UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the period ended September 30, 1994
Commission File Number: 0-12358
CCB FINANCIAL CORPORATION
(Exact name of issuer as specified in charter)
North Carolina 56-1347849
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
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
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.
Yes [ X ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $5 Par value 9,516,295
(Class of Stock) (Shares outstanding
as of October 31, 1994)
<PAGE>
CCB FINANCIAL CORPORATION
FORM 10-Q
INDEX
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
September 30, 1994, December 31, 1993 and
September 30, 1993 3
Consolidated Statements of Income
Three Months Ended September 30, 1994 and 1993
and Nine Months Ended September 30, 1994 and 1993 4
Consolidated Statements of Shareholders' Equity
Nine Months Ended September 30, 1994 and 1993 5
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1994 and 1993 6
Notes to Consolidated Financial Statements
Nine Months Ended September 30, 1994 and 1993 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CCB Financial Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1994 1993 1993
------------- ------------- -------------
<S> <C> <C> <C>
Assets:
Cash and due from banks $148,482,776 191,332,445 150,387,557
Time deposits in other banks 26,819,560 35,431,738 30,103,768
Federal funds sold and other
short-term investments 139,000,000 169,286,165 71,228,378
Investment securities:
Available for sale (market values
of $540,346,730,$563,187,727
and $598,109,136) 540,346,730 553,292,393 580,971,879
Held for investment (market values
of $69,963,931, $68,553,264
and $59,811,096) 68,971,631 64,126,134 54,759,560
Loans and lease financing (notes
2 and 4) 2,385,216,472 2,159,489,054 1,905,981,558
Less reserve for loan and lease
losses (note 3) 29,752,443 26,963,334 23,685,031
------------- ------------- -------------
Net loans and lease financing 2,355,464,029 2,132,525,720 1,882,296,527
Premises and equipment 41,905,155 42,597,185 42,488,297
Other assets (note 4) 91,729,447 69,050,959 74,197,729
-------------- ------------- -------------
Total assets $3,412,719,328 3,257,642,739 2,886,433,695
============== ============= =============
Liabilities:
Deposits:
Demand (non-interest bearing) $405,839,381 421,432,974 383,901,185
Savings and NOW accounts 410,042,313 420,344,480 380,367,193
Money market accounts 858,055,550 778,606,879 705,395,692
Jumbo time deposits 224,077,094 172,034,160 160,203,315
Consumer time deposits 991,102,066 1,024,352,268 922,722,934
------------- ------------- -------------
Total deposits 2,889,116,404 2,816,770,761 2,552,590,319
Federal funds purchased and
securities sold under
agreements to repurchase 38,381,066 25,526,966 27,541,580
Other short-term borrowed funds 63,506,976 16,202,362 20,415,322
Long-term debt 76,486,044 78,698,073 37,151,187
Other liabilities 79,854,660 69,440,814 32,558,341
------------- ------------- -------------
Total liabilities 3,147,345,150 3,006,638,976 2,670,256,749
------------- ------------- -------------
Shareholders' equity:
Serial preferred stock. Authorized
5,000,000 shares; none issued -- -- --
Common stock of $5 par value. Authorized
30,000,000 shares; 9,516,379, 9,517,277
and 8,443,223 shares issued 47,581,895 47,586,385 42,216,115
Additional paid-in capital 83,589,362 83,349,012 55,783,953
Retained earnings 143,937,241 124,922,331 118,705,703
Unrealized loss on investment
securities available for sale (6,499,259) (835,677) (528,825)
Less: Unearned common stock held by
management recognition plans (3,235,061) (4,018,288) --
-------------- ------------- -------------
Total shareholders' equity 265,374,178 251,003,763 216,176,946
-------------- ------------- -------------
Total liabilities and
shareholders' equity $3,412,719,328 3,257,642,739 2,886,433,695
============== ============= ==============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CCB Financial Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1994 1993 1994 1993
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans
and leases $51,485,692 40,879,677 143,768,462 110,609,561
Interest and dividends on
investment securities:
U.S. Treasury 4,905,469 4,981,357 14,174,018 13,246,174
U.S. Government agencies
and corporations 2,941,854 2,229,705 8,126,190 5,159,807
States and political sub-
divisions(primarily tax exempt) 886,412 804,736 2,608,948 2,466,906
Equity securities 414,764 124,169 1,461,563 1,219,441
Interest on time deposits in
other banks 335,406 185,696 942,623 270,239
Interest on federal funds sold
and other short-term investments 1,290,378 1,253,128 3,568,813 3,067,416
---------- ---------- ----------- -----------
Total interest income 62,259,975 50,458,468 174,650,617 136,039,544
---------- ---------- ----------- -----------
Interest expense:
Deposits 22,867,639 18,115,327 63,165,217 50,055,019
Federal funds purchased and
securities sold under
agreements to repurchase 306,825 131,227 693,628 416,903
