loan concentration in any one
industry. Real estate-construction loans are primarily made to developers of
both residential and commercial properties on a floating rate basis. Cash flow
analyses for each project are prepared and reviewed in addition to reliance upon
collateral values.
14
<PAGE>
Real estate-mortgage loans consist primarily of loans secured by first or
second deeds of trust on primary residences (69%). It is the Subsidiary Banks'
policy to retain only adjustable rate first mortgage loans within the portfolio.
The remaining portion (31%) of real estate-mortgage loans are primarily for
commercial purposes and often include the commercial borrower's real property in
addition to other collateral.
Instalment loans to individuals consist primarily of loans secured by
automobiles and other consumer personal property. During the two years prior to
1993, loans of this type declined due to changes in federal tax laws and
increased competition from automotive finance companies. In 1993, the
Corporation emphasized indirect lending with a major automobile insurance
company and increased the amount of automobile loans. Consequently, outstanding
instalment loans increased 23.2% over 1992's level of $163,996,000.
Credit card receivables have increased steadily during the periods
presented. Products offered within this category include revolving lines of
credit, overdraft protection and traditional credit card services. Outstandings
have increased from approximately $87,207,000 at December 31, 1989 to
$175,485,000 at December 31, 1993. Traditional credit card receivables increased
$12,553,000 from 1992 to 1993 of which approximately $11,000,000 of the increase
is due to the introduction of a credit card in the third quarter of 1993 with
lower interest rates than many competitors' credit cards.
The net leasing portfolio increased slightly in 1993 to $21,918,000 or 5.9%
from $20,704,000 at December 31, 1992. Approximately 10% of the total portfolio
consists of rolling stock such as automobiles, trucks and trailers. The
remaining 90% consists of broadly diversified equipment.
TABLE 12 MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1993
COMMERCIAL,
FINANCIAL AND REAL ESTATE-
AGRICULTURAL CONSTRUCTION
<S> <C> <C>
Due in one year or less $ 165,789 164,165
Due after one year through five years:
Fixed interest rates 74,160 6,508
Floating interest rates 98,894 25,933
Due after five years:
Fixed interest rates 9,617 8,945
Floating interest rates 37,744 14,844
Total $ 386,204 220,395
<CAPTION>
TOTAL
<S> <C>
Due in one year or less 329,954
Due after one year through five years:
Fixed interest rates 80,668
Floating interest rates 124,827
Due after five years:
Fixed interest rates 18,562
Floating interest rates 52,588
Total 606,599
</TABLE>
ASSET QUALITY
Table 13 presents a summary of loss experience and the reserve for loan and
lease losses for the previous five years. Loss experience, as measured by net
charge-offs to average loans and lease financing outstanding, has shown
significant improvement during the past two years. This ratio decreased in 1993
to .24% from .32% in 1992 and compares to .43% in 1991. The 1993 ratio is the
lowest since 1988's level of .21% and continues to compare very favorably with
peer group averages. Net charge-offs in 1993 occurred primarily in credit card
receivables and instalment loans to individuals. Net charge-offs in credit card
receivables amounted to approximately $2,142,000 while net charge-offs of
instalment loans to individuals amounted to approximately $1,130,000.
15
<PAGE>
TABLE 13 SUMMARY OF LOAN AND LEASE FINANCING LOSS EXPERIENCE AND THE RESERVE
FOR LOAN AND LEASE LOSSES
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
BALANCE AT BEGINNING OF YEAR $ 19,027 17,742 16,234 14,656 13,804
Loan and lease losses charged to reserve:
Commercial, financial and agricultural (410) (885) (1,214) (1,117) (365)
Real estate -- construction (412) (255) (552) (99) --
Real estate -- mortgage (504) (518) (368) (166) (142)
Instalment loans to individuals (1,616) (1,752) (2,695) (2,700) (2,044)
Credit card receivables (2,738) (2,629) (2,132) (1,552) (1,600)
Lease financing (160) (158) (393) (430) (1,321)
Total loan and lease losses charged to reserve (5,840) (6,197) (7,354) (6,064) (5,472)
Recoveries of loans and leases previously charged-off:
Commercial, financial and agricultural 265 228 214 124 7
Real estate -- construction 59 16 113 -- --
Real estate -- mortgage 87 28 13 22 30
Instalment loans to individuals 486 451 368 382 354
Credit card receivables 596 572 375 438 489
Lease financing 58 204 162 331 502
Total recoveries of loans and leases previously
charged-off 1,551 1,499 1,245 1,297 1,382
Net charge-offs (4,289) (4,698) (6,109) (4,767) (4,090)
Provision charged to operations 6,453 5,983 7,407 6,345 4,942
Reserves related to acquisitions 5,772 -- 210 -- --
BALANCE AT END OF YEAR $ 26,963 19,027 17,742 16,234 14,656
Loans and lease financing outstanding at end of year $2,159,489 1,521,136 1,444,875 1,379,290 1,303,211
Ratio of reserve for loan and lease losses to loans and lease
financing outstanding at end of year 1.25% 1.25 1.23 1.18 1.12
Average loans and lease financing outstanding during the year $1,804,656 1,489,943 1,408,595 1,331,896 1,244,880
Ratio of net charge-offs of loans and lease financing to
average loans and lease financing outstanding during the
year .24% .32 .43 .36 .33
</TABLE>
The reserve for loan and lease losses to loans and lease financing
outstanding stood at 1.25% at December 31, 1993 and 1992, compared to 1.23% at
December 31, 1991. Provisions for loan and lease losses amounted to $6,453,000,
$5,983,000 and $7,407,000 in 1993, 1992 and 1991, respectively.
16
<PAGE>
TABLE 14 ALLOCATION OF THE RESERVE FOR LOAN AND LEASE LOSSES (1)
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31
1993 1992 1991 1990
% OF % OF % OF % OF
LOANS LOANS LOANS LOANS
AND AND AND AND
AMOUNT OF LEASES AMOUNT OF LEASES AMOUNT OF LEASES AMOUNT OF LEASES
RESERVE IN EACH RESERVE IN EACH RESERVE IN EACH RESERVE IN EACH
ALLOCATED CATEGORY ALLOCATED CATEGORY ALLOCATED CATEGORY ALLOCATED CATEGORY
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LOAN TYPE
Commercial, financial and
agricultural $ 4,828 17.9% 4,019 21.0 4,293 23.8 2,796 20.3
Real estate -- construction 4,408 10.2 3,413 11.2 3,327 11.5 3,470 12.6
Real estate -- mortgage 5,768 53.3 2,047 44.8 1,829 42.2 1,822 44.0
Instalment loans to
individuals 3,030 9.3 2,460 10.8 2,717 12.5 2,851 13.8
Credit card receivables 3,510 8.1 3,237 10.6 2,385 8.3 2,019 7.3
Lease financing 552 1.2 383 1.6 608 1.7 835 2.0
Unallocation portion of
reserve 4,867 -- 3,468 -- 2,583 -- 2,441 --
$ 26,963 100.0% 19,027 100.0 17,742 100.0 16,234 100.0
<CAPTION>
1989
% OF
LOANS
AND
AMOUNT OF LEASES
RESERVE IN EACH
ALLOCATED CATEGORY
<S> <C> <C>
LOAN TYPE
Commercial, financial and
agricultural 2,680 20.6
Real estate -- construction 2,332 11.9
Real estate -- mortgage 1,446 44.4
Instalment loans to
individuals 2,852 14.6
Credit card receivables 2,616 6.7
Lease financing 923 1.8
Unallocation portion of
reserve 1,807 --
14,656 100.0
</TABLE>
(1) The allocation of the reserve for loan and lease losses by loan type is
based on management's on-going evaluation of the adequacy of the reserve for
loan and lease losses as referenced above. Since the factors involved in
such evaluation are subject to change, the allocation of the reserve to the
respective loan types is not necessarily indicative of future losses in each
loan type. Additionally, no assurances can be made that the allocation shown
will be indicative of future allocations.
Nonperforming assets (nonaccrual loans and lease financing, other real
estate acquired through loan foreclosure and restructured loans and lease
financing) and risk assets (nonperforming assets plus accruing loans and lease
financing 90 days or more past due) at the end of each of the previous five
years are presented in Table 15. At December 31, 1993, risk assets amounted to
1.07% of outstanding loans and lease financing and other real estate acquired
through loan foreclosures. This compares to 1.52% and 2.19% at December 31, 1992
and 1991, respectively. Risk assets as a percentage of total assets has fallen
from a high of 1.48% at December 31, 1991 to .71% at December 31, 1993. Of the
$1,916,000 increase in nonaccrual loans and lease financing at December 31,
1993, $1,605,000 was due to loans acquired through the Acquisitions. Real estate
acquired through loan foreclosures decreased to $8,033,000 at December 31, 1993
from $9,296,000 at December 31, 1992. In the opinion of management, all loans
and lease financing in which serious doubts exist as to the ability of borrowers
to comply with the present repayment terms are included in this table.
The Corporation's policy in regards to placing loans and lease financing in
a nonaccrual status is that generally, business credits are placed in a
nonaccrual status when there are doubts regarding the collectibility of
principal or interest or when payment of principal or interest is ninety days or
more past due (unless management determines that the collectibility is not
reasonably considered in doubt). At December 31, 1993, there were no interest
earning assets, other than loans and lease financing, that were in a nonaccrual,
past due or restructured status.
Management feels that the reserve for loan and lease losses is adequate to
absorb known and inherent risks in the loans and lease financing portfolio. See
Table 14 for management's allocation of the reserve for loan and lease losses
for the previous five years. A key tool in controlling loan losses is the
Corporation's loan grading system that begins at the inception of the credit
relationship. Under this grading system, substantially all credit relationships
greater than $100,000 (excluding residential mortgage and home equity lines) are
assigned grades that direct the timing and intensity of loan review activity
throughout the life of the relationship. All relationships are reviewed at least
annually. Relationships that have the lowest grade are reviewed each thirty
days. Based on these reviews and the Corporation's historical loss experience,
the loan and lease loss reserve appears adequate to cover known and inherent
losses in the loan portfolio. The most recent regulatory agency examinations
have not revealed any material problem credits that had not been previously
identified.
17
<PAGE>
TABLE 15 NONPERFORMING AND RISK ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Nonaccrual loans and lease financing (1) $12,975 11,059 17,639 13,507 15,915
Other real estate acquired through loan foreclosures 8,033 9,296 9,904 5,666 4,808
Restructured loans and lease financing -- 86 143 -- 980
Total nonperforming assets 21,008 20,441 27,686 19,173 21,703
Accruing loans and lease financing 90 days or more past due 2,244 2,871 4,216 10,323 6,244
Total risk assets $23,252 23,312 31,902 29,496 27,947
Ratio of nonperforming assets to:
Loans and lease financing outstanding and other real estate acquired
through loan foreclosures .97% 1.34 1.90 1.38 1.66
Total assets .64 .88 1.28 .91 1.09
Ratio of total risk assets to:
Loans and lease financing outstanding and other real estate acquired
through loan foreclosures 1.07 1.52 2.19 2.13 2.14
Total assets .71 1.01 1.48 1.40 1.41
Reserve for loan and lease losses to total risk assets 1.16x .82 .56 .55 .52
</TABLE>
(1) For the year ended December 31, 1993, gross interest income that would have
been recorded during the year on the nonaccrual loans and lease financing
listed above, if the loans and lease financing had been current in
accordance with their original terms, would have amounted to approximately
$716,528. Gross interest income, included in net income on these nonaccrual
and restructured loans and lease financing for the year ended December 31,
1993, amounted to approximately $140,350. This amount also includes interest
from prior years collected during 1993.
OTHER INCOME AND OTHER EXPENSES
Table 16 presents various operating efficiency ratios for the Corporation
for the previous five years. Noninterest income as a percentage of average
assets dropped slightly from 1992's level due to not all of the Corporation's
products and services being fully integrated into the financial institutions
acquired during 1993. Consequently, the rise in average assets outstanding did
not equate to a proportionate increase in noninterest income. During 1994, all
products and services will be fully integrated at all of the Subsidiary Banks.
Despite the slight decline in this ratio, 1993's other income, excluding net
investment securities gains, increased by $5,778,000 or 18.9% over 1992.
Increases in income were experienced in 1993 in all categories of other income
except other service charges and fees. During 1993, the Corporation emphasized
selling annuity products through CCB's subsidiary, CCBIISC, which resulted in
the 36.5% increase in insurance commission income to $2,242,000. Noninterest
income increased as a result of the accretion of negative goodwill from the
Acquisitions which totaled $1,196,000 in 1993. Negative goodwill is being
accreted to income over a ten-year period.
TABLE 16 OPERATING EFFICIENCY RATIOS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
As a percentage of average assets:
Noninterest income 1.45% 1.50 1.58 1.49 1.50
Personnel expense 1.98 2.11 2.18 2.01 2.07
Occupancy and equipment expense .62 .72 .77 .78 .72
Other operating expense 1.32 1.23 1.20 1.19 1.09
Noninterest expense 3.92 4.06 4.15 3.98 3.88
Net overhead (noninterest expense less noninterest income) 2.47% 2.56 2.57 2.49 2.38
Noninterest expense as a percentage of net interest income and other income (1) 65.77% 65.04 66.71 65.93 64.32
Average assets per employee (in millions) $1.71 1.56 1.55 1.40 1.34
</TABLE>
(1) Presented using taxable equivalent net interest income. The taxable
equivalent basis is computed using 35% federal and 7.91% state tax rates in
1993, 34% federal and 7.98% state tax rates in 1992 and 34% federal and
8.06% state tax rates in 1991 where applicable.
In 1992, other income, excluding investment securities gains, decreased by
$1,968,000 or 6.0% from 1991. An increase in 1992's service charges on deposit
accounts was more than offset by decreases in insurance commissions
18
<PAGE>
and other income. Included in other income in 1991 was a gain of approximately
$1,900,000 on the sale of the insurance division of Southland Associates, Inc.
Consequently, insurance commission income decreased in 1992.
Noninterest expense as a percentage of average assets continued to show
favorable improvement to 3.92% from a high of 4.15% in 1991. Management will
continue to closely monitor this ratio and anticipates further improvement as
cost-containment programs implemented in 1993 begin to show results. Other
operating expenses as a percentage of average assets had an unfavorable increase
in 1993 from prior years. Other operating expenses in 1993 increased by
$8,763,000 or 32.7%, while in 1992 the increase was a more modest $2,104,000 or
8.5% over 1991. The 1993 increase was primarily due to system conversions and
training costs, marketing efforts in the new market areas, revamping offices and
other costs related to the Acquisitions. Furthermore, the Corporation recorded
$1,546,000 of amortization expense related primarily to identified and
unidentified intangibles resulting from the 1st Home Federal acquisition. These
items are being amortized on accelerated and straight-line methods ranging up to
10 years.
SECURITIES TRANSACTIONS
Net securities gains of $2,652,000, $2,065,000 and $56,000 were realized in
1993, 1992 and 1991, respectively. After the related income tax effects,
respective net gains amounted to $1,588,000, $1,254,000 and $34,000. The gains
in 1993 were primarily realized through the sale of U.S. Treasury securities
with an approximate book value of $39,254,000. Approximately $116,000 of the net
gains on sales of investment securities with book values of $53,322,000 were due
to the sales of investment securities acquired through 1st Home Federal that did
not fit into the Corporation's investment securities strategy. The gains in 1992
were realized through the sale of approximately $22,000,000 in higher coupon
Government National Mortgage Association securities. The mortgages underlying
these securities had higher interest rates than those available in the market,
and thus were prepaying at an accelerated rate and at their par value. In
recognition of these conditions, management felt that it was prudent to sell
these securities and recognize the gains before further erosion in value
occurred.
INCOME TAXES
Income tax expense was $14,640,000 in 1993, $11,915,000 in 1992 and
$8,828,000 in 1991. The Corporation's effective income tax rate was 33.4%, 32.0%
and 29.2% in 1993, 1992 and 1991, respectively. Deferred tax assets of
$12,128,000 and deferred tax liabilities of $6,966,000 are recorded on the
Consolidated Balance Sheet as of December 31, 1993. The Corporation has
determined that a valuation allowance for the deferred tax assets is not needed
at December 31, 1993.
SIX YEAR SUMMARY OF SELECTED FINANCIAL DATA
The Six Year Summary of Selected Financial Data in Table 17 provides a
summary of the Corporation's operations for the past six years. Reviewing this
schedule and the financial ratios included therein allows the reader to compare
the results of one year with those of other years and to compare the
Corporation's performance with that of other banks and bank holding companies.
19
<PAGE>
TABLE 17 SIX YEAR SUMMARY OF SELECTED FINANCIAL DATA
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest income $ 190,689 169,736 186,577 196,201 188,089 156,793
Interest expense 73,821 70,637 96,039 110,148 108,598 83,603
Net interest income 116,868 99,099 90,538 86,053 79,491 73,190
Provision for loan and lease losses 6,453 5,983 7,407 6,345 4,942 3,500
Net interest income after provision 110,415 93,116 83,131 79,708 74,549 69,690
Other income 39,060 32,695 32,653 29,746 27,890 25,730
Other expenses 105,610 88,574 85,502 79,497 72,068 66,036
Income before income taxes and cumulative
changes in accounting principles 43,865 37,237 30,282 29,957 30,371 29,384
Income taxes 14,640 11,915 8,828 9,440 9,360 9,657
Income before cumulative changes in accounting
principles 29,225 25,322 21,454 20,517 21,011 19,727
Cumulative changes in accounting principles
(1) (1,371) -- -- -- -- --
Net income $ 27,854 25,322 21,454 20,517 21,011 19,727
PER SHARE (2)
Income before cumulative changes in accounting
principles:
Primary $ 3.50 3.30 2.81 2.70 2.78 2.62
Fully diluted (3) 3.41 3.10 2.66 2.56 2.63 2.49
Net income:
Primary 3.33 3.30 2.81 2.70 2.78 2.62
Fully diluted (3) 3.25 3.10 2.66 2.56 2.63 2.49
Cash dividends 1.24 1.14 1.047 .987 .933 .867
Book value 26.37 24.40 22.23 20.38 18.67 16.85
Average shares outstanding (000's):
Primary 8,345 7,664 7,628 7,598 7,559 7,520
Fully diluted (3) 8,726 8,578 8,565 8,536 8,497 8,458
AVERAGE BALANCES
Assets $2,694,973 2,179,452 2,062,153 1,996,695 1,856,079 1,660,235
Loans and lease financing 1,804,656 1,489,943 1,408,595 1,331,896 1,244,880 1,157,937
Earning assets 2,496,290 2,003,920 1,893,055 1,815,883 1,680,223 1,501,913
Deposits 2,358,451 1,912,362 1,805,230 1,750,897 1,611,033 1,442,360
Interest bearing liabilities 2,098,921 1,683,427 1,614,056 1,557,520 1,424,950 1,255,798
Shareholders' equity 209,672 176,869 161,010 146,595 133,220 118,926
SELECTED YEAR END ASSETS AND LIABILITIES
Assets $3,257,643 2,312,218 2,158,196 2,102,248 1,983,812 1,794,890
Loans and lease financing 2,159,489 1,521,136 1,444,875 1,379,290 1,303,211 1,201,135
Reserve for loan and lease losses 26,963 19,027 17,742 16,234 14,656 13,804
Deposits 2,816,771 2,028,506 1,885,597 1,845,054 1,736,263 1,558,512
Long-term debt 78,698 27,746 25,600 25,650 29,267 29,990
Shareholders' equity 251,004 189,845 169,847 154,867 141,886 126,772
RATIOS (AVERAGES)
Income before cumulative changes in accounting
principles to:
Average assets 1.08% 1.16 1.04 1.03 1.13 1.19
Average shareholders' equity 13.94 14.32 13.32 14.00 15.77 16.59
Net income to:
Average assets 1.03 1.16 1.04 1.03 1.13 1.19
Average shareholders' equity 13.28 14.32 13.32 14.00 15.77 16.59
Average shareholders' equity to:
Average assets 7.78 8.12 7.81 7.34 7.18 7.16
Average deposits 8.89 9.25 8.92 8.37 8.27 8.25
Average loans and lease financing to average
deposits 76.52 77.91 78.03 76.07 77.27 80.28
Net loan and lease losses to average loans and
lease financing .24 .32 .43 .36 .33 .21
Dividend payout ratio 37.24 34.55 37.26 36.56 33.56 33.09
<CAPTION>
FIVE YEAR COMPOUND
GROWTH RATE %
<S> <C>
SUMMARY OF OPERATIONS
Interest income 4.0
Interest expense (2.5)
Net interest income 9.8
Provision for loan and lease losses 13.0
Net interest income after provision 9.6
Other income 8.7
Other expenses 9.8
Income before income taxes and cumulative
changes in accounting principles 8.3
Income taxes 8.7
Income before cumulative changes in accounting
principles 8.2
Cumulative changes in accounting principles
(1)
Net income 7.1
PER SHARE (2)
Income before cumulative changes in accounting
principles:
Primary 6.0
Fully diluted (3) 6.5
Net income:
Primary 4.9
Fully diluted (3) 5.5
Cash dividends 7.4
Book value 9.4
Average shares outstanding (000's):
Primary 2.1
Fully diluted (3) .6
AVERAGE BALANCES
Assets 10.2
Loans and lease financing 9.3
Earning assets 10.7
Deposits 10.3
Interest bearing liabilities 10.8
Shareholders' equity 12.0
SELECTED YEAR END ASSETS AND LIABILITIES
Assets 12.7
Loans and lease financing 12.4
Reserve for loan and lease losses 14.3
Deposits 12.6
Long-term debt 21.3
Shareholders' equity 14.6
RATIOS (AVERAGES)
Income before cumulative changes in accounting
principles to:
Average assets --
Average shareholders' equity --
Net income to:
Average assets --
Average shareholders' equity --
Average shareholders' equity to:
Average assets --
Average deposits --
Average loans and lease financing to average
deposits --
Net loan and lease losses to average loans and
lease financing --
Dividend payout ratio --
</TABLE>
(1) The cumulative changes in accounting principles reflect the adoption of
Statement of Financial Accounting Standards No. 106, Employers' Accounting
for Postretirement Benefits Other Than Pensions, which resulted in a
one-time net charge of $2,271,234 ($3,736,834 pre-tax) in recognition of the
entire Accumulated Postretirement Benefit Obligation and adoption of
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes, which resulted in a one-time benefit of $900,000.
20
<PAGE>
(2) Amounts for 1991 and prior years have been restated to give effect to the
three for two stock split effected in the form of a 50% stock dividend paid
October 1, 1992.
(3) Assumes full conversion of convertible subordinated debentures issued in
1985. The convertible subordinated debentures were called for redemption
during 1993 and substantially all were converted into the Corporation's
common stock.
IMPACT OF ACCOUNTING FOR POSTEMPLOYMENT BENEFITS
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards No. 112, Employers' Accounting for Postemployment
Benefits (SFAS 112), which requires accrual of a liability for all types of
benefits paid to former or inactive employees after employment but before
retirement. These benefits include, but are not limited to, salary continuation,
supplemental unemployment benefits, severance benefits and continuation of
benefits such as health care benefits and life insurance coverage. Management
estimates that adoption of SFAS 112 will have an immaterial effect on net
income. Adoption of SFAS 112 is required for fiscal years beginning after
December 15, 1993.
IMPACT OF ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES
The FASB has issued Statement of Financial Accounting Standards No. 115
(SFAS 115), Accounting for Certain Investment in Debt and Equity Securities.
SFAS 115 requires the segregation of the investment securities portfolio into
three categories for accounting and reporting purposes. Debt securities that the
enterprise has the positive intent and ability to hold to maturity are
classified as held for investment securities and reported at amortized cost.
Debt and equity securities that are bought and held principally for the purpose
of selling them in the near term are classified as trading securities and
reported at fair value, with unrealized gains and losses included in earnings.
Debt and equity securities not classified as either held for investment
securities or trading securities are classified as available for sale securities
and reported at fair value, with unrealized gains and losses excluded from
earnings and reported in a separate component of shareholders' equity. SFAS 115
is effective for fiscal years beginning after December 15, 1993, is to be
initially applied as of the beginning of the Corporation's fiscal year and
cannot be applied retroactively to prior years' financial statements. The
Corporation has reviewed the provisions of SFAS 115 and estimates that if SFAS
115 had been adopted at December 31, 1993, approximately $9,900,000 would have
been added to capital when investments categorized as available for sale were
marked to their market value through adjustment of a separate component of
shareholders' equity. Estimates of the future effects of adopting SFAS 115 are
not possible to determine as such effects are based solely on the condition of
the financial markets. The Corporation adopted SFAS 115 on January 1, 1994.
OTHER ACCOUNTING MATTERS
The FASB has issued Statement of Financial Accounting Standards No. 114,
Accounting by Creditors for Impairment of a Loan (SFAS 114), which requires that
creditors value all loans for which it is probable that the creditor will be
unable to collect all amounts due according to the terms of the loan agreement
based on the discounted expected future cash flows. The impairment will
constitute the difference between the discounted estimated future cash flows and
the carrying amount of the loan. The impairment will be recorded through a
valuation allowance. In addition, at the time of a formal loan restructuring,
the restructured loan will be valued at fair value, which will become the
recorded investment in the loan. Previously, such loans have been carried at the
same value as before the formal restructuring in accordance with SFAS 15. This
discounting would be at the loan's effective interest rate. Adoption of SFAS 114
is required for fiscal years beginning after December 15, 1994. The Corporation
has not determined the effect, if any, of SFAS 114 on its consolidated financial
statements.
The FASB has issued Statement of Financial Accounting Standards No. 116,
Accounting for Contributions Received and Contributions Made (SFAS 116) which
establishes accounting standards for contributions received and contributions
made. Contributions received as well as unconditional promises to give are
generally recognized as revenues in the period received at their fair values.
Contributions made as well as unconditional promises to give are recognized as
expenses in the period made at their fair value. Adoption of SFAS 116 is
generally required for fiscal years beginning after December 15, 1994. The
Corporation has not determined the effect, if any, of SFAS 116 on its
consolidated financial statements.