Other short-term borrowed funds 308,954 221,679 441,964 425,925
Long-term debt 1,363,424 707,817 4,145,876 1,889,041
---------- ---------- ----------- ----------
Total interest expense 24,846,842 19,176,050 68,446,685 52,786,888
---------- ---------- ----------- ----------
Net interest income 37,413,133 31,282,418 106,203,932 83,252,656
Provision for loan and lease
losses (note 3) 2,325,000 1,835,000 5,800,000 4,535,000
---------- ---------- ----------- ----------
Net interest income after provision
for loan and lease losses 35,088,133 29,447,418 100,403,932 78,717,656
Other income:
Service charges on deposit
accounts 4,820,261 4,732,605 14,290,927 13,238,655
Trust and custodian fees 1,372,119 1,512,825 4,996,361 4,538,475
Insurance commissions 572,574 595,444 2,052,763 1,496,152
Merchant discount 924,579 727,486 2,631,540 2,075,878
Other service charges and fees 640,958 456,423 1,967,798 1,383,930
Other 1,341,524 1,579,554 4,011,441 2,815,713
Investment securities gains, net - 44,448 44,552 249,293
--------- --------- ---------- ----------
Total other income 9,672,015 9,648,785 29,995,382 25,798,096
Other expenses:
Personnel 14,855,377 13,969,867 43,953,528 38,649,599
Net occupancy 2,262,844 2,281,886 6,705,518 5,911,249
Equipment 2,112,572 2,334,534 6,500,300 6,153,044
Other 10,142,843 9,854,111 30,447,524 23,731,901
---------- ---------- ---------- ----------
Total other expenses 29,373,636 28,440,398 87,606,870 74,445,793
---------- ---------- ---------- ----------
Income before income taxes
and cumulative changes in
accounting principles 15,386,512 10,655,805 42,792,444 30,069,959
Income taxes 5,238,600 3,676,119 14,451,483 10,095,749
---------- ---------- ---------- ----------
Income before cumulative changes
in accounting principles 10,147,912 6,979,686 28,340,961 19,974,210
Cumulative changes in accounting
principles (note 5) - - - (1,371,234)
---------- ---------- ---------- ----------
Net income $10,147,912 6,979,686 28,340,961 18,602,976
========== ========== ========== ==========
Income per share (note 6):
Income before cumulative changes
in accounting principles:
Primary $ 1.07 .83 2.98 2.47
Fully diluted 1.07 .83 2.98 2.38
Net income:
Primary 1.07 .83 2.98 2.30
Fully diluted 1.07 .83 2.98 2.22
Weighted average shares outstanding:
Primary 9,516,379 8,443,223 9,516,389 8,098,668
Fully diluted 9,516,379 8,443,223 9,516,389 8,607,458
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CCB Financial Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Nine Months Ended September 30, 1994 and 1993
<TABLE>
<CAPTION>
Unrealized
Gain (Loss)
on Investment
Additional Securities Management Total
Common Paid-In Retained Available Recognition Shareholders'
Stock Capital Earnings for Sale Plans Equity
------------ ---------- ----------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance January 1, 1993 $38,895,530 44,095,683 107,454,940 (600,877) - 189,845,276
Net income - - 18,602,976 - - 18,602,976
Conversion of subordinated
debentures 3,969,140 16,919,782 - - - 20,888,922
Transactions pursuant to
restricted stock plan, net 11,155 97,365 - - - 108,520
Shares issued for acquisition 1,590,290 8,891,123 - - - 10,481,413
Purchase and retirement of
shares (2,250,000) (14,220,000) - - - (16,470,000)
Cash dividends ($.92 per
share) - - (7,352,213) - - (7,352,213)
Revaluation of marketable
equity securities - - - 72,052 - 72,052
----------- ---------- ----------- --------- ---------- -----------
Balance September 30, 1993 $42,216,115 55,783,953 118,705,703 (528,825) - 216,176,946
=========== ========== =========== ========= ========== ===========
Balance December 31, 1993 $47,586,385 83,349,012 124,922,331 (835,677) (4,018,288) 251,003,763
Mark to market adjustment, net
of applicable income taxes - - - 6,263,318 - 6,263,318
----------- ---------- ----------- --------- ---------- -----------
Balance January 1, 1994 47,586,385 83,349,012 124,922,331 5,427,641 (4,018,288) 257,267,081
Net income - - 28,340,961 - - 28,340,961
Transactions pursuant to
restricted stock plan, net (4,490) 240,350 - - - 235,860
Earned portion of management
recognition plans - - - - 783,227 783,227
Cash dividends ($.98 per
share) - - (9,326,051) - - (9,326,051)
Change in unrealized gains
(losses), net of applicable
income taxes - - - (11,926,900) - (11,926,900)
----------- ---------- ----------- ----------- ---------- -----------
Balance September 30, 1994 $47,581,895 83,589,362 143,937,241 (6,499,259) (3,235,061) 265,374,178
=========== ========== =========== =========== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CCB Financial Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 1994 and 1993
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Operating activities:
Net income $28,340,961 18,602,976
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 3,422,387 4,030,255
Provision for loan and lease losses 5,800,000 4,535,000
Net gain on sales of investment securities (44,552) (249,293)
Net amortization and accretion on
investment securities 4,074,397 2,746,717
Amortization of intangibles and other assets 2,487,969 1,034,406
Accretion of negative goodwill (2,525,993) (386,805)
Increase in accrued interest receivable (5,860,585) (2,634,288)
Decrease in accrued interest payable (278,818) (3,919,955)
Increase in other assets (14,960,493) (5,945,947)
Increase (decrease) in other liabilities 13,726,719 (5,855,296)
Vesting of shares held by management
recognition plans 783,227 -
Transactions pursuant to restricted stock
plan, net (20,909) 108,520
Other 7,671 208
----------- -----------
Net cash provided by operating activities 34,951,981 12,066,498
----------- -----------
Investing activities:
Proceeds from maturities and issuer calls of
investment securities held for investment 2,884,903 315,674,709
Proceeds from sales of investment securities
held for investment - 3,048,954
Purchases of investment securities held for
investment (7,744,278) (464,107,337)
Proceeds from sales of investment securities
acquired in purchase acquisitions - 53,438,906
Proceeds from sales of investment securities
available for sale 116,778,688 -
Proceeds from maturities and issuer calls of
investment securities available for sale 307,922,068 -
Purchases of investment securities available
for sale (425,534,747) -
Cash acquired, net of cash paid, in purchase
acquisitions - 143,019,234
Net increase in loans and leases receivable (229,234,876) (110,176,179)
Purchases of premises and equipment (2,730,357) (5,280,239)
------------ ------------
Net cash used by investing activities (237,658,599) (64,381,952)
------------ ------------
Financing activities:
Net increase in deposit accounts 72,345,643 21,067,426
Net increase in federal funds purchased and
securities sold under agreements to repurchase 12,854,100 2,273,323
Net increase in other short-term borrowed funds 47,304,614 28,747
Proceeds from issuance of long-term debt 4,555,662 12,267,877
Repayments of long-term debt (6,775,362) (3,267,532)
Issuance of stock from acquisitions, net - 10,481,413
Purchase and retirement of common stock - (16,470,000)
Cash dividends (9,326,051) (7,352,213)
----------- -----------
Net cash provided by financing activities 120,958,606 19,029,041
----------- -----------
Net decrease in cash and cash equivalents (81,748,012) (33,286,413)
Cash and cash equivalents at January 1 396,050,348 285,006,116
------------ -----------
Cash and cash equivalents at September 30 $314,302,336 251,719,703
============ ============
Supplemental disclosure of cash flow information:
Interest paid during the year $68,725,503 56,706,843
Income taxes paid during the year $14,818,200 10,794,633
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CCB Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Nine Months Ended September 30, 1994 and 1993
(1) 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, Graham Savings Bank,
Inc., SSB and Central Carolina Bank - Georgia. The consolidated
financial statements also include the accounts and results of operations
of CCB Investment and Insurance Service Corporation, Southland
Associates, Inc., CCBDE and 1st Home Mortgage Acceptance Corporation,
wholly-owned subsidiaries of CCB. All significant intercompany accounts
are eliminated in consolidation.
(2) Loans and Lease Financing
A summary of loans and lease financing at September 30, 1994 and 1993
follows:
1994 1993
------------- -------------
Commercial, financial and
agricultural $ 424,455,322 364,870,593
Real estate-construction 315,394,429 206,405,762
Real estate-mortgage 1,202,426,917 959,556,011
Instalment loans to individuals 229,059,596 189,180,122
Credit card receivables 184,566,425 164,389,634
Lease financing 33,432,409 24,802,389
------------- -------------
Gross loans and lease financing 2,389,335,098 1,909,204,511
Less unearned income 4,118,626 3,222,953
------------- -------------
Total loans and lease financing $ 2,385,216,472 1,905,981,558
============= =============
(3) Reserve for Loan and Lease Losses
Following is a summary of the reserve for loan and lease losses for the
nine months ended September 30, 1994 and 1993:
1994 1993
---------- ----------
Balance at beginning of year $ 26,963,334 19,026,764
Provision charged to operations 5,800,000 4,535,000
Recoveries of loans and leases
previously charged-off 1,100,703 1,128,887
Loan and lease losses charged to
reserve (4,111,594) (4,505,620)
Reserves related to acquisitions - 3,500,000
---------- ----------
Balance at September 30 $ 29,752,443 23,685,031
========== ==========
<PAGE>
(4) Risk Assets
Following is a summary of risk assets at September 30, 1994 and 1993 (in
thousands):
1994 1993
-------- --------
Nonaccrual loans and lease financing $ 11,463 9,971
Other real estate acquired through
loan foreclosures 5,181 8,251
Accruing loans and lease financing
90 days or more past due 1,331 5,869
Restructured loans and lease financing - 40
-------- --------
Total risk assets $ 17,975 24,131
======== ========
(5) Accounting Changes
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. Both Statements were adopted on January 1, 1993.