21
<PAGE>
CONSOLIDATED BALANCE SHEETS
December 31, 1993 and 1992
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
ASSETS:
Cash and due from banks (note 3) $ 191,332,445 129,006,116
Time deposits in other banks 35,431,738 --
Federal funds sold and other short-term investments 169,286,165 156,000,000
Investment securities (notes 4, 8, 9, and 10):
Available for sale (market value of $563,187,727) 553,292,393 --
Held for investment (market values of $68,553,264 and $462,488,504) 64,126,134 448,337,864
Loans and lease financing (note 5) 2,159,489,054 1,521,136,146
Less reserve for loan and lease losses (note 6) 26,963,334 19,026,764
Net loans and lease financing 2,132,525,720 1,502,109,382
Premises and equipment (notes 7 and 10) 42,597,185 34,872,730
Other assets (note 13) 69,050,959 41,891,979
Total assets $3,257,642,739 2,312,218,071
LIABILITIES:
Deposits:
Demand (non-interest bearing) $ 421,432,974 344,180,703
Savings 48,028,190 45,930,849
Money market accounts 1,150,923,169 853,695,825
Time 1,196,386,428 784,698,859
Total deposits 2,816,770,761 2,028,506,236
Federal funds purchased and securities sold under agreements to repurchase (note 8) 25,526,966 25,268,257
Other short-term borrowed funds (note 9) 16,202,362 20,386,575
Long-term debt (note 10) 78,698,073 27,745,631
Other liabilities (note 13) 69,440,814 20,466,096
Total liabilities 3,006,638,976 2,122,372,795
SHAREHOLDERS' EQUITY (notes 10, 11, and 15):
Serial preferred stock. Authorized 5,000,000 shares; none issued -- --
Common stock of $5 par value. Authorized 20,000,000 shares; 9,517,277 shares issued in 1993
and 7,779,106 shares issued in 1992 47,586,385 38,895,530
Additional paid-in capital 83,349,012 44,095,683
Retained earnings 124,086,654 106,854,063
Less: Unearned common stock held by Management Recognition Plans (note 11) (4,018,288) --
Total shareholders' equity 251,003,763 189,845,276
Total liabilities and shareholders' equity $3,257,642,739 2,312,218,071
</TABLE>
Commitments and contingencies (note 14)
See accompanying notes to consolidated financial statements.
22
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1993, 1992 and 1991
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $153,226,869 135,809,564 145,877,653
Lease financing income 2,166,512 2,610,585 3,167,052
Interest and dividends on investment securities:
U.S. Treasury 17,800,627 15,983,306 14,567,471
U.S. Government agencies and corporations 7,504,221 5,407,164 11,603,891
States and political subdivisions (tax exempt) 3,293,216 3,603,509 4,684,012
Equity securities 2,159,050 1,554,631 1,141,095
Interest on time deposits in other banks 535,516 4,576 131,955
Interest on federal funds sold and other short-term investments 4,003,146 4,762,621 5,404,373
Total interest income 190,689,157 169,735,956 186,577,502
INTEREST EXPENSE:
Deposits 69,938,845 67,231,641 91,545,308
Federal funds purchased and securities sold under agreements to repurchase (note 8) 564,003 653,930 1,458,685
Other short-term borrowed funds (note 9) 668,133 483,609 798,929
Long-term debt (note 10) 2,649,525 2,267,826 2,236,282
Total interest expense 73,820,506 70,637,006 96,039,204
NET INTEREST INCOME 116,868,651 99,098,950 90,538,298
Provision for loan and lease losses (note 6) 6,453,000 5,983,000 7,407,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES 110,415,651 93,115,950 83,131,298
OTHER INCOME:
Service charges on deposit accounts 18,207,880 16,624,378 15,595,582
Trust and custodian fees 6,432,684 5,861,593 5,972,614
Insurance commissions 2,241,682 1,642,492 2,773,290
Merchant discount 2,904,160 2,521,930 2,437,682
Other service charges and fees 1,764,429 1,835,621 1,776,703
Accretion of negative goodwill from acquisitions 1,196,260 -- --
Other 3,660,484 2,143,546 4,041,949
Investment securities gains (note 13) 2,657,322 2,114,532 66,256
Investment securities losses (note 13) (5,153) (49,463) (10,642)
Total other income 39,059,748 32,694,629 32,653,434
OTHER EXPENSES:
Personnel expense (note 11) 53,404,550 46,104,498 45,028,936
Net occupancy expense (note 14) 8,212,255 7,090,815 7,133,502
Equipment expense (note 14) 8,432,080 8,580,356 8,645,648
Other operating expenses (note 12) 35,561,368 26,798,388 24,694,282
Total other expenses 105,610,253 88,574,057 85,502,368
INCOME BEFORE INCOME TAXES AND CUMULATIVE CHANGES IN ACCOUNTING PRINCIPLES 43,865,146 37,236,522 30,282,364
Income taxes (note 13) 14,640,300 11,915,000 8,828,100
INCOME BEFORE CUMULATIVE CHANGES IN ACCOUNTING PRINCIPLES 29,224,846 25,321,522 21,454,264
Cumulative changes in accounting principles (notes 1, 11, and 13) (1,371,234) -- --
NET INCOME $ 27,853,612 25,321,522 21,454,264
INCOME PER SHARE (note 1):
Income before cumulative changes in accounting principles:
Primary $ 3.50 3.30 2.81
Fully diluted 3.41 3.10 2.66
Net income:
Primary 3.33 3.30 2.81
Fully diluted 3.25 3.10 2.66
WEIGHTED AVERAGE SHARES OUTSTANDING (note 1):
Primary 8,344,540 7,663,659 7,627,952
Fully diluted 8,726,133 8,577,782 8,565,452
</TABLE>
See accompanying notes to consolidated financial statements.
23
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended December 31, 1993, 1992 and 1991
<TABLE>
<CAPTION>
MANAGEMENT TOTAL
COMMON ADDITIONAL RETAINED RECOGNITION SHAREHOLDERS'
STOCK PAID-IN CAPITAL EARNINGS PLANS EQUITY
<S> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1990 $25,327,795 40,148,408 89,390,430 -- 154,866,633
Net income 1991 -- -- 21,454,264 -- 21,454,264
Stock issued pursuant to restricted stock plan (note 11) 140,910 845,460 -- -- 986,370
Cash dividends ($1.047 per share) -- -- (7,986,464) -- (7,986,464)
Revaluation of marketable equity securities -- -- 526,161 -- 526,161
BALANCE DECEMBER 31, 1991 25,468,705 40,993,868 103,384,391 -- 169,846,964
Net income 1992 -- -- 25,321,522 -- 25,321,522
Conversion of subordinated debentures 600,185 3,101,815 -- -- 3,702,000
3 for 2 stock split effected in the form of a 50% stock
dividend 12,826,640 -- (12,838,051) -- (11,411)
Cash dividends ($1.14 per share) -- -- (8,768,656) -- (8,768,656)
Revaluation of marketable equity securities -- -- (245,143) -- (245,143)
BALANCE DECEMBER 31, 1992 38,895,530 44,095,683 106,854,063 -- 189,845,276
Net income 1993 -- -- 27,853,612 -- 27,853,612
Conversion of subordinated debentures 3,965,390 16,903,532 -- -- 20,868,922
Shares issued for acquisitions 3,443,710 17,331,383 -- -- 20,775,093
Stock issued pursuant to restricted stock plan, net of
forfeitures (note 11) 11,155 97,365 -- -- 108,520
Common stock issued pursuant to Management Recognition
Plans (note 11) 590,600 3,789,040 -- (4,379,640) --
Earned portion of Management Recognition Plans (note 11) -- -- -- 361,352 361,352
Public offering of shares 2,930,000 15,352,009 -- -- 18,282,009
Purchase and retirement of shares (2,250,000) (14,220,000) -- -- (16,470,000)
Cash dividends ($1.24 per share) -- -- (10,386,221) -- (10,386,221)
Revaluation of marketable equity securities -- -- (234,800) -- (234,800)
BALANCE DECEMBER 31, 1993 $47,586,385 83,349,012 124,086,654 (4,018,288) 251,003,763
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1993, 1992 and 1991
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 27,853,612 25,321,522 21,454,264
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 5,559,420 5,110,859 5,429,937
Provision for loan and lease losses 6,453,000 5,983,000 7,407,000
Deferred income taxes (1,137,951) (2,237,839) (2,781,800)
Net gain on sales of investment securities (2,652,169) (2,065,069) (55,614)
Net amortization and accretion on investment securities 3,788,093 2,272,365 1,838,399
Amortization of intangibles and other assets 1,944,706 760,963 366,788
Accretion of negative goodwill (1,196,260) -- --
Decrease (increase) in accrued interest receivable (201,613) 3,137,666 3,762,590
Decrease in accrued interest payable (1,405,975) (368,612) (1,686,117)
Decrease (increase) in other assets 3,445,870 12,242,417 (11,935,197)
Increase (decrease) in other liabilities 1,397,608 2,662,707 (1,728,721)
Vesting of shares held by Management Recognition Plans 361,352 -- --
Issuance of restricted stock, net 108,520 -- 986,370
NET CASH PROVIDED BY OPERATING ACTIVITIES 44,318,213 52,819,979 23,057,899
INVESTING ACTIVITIES:
Proceeds from sales of investment securities held for investment 3,048,951 34,772,480 62,548,001
Proceeds from sales of investment securities acquired in purchase acquisitions 53,438,906 -- --
Proceeds from maturities and issuer calls of investment securities held for
investment 316,347,564 152,103,814 95,874,130
Purchases of investment securities held for investment (471,333,220) (256,780,735) (144,850,937)
Proceeds from sales of investment securities available for sale 57,708,429 -- --
Proceeds from maturities and issuer calls of investment securities available
for sale 139,076,025 -- --
Purchases of investment securities available for sale (145,508,300) -- --
Net increase in loans and leases receivable (185,021,225) (80,958,879) (71,484,055)
Purchases of premises and equipment (6,918,292) (4,859,937) (3,300,790)
Cash acquired, net of cash paid, in purchase acquisitions 173,630,030 -- --
NET CASH USED BY INVESTING ACTIVITIES (65,531,132) (155,723,257) (61,213,651)
FINANCING ACTIVITIES:
Net increase in deposit accounts 73,454,542 142,909,553 40,542,944
Net increase (decrease) in federal funds purchased and securities sold under
agreements to repurchase 258,709 (2,056,229) (5,581,281)
Net increase (decrease) in other short-term borrowed funds (4,184,213) (9,031,575) 12,253,694
Proceeds from issuance of long-term debt 55,117,878 6,000,000 80,000
Repayments of long-term debt (4,590,646) (151,924) (130,901)
Issuances of common stock in public offering, net 18,282,009 -- --
Issuances of common stock in acquisitions, net 20,775,093 -- --
Purchase and retirement of common stock (16,470,000) -- --
Cash dividends (10,386,221) (8,768,656) (7,986,464)
Other, net -- (11,411) --
NET CASH PROVIDED BY FINANCING ACTIVITIES 132,257,151 128,889,758 39,177,992
NET INCREASE IN CASH AND CASH EQUIVALENTS 111,044,232 25,986,480 1,022,240
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR (note 1) 285,006,116 259,019,636 257,997,396
CASH AND CASH EQUIVALENTS AT END OF YEAR (note 1) $ 396,050,348 285,006,116 259,019,636
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid during the year $ 75,226,481 70,575,941 97,725,321
Income taxes paid during the year $ 15,218,133 12,461,175 13,689,121
</TABLE>
See accompanying notes to consolidated financial statements.
25
<PAGE>
CCB FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts and results of
operations of CCB Financial Corporation (the Corporation) and its wholly-owned
subsidiaries, Central Carolina Bank and Trust Company (CCB), CCB Savings Bank of
Lenoir, Inc., SSB (CCB Savings), Graham Savings Bank, Inc., SSB (Graham Savings)
and Central Carolina Bank-Georgia (collectively, the Subsidiary Banks). The
consolidated financial statements also include the accounts and results of
operations of CCB's wholly-owned subsidiaries, CCB Investment and Insurance
Service Corporation, CCBDE, 1st Home Mortgage Acceptance Corporation (FHMAC) and
Southland Associates, Inc. All significant intercompany transactions and
accounts are eliminated in consolidation.
FINANCIAL STATEMENT PRESENTATION
In 1993, the Corporation adopted two new accounting standards, Statements
of Financial Accounting Standards No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions (SFAS 106) and No. 109, Accounting
for Income Taxes (SFAS 109). SFAS 106 requires that the projected future cost of
providing postretirement benefits be recognized during the periods employees
provide services to earn those benefits. Prior to adopting SFAS 106, the cost of
providing these benefits was expensed as paid. As permitted under SFAS 106, the
Corporation chose to immediately recognize the accumulated benefit obligation
for these postretirement benefits as a one-time charge to income in 1993, rather
than on a delayed basis over the remaining average service period of active plan
participants. The cumulative impact of this change in accounting method was to
reduce net income by $2,271,234 ($3,736,834 pre-tax), or $.27 per primary common
share.
Effective January 1, 1993, the Corporation adopted SFAS 109 which
superseded previously adopted Statement of Financial Accounting Standards No.
96. SFAS 109 requires a balance sheet approach in which deferred tax assets and
liabilities are required to be revalued annually using enacted tax rates
expected to apply to taxable income in the years in which these temporary
differences are expected to be recovered or settled. Subsequent changes in tax
rates will require adjustments to these assets and liabilities. The cumulative
impact of this change in accounting method was to increase net income by
$900,000, or $.10 per primary common share.
The Corporation adopted both of these changes on a prospective basis on
January 1, 1993. Prior years' financial statements have not been restated to
apply the provisions of SFAS 106 or SFAS 109. The effects of these changes on
operating results for the year ended December 31, 1993, excluding the cumulative
effect of changing methods, were not material.
Certain accounts included in the 1992 and 1991 financial statements have
been reclassified to conform to the 1993 presentation. Net income and
shareholders' equity of the Corporation previously reported for 1992 and 1991
were not affected by these reclassifications.
For purposes of the Statements of Cash Flows, the Corporation considers
time deposits in other banks, federal funds sold and other short-term
investments to be cash equivalents.
INVESTMENT SECURITIES
Investment securities that management has the intent and ability to hold
until maturity are classified as held for investment. These securities are
carried at cost, adjusted for amortization of premium and accretion of discount.
Investment securities that management may sell prior to maturity or will hold
for indefinite periods of time are carried at the lower of cost or market value
and are classified as available for sale. Securities classified as available for
sale will be considered in the Corporation's asset/liability management
strategies and may be sold in response to changes in interest rates, liquidity
needs and/or significant prepayment risk. The cost of investment securities sold
is determined by the identified certificate method.
Included in equity securities available for sale are investments in mutual
funds that are carried at the lower of cost or market.
26
<PAGE>
CCB FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is computed over the estimated lives of the assets on
accelerated and straight-line methods. Leasehold improvements are amortized over
the term of the respective leases or the estimated useful lives of the
improvements, whichever is shorter.
RESERVE FOR LOAN AND LEASE LOSSES
The reserve for loan and lease losses is increased by provisions charged to
operating expense and reduced by loans and lease financings charged-off, net of
recoveries. The reserve is maintained at a level considered adequate by
management to provide for known and inherent loan and lease losses based on
management's evaluation of the loan and lease financing portfolio, including
historical loss experience, identified problem loans, volumes and outstandings,
as well as on prevailing and anticipated economic conditions. Additionally, bank
regulatory agency examiners periodically review the loan and lease financing
portfolio and may require the Corporation to charge-off loans and lease
financing and/or increase the reserve for loan and lease losses to reflect their
assessment of the collectibility of loans and lease financing in the portfolio
based on available information at the time of their examination.
REAL ESTATE HELD FOR SALE AND DEVELOPMENT BY SOUTHLAND ASSOCIATES, INC.
Real estate held for sale and development is valued at the lower of cost,
including interest and other carrying costs, or estimated net realizable value.
A provision for possible losses on this real estate is made when management
determines that the cost of the property exceeds the estimated net realizable
value. A reserve for possible losses on real estate of $500,000 was maintained
at December 31, 1993 and 1992. Cost of real estate sold is based on costs
incurred to the date of sale and estimates of future costs, if applicable.
NON-ACCRUING LOANS AND LEASE FINANCING AND OTHER REAL ESTATE
Accrual of interest on loans and lease financing is discontinued when
management deems that collection of additional interest is doubtful. Other real
estate acquired through loan foreclosures is valued at the lower of cost or fair
value less estimated cost of sale.
SUBORDINATED NOTES
Underwriting discounts and commissions and issuance expenses of the
subordinated notes are included in other assets on the Consolidated Balance
Sheets. These expenses are being amortized over the term of the subordinated
notes on the interest method.
MANAGEMENT RECOGNITION PLANS
The Corporation has two Management Recognition Plans (the MRP's) designed
to provide an ownership interest in the Corporation through the issuance of
common stock to certain officers and directors of the Subsidiary Banks as an
incentive for those persons to remain with the Subsidiary Banks. The shares of
common stock issued will be earned in instalments over a period of up to five
years and the cost of the shares is being charged to operating expense over the
period the shares are earned. Prior to vesting, each participant granted shares
under the MRP's may direct the voting of the shares allocated to the participant
and will be entitled to receive any dividends or other distributions paid on
such shares.
LOAN FEES
Certain fees and direct loan origination costs are deferred and amortized
as an adjustment of the related loan's yield by a level-yield method.
27
<PAGE>
CCB FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
INTANGIBLES ARISING FROM ACQUISITIONS
Intangibles arising from acquisitions result from the Corporation paying
amounts in excess of fair value for businesses, core deposits and tangible
assets acquired. Such amounts are being amortized by systematic charges to
income over a period no greater than the estimated remaining life of the assets
acquired or not exceeding the estimated average remaining life of the existing
deposit base assumed (primarily for up to 10 years).
Negative goodwill, included in other liabilities on the Consolidated
Balance Sheet, represents the excess of fair value of net assets acquired over
cost after recording the liability for recaptured tax bad debt reserves and
after reducing the basis in noncurrent assets acquired to zero. Negative
goodwill is being accreted into earnings over the estimated periods to be
benefited (generally 10 years).
INCOME TAXES
The provision for income taxes is based on income and expense reported for
financial statement purposes after adjustment for permanent differences such as
tax exempt interest income. Deferred income taxes are provided when there is a
difference between the periods items are reported for financial statement
purposes and when they are reported for tax purposes and are recorded at the
enacted tax rates expected to apply to taxable income in the years in which
these temporary differences are expected to be recovered or settled.
RESTRICTED STOCK AND PERFORMANCE UNIT PLANS
The Corporation has Restricted Stock and Performance Unit Plans covering
certain officers of the Corporation and Subsidiary Banks. The market value of
shares issued under the Restricted Stock Plans, along with a provision for the
estimated value of performance units awarded under the Performance Unit Plans,
is being charged to operating expense as earned over five-year periods.
PER SHARE DATA
Primary income per share is computed based on the weighted average number
of common shares outstanding during each period. Fully diluted income per share
is computed based on the weighted average number of common shares outstanding
and common shares issuable upon full conversion of convertible debt (which was
fully converted or redeemed at December 31, 1993). In this computation, interest
expense on convertible debt, net of applicable income taxes, is added back to
income as if the debt was converted into common stock at the beginning of the
period.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, Disclosure About Fair
Value of Financial Instruments (SFAS 107) requires disclosure of fair value
information about financial instruments, whether or not recognized on the
balance sheet, for which it is practicable to estimate that value. In cases
where quoted market prices are not available, fair values are based on estimates
using present value or other valuation techniques. Those techniques are
significantly affected by the assumptions used, including the discount rate and
estimates of future cash flows. In that regard, the derived fair value estimates
cannot be substantiated by comparison to independent markets and, in many cases,
could not be realized in immediate settlement of the financial instrument. SFAS
107 excludes certain financial instruments and all nonfinancial instruments from
its disclosure requirements. Accordingly, the aggregate fair value amounts
presented do not intend to represent the underlying value of the Corporation.
(2) ACQUISITIONS
On April 1, 1993, the Corporation consummated the acquisition of Mutual
Savings Bank, SSB of Lenoir, North Carolina (Mutual). In the acquisition
transaction, Mutual converted from mutual to stock form and the Corporation
offered and sold 284,282 shares of its $5.00 par value common stock to the
depositors and loan customers of Mutual as required under North Carolina law to
effect the conversion of Mutual to the stock form. Gross proceeds from the sale
of the shares of the Corporation's common stock amounted to $9,706,000. The
Corporation is operating Mutual as a
28
<PAGE>
CCB FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) ACQUISITIONS -- Continued
wholly-owned stock subsidiary under the name CCB Savings Bank of Lenoir, Inc.,
SSB. At March 31, 1993, Mutual had total assets of $109,754,000, total loans of
$73,652,000, total deposits of $90,036,000 and retained earnings of $9,750,000.
The transaction was effected as a tax free reorganization and accounted for
under the purchase method of accounting. Negative goodwill of $7,736,096 was
recorded as a result of the transaction.
On May 31, 1993, the Corporation, through its lead bank subsidiary, CCB,
acquired the Greensboro, North Carolina operations of 1st Home Federal Savings
and Loan Association, F.A. (1st Home Federal). In this transaction, CCB, for a
purchase price of $17,800,000, assumed deposits of $412,981,000, assumed other
liabilities of $25,265,000, purchased loans of $204,394,000 and purchased
investment securities and other assets of $216,052,000. Goodwill of $24,619,829
was recorded as a result of the transaction.
On October 1, 1993, the Corporation consummated the acquisition of Graham
Savings Bank, SSB (Graham) of Graham, North Carolina in a conversion/acquisition
transaction similar to the Mutual transaction discussed above. The Corporation
is operating Graham as a wholly-owned subsidiary under the name Graham Savings
Bank, Inc., SSB. At September 30, 1993, Graham operated two offices and had
total assets of $111,013,000, total loans of $84,505,000, total deposits of
$94,131,000 and retained earnings of $16,636,000. Negative goodwill of
$13,198,190 was recorded as a result of the transaction.
On October 15, 1993, the Corporation consummated the acquisition of
Citizens Savings, SSB (Citizens) of Lenoir, North Carolina in a
conversion/acquisition transaction similar to the Mutual and Graham transactions
discussed above. Citizens was merged with and into CCB Savings shortly after
acquisition. At September 30, 1993, Citizens operated two offices and had total
assets of $136,697,000, total loans of $99,779,000, total deposits of
$117,964,000 and retained earnings of $17,957,000. Negative goodwill of
$13,732,725 was recorded as a result of the transaction.
The Corporation's proposed conversion/acquisition of Shelby Savings Bank,
SSB of Shelby, North Carolina was terminated on September 16, 1993. Expenses
incurred for the terminated transaction were charged to earnings in 1993.
The following presents on a pro forma basis certain financial data that
gives effect to the Corporation's acquisitions of Mutual, 1st Home Federal,
Graham and Citizens as if they had occurred at the beginning of the periods
presented and reflects adjustments made under the purchase method of accounting
for business combinations. The pro forma financial information presented is not
necessarily indicative of actual results that would have been achieved had the
acquisitions been consummated at the beginning of the periods presented, and is
not indicative of future results. Information related to Citizens and Mutual has
been combined due to immateriality and their subsequent merger after
acquisition. Earnings per share are presented only on a fully combined basis.
<TABLE>
<CAPTION>
PRO FORMA (UNAUDITED)
MUTUAL AND
(IN THOUSANDS, EXCEPT PER SHARE DATA) CORPORATION CITIZENS 1ST HOME GRAHAM
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993:
Interest and other income $ 229,748 10,730 12,944 8,205
Income before cumulative changes in accounting principles 29,225 1,576 611 1,770
Income before cumulative changes in accounting principles per primary
share 3.50 -- -- --
Income before cumulative changes in accounting principles per fully
diluted share 3.41 -- -- --
Net income 27,854 1,576 611 1,770
Net income per primary share 3.33 -- -- --
Net income per fully diluted share 3.25 -- -- --
Year ended December 31, 1992:
Interest and other income 202,431 22,832 27,431 12,317
Net income 25,322 3,945 (1,345) 2,998
Net income per primary share 3.30 -- -- --
Net income per fully diluted share 3.10 -- -- --
<CAPTION>
FULLY
(IN THOUSANDS, EXCEPT PER SHARE DATA) COMBINED
<S> <C>
YEAR ENDED DECEMBER 31, 1993:
Interest and other income 261,627
Income before cumulative changes in accounting principles 33,182
Income before cumulative changes in accounting principles per primary
share 3.81
Income before cumulative changes in accounting principles per fully
diluted share 3.69
Net income 31,811
Net income per primary share 3.65
Net income per fully diluted share 3.54
Year ended December 31, 1992:
Interest and other income 265,011
Net income 30,920
Net income per primary share 3.70
Net income per fully diluted share 3.48
</TABLE>
29
<PAGE>
CCB FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(3) RESTRICTIONS ON CASH AND DUE FROM BANKS
The Subsidiary Banks are required to maintain non-interest bearing reserve
and clearing balances with the Federal Reserve Bank. These balances are included
in cash and due from banks on the Consolidated Balance Sheets. For the reserve
maintenance periods in effect at December 31, 1993 and 1992, the Subsidiary
Banks were required to maintain average reserve and clearing balances of
approximately $28,102,000 and $27,830,000, respectively.
(4) INVESTMENT SECURITIES
The book values and approximate market values of investment securities at
December 31, 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
1993 1992
BOOK UNREALIZED UNREALIZED MARKET BOOK UNREALIZED UNREALIZED
VALUE GAINS LOSSES VALUE VALUE GAINS LOSSES
<S> <C> <C> <C> <C> <C> <C> <C>
HELD FOR INVESTMENT:
U.S. Treasury $ -- -- -- -- 264,350,423 9,039,350 (486)
U.S. Government agencies
and corporations -- -- -- -- 124,483,876 898,878 (699)
States and political
subdivisions 50,340,505 4,468,206 (41,076) 54,767,635 43,602,066 4,218,191 (4,594)
Equity securities 13,785,629 -- -- 13,785,629 15,901,499 -- --
Total $ 64,126,134 4,468,206 (41,076) 68,553,264 448,337,864 14,156,419 (5,779)
AVAILABLE FOR SALE:
U.S. Treasury $ 266,465,301 9,249,160 (368,221) 275,346,240 -- -- --
U.S. Government agencies
and corporations 242,353,226 1,392,310 (377,915) 243,367,621 -- -- --
Equity securities 44,473,866 -- -- 44,473,866 -- -- --
Total $ 553,292,393 10,641,470 (746,136) 563,187,727 -- -- --
<CAPTION>
MARKET
VALUE
<S> <C>
HELD FOR INVESTMENT:
U.S. Treasury 273,389,287
U.S. Government agencies
and corporations 125,382,055
States and political
subdivisions 47,815,663
Equity securities 15,901,499
Total 462,488,504
AVAILABLE FOR SALE:
U.S. Treasury --
U.S. Government agencies
and corporations --
Equity securities --
Total --
</TABLE>
Following is a maturity schedule of investment securities at December 31,
1993:
<TABLE>
<CAPTION>
BOOK MARKET
VALUE VALUE
<S> <C> <C>
Within 1 year $ 207,424,346 208,119,830
After 1 but within 5 years 220,312,363 226,715,712
After 5 but within 10 years 57,716,017 61,708,152
After 10 years 25,556,633 27,787,609
Subtotal 511,009,359 524,331,303
Mortgage-backed securities 48,149,673 49,150,193
Equity securities 58,259,495 58,259,495
Total investment securities $ 617,418,527 631,740,991
</TABLE>
Investment securities with book values of approximately $279,225,000 at
December 31, 1993 and $169,687,000 at December 31, 1992 were pledged to secure
public funds on deposit, collateralized mortgage obligations and for other
purposes required by law.
The balance in the valuation allowance for marketable equity securities
included as an adjustment to retained earnings was ($835,677) and ($600,877) at
December 31, 1993 and 1992, respectively.
30
<PAGE>
CCB FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(5) LOANS AND LEASE FINANCING
A summary of loans and lease financing at December 31, 1993 and 1992
follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Commercial, financial and agricultural $ 386,203,497 321,488,300
Real estate-construction 220,395,299 170,641,183
Real estate-mortgage 1,153,502,835 682,444,534
Instalment loans to individuals 201,984,672 163,996,314
Credit card receivables 175,484,680 161,872,827
Lease financing 25,062,190 24,240,808
Total gross loans and lease financing 2,162,633,173 1,524,683,966
Less unearned income 3,144,119 3,547,820
Total loans and lease financing $ 2,159,489,054 1,521,136,146
</TABLE>
Loans and lease financing of approximately $12,975,000 at December 31, 1993
and $11,059,000 at December 31, 1992 were not accruing interest. Other real
estate acquired through loan foreclosures amounted to $8,033,000 and $9,296,000
at December 31, 1993 and 1992, respectively, and is included in other assets on
the Consolidated Balance Sheets.
In general, the Subsidiary Banks do not purchase loans or participate with
others in the origination of loans and confine their lending activities to North
Carolina. Substantially all loans are made on a secured basis and, with the
exception of marketable mortgage loans, are originated for retention in the
Subsidiary Banks' portfolios. The Subsidiary Banks do not engage in highly
leveraged transactions or foreign lending activities. The loan portfolios are
well diversified and there are no significant group concentrations of credit
risk.
During 1993 and 1992, the Subsidiary Banks had loan, lease financing and
deposit relationships with Executive Officers and Directors of the Corporation
and their Associates. Following is an analysis of these borrowings for the year
ended December 31, 1993:
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING NEW BALANCE AT
OF YEAR LOANS REPAYMENTS END OF YEAR
<S> <C> <C> <C> <C>
Directors, Executive Officers and Associates $ 6,185,000 5,076,000 3,786,000 $7,475,000
</TABLE>
In the opinion of management, these loans and lease financing arrangements
do not involve more than the normal risk of collectibility and are made on terms
comparable to other borrowers.
Loans serviced for the benefit of others totaled approximately
$432,689,000, $254,952,000 and $86,357,000 at December 31, 1993, 1992 and 1991,
respectively.
(6) RESERVE FOR LOAN AND LEASE LOSSES
Following is a summary of the reserve for loan and lease losses:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Balance at beginning of year $19,026,764 $17,741,918 16,233,854
Provision charged to operations 6,453,000 5,983,000 7,407,000
Reserves related to acquisitions 5,772,729 -- 210,000
Recoveries of loan and leases previously charged-off 1,551,622 1,499,106 1,244,436
Loan and lease losses charged to reserve (5,840,781) (6,197,260) (7,353,372)
Balance at end of year $26,963,334 $19,026,764 17,741,918
</TABLE>
31
<PAGE>
CCB FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) PREMISES AND EQUIPMENT
Following is a summary of premises and equipment:
<TABLE>
<CAPTION>
ACCUMULATED NET
DEPRECIATION BOOK
COST AND AMORTIZATION VALUE
<S> <C> <C> <C>
DECEMBER 31, 1993:
Land $ 8,228,647 -- 8,228,647
Buildings 29,758,805 11,839,761 17,919,044
Leasehold improvements 4,719,037 1,715,985 3,003,052
Furniture and equipment 46,207,519 32,761,077 13,446,442
Total premises and equipment $ 88,914,008 46,316,823 42,597,185
December 31, 1992:
Land $ 6,339,717 -- 6,339,717
Buildings 26,768,815 12,573,574 14,195,241
Leasehold improvements 3,984,297 1,395,064 2,589,233
Furniture and equipment 38,231,790 26,483,251 11,748,539
Total premises and equipment $ 75,324,619 40,451,889 34,872,730
</TABLE>
(8) FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Federal funds purchased generally represent overnight borrowings by the
Subsidiary Banks for temporary funding requirements. The Subsidiary Banks have
not had any federal fund purchases in the prior three years. Securities sold
under agreements to repurchase represent short-term borrowings by the Subsidiary
Banks collateralized by U.S. Treasury and U.S. Government agency and corporation
securities with book values of $65,002,758 and market values of $66,436,271 at
December 31, 1993. Following is a summary of this type of borrowing for the
three previous years:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Balance at December 31 $25,526,966 25,268,257 27,324,486
Weighted average interest rate at December 31 2.13% 3.62 3.91
Maximum amount outstanding at any month end during the year $37,265,241 25,268,257 38,093,822
Average daily balance outstanding during the year $29,016,000 26,525,000 30,418,000
Average annual interest rate paid during the year 1.94% 2.47 4.80
</TABLE>
(9) OTHER SHORT-TERM BORROWED FUNDS
Other short-term borrowed funds outstanding at December 31, 1993 and 1992
consist of the Subsidiary Banks' treasury tax and loan depository note accounts
(the TTL accounts). The TTL accounts are payable on demand and interest on
borrowings under this arrangement is payable at .25% below the weekly federal
fund rate as quoted by the Federal Reserve. The TTL accounts are collateralized
by various investment securities with book values of $29,012,160 and market
values of $29,056,878 at December 31, 1993. Interest expense on the TTL accounts
amounted to $386,487, $439,312 and $749,980 in 1993, 1992, and 1991,
respectively.
Also outstanding during 1993 was a short-term credit facility from a
commercial bank with outstandings of up to $23,000,000 and bearing interest at
4.70%. Proceeds from the borrowed funds were contributed as equity capital by
the Corporation to its Subsidiary Banks. This facility was paid in full on
November 29, 1993.
32
<PAGE>
CCB FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(10) LONG-TERM DEBT
Following is a summary of long-term debt at December 31, 1993 and 1992:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Mortgages payable and other notes payable with interest rates of 8% to 9% $ 214,589 247,631
7% Subordinated capital notes issued in 1968 and matured on November 15, 1993 -- 200,000
Federal Home Loan Bank Advances maturing through 2013 20,837,705 6,000,000
Collateralized mortgage obligations 17,645,779 --
6.75% Subordinated notes issued in 1993 and maturing on December 1, 2003 40,000,000 --
8.75% Convertible subordinated debentures issued in 1985 -- 21,298,000
Total long-term debt $ 78,698,073 27,745,631
</TABLE>
Mortgages payable are collateralized by premises with an approximate book
value of $497,000 at December 31, 1993. The Federal Home Loan Bank Advances are
at fixed rates of 4.50% to 6.78% and are collateralized by liens on first
mortgage loans with book values not less than the outstanding principal balance
of the obligations.
In connection with the acquisition of the 1st Home branches, the
Corporation assumed the liabilities of FHMAC including collateralized mortgage
obligations (the CMO's) of which $17,645,779 are outstanding at December 31,
1993. The CMO's are collateralized by FNMA mortgage-backed securities,
short-term investments and time deposits in other banks of $18,763,568 at
December 31, 1993 and bear a contractual 11% interest rate, payable quarterly.
The CMO's have a stated maturity of February 1, 2016 and are redeemable after
February 1, 1996 subject to certain restrictions at the option of FHMAC. Since
the rate of payment of principal will depend on the rate of payment (including
prepayments) of the mortgage-backed securities, the actual maturity could occur
significantly earlier than its stated maturity.
In 1993, the Corporation issued $40,000,000 of 6.75% subordinated notes due
December 1, 2003. Interest on the notes is payable semi-annually on June 1 and
December 1 beginning June 1, 1994. The notes are not redeemable prior to
maturity and the notes do not provide for any sinking fund. The notes are
unsecured and subordinated to all present and future senior indebtedness of the
Corporation.
In 1985, the Corporation issued $25,000,000 of 8.75% convertible
subordinated debentures due June 15, 2010. The debentures were convertible into
common stock of the Corporation at any time on or before June 15, 2010, unless
previously redeemed, at a conversion price of $26.667 per share, subject to
adjustment in certain events. During 1993, $21,150,000 of debentures were
converted into 793,828 shares of common stock and $148,000 of debentures were
redeemed for cash as a result of voluntary conversions and a full redemption
call by the Corporation on May 28, 1993, effective June 30, 1993.
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
TOTAL MATURITIES
<S> <C>
Year Ending December 31
1994 $ 699,971
1995 6,452,010
1996 451,207
1997 471,956
1998 494,380
Thereafter 70,128,549
Total $ 78,698,073
</TABLE>
33
<PAGE>
CCB FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(11) EMPLOYEE BENEFIT PLANS
PENSION PLAN
The Corporation has a noncontributory, defined benefit pension plan
covering substantially all full-time employees. The pension plan, which makes
provisions for early and delayed retirement as well as normal retirement,
provides participants with retirement benefits based on credited years of
service and an average salary for the five consecutive years within the last ten
years preceding normal retirement that will produce the highest average salary.
The Corporation has made no contributions to its pension plan for the three
previous years due to the full funding limitations imposed by the Omnibus Budget
Reconciliation Act of 1987. The Corporation has recorded pension expense of
$541,476, $646,362 and $1,120,171 for 1993, 1992 and 1991, respectively, the
components of which are shown below:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Service cost of benefits earned during the period $ 1,514,809 1,604,524 1,581,975
Interest cost on projected benefit obligation 2,107,404 2,003,964 1,846,917
Return on pension plan assets (2,561,883) (2,466,973) (2,050,758)
Net amortization and deferral (518,854) (495,153) (257,963)
Net pension expense $ 541,476 646,362 1,120,171
</TABLE>
At January 1, 1993, pension plan assets were $32,637,992, the projected
benefit obligation was $27,219,216, and the accumulated benefit obligation was
$18,465,480. At January 1, 1992, pension plan assets were $31,257,066, the
projected accumulated benefit obligation was $25,360,381, and the accumulated
benefit obligation was $16,395,132. At January 1, 1991, pension plan assets were
$25,991,102, the projected benefit obligation was $23,360,387, and the
accumulated benefit obligation was $14,577,677. The funded status of the
Corporation's pension plan and the amounts recognized on the Consolidated
Balance Sheets at December 31, 1993, 1992 and 1991 are shown below:
<TABLE>
<CAPTION>
DECEMBER 31
1993 1992 1991
<S> <C> <C> <C>
ACTUARIAL PRESENT VALUE OF ACCUMULATED BENEFIT OBLIGATIONS:
Vested $22,064,288 18,285,354 16,186,465
Nonvested 307,788 257,628 219,661
Accumulated benefit obligation $22,372,076 18,542,982 16,406,126
Pension plan assets at fair value (primarily listed stocks and bonds) $32,990,764 32,637,992 31,257,066
Projected benefit obligation 32,744,702 28,682,902 26,041,926
Pension plan assets in excess of projected benefit obligation 246,062 3,955,090 5,215,140
Unrecognized prior service costs 1,029,398 -- --
Unrecognized net gain (3,359,167) (5,032,877) (5,192,026)
Unrecognized net excess pension plan assets at transition (1,126,923) (1,232,052) (1,686,591)
Accrued pension expense $(3,210,630) (2,309,839) (1,663,477)
</TABLE>
Assumptions used in computing the actuarial present value of the projected
benefit obligation were as follows:
<TABLE>
<S> <C> <C> <C>
Discount rate 7.25% 8.00 8.00
Rate of increase in compensation level of employees 5.50% 6.50 6.50
Expected long-term rate of return on pension plan assets 8.00% 8.00 8.00
</TABLE>
SAVINGS AND PROFIT SHARING PLANS
The Corporation has a Retirement Savings Plan covering substantially all
employees with one year's service. Under the plan, employee contributions are
partially matched by the Corporation. Total expense under this plan was
$706,379, $624,989 and $563,420 in 1993, 1992 and 1991, respectively.
34
<PAGE>
CCB FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(11) EMPLOYEE BENEFIT PLANS -- Continued
The Corporation had an Employee Stock Ownership Plan covering substantially
all employees with one year's service. Total expense under this plan amounted to
$580,711, $525,000 and $475,000 in 1993, 1992 and 1991, respectively. During
1993, this plan was merged into the Retirement Savings Plan.
STOCK OPTION AND OTHER INCENTIVE PLANS
The Corporation had a Restricted Stock Plan designed to provide long-term
incentive compensation to certain officers of the Corporation and its
subsidiaries. A maximum of 300,000 shares of the Corporation's common stock was
available for awards under this plan. At December 31, 1993, a total of 78,038
shares were issued and outstanding under this plan with original restriction
periods of five years. Total expense under this plan was $374,331, $362,751 and
$349,910 in 1993, 1992 and 1991, respectively. The plan expired on December 31,
1993 and no further grants will be awarded under the plan.
The Corporation has a Performance Unit Plan, which operates in conjunction
with the Restricted Stock Plan, covering certain senior officers of the
Corporation and its subsidiaries. Under this plan, eligible participants have
been awarded performance units with a target value of $100 each. At December 31,
1993, a total of 13,378 units were outstanding and will be deemed earned if and
to the extent the Corporation and its subsidiaries meet profit objectives
established by the Board of Directors. Total expense under this plan was
$340,600, $422,796 and $369,950 for 1993, 1992 and 1991, respectively.
During 1993, the Corporation adopted the MRP's covering certain officers
and directors of the Subsidiary Banks. Under the MRP's, 118,120 shares of the
Corporation's stock were awarded to MRP participants. The shares will be earned
in installments over a period of up to five years. A participant becomes fully
vested in the event of the participant's death or disability. In addition, the
Corporation has agreed to make cash payments to MRP's participants in an amount
estimated to approximate the federal and state income tax liability for the
stock grants under the MRP's. Total expense during 1993 under the MRP's
(including income tax payments) was $463,237.
CCB has a Management Performance Incentive Plan covering certain officers.
The total award is based on a percentage of base salary of the eligible
participants and financial performance of the Corporation as compared to certain
other North Carolina and Virginia bank holding companies. Total expense under
this plan was $1,000,000, $742,033 and $975,000 in 1993, 1992 and 1991,
respectively.
During 1993, the Corporation adopted nonstatutory and incentive stock
option plans for certain of the Subsidiary Banks. The stock options were granted
to the directors and certain officers of the applicable Subsidiary Banks
entitling them to purchase shares of the Corporation's common stock at prices
ranging from $36.98 to $37.75, the fair market value per share on the dates of
grant. The options are earned and exercisable over a period of up to 10 years.
The following table summarizes stock option transactions during 1993:
<TABLE>
<CAPTION>
OPTION OPTION PRICE AGGREGATE
SHARES PER SHARE AMOUNT
<S> <C> <C> <C>
Granted in 1993 and Outstanding at December 31, 1993 128,771 $36.98-37.76 $4,794,369
Exercisable at December 31, 1993 52,491
</TABLE>
POSTRETIREMENT HEALTH AND LIFE INSURANCE PLAN
The Corporation maintains a defined contribution retiree health and life
insurance plan covering all employees who retire after age 55 with ten years of
service. As discussed in Note 1, effective January 1, 1993, the Corporation
adopted SFAS 106 which requires the recognition of the accumulated obligation
for the Corporation's health care and life insurance plans as well as the
periodic costs of providing these coverages for retirees. Prior to the adoption
of SFAS 106, the costs of providing these coverages were expensed as paid.
35
<PAGE>
CCB FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(11) EMPLOYEE BENEFIT PLANS -- Continued
The following table sets forth the plan's funded status and the amounts
recognized in the Corporation's Consolidated Balance Sheet at December 31, 1993:
<TABLE>
<CAPTION>
DECEMBER 31,
1993
<S> <C>
ACTUARIAL PRESENT VALUE OF ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION:
Retirees $ 2,951,700
Active employees -- fully eligible 641,120
Active employees -- not fully eligible 1,104,880
Accumulated postretirement benefit obligation 4,697,700
Plan assets at fair value --
Accrued postretirement benefit expense $ (4,697,700)
</TABLE>
The accumulated postretirement benefit obligation at December 31, 1993 was
determined using the following assumptions:
<TABLE>
<S> <C>
Rate of return on plan assets N/A
Discount rate 7.25%
Rate of increase in healthcare costs:
Initial 16.00
Ultimate 6.00
</TABLE>
Net periodic postretirement benefit expense charged to operations for the
year ended December 31, 1993 included the following components:
<TABLE>
<CAPTION>
1993
<S> <C>
Service cost of benefits earned during the period $ 77,079
Interest cost on projected benefit obligation 336,315
Net postretirement expense $413,394
</TABLE>
Total expense in providing these benefits was $196,753 and $162,082 in 1992
and 1991, respectively.
(12) SUPPLEMENTARY INCOME STATEMENT INFORMATION
Following is a breakdown of the components of other operating expenses on
the Consolidated Statements of Income:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1993 1992 1991
<S> <C> <C> <C>
Advertising $ 2,963,640 1,869,255 1,641,468
Data processing external services 3,471,662 2,941,880 2,589,239
FDIC insurance assessment 5,467,950 4,206,198 3,771,952
Postage and freight 2,148,492 1,956,201 1,814,530
Printing and office supplies 2,905,644 1,946,594 2,018,670
Telephone 2,636,093 2,147,137 1,766,494
Legal and professional fees 2,960,605 3,103,380 1,525,443
Amortization of intangible assets 1,570,374 211,130 47,700
All other 11,436,908 8,416,613 9,518,786
Total other operating expenses $ 35,561,368 26,798,388 24,694,282
</TABLE>
36
<PAGE>
CCB FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(13) INCOME TAXES
As discussed in Note 1, the Corporation adopted SFAS 109 on January 1, 1993
and has reported the cumulative effect of that change in method of accounting
for income taxes, a benefit of $900,000, in the 1993 Consolidated Statement of
Income. Prior years' financial statements have not been restated to apply the
provisions of SFAS 109. The Corporation previously used the asset and liability
method under Statement of Financial Accounting Standards No. 96, Accounting for
Income Taxes (SFAS 96). Under SFAS 96, deferred tax assets and liabilities were
recognized for all events that had been recognized in the financial statements.
The future tax consequences of recovering assets or settling liabilities at
their financial statement carrying amounts were considered in calculating
deferred taxes. Generally, SFAS 96 prohibited consideration of any other future
events in calculating deferred taxes.
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
TAXES CURRENTLY PAYABLE:
Federal $14,337,300 11,855,000 10,596,900
State 1,238,000 1,255,000 1,013,000
Total 15,575,300 13,110,000 11,609,900
DEFERRED INCOME TAX (BENEFIT):
Federal (894,000) (926,000) (2,249,300)
State (41,000) (269,000) (532,500)
Total (935,000) (1,195,000) (2,781,800)
Income tax expense $14,640,300 11,915,000 8,828,100
</TABLE>
At December 31, 1993, the Corporation has recorded a net deferred income
tax asset of $5,162,000 which is included in other assets in the Consolidated
Balance Sheet. Taxes paid in the carryback period exceed the amount of the
Corporation's net deferred tax asset. A valuation allowance is provided when it
is more likely than not that some portion of the deferred tax asset will not be
realized. Management has determined that a valuation allowance for deferred tax
assets is not required at December 31, 1993. The sources and tax effects of
cumulative temporary differences that give rise to significant portions of the
net deferred income tax asset at December 31, 1993 are shown below:
<TABLE>
<CAPTION>
1993
<S> <C>
DEFERRED TAX ASSETS:
Reserve for loan losses $ 5,113,000
Postretirement benefits 1,559,000
Pension expense 1,649,000
Deferred compensation 585,000
Purchase accounting adjustment on deposit rates 1,610,000
Other 1,612,000
Total gross deferred assets 12,128,000
DEFERRED TAX LIABILITIES:
Lease financing 2,103,000
Intangible assets 3,096,000
Net deferred loan costs 756,000
Other 1,011,000
Total gross deferred liabilities 6,966,000
Net deferred tax asset $ 5,162,000
</TABLE>
Deferred income tax benefits for 1992, as computed under SFAS 96, consist
of temporary differences primarily related to the loan loss provision charged to
operating expense in excess of the deduction for tax purposes, depreciation on
premises and equipment deducted for tax purposes in excess of depreciation
charged to operations, certain benefit plan expenses charged to operating
expense in excess of the deduction for tax purposes and income from
37
<PAGE>
CCB FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(13) INCOME TAXES -- Continued
lease financing reported under the financing method for financial statement
purposes and the operating method for tax purposes. Deferred income tax assets
totaled $4,319,000 at December 31, 1992 and are included in other assets in the
Consolidated Balance Sheet.
A reconciliation of income tax expense to the amount computed by
multiplying income before income taxes by the statutory federal income tax rate
follows:
<TABLE>
<CAPTION>
AMOUNT % OF PRETAX INCOME
1993 1992 1991 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Tax expense at statutory rate on income before income taxes $15,353,000 12,660,000 10,296,000 35.0% 34.0 34.0
State taxes, net of federal benefit 778,000 651,000 317,000 1.8 1.8 1.1
Increase (reduction) in taxes resulting from:
Tax exempt interest on investment securities and loans (1,098,000) (1,253,000) (1,636,300) (2.5 ) (3.4) (5.4 )
Other, net (392,700) (143,000) (148,600) (.9 ) (.4) (.5 )
Income tax expense $14,640,300 11,915,000 8,828,100 33.4% 32.0 29.2
</TABLE>
The related income tax expense of net securities gains was $1,064,000,
$811,500 and $21,900 in 1993, 1992 and 1991, respectively.
(14) COMMITMENTS AND CONTINGENCIES
The Subsidiary Banks lease certain real property and equipment under
long-term operating leases expiring at various dates to 2013. Total rental
expense amounted to $4,769,433 in 1993, $4,818,710 in 1992 and $4,674,518 in
1991.
A summary of noncancellable, long-term lease commitments at December 31,
1993 follows:
<TABLE>
<CAPTION>
TYPE OF PROPERTY
REAL TOTAL
YEAR ENDING DECEMBER 31 PROPERTY EQUIPMENT COMMITMENTS
<S> <C> <C> <C>
1994 $ 2,293,090 1,178,155 3,471,245
1995 2,054,793 678,872 2,733,665
1996 1,981,156 331,586 2,312,742
1997 2,514,783 133,453 2,648,236
1998 1,553,142 65,934 1,619,076
Thereafter 21,932,277 -- 21,932,277
Total lease commitments $ 32,329,241 2,388,000 34,717,241
</TABLE>
Generally, real estate taxes, insurance, and maintenance expenses are
obligations of the Subsidiary Banks. It is expected that in the normal course of
business, leases that expire will be renewed or replaced by leases on other
properties; thus it is anticipated that future minimum lease commitments will
not be less than the amounts shown for 1994.
The Subsidiary Banks are parties to financial instruments with off-balance
sheet risk in the normal course of business to meet the financial needs of their
customers and to reduce their own exposure to fluctuations in interest rates.
These financial instruments include commitments to extend credit, standby
letters of credit and interest rate swaps. These instruments involve, to varying
degrees, elements of credit and interest rate risk in excess of the amounts
recognized in the Consolidated Balance Sheets. The contract or notional amount
of these instruments reflects the extent of involvement that the Subsidiary
Banks have in classes of financial instruments.
The Subsidiary Banks use the same credit policies in making commitments to
extend credit and in issuing standby letters of credit that are used for
on-balance sheet instruments. For interest rate swaps, the contract or notional
amounts do not represent exposure to credit loss.
Commitments to extend credit are agreements to lend to customers as long as
there is no violation of any condition established in the contract. These
commitments generally have fixed expiration dates or other termination clauses
38
<PAGE>
CCB FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(14) COMMITMENTS AND CONTINGENCIES -- Continued
and may require payment of a fee. Since many of these commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. Each customer's credit
worthiness is evaluated on a case-by-case basis and collateral is obtained if
deemed necessary.
Standby letters of credit are commitments issued by the Subsidiary Banks to
guarantee the performance of a customer to a third party. The credit risk
involved is essentially the same as that involved in extensions of credit with
collateral being obtained if deemed necessary.
During 1993, CCB entered into a corridor interest rate contract with a
large money center bank (the counterparty) to manage interest rate risk. The
contract, which has a notional amount of $100,000,000, was entered into for a
two-year period beginning July 1, 1993 and the 72 basis point fee on the
contract is being amortized over the life of the contract as an adjustment to
interest income. The contract was structured to offset exposure from a rising
interest rate environment, and at the same time, to take advantage of balance
sheet sensitivity in a falling interest rate environment. This contract involves
potential credit risk arising from the counterparty's inability to meet the
terms of the contract. Mangement considers the credit risk of this transaction
to be minimal and manages this risk through routine monitoring procedures.
At December 31, 1993 and 1992, the Subsidiary Banks had commitments to
extend credit of approximately $764,029,000 and $375,271,000. These amounts
include unused credit card receivables and home mortgage equity lines of
$291,224,000 and $123,032,000, respectively, at December 31, 1993 and
$181,218,000 and $83,304,000, respectively at December 31, 1992.
The Subsidiary Banks had approximately $13,533,000 and $9,351,000 in
outstanding standby letters of credit at December 31, 1993 and 1992.
The notional amount of interest rate swaps at December 31, 1992 was
$25,000,000. The Corporation had no interest rate swaps at December 31, 1993.
Certain legal claims have arisen in the normal course of business, which,
in the opinion of management and counsel, will have no material effect on the
Corporation's financial position.
(15) DIVIDEND RESTRICTIONS
Certain restrictions exist regarding the ability of the Subsidiary Banks to
transfer funds to the Corporation in the form of cash dividends. In addition to
restrictions under the General Statutes of North Carolina, there are regulatory
capital requirements which must be met by the Subsidiary Banks. Under these
requirements, the Subsidiary Banks have approximately $101,613,000 in retained
earnings at December 31, 1993 that can be transferred to the Corporation in the
form of cash dividends. Total dividends declared by the Subsidiary Banks to the
Corporation in 1993 were $10,150,000.
As a result of the above requirements, consolidated net assets of the
Subsidiary Banks amounting to approximately $160,149,000 at December 31, 1993
were restricted from transfer to the Corporation.