(6) 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 June 30,
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.
(7) Contingencies
Certain legal claims have arisen in the normal course of business, which,
in the opinion of management and counsel, will have no material adverse
effect on the financial position of the Corporation or its subsidiaries.
(8) Management Opinion
The financial statements in this report are unaudited. In the opinion of
management, all adjustments (none of which were other than normal
accruals) necessary for a fair presentation of the financial position and
results of operations for the periods presented have been included.
<PAGE>
(9) Mergers
On November 7, 1994, the Corporation announced that it had entered into a
definitive agreement to merge with Security Capital Bancorp ("Security
Capital") of Salisbury, North Carolina. Security Capital is a $1.2
billion bank holding company operating 46 offices located in the south
central and western Piedmont regions of North Carolina. Under the terms
of the definitive agreement, the Corporation will issue .50 shares of its
common stock in exchange for each share of common stock of Security
Capital in a tax-free exchange. The merger will be accounted for as a
pooling of interests. The transaction, which is subject to, among other
things, approval by regulatory authorities and stockholders of both
companies, is expected to be completed during the second quarter of 1995.
<PAGE>
Item 2. 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 the 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 ("CCB-Ga.") (collectively "the Banks"), and CCB's
wholly-owned subsidiaries, CCB Investment and Insurance Service
Corporation, CCBDE, 1st Home Mortgage Acceptance Corporation and
Southland Associates, Inc. for the three and nine months ended September
30, 1994 and 1993. This discussion and analysis is intended to
complement the unaudited financial statements and footnotes and the
supplemental financial data appearing elsewhere in this Form 10-Q, and
should be read in conjunction therewith.
Results of Operations
Three Months Ended September 30, 1994 and 1993
Net income for the three months ended September 30, 1994 amounted to
$10,148,000, an increase of $3,168,000 or 45.4% over the same period in
1993. Net income per share was $1.07 in 1994, a $.24 increase over the
1993 period. Returns on average assets and average shareholders' equity
were 1.21% and 15.43%, respectively, compared to .98% and 13.15% in the
1993 period.
Average Balance Sheets and Net Interest Income Analyses on a taxable
equivalent basis for each of the periods are included in this discussion
as Table 1. Average earning assets increased by $438,575,000 or 16.6%
over the 1993 period which was due primarily to the Corporation's
financial institution acquisitions consummated in the second through
fourth quarters of 1993. Third quarter increases in overall interest
rates combined with shifts in the mix of earning assets toward higher
yielding assets increased the net interest margin from 4.89% in 1993 to
4.99% in 1994. Net interest income on a taxable equivalent basis
increased $6,203,000 or 19.1% primarily due to increased volume of net
earning assets and, to a lesser extent, to increased interest rates.
The provision for loan and lease losses for the third quarter was
increased to $2,325,000 from $1,835,000 in 1993 due to growth in
outstanding loans and lease financing. The reserve for loan and lease
losses to loans and lease financing outstanding was 1.25%
<PAGE>
Table 1
CCB FINANCIAL CORPORATION
Average Balances and Net Interest Income Analyses
Three Months Ended September 30, 1994 and 1993
(Taxable Equivalent Basis-In Thousands) (1)
<TABLE>
<CAPTION>
1994
-----------------------------
Interest Average
Average Income/ Yield/
Balance Expense Rate
---------- --------- -------
<S> <C> <C> <C>
Earning assets:
Loans and lease financing (2) $ 2,329,111 51,573 8.78 %
U.S. Treasury and agency obligations 527,456 8,505 6.40
State and political subdivision obligations 52,685 1,366 10.29
Other securities 23,316 429 7.30
Federal funds sold and other
short-term investments 116,311 1,339 4.57
Time deposits in other banks 27,088 355 5.20
----------- --------- -------
Total earning assets 3,075,967 63,567 8.20
Non-earning assets:
Cash and due from banks 143,558
Premises and equipment 41,958
All other assets, net 56,130
-----------
Total assets $ 3,317,613
===========
Interest bearing liabilities:
Savings and time deposits $ 2,440,354 22,867 3.72 %
Federal funds purchased and securities
sold under agreements to repurchase 37,963 307 3.21
Other short-term borrowed funds 26,476 309 4.63
Long-term debt 76,960 1,364 7.03
----------- --------- -------
Total interest bearing liabilities 2,581,753 24,847 3.82
--------- -------
Other liabilities and shareholders' equity:
Demand deposits 392,577
Other liabilities 82,371
Shareholders' equity 260,912
-----------
Total liabilities and shareholders'
equity $ 3,317,613
===========
Net interest income and net interest
margin (3) $ 38,720 4.99 %
========= =======
Interest rate spread (4) 4.38 %
=======
(Continued)
1993
----------------------------
Interest Average
Average Income/ Yield/
Balance Expense Rate