(16) CCB FINANCIAL CORPORATION (PARENT COMPANY)
CCB Financial Corporation's principal asset is its investment in its
Subsidiary Banks and its principal source of income is dividends from its
Subsidiary Banks. The Parent Company's Condensed Balance Sheets at December 31,
1993 and 1992 and the related Condensed Statements of Income and Cash Flows for
the years ended December 31, 1993, 1992 and 1991 are as follows:
39
<PAGE>
CCB FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(16) CCB FINANCIAL CORPORATION (PARENT COMPANY) -- Continued
<TABLE>
<CAPTION>
DECEMBER 31
1993 1992
<S> <C> <C>
BALANCE SHEETS
Cash and short-term investments $ 2,761,648 1,037,010
Notes receivable from subsidiaries 33,265,000 26,535,000
Investments in bank subsidiaries 261,761,943 185,617,840
Other assets 3,553,520 2,674,646
Total assets $ 301,342,111 215,864,496
Subordinated notes $ 40,000,000 --
Convertible subordinated debentures -- 21,298,000
Other liabilities 10,338,348 4,721,220
Total liabilities 50,338,348 26,019,220
Shareholders' equity 251,003,763 189,845,276
Total liabilities and shareholders' equity $ 301,342,111 215,864,496
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1993 1992 1991
<S> <C> <C> <C>
INCOME STATEMENTS
Dividends from bank subsidiaries $ 10,150,000 6,900,000 3,810,000
Interest income 1,231,674 2,431,551 2,919,630
Management fees 957,646 60,504 --
Total operating income 12,339,320 9,392,055 6,729,630
Interest expense 1,334,951 2,127,517 2,236,448
Other operating expenses 854,369 364,538 683,182
Total operating expenses 2,189,320 2,492,055 2,919,630
Income before income taxes 10,150,000 6,900,000 3,810,000
Income taxes -- -- --
Income before equity in undistributed net income of bank subsidiaries 10,150,000 6,900,000 3,810,000
Equity in undistributed net income of bank subsidiaries 17,703,612 18,421,522 17,644,264
Net income $ 27,853,612 25,321,522 21,454,264
</TABLE>
40
<PAGE>
CCB FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(16) CCB FINANCIAL CORPORATION (PARENT COMPANY) -- Continued
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1993 1992 1991
<S> <C> <C> <C>
STATEMENTS OF CASH FLOWS
Net cash provided by operating activities $ 14,820,528 5,570,782 7,970,339
Investment in acquired subsidiaries (39,675,291) -- --
Investment in existing subsidiaries (19,000,000) -- --
Net (increase) decrease in loans to subsidiaries (6,730,000) 1,690,000 990,937
Net cash provided (used) by investing activities (65,405,291) 1,690,000 990,937
Increase (decrease) in master notes -- (2,729,827) 2,729,827
Public offering of common stock and subordinated notes, net 58,390,529 -- --
Issuances of common stock in acquisitions, net 20,775,093 -- --
Purchase and retirement of common stock (16,470,000) -- --
Cash dividends (10,386,221) (8,768,656) (7,986,464)
Net cash provided (used) by financing activities 52,309,401 (11,498,483) (5,256,637)
Net increase (decrease) in cash and short-term investments 1,724,638 (4,237,701) 3,704,639
Cash and short-term investments at beginning of year 1,037,010 5,274,711 1,570,072
Cash and short-term investments at end of year $ 2,761,648 1,037,010 5,274,711
</TABLE>
(17) QUARTERLY FINANCIAL DATA (UNAUDITED)
Following is a summary of the consolidated quarterly financial data for the
years ended December 31, 1993 and 1992 (in thousands except per share data):
<TABLE>
<CAPTION>
1993 1992
3RD 2ND 1ST 4TH 3RD 2ND 1ST
4TH QTR. QTR. QTR. QTR. QTR. QTR. QTR. QTR.
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income $ 54,649 50,459 45,157 40,424 42,267 42,202 42,714 42,553
Interest expense 21,034 19,176 17,895 15,716 16,388 17,174 17,793 19,282
Net interest income 33,615 31,283 27,262 24,708 25,879 25,028 24,921 23,271
Provision for loan and lease losses 1,918 1,835 1,700 1,000 1,010 1,805 1,373 1,795
Net interest income after provision for loan and lease
losses 31,697 29,448 25,562 23,708 24,869 23,223 23,548 21,476
Other income 13,262 9,649 8,181 7,968 7,579 7,954 9,696 7,466
Other expenses 31,163 28,441 23,772 22,234 23,060 21,581 22,054 21,879
Income before income taxes and cumulative changes in
accounting principles 13,796 10,656 9,971 9,442 9,388 9,596 11,190 7,063
Income taxes 4,545 3,676 3,328 3,091 3,032 3,174 3,651 2,058
Income before cumulative changes in accounting principles 9,251 6,980 6,643 6,351 6,356 6,422 7,539 5,005
Cumulative changes in accounting principles
(notes 1, 11, and 13) -- -- -- (1,371) -- -- -- --
Net income $ 9,251 6,980 6,643 4,980 6,356 6,422 7,539 5,005
Income per share (note 1):
Income before cumulative changes in accounting principles:
Primary $ 1.03 .83 .83 .81 .82 .84 .99 .65
Fully diluted 1.03 .83 .78 .77 .77 .79 .92 .62
Net income:
Primary 1.03 .83 .83 .64 .82 .84 .99 .65
Fully diluted 1.03 .83 .78 .61 .77 .79 .92 .62
</TABLE>
41
<PAGE>
CCB FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(18) FAIR VALUE OF FINANCIAL INSTRUMENTS
Disclosure of fair value estimates of on-and off-balance sheet financial
instruments is required under SFAS 107. Certain financial instruments and all
non-financial instruments are excluded from its disclosure requirements. Fair
value estimates are based on existing financial instruments without attempting
to estimate the value of anticipated future business. Significant assets and
liabilities that are not considered financial instruments include premises and
equipment, intangibles assets, negative goodwill and the trust department and
mortgage banking operations. In addition, the tax ramifications resulting from
the realization of the unrealized gains and losses of the financial instruments
would have a significant impact on the fair value estimates presented and have
not been considered in any of the fair value estimates. Estimated fair values of
on-and off-balance sheet financial instruments of the Corporation at December
31, 1993 and 1992 are presented below:
<TABLE>
<CAPTION>
1993 1992
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
<S> <C> <C> <C> <C>
FINANCIAL ASSETS:
Cash, time deposits in other banks and other short-term investments $ 396,050 396,050 285,006 285,006
Investment securities 617,419 631,741 448,338 462,489
Loans 2,137,570 -- 1,500,432 --
Reserve for loan losses (26,744) -- (18,820) --
Net loans 2,110,826 2,147,997 1,481,612 1,505,368
Total financial assets $3,124,295 3,175,788 2,214,956 2,252,863
FINANCIAL LIABILITIES:
Deposits $2,816,771 2,826,100 2,028,506 2,055,429
Securities sold under agreements to repurchase 25,527 25,527 25,268 25,268
Short-term borrowings 16,202 16,202 20,386 20,386
Long-term debt 78,698 74,394 27,746 30,318
Total financial liabilities $2,937,198 2,942,223 2,101,906 2,131,401
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS:
Interest rate swaps:
Net payable $ -- -- -- (280)
Interest rate corridor 540 362 -- --
</TABLE>
42
<PAGE>
REPORT OF MANAGEMENT REGARDING RESPONSIBILITY FOR FINANCIAL STATEMENTS
Management is responsible for the content of the financial information
included in this annual report. The financial statements from which the
financial information has been drawn are prepared in accordance with generally
accepted accounting principles. Other information in this report is consistent
with the financial statements.
In meeting its responsibility, management relies on the system of internal
accounting control and related control systems. Elements of these systems
include selection and training of qualified personnel, establishment and
communication of accounting and administrative policies and procedures,
appropriate segregation of responsibilities, and programs of internal audits.
These systems are designed to provide reasonable assurance that financial
records are reliable for preparing financial statements and maintaining
accountability for assets, and that assets are safeguarded against unauthorized
use or disposition. Such assurance cannot be absolute because of inherent
limitations in any system of internal control. The concept of reasonable
assurance recognizes that the cost of a system of internal control should not
exceed the benefit derived and that the evaluation of such cost and benefit
necessarily requires estimates and judgments.
KPMG Peat Marwick, independent auditors, audited the accompanying financial
statements in accordance with generally accepted auditing standards. These
standards include a study and evaluation of internal control for the purpose of
establishing a basis for reliance thereon relative to the determination of the
scope of their audits.
The voting members of the Corporation's Audit Committee of the Board of
Directors consist solely of outside Directors. The Audit Committee meets
periodically with management, the Corporation's internal auditors and the
independent auditors to discuss audit, financial reporting, and related matters.
KPMG Peat Marwick and the internal auditors have direct access to the Audit
Committee.
ERNEST C. ROESSLER
President and Chief Executive Officer
W. HAROLD PARKER, JR.
Senior Vice President and Controller
43
<PAGE>
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND SHAREHOLDERS
CCB FINANCIAL CORPORATION
We have audited the consolidated balance sheets of CCB Financial
Corporation and subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the years in the three-year period ended December 31, 1993. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CCB
Financial Corporation and subsidiaries at December 31, 1993 and 1992, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1993 in conformity with generally accepted
accounting principles.
On January 1, 1993, the Corporation adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 106, Employers Accounting for
Postretirement Benefits Other Than Pensions, and SFAS No. 109, Accounting for
Income Taxes.
KPMG PEAT MARWICK
Raleigh, North Carolina
January 18, 1994
44
<PAGE>
DESCRIPTION OF EXHIBITS
Plan of Stock Conversion and Acquisition of Mutual Savings Bank, SSB, as amended
Acquisition Agreement between Mutual Savings Bank, SSB and Registrant, as
amended
Plan of Stock Conversion and Acquisition of Graham Savings Bank, SSB, as amended
Acquisition Agreement between Graham Savings Bank, SSB and Registrant and
Amendments No. 1 and No. 2
Plan of Stock Conversion and Acquisition of Citizens Savings, SSB, as amended
Acquisition Agreement between Citizens Savings, SSB and Registrant
Amendment No. 1 to Acquisition Agreement between Citizens Savings, SSB, the
Registrant and CCB Savings Bank of Lenoir, Inc., SSB
Copy of Articles of Incorporation of Registrant, as restated and amended
Copy of Bylaws of the Registrant, as amended
Rights Agreement dated February 26, 1990 between the Registrant and Central
Carolina Bank and Trust Company
Form of Indenture dated as of November 1, 1993 between Registrant and Wachovia
Bank of North Carolina, N.A., Trustee, pursuant to which Registrant's
Subordinated Notes are issued and held
Description of Management Performance Incentive Plan of Central Carolina Bank
and Trust Company
Performance Unit Plan of the Registrant
Restricted Stock Plan of the Registrant
Employment Agreement and Deferred Compensation Agreement by and between the
Registrant, Central Carolina Bank and Trust Company (as successor to Republic
Bank & Trust Company) and John B. Stedman
1993 Management Recognition Plan for CCB Savings Bank of Lenoir, Inc., SSB
1993 Nonstatutory Stock Option Plan for CCB Savings Bank of Lenoir, Inc., SSB
Amendment No. 1 to 1993 Nonstatutory Stock Option Plan for CCB Savings Bank of
Lenoir, Inc., SSB
1993 Nonstatutory Stock Option Plan for Graham Savings Bank, Inc., SSB
1993 Management Recognition Plan for Graham Savings Bank, Inc., SSB
1993 Incentive Stock Option Plan of the Registrant
Subsidiaries of the Registrant
COPIES OF EXHIBITS ARE AVAILABLE UPON WRITTEN REQUEST TO W. HAROLD
PARKER, JR., SENIOR VICE PRESIDENT AND CONTROLLER
OF CCB FINANCIAL CORPORATION
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CCB FINANCIAL CORPORATION
By: /s/ ERNEST C. ROESSLER
Ernest C. Roessler
President and Chief Executive Officer
Date: March 11, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ ERNEST C. ROESSLER President and Director March 11, 1994
Ernest C. Roessler (Chief Executive Officer)
/s/ JAMES B. BRAME, JR. Director March 11, 1994
James B. Brame, Jr.
/s/ W.L. BURNS, JR. Director March 11, 1994
W.L. Burns, Jr.
/s/ ARTHUR W. CLARK Director March 11, 1994
Arthur W. Clark
/s/ KINSLEY VAN R. DEY, JR. Director March 11, 1994
Kinsley van R. Dey, Jr.
/s/ FRANCES HILL FOX Director March 11, 1994
Mrs. Frances Hill Fox
____________________ Director March __, 1994
T.E. Haigler
/s/ GEORGE R. HERBERT Director March 11, 1994
George R. Herbert
___________________ Director March __, 1994
Edward S. Holmes
___________________ Director March __, 1994
Owen J. Kenan
___________________ Director March __, 1994
Eugene J. McDonald
___________________ Director March __, 1994
Hamilton W. McKay, Jr., M.D.
/s/ ERIC B. MUNSON Director March 11, 1994
Eric B. Munson
___________________ Director March __, 1994
Thomas A. Rose
___________________ Director March __, 1994
John B. Stedman
___________________ Director March __, 1994
H. Allen Tate, Jr.
/s/ PHAIL WYNN, JR. Director March 11, 1994
Dr. Phail Wynn, Jr.
/s/ W. HAROLD PARKER, JR. Senior Vice President March 11, 1994
W. Harold Parker, Jr. and Controller (Chief
Accounting Officer)
<CAPTION>
EXHIBIT INDEX
Exhibit Number
per Item 601 of Exhibit No. in this
Regulation S-K Form 10-K
<S> <C>
(2) Plan of acquisition, reorganization, arrangement,
liquidation or succession.
a. Plan of Stock Conversion and Acquisition of Mutual Savings Bank, SSB,
as amended, is incorporated herein by reference from Exhibit 2.1 of the
Registrant's Registration Statement No. 33-56398 on Form S-3.
b. Acquisition Agreement between Mutual Savings Bank, SSB and
Registrant, as amended, is incorporated herein by reference
from Exhibit 2.2 of the Registrant's Registration Statement No. 33-56398
on Form S-3.
c. Plan of Stock Conversion and Acquisition of Graham Savings Bank, SSB,
as amended, is incorporated herein by reference from Exhibit 2.1 of the
Registrant's Registration Statement No. 33-65202 on Form S-3.
d. Acquisition Agreement between Graham Savings Bank, SSB and
Registrant and Amendments No. 1 and No. 2 are incorporated herein by
reference from Exhibit 2.2 of the Registrant's Registration Statement No.
33-65202 on Form S-3.
e. Plan of Stock Conversion and Acquisition of Citizens Savings, SSB,
as amended, is incorporated herein by reference from Exhibit 2.1 of the
Registrant's Registration Statement No. 33-66216 on Form S-3.
f. Acquisition Agreement between Citizens Savings, SSB and
Registrant, is incorporated herein by reference from
Exhibit 2.2 of the Registrant's Registration Statement No. 33-66216 on
Form S-3.
g. Amendment No. 1 to Acquisition Agreement between Citizens Savings, SSB
and Registrant, is incorporated herein by reference from
Exhibit 2.2 of the Registrant's Registration Statement No. 33-66216 on
Form S-3.
(3) Articles of Incorporation and Bylaws.
a. The Registrant's Articles of Incorporation
as restated and amended is incorporated herein
by reference from Exhibit 4 of Registrant's
Registration Statement No. 33-56398 on Form S-3.
b. The Registrant's Bylaws as amended on April
20, 1993 3 (B)
(4) Instruments defining the rights of security holders,
including indentures.
a. Rights Agreement dated February 26, 1990 between
the Registrant and Central Carolina Bank and Trust
Company is incorporated herein by reference from Exhibit
4 of the Corporation's Current Report on Form 8-K
dated February 16, 1990.
b. Form of indenture dated November 1, 1993 between Registrant and
Wachovia Bank of North Carolina, N.A., Trustee, pursuant to
which Registrant's Subordinated Notes are issued and held is
incorporated herein by reference from Exhibit 4.2 of the Registrant's
Registrant Statement No. 33-50793 on Form S-3.
(9) Voting trust agreement. Not Applicable
(10) Material contracts.
a. Description of Management Performance Incentive Plan
of Central Carolina Bank and Trust Company is
incorporated herein by reference from the Registrant's
1988 Annual Report on Form 10-K.
b. Performance Unit Plan of the Registrant is incorporated
herein by reference from the Registrant's 1983 Annual
Report on Form 10-K.
c. Restricted Stock Plan of the Registrant is incorporated
herein by reference from the Registrant's 1984 Annual
Report on Form 10-K.
d. Employment Agreement and Deferred Compensation Agreement
by and between the Registrant, Central Carolina Bank and Trust
Company (as successor to Republic Bank & Trust Company)
and John B. Stedman are incorporated herein by reference from pages
A-25 through A-33 of the Registrant's Registration
Statement No. 33-7118, dated July 9, 1986, on Form S-4.
e. 1993 Management Recognition Plan for CCB Savings
Bank of Lenoir, Inc. SSB is incorporated herein by
reference from Exhibit 28 of the Registrant's Registration
Statement No. 33-61268 on Form S-8.
f. 1993 Nonstatutory Stock Option Plan for CCB
Savings Bank of Lenoir, Inc., SSB is incorporated herein
by reference from Exhibit 28 of the Registrant's
Registration Statement No. 33-61272 on Form S-8.
g. Amendment No. 1 to the 1993 Nonstatutory Stock Option
Plan for CCB Savings Bank of Lenoir, Inc., SSB 10 (G)
h. 1993 Nonstatutory Stock Option Plan for Graham
Savings Bank, Inc., SSB 10 (H)
i. 1993 Management Recognition Plan for Graham
Savings Bank, Inc., SSB 10 (I)
j. 1993 Incentive Stock Option Plan of the Registrant is
incorporated herein by reference from Exhibit 28
of the Registrant's Registration Statement
No. 33-61270 on Form S-3.
(11) Statement re computation of per share earnings. Not Applicable
(12) Statement re computation of ratios. Not Applicable
(13) Annual Report to security holders, Form 10-Q
or quarterly report to security holders. Submitted in
paper format for
informational
purposes
(16) Letter re change in certifying accountant. Not Applicable
(18) Letter re change in accounting principles. Not Applicable
(21) Subsidiaries of the Registrant.
A listing of the direct and indirect subsidiaries of the
Registrant is included in Note 1 to the Consolidated
Financial Statements of the Registrant included in this
Form 10-K.
(22) Published report regarding matters submitted to a vote
of security holders. Not Applicable
(23) Consents of experts and counsel. Not Applicable
(24) Power of attorney. Not Applicable
(27) Financial Data Schedule. Not Applicable
(28) Information from reports furnished to state insurance
regulatory authorities. Not Applicable
(99) Additional exhibits.
Proxy Statement to Shareholders dated March 15, 1994
as filed on March 11, 1994 Not Required to
be Refiled
</TABLE>
BYLAWS
OF
CCB FINANCIAL CORPORATION
as of April 20, 1993
ARTICLE I
Offices
Section 1. Principal Office: The principal office of the
corporation shall be located at 111 Corcoran Street, Durham, North
Carolina.
Section 2. Registered Office: The registered office of the
corporation required by law to be maintained in the State of North
Carolina may be, but need not be, identical with the principal office.
Section 3. Other Offices: The corporation may have
offices at such other places, either within or without the State of
North Carolina, as the Board of Directors from time to time may
determine, or as the affairs of the corporation may require.
ARTICLE II
Meetings of Shareholders
Section 1. Place of Meetings: All meetings of shareholders
shall be held at the principal office of the corporation or at such
other place, either within or without the State of North Carolina, as
shall be designated in the notice of the meeting.
Section 2. Annual Meetings: The annual meeting of
shareholders shall be determined by the Board of Directors of the
corporation and shall be held during the first six (6) calendar months
of each year, for the purpose of electing directors of the corporation
and for the transaction of such other business as properly may be
brought before the meeting.
Section 3. Substitute Annual Meeting: If the annual meeting
shall not be held within the period of time designated by these
Bylaws, a substitute annual meeting may be called in accordance
with the provisions of Section 4 of this Article. A meeting so called
shall be designated and treated for all purposes as the annual
meeting.
Section 4. Special Meetings: Special meetings of the
shareholders may be called at any time by the Chairman, Vice
Chairman, President or Board of Directors of the corporation, or by
any shareholder pursuant to the written request of the holders of not
less than one-tenth of all the shares entitled to vote at the meeting.
Section 5. Notice of Meetings: Written or printed notice
stating the time, place, day and hour of the meeting shall be
delivered not less than ten (10) nor more than fifty (50) days before
the date thereof, either personally or by mail, by or at the direction
of the Chairman, Vice Chairman, President, Secretary or other person
calling the meeting, to each shareholder of record entitled to vote at
such meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail, addressed to the
shareholder at his address as it appears on the stock transfer books
of the corporation, with postage thereon prepaid.
In the case of an annual or substitute annual meeting, the
notice of meeting need not specifically state the business to be
transacted thereat unless such a statement is expressly required by
the provisions of the North Carolina Business Corporation Act. In the
case of a special meeting, the notice of meeting shall specifically state
the purpose or purposes for which the meeting is called.
When a meeting is adjourned for thirty (30) days or more,
notice of the adjourned meeting shall be given as in the case of an
original meeting. When a meeting is adjourned for less than thirty
(30) days in any one adjournment, it is not necessary to give any
notice of the adjourned meeting other than by announcement at the
meeting at which the adjournment is taken.
Section 6. (Amended 10/16/90) Voting Lists: After fixing a record
date for a meeting, the corporation shall prepare an alphabetical list of the
names of all the shareholders who are entitled to notice of the shareholders'
meeting. The list shall be arranged by voting group (and within each voting
group by class and series of shares) and show the address of and number
of shares held by each shareholder.
The shareholder list shall be available for inspection by any
shareholder, beginning two business days after notice of the meeting
is given for which the list was prepared and continuing through the
meeting, at the corporation's principal office or at a place identified
in the meeting notice in the city where the meeting will be held. A
shareholder, or his agent or attorney, is entitled to inspect and copy
the list during regular business hours and at this own expense,
during the period it is available for inspection.
The corporation shall make the shareholders' list available at
the meeting, and any shareholder, his agent, or attorney is entitled to
inspect the list at any time during the meeting or any adjournment
thereof.
Section 7: Quorum: The holders of a majority of the
outstanding shares of the corporation entitled to vote, represented in
person or by proxy, shall constitute a quorum at a meeting of
shareholders, except that at a substitute annual meeting of
shareholders the number of shares there represented either in
person or by proxy, even though less than a majority, shall constitute
a quorum for the purpose of such meeting.
The shareholders present at a duly organized meeting may
continue to do business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum.
In the absence of a quorum at the opening of any meeting of
shareholders, such meeting may be adjourned from time to time by a
vote of the majority of the shares voting on the motion to adjourn;
and at any adjourned meeting at which a quorum is present any
business may be transacted which might have been transacted at the
original meeting.
Section 8. Proxies: Shares may be voted either in person or
by one or more agents authorized by a written proxy executed by
the shareholder or by his duly authorized attorney-in-fact. Such
proxy shall be filed with the Secretary of the corporation before or at
the time of the meeting. A proxy is not valid after the expiration of
eleven (11) months from the date of its execution unless the person
executing it specifies therein the length of time for which it is to
continue in force, or limits its use to a particular meeting, but no
proxy shall be valid after ten (10) years from the date of its
execution.
Section 9. Voting of Shares: Each outstanding share
having voting rights shall be entitled to one vote on each matter
submitted to a vote at a meeting of shareholders.
Except in the election of directors as provided in Section 3 of
Article III, the vote of a majority of the shares voted on any matter
at a meeting of shareholders at which a quorum is present shall be
the act of the shareholders on that matter, unless the vote of a
greater number is required by law or by the Charter or Bylaws of
this corporation. Voting on all matters except the election of
directors shall be by voice vote or by a show of hands unless the
holders of one-tenth of the shares represented at the meeting shall,
prior to the voting on any matter, demand a ballot vote on that
particular matter.
Shares of its own stock owned by the corporation, directly or
indirectly, through a subsidiary corporation or otherwise, shall not be
voted and shall not be counted in determining the total number of
shares entitled to vote, except that shares held in a fiduciary capacity
may be voted and shall be counted to the extent provided by law.
Section 10. Informal Action by Shareholders: Any action which
may be taken at a meeting of the shareholders may be taken without
a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the persons who would be entitled to vote
upon such action at a meeting, and filed with the Secretary of the
corporation to be kept as part of the corporate records.
ARTICLE III
Directors
Section 1. General Powers: The business and affairs of the
corporation shall be managed by the Board of Directors or by such
Executive Committees as the Board may establish pursuant to these
Bylaws.
Section 2. Number, Term and Qualifications: The
number of directors constituting the Board of Directors shall consist
of such number not less than five (5) nor more than thirty (30) as
from time to time shall be determined by a majority of the votes to
which all of the shareholders are at the time entitled. In the event of
the death, resignation, retirement, removal or disqualification of a
director during his elected term of office, his successor shall be
elected to serve only until the expiration of the term of his
predecessor. Directors need not be residents of the State of North
Carolina or shareholders of the corporation.
Section 3. (Amended 4/2/85) Retirement: Each director
shall retire at the regularly scheduled meeting of shareholders
following his attainment of the age of 70 years. Should a director's
responsibilities be diminished from that business or professional
position occupied at the time of the election as director, then the
retirement provision would be the same as that for reaching the age
70. The Board can annually exempt the retirement provision by
resolution at a regularly scheduled director's meeting prior to the
Annual Shareholder's Meeting.
Section 4. Election of Directors: Except as provided in Section
6 of this Article, the directors shall be elected at the annual meeting
of the shareholders; and those persons who receive the highest
number of votes shall be deemed to have been elected. If any
shareholder so demands, election of directors shall be by secret
ballot.
Section 5. Cumulative Voting: Every shareholder entitled
to vote at an election of directors shall have the right to vote the
number of shares standing of record in his name for as many persons
as there are directors to be elected and for whose election he has a
right to vote, or to cumulate his vote by giving one candidate as
many votes as the number of such directors multiplied by the
number of his shares shall equal, or by distributing such votes on the
same principle among any number of such candidates. This right of
cumulative voting shall not be exercised unless some shareholder or
proxy holder announces in open meeting, before the voting for the
directors starts, his intention so to vote cumulatively; and if such
announcement is made, the Chairman shall declare that all shares
entitled to vote have the right to vote cumulatively and thereupon
shall grant a recess of not less than one (1) nor more than four (4)
hours, as he shall determine, or of such other period of time as is
unanimously then agreed upon.
Section 6. Removal: Any director may be removed from
office with or without cause by a vote of shareholders holding a
majority of the shares entitled to vote at an election of directors.
However, unless the entire Board of Directors is removed, an
individual director may not be removed if the number of shares
voting against the removal would be sufficient to elect a director if
such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same
meeting.
Section 7. Vacancies: A vacancy occurring in the Board of
Directors may be filled by a majority of the remaining directors,
though less than a quorum, or by the sole remaining director. A
vacancy created by an increase in the authorized number of directors
shall be filled only by the election at an annual meeting or at a
special meeting of shareholders called for that purpose. The
shareholders may elect a director at any time to fill any vacancy not
filled by the Board.