--------- -------- --------
Earning assets:
Loans and lease financing (2) $ 1,886,402 40,961 8.61 %
U.S. Treasury and agency obligations 524,510 7,824 5.92
State and political subdivision obligations 43,326 1,308 11.98
Other securities 44,760 519 4.60
Federal funds sold and other
short-term investments 112,701 895 3.15
Time deposits in other banks 25,693 186 2.87
----------- --------- -------
Total earning assets 2,637,392 51,693 7.78
--------- -------
Non-earning assets:
Cash and due from banks 127,595
Premises and equipment 42,600
All other assets, net 37,405
-----------
Total assets $ 2,844,992
===========
Interest bearing liabilities:
Savings and time deposits $ 2,163,478 18,115 3.32 %
Federal funds purchased and securities
sold under agreements to repurchase 25,899 131 2.01
Other short-term borrowed funds 26,242 222 3.36
Long-term debt 34,493 708 8.14
----------- --------- -------
Total interest bearing liabilities 2,250,112 19,176 3.38
--------- -------
Other liabilities and shareholders' equity:
Demand deposits 348,887
Other liabilities 33,635
Shareholders' equity 212,358
-----------
Total liabilities and shareholders'
equity $ 2,844,992
===========
Net interest income and net interest
margin (3) 32,517 4.89 %
========= =======
Interest rate spread (4) 4.40 %
=======
</TABLE>
(1) The taxable equivalent basis is computed using 35% federal and 7.83%
state tax rates in 1994 and 34% federal and 7.91% state tax rates in 1993
where applicable.
(2) The average loan and lease financing balances include non-accruing
loans and lease financing. Loan fees of $1,299,000 and $1,784,000 for
1994 and 1993, 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.
<PAGE>
at September 30, 1994 and 1.24% at September 30, 1993. Third quarter
1994 net loan and lease charge-offs amounted to $894,000 or .15%
(annualized) of average loans and lease financing compared to $1,344,000
or .28% (annualized) in 1993.
Other income increased in the third quarter of 1994 to $9,672,000
compared to 1993's $9,649,000. Despite other income remaining relatively
flat in total, individual components changed during the quarter.
Increased service charges on deposit accounts, merchant discount income,
mortgage loan servicing income and negative goodwill accretion from the
acquisition of financial institutions in 1993 were offset by decreased
trust income and decreased gains on sales of mortgage loans. As a result
of the third quarter 1994's relatively flat income and the significant
increase in average assets, noninterest income as a percentage of average
assets for the three months ended September 30, 1994 has decreased to
1.16% from the 1.33% earned in the same period of 1993.
The following schedule presents noninterest income and expense as a
percentage of average assets for the three months ended September 30,
1994 and 1993:
1994 1993
---- ----
Noninterest income 1.16 % 1.33
---- ----
Personnel expense 1.78 1.92
Occupancy and equipment expense .52 .63
Other operating expense 1.21 1.36
---- ----
Noninterest expense 3.51 3.91
---- ----
Net overhead 2.35 2.58
==== ====
Other expenses in the 1994 period increased by $933,000 or 3.3% from the
1993 period. Personnel expense increases due to growth from the 1993
acquisitions of financial institutions were the primary cause of the
increase. Despite the $886,000 increase in personnel expense, assets per
employee improved from $1.86 million at September 30, 1993 to $2.14
million per employee at September 30, 1994. Noninterest expense as a
percentage of average assets has improved from 3.91% for the three months
ended September 30, 1993 to 3.51% for the same period in 1994. The
effective income tax rate was 34.05% in 1994 compared to 34.50% in the
same period of 1993.
Net overhead (noninterest expense less noninterest income) as a
percentage of average assets improved to 2.35% for the three months ended
September 30, 1994 from 2.58% for the same period in 1993. The
Corporation's efficiency ratio (noninterest expense as a percentage of
taxable equivalent net interest income and other
<PAGE>
income) dramatically improved from 67.45% for the three months ended
September 30, 1993 to 60.70% for the same period in 1994. The efficiency
ratio has steadily improved in 1994 as the first quarter ratio was 65.86%
followed by the second quarter's 61.53%. The improvements were due to
continued implementation of cost-saving strategies, efficiencies achieved
from CCB performing operational functions for Graham Savings and CCB
Savings and the previously discussed increases in net interest income.
Nine Months Ended September 30, 1994 and 1993
Income before cumulative changes in accounting principles increased
$8,367,000 or 41.9% to total $28,341,000 for the nine months ended
September 30, 1994 compared to $19,974,000 for the same period in 1993.
Income before cumulative changes in accounting principles per fully
diluted share was $2.98 for the nine months ended September 30, 1994
compared to $2.38 for 1993. Net income for the nine months ended
September 30, 1994 amounted to $28,341,000, an increase of $9,738,000 or
52.3% over the same period in 1993. On a fully diluted basis, income per
share was $2.98, which represented a $.76 increase over the 1993 period.
Returns on average assets and average shareholders' equity were 1.16% and
14.74%, respectively, compared to .98% and 12.34% in the 1993 period.
Average Balance Sheets and Net Interest Income Analyses on a taxable
equivalent basis for each of the nine month periods are included in this
discussion as Table 2. Average earning assets increased by $672,245,000
or 28.6% over the 1993 period which was due primarily to the
Corporation's 1993 financial institution acquisitions. Lower interest
rates during the nine months ended September 30, 1994 resulted in a net
interest margin of 4.86% compared to 4.92% for the same period in 1993.
Net interest income on a taxable equivalent basis increased 27.0% from
1993's level. Growth in the volume of net earning assets increased net
interest income by $26,329,000 which was offset $2,946,000 due to lower
interest rates to result in the $23,383,000 increase in net interest
income for the nine months of 1994.
The provision for loan and lease losses was increased to $5,800,000 from
$4,535,000 in 1993 due to increased outstanding loans and lease
financing. Year to date 1994 net loan and lease charge-offs amounted to
$3,011,000 or .18% (annualized) of average loans and lease financing
compared to $3,377,000 or .27% (annualized) in 1993.
Other income increased $4,197,000 during the first nine months of 1994 to
$29,995,000 compared to 1993's $25,798,000. The increase was due in part
to a $1,052,000 increase in service charges on
<PAGE>
Table 2
CCB FINANCIAL CORPORATION
Average Balances and Net Interest Income Analyses
Nine Months Ended September 30, 1994 and 1993
(Taxable Equivalent Basis-In Thousands) (1)
<TABLE>
<CAPTION>
1994
--------------------------------
Interest Average
Average Income/ Yield/
Balance Expense Rate
---------- ------- -------
<S> <C> <C> <C>
Earning assets:
Loans and lease financing (2) $ 2,236,597 143,949 8.61 %
U.S. Treasury and agency obligations 548,205 24,167 5.89
State and political subdivision obligations 51,072 4,018 10.52
Other securities 31,429 1,531 6.51
Federal funds sold and other
short-term investments 128,117 3,715 3.88
Time deposits in other banks 29,359 999 4.55
----------- -------- --------
Total earning assets 3,024,779 178,379 7.88
-------- --------
Non-earning assets:
Cash and due from banks 141,634
Premises and equipment 42,712
All other assets, net 45,246
-----------
Total assets $ 3,254,371
===========
Interest bearing liabilities:
Savings and time deposits $ 2,407,294 63,165 3.51 %
Federal funds purchased and securities
sold under agreements to repurchase 34,833 694 2.66
Other short-term borrowed funds 16,361 442 3.61
Long-term debt 77,234 4,146 7.18
----------- -------- --------
Total interest bearing liabilities 2,535,722 68,447 3.61
-------- --------
Other liabilities and shareholders' equity:
Demand deposits 385,091
Other liabilities 76,488
Shareholders' equity 257,070
-----------
Total liabilities and shareholders'
equity $ 3,254,371
===========
Net interest income and net
interest margin (3) $ 109,932 4.86 %
======== ========
Interest rate spread (4) 4.28 %
========
(Continued)
1993
-----------------------------
Interest Average
Average Income/ Yield/
Balance Expense Rate
---------- --------- --------
Earning assets:
Loans and lease financing (2) $ 1,697,206 110,844 8.73 %
U.S. Treasury and agency obligations 437,424 19,908 6.08
State and political subdivision obligations 43,676 3,893 11.92
Other securities 29,106 1,321 6.07
Federal funds sold and other
short-term investments 131,439 3,100 3.15
Time deposits in other banks 13,683 270 2.64
----------- -------- --------
Total earning assets 2,352,534 139,336 7.92
-------- --------
Non-earning assets:
Cash and due from banks 128,729
Premises and equipment 38,738
All other assets, net 23,993
-----------
Total assets $ 2,543,994
===========
Interest bearing liabilities:
Savings and time deposits $ 1,898,540 50,055 3.52 %
Federal funds purchased and securities
sold under agreements to repurchase 28,541 417 1.95
Other short-term borrowed funds 20,124 426 2.83
Long-term debt 31,893 1,889 7.92
----------- -------- --------
Total interest bearing liabilities 1,979,098 52,787 3.57
-------- --------
Other liabilities and shareholders' equity:
Demand deposits 332,521
Other liabilities 30,867
Shareholders' equity 201,508
-----------
Total liabilities and shareholders'
equity $ 2,543,994
===========
Net interest income and net
interest margin (3) 86,549 4.92 %
======== ========
Interest rate spread (4) 4.35 %
========
</TABLE>
(1) The taxable equivalent basis is computed using 35% federal and 7.83%
state tax rates in 1994 and 34% federal and 7.91% state tax rates in 1993
where applicable.
(2) The average loan and lease financing balances include non-accruing
loans and lease financing. Loan fees of $5,666,000 and $4,483,000 for
1994 and 1993, 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.