Section 8. (Amended 4/2/91) Chairman and Vice Chairman
of the Board: There may be a Chairman of the Board of Directors,
and one or more Vice Chairmen of the Board of Directors, elected by
the Directors from their number at any meeting of the Board of
Directors. The Chairman shall preside at all meetings of the Board of
Directors and perform such other duties as may be directed by the
Board of Directors. The Vice Chairmen, in their order of appointment,
shall perform the duties of the Chairman in the absence or inability
of the Chairman to act. The Vice Chairmen also shall perform such
other duties as may be directed by its Chairman and the Board of
Directors.
Section 9. Compensation: The Board of Directors may
compensate directors for their services as such and may provide for
the payment of all expenses incurred by directors in attending
regular and special meetings of the Board of Directors.
ARTICLE IV
Executive Committee
Section 1. Appointment: The Board of Directors, by
resolution adopted by a majority of the Board of Directors, shall
annually appoint an Executive Committee, which shall be composed
of at least three (3) of its members, who shall serve until their
successors are appointed.
Section 2. Meetings: The Executive Committee shall meet at
such intervals as shall be established by the Committee, but not less
frequently than monthly. All regular meetings shall be held at the
principal office of the corporation, unless the Committee shall
designate another location.
Section 3. General Powers: The Executive Committee, to the
extent authorized by law, is empowered to act for and on behalf of
the Board of Directors in any and all matters in the interim between
meetings of the Board of Directors. Within the powers conferred
upon it, action by the Committee shall be as binding upon the
corporation as if done by the full Board of Directors for review at its
next meeting following such action.
ARTICLE V
Nominating Committee
The Board of Directors shall annually appoint a Nominating
Committee which will be responsible for selecting potential
candidates for directors and recommending candidates to the entire
Board of Directors. The Committee will meet at the request of the
President, but not less frequently than annually. The Nominating
committee will include at least three (3) directors.
ARTICLE VI
Other Committees
To the extent permitted by law, the Board of Directors may
appoint such other committees, either standing or special for such
purposes and with such powers as the Board of Directors may
determine.
ARTICLE VII
Meetings of Directors
Section 1. Regular Meetings: A regular meeting of the Board
of Directors shall be held immediately after, and at the same place as,
the annual meeting of shareholders. In addition, the Board of
Directors may provide, by resolution, the time and place, either
within or without the State of North Carolina, for the holding of
additional regular meetings.
Section 2. Special Meetings: Special meetings of the Board of
Directors may be called by or at the request of the Chairman, the
President or any two directors. Such meetings may be held either
within or without the State of North Carolina.
Section 3. (Amended 10/16/90) Notice of Meetings:
Regular meetings of the Board of Directors may be held without
notice. Special meetings of the Board of Directors shall be held upon
such notice sent by an usual means of communication not less than
twenty-four (24) hours before the meeting.
Section 4. Waiver of Notice: Any director may waive notice
of any meeting. The attendance by a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director
attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully
called or convened.
Section 5. Quorum: A majority of the Board of Directors fixed
by these Bylaws shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors.
Section 6. Manner of Acting: Except as otherwise provided in
the Bylaws, the act of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of
Directors.
Section 7. Presumption of Assent: A director of the
corporation who is present at a meeting of the Board of Directors at
which action on any corporate matter is taken shall be presumed to
have assented to the action taken unless his contrary vote is
recorded or his dissent is otherwise entered in the minutes of the
meeting or unless he shall file his written dissent to such action with
the person acting as the Secretary of the meeting before the
adjournment thereof or shall forward such dissent by registered mail
to the Secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to
a director who voted in favor of such action.
Section 8. Informal Action by Directors: Action taken by a
majority of the directors without a meeting is nevertheless action by
the Board of Directors if written consent to the action in question is
signed by all the directors and filed with the minutes of the
proceedings of the Board of Directors, whether done before or after
the action so taken.
ARTICLE VIII
Officers
Section 1. (Amended 7/17/90) Number: The officers
of the corporation shall consist of a Chairman of the Board, President,
one or more Executive Vice Presidents, one or more Senior Vice
Presidents, one or more First Vice Presidents, and other specifically
designated Vice Presidents or Assistant Vice Presidents as may be
determined by the Board of Directors, a Secretary and Assistant
Secretaries, and a Controller and Assistant Controllers and other
titled officers as may be deemed necessary or advisable by the Board
of Directors, each of which officers or assistant officers thereto shall
have such powers as may be delegated to them by the Board of
Directors and by these Bylaws. Any two or more offices may be
held by the same person, except that no officer may act in more than
one capacity where action of two or more officers is required.
Section 2. Election and Term: The officers of the corporation
shall be elected by the Board of Directors. Such elections may be
held at any regular or special meeting of the Board of Directors. Each
officer shall hold office until his death, resignation, retirement,
removal, disqualification, or his successor is elected and qualified,
each such officer serving at the pleasure of the Board of Directors.
Section 3. Removal: Any officer or agent elected or appointed
by the Board of Directors may be removed by the Board with or
without cause; but such removal shall be without prejudice to the
contract rights, if any, of the person so removed.
Section 4. Compensation: The compensation of all officers of
the corporation shall be fixed by the Board of Directors or, as
delegated by the Board, by the Executive Committee.
Section 5. President: The President, subject to the control of
the Board of Directors, shall supervise and control the management
of the corporation in accordance with these Bylaws. He shall be a
member of the Board of Directors.
Section 6. Additional Duties of President: The President,
subject to the control of the Board of Directors, shall sign, with any
other proper officer, certificates for shares of the corporation and
any deeds, leases, mortgages, bonds, contracts or other instruments
which may be lawfully executed on behalf of the corporation, except
where required or permitted by law to be otherwise signed and
executed and except where the signing and execution thereof shall be
delegated by the Board of Directors to some other officer or agent,
and, in general, he shall perform all duties incident to the office of
President and such other duties as may be prescribed by the Board
of Directors from time to time. The President shall sign, either
manually or by facsimile signature, all certificates of stock and shall
have the power to make any and all transfers of the securities of the
corporation.
Section 7. (Amended 7/17/90) Duties of Executive
Vice Presidents, Senior Vice Presidents, First Vice Presidents and
Vice Presidents: The duties of the Executive Vice Presidents, the
Senior Vice Presidents, First Vice Presidents and other Vice
Presidents shall be to perform the tasks assigned and exercise the
powers of the office given to them as directed by the President and
the Board of Directors.
Section 8. Secretary: The Secretary shall keep accurate
records of the acts and proceedings of all meetings of shareholders
and directors. He shall give all notices required by law and by the
Bylaws. He shall have general charge of the corporate books and
records and of the corporate seal, and he shall affix the corporate
seal to any lawfully executed instrument requiring it. He shall have
general charge of the stock transfer books of the corporation and
shall keep, at the registered or principal office of the corporation, a
record of shareholders showing the name and address of each
shareholder and the number and class of the shares held by each. he
shall sign such instruments as may require his signature, either
manually or by facsimile signature, and, in general, shall perform all
duties incident to the office of Secretary and such other duties as
may be assigned him from time to time by the President or by the
Board of Directors.
Section 9. Assistant Secretaries: In the absence of the
Secretary of in the event of his death, inability or refusal to act, the
Assistant Secretaries in the order of their length of service as
Assistant Secretaries, unless otherwise determined by the Board of
Directors, shall perform the duties of the Secretary, and when so
acting shall have all the powers of and be subject to all the
restrictions upon the Secretary. They shall perform such other
duties as may be assigned to them by the Secretary, by the
President, or by the Board of Directors. Any Assistant Secretary may
sign, with the President or a Vice President, certificates for shares of
the corporation.
Section 10. Controller: The Controller shall have custody of all
funds and securities belonging to the corporation and shall receive,
deposit or disburse the same under the direction of the Board of
Directors. He shall keep full and accurate accounts of the finances of
the corporation in books especially provided for that purpose; and he
shall cause a true statement of its assets and liabilities as of the close
of each fiscal year and of the results of its operations and of changes
in surplus for such fiscal year, all in reasonable detail, to be made
and filed at the registered or principal office of the corporation
within four (4) months after the inspection by any shareholder for a
period of ten (10) years; and the Controller shall mail or otherwise
deliver a copy of the latest such statement to any shareholder upon
his written request therefor. The Controller, in general, shall
perform all duties incident to his office and such other duties as may
be assigned to him from time to time by the President or by the
Board of Directors.
Section 11. Assistant Controllers: The Assistant Controllers
shall perform in the order of their length of service as Assistant
Controllers, in the absence or disability of the Controller, the duties
and exercise the powers of the Controller, and they shall perform, in
general, such other duties as shall be assigned to them by the
Controller or by the President or by the Board of Directors.
Section 12. Duties of Other Officers: The duties of all officers
and employees not defined and enumerated in the Bylaws shall be
prescribed and fixed by the President and, in carrying out the
authority to do all other acts necessary to be done to carry out the
prescribed duties, unless otherwise ordered by the Board of
Directors, shall include but not be limited to the power to sign, certify
or endorse notes, certificates of indebtedness, deeds, checks, drafts or
other contracts for and on behalf of the corporation and/or affix the
seal of the corporation to such documents as may require it.
Section 13. Bonds: The Board of Directors may by resolution
require any or all officers, agents and employees of the corporation
to give bond to the corporation, with sufficient sureties, conditioned
on the faithful performance of the duties of their respective offices
or positions, and to comply with such other conditions as may from
time to time be required by the Board of Directors.
Section 14. Retirement: Normal retirement for officers and
employees of the corporation shall be in accordance with the
Retirement Plan of the corporation. Any exception will require
approval of the Board of Directors initially and on a continuing
annual basis.
ARTICLE IX
Contracts, Loans, Checks and Deposits
Section 1. Contracts. The Board of Directors may authorize
any officer or officers, agent or agents, to enter into any contract,
lease, or to execute and deliver any instrument on behalf of the
corporation, and such authority may be general or confined to
specific instances. The Board of Directors may enter into
employment contracts for any length of time it deems wise.
Section 2. Loans: No loans shall be contracted on behalf of
the corporation and no evidences of indebtedness shall be issued in
its name unless authorized by a resolution of the Board of Directors.
Such authority may be general or specific in nature and scope.
Section 3. Checks and Drafts: All checks, drafts or other
orders for the payment of money issued in the name of the
corporation shall be signed by such officer or officers, agent or
agents, of the corporation and in such manner as from time to time
shall be determined by resolution of the Board of Directors.
Section 4. Deposits: All funds of the corporation not
otherwise employed from time to time shall be deposited to the
credit of the corporation in such depositories as the Board of
Directors shall direct.
ARTICLE X
Certificates for Shares and Their Transfer
Section 1. Certificates for Shares: Certificates representing
shares of the corporation shall be issued in such form as the Board of
Directors shall determine to every shareholder for the fully paid
shares owned by him. These certificates shall be signed by the
President or any Vice President and the Secretary, an Assistant
Secretary, Treasurer or an Assistant Treasurer. They shall be
consecutively numbered or otherwise identified; and the name and
address of the persons to whom they are issued, with the number of
shares and the date of issue, shall be entered on the stock transfer
books of the corporation.
Section 2. Transfer of Shares: Transfer of shares shall be
made on the stock transfer books of the corporation only upon
surrender of the certificates for the shares sought to be transferred
by the record holder thereof or by his duly authorized agent,
transferee, or legal representative. All certificates surrendered for
transfer shall be canceled before new certificates for the transferred
shares shall be issued.
Section 3. Closing Transfer Books and Fixing Record Date: For
the purpose of determining shareholders entitled to notice of or to
vote at any meeting of shareholders or any adjournment thereof, or
entitled to receive payment of any dividend, or in order to make a
determination of shareholders for any other proper purpose, the
Board of Directors may provide that the stock transfer books shall be
closed for a stated period but not to
exceed, in any case, fifty (50) days. If the stock transfer books shall
be closed for the purpose of determining shareholders entitled to
notice of or to vote at a meeting of shareholders, such books shall be
closed for at least ten (10) days immediately preceding such meeting.
In lieu of closing the stock transfer books, the Board of
Directors may fix in advance a date as the record date for any such
determination of shareholders, such record date in any case to be not
more than fifty (50) days and, in case of a meeting of shareholders,
not less than ten (10) days immediately preceding the date on which
the particular action, requiring such determination of shareholders, is
to be taken.
If the stock transfer books are not closed and no record date is
fixed for the determination of shareholders entitled to notice of or to
vote at a meeting of shareholders, or shareholders entitled to receive
payment of a dividend, the date on which notice of the meeting is
mailed or the date on which the resolution of the Board of Directors
declaring such dividend is adopted, as the case may be, shall be the
record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section,
such determination shall apply to any adjournment thereof except
where the determination has been made through the closing of the
stock transfer books and the stated period of closing has expired.
Section 4. Lost Certificates: The Board of Directors may
authorize the issuance of a new share certificate in place of a
certificate claimed to have been lost or destroyed, upon receipt of an
affidavit to such fact from the person claiming the loss or
destruction. When authorizing such issuance of a new certificate, the
Board may require the claimant to give the corporation a bond in
such sum as the Board may direct to indemnify the corporation
against loss from any claim with respect to the certificate claimed to
have been lost or destroyed; or the Board may, by resolution reciting
the circumstances justifying such action, authorize the issuance of the
new certificate without requiring such a bond.
Section 5. Holder of Record: The corporation may treat as
absolute owner of shares the person in whose name the shares stand
of record on its books just as if that person had full competency,
capacity and authority to exercise all rights of ownership irrespective
of any knowledge or notice to the contrary or any description
indicating a representative, pledge or other fiduciary relation or any
reference to any other instrument or to the rights of any other
person appearing upon its record or upon the share certificate,
except that any person furnishing to the corporation proof of his
appointment as a fiduciary shall be treated as if he were a holder of
record of its shares.
ARTICLE XI
General Provisions
Section 1. Dividends: The Board of Directors from time to time
may declare, and the corporation may pay, the dividends on its
outstanding shares in the manner and upon the terms and conditions
provided by law and by its Charter.
Section 2. Seal: The corporate seal of the corporation shall
consist of two concentric circles between which is [fcoq]chartered 1982
Durham, North Carolina[fccq] and in the center of which is the name of
the corporation; and such seal, in the form approved and adopted by
the Board of Directors, shall be the corporate seal of the corporation.
Section 3. Share Certificates: The share certificates of this
corporation shall be in a form approved by the Board of Directors
and shall indicate thereon a reference to any and all restrictive
conditions of said shares.
Section 4. Waiver of Notice: Whenever any notice is
required to be given to any shareholder or director under the
provisions of the North Carolina Business Corporation Act or under
the provisions of the Charter of Bylaws of this corporation, a waiver
thereof in writing signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be
equivalent to the giving of such notice.
Section 5. (Amended 10/16/90) Amendments: Except as otherwise
provided herein, these Bylaws may be amended
or repealed and new bylaws may be adopted by the affirmative vote
of a majority of the directors then holding office at any regular or
special meeting of the Board of Directors.
Except as may be approved by the shareholders, the Board of
Directors shall have no power to adopt a bylaw: (1) providing for
the management of the corporation otherwise than by the Board of
Directors or its Executive Committee; (2) increasing or decreasing
the number of directors; (3) classifying and staggering the election
of directors; or (4) requiring more than a majority of the voting
shares for a quorum at a meeting of the shareholders or more than a
majority of the votes cast to constitute action by the shareholders,
except where higher percentages are required by law.
Section 6. Fiscal Year: The fiscal year of the corporation
shall be fixed by the Board of Directors.
Section 7. (Originally Adopted 4/18/89) Notification of
Indemnification: The Secretary of the corporation, or his duly
authorized delegate, shall give written notice of any proposed change
or amendment to ARTICLE XI, Section 7 of the bylaws to each and
every director of this corporation and of its subsidiary and affiliated
corporations, and to each and every officer of said corporations who
would be affected thereby. Such notice shall be delivered by first
class mail to the interested party at his or her address as disclosed in
the records of the corporation with which he/she is affiliated. Such
notice shall be delivered at least fourteen (14) days prior to the date
on which action upon the proposed amendment is to be taken, and
shall set forth the substance of the amendment as proposed.
Section 8. (Amended 4/13/87) Indemnification: Any
person who is or was serving as a member of the Board of Directors
of CCB Financial Corporation, or who is or was serving, at the request
of CCB Financial Corporation, as a member of the Board of Directors of
a subsidiary or affiliated corporation of CCB Financial Corporation,
shall be indemnified by CCB Financial Corporation to the fullest
extent from time to time permitted by the law of North Carolina
and/or any applicable federal law, against liability including, but not
limited to, judgments, decrees, fines, penalties, excise taxes and
amounts paid in settlement actually and reasonably incurred by
him/her, and litigation expenses, including costs and reasonable
attorney fees, incurred by the Director arising out of his or her status
as a Director or out of his or her activities in that capacity.
Indemnification as provided in this Article shall, to the fullest extent
permitted by law, extend to and cover all such liability and litigation
expenses incurred by the Director in connection with, or in
consequence of, any threatened, pending, or completed action, suit or
other proceeding, whether civil or
criminal, administrative or investigative, formal or informal, and
whether or not brought by or on behalf of CCB Financial Corporation
or otherwise, to which the Director is made, or is threatened to be
made, a party by reason of the fact that he or she is or was a Director
of CCB Financial Corporation or is or was a Director of a subsidiary or
affiliated corporation serving at the request of CCB Financial
Corporation.
To the fullest extent permitted by law, expenses incurred by a
Director in defending any such action, suit, or proceeding shall be
paid by CCB Financial Corporation in advance of the final disposition
of such action, suit, or proceeding upon receipt by the Corporation of
an unsecured, written promise by the Director or on the Director's
behalf to repay any and all amounts so paid by CCB Financial
Corporation unless it shall ultimately be determined that the Director
is entitled to be indemnified by CCB Financial Corporation against
such expenses.
The following Officers of the Corporation and subsidiaries shall have
rights co-equal and co-extensive to those provided for Directors
herein:
* CCB Financial Corporation - All officers of the
Corporation will be covered.
* Central Carolina Bank and Trust Company - The
following officers will be covered: Chairman of the Board,
President, Executive Vice Presidents, Senior Vice
Presidents and Regional Executives.
* Republic Bank and Trust Company - The following
officers will be covered: President, Executive Vice
Presidents and Senior Vice Presidents.
* Southland Associates, Inc. - The following officers will
be covered: Chairman of the Board, President and CEO and
all Senior Vice Presidents.
PROVIDED, however, that no indemnification shall be permitted for
any Director or Officer included herein against liability or litigation
expenses which may be incurred by such Director or Officer on
account of any activities of such Director or Officer on account of any
activities of such Director or Officer known or believed by the
Director or Officer at
the time taken to be clearly in conflict with the best interest of CCB
Financial Corporation or any other corporation, partnership, joint
venture, trust or other enterprise which the Director of Officer is or
was serving or employed by at the request of CCB Financial
Corporation.
The Board of Directors is hereby authorized to take any and all such
action as may be necessary and appropriate to authorize or in CCB
Financial Corporation to carry out the purposes of this Article
including, but not limited to, authorizing the Corporation to enter into
indemnification agreements with Directors and Officers included
herein, or such other agreements as may be necessary and
appropriate to carry out the purposes of this Article.
The rights provided for Directors and stated Officers herein shall be
in addition to and not exclusive of any other rights to which they
may be or become entitled under the General Statutes of North
Carolina, or under any other statutes, insurance policies, or other
agreements of any kind.
ARTICLE XII
Shareholder Protection
(Amended 4-20-93) The provisions of the North Carolina
Shareholder Protection Act, N.C.G.S. Sections 55-75 to 55-79 (the
[fcoq]Act[fccq]), shall be applicable to this Corporation. The Board of [ZW]
Directors
reserves for the Corporation the right to rescind this bylaw provision
at any time to subject the Corporation to the protection of the Act
should such protection be deemed necessary and desirable at a later
date.
CCB FINANCIAL CORPORATION
1993 NONSTATUTORY STOCK OPTION PLAN
FOR CCB SAVINGS BANK OF LENOIR, INC., SSB
AMENDMENT NO. 1
October 15, 1993
I. General
Effective March 31, 1993, the Board of Directors (the
"Board") of CCB Financial Corporation (the "Corporation") adopted
the 1993 Nonstatutory Stock Option Plan for CCB Savings Bank of
Lenoir, Inc., SSB (the "Plan"). Paragraph 2(a) of the Plan
provides that the Plan shall be administered by the Compensation
Committee of the Board (the "Committee"). The Committee desires
to amend the Plan to effect certain changes of a technical nature
and to enable the Corporation to comply with the terms of an
acquisition agreement, dated May 19, 1993 and amended on August
10, 1993, by and between Citizens Savings, SSB ("Citizens") and
the Corporation (the "Agreement").
II. Purpose of the Plan
Paragraph 1 of the Plan is amended to read in its entirety
as follows:
"1. Purpose of this Plan. The purpose of this
Plan is to provide for the grant of Nonstatutory Stock
Options (hereinafter referred to as "Options" or
singularly, "Option") and in certain circumstances the
right to surrender such Options for cash, to Directors
(as hereinafter defined) of the Corporation and of its
subsidiary corporations, who wish to invest in the
Corporation's common stock, par value $5.00 per share
(hereinafter referred to as "Common Stock"). The
Corporate Board believes that participation in the
ownership of the Corporation by Directors will be to
the mutual benefit of the Corporation, its
subsidiaries, and the Directors. In addition, the
existence of this Plan will make it possible for the
Corporation and its subsidiaries to attract capable
individuals to serve on the Corporate Board and the
Boards of Directors of its subsidiaries. As used
herein, the term "Directors" or singularly, "Director,"
shall mean those members of the Corporate Board or the
Boards of Directors of any of its subsidiaries and who
1
<PAGE>
do not participate in the 1993 Incentive Stock Option
Plan of the Corporation as of the date of the Mutual
Conversion (as hereinafter defined) or the Citizens
Conversion (as hereinafter defined), as applicable."
III. Shares of Common Stock Subject to the Plan
Paragraph 3 of the Plan is amended to read in its entirety
as follows:
"3. Shares of Common Stock Subject to this Plan.
The maximum number of shares of Common Stock that shall
be offered under this Plan is 41,516 shares, subject to
adjustment as provided in paragraph 13. Shares subject
to Options which expire or terminate prior to the
issuance of the shares of Common Stock shall lapse and
the shares of Common Stock originally subject to such
Options shall again be available for future grants of
Options under this Plan."
IV. Eligibility; Grant of Options
Paragraph 4 of the Plan is amended to read in its entirety
as follows:
"4. Eligibility; Grant of Options
(a) Upon the conversion of Mutual Savings Bank,
SSB (hereinafter referred to as "Mutual") from a North
Carolina-chartered mutual savings bank to a North
Carolina-chartered stock savings bank and simultaneous
acquisition of Mutual by the Corporation (hereinafter
referred to as the "Mutual Conversion"), each Director
then serving on the Board of Directors of Mutual shall
receive an Option to purchase shares of Common Stock in
the amount set forth below:
SHARES
William C. Smith 2,815
Lawrence W. Hayes 2,392
David O. Rufty 2,252
Paul Pendry 1,970
D. Leon Clark 1,548
W. L. Underdown 1,548
Ben H. Kincaid, Sr. 1,548
Total 14,073
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(b) Upon the conversion of Citizens Savings, SSB
(hereinafter referred to as "Citizens") from a North
Carolina-chartered mutual savings bank to a North
Carolina-chartered stock savings bank and simultaneous
acquisition of Citizens by the Corporation (hereinafter
referred to as the "Citizens Conversion"), each
Director then serving on the Board of Directors of
Citizens shall receive an Option to purchase shares of
Common Stock in the amount set forth below:
SHARES
George W. Kirby 2,920
Guy E. Herman, Jr. 2,920
J. Harper Beall, Jr. 4,321
J. Harper Beall, III 4,321
E. H. Blair 4,321
W. T. Carpenter, Jr. 4,320
Lloyd B. Smith, Jr. 4,320
Total 27,443"
V. Option Price
Subparagraph 5(a) of the Plan is amended to read in its
entirety as follows:
"(a) The price per share of each Option granted
under this Plan (hereinafter called the "Option Price")
shall be determined by the Committee as of the
effective date of grant of such Option, but in no event
shall such Option Price be less than the greater of
(i) 100% of the fair market value of Common Stock on
the date of grant or (ii) the par value of Common
Stock. An Option shall be considered as granted on the
later of (i) the effective date of the Mutual
Conversion or the Citizens Conversion, as applicable,
(ii) the date that the Committee acts to grant such
Option, or (iii) such later date as the Committee shall
specify in an Option Agreement (as hereinafter
defined)."
VI. Amendment and Modification of the Plan
Paragraph 18 of the Plan is amended to read in its entirety
as follows:
"18. Amendment and Modification of this Plan. The
Corporate Board may at any time, and from time to time,
amend or modify this Plan (including the form of Option
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Agreement) in any respect. Any amendment or
modification of this Plan shall not materially reduce
the benefits under any Option theretofore granted to an
Optionee under this Plan without the consent of such
Optionee or the transferee in the event of the death of
such Optionee."
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<PAGE>
VII. Effective Date
Paragraph 20 of the Plan is amended to read in its entirety
as follows:
"20. Effective Date. This Plan has been adopted
by the Corporate Board to be effective as of the date
of the Mutual Conversion."
VIII. Miscellaneous
All terms used in this Amendment not defined herein shall
have the same meaning as those in the Plan.
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CCB FINANCIAL CORPORATION
1993 NONSTATUTORY STOCK OPTION PLAN
FOR GRAHAM SAVINGS BANK, INC., SSB
CCB Financial Corporation, a North Carolina corporation
(hereinafter referred to as the "Corporation"), does herein set
forth the terms of the 1993 Nonstatutory Stock Option Plan for
Graham Savings Bank, Inc., SSB (hereinafter referred to as this
"Plan"), which was adopted by the Board of Directors of the
Corporation (hereinafter referred to as the "Corporate Board").
1. Purpose of this Plan. The purpose of this Plan is to
provide for the grant of Nonstatutory Stock Options (hereinafter
referred to as "Options" or singularly, "Option") and in certain
circumstances the right to surrender such Options for cash, to
Directors (as hereinafter defined) of certain of its subsidiary
corporations, who wish to invest in the Corporation's common
stock, par value $5.00 per share (hereinafter referred to as
"Common Stock"). The Corporate Board believes that participation
in the ownership of the Corporation by Directors will be to the
mutual benefit of the Corporation and its subsidiaries and the
Directors. In addition, the existence of this Plan will make it
possible for the Corporation and its subsidiaries to attract
capable individuals to serve on the Board of Directors of its
subsidiaries. As used herein, the term "Directors" or
singularly, "Director", shall mean those members of the Board of
Directors of Graham Savings Bank, Inc., SSB (hereinafter the
"Savings Bank") who do not participate in the 1993 Incentive
Stock Option Plan of the Corporation as of the date of the
Conversion (as hereinafter defined). Further, should the Savings
Bank at any time after the effective date of the Conversion be
merged or consolidated with and into any other subsidiary of the
Corporation, the "Board of Directors" shall include the advisory
board of directors of the Graham, North Carolina branch office of
the holding company subsidiary with which the Savings Bank is
merged or consolidated.
2. Administration of this Plan.
(a) This Plan shall be administered by the
Compensation Committee of the Corporate Board (hereinafter the
"Committee"). The Committee shall have full power and authority
to construe, interpret and administer this Plan. All actions,
decisions, determinations, or interpretations of the Committee
shall be final, conclusive, and binding upon all parties.
(b) The Committee shall determine when Limited Stock
Appreciation Rights (as hereinafter described) shall be available
in place of outstanding Options.
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(c) The Committee may designate any officers or
employees of the Corporation or of any of its subsidiaries to
assist in the administration of this Plan. The Committee may
authorize such individuals to execute documents on its behalf and
may delegate to them such other ministerial and limited
discretionary duties as the Committee may see fit.
3. Shares of Common Stock Subject to this Plan. The
maximum number of shares of Common Stock that shall be offered
under this Plan is thirty-six thousand five hundred and eighty-
two (36,582) shares, subject to adjustment as provided in
paragraph 13. Shares subject to Options which expire or
terminate prior to the issuance of the shares of Common Stock
shall lapse and the shares of Common Stock originally subject to
such Options shall again be available for future grants of
Options under this Plan.
4. Eligibility; Grant of Options. Upon the conversion of
Graham Savings Bank, SSB, (hereinafter referred to as the "Bank")
from a North Carolina-chartered mutual savings bank to a North
Carolina-chartered stock savings bank and simultaneous
acquisition of the Bank by the Corporation (herein referred to as
the "Conversion"), each Director then serving on the Board of
Directors of the Bank shall be allocated an Option to purchase
shares of Common Stock in the amount set forth below:
Forrest C. Hall . . . . . . . . . . 3,630 Shares
Sarah G. Johnston . . . . . . . . . 10,332 Shares
A. C. Motsinger . . . . . . . . . . 11,730 Shares
J. Worth Rich. . . . . . . . . 3,630 Shares
William R. Sizemore . . . . . . . . . 3,630 Shares
James R. Guthrie . . . . . . . . . . 3,630 Shares
TOTAL . . . . . . . . . . . . . 36,582 Shares
5. Option Price.
(a) The price per share of each Option granted under
this Plan (hereinafter called the "Option Price") shall be
determined by the Committee as of the effective date of grant of
such Option, but in no event shall such Option Price be less than
the greater of (i) 100% of the fair market value of Common Stock
on the date of grant or (ii) the par value of Common Stock. An
Option shall be considered as granted on the effective date of
the Conversion.
(b) The fair market value of a share of Common Stock
shall be determined as follows: (i) if on the date as of which
such determination is being made, Common Stock being valued is
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<PAGE>
admitted to trading on a securities exchange or exchanges for
which actual sale prices are regularly reported, or actual sale
prices are otherwise regularly published, the fair market value
of a share of Common Stock shall be deemed to be equal to the
mean of the closing sale price as reported for each of the
five (5) trading days immediately preceding the date as of which
such determination is made; provided, however, that, if a closing
sale price is not reported for each of the five (5) trading days
immediately preceding the date as of which such determination is
made, then the fair market value shall be equal to the mean of
the closing sale prices on those trading days for which such
price is available, or (ii) if on the date as of which such
determination is made, no such closing sale prices are reported,
but quotations for Common Stock being valued are regularly listed
on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") or another comparable system, the
fair market value of a share of Common Stock shall be deemed to
be equal to the mean of the average of the closing bid and asked
prices for such Common Stock quoted on such system on each of the
five (5) trading days preceding the date as of which such
determination is made, but if a closing bid and asked price is
not available for each of the five (5) trading days, then the
fair market value shall be equal to the mean of the average of
the closing bid and asked prices on those trading days during the
five-day period for which such prices are available, or (iii) if
no such quotations are available, the fair market value of a
share of Common Stock shall be deemed to be the average of the
closing bid and asked prices furnished by a professional
securities dealer making a market in such shares, as selected by
the Committee, for the trading date first preceding the date as
of which such determination is made. If the Committee determines
that the price as determined above does not represent the fair
market value of a share of Common Stock, the Committee may then
consider such other factors as it deems appropriate and then fix
the fair market value for the purposes of this Plan.
6. Payment of Option Price. Payment for shares subject to
an Option may be made either in cash, or with the approval of the
Committee, in other stock of the Corporation owned by an Director
or such other person as may be entitled to exercise such Option.
Any shares of the Corporation's stock that are delivered in
payment of the aggregate Option Price shall be valued at their
fair market value, as determined by the Committee, on the date of
the exercise of such Option.
7. Terms and Conditions of Grant of Options.
(a) Each Option granted pursuant to this Plan shall be
evidenced by a written Nonstatutory Stock Option Agreement
(hereinafter referred to as "Option Agreement") with each
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<PAGE>
Director (hereinafter referred to as "Optionee") to whom an
Option is granted; such agreement shall be substantially in the
form attached hereto as "Exhibit A", unless the Committee shall
adopt a different form and, in each case, may contain such other,
different, or additional terms and conditions as the Committee
may determine.
(b) Options granted under this Plan shall vest and the
right of an Optionee to the Options shall be nonforfeitable in
accordance with the following schedule:
Date When Such Options Percentage of Such
Become Vested Options Vested
Effective Date of Grant of Options 20%
First Anniversary of Effective Date 20%
Second Anniversary of Effective Date 20%
Third Anniversary of Effective Date 20%
Fourth Anniversary of Effective Date 20%
(c) In determining the number of shares vested under
the above vesting schedules, an Optionee shall not receive
fractional shares. If the product resulting from multiplying the
vested percentage times the allocated shares results in a
fractional share, then an Optionee's vested right shall be to the
whole number of shares disregarding any fractional share.
(d) In the event any Optionee to whom Options are
awarded under this Plan terminates membership on the Board of
Directors or employment with the Corporation or any subsidiary of
the Corporation for any reason, other than as provided in
subparagraphs 7(e) and 7(f) below, and such Optionee does not
have a 100% vested interest in his or her shares under this Plan,
then any shares under the Option which are not vested, based upon
the applicable schedule in subparagraph 7(b) above, shall be
forfeited and shall be available again for distribution to such
Optionees as may be determined by the Committee.
(e) In the event that the membership of an Optionee on
the Board of Directors should terminate because of such
Optionee's retirement, disability, or death or failure of the
Corporation to elect an Optionee for service as a member of the
Board of Directors for other than Cause prior to the date when
all shares under the Option allocated to him or her would be 100%
vested in accordance with the applicable schedule in
subparagraph 7(b) above, then, notwithstanding the foregoing
schedules in subparagraph 7(b) above, all shares under the Option
allocated to such Optionee shall immediately become fully vested
and nonforfeitable. For purposes of this Plan, the term
"retirement" shall mean (i) with respect to Optionees who are
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<PAGE>
employees of the Corporation or of any of its subsidiaries,
(A) simultaneously with or subsequent to the termination of the
Optionee's employment under conditions which would constitute
retirement under any tax qualified retirement plan maintained by
the Corporation or by any of its subsidiaries or (B) attaining
age 65; (ii) with respect to Optionees who are not employees of
the Corporation or of any of its subsidiaries, at any time after
attaining age 65 with the approval of the Committee; or (iii) at
the election of a Optionee, at any time after not less than
five (5) years service as a member of the Board of Directors of
the Bank or the Savings Bank, such service being computed
cumulatively for purposes of this clause (iii). For purposes of
this Plan, the term "disability" shall (i) with respect to any
Optionee who is also an employee of the Corporation or of any of
its subsidiaries, be defined in the same manner as such term is
defined in Section 22(e)(3) of the Internal Revenue Code of 1986,
as amended, and (ii) with respect to any other Optionee, as may
be defined by the Committee from time to time, or as may be
determined by the Committee at any time with respect to any
individual Optionee. For purposes of this Plan, the term "Cause"
shall refer to (i) the commission of an act of fraud,
embezzlement, theft or proven dishonesty, or any other illegal
act or practice (whether or not resulting in criminal prosecution
or conviction but excepting minor traffic and similar violations
in the nature of a misdemeanor); or (ii) the willful engaging in
misconduct which is deemed by the Corporation, in good faith, to
be materially injurious to the Corporation, monetarily or
otherwise; or (iii) the conviction of a felony; or (iv) the
willful and continued failure or habitual neglect to attend
meetings of the Board of Directors (other than any failure or
neglect caused by or resulting from disability); provided,
however, that no act or failure to act shall be deemed to be
"willful" unless done or omitted to be done not in good faith and
without reasonable belief that such action or omission was in the
best interest of the Corporation.
(f) In the event of a "change in control" of the
Corporation, then, notwithstanding the foregoing schedules in
subparagraph 7(b) above, all shares under the Option awarded to
Optionees shall immediately become fully vested. Written notice
that a change in control has occurred shall be given by the
Committee to each Optionee. When used in this Plan, the phrase
"change in control" refers to (i) the acquisition by any person,
group of persons or entity of the beneficial ownership or power
to vote more than twenty (20%) percent of the Corporation's
outstanding stock or (ii) during any period of two (2)
consecutive years, a change in the majority of the Corporate
Board, unless the election of each new Director was approved by
at least two-thirds of the Directors then still in office who
were Directors at the beginning of the two (2) year period.
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<PAGE>
8. Option Period. Each Option Agreement shall set forth a
period during which such Option may be exercised (hereinafter
referred to as the "Option Period"); provided, however, that the
Option Period shall not exceed ten (10) years after the date of
grant of such Option as specified in an Option Agreement.
9. Change of Control; Limited Stock Appreciation Rights.
(a) In connection with the grant of any Option under
this Plan, the Committee may, in its discretion, provide an
Optionee with the right (herein sometimes referred to as "Limited
Stock Appreciation Rights"), following a "change in control" of
the Corporation and without regard to any restrictions on
exercise that would otherwise apply, to surrender any unexercised
portion of such Option as such Optionee then may have for a cash
payment equal to the amount by which the fair market value (as
determined by the Committee) of the number of shares of Common
Stock then subject to such Option exceeds the aggregate Option
Price therefor.
(b) Limited Stock Appreciation Rights shall be
exercised by written notice to the Corporation as provided in
paragraph 10 hereof at any time prior to the earlier of (i) the
date which is thirty (30) days after the date of notice of a
change in control is given by the Committee to the Optionee or
(ii) the last day of the Option Period provided for in an Option
Agreement, but in no event shall the expiration date be more than
ten (10) years after the date of grant of an Option as provided
in paragraph 8 above.
(c) Limited Stock Appreciation Rights may be exercised
only when the market value of Common Stock subject to an Option
exceeds the aggregate Option Price determined as provided in
paragraph 5 above.
10. Exercise of Options. An Option or the right to
surrender an Option for cash as provided in paragraph 9 hereof
shall be exercised by written notice to the Committee signed by
an Optionee or by such other person as may be entitled to
exercise such Option or to surrender such Option. In the case of
the exercise of an Option, the aggregate Option Price for the
shares being purchased may be paid either in cash or, with the
approval of the Committee, in shares of the Corporation's stock
(valued as determined by the Committee as of the date of
exercise) or any combination thereof and the notice of exercise
shall specify how payment will be made. The written notice shall
state the number of shares with respect to which an Option is
being exercised or surrendered and, in the case of the exercise
of an Option, shall either be accompanied by the payment of the
aggregate Option Price for such shares or shall fix a date (not
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<PAGE>
more than ten (10) business days after the date of such notice)
by which the payment of the aggregate Option Price will be made.
An Optionee shall not exercise an Option to purchase less than
100 shares, unless the Committee otherwise approves or unless the
partial exercise is for the remaining shares available under such
Option. A certificate or certificates for the shares of Common
Stock purchased by the exercise of an Option shall be issued in
the regular course of business subsequent to the exercise of such
Option and the payment therefor. During the Option Period, no
person entitled to exercise any Option granted under this Plan
shall have any of the rights or privileges of a shareholder with
respect to any shares of Common Stock issuable upon exercise of
such Option, until certificates representing such shares shall
have been issued and delivered and the individual's name entered
as a shareholder of record on the books of the Corporation for
such shares.
11. Effect of Leaving the Board or Death.
(a) In the event that an Optionee leaves the Board of
Directors of the Savings Bank for any reason other than failure
to be reappointed to such Board of Directors for other than Cause
(as defined herein), retirement, disability, or death, any Option
granted to the Optionee under this Plan, to the extent not
previously exercised or surrendered by the Optionee or expired,
shall immediately terminate; provided, however, that an Optionee
who leaves the Board of Directors of the Savings Bank at the
request of such Board of Directors for other than Cause, may be
exempted from the operation of the foregoing provision by a
majority vote of the Committee. "Cause" shall refer to (i) the
commission of an act of fraud, embezzlement, theft or proven
dishonesty or any other illegal act or practice (whether or not
resulting in criminal prosecution or conviction but excepting
minor traffic and similar violations in the nature of a
misdemeanor); or (ii) the willful engaging in misconduct which is
deemed by the Corporation, in good faith, to be materially
injurious to the Corporation, monetarily or otherwise; or (iii)
the conviction of a felony; or (iv) the willful and continued
failure or habitual neglect to attend meetings of the Board of
Directors (other than failure or neglect caused by or resulting
from disability); provided, however, that no act or failure to
act shall be deemed to be "willful" unless done or admitted to be
done not in good faith and without reasonable belief that such
action or omission was in the best interest of the Corporation.
(b) In the event that an Optionee should leave the
Board of Directors as a result of such Optionee's retirement or
failure to be reappointed to such Board of Directors for other
than Cause, such Optionee shall have the right to exercise an
Option granted to him or her under this Plan, to the extent that
it has not previously been exercised or surrendered by the
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<PAGE>
Optionee or expired, for such period of time as may be determined
by the Committee and specified in an Option Agreement, but in no
event may any Option or the right to surrender any Option for
cash be exercised later than the end of the Option Period
provided in the Option Agreement in accordance with paragraph 8
hereof. Notwithstanding any other provision contained herein, or
in any Option Agreement, upon retirement or failure to be
reappointed for other than Cause, any Option then held by an
Optionee shall be exercisable immediately in full.
(c) In the event that an Optionee should leave the
Board of Directors by reason of such Optionee's disability, such
Optionee shall have the right to exercise an Option granted to
him or her under this Plan, to the extent that it has not
previously been exercised or surrendered by the Optionee or
expired, for such period of time as may be determined by the
Committee and specified in an Option Agreement, but in no event
may any Option or the right to surrender any Option for cash be
exercised later than the end of the Option Period provided in the
Option Agreement in accordance with paragraph 8 hereof.
Notwithstanding any other provision contained herein, or in any
Option Agreement, upon leaving by reason of disability, any
Option then held by an Optionee shall be exercisable immediately
in full.
(d) In the event that an Optionee should die while
serving on the Board of Directors or after his or her retirement
or after his or her leaving by reason of disability during the
Option Period provided in an Option Agreement in accordance with
paragraph 8 hereof, an Option granted to the Optionee under this
Plan, to the extent that it has not previously been exercised or
surrendered by the Optionee or expired, shall vest and shall be
exercisable, in accordance with its terms, by the personal
representative of such Optionee, the executor or administrator of
such Optionee's estate, or by any person or persons who acquired
such Option by bequest or inheritance from such Optionee,
notwithstanding any limitations placed on the exercise of such
Option by this Plan or an Option Agreement, at any time within
twelve (12) months after the date of death of such Optionee, but
in no event may an Option or the right to surrender an Option for
cash be exercised later than the end of the Option Period
provided in an Option Agreement in accordance with paragraph 8
hereof. Any references herein to an Optionee shall be deemed to
include any person entitled to exercise an Option after the death
of such Optionee under the terms of this Plan.
12. Effect of Plan on Status as Member of a Board. The
fact that a Director has been granted an Option under this Plan
shall not confer on such Director any right to continued service
on the Board of Directors, nor shall it limit the right of the
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Corporation or of any of its subsidiaries to remove such Director
from the Board of Directors at any time.
13. Adjustment Upon Changes in Capitalization; Dissolution
or Liquidation.
(a) In the event of a change in the number of shares
of Common Stock outstanding by reason of a stock dividend, stock
split, recapitalization, reorganization, merger, exchange of
shares, or other similar capital adjustment prior to the
termination of an Optionee's rights under this Plan, equitable
proportionate adjustments shall be made by the Committee in (i)
the number and kind of shares which remain available under this
Plan and (ii) the number, kind, and the Option Price of shares
subject to the unexercised portion of an Option under this Plan.
The adjustments to be made shall be determined by the Committee
and shall be consistent with such change or changes in the
Corporation's total number of outstanding shares; provided,
however, that no adjustment shall change the aggregate Option
Price for the exercise of Options granted under this Plan.
(b) The grant of Options under this Plan shall not
affect in any way the right or power of the Corporation or its
shareholders to make or authorize any adjustment,
recapitalization, reorganization, or other change in the
Corporation's capital structure or its business, or any merger or
consolidation of the Corporation, or to issue bonds, debentures,
preferred or other preference stock ahead of or affecting Common
Stock or the rights thereof, or the dissolution or liquidation of
the Corporation, or any sale or transfer of all or any part of
the Corporation's assets or business.
(c) Upon the effective date of the dissolution or
liquidation of the Corporation, or of a reorganization, merger,
or consolidation of the Corporation with one or more other
corporations in which the Corporation is not the surviving
corporation, or the transfer of all or substantially all of the
assets or shares of the Corporation to another person or entity
(any such transaction being hereinafter referred to as a
"Terminating Event"), this Plan and any Options granted
hereunder, including the right to surrender such Options for cash
as provided in paragraph 9 hereof, shall terminate unless
provision is made in writing in connection with such Terminating
Event for the continuance of this Plan and for the assumption of
Options granted hereunder, or the substitution for such Options
of new options for the shares of the successor corporation, or a
parent or a subsidiary thereof, with such appropriate adjustments
as may be determined or approved by the Committee, or the
successor to the Corporation, to the number and kind of shares
subject to such substituted options in which event this Plan and
Options granted hereunder, or the new options substituted
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<PAGE>
therefore, shall continue in the manner and under the terms so
provided. Upon the occurrence of any Terminating Event in which
provision is not made for the continuance of this Plan and for
the assumption of Options granted hereunder, or the substitution
for such Options of new options for the shares of a successor
corporation or a parent or a subsidiary thereof, each Optionee to
whom an Option has been granted under this Plan (or such person's
personal representative, the executor or administrator of such
person's estate, or any person who acquired the right to exercise
such Option from such person by bequest or inheritance) shall be
entitled, prior to the effective date of any such Terminating
Event, (i) to exercise, in whole or in part, his or her rights
under any Option granted to the Optionee without any regard to
any restrictions on exercise that would otherwise apply, or (ii)
to surrender any such Option to the Corporation in exchange for
receipt of cash equivalent to the amount by which the fair market
value of the shares of Common Stock such person would have
received had the Optionee exercised his or her Option in full
immediately prior to consummation of such Terminating Event
exceeds the applicable aggregate Option Price. To the extent
that a person, pursuant to this subparagraph 11(c) has a right to
exercise or surrender any Option on account of a Terminating
Event which that person otherwise would not have had at that
time, such right shall be contingent upon the consummation of
such Terminating Event.
14. Non-Transferability. An Option granted under this Plan
shall not be assignable or transferable except, in the event of
the death of an Optionee, by will or by the laws of descent and
distribution. In the event of the death of an Optionee, the
Optionee's personal representative, the executor or the
administrator of such Optionee's estate, or the person or persons
who acquired by bequest or inheritance the rights to exercise or
to surrender such Options, may exercise or surrender any Option
or portion thereof to the extent not previously exercisable or
surrendered by an Optionee or expired, in accordance with its
terms, prior to the expiration of the exercise period as
specified in subparagraph 11(d) hereof.
15. Tax Withholding. The Corporation or any of its
subsidiaries shall have the right to deduct or otherwise effect a
withholding of any amount required by federal or state laws to be
withheld with respect to the grant, exercise or surrender for
cash of any Option or the sale of stock acquired upon the
exercise of an Option in order for the Corporation or any of its
subsidiaries to obtain a tax deduction otherwise available as a
consequence of such grant, exercise, surrender for cash, or sale,
as the case may be.
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16. Listing and Registration of Option Shares. The
Corporation shall register the Options and Common Stock issued
under this Plan under the Securities Act of 1933. Any Option
granted under this Plan shall be subject to the requirement that
if at any time the Committee shall determine, in its discretion,
that any additional listing, registration, or qualification of
the shares covered thereby upon any securities exchange or under
any state or federal law or the consent or approval of any
governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the granting of such Option
or the issuance or purchase of shares thereunder, such Option may
not be exercised in whole or in part unless and until such
listing, registration, qualification, consent, or approval shall
have been effected or obtained free of any conditions not
acceptable to the Committee; provided, however, that the
Corporation shall take reasonable steps to effect such listing,
registration, qualification, consent or approval.
17. Exculpation and Indemnification. In connection with
this Plan, no member of the Committee shall be personally liable
for any act or omission to act in his or her capacity as a member
of the Committee, nor for any mistake in judgment made in good
faith, unless arising out of, or resulting from, such person's
own bad faith, gross negligence, willful misconduct, or criminal
acts. To the extent permitted by applicable law and regulation,
the Corporation shall indemnify and hold harmless the members of
the Committee, and each other officer or employee of the
Corporation or of any of its subsidiaries to whom any duty or
power relating to the administration or interpretation of this
Plan may be assigned or delegated, from and against any and all
liabilities (including any amount paid in settlement of a claim
with the approval of the Committee) and any costs or expenses
(including counsel fees) incurred by such persons arising out of
or as a result of, any act or omission to act in connection with
the performance of such person's duties, responsibilities, and
obligations under this Plan, other than such liabilities, costs,
and expenses as may arise out of, or result from, the bad faith,
gross negligence, willful misconduct, or criminal acts of such
persons.
18. Amendment and Modification of this Plan. The Corporate
Board may at any time, and from time to time, amend or modify
this Plan (including the form of Option Agreement) in any
respect; provided, however, that no amendment or modification
shall be made that increases the total number of shares covered
by this Plan or effects any change in the category of persons who
may receive Options under this Plan or materially increases the
benefits accruing to Optionees under this Plan. Any amendment or
modification of this Plan shall not materially reduce the
benefits under any Option therefore granted to an Optionee under
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this Plan without the consent of such Optionee or the transferee
in the event of the death of such Optionee.
19. Termination and Expiration of this Plan. This Plan may
be abandoned, suspended, or terminated at any time by the
Corporate Board; provided, however, that abandonment, suspension,
or termination of this Plan shall not affect any Options then
outstanding under this Plan. No Option shall be granted pursuant
to this Plan after ten (10) years from the effective date of this
Plan as provided in paragraph 20 hereof.
20. Effective Date. This Plan has been adopted by the
Corporate Board to be effective as of the date of the Conversion.
21. Captions and Headings; Gender and Number. Captions and
paragraph headings used herein are for convenience only, do not
modify or affect the meaning of any provision herein, are not a
part hereof, and shall not serve as a basis for interpretation or
in construction of this Plan. As used herein, the masculine
gender shall include the feminine and neuter, the singular
number, the plural, and vice versa, whenever such meanings are
appropriate.
22. Expenses of Administration of Plan. All costs and
expenses incurred in the operation and administration of this
Plan shall be borne by the Corporation or by one of its
subsidiaries.
23. Governing Law. Without regard to the principles of
conflicts of laws, the laws of the State of North Carolina shall
govern and control the validity, interpretation, performance, and
enforcement of this Plan.
24. Inspection of Plan. A copy of this Plan, and any
amendments thereto or modifications thereof, shall be maintained
by the Secretary of the Corporation and shall be shown to any
proper person making inquiry about it.
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EXHIBIT A
STATE OF NORTH CAROLINA
COUNTY OF DURHAM
NONSTATUTORY STOCK OPTION AGREEMENT
This Nonstatutory Stock Option Agreement (hereinafter
referred to as this "Agreement") is made and entered into as of
this 1st day of October, 1993, between CCB FINANCIAL CORPORATION,
a North Carolina corporation (hereinafter referred to as the
"Corporation"), and _________________________________,
(hereinafter referred to as the "Optionee").
WHEREAS, the Board of Directors of the Corporation
(hereinafter referred to as the "Corporate Board") has adopted
the 1993 Nonstatutory Stock Option Plan for Graham Savings Bank,
Inc., SSB (hereinafter referred to as the "Plan"); and
WHEREAS, the Plan provides that the Compensation Committee
of the Corporate Board (the "Committee") will make available to
the Directors (as defined in the Plan) of the Savings Bank (as
defined in the Plan), the right to purchase shares of the
Corporation's common stock, par value $5.00 per share
(hereinafter referred to as "Common Stock") and, when so notified
by the Committee, the right to surrender such shares for cash;
and
WHEREAS, the Committee has determined that the Optionee is
entitled to purchase shares of Common Stock under the Plan.
NOW, THEREFORE, the Corporation and the Optionee agree as
follows:
1. Date of Grant of Option. The date of grant of the
option granted under this Agreement is the 1st day of October,
1993.
2. Grant of Option. Pursuant to the Plan, the Corporation
grants to the Optionee the right (hereinafter referred to as the
"Option") to purchase from the Corporation all or a portion of an
aggregate number of __________________________ (______) shares of
Common Stock (hereinafter referred to as the "Option Shares")
which shall be authorized but unissued shares.
3. Option Price. The price to be paid for the Option
Shares shall be ___________________________ Dollars ($_____) per
share (hereinafter referred to as the "Option Price") which is
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the fair market value of the Option Shares as determined by the
Committee as of the date of grant of this Option.
4. Period within which Option may be Exercised.
(a) Subject to any further restrictions in this
Agreement, the Optionee shall have the right to exercise the
Option to purchase the Option Shares in accordance with the
following schedule:
On the date of grant of the Option: 20% vested
On the first anniversary of the date of
grant of the Option: 20% vested
On the second anniversary of the date of
grant of the Option: 20% vested
On the third anniversary of the date of 20% vested
grant of the Option:
On the fourth anniversary of the 20% vested
date of grant of the Option:
(b) Accelerated Vesting. Notwithstanding
paragraph (a) above, all Option Shares previously not vested and
subject to forfeiture shall vest and the right of the Optionee to
such Option Shares shall become nonforfeitable upon the
occurrence of any of the following:
(i) Retirement of Participant. The termination
of the Optionee's membership on the Board of Directors
(as defined in the Plan) or employment by the
Corporation by reason of retirement. For purposes of
this Plan, the term "retirement" shall mean (i) with
respect to Optionees who are employees of the
Corporation or of any of its subsidiaries, (A)
simultaneously with or subsequent to the termination of
employment under conditions which constitute retirement
under any tax qualified retirement plan maintained by
the Corporation or by any of its subsidiaries or (B)
attaining age 65; (ii) with respect to Optionees who
are not employees of the Corporation or of any of its
subsidiaries, at any time after attaining age 65 with
the approval of the Committee; or (iii) at the election
of the Optionee, at any time after not less than five
(5) years service as a member of the Board of Directors
of the Savings Bank or the Bank (as defined in the
Plan) with such service computed cumulatively for
purposes of this clause (iii).