<PAGE>
deposit accounts resulting from increased volume of deposit accounts, a
$584,000 increase in other service charges and fees primarily from
mortgage servicing fees, a $557,000 increase in
insurance commissions from increased annuity and mutual fund sales and a
$2,139,000 increase in negative goodwill accretion from the acquisition
of financial institutions in 1993. These increases were partially offset
by decreases in gains on sales of mortgage loans of $1,576,000 and
decreases in gains on sales of investment securities of $205,000.
Noninterest income as a percentage of average assets decreased from 1.36%
for the nine months ended September 30, 1993 to 1.23% for the 1994 period
due to the changes in other income explained above and because growth in
income-producing services have not kept pace with the increase in average
assets.
The following schedule presents noninterest income and expense as a
percentage of average assets for the nine months ended September 30, 1994
and 1993:
1994 1993
---- ----
Noninterest income 1.23 % 1.36
---- ----
Personnel expense 1.81 2.03
Occupancy and equipment expense .54 .63
Other operating expense 1.25 1.25
---- ----
Noninterest expense 3.60 3.91
---- ----
Net overhead 2.37 2.55
==== ====
Other expenses in the 1994 period increased by $13,161,000 or 17.7% from
the 1993 period. As discussed previously, increases were experienced in
personnel expense due to the 1993 acquisitions of financial institutions.
Other operating expenses increased $6,716,000 due to telecommunication
expense increases of $388,000, community donations and other expense
increases of $1,255,000 related to the acquisitions of financial
institutions in 1993, a $710,000 increase in expenses related to other
real estate, increases of $1,026,000 from goodwill and other intangible
asset amortization, a $1,260,000 increase in deposit insurance based on
the increased level of deposits and general increases in expenses
resulting from a 27.9% increase in average assets for the nine months
ended September 30, 1993. Noninterest expense as a percentage of average
assets improved from 3.91% for the nine months ended September 30, 1993
to 3.60% for the 1994 period. The effective income tax rate was 33.77%
in 1994 compared to 33.57% in the same period of 1993.
<PAGE>
Net overhead as a percentage of average assets improved to 2.37% for the
nine months ended September 30, 1994 from 2.56% for the same period in
1993. The Corporation's efficiency ratio improved from 66.26% for the
nine months ended September 30, 1993 to 62.61% for the same period in
1994. As mentioned previously, the decreases were due to continued
emphasis on implementing cost-saving strategies and efficiencies achieved
from having CCB perform operational functions for Graham Savings and CCB
Savings.
Financial Condition
Total assets have increased slightly, 4.8%, from year-end 1993 but have
increased $526,286,000 or 18.2% since September 30, 1993 due to
acquisitions of financial institutions and internal growth. Virtually
all of the increase occurred in interest-earning assets. Average assets
have increased from $2,543,994,000 for the nine months ended September
30, 1993 to $3,254,371,000 for the 1994 period.
At September 30, 1994, risk assets (consisting of nonaccrual loans and
lease financing, foreclosed real estate, restructured loans and lease
financing and accruing loans 90 days or more past due) amounted to
approximately $17,975,000 or .75% of outstanding loans and lease
financing and foreclosed real estate. This compares to approximately
$24,131,000 or 1.26% and $23,252,000 or 1.07% at September 30, 1993 and
December 31, 1993, respectively. Risk assets as of September 30, 1994
are at their lowest level since 1989. The reserve for loan and lease
losses to risk assets was 1.66x at September 30, 1994 compared to .98x at
September 30, 1993 and 1.16x at December 31, 1993.
Effective January 1, 1994, the Corporation adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt
and Equity Securities" (SFAS 115). Under SFAS 115, debt securities and
equity securities are segregated into three categories for accounting and
reporting purposes. Debt and equity securities that the Corporation has
the positive intent and ability to hold until maturity are classified as
held for investment 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. The Corporation does not hold any trading securities. Debt
and equity securities not classified as either held for investment or as
trading securities are classified as available for sale securities and
reported at fair value, with unrealized gains and losses excluded from
earnings and reported as a separate component of shareholders' equity.
After adjusting for changes in market value
<PAGE>
during the third quarter, this component of shareholders' equity totals
$(6,499,000) at September 30, 1994.
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 7.90% and 7.92% for the nine months ended
September 30, 1994 and 1993, respectively. Furthermore, the Corporation
and the Banks continue to maintain higher capital ratios than required
under regulatory guidelines. Due to the retention of earnings and the
public offerings of common stock and qualifying debt late in 1993, the
Corporation's and Banks' capital ratios are returning to their pre-
acquisition levels.
The chart below illustrates that the Corporation and the Banks
significantly exceed all risk-based capital requirements at September 30,
1994.
September December September Regulatory
Ratio 30, 1994 31, 1993 30, 1993 Minimums
- ----- -------- -------- -------- ----------
Tier 1 Capital 4.00%
Corporation 9.50% 9.93% 9.12%
CCB 8.60 9.12 8.88
CCB Savings 21.07 17.87 -
Graham Savings 36.26 34.16 -
CCB-Ga. 22.00 30.42 -
Total Capital 8.00
Corporation 12.20 12.86 10.25
CCB 10.56 11.21 10.00
CCB Savings 22.98 19.67 -
Graham Savings 37.97 35.90 -
CCB-Ga. 22.64 31.26 -
Leverage 4.00
Corporation 7.54 8.50 7.60
CCB 6.98 7.47 7.27
CCB Savings 9.83 8.59 -
Graham Savings 17.87 16.64 -
CCB-Ga. 19.43 35.35 -
The Corporation has increased its annual cash dividends consistently over
the past 30 years, increasing to $.34 per share for the three months
ended September 30, 1994 from $.32 per share for the same period in 1993.
Book value per share increased 8.9% to $27.89 at September 30, 1994 from
1993's level of $25.60.
Litigation opposing the Corporation's acquisition of Graham Savings was
resolved during the third quarter. In settlement of the litigation, the
Corporation and Graham Savings agreed to pay the depositors of Graham
Savings an additional one percent bonus
<PAGE>
interest payment on October 1, 1995. The bonus interest payment, which
will total approximately $1,000,000, will primarily be provided through
reductions in fees and retirement benefits previously agreed to be
provided to Graham Savings directors. On September 7, 1994, the
settlement was approved in North Carolina Superior Court.
Merger Announced
On November 7, 1994, the Corporation announced that it had entered into a
definitive agreement to merge with Security Capital Bancorp ("Security
Capital") of Salisbury, North Carolina. Security Capital is a $1.2
billion bank holding company operating 46 offices located in the south
central and western Piedmont regions of North Carolina. Security
Capital's four bank subsidiaries are Security Capital Bank and OMNIBANK,
SSB, both located in Salisbury, North Carolina; Citizens Savings, SSB,
Concord, North Carolina; and Home Savings Bank, SSB, Kings Mountain,
North Carolina. As of or for the nine months ended September 30, 1994,
Security Capital had an equity to assets ratio of 10.15%, non-performing
assets as a percentage of total assets of .36%, and a return on average
assets before nonrecurring charges of approximately 1.50%.
Under the terms of the definitive agreement, the Corporation will issue
.50 shares of its common stock in exchange for each share of common stock
of Security Capital in a tax-free exchange. The merger, which is based
on a fixed exchange ratio, will be accounted for as a pooling of
interests. As part of the transaction, CCB announced that it anticipates
repurchasing up to 9% of the common shares of stock issued in the merger.
The Corporation is planning to effect this open market repurchase prior
to the completion of the transaction. The transaction, which is subject
to, among other things, approval by regulatory authorities and
stockholders of both companies, is expected to be completed during the
second quarter of 1995.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a). Exhibits
None.
(b). Reports on Form 8-K
A report on Form 8-K dated August 17, 1994 was filed under items 5
and 7.
<PAGE>
SIGNATURES
Pursuant to the requirements 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
Registrant
Date: November 10, 1994 /S/ Ernest C. Roessler
Ernest C. Roessler
President and Chief Executive Officer
Date: November 10, 1994 /S/ W. Harold Parker, Jr.
W. Harold Parker, Jr.
Senior Vice President and Controller
(Chief Accounting Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated financial statements as of and for the nine months ended September
30, 1994 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 148,483
<INT-BEARING-DEPOSITS> 26,820
<FED-FUNDS-SOLD> 139,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 540,347
<INVESTMENTS-CARRYING> 68,972
<INVESTMENTS-MARKET> 69,964
<LOANS> 2,385,216
<ALLOWANCE> 29,752
<TOTAL-ASSETS> 3,412,719
<DEPOSITS> 2,889,116
<SHORT-TERM> 101,888
<LIABILITIES-OTHER> 79,855
<LONG-TERM> 76,486
<COMMON> 47,582
0
0
<OTHER-SE> 217,792
<TOTAL-LIABILITIES-AND-EQUITY> 3,412,719
<INTEREST-LOAN> 143,768
<INTEREST-INVEST> 26,371
<INTEREST-OTHER> 4,511
<INTEREST-TOTAL> 174,650
<INTEREST-DEPOSIT> 63,165
<INTEREST-EXPENSE> 68,446
<INTEREST-INCOME-NET> 106,204
<LOAN-LOSSES> 5,800
<SECURITIES-GAINS> 44
<EXPENSE-OTHER> 87,607
<INCOME-PRETAX> 42,792
<INCOME-PRE-EXTRAORDINARY> 42,792
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,341
<EPS-PRIMARY> 2.98
<EPS-DILUTED> 2.98
<YIELD-ACTUAL> 4.86
<LOANS-NON> 11,463
<LOANS-PAST> 1,331
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 26,963
<CHARGE-OFFS> 4,112
<RECOVERIES> 1,101
<ALLOWANCE-CLOSE> 29,752
<ALLOWANCE-DOMESTIC> 22,612
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 7,140
</TABLE>