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(ii) Disability of Optionee. The termination of
the Optionee's membership on the Board of Directors or
of employment by the Corporation by reason of
disability. For purposes of this Plan, the term
"disability" shall (i) if the Optionee is also an
employee of the Corporation or of any of its
subsidiaries, be defined in the same manner as such
term is defined in Section 22(e)(3) of the Internal
Revenue Code of 1986, as amended, and (ii) if the
Optionee is not such an employee, as may be defined by
the Committee from time to time, or as may be
determined by the Committee at any time with respect to
the Optionee.
(iii) Death of Optionee. The Optionee's death.
(iv) Change in Control. Notice of a "change in
control" of the Corporation being given by the
Committee. For the purpose of this Agreement, a
"change in control" of the Corporation means the
acquisition by any person, group of persons or entity
of (i) the beneficial ownership or power to vote more
than twenty (20%) percent of the outstanding Common
Stock or (ii) during any period of two (2) consecutive
years, a change in the majority of the Corporate Board,
unless the election of each new director was approved
by at least two-thirds (2/3) of the directors then
still in office who were directors at the beginning of
the two (2) year period.
(v) Reappointment to Board. The termination of
the Optionee's membership on the Board of Directors by
reason of the failure to be reappointed for other than
Cause (as defined in the Plan).
(c) Delivery of Option to the Optionee. Within
thirty (30) days after (i) a date on which Option Shares have
become vested as provided in subparagraphs (a) and (b) above, all
of such shares that have become nonforfeitable in accordance with
this paragraph 4 shall be delivered to the Optionee or Optionee's
designee, (ii) receipt of written notification of Optionee's
retirement, disability, or death together with such other
documentation as the Committee shall reasonably require, or (iii)
a change in control of the Corporation, the Committee shall
deliver to the Optionee, the Optionee's designee, or such other
person as shall have been designated as Optionee's beneficiary in
accordance with this Agreement, as applicable, Option Shares
which have become vested and nonforfeitable, as the Committee
shall determine, free from any restrictions imposed by this
Agreement other than such restrictions and conditions as may be
deemed necessary by the Committee to assure compliance with all
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applicable securities or banking laws, rules, regulations and
listing requirements.
(d) Delivery of Forfeited Restricted Stock. If the
Optionee's membership on the Board of Directors or employment
with the Corporation, terminates for any reason other than one of
those provided in subparagraph 4(b) above, before all of the
Option Shares are vested in accordance with subparagraphs 4(a)
and 4(b) above, all such shares then subject to forfeiture shall
be deemed forfeited by the Optionee.
5. Change in Control
(a) In connection with the Option, the Optionee has
the right, following a "change in control" (as defined in the
Plan) of the Corporation, and without regard to any restrictions
on exercise that would otherwise apply, to surrender any
unexercised portion of the Option as the Optionee then may have
for a cash payment equal to the amount by which the fair market
value (as determined by the Committee) of the number of shares of
Common Stock then subject to the Option exceeds the aggregate
Option Price therefor.
(b) The Optionee shall have the right to surrender the
Option by giving written notice to the Committee as provided in
Paragraph 6 hereof at any time prior to the earlier of (i) the
date which is thirty (30) days after the date notice of a change
in control is given by the Committee to the Optionee or (ii) the
date which is ten (10) years after the date of grant of the
Option as set forth in Paragraph 1 hereof.
(c) The Option may be surrendered for cash pursuant to
this Paragraph 5 only when the market value of Common Stock
subject to the Option exceeds the aggregate Option Price as
provided in Paragraph 3 above.
(d) If the Optionee surrenders the Option for cash,
the cash payment due to the Optionee shall be made by the
Corporation no more than then (10) business days after the date
of the receipt by the Committee of the notice of surrender of the
Option.
6. Method of Exercise. The Option or the right to
surrender the Option for cash as provided in Paragraph 5 hereof
shall be exercised by written notice to the Committee signed by
the Optionee or by such other person as may be entitled to
exercise or to surrender the Option. In the case of the exercise
of the Option, the aggregate Option Price for the shares being
purchased may be paid either in cash or, with the approval of the
Committee, in shares of the Corporation's stock (valued as
determined by the Committee as of the date of exercise) or any
combination thereof and the notice of exercise shall specify how
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<PAGE>
payment will be made. The written notice shall state the number
of shares with respect to which the Option is being exercised or
surrendered and, in the case of the exercise of the Option, shall
either be accompanied by the payment of the aggregate Option
Price for such shares or shall fix a date (not more than ten (10)
business days after the date of such notice) by which the payment
of the aggregate Option Price will be made. The Optionee shall
not exercise the Option to purchase less than one hundred (100)
shares, unless the Committee otherwise approves or unless the
partial exercise is for the remaining shares available under the
Option. A certificate or certificates for the shares of Common
Stock purchased by the exercise of the Option shall be issued in
the regular course of business subsequent to the exercise of the
Option and the payment therefor. Neither the Optionee, nor any
other person who may be entitled to exercise the Option, shall
have any of the rights or privileges of a shareholder with
respect to any shares of Common Stock issuable upon exercise of
the Option, until certificates representing such shares shall
have been issued and delivered and the individual's name entered
as a shareholder of record on the books of the Corporation for
such shares.
7. Termination of Option. The Option and any right to
surrender the Option for cash shall terminate on the earlier of:
(a) Except as provided in subparagraphs (b), (c) and
(d) below, the Option, to the extent that it has not been
exercised or surrendered by the Optionee or expired, shall
terminate on the earlier of (i) the date the Optionee leaves the
Board of Directors for any reason other than failure to be
reappointed to the Board of Directors for other than Cause (as
defined in the Plan), retirement, disability or death (ii) the
date which is ten (10) years after the date of grant of the
Option as set forth in Paragraph 1 hereof; provided, however,
that if the Optionee leaves the Board of Directors at the request
of the Board of Directors for other than Cause, the Optionee may
be exempted from the operation of clause (i) of the foregoing
provision by a majority vote of the Committee.
(b) In the event the Optionee fails to be reappointed
to the Board of Directors for other than Cause (as defined in the
Plan) or retires prior to the date which is ten (10) years after
the date of grant of the Option as set forth in Paragraph 1
hereof, the Optionee shall have the right to exercise the Option,
to the extent that it has not been exercised or surrendered or
expired, for the remainder of such ten (10) year period.
(c) In the event the Optionee becomes disabled prior
to the date which is ten (10) years after the date of grant of
the Option as set forth in Paragraph 1 hereof, the Optionee
shall have the right to exercise the Option, to the extent that
17
<PAGE>
it has not been exercised or surrendered by the Optionee or
expired, for the remainder of such ten (10) year period.
(d) In the event the Optionee dies while serving on a
Board of Directors or after his or her retirement or after his or
her leaving by reason of disability, and prior to the date which
is ten (10) years after the date of grant of the Option as set
forth in Paragraph 1 hereof, the Option, to the extent that it
has not been exercised or surrendered by the Optionee or expired,
shall be exercisable, according to its terms, by the Optionee's
personal representative, the executor or administrator of the
Optionee's estate, or the person or persons who acquired the
Option by bequest or inheritance from the Optionee, at any time
within twelve (12) months after the date of death of the
Optionee, but in no event may the Option or the right to
surrender the Option for cash be exercised later than ten (10)
years after the date of grant of the Option as set forth in
Paragraph 1 hereof.
8. Effect of Agreement on Status of Optionee. The fact
that the Optionee has been granted the Option under the Plan
shall not confer on the Optionee any right to continued service
on the Board of Directors, nor shall it limit the right of the
Corporation or of any of its subsidiaries to remove the Optionee
from the Board of Directors at any time.
9. Listing and Registration of Option Shares. The
Corporation's obligation to issue shares of Common Stock upon
exercise of the Option is expressly conditioned upon the
completion by the Corporation of any registration or other
qualification of such shares under any state or federal law or
regulations or rulings of any governmental regulatory body or the
making of such investment representations or other
representations and agreements by the Optionee or any person
entitled to exercise the Option in order to comply with the
requirements of any exemption from any such registration or other
qualification of the Option Shares which the Committee shall, in
its discretion, deem necessary or advisable. The Corporation
shall use its best efforts to register the Options and Option
Shares under the Securities Act of 1993. Notwithstanding the
foregoing, the Corporation shall be under no obligation to
register or qualify the Option Shares under any state securities
law other than North Carolina. The required representations and
agreements referenced above may include representations and
agreements that the Optionee, or any other person entitled to
exercise the Option, (i) is purchasing such shares on his or her
own behalf as an investment and not with a present intention of
distribution or re-sale and (ii) agrees to have placed upon any
certificates representing the Option Shares a legend setting
forth any representations and agreements which have been given to
the Committee or a reference thereto and stating that such shares
may not be transferred except in accordance with all applicable
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<PAGE>
state and federal securities and banking laws and regulations,
and further representing that, prior to making any sale or other
disposition of the Option Shares, the Optionee, or any other
person entitled to exercise the Option, will give the Corporation
notice of the intention to sell or dispose of such shares not
less than five (5) days prior to such sale or disposition.
10. Adjustment Upon Changes in Capitalization; Dissolution
or Liquidation
(a) In the event of a change in the number of shares
of Common Stock outstanding by reason of a stock dividend, stock
split, recapitalization, reorganization, merger, exchange of
shares, or other similar capital adjustment, prior to the
termination of the Optionee's rights under this Agreement,
equitable proportionate adjustments shall be made by the
Committee in the number, kind, and the Option Price of shares
subject to the unexercised portion of the Option. The
adjustments to be made shall be determined by the Committee and
shall be consistent with such changes or changes in the
Corporation's total number of outstanding shares; provided,
however, that no adjustment shall change the aggregate Option
Price for the exercise of the Option granted.
(b) The grant of the Option under this Agreement shall
not affect in any way the right or power of the Corporation or
its shareholders to make or authorize any adjustment,
recapitalization, reorganization, or other change in the
Corporation's capital structure or its business, or any merger or
consolidation of the Corporation, or to issue bonds, debentures,
preferred or other preference stock ahead of or affecting Common
Stock or the rights thereof, or the dissolution or liquidation of
the Corporation, or any sale or transfer of all or any part of
the Corporation's assets or business.
(c) Upon the effective date of the dissolution or
liquidation of the Corporation, or of a reorganization, merger,
or consolidation of the Corporation with one or more other
corporations in which the Corporation is not the surviving
corporation, or the transfer of all or substantially all of the
assets or shares of the Corporation to another person or entity,
the Option granted under this Agreement shall be governed in
accordance with Paragraph 13(c) of the Plan.
11. Non-Transferability. The Option granted under this
Agreement shall not be assignable or transferable except, in the
event of the death of the Optionee, by will or by the laws of
descent and distribution. In the event of the death of the
Optionee, the personal representative, the executor or the
administrator of the Optionee's estate, or the person or persons
who acquired by bequest or inheritance the right to exercise or
to surrender the Option may exercise or surrender the unexercised
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<PAGE>
Option or portion thereof, in accordance with the terms hereof,
prior to the date which is ten (10) years after the date of grant
of the Option as set forth in Paragraph 1 hereof.
12. Tax Withholding. The grant of the Option and Option
Shares delivered pursuant to this Agreement, and any amounts
distributed with respect thereto, may be subject to applicable
federal, state and local withholding for taxes. The Optionee
expressly acknowledges and agrees to such withholding, where
applicable, without regard to whether the Option Shares may then
be sold or otherwise transferred by the Optionee.
13. Notices. Any notices or other communications required
or permitted to be given under this Agreement shall be in writing
and shall be deemed to have been sufficiently given if delivered
personally or when deposited in the United States mail as
Certified Mail, return receipt requested, properly addressed and
postage prepaid, if to the Corporation, at its principal office
at 111 Corcoran Street, Durham, North Carolina 27701; and, if to
the Optionee, at the Optionee's last address appearing on the
books of the Corporation or of any of its subsidiaries. The
Corporation or any of its subsidiaries and the Optionee may
change their address or addresses by giving written notice of
such change as provided herein. Any notice or other
communication hereunder shall be deemed to have been given on the
date actually delivered or as of the third (3rd) business day
following the date mailed, as the case may be.
14. Construction Controlled by Plan. This Agreement shall
be construed so as to be consistent with the Plan; and the
provisions of the Plan shall be deemed to be controlling in the
event that any provision hereof should appear to be inconsistent
therewith. The Optionee hereby acknowledges receipt of a copy of
the Plan from the Corporation.
15. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be valid and
enforceable under applicable law, but if any provision of this
Agreement is determined to be unenforceable, invalid or illegal,
the validity of any other provision or part thereof, shall not be
affected thereby and this Agreement shall continue to be binding
on the parties hereto as if such unenforceable, invalid or
illegal provision or part thereof had not been included herein.
16. Modification of Agreement; Waiver. This Agreement may
be modified, amended, suspended or terminated, and any terms,
representations or conditions may be waived, but only by a
written instrument signed by each of the parties hereto. No
waiver hereunder shall constitute a waiver with respect to any
subsequent occurrence or other transaction hereunder or of any
other provision hereof.
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17. Captions and Hearings; Gender and Number. Captions and
paragraph headings used herein are for convenience only, do not
modify or affect the meaning of any provision herein, are not a
part hereof, and shall not serve as a basis for interpretation or
in construction of this Agreement. As used herein, the masculine
gender shall include the feminine and neuter, the singular
number, the plural, and vice versa, whenever such meanings are
appropriate.
18. Governing Law; Venue and Jurisdiction. Without regard
to the principles of conflicts of laws, the laws of the State of
North Carolina shall govern and control the validity,
interpretation, performance, and enforcement of this Agreement.
The parties hereto agree that any suit or action relating to this
Agreement shall be instituted and prosecuted in the courts of the
County of Durham, State of North Carolina, and each party hereby
does waive any right or defense relating to such jurisdiction and
venue.
19. Binding Effect. This Agreement shall be binding upon
and shall inure to the benefit of the Corporation, its successors
and assigns, and shall be binding upon and inure to the benefit
of the Optionee, his or her heirs, legatees, personal
representatives, executors, and administrators.
20. Entire Agreement. This Agreement constitutes and
embodies the entire understanding and agreement of the parties
hereto and, except as otherwise provided hereunder, there are no
other agreements or understandings, written or oral, in effect
between the parties hereto relating to the matters addressed
herein.
21. Counterparts. This Agreement may be executed in any
number of counterparts, each of which when executed and delivered
shall be deemed an original, but all of which taken together
shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the Corporation has caused this
instrument to be executed in its corporate name by its President,
or one of its Vice Presidents, and attested by its Secretary or
one of its Assistant Secretaries, and its corporate seal to be
hereto affixed, all by authority of the Corporate Board and the
Optionee has hereunto set his or her hand and adopted as his or
her seal the typewritten word "SEAL" appearing beside his or her
name, all done this the day and year first above written.
CCB FINANCIAL CORPORATION
By:
________________________________
Ernest C. Roessler
President
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Attest:
_____________________________________
Assistant Secretary
[CORPORATE SEAL]
__________________________(SEAL)
______________________,
Optionee
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<PAGE>
EXHIBIT A
NOTICE OF EXERCISE OF
NONSTATUTORY STOCK OPTION
To: The Compensation Committee of CCB Financial Corporation
The undersigned hereby elects to purchase ________ whole
shares of Common Stock, par value $5.00 per share, of CCB
Financial Corporation (the "Corporation") pursuant to the
Nonstatutory Stock Option granted to the undersigned in that
certain Nonstatutory Stock Option Agreement between the
Corporation and the undersigned dated the ____ day of _________,
1993. The aggregate purchase price for such shares is
$_______________, which amount is (i) being tendered herewith,
(ii) will be tendered on or before _______________, 199__, (cross
out provision which does not apply) in cash and/or stock of the
Corporation owned by me, and I request that a value as of the
date of exercise of the Option be placed on any stock being
tendered in payment of the purchase price. The effective date of
this election shall be ____________________, 199___, or the date
of receipt of this Notice by the Corporation if later.
Executed this ___ day of ___________________, 199__, at
.
___________________________________
___________________________________
___________________________________
(Social Security Number)
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CCB FINANCIAL CORPORATION
1993 MANAGEMENT RECOGNITION PLAN
FOR GRAHAM SAVINGS BANK, INC., SSB
CCB Financial Corporation, a North Carolina bank holding
company (hereinafter referred to as the "Corporation"), does
herein set forth the terms of the 1993 Management Recognition
Plan for Graham Savings Bank, Inc., SSB (hereinafter referred to
as this "Plan") which was adopted by the Board of Directors
(hereinafter referred to as the "Corporate Board") of the
Corporation.
1. Purpose of this Plan.
(a) The purpose of this Plan is to provide to
directors and certain officers of certain of the Corporation's
subsidiary corporations (hereinafter referred to as
"Participants" or singularly, "Participant") an ownership
interest in the Corporation, in consideration of their
contributions to the management of the Corporation or any of its
subsidiaries by making awards (hereinafter referred to as
"Awards" or singularly, "Award") of shares of common stock, par
value $5.00 per share, of the Corporation ("Common Stock"). The
Corporate Board believes that participation in the ownership of
the Corporation will induce Participants to continue to serve the
Corporation or any of its subsidiaries as directors or officers
and encourage them to contribute to the future growth and profits
of the Corporation and its subsidiaries. In addition, the
existence of this Plan will make it possible for the Corporation
to attract capable individuals to serve as directors or officers
of the Corporation and its subsidiaries.
(b) This Plan was adopted in connection with
the conversion of Graham Savings Bank, SSB from a North
Carolina-chartered mutual savings bank to a North
Carolina-chartered stock savings bank (hereinafter referred to as
the "Bank") and the simultaneous acquisition of the Bank by the
Corporation (the "Conversion") which acquired all of the stock of
the Bank issued in connection with the Conversion.
2. Administration of this Plan.
(a) This Plan shall be administered by the
Compensation Committee of the Corporate Board (the "Committee").
The Committee shall have full power and authority to construe,
interpret and administer this Plan. All actions, decisions,
determinations, or interpretations of the Committee shall be
final, conclusive, and binding upon all parties.
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(b) The Committee shall decide to whom Awards shall be
made under this Plan except as provided in Subparagraphs 3(b) and
5(a) hereof, the number of shares of Common Stock subject to each
Award except as provided in Subparagraph 5(a) hereof and such
additional terms and conditions for Awards as the Committee shall
deem appropriate, including, without limitation, any
determinations as to the restrictions or conditions on transfer
of shares of Common Stock that are necessary or appropriate to
satisfy all applicable securities and banking laws, rules,
regulations, and listing requirements.
(c) The Committee may designate any officers or
employees of the Corporation or of any of its subsidiaries to
assist in the administration of this Plan. The Committee may
authorize such individuals to execute documents on its behalf and
may delegate to them such other ministerial and limited
discretionary duties as the Committee may see fit.
3. Shares of Common Stock Available Under the Plan.
(a) In connection with and simultaneously upon the
Conversion, the Corporation shall provide funding to the Plan to
acquire 41,888 shares of authorized but unissued Common Stock
(the "Plan Shares"). The Plan Shares shall be delivered by the
Committee pursuant to the terms of this Plan.
(b) Upon acquisition of the Plan Shares as provided in
Subparagraph (a) above, 41,888 of such shares (the "Allocated
Plan Shares") shall be allocated as provided in Paragraph 5
hereof. If shares once allocated to a Participant are forfeited
as provided in Paragraph 6 hereof, then such forfeited shares
shall be retained by the Committee and they shall again be
available for making additional Awards to Participants as
provided in Paragraph 2 hereof.
(c) The shares referred to in (i) the last sentence of
Subparagraph (b) above and (ii) the last sentence of this
Subparagraph (c) shall be treated collectively as a pool of
shares available (hereinafter referred to as the "Available
Shares") for making additional Awards to Participants as provided
in Paragraph 2 hereof. With respect to Available Shares, if any
such shares once allocated to a Participant are forfeited as
provided in Paragraph 6 hereof, then such forfeited shares shall
be available again for grants to Participants as provided in
Paragraph 2 hereof.
4. Eligibility. The Participants in this Plan to whom
Awards may be made shall be the following: members of the Board
of Directors of the Bank ("Subsidiary Board") and such officers
of the Bank as may be designated by the Committee. Subsidiary
Board shall include the advisory board of directors of the
Graham, North Carolina branch office of the Corporation's
subsidiary with which the Bank is merged or consolidated.
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Participants who are eligible to participate in the Plan by
virtue of their membership on the Subsidiary Board are sometimes
referred to hereinafter as "Board Participants." Participants
who are eligible to participate in the Plan solely by virtue of
their status as an officer of the Bank are sometimes referred to
hereinafter as "Officer Participants."
5. Award of Allocated Plan Shares; Additional Awards.
(a) Subject to the provisions of Paragraph 7 hereof,
all of the Allocated Plan Shares shall be awarded to the
following Participants in the number indicated opposite their
respective names, based upon past service and future service of
such individuals as members of the Subsidiary Board or the
Advisory Board or as officers of the Bank:
Name Number of Shares
A. C. Motsinger 8,738
Sarah G. Johnston 4,941
F. C. Hall 3,211
William R. Sizemore 3,211
J. Worth Rich 3,211
James R. Guthrie 2,095
U. Dean Hall 3,464
Larry W. Sharpe 3,491
Michael C. Motsinger 3,491
Billie L. May 3,491
Cheryl F. Cook 1,285
Janice Kornegay 699
Patricia Moore 140
Vicki Sharp 140
Judy Hayes 140
Lynwood Brown 140
TOTAL 41,888
(b) The Available Shares shall be available for the
making of additional Awards to Participants during the remaining
term of this Plan, upon such terms and conditions as may be
determined by the Committee.
6. Vesting of Shares.
(a) Shares granted under this Plan shall vest and the
right of a Participant to the shares shall be nonforfeitable in
accordance with the following schedules:
(i) With respect to the Allocated Plan Shares:
Date When Such Shares Percentage of Such
Become Vested Shares Vested
Effective Date of Plan 20%
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First Anniversary of Effective Date 20%
Second Anniversary of Effective Date 20%
Third Anniversary of Effective Date 20%
Fourth Anniversary of Effective Date 20%
(ii) With respect to the Available Shares which
may be made subject to an Award:
Date When Such Shares Percentage of Such
Become Vested Shares Vested
Date of Award 20%
First Anniversary of the date of Award 20%
Second Anniversary of the date of Award 20%
Third Anniversary of the date of Award 20%
Fourth Anniversary of the date of Award 20%
(b) In determining the number of shares vested under
the above vesting schedules, a Participant shall not receive
fractional shares. If the product resulting from multiplying the
vested percentage times the allocated shares results in a
fractional share, then a Participant's vested right shall be to
the whole number of shares disregarding any fractional share.
(c) In the event any Participant to whom shares are
awarded under this Plan terminates membership on the Subsidiary
Board or employment with the Corporation or any subsidiary of the
Corporation for any reason, other than as provided in
Subparagraphs 6(d) and 6(e) below, and such Participant does not
have a 100% vested interest in his or her shares under this Plan,
then any shares which are not vested, based upon the applicable
schedule in Subparagraph (a) above, shall be forfeited and shall
be available again for Awards to Participants as may be
determined by the Committee.
(d) In the event that the membership of a Board
Participant on the Subsidiary Board should terminate because of
such Board Participant's retirement, disability, or death or
failure of the Corporation to elect a Board Participant for
service as a member of the Subsidiary Board for other than Cause
or if the employment of an Officer Participant should terminate
because of such Officer Participant's retirement, disability,
death, or unilateral action by the Holding Company for other than
Cause, prior to the date when all shares allocated to him or her
would be 100% vested in accordance with the applicable schedule
in Subparagraph 6(a) above, then, notwithstanding the foregoing
schedules in Subparagraph 6(a) above, all shares allocated to
such Participant shall immediately become fully vested and
nonforfeitable. For purposes of this Plan, the term "retirement"
shall mean (i) with respect to Participants other than A. C.
Motsinger, Sarah G. Johnston, and U. Dean Hall ("Executive
Participants") who are employees of the Corporation or of any of
its subsidiaries, (A) simultaneously with or subsequent to the
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<PAGE>
termination of his or her employment under conditions which would
constitute retirement under any tax qualified retirement plan
maintained by the Corporation or by any of its subsidiaries or
(B) attaining age 65; (ii) with respect to Participants other
than Executive Participants who are not employees of the
Corporation or of any of its subsidiaries, at any time after
attaining age 65 with the approval of the Committee; (iii) at the
election of a Participant other than an Executive Participant, at
any time after not less than five (5) years service as a member
of the Subsidiary Board or the Board of Directors of Graham
Savings Bank, SSB, such service being computed cumulatively for
purposes of this clause (iii); or (iv) with respect to Executive
Participants, termination of such Executive Participant's
employment for any reason after September 30, 1997. For purposes
of this Plan, the term "disability" shall (i) with respect to any
Participant who is also an employee of the Corporation or of any
of its subsidiaries, be defined in the same manner as such term
is defined in Section 22(e)(3) of the Internal Revenue Code of
1986, as amended, and (ii) with respect to any other Participant,
as may be defined by the Committee from time to time, or as may
be determined by the Committee at any time with respect to any
individual Participant. For purposes of this Plan, the term
"Cause" shall refer to (i) the commission of an act of fraud,
embezzlement, theft or proven dishonesty, or any other illegal
act or practice (whether or not resulting in criminal prosecution
or conviction but excepting minor traffic and similar violations
in the nature of a misdemeanor); or (ii) the willful engaging in
misconduct which is deemed by the Corporation, in good faith, to
be materially injurious to the Corporation, monetarily or
otherwise; or (iii) the conviction of a felony; or (iv) the
willful and continued failure or habitual neglect to attend
meetings of the Subsidiary Board (other than any failure or
neglect caused by or resulting from disability); provided,
however, that no act or failure to act shall be deemed to be
"willful" unless done or omitted to be done not in good faith and
without reasonable belief that such action or omission was in the
best interest of the Corporation.
(e) In the event of a "change in control" of the
Corporation, then, notwithstanding the foregoing schedules in
Subparagraph 6(a) above, all shares awarded to Participants shall
immediately become fully vested. Written notice that a change in
control has occurred shall be given by the Committee to each
Participant. When used herein, the phrase "change in control"
refers to (i) the acquisition by any person, group of persons or
entity of the beneficial ownership or power to vote more than
twenty (20%) percent of the Corporation's outstanding stock or
(ii) during any period of two (2) consecutive years, a change in
the majority of the Corporate Board, unless the election of each
new Director was approved by at least two-thirds of the Directors
then still in office who were Directors at the beginning of the
two (2) year period.
7. Action Required of Participants.
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<PAGE>
(a) Each Participant receiving an Award of shares
under this Plan shall represent to and agree with the Corporation
that such shares shall be transferable only if the proposed
transfer shall be permissible under this Plan and if, in the
opinion of counsel for the Corporation, such transfer shall at
such time be in compliance with all applicable federal and state
securities and banking laws and regulations.
(b) Each Participant receiving an Award of shares
under this Plan shall deliver to the Corporation a Restricted
Stock Agreement, substantially in the form attached hereto as
Exhibit A, which shall be signed by such Participant.
8. Restriction.
(a) Shares subject to an Award made under this Plan
shall forthwith, after the making of the representations required
by Paragraph 7 hereof, be allocated in the name of the
Participant. Such Participant shall thereupon be a shareholder
with respect to all such shares and shall have all the rights of
a shareholder with respect to all such shares, including the
right to vote such shares and to receive all dividends and other
distributions (subject to the provisions of Subparagraph 8(b)
below) paid with respect to such shares; provided, however, that
such shares shall be subject to the restrictions hereinafter
described and to possible forfeiture as previously described in
Paragraph 6 hereof. The transfer agent for Common Stock shall be
instructed to that effect with respect to such shares.
(b) In the event that, as the result of a stock split
or stock dividend or combination of shares or any other change or
exchange for other securities by reclassification,
reorganization, merger, consolidation, recapitalization, or
otherwise, a Participant shall, as the owner of the shares
subject to an Award made under this Plan and subject to the
restrictions hereunder, be entitled to new or additional or
different shares of Common Stock or other securities, all
provisions of this Plan relating to vesting, restrictions and
lapse of restrictions herein set forth shall thereupon be
applicable to such new or additional or different shares or other
securities to the extent applicable to the shares with respect to
which they were distributed; provided, however, that if a
Participant should receive rights, warrants or fractional
interests in respect of any of such shares, such rights or
warrants may be held, exercised, sold or otherwise disposed of,
and such fractional interests may be settled, by such Participant
free and clear of the restrictions herein set forth.
(c) The restriction to which shares subject to an
Award made under this Plan shall be subject is that if the
directorship or employment of a Participant should be terminated
for any reason during the "restricted period" (as defined in
Subparagraph 10(b) hereof), except as otherwise specifically
6
<PAGE>
provided in Paragraph 6 hereof, the Participant's interest in the
shares allocated under this Plan shall be forfeited as provided
in the applicable schedule in Subparagraph 6(a) hereof.
(d) The restrictions imposed on shares allocated under
this Plan may at any time be modified, reduced, relaxed, or
eliminated altogether as the Committee shall from time to time
determine, if, in its discretion, the Committee considers such
action to be in furtherance of the purposes of this Plan. Notice
of any change in restrictions shall be given to Participants and
the Corporation's transfer agent.
9. Effect of Award on Status of Participant. The fact
that an Award is made to a Participant under this Plan shall not
confer on such Participant any right to continued service on the
Board or on the Board of Directors of any of the subsidiaries of
the Corporation, nor any right to continued employment with the
Corporation or any of the subsidiaries of the Corporation; nor
shall it limit the right of the Corporation or of any of the
directors of the subsidiaries of the Corporation to remove such
Participant from their respective boards, or to terminate the
Participant's employment at any time.
10. Voting Rights; Dividends; Other Distributions. A
Participant shall have the full power to vote all of the shares
in the Participant's name from time to time and shall be entitled
to receive all cash dividends declared upon any such shares in
the Participant's name from time to time. All shares of Common
Stock or other securities, including but not limited to stock
dividends, allocated in respect of such shares or in substitution
thereof, whether by the Corporation or by another issuer, shall
be subject to all terms and conditions of this Plan and shall be
redelivered to a Participant or delivered as instructed by the
Committee under the same circumstances as the shares with respect
to, or in substitution for, which they were allocated; provided,
however, that if a Participant should receive rights, warrants or
fractional interests in respect of any of the shares in the
Participant's name, such rights or warrants may be held,
exercised, sold or otherwise disposed of, and such fractional
interests may be settled, by such Participant free and clear of
the restrictions herein set forth.
11. Adjustment Upon Changes in Capitalization; Dissolution
or Liquidation.
(a) In the event of a change in the number of shares
of Common Stock outstanding by reason of a reclassification,
recapitalization, reorganization, merger, or consolidation, or
other similar capital adjustment, merger or consolidation of the
Corporation, or the sale by the Corporation of all or a
substantial portion of its assets, or the occurrence of any other
event which could affect the implementation of this Plan and the
realization of its objectives, the Committee may make such
7
<PAGE>
adjustments in the terms, conditions, or restrictions of this
Plan and in any Restricted Stock Agreement then in effect, as the
Committee shall deem equitable and just.
(b) The making of an Award under this Plan shall not
affect in any way the right or power of the Corporation or its
shareholders to make or authorize any adjustment,
recapitalization, reorganization, or other change in the
Corporation's capital structure or its business, or any merger or
consolidation of the Corporation, or to issue bonds, debentures,
preferred or other preference stock ahead of or affecting Common
Stock or the rights thereof, or the dissolution or liquidation of
the Corporation, or any sale or transfer of all or any part of
the Corporation's assets or business.
12. Non-Transferability.
(a) Any shares subject to an Award made under this
Plan shall not be sold, exchanged, transferred, pledged,
hypothecated or otherwise disposed of during the "restricted
period". Nothing herein shall preclude a Participant from making
a gift of any such shares to a spouse, child, stepchild,
grandchild, parent or sibling, or legal dependent of such
Participant, or to a trust of which the beneficiary or
beneficiaries of the trust shall be either a person designated
herein or such Participant; provided, however, that any such
shares so given by a Participant shall remain subject to the
restrictions, obligations and conditions set forth in this Plan.
In addition, such shares may be tendered in response to a tender
offer for or a request or invitation to tenders of greater than
fifty (50%) percent of the outstanding Common Stock and may be
surrendered in a merger, consolidation or share exchange
involving the Corporation; provided, however, in each case, that
except as otherwise provided herein, the securities or other
consideration received in exchange therefor shall thereafter be
subject to the restrictions and conditions set forth in this
Plan.
(b) The term "restricted period" with respect to
shares subject to an Award made under this Plan shall be the
period commencing on the date of making such Award of such shares
to a Participant and ending on the date on which such shares are
no longer registered under the Securities Act of 1933 or no
longer subject to forfeiture as provided in Paragraph 6(a)
hereof. The date of making an Award with respect to the Initial
Plan Shares shall be the date of Conversion. The date of making
an Award with respect to Available Shares shall be the date of
execution by a Participant of a Restricted Stock Agreement in the
form referred to in Subparagraph 7(b) hereof.
13. Tax.
(a) With respect to each Award of Allocated Plan
Shares, the Corporation shall make a cash payment to each
8
<PAGE>
Participant in an amount reasonably calculated to approximate the
Participant's federal and state tax liability associated with
such Award, but in no case shall this amount exceed 36% of the
dollar value of the Award vesting in each tax year.
(b) The Corporation or any of its subsidiaries shall
have the right to deduct or otherwise effect a withholding of any
amount required by federal or state laws to be withheld with
respect to the making of an Award or the sale of shares acquired
under this Plan in order for the Corporation or any of its
subsidiaries to obtain a tax deduction otherwise available as a
consequence of such Award or sale, as the case may be.
14. Exculpation and Indemnification. In connection with
this Plan, no member of the Committee shall be personally liable
for any act or omission to act in his or her capacity as a member
of the Committee, nor for any mistake in judgment made in good
faith, unless arising out of, or resulting from, such person's
own bad faith, gross negligence, willful misconduct, or criminal
acts. To the extent permitted by applicable law and regulation,
the Corporation shall indemnify and hold harmless the members of
the Committee and each other officer or employee of the
Corporation or of any of its subsidiaries to whom any duty or
power relating to the administration or interpretation of this
Plan may be assigned or delegated, from and against any and all
liabilities (including any amount paid in settlement of a claim
with the approval of the Committee) and any costs or expenses
(including counsel fees) incurred by such persons arising out of
or as a result of, any act or omission to act in connection with
the performance of such person's duties, responsibilities, and
obligations under this Plan, other than such liabilities, costs,
and expenses as may arise out of, or result from, the bad faith,
gross negligence, willful misconduct, or criminal acts of such
persons.
15. Amendment and Modification of this Plan. The Corporate
Board may at any time, and from time to time, amend or modify
this Plan (including the form of Restricted Stock Agreement) in
any respect; provided, however, that no amendment or modification
shall be made that increases the total number of Allocated Plan
Shares covered by this Plan, changes the list of Participants or
the number of Allocated Plan Shares allocated to each, or effects
any change in the category of persons who may receive Awards of
shares under this Plan. Any amendment or modification of this
Plan shall not in any manner affect any Award of shares
theretofore made to a Participant under this Plan without the
consent of such Participant or the transferee in the event of the
death of such Participant.
16. Termination and Expiration of this Plan. This Plan may
be abandoned, suspended, or terminated, in whole or in part, at
any time by the Corporate Board; provided, however, that
abandonment, suspension, or termination of this Plan shall not
9
<PAGE>
affect any Awards theretofore made under this Plan. Unless
sooner terminated, this Plan shall terminate at the close of
business on the day that is the tenth (10th) anniversary of the
Conversion, or the next business day thereafter; and no Award of
shares may be made under this Plan thereafter but such
termination shall not effect any Award of shares theretofore
made. In the event that the Board terminates this Plan in whole,
any Available Shares that had not been allocated to eligible
Participants together with any other trust assets, shall revert
to the Corporation.
17. Effective Date. This Plan has been adopted by the
Corporate Board to be effective as of the date of the Conversion.
18. Captions and Headings; Gender and Number. Captions and
paragraph headings used herein are for convenience only, do not
modify or affect the meaning of any provision herein, are not a
part hereof, and shall not serve as a basis for interpretation or
in construction of this Plan. As used herein, the masculine
gender shall include the feminine and neuter, the singular
number, the plural, and vice versa, whenever such meanings are
appropriate.
19. Expenses of Administration of Plan. All costs and
expenses incurred in the operation and administration of this
Plan shall be borne by the Corporation or by one of its
subsidiaries.
20. Governing Law. Without regard to the principles of
conflicts of laws, the laws of the State of North Carolina shall
govern and control the validity, interpretation, performance, and
enforcement of this Plan.
21. Inspection of Plan. A copy of this Plan, and any
amendments thereto, shall be maintained by the Secretary of the
Corporation and shall be shown to any proper person making
inquiry about it.
10
<PAGE>
STATE OF NORTH CAROLINA
COUNTY OF DURHAM
RESTRICTED STOCK AGREEMENT
THIS RESTRICTED STOCK AGREEMENT (the "Agreement") is made
and entered into as of the 1st day of October, 1993 (hereinafter
referred to as the "Effective Date"), by and between CCB
FINANCIAL CORPORATION (hereinafter referred to as the
"Corporation"), a North Carolina corporation, and
__________________ (hereinafter referred to as "Participant").
WHEREAS, in connection with the conversion of Graham Savings
Bank, SSB from a North Carolina-chartered mutual savings bank
(hereinafter referred to as the "Bank") to a North
Carolina-chartered stock savings bank and the simultaneous
acquisition of the Bank by the Corporation (hereinafter referred
to as the "Conversion"), the 1993 Management Recognition Plan for
Graham Savings Bank, Inc., SSB (hereinafter referred to as the
"Plan") was adopted by the Board of Directors of the Corporation
(hereinafter referred to as the "Corporate Board"); and
WHEREAS, the Compensation Committee of the Corporate Board
(hereinafter referred to as the "Committee") has determined that
it is desirable and in the best interest of the Corporation to
make an award (the "Award") of certain shares of the common
stock, par value $5.00 per share (hereinafter referred to as the
"Common Stock"), of the Corporation, under the Plan to the
Participant, subject to certain restrictions as specified below,
in recognition of his or her outstanding service to the
Corporation or of one or more of its subsidiaries.
NOW, THEREFORE, the Corporation and the Participant agree as
follows:
1. Date of Award. The date of making the Award under this
Agreement is the 1st day of October, 1993.
2. Receipt by Participant. The Participant acknowledges
receipt from the Corporation of ______________ (_______) shares
of Common Stock and notice of the allocation of _________
(___________) shares of Common Stock under the terms of the Plan
(the "Restricted Stock").
3. Transfer Restrictions.
(a) Securities and Banking Law Restrictions. The
Participant agrees with the Corporation that the Restricted Stock
shall be subject to such stop-transfer orders and other
restrictions as the Committee may deem advisable under the rules,
11
<PAGE>
regulations, and other requirements of the Securities and
Exchange Commission, any stock exchange upon which Common Stock
is then listed, and any other applicable federal or state
securities or banking laws, rules, or regulations.
(b) Other Transfer Restrictions. The Participant
agrees with the Corporation that each certificate representing
any of the Restricted Stock shall be subject to such stop-
transfer orders and other restrictions as the Committee shall
deem advisable to insure compliance with the terms of this
Agreement.
4. Vesting and Delivery of Restricted Stock.
(a) Periodic Vesting. Subject to subparagraphs 4(b),
4(c), and 4(d) below, Restricted Stock shall vest and become
nonforfeitable in accordance with the following schedules, as
applicable:
(i) With respect to any shares of Restricted
Stock which are Allocated Plan Shares as defined in the Plan:
On the date of Conversion: 20% vested
On the first anniversary of the date of
Conversion: 20% vested
On the second anniversary of the date of
Conversion: 20% vested
On the third anniversary of the date of 20% vested
Conversion:
On the fourth anniversary of the 20% vested
date of Conversion:
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<PAGE>
(ii) With respect to any shares of Restricted
Stock which were Available Shares as defined in the Plan:
On the Date of Award: 20% vested
On the first anniversary of the date of
Award: 20% vested
On the second anniversary of the date of
Award: 20% vested
On the third anniversary of the date of 20% vested
Award:
On the fourth anniversary of the date of 20% vested
Award:
(b) Accelerated Vesting. Notwithstanding
paragraph (a) above, all Restricted Stock previously not vested
and subject to forfeiture shall vest and the right of the
Participant to such shares of the Restricted Stock shall become
nonforfeitable upon the occurrence of any of the following:
(i) Retirement of Participant. The termination
of the Participant's membership on the Subsidiary Board
(as defined in the Plan) or of the Participant's
employment by the Corporation by reason of retirement.
For purposes of this Plan, the term "retirement" shall
mean (i) with respect to Participants who are employees
of the Corporation or of any of its subsidiaries,
(A) simultaneously with or subsequent to the
termination of the Participant's employment under
conditions which constitute retirement under any tax
qualified retirement plan maintained by the Corporation
or by any of its subsidiaries or (B) attaining age 65;
(ii) with respect to Participants who are not employees
of the Corporation or of any of its subsidiaries, at
any time after attaining age 65 with the approval of
the Committee; or (iii) at the election of the
Participant, at any time after not less than five (5)
years service as a member of a Subsidiary Board or the
Board of Directors of Graham Savings Bank, SSB with
such service computed cumulatively for purposes of this
clause (iii).
(ii) Disability of Participant. The termination
of the Participant's membership on the Subsidiary Board
or of the Participant's employment by the Corporation
by reason of disability. For purposes of this Plan,
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<PAGE>
the term "disability" shall (i) if the Participant is
also an employee of the Corporation or of any of its
subsidiaries, be defined in the same manner as such
term is defined in Section 22(e)(3) of the Internal
Revenue Code of 1986, as amended, and (ii) if the
Participant is not such an employee, as may be defined
by the Committee from time to time, or as may be
determined by the Committee at any time with respect to
the Participant.
(iii) Death of Participant. The Participant's
death.
(iv) Change in Control. Notice of a "change in
control" of the Corporation being given by the
Committee. For the purpose of this Agreement, a
"change in control" of the Corporation means (i) the
acquisition by any person, group of persons or entity
of the beneficial ownership or power to vote more than
twenty (20%) percent of the outstanding Common Stock or
(ii) during any period of two (2) consecutive years, a
change in the majority of the Corporate Board, unless
the election of each new director was approved by at
least two-thirds (2/3) of the directors then still in
office who were directors at the beginning of the
two (2) year period.
(v) Reappointment to Board. The termination of
the Participant's membership on the Subsidiary Board by
reason of the failure to be reappointed for other than
Cause (as defined in the Plan).
(c) Delivery of Restricted Stock to the Participant.
Within thirty (30) days after (i) a date on which shares of
Restricted Stock have become vested as provided in
subparagraphs (a) and (b) above, all of such shares that have
become nonforfeitable in accordance with this paragraph 4 shall
be delivered to the Participant or Participant's designee,
(ii) receipt of written notification of Participant's retirement,
disability, or death together with such other documentation as
the Committee shall reasonably require, or (iii) a change in
control of the Corporation, the Committee shall deliver to the
Participant, the Participant's designee, or such other person as
shall have been designated as Participant's beneficiary in
accordance with this Agreement, as applicable, certificates
representing the shares of Restricted Stock which have become
vested and nonforfeitable, as the Committee shall determine, free
from any restrictions imposed by this Agreement other than such
restrictions and conditions as may be deemed necessary by the
Committee to assure compliance with all applicable securities or
banking laws, rules, regulations, and listing requirements as set
forth in subparagraph 3(b) above.
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<PAGE>
(d) Delivery of Forfeited Restricted Stock. If the
Participant's membership on the Subsidiary Board or employment
with the Corporation terminates for any reason other than one of
those provided in subparagraph 4(b) above, before all of the
shares of Restricted Stock are vested in accordance with
subparagraphs 4(a) and 4(b) above, all such shares then subject
to forfeiture shall be deemed forfeited by the Participant.
5. Voting Rights; Dividends; Other Distributions. The
Participant shall have the full power to vote all of the
Restricted Stock in the Participant's name from time to time and
shall be entitled to receive all cash dividends declared upon any
of the Restricted Stock in the Participant's name from time to
time. All shares of Common Stock or other securities, including
but not limited to stock dividends, allocated in respect of the
Restricted Stock or in substitution thereof, whether by the
Corporation or by another issuer shall be subject to all terms
and conditions of this Agreement and shall be redelivered to the
Participant or allocated as instructed by the Committee under the
same circumstances as the Restricted Stock with respect to, or in
substitution for, which they were allocated; provided, however,
that if the Participant should receive rights, warrants, or
fractional interests in respect of any of the Restricted Stock in
the Participant's name, such rights or warrants may be held,
exercised, sold, or otherwise disposed of, and such fractional
interests may be settled, by the Participant free and clear of
the restrictions herein set forth.
6. Designation of Beneficiary. The Participant may file
with the Committee a written designation of one or more persons
as the beneficiary who shall be entitled to receive the
Restricted Stock, if any, distributable to the Participant upon
the Participant's death. The Participant may, from time to time,
revoke or change the Participant's beneficiary designation
without the consent of any prior beneficiary, if any, by filing a
new designation with the Committee. The last such designation
received by the Committee shall be controlling; provided,
however, that no designation, or change or revocation thereof,
shall be effective unless received by the Committee prior to the
Participant's death, and in no event shall it be effective as of
a date prior to such receipt.
If no such beneficiary designation is in effect at the
time of the Participant's death, or if no designated beneficiary
survives the Participant, or if such designation conflicts with
law, the Participant's estate shall be deemed to have been
designated the Participant's beneficiary and shall receive the
Restricted Stock, if any, distributable to the Participant upon
the Participant's death. If the Committee is in doubt as to the
right of any person to receive such distribution, the Committee
15
<PAGE>
may retain the Restricted Stock, without liability for any
interest in respect thereof, until the rights thereto are
determined, or the Committee may direct the transfer of such
Restricted Stock into any court of appropriate jurisdiction and
such transfer shall be deemed a complete discharge of the
obligations of the Corporation hereunder.
7. Effect of Award on Status of Participant. The fact
that an Award has been made to the Participant under this Plan
shall not confer on the Participant any right to continued
service on the Board or on the Board of Directors of any
subsidiary of the Corporation, nor to continued employment with
the Corporation; nor shall it limit the right of the Corporation
or of any of its subsidiaries to remove the Participant from
their respective boards, or to terminate the Participant's
employment at any time.
8. Adjustment Upon Changes in Capitalization; Dissolution
or Liquidation.
(a) In the event of a change in the number of shares
of Common Stock outstanding by reason of a reclassification,
recapitalization, reorganization, merger, or consolidation, or
other similar capital adjustment, merger or consolidation of the
Corporation, or the sale by the Corporation of all or a
substantial portion of its assets, or the occurrence of any other
event which could affect the implementation of this Plan and the
realization of its objectives, the Committee may make such
adjustments in the terms, conditions, or restrictions of this
Agreement as the Committee shall deem equitable and just.
(b) The making of the Award under this Agreement does
not affect in any way the right or power of the Corporation or
its shareholders to make or authorize any adjustment,
recapitalization, reorganization, or other change in the
Corporation's capital structure or its business, or any merger or
consolidation of the Corporation, or to issue bonds, debentures,
preferred or other preference stock ahead of or affecting Common
Stock or the rights thereof, or the dissolution or liquidation of
the Corporation, or any sale or transfer of all or any part of
the Corporation's assets or business.
9. Non-Transferability. The Restricted Stock may not be
sold, exchanged, transferred, pledged, hypothecated, or otherwise
disposed of by the Participant until transferred to the
Participant in accordance with the terms of this Agreement.
Nothing herein shall preclude the Participant from making a gift
of any Restricted Stock to a spouse, child, stepchild,
grandchild, parent, sibling, or legal dependent of the
Participant, or to a trust of which the beneficiary or
beneficiaries of the trust shall be either a person designated
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herein or the Participant, provided, however, that any Restricted
Stock so given shall remain subject to the restrictions,
obligations, and conditions set forth in this Agreement. In
addition, the Restricted Stock may be tendered in response to a
tender offer for or a request or invitation to tenders of greater
than fifty percent (50%) of the common stock of the Corporation
and may be surrendered in a merger, consolidation, or share
exchange involving the Corporation; provided, however, in each
case, that except as otherwise provided in paragraph 5 above, the
security or other consideration received in exchange therefor
shall thereafter be subject to the restrictions and conditions
set forth in this Agreement.
10. Tax.
(a) With respect to the Allocated Plan Shares, the
Corporation shall make a cash payment to the Participant in an
amount reasonably calculated to approximate the Participant's
federal and state tax liability associated with the Award of
Allocated Plan Shares provided that this amount shall not exceed
36% of the dollar value of the Award vesting in each tax year.
(b) All Restricted Stock distributed pursuant to this
Agreement, and any amounts distributed with respect thereto prior
to distribution of such Restricted Stock by the Committee, shall
be subject to applicable federal, state, and local withholding
for taxes. The Participant expressly acknowledges and agrees to
such withholding without regard to whether the Restricted Stock
may then be sold or otherwise transferred by the Participant.
11. Notices. Any notices or other communications required
or permitted to be given under this Agreement shall be in writing
and shall be deemed to have been sufficiently given if delivered
personally or when deposited in the United States mail as
Certified Mail, return receipt requested, properly addressed and
postage prepaid, if to the Corporation at its principal office at
111 Corcoran Street, Durham, North Carolina 27701; and, if to the
Participant, at the Participant's last address appearing on the
books of the Corporation or of any of its subsidiaries. The
Corporation or any of its subsidiaries and the Participant may
change their address or addresses by giving written notice of
such change as provided herein. Any notice or other
communication hereunder shall be deemed to have been given on the
date actually delivered or as of the third (3rd) business day
following the date mailed, as the case may be.
12. Construction Controlled by Plan. This Agreement shall
be construed so as to be consistent with the Plan; and the
provisions of the Plan shall be deemed to be controlling in the
event that any provision hereof should appear to be inconsistent
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therewith. The Participant hereby acknowledges receipt of a copy
of the Plan from the Corporation.
13. Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such a manner as to be
valid and enforceable under applicable law, but if any provision
of this Agreement is determined to be unenforceable, invalid or
illegal, the validity of any other provision or part thereof,
shall not be affected thereby and this Agreement shall continue
to be binding on the parties hereto as if such unenforceable,
invalid or illegal provision or part thereof had not been
included herein.
14. Modification of Agreement; Waiver. This Agreement may
be modified, amended, suspended, or terminated, and any terms,
representations or conditions may be waived, but only by a
written instrument signed by each of the parties hereto. No
waiver hereunder shall constitute a waiver with respect to any
subsequent occurrence or other transaction hereunder or of any
other provision hereof.
15. Captions and Headings; Gender and Number. Captions and
paragraph headings used herein are for convenience only, do not
modify or affect the meaning of any provision herein, are not a
part hereof, and shall not serve as a basis for interpretation or
in construction of this Agreement. As used herein, the masculine
gender shall include the feminine and neuter, the singular number
the plural, and vice versa, whenever such meanings are
appropriate.
16. Governing Law; Venue and Jurisdiction. Without regard
to the principles of conflicts of laws, the laws of the State of
North Carolina shall govern and control the validity,
interpretation, performance, and enforcement of this Agreement.
The parties hereto agree that any suit or action relating to this
Agreement shall be instituted and prosecuted in the courts of the
County of Durham, State of North Carolina, and each party hereby
does waive any right or defense relating to such jurisdiction and
venue.
17. Binding Effect. This Agreement shall be binding upon
and shall inure to the benefit of the Corporation, and its
successors and assigns, and shall be binding upon and inure to
the benefit of the Participant, and the Participant's heirs,
legatees, personal representatives, executors, and
administrators.
18. Entire Agreement. This Agreement constitutes and
embodies the entire understanding and agreement of the parties
hereto and, except as otherwise provided hereunder, there are no
other agreements or understandings, written or oral, in effect
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between the parties hereto relating to the matters addressed
herein.
19. Counterparts. This Agreement may be executed in any
number of counterparts, each of which when executed and delivered
shall be deemed an original, but all of which taken together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Corporation has caused this
instrument to be executed in its corporate name by its President,
or one of its Vice Presidents, and attested by its Secretary or
one of its Assistant Secretaries, and its corporate seal to be
hereto affixed, all by authority of the Corporate Board first
duly given; and the individual parties hereto have hereunto set
his or her hand and adopted as his or her seal the typewritten
word "SEAL" appearing beside his or her name, all done this the
day and year first above written.
CCB FINANCIAL CORPORATION
By: ____________________________
Ernest C. Roessler
President
ATTEST:
___________________________
___________________________
Assistant Secretary
[Corporate Seal]
PARTICIPANT
___________________________________(SEAL)
___________________________________
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